Exhibit 10.117


                                                                              


                               CREDIT AGREEMENT


                                     among

                         READING & BATES CORPORATION,

                         READING & BATES DRILLING CO.,

                         VARIOUS LENDING INSTITUTIONS,

                               BANQUE INDOSUEZ, 
                            as DOCUMENTATION AGENT

                       CREDIT LYONNAIS NEW YORK BRANCH,
                             as DOCUMENTATION AGENT

                                      and

                       CHRISTIANIA BANK OG KREDITKASSE,
                               NEW YORK BRANCH,

                           as ADMINISTRATIVE AGENT,
                                   ARRANGER
                             AND SECURITY TRUSTEE


                     ____________________________________


                         Dated as of November 13, 1996

                     ____________________________________


                               TABLE OF CONTENTS
                                                                          Page

SECTION 1.  Amount and Terms of Credit  . . . . . . . . . . . . . . . . .    1
      1.01  Commitment  . . . . . . . . . . . . . . . . . . . . . . . . .    1
      1.02  Minimum Borrowing Amounts, etc. . . . . . . . . . . . . . . .    2
      1.03  Notice of Borrowing . . . . . . . . . . . . . . . . . . . . .    2
      1.04  Disbursement of Funds . . . . . . . . . . . . . . . . . . . .    2
      1.05  Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . .    3
      1.06  Conversions . . . . . . . . . . . . . . . . . . . . . . . . .    3
      1.07  Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . .    4
      1.08  Interest  . . . . . . . . . . . . . . . . . . . . . . . . . .    4
      1.09  Interest Periods  . . . . . . . . . . . . . . . . . . . . . .    5
      1.10  Increased Costs, Illegality, etc. . . . . . . . . . . . . . .    6
      1.11  Compensation  . . . . . . . . . . . . . . . . . . . . . . . .    8
      1.12  Change of Lending Office; Limitation on Indemnities . . . . .    9
      1.13  Replacement of Banks  . . . . . . . . . . . . . . . . . . . .    9

SECTION 2.  Letters of Credit . . . . . . . . . . . . . . . . . . . . . .   10
      2.01  Letters of Credit . . . . . . . . . . . . . . . . . . . . . .   10
      2.02  Letter of Credit Requests; Request for Issuance of Letter of
              Credit  . . . . . . . . . . . . . . . . . . . . . . . . . .   11
      2.03  Agreement to Repay Letter of Credit Payments  . . . . . . . .   11
      2.04  Letter of Credit Participations . . . . . . . . . . . . . . .   12
      2.05  Increased Costs . . . . . . . . . . . . . . . . . . . . . . .   14
      2.06  Indemnities . . . . . . . . . . . . . . . . . . . . . . . . .   15

SECTION 3.  Fees; Commitments . . . . . . . . . . . . . . . . . . . . . .   15
      3.01  Fees  . . . . . . . . . . . . . . . . . . . . . . . . . . . .   15
      3.02  Voluntary Reduction of Commitments  . . . . . . . . . . . . .   16
      3.03  Mandatory Adjustments of Commitments, etc.  . . . . . . . . .   17

SECTION 4.  Payments  . . . . . . . . . . . . . . . . . . . . . . . . . .   18
      4.01  Voluntary Prepayments . . . . . . . . . . . . . . . . . . . .   18
      4.02  Mandatory Prepayments . . . . . . . . . . . . . . . . . . . .   19
      4.03  Method and Place of Payment . . . . . . . . . . . . . . . . .   20
      4.04  Net Payments  . . . . . . . . . . . . . . . . . . . . . . . .   21

SECTION 5.  Conditions Precedent  . . . . . . . . . . . . . . . . . . . .   23
      5.01  Execution of Agreement  . . . . . . . . . . . . . . . . . . .   23
      5.02  No Default; Representations and Warranties  . . . . . . . . .   23
      5.03  Officer's Certificate . . . . . . . . . . . . . . . . . . . .   23
      5.04  Opinions of Counsel . . . . . . . . . . . . . . . . . . . . .   23
      5.05  Corporate Proceedings . . . . . . . . . . . . . . . . . . . .   24
      5.06  Existing Indebtedness Agreements  . . . . . . . . . . . . . .   24
      5.07  Adverse Change, etc.  . . . . . . . . . . . . . . . . . . . .   24
      5.08  Litigation  . . . . . . . . . . . . . . . . . . . . . . . . .   24
      5.09  Approvals . . . . . . . . . . . . . . . . . . . . . . . . . .   25
      5.10  Fees  . . . . . . . . . . . . . . . . . . . . . . . . . . . .   25
      5.11  Security Agreement  . . . . . . . . . . . . . . . . . . . . .   25
      5.12  Subsidiary Guaranty . . . . . . . . . . . . . . . . . . . . .   26
      5.13  Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . .   26
      5.14  Evidence of Lien, etc.  . . . . . . . . . . . . . . . . . . .   26
      5.15  Rig Reports; Drilling Contracts . . . . . . . . . . . . . . .   27
      5.16  Insurance Report  . . . . . . . . . . . . . . . . . . . . . .   27
      5.17  Pledge Agreement  . . . . . . . . . . . . . . . . . . . . . .   28
      5.18  Refinancing; Existing Credit Agreement  . . . . . . . . . . .   28
      5.19  Compliance Certificate  . . . . . . . . . . . . . . . . . . .   29

SECTION 6.  Representations, Warranties and Agreements  . . . . . . . . .   29
      6.01  Corporate Status  . . . . . . . . . . . . . . . . . . . . . .   29
      6.02  Corporate Power and Authority . . . . . . . . . . . . . . . .   30
      6.03  No Violation  . . . . . . . . . . . . . . . . . . . . . . . .   30
      6.04  Litigation  . . . . . . . . . . . . . . . . . . . . . . . . .   30
      6.05  Use of Proceeds; Margin Regulations . . . . . . . . . . . . .   30
      6.06  Governmental Approvals  . . . . . . . . . . . . . . . . . . .   31
      6.07  Investment Company Act  . . . . . . . . . . . . . . . . . . .   31
      6.08  Public Utility Holding Company Act  . . . . . . . . . . . . .   31
      6.09  True and Complete Disclosure  . . . . . . . . . . . . . . . .   31
      6.10  Financial Condition; Financial Statements; Projections  . . .   32
      6.11  Security Interests  . . . . . . . . . . . . . . . . . . . . .   33
      6.12  Tax Returns and Payments  . . . . . . . . . . . . . . . . . .   33
      6.13  Compliance with ERISA . . . . . . . . . . . . . . . . . . . .   33
      6.14  Subsidiaries  . . . . . . . . . . . . . . . . . . . . . . . .   34
      6.15  Patents, etc. . . . . . . . . . . . . . . . . . . . . . . . .   34
      6.16  Pollution and Other Regulations . . . . . . . . . . . . . . .   34
      6.17  Properties  . . . . . . . . . . . . . . . . . . . . . . . . .   35
      6.18  Labor Relations . . . . . . . . . . . . . . . . . . . . . . .   36
      6.19  Existing Indebtedness . . . . . . . . . . . . . . . . . . . .   36
      6.20  Citizenship . . . . . . . . . . . . . . . . . . . . . . . . .   36
      6.21  Rig Classification  . . . . . . . . . . . . . . . . . . . . .   36

SECTION 7.  Affirmative Covenants . . . . . . . . . . . . . . . . . . . .   36
      7.01  Information Covenants . . . . . . . . . . . . . . . . . . . .   37
      7.02  Books, Records and Inspections  . . . . . . . . . . . . . . .   39
      7.03  Insurance . . . . . . . . . . . . . . . . . . . . . . . . . .   39
      7.04  Payment of Taxes  . . . . . . . . . . . . . . . . . . . . . .   39
      7.05  Consolidated Corporate Franchises . . . . . . . . . . . . . .   40
      7.06  Compliance with Statutes, etc.  . . . . . . . . . . . . . . .   40
      7.07  Good Repair . . . . . . . . . . . . . . . . . . . . . . . . .   40
      7.08  End of Fiscal Years; Fiscal Quarters  . . . . . . . . . . . .   40
      7.09  Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . .   40
      7.10  Earnings Concentration Account  . . . . . . . . . . . . . . .   40
      7.11  Additional Rig Valuations . . . . . . . . . . . . . . . . . .   41
      7.12  Further Assurances  . . . . . . . . . . . . . . . . . . . . .   41
      7.13  ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . .   42

SECTION 8.  Negative Covenants  . . . . . . . . . . . . . . . . . . . . .   43
      8.01  Changes in Business . . . . . . . . . . . . . . . . . . . . .   43
      8.02  Consolidation, Merger or Sale of Assets, etc. . . . . . . . .   44
      8.03  Liens on Collateral; Arcade Drilling  . . . . . . . . . . . .   45
      8.04  Indebtedness of Arcade  . . . . . . . . . . . . . . . . . . .   46
      8.05  Dividends; Restrictions on Subsidiaries, etc. . . . . . . . .   46
      8.06  Transactions with Affiliates  . . . . . . . . . . . . . . . .   48
      8.07  Vessel Management; Registry . . . . . . . . . . . . . . . . .   48
      8.08  Coverage Ratio  . . . . . . . . . . . . . . . . . . . . . . .   49
      8.09  Working Capital . . . . . . . . . . . . . . . . . . . . . . .   49
      8.10  Leverage Ratio  . . . . . . . . . . . . . . . . . . . . . . .   49
      8.11  Collateral Maintenance  . . . . . . . . . . . . . . . . . . .   49

SECTION 9.  Events of Default . . . . . . . . . . . . . . . . . . . . . .   49
      9.01  Payments  . . . . . . . . . . . . . . . . . . . . . . . . . .   49
      9.02  Representations, etc. . . . . . . . . . . . . . . . . . . . .   49
      9.03  Covenants . . . . . . . . . . . . . . . . . . . . . . . . . .   49
      9.04  Default Under Other Agreements  . . . . . . . . . . . . . . .   50
      9.05  Bankruptcy, etc.  . . . . . . . . . . . . . . . . . . . . . .   50
      9.06  Security Documents  . . . . . . . . . . . . . . . . . . . . .   51
      9.07  Guaranty  . . . . . . . . . . . . . . . . . . . . . . . . . .   51
      9.08  Judgments . . . . . . . . . . . . . . . . . . . . . . . . . .   51
      9.09  Citizenship . . . . . . . . . . . . . . . . . . . . . . . . .   51
      9.10  Employee Benefit Plans  . . . . . . . . . . . . . . . . . . .   51
      9.11  Change of Control . . . . . . . . . . . . . . . . . . . . . .   52

SECTION 10.  Definitions  . . . . . . . . . . . . . . . . . . . . . . . .   52

SECTION 11.  The Administrative Agent and the Security Trustee  . . . . .   71
      11.01  Appointment of the Administrative Agent and the Security
              Trustee . . . . . . . . . . . . . . . . . . . . . . . . . .   71
      11.02  Nature of Duties . . . . . . . . . . . . . . . . . . . . . .   71
      11.03  Lack of Reliance on the Administrative Agent . . . . . . . .   72
      11.04  Certain Rights of the Administrative Agent . . . . . . . . .   72
      11.05  Reliance . . . . . . . . . . . . . . . . . . . . . . . . . .   72
      11.06  Indemnification  . . . . . . . . . . . . . . . . . . . . . .   73
      11.07  The Administrative Agent in Its Individual Capacity  . . . .   73
      11.08  Holders  . . . . . . . . . . . . . . . . . . . . . . . . . .   73
      11.09  Resignation by the Administrative Agent  . . . . . . . . . .   73

SECTION 12.  Miscellaneous  . . . . . . . . . . . . . . . . . . . . . . .   74
      12.01  Payment of Expenses, etc.  . . . . . . . . . . . . . . . . .   74
      12.02  Right of Setoff  . . . . . . . . . . . . . . . . . . . . . .   75
      12.03  Notices  . . . . . . . . . . . . . . . . . . . . . . . . . .   76
      12.04  Benefit of Agreement . . . . . . . . . . . . . . . . . . . .   76
      12.05  No Waiver; Remedies Cumulative . . . . . . . . . . . . . . .   78
      12.06  Payments Pro Rata  . . . . . . . . . . . . . . . . . . . . .   78
      12.07  Calculations; Computations . . . . . . . . . . . . . . . . .   79
      12.08  GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
              JURY TRIAL  . . . . . . . . . . . . . . . . . . . . . . . .   79
      12.09  Counterparts . . . . . . . . . . . . . . . . . . . . . . . .   80
      12.10  Effectiveness  . . . . . . . . . . . . . . . . . . . . . . .   80
      12.11  Headings Descriptive . . . . . . . . . . . . . . . . . . . .   81
      12.12  Amendment or Waiver  . . . . . . . . . . . . . . . . . . . .   81
      12.13  Survival . . . . . . . . . . . . . . . . . . . . . . . . . .   82
      12.14  Domicile of Loans  . . . . . . . . . . . . . . . . . . . . .   82
      12.15  Confidentiality  . . . . . . . . . . . . . . . . . . . . . .   82
      12.16  Registry . . . . . . . . . . . . . . . . . . . . . . . . . .   82

SECTION 13.  Holdings Guaranty  . . . . . . . . . . . . . . . . . . . . .   83
      13.01  The Guaranty . . . . . . . . . . . . . . . . . . . . . . . .   83
      13.02  Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . .   83
      13.03  Nature of Liability  . . . . . . . . . . . . . . . . . . . .   83
      13.04  Independent Obligation . . . . . . . . . . . . . . . . . . .   84
      13.05  Waiver of Notice, etc. . . . . . . . . . . . . . . . . . . .   84
      13.06  Authorization  . . . . . . . . . . . . . . . . . . . . . . .   84
      13.07  Reliance . . . . . . . . . . . . . . . . . . . . . . . . . .   85
      13.08  Subordination  . . . . . . . . . . . . . . . . . . . . . . .   85
      13.09  Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . .   86

ANNEX I       --  Commitments
ANNEX II      --  Bank Addresses
ANNEX III     --  Existing Letters of Credit
ANNEX IV      --  Commitment Reduction Schedule
ANNEX V       --  Subsidiaries
ANNEX VI      --  Rigs and Vessels
ANNEX VII     --  Existing Indebtedness
ANNEX VIII    --  Existing Liens
ANNEX IX      --  Approved Shipbrokers

EXHIBIT A     --  Form of Notice of Borrowing
EXHIBIT B     --  Form of Note
EXHIBIT C     --  Form of Letter of Credit Request
EXHIBIT D     --  Form of Section 4.04(b)(ii) Certificate
EXHIBIT E-1   --  Form of Opinion of Wayne Hillin, Esq.
EXHIBIT E-2   --  Form of Opinion of White & Case
EXHIBIT F     --  Form of Officers' Certificate
EXHIBIT G     --  Form of Security Agreement
EXHIBIT H     --  Form of Subsidiary Guaranty
EXHIBIT I-1   --  Form of US Mortgage 
EXHIBIT I-2   --  Form of Panamanian Mortgage
EXHIBIT I-3   --  Form of Australian Mortgage
EXHIBIT J     --  Form of Pledge Agreement
EXHIBIT K     --  Form of Compliance Certificate 
EXHIBIT L     --  Form of Assignment and Assumption Agreement

========================================================================
 
            CREDIT AGREEMENT, dated  as of November 13, 1996,  among READING &
BATES CORPORATION  ("Holdings"),  a  Delaware  corporation,  READING  &  BATES
DRILLING  CO.  (the   "Borrower"),  an  Oklahoma   corporation,  the   lending
institutions  listed from time to  time on Annex I hereto  (each a "Bank" and,
collectively,  the  "Banks"), BANQUE  INDOSUEZ  and CREDIT  LYONNAIS  NEW YORK
BRANCH as documentation  agents (the "Documentation  Agents") and  CHRISTIANIA
BANK OG  KREDITKASSE, NEW YORK  BRANCH, as administrative agent,  arranger and
security  trustee  (the "Administrative  Agent").    Unless otherwise  defined
herein, all capitalized  terms used herein and defined in  Section 10 are used
herein as so defined.


                             W I T N E S S E T H :


            WHEREAS, subject  to and upon  the terms and conditions  set forth
herein, the Banks  are willing to  make available to  the Borrower the  credit
facilities provided for herein;


            NOW, THEREFORE, IT IS AGREED:

            SECTION 1.  Amount and Terms of Credit.

            1.01  Commitment.   Subject to  and upon the  terms and conditions
herein set forth, each Bank  severally agrees to make a loan or  loans (each a
"Loan" and,  collectively, the  "Loans") under the  Facility to  the Borrower,
which Loans (i) shall be made at any  time and from time to time on and  after
the  Initial Borrowing  Date and prior  to the  Maturity Date,  (ii) except as
hereinafter  provided, may, at  the option  of the  Borrower, be  incurred and
maintained as,  and/or converted  into, Base Rate  Loans or  Eurodollar Loans,
provided  that all  Loans made  as part  of the  same Borrowing  shall, unless
otherwise specifically  provided herein,  consist of Loans  of the  same Type,
(iii) may be  repaid and reborrowed in accordance with  the provisions hereof,
(iv) shall not exceed in the aggregate for all Banks at any time  outstanding,
the  Total Commitment  and  (v) shall  not  exceed for  any Bank  at  any time
outstanding that  aggregate  principal amount  which, when  combined with  the
aggregate  outstanding principal  amount of all  other Loans of  such Bank and
with  such Bank's  Adjusted Percentage  of the  Letter of  Credit Outstandings
(exclusive  of Unpaid  Drawings which  are repaid  with the  proceeds of,  and
simultaneously with the incurrence of,  the respective incurrence of Loans) at
such time,  equals (1)  if such  Bank is a  Non-Defaulting Bank,  the Adjusted
Commitment  of such  Bank at such  time and (2)  if such Bank  is a Defaulting
Bank, the Commitment of such Bank at such time.  

            1.02  Minimum  Borrowing  Amounts, etc.   The  aggregate principal
amount of each Borrowing shall  not be less than the Minimum  Borrowing Amount
for the Loans  constituting such Borrowing.   More than  one Borrowing may  be
incurred on any day, provided that at no time shall there be outstanding  more
than eight Borrowings of Eurodollar Loans.

            1.03  Notice of Borrowing.  Whenever the Borrower desires to incur
Loans under the Facility, it shall give the Administrative Agent at its Notice
Office,  prior to  12:00 Noon (New York  time), at least  three Business Days'
prior written notice (or  telephonic notice promptly confirmed in  writing) of
each  Borrowing of  Eurodollar Loans  and at  least one  Business Day's  prior
written  notice (or telephonic notice  promptly confirmed in  writing) of each
Borrowing of Base Rate  Loans to be made hereunder.  Each  such notice (each a
"Notice  of  Borrowing") shall  be  in  the form  of  Exhibit A  and shall  be
irrevocable and shall  specify (i) the aggregate principal amount of the Loans
to be made pursuant to such Borrowing, (ii) the date of Borrowing (which shall
be a Business  Day), (iii) whether the  respective Borrowing shall consist  of
Base Rate  Loans  or  (to  the extent  permitted)  Eurodollar  Loans  and,  if
Eurodollar Loans, the Interest  Period to be initially applicable  thereto and
(iv)  disbursement instructions.  The Administrative Agent shall promptly give
each  Bank written notice (or telephonic notice promptly confirmed in writing)
of each proposed Borrowing, of such  Bank's proportionate share thereof and of
the other matters covered by the Notice of Borrowing.

            1.04  Disbursement of  Funds.  (a)  No later  than 1:00  P.M. (New
York time) on the  date specified in each Notice of  Borrowing, each Bank will
make available  its pro rata share of  each Borrowing requested to  be made on
such date in the manner provided below.  All such amounts shall be made avail-
able to the  Administrative Agent  in U.S. Dollars  and immediately  available
funds at the Payment  Office and the  Administrative Agent promptly will  make
available to the  Borrower by depositing to its account  at the Payment Office
(or  in accordance  with  any other  disbursement  instructions given  by  the
Borrower)  the aggregate of the amounts so  made available in U.S. Dollars and
immediately  available funds.  Unless the Administrative Agent shall have been
notified by  any Bank prior to the  date of Borrowing that  such Bank does not
intend  to make  available  to the  Administrative  Agent its  portion  of the
Borrowing or Borrowings to be made  on such date, the Administrative Agent may
assume that  such Bank has  made such  amount available to  the Administrative
Agent on such  date of Borrowing,  and the  Administrative Agent, in  reliance
upon  such assumption, may (in its  sole discretion and without any obligation
to do so)  make available to  the Borrower  a corresponding amount.   If  such
corresponding amount is not in fact made available to the Administrative Agent
by such Bank and the Administrative Agent has made available same to the  Bor-
rower,  the Administrative Agent shall be entitled to recover such correspond-
ing amount  from such Bank.   If  such Bank  does not  pay such  corresponding
amount  forthwith  upon  the   Administrative  Agent's  demand  therefor,  the
Administrative Agent shall promptly (and in any event within two Business Days
from  the  date the  Administrative Agent  made  such funds  available  to the
Borrower) notify the  Borrower, and  the Borrower shall  (within two  Business
Days   of  receiving  such  demand)  pay  such  corresponding  amount  to  the
Administrative  Agent.   The Administrative  Agent shall  also be  entitled to
recover on demand from such Bank or the Borrower, as the case may be, interest
on  such corresponding  amount  in respect  of  each day  from  the date  such
corresponding amount was  made available  by the Administrative  Agent to  the
Borrower  to  the  date   such  corresponding  amount  is  recovered   by  the
Administrative  Agent, at a rate per annum equal  to (x) if paid by such Bank,
the overnight Federal Funds Effective Rate or (y) if paid by the Borrower, the
then  applicable rate of interest, calculated in accordance with Section 1.08,
for the respective Loans.

            (b)  Nothing herein shall be  deemed to relieve any Bank  from its
obligation to fulfill  its commitments  hereunder or to  prejudice any  rights
which the Borrower  may have against  any Bank as a  result of any  default by
such Bank hereunder.

            1.05  Notes.  (a)  The Borrower's obligation to pay  the principal
of, and interest on, the Loans made to it by each Bank shall be evidenced by a
promissory  note  substantially  in   the  form  of  Exhibit  B   with  blanks
appropriately   completed  in   conformity  herewith   (each  a   "Note"  and,
collectively, the "Notes").

            (b)  The  Note issued to  each Bank shall  (i) be  executed by the
Borrower, (ii) be payable to the  order of such Bank and be dated  the Initial
Borrowing Date, (iii) be in a  stated principal amount equal to the Commitment
of such Bank on  such date and be payable in the principal amount of the Loans
evidenced thereby, (iv) mature on the Maturity Date, (v) bear interest as pro-
vided in the  appropriate clause of Section  1.08 in respect of the  Base Rate
Loans  and Eurodollar Loans,  as the case  may be, evidenced  thereby, (vi) be
subject to  mandatory  repayment as  provided  in Section  4.02  and (vii)  be
entitled to the benefits of and subject to this Agreement and the other Credit
Documents.

            (c)  Each Bank will  note on  its internal records  the amount  of
each Loan  made by it and each  payment in respect thereof  and will, prior to
any  transfer of any  of its Notes,  endorse on  the reverse side  thereof the
outstanding principal amount  of Loans evidenced thereby.  Failure to make any
such notation shall  not affect the Borrower's obligations in  respect of such
Loans.

            1.06  Conversions.  The Borrower shall have the  option to convert
on any Business Day all or a portion at least equal  to the applicable Minimum
Borrowing  Amount of  the  outstanding principal  amount  of the  Loans  owing
pursuant  to the  Facility  into a  Borrowing or  Borrowings  pursuant to  the
Facility of  another  Type of  Loan,  provided that  (i) except  as  otherwise
provided in Section 1.10(b), Eurodollar Loans may be converted into  Base Rate
Loans  only on the  last day of  an Interest Period applicable  thereto and no
partial  conversion  of  a Borrowing  of  Eurodollar  Loans  shall reduce  the
outstanding principal amount  of the  Eurodollar Loans made  pursuant to  such
Borrowing to less than  the Minimum Borrowing Amount applicable  thereto, (ii)
no Base  Rate Loans may be converted into Eurodollar  Loans at any time when a
Default or Event of Default is  in existence on the date of the  conversion if
the Administrative  Agent or  the Required Banks  have determined that  such a
conversion  would  be disadvantageous  to the  Banks  and (iii)  Borrowings of
Eurodollar Loans resulting from  this Section 1.06 shall be limited  in number
as provided  in Section 1.02.   Each such conversion shall be  effected by the
Borrower giving the Administrative Agent at its Notice Office, prior to  12:00
Noon (New York time), at least three Business Days' (or one Business Day's, in
the  case of  a conversion  into  Base Rate  Loans) prior  written notice  (or
telephonic  notice  promptly   confirmed  in  writing)  (each  a   "Notice  of
Conversion")  specifying the Loans to be so converted, the Type of Loans to be
converted into and,  if to be converted into a  Borrowing of Eurodollar Loans,
the  Interest Period to be  initially applicable thereto.   The Administrative
Agent shall  give each  Bank prompt  notice of  any  such proposed  conversion
affecting any of its Loans.

            1.07  Pro Rata Borrowings.   All Loans under this  Agreement shall
be made by the Banks pro rata on the basis of their Commitments.  It is under-
stood that no Bank  shall be responsible for any default by  any other Bank in
its  obligation to make Loans hereunder and  that each Bank shall be obligated
to make  the Loans  provided to be  made by  it hereunder,  regardless of  the
failure of any other Bank to fulfill its commitments hereunder.

            1.08  Interest.  (a)  The  unpaid principal  amount  of each  Base
Rate  Loan shall bear  interest from the  date of the  Borrowing thereof until
maturity (whether  by acceleration  or otherwise)  at a  rate per  annum which
shall at all times be the Base Rate in effect from time to time.

            (b)  The  unpaid principal  amount of  each Eurodollar  Loan shall
bear interest from the date  of the Borrowing thereof until  maturity (whether
by acceleration or otherwise) at a rate per annum which shall at all  times be
the Applicable Eurodollar Margin plus the relevant Eurodollar Rate.

            (c)  All overdue  principal and, to  the extent permitted  by law,
overdue interest in respect of each Loan and any other  overdue amount payable
hereunder  shall bear interest at  a rate per annum equal  to the Base Rate in
effect  from time to time  plus 2%, provided that no  Loan shall bear interest
after maturity (whether by acceleration or otherwise) at a rate per annum less
than 2% plus the rate of interest applicable thereto at maturity.

            (d)  Interest shall  accrue from  and  including the  date of  any
Borrowing to  but excluding  the date  of any repayment  thereof and  shall be
payable (i) in  respect of each Base  Rate Loan, quarterly  in arrears on  the
first  day of each January, April,  July and October, (ii)  in respect of each
Eurodollar Loan, on  the last day  of each Interest Period  applicable thereto
and, in the case of an Interest Period in excess of three months, on  the date
occurring three months after the  first day of such Interest Period  and (iii)
in  respect of  each Loan,  on any  prepayment or  conversion (other  than the
prepayment and  conversion  of Base  Rate  Loans) (on  the amount  prepaid  or
converted), at maturity (whether by acceleration or otherwise) and, after such
maturity, on demand.

            (e)  All  computations  of interest  hereunder  shall  be made  in
accordance with Section 12.07(b).

            (f)  The Administrative Agent, upon determining  the interest rate
for any Borrowing of Loans for any Interest Period, shall  promptly notify the
Borrower and the Banks thereof.

            1.09  Interest  Periods.  (a)  At the  time  the Borrower  gives a
Notice of Borrowing  or Notice of Conversion  in respect of the  making of, or
conversion into, a Borrowing of  Eurodollar Loans (in the case of  the initial
Interest Period applicable thereto) or prior to 12:00 Noon (New  York time) on
the  third  Business  Day  prior  to the  expiration  of  an  Interest  Period
applicable to  a Borrowing of  Eurodollar Loans,  it shall have  the right  to
elect  by giving the Administrative Agent written notice (or telephonic notice
promptly  confirmed  in writing)  of the  Interest  Period applicable  to such
Borrowing, which  Interest Period shall, at  the option of the  Borrower, be a
one, three  or six  month period.   Notwithstanding  anything to the  contrary
contained above:

           (i)  the initial  Interest Period  for any Borrowing  of Eurodollar
      Loans shall commence on  the date of such Borrowing  (including the date
      of any conversion from a Borrowing of Base Rate Loans) and each Interest
      Period occurring thereafter in respect of  such Borrowing shall commence
      on the day on which the next preceding Interest Period expires;

          (ii)  if any Interest Period begins on a  day for which there is  no
      numerically corresponding day in the  calendar month at the end  of such
      Interest Period, such Interest Period shall end on the last Business Day
      of such calendar month;

         (iii)  if any Interest  Period would otherwise expire on a  day which
      is not a  Business Day, such  Interest Period shall  expire on the  next
      succeeding  Business Day,  provided  that if  any Interest  Period would
      otherwise expire on a  day which is not a  Business Day but is a  day of
      the month after which no further Business Day occurs in such month, such
      Interest Period shall expire on the next preceding Business Day;

          (iv)  no Interest Period shall extend beyond the Maturity Date; 

           (v)  no  Interest Period  with respect  to  any Borrowing  of Loans
      under the Facility may be elected that would extend beyond any date upon
      which a Scheduled Commitment Reduction is required to be made in respect
      of  the Facility  if,  after  giving effect  to  the selection  of  such
      Interest Period, the  aggregate principal amount of  Loans maintained as
      Eurodollar Loans under the  Facility with Interest Periods  ending after
      such  date would exceed  the aggregate principal amount  of Loans of the
      Facility  permitted to  be outstanding  after such  Scheduled Commitment
      Reduction; 

          (vi)  no Interest Period  may be elected at any  time when a Default
      or Event of Default is then in existence if the  Administrative Agent or
      the Required  Banks have determined  that such an election  at such time
      would be disadvantageous to the Banks; and

         (vii)  no more than six Interest Periods of one month may be selected
      by the Borrower in any calendar year.

            (b)  If upon the  expiration of any Interest  Period, the Borrower
has failed to (or may not) elect a new Interest Period to be applicable to the
respective Borrowing of Eurodollar Loans as provided above, the Borrower shall
be deemed  to have  elected a  one month Interest  Period for  such Borrowing,
provided that if the Borrower  may not elect an Interest Period,  the Borrower
will be  deemed to have elected to convert  such Borrowing into a Borrowing of
Base Rate Loans  effective as of the expiration date  of such current Interest
Period.

           1.10  Increased Costs, Illegality, etc.  (a)  In the event that (x)
in the  case of clause (i) below, the Administrative  Agent or (y) in the case
of  clauses  (ii) and  (iii)  below, any  Bank  shall  have determined  (which
determination  shall,  absent  manifest error,  be  final  and  conclusive and
binding upon all parties hereto):

           (i)  on  any date  for  determining  the Eurodollar  Rate  for  any
      Interest Period that, by reason of any changes arising after the date of
      this Agreement  affecting the interbank Eurodollar  market, adequate and
      fair means do not exist for ascertaining the applicable interest rate on
      the basis provided for in the definition of Eurodollar Rate; or

          (ii)  at any  time, that such  Bank shall incur  increased costs  or
      reductions in the amounts received  or receivable hereunder with respect
      to any Eurodollar Loans  (other than any increased cost  or reduction in
      the amount received  or receivable resulting from the imposition of or a
      change  in the rate or basis of taxes or similar charges) because of (x)
      any change since  the date  of this  Agreement in  any appli-cable  law,
      governmental   rule,  regulation,   guideline  or   order  (or   in  the
      interpretation or administration thereof  and including the introduction
      of any new  law or  governmental rule, regulation,  guideline or  order)
      (such as, for example, but not  limited to, a change in official reserve
      requirements,  but, in  all  events, excluding  reserves required  under
      Regulation D to the extent included in the computation of the Eurodollar
      Rate)  and/or (y) other circumstances  occurring after the  date of this
      Agreement and affecting the interbank Eurodollar market; or

         (iii)  at any time, that the making or continuance of any  Eurodollar
      Loan has become unlawful by  compliance by such Bank in good  faith with
      any  law, governmental  rule, regulation,  guideline (or  would conflict
      with  any such  governmental rule,  regulation, guideline  or order  not
      having the  force of law but  with which such Bank  customarily complies
      even though the failure to comply therewith would not be unlawful);

then, and  in any such  event, such Bank (or  the Administrative Agent  in the
case of  clause (i) above) shall (x) on such  date and (y) within ten Business
Days of  the  date on  which  such event  no longer  exists,  give notice  (by
telephone  confirmed in  writing) to  the Borrower  and to  the Administrative
Agent  of  such determination  (which  notice the  Administrative  Agent shall
promptly transmit to each of the other  Banks).  Thereafter (x) in the case of
clause (i)  above, Eurodollar Loans  shall no longer  be available until  such
time as the Administrative Agent notifies the Borrower and the  Banks that the
circumstances giving rise to such notice by the Administrative Agent no longer
exist,  and  any Notice  of Borrowing  or Notice  of  Conversion given  by the
Borrower with  respect to Eurodollar  Loans which have  not yet  been incurred
shall be  deemed rescinded by  the Borrower,  (y) in the  case of clause  (ii)
above,  the  Borrower  shall,  subject  to  Section  1.12(b)  (to  the  extent
applicable), pay to such  Bank, upon written demand therefor,  such additional
amounts  (in the  form of  an  increased rate  of, or  a  different method  of
calculating, interest or otherwise as  such Bank in its sole discretion  shall
determine) as shall  be required to  compensate such Bank  for such  increased
costs  or reductions in amounts  receivable hereunder (a  written notice as to
the  additional  amounts  owed  to  such  Bank,  showing  the  basis  for  the
calculation  thereof, submitted  to the  Borrower by  such Bank  shall, absent
manifest error, be final  and conclusive and binding upon all  parties hereto)
and (z) in the  case of clause (iii) above, the Borrower shall take one of the
actions  specified in  Section 1.10(b)  as  promptly as  possible and,  in any
event, within the time period required by law.

            (b)  At  any  time that  any Eurodollar  Loan  is affected  by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case  of a Eurodollar  Loan affected pursuant to  Section 1.10(a)(iii),
the  Borrower shall) either (i) if the  affected Eurodollar Loan is then being
made   pursuant  to  a  Borrowing,   cancel  said  Borrowing   by  giving  the
Administrative Agent telephonic notice (confirmed promptly in writing) thereof
on the same date that the Borrower was notified by a Bank pursuant  to Section
1.10(a)(ii) or  (iii),  or  (ii)  if the  affected  Eurodollar  Loan  is  then
outstanding, upon at least  three Business Days' notice to  the Administrative
Agent,  require the affected Bank to convert  each such Eurodollar Loan into a
Base Rate Loan, provided that  if more than one Bank is affected  at any time,
then all  affected Banks must  be treated  the same pursuant  to this  Section
1.10(b).

            (c)  If any Bank shall have determined that after the date of this
Agreement,  the adoption  or  effectiveness of  any  applicable law,  rule  or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation  or administration  thereof by any  governmental authority,
central   bank  or  comparable  agency  charged  with  the  interpretation  or
administration  thereof, or compliance by such Bank with any request or direc-
tive regarding  capital adequacy (whether or  not having the force  of law but
with which  such Bank customarily complies  even though the failure  to comply
therewith  would  not be  unlawful)  of any  such authority,  central  bank or
comparable agency, has or would have the effect of reducing the rate of return
on such Bank's capital or assets as  a consequence of its commitments or obli-
gations hereunder  to a level below  that which such Bank  could have achieved
but for  such  adoption,  effectiveness,  change or  compliance  (taking  into
consideration such  Bank's policies  with respect to  capital adequacy),  then
from time to time,  within 15 days after demand  by such Bank (with a  copy to
the  Administrative Agent), the Borrower shall, subject to Section 1.12(b) (to
the extent  applicable), pay to such Bank such additional amount or amounts as
will compensate such Bank for such reduction.  Each Bank,  upon determining in
good faith that  any additional amounts will be payable  pursuant to this Sec-
tion 1.10(c), will give  prompt written notice thereof to the  Borrower, which
notice  shall set  forth  the basis  of  the  calculation of  such  additional
amounts, although  the failure to  give any such  notice shall not  release or
diminish  any of the Borrower's obligations to pay additional amounts pursuant
to this Section 1.10(c) upon the subsequent receipt of such notice.

            1.11  Compensation. The Borrower shall compensate each  Bank, upon
its written request  (which request shall  set forth the basis  for requesting
such  compensation),  for  all  reasonable losses,  expenses  and  liabilities
(including, without  limitation, any  loss, expense  or liability  incurred by
reason of the liquidation or reemployment  of deposits or other funds required
by such Bank to fund its Eurodollar Loans but excluding in  any event the loss
of anticipated profits) which  such Bank may sustain:   (i) if for  any reason
(other than a default by such Bank or the Administrative Agent) a Borrowing of
Eurodollar  Loans does not occur  on a date specified  therefor in a Notice of
Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower or
deemed  withdrawn  pursuant  to  Section  1.10(a));  (ii)  if  any prepayment,
repayment or conversion of any of  its Eurodollar Loans (including as a result
of Section 1.10 or  the last paragraph of Section 9) occurs on a date which is
not the  last day  of  an Interest  Period applicable  thereto;  (iii) if  any
prepayment of any of its Eurodollar Loans is not made on any date specified in
a notice of prepayment given by the Borrower; or  (iv) as a consequence of (x)
any other default by the Borrower to repay its Eurodollar  Loans when required
by the terms  of this Agreement  or (y) an  election made pursuant to  Section
1.10(b).

            1.12  Change of Lending  Office;  Limitation on  Indemnities.  (a)
Each Bank agrees  that, upon the occurrence  of any event  giving rise to  the
operation of Section 1.10(a)(ii) or (iii), 1.10(c), 2.05  or 4.04 with respect
to such  Bank, it will, if  requested by the Borrower,  use reasonable efforts
(subject to overall policy  considerations of such Bank) to  designate another
lending office for any Loan, Letters of Credit or Commitments affected by such
event, provided that such designation is made on such terms that such Bank and
its  lending office suffer no economic, legal or regulatory disadvantage, with
the object of  avoiding the consequence of the event giving rise to the opera-
tion  of  any such  Section.   Nothing in  this Section  1.12 shall  affect or
postpone any of the obligations of the Borrower or the right of any  Bank pro-
vided in Section 1.10, 2.05 or 4.04.

            (b)  Notwithstanding anything in  this Agreement to  the contrary,
to  the extent any notice required  by Section 1.10, 2.05 or  4.04 is given by
any Bank more than 90 days after such Bank obtained, or reasonably should have
obtained, knowledge  of  the  occurrence  of  the event  giving  rise  to  the
additional costs of the type described in such Section, such Bank shall not be
entitled  to compensation under  Section 1.10,  2.05 or  4.04 for  any amounts
incurred or accruing prior to the giving of such notice to the Borrower.

            1.13  Replacement of Banks. (x)  Upon the occurrence  of any event
giving rise to the operation of Section 1.10(a)(ii) or (iii), 1.10(c), 2.05 or
4.04  with respect  to any  Bank which results  in such  Bank charging  to the
Borrower increased  costs in excess  of those being  generally charged  by the
other Banks or such Bank becoming incapable of making Eurodollar Loans, (y) if
a Bank becomes a Defaulting  Bank and/or (z) as provided in  Section 12.12(b),
in the case of  a refusal by a Bank  to consent to a proposed  change, waiver,
discharge  or  termination  with respect  to  this  Agreement  which has  been
approved  by the  Required Banks,  the Borrower  shall have  the right,  if no
Default  or Event of Default then exists,  to replace such Bank (the "Replaced
Bank")  with one or more  other Eligible Transferee  or Transferees reasonably
acceptable  to  the Administrative  Agent,  none  of which  Transferees  shall
constitute  a Defaulting Bank at  the time of  such replacement (collectively,
the "Replacement Bank"),  provided that  (i) at  the time  of any  replacement
pursuant to  this Section 1.13, the  Replacement Bank shall enter  into one or
more Assignment and  Assumption Agreements pursuant  to Section 12.04(b)  (and
with all  fees payable pursuant  to said Section  12.04(b) to  be paid by  the
Replacement Bank) pursuant to  which the Replacement Bank shall acquire all of
the Commitments and  outstanding Loans of, and in each  case participations in
Letters  of Credit by,  the Replaced Bank and,  in connection therewith, shall
pay to (x) the  Replaced Bank in respect thereof an amount equal to the sum of
(A) an amount equal to the principal of, and all accrued interest on, all out-
standing  Loans of  the  Replaced Bank,  (B)  an amount  equal  to all  Unpaid
Drawings that  have been funded by (and not reimbursed to) such Replaced Bank,
together  with all then unpaid interest with  respect thereto at such time and
(C) an amount equal to all accrued, but theretofore unpaid, Fees  owing to the
Replaced Bank pursuant to Section 3.01, and (y) the Letter of Credit Issuer an
amount equal to such Replaced  Bank's Percentage of any Unpaid  Drawing (which
at such time  remains an  Unpaid Drawing) to  the extent  such amount was  not
theretofore funded  by such  Replaced Bank,  and (ii)  all obligations  of the
Borrower owing to the  Replaced Bank (other than those  specifically described
in clause  (i) above  in respect  of which the  assignment purchase  price has
been, or is concurrently being, paid)  shall be paid in full to  such Replaced
Bank concurrently with such replacement.  Upon the execution of the respective
Assignment  and Assumption Agreements, the  payment of amounts  referred to in
clauses  (i) and  (ii) above  and, if  so requested  by the  Replacement Bank,
delivery  to the  Replacement Bank  of a  Note executed  by the  Borrower, the
Replacement Bank  shall become a  Bank hereunder and  the Replaced Bank  shall
cease to constitute a  Bank hereunder, except with respect  to indemnification
provisions applicable to the  Replaced Bank under this Agreement,  which shall
survive as to such Replaced Bank as described herein. 

            SECTION 2.  Letters of Credit.

            2.01  Letters of  Credit.  (a)  Subject to and upon  the terms and
conditions  herein set  forth, the  Borrower may  request that  the Letter  of
Credit  Issuer at  any time  and from  time to  time on  or after  the Initial
Borrowing  Date  and  prior to  the  Business  Day  immediately preceding  the
Maturity Date issue,  for the account  of the Borrower  and in support of  L/C
Supportable  Obligations, and  subject to  and upon  the terms  and conditions
herein set forth,  the Letter of  Credit Issuer agrees to  issue from time  to
time, irrevocable standby letters of credit denominated in U.S. Dollars or any
other  currency acceptable  to  the Letter  of Credit  Issuer (subject  to the
provisions of  Section 2.01(b)) and  in such  form as may  be approved by  the
Letter of  Credit Issuer (each  such standby  letter of credit,  a "Letter  of
Credit" and  collectively, the  "Letters of  Credit").   Annex III contains  a
description  of all  letters  of  credit  issued  under  the  Existing  Credit
Agreement prior to the Effective Date and which will remain outstanding on the
Effective Date.   Each such letter of  credit, including any extension thereof
(each  an "Existing Letter of  Credit") shall constitute  a "Letter of Credit"
for all purposes of this Agreement and  shall be deemed issued for purposes of
Sections 2.04 and 3.01 on the Effective Date.

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

            (c)  Notwithstanding the foregoing, (i)  no Letter of Credit shall
be issued,  the Stated Amount  of which,  when added to  the Letter of  Credit
Outstandings (exclusive of  Unpaid Drawings which  are repaid on the  date of,
and prior to the issuance of,  the respective Letter of Credit) at  such time,
would  exceed  either  (x) $30,000,000  or  (y)  when added  to  the aggregate
principal amount of all  Loans made by Non-Defaulting Banks  then outstanding,
the Adjusted  Total Commitment at  such time; and  (ii) each Letter  of Credit
shall  have  an  expiry  date  occurring  not  later  than  the  Business  Day
immediately preceding the Maturity Date.

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

            (b)  The  Letter of  Credit  Issuer shall,  on  the date  of  each
issuance of a Letter of Credit by it, give  each Bank and the Borrower written
notice of the issuance of such Letter of Credit.

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

            (b)  The  Borrower's  obligation  under   this  Section  2.03   to
reimburse  the Letter  of  Credit  Issuer  with  respect  to  Unpaid  Drawings
(including,  in   each  case,   interest  thereon)   shall  be  absolute   and
unconditional  under any and all circumstances and irrespective of any setoff,
counterclaim  or defense to  payment which the  Borrower may have  or have had
against   the  Letter  of  Credit  Issuer  or  any  Bank,  including,  without
limitation, any defense  based upon the failure of any  drawing under a Letter
of Credit to  conform to  the terms of  the Letter of  Credit (other than  the
failure of  the  Letter of  Credit  Issuer  to determine  that  any  documents
required to be  delivered under such Letter of Credit  have been delivered and
that  they substantially  comply on their  face with the  requirements of such
Letter  of Credit) or any non-application or misapplication by the beneficiary
of the  proceeds of such drawing;  provided, however, that the  Borrower shall
not be  obligated to reimburse  the Letter of  Credit Issuer for  any wrongful
payment made by  the Letter  of Credit Issuer  under a Letter  of Credit as  a
result  of  acts   or  omissions  constituting  willful  misconduct  or  gross
negligence on the part of the Letter of Credit Issuer.

            2.04  Letter of Credit Participations.  (a)  Immediately  upon the
issuance by the Letter of Credit Issuer of any Letter of Credit, the Letter of
Credit Issuer shall be deemed to have sold and transferred to each other Bank,
and each  such Bank  (each a  "Participant") shall be  deemed irrevocably  and
unconditionally  to  have purchased  and received  from  the Letter  of Credit
Issuer, without recourse or warranty, an undivided interest and participation,
to the  extent of such Bank's  Adjusted Percentage, in such  Letter of Credit,
each  substitute  letter  of credit,  each  drawing  made  thereunder and  the
obligations  of  the  Borrower  under  this  Agreement  with  respect  thereto
(although  the  Letter  of  Credit  Fee  shall  be  payable  directly  to  the
Administrative  Agent for  the account  of the  Banks as  provided in  Section
3.01(b) and the Participants shall have no right to receive any portion of any
Facing  Fees) and any security therefor  or guaranty pertaining thereto.  Upon
any change in the Commitments or Adjusted Percentages of the Banks pursuant to
Section  12.04(b)  or upon  a Bank  Default, it  is  hereby agreed  that, with
respect to all outstanding  Letters of Credit and Unpaid Drawings, there shall
be an automatic adjustment to the participations pursuant to this Section 2.04
to reflect  the new Adjusted Percentages of the assigning and assignee Bank or
of all Banks, as the case may be. 

            (b)  In determining whether to pay under any Letter of Credit, the
Letter  of  Credit Issuer  shall  not  have  any  obligation relative  to  the
Participants  other  than  to determine  that  any  documents  required to  be
delivered  under such  Letter  of Credit  have  been delivered  and that  they
substantially  comply on their  face with the  requirements of such  Letter of
Credit.   Any action  taken or  omitted to  be taken by  the Letter  of Credit
Issuer under or in connection with any  Letter of Credit, if taken or  omitted
in the absence of gross negligence or willful misconduct, shall not create for
the Letter of Credit Issuer any resulting liability to the Participants.

            (c)  In  the event that the Letter of Credit Issuer makes any pay-
ment under  any Letter of  Credit and the  Borrower shall not  have reimbursed
such amount  in  full to  the  Letter of  Credit  Issuer pursuant  to  Section
2.03(a), the Letter of Credit Issuer shall promptly notify each Participant of
such failure, and each  Participant shall promptly and unconditionally  pay to
the  Letter  of  Credit Issuer,  the  amount  of  such Participant's  Adjusted
Percentage of  such payment in U.S.  Dollars and in same  day funds; provided,
however, that no Participant shall be obligated to pay to the Letter of Credit
Issuer  its Adjusted Percentage of  such unreimbursed amount  for any wrongful
payment  made by the  Letter of Credit  Issuer under  a Letter of  Credit as a
result  of  acts  or  omissions  constituting  willful  misconduct   or  gross
negligence on the part of the Letter of Credit  Issuer.  If the Administrative
Agent so notifies any Participant  required to fund an Unpaid Drawing  under a
Letter of Credit prior to 12:00 Noon (New York time) on any Business Day, such
Participant  shall  make  available  to  the  Letter  of  Credit  Issuer  such
Participant's  Adjusted Percentage  of  the amount  of  such payment  on  such
Business Day in same day funds.   If and to the extent such  Participant shall
not have so made its Adjusted Percentage of the amount of such Unpaid  Drawing
available to  the Letter of Credit  Issuer, such Participant agrees  to pay to
the Letter of  Credit Issuer, forthwith on  demand such amount, together  with
interest thereon,  for each day from  such date until the date  such amount is
paid to the Letter of  Credit Issuer at the overnight Federal  Funds Effective
Rate.   The failure  of any Participant  to make  available to  the Letter  of
Credit  Issuer its Adjusted Percentage of any  Unpaid Drawing under any Letter
of Credit shall not relieve any  other Participant of its obligation hereunder
to make  available to the Letter  of Credit Issuer its  Adjusted Percentage of
any payment  under any  Letter of  Credit on the  date required,  as specified
above, but  no Participant shall be  responsible for the failure  of any other
Participant  to make  available to  the  Letter of  Credit  Issuer such  other
Participant's Adjusted Percentage of any such payment.

            (d)  Whenever  the Letter of Credit Issuer receives a payment of a
reimbursement obligation as to which the Administrative Agent has received for
the account  of the Letter of Credit Issuer any payments from the Participants
pursuant to clause  (c) above, the Letter  of Credit Issuer shall  pay to each
Participant which has paid its Adjusted  Percentage thereof, in Dollars and in
same day funds, an amount  equal to such Participant's Adjusted Percentage  of
the  principal amount thereof and  interest thereon accruing  at the overnight
Federal   Funds  Effective   Rate  after   the  purchase  of   the  respective
participations. 

            (e)  The  obligations of the Participants to  make payments to the
Letter of Credit Issuer with respect to Letters of Credit shall be irrevocable
and  not  subject  to counterclaim,  set-off  or other  defense  or  any other
qualification or exception  whatsoever (provided that no  Participant shall be
required  to make payments resulting from the  Letter of Credit Issuer's gross
negligence or  willful misconduct) and  shall be  made in accordance  with the
terms  and conditions  of this  Agreement under all  circumstances, including,
without limitation, any of the following circumstances:

           (i)  any  lack of validity or  enforceability of this  Agreement or
      any of the other Credit Documents;

          (ii)  the existence  of any claim,  set-off, defense  or other right
      which the Borrower may have at any time against a beneficiary named in a
      Letter of Credit, any transferee of any Letter of Credit  (or any Person
      for whom any such  transferee may be acting), the  Administrative Agent,
      any Bank or other Person, whether in connection with this Agreement, any
      Letter of Credit, the transactions contemplated  herein or any unrelated
      transactions (including any underlying transaction between the  Borrower
      and the beneficiary named in any such Letter of Credit);

         (iii)  any draft,  certificate or other document  presented under the
      Letter of Credit  proving to be  forged, fraudulent, or  invalid in  any
      respect  or  any statement  therein being  untrue  or inaccurate  in any
      respect;

          (iv)  the  surrender   or  impairment   of  any  security   for  the
      performance  or observance  of any  of the  terms of  any of  the Credit
      Documents; or

           (v)  the occurrence of any Default or Event of Default.

            2.05  Increased  Costs.  If  at any  time  after the  date  of the
Agreement,  the adoption  or  effectiveness of  any  applicable law,  rule  or
regulation,  or any  change therein,  or any change  in the  interpretation or
administration  thereof  by  any   governmental  authority,  central  bank  or
comparable agency  charged with the interpretation  or administration thereof,
or compliance by the Letter of  Credit Issuer or any Bank with any  request or
directive (whether or  not having the force  of law but  with which such  Bank
customarily complies even though the failure to comply therewith would not  be
unlawful)  by  any such  authority, central  bank  or comparable  agency shall
either (i) impose,  modify or  make applicable any  reserve, deposit,  capital
adequacy or similar requirement against Letters of Credit issued by the Letter
of Credit Issuer or such Bank's participation therein, or (ii) shall impose on
the Letter  of Credit Issuer or  any Bank any other  conditions affecting this
Agreement,  any Letter of Credit or such Bank's participation therein; and the
result of any of the foregoing is to increase the cost to the Letter of Credit
Issuer or such Bank of issuing, maintaining or participating in  any Letter of
Credit, or  to reduce  the amount  of any  sum received or  receivable by  the
Letter of  Credit Issuer or such Bank hereunder (other than any increased cost
or reduction in  the amount received or receivable  resulting from the imposi-
tion of or  a change in the rate or basis  of taxes or similar charges), then,
upon  demand to the Borrower  by the Letter  of Credit Issuer or  such Bank (a
copy of which notice shall be sent by the Letter of Credit Issuer or such Bank
to the Administrative Agent),  the Borrower shall, subject to  Section 1.11(b)
(to the extent  applicable), pay to the Letter  of Credit Issuer or  such Bank
such  additional amount  or amounts  as will compensate  the Letter  of Credit
Issuer  or such  Bank for  such increased  cost or  reduction.   A certificate
submitted to the Borrower by the Letter of Credit  Issuer or such Bank, as the
case may be (a copy of which certificate shall be sent by the Letter of Credit
Issuer or such Bank to the  Administrative Agent), setting forth the basis for
the determination of such additional amount or amounts necessary to compensate
the Letter of Credit Issuer or such Bank  as aforesaid shall be conclusive and
binding on the Borrower absent manifest error, although the failure to deliver
any  such certificate  shall not  release or  diminish any  of the  Borrower's
obligations to pay additional amounts  pursuant to this Section 2.05 upon  the
subsequent receipt thereof.

            2.06  Indemnities.   The Borrower  hereby agrees to  reimburse and
indemnify the Letter of Credit Issuer for and against any and all liabilities,
obligations,  losses, damages,  penalties, claims, actions,  judgments, suits,
costs,  expenses or disbursements  of whatsoever kind  or nature  which may be
imposed  on, asserted against  or incurred by  the Letter of  Credit Issuer in
performing its respective duties in any way relating  to or arising out of its
issuance of Letters of Credit; provided  that the Borrower shall not be liable
for any portion of such liabilities, obligations,  losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Letter of  Credit Issuer's gross  negligence or  willful misconduct.   To  the
extent  the Letter of  Credit Issuer is  not indemnified by  the Borrower, the
Participants  will reimburse  and indemnify  the Letter  of Credit  Issuer, in
proportion  to their respective "percentages" of the Total Commitment, for and
against  any and  all  liabilities, obligations,  losses, damages,  penalties,
claims,  actions,  judgments,  suits,  costs,  expenses  or  disbursements  of
whatsoever  kind  or nature  which  may be  imposed  on,  asserted against  or
incurred by the Letter of Credit Issuer in performing its respective duties in
any way  relating to  or arising  out of  its issuance of  Letters of  Credit;
provided that no Participants shall be liable for any portion of such liabili-
ties, obligations,  losses,  damages, penalties,  actions,  judgments,  suits,
costs,  expenses or disbursements resulting from the Letter of Credit Issuer's
gross negligence or willful misconduct.

            SECTION 3.  Fees; Commitments.

            3.01  Fees.  (a)  The Borrower agrees to pay to the Administrative
Agent  a  commitment commission  ("Commitment  Commission") pro  rata  for the
account  of each  Non-Defaulting Bank  for the period  from and  including the
Effective Date to, but not  including, the date the Total Commitment  has been
terminated, which Commitment Commission shall be equal to the amount set forth
below as determined  by Holdings' Leverage Ratio,  as calculated for the  last
day of the fiscal quarter  last ended, computed at such rate for  each day, on
the daily amount  of such Bank's Unutilized Commitment;  provided that, in the
event a  change in the  Commitment Commission is  made, such change  shall not
become effective until  the date  on which the  Administrative Agent  receives
written notice from the Borrower indicating that such change is warranted:

      0.25% per annum   If the Leverage Ratio is equal to or less than 0.25 to
                        1.00

      0.35% per annum   If the Leverage Ratio is greater than 0.25 to 1.00.

Such Commitment  Commission shall be due  and payable in arrears  on the first
day of each  January, April, July and  October and on the date  upon which the
Total Commitment is terminated.

            (b)  The Borrower  agrees to pay  to the Administrative  Agent for
the  account  of each  Non-Defaulting  Bank pro  rata  on the  basis  of their
respective Adjusted Percentages,  a fee in  respect of each  Letter of  Credit
(the "Letter  of  Credit Fee")  computed at  a  rate per  annum  equal to  the
Applicable Eurodollar Margin then in effect or the daily Stated Amount of such
Letter of  Credit.   Accrued Letter of  Credit Fees shall  be due  and payable
quarterly in arrears on the first day of each January, April, July and October
of each  year and on the date after the  Total Commitment is terminated and no
Letters of Credit remain outstanding.

            (c)  The Borrower agrees  to pay to the Letter of  Credit Issuer a
fee  in respect  of  each Letter  of Credit  issued by  it (the  "Facing Fee")
computed at the rate of 1/8 of 1% per annum on the daily Stated Amount of such
Letter of Credit.   Accrued Facing Fees shall be due  and payable quarterly in
arrears on the first day of each January, April, July and October of each year
and on  the date after the  Total Commitment is  terminated and no  Letters of
Credit remain outstanding.

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

            (e)  The Borrower shall pay to the Administrative Agent (x) on the
Initial Borrowing  Date for  its own  account and/or for  distribution to  the
Banks such  Fees as  heretofore  agreed in  writing by  the  Borrower and  the
Administrative Agent and (y) for its own account such other fees as  agreed to
in writing between the Borrower and the Administrative Agent, when and as due.

            (f)  All  computations of  Fees shall  be made in  accordance with
Section 12.07(b).

            3.02  Voluntary  Reduction of  Commitments.  Upon at  least thirty
Days' prior written notice (or telephonic notice confirmed in  writing) to the
Administrative Agent  at its  Notice Office  (which notice the  Administrative
Agent shall promptly  transmit to each of the Banks),  the Borrower shall have
the right, without premium  or penalty, to terminate  or partially reduce  the
Total Unutilized  Commitment, provided  that  (w) any  such termination  shall
apply to proportionately and  permanently reduce the Commitment of  each Bank,
(x) no such reduction shall reduce any Non-Defaulting Bank's Commitment  to an
amount that is  less than the sum  of (A) the  outstanding Loans of such  Bank
plus (B) such Bank's Adjusted Percentage of Letter of Credit Outstandings, (y)
any  partial reduction pursuant to this Section 3.02 shall be in the amount of
at least $5,000,000  and (z)  any such  reduction shall  reduce the  remaining
Scheduled Commitment Reductions pro  rata based on the then  remaining amounts
of Scheduled Commitment Reductions.

            3.03  Mandatory Adjustments of  Commitments, etc.  (a)  The  Total
Commitment  shall terminate  on the  earlier of  (i) the  Maturity Date,  (ii)
November 30,  1996, unless the Effective  Date has occurred on  or before such
date and (iii) unless the Required  Banks otherwise consent, the date on which
any Change of Control occurs.

            (b)  In  addition  to any  other  mandatory  commitment reductions
pursuant to  this  Section 3.03,  on  each date  set  forth below,  the  Total
Commitment  shall be permanently reduced by the amount set forth opposite such
date (each such  reduction, as same may be further  reduced in accordance with
Sections 3.02 and 3.03(d), a "Scheduled Commitment Reduction"):

                     Date                          Amount

             May 13, 1999                      $25,000,000
             November 13, 1999                 $25,000,000
             May 13, 2000                      $25,000,000
             November 13, 2000                 $25,000,000
             May 13, 2001                      $25,000,000
             Maturity Date                    Remaining amount
                                                  of Total
                                                 Commitment

            (c)  In addition  to  any other  mandatory  commitment  reductions
pursuant  to this  Section 3.03,  on the  Business Day  following the  date of
receipt thereof  by the Borrower  and/or any of  its Subsidiaries of  the Cash
Proceeds  from any Collateral Disposition, the Total Commitment then in effect
shall be  permanently reduced by an amount equal to the Total Commitment as in
effect on the Initial Borrowing Date multiplied by the percentage set forth on
Annex IV hereto adjacent to the name of the Mortgaged Rig (other than the Jack
Bates,  the Paul B. Loyd, Jr. and the  Henry Goodrich) which is the subject of
such Collateral Disposition under the heading "Percentage Reduction."  

            (d)  Notwithstanding  anything to  the contrary  contained herein,
and in addition to any other mandatory commitment reductions pursuant to  this
Section  3.03, in  the case of  any Collateral Disposition  involving the Jack
Bates, the Total Commitment then  in effect shall be reduced by  the lesser of
the Total Commitment then in effect or $100,000,000.

            (e)  In  addition to  any  other mandatory  commitment  reductions
pursuant to this Section 3.03, in the case of any sale, disposition or loss by
Arcade Drilling AS ("Arcade") with  respect to the Henry Goodrich or  the Paul
B. Loyd,  Jr. (collectively, the "Arcade  Rigs") the Total Commitment  then in
effect  shall be reduced by the lesser  of the Total Commitment then in effect
or $100,000,000 per rig.

            (f)  In  addition to  any  other mandatory  commitment  reductions
pursuant  to this Section 3.03, on June 30,  1997 the Total Commitment as then
in  effect shall  be  reduced by  $15,000,000  unless the  documentation  with
respect to the  C.E. Thornton  required pursuant to  Section 7.12(a) has  been
provided.

            (g)  Each  reduction  of the  Total  Commitment  pursuant to  this
Section 3.03 shall apply proportionately to the Commitment of each  Bank.  Any
reduction to the Total Commitment pursuant  to this Section 3.03 shall  reduce
the  remaining Schedule  Commitment  Reductions pro  rata  based on  the  then
remaining amounts of Scheduled Commitment Reductions.  

            SECTION 4.  Payments.

            4.01  Voluntary Prepayments.  The Borrower shall have the right to
prepay  Loans in whole  or in part,  without premium or penalty,  from time to
time on the following  terms and conditions:  (i) the Borrower  shall give the
Administrative  Agent at  the  Payment Office  written  notice (or  telephonic
notice promptly confirmed in writing)  of its intent to prepay the  Loans, the
amount  of such prepayment and (in the  case of Eurodollar Loans) the specific
Borrowing or Borrowings pursuant to which made, which notice shall be given by
the Borrower at least five Business Days prior to the date of such  prepayment
of Loans, which  notice shall  promptly be transmitted  by the  Administrative
Agent to  each of  the Banks; (ii) each  partial prepayment  of any  Borrowing
shall  be in  an aggregate  principal amount  of at  least $1,000,000  and, if
greater,  in  an  integral multiple  of  $100,000,  provided  that no  partial
prepayment of Eurodollar  Loans made pursuant to a Borrowing  shall reduce the
aggregate principal amount of the Loans outstanding pursuant to such Borrowing
to an amount  less than the  Minimum Borrowing Amount; (iii)  Eurodollar Loans
may  only be  prepaid pursuant  to this Section  4.01 on  the last  day of the
Interest Period applicable thereto; and (iv) each prepayment in respect of any
Loans  made pursuant to a Borrowing shall be  applied pro rata among the Banks
which made such Loans, provided that at  the Borrower's election in connection
with any  prepayment of Loans  pursuant to this Section  4.01, such prepayment
shall not be applied to any Loans of a Defaulting Bank. 

            4.02  Mandatory Prepayments.

            (A)  Requirements: 

            (a)  (i) If  on  any date  the  sum of  the  aggregate outstanding
principal amount  of Loans  made by  Non-Defaulting Banks  and  the Letter  of
Credit Outstandings exceeds the  Adjusted Total Commitment as then  in effect,
the Borrower shall repay on such date the principal of Loans of Non-Defaulting
Banks,  in an aggregate amount equal to such  excess.  If, after giving effect
to  the  repayment  of all  outstanding  Loans  of  Non-Defaulting Banks,  the
aggregate amount of Letter  of Credit Outstandings exceeds the  Adjusted Total
Commitment then in effect,  the Borrower shall pay to the Administrative Agent
an amount  in cash and/or  Cash Equivalents equal  to such  excess (up to  the
aggregate amount  of the Letter of  Credit Outstandings at such  time) and the
Administrative Agent shall hold  such payment as security for  the obligations
of the  Borrower hereunder  pursuant  to a  cash  collateral agreement  to  be
entered  into   in  form   and  substance   reasonably  satisfactory   to  the
Administrative  Agent   (which  shall  permit  certain   investments  in  Cash
Equivalents  satisfactory to the Administrative Agent,  until the proceeds are
applied to the secured obligations).

            (ii)  If on any date the aggregate outstanding principal amount of
the Loans  made by a Defaulting Bank exceeds the Commitment of such Defaulting
Bank, the Borrower shall repay the principal of Loans of  such Defaulting Bank
in an amount equal to such excess.

            (b)  Notwithstanding  anything to the contrary contained elsewhere
in  this Agreement, all then outstanding Loans  shall be repaid in full on the
Maturity Date.

            (c)  On the date  on which  any Change of  Control occurs,  unless
otherwise  agreed by the Required  Banks, the outstanding  principal amount of
the Loans, if any, shall become due and payable in full.

            (B)  Application:

            With respect to each prepayment of Loans required by Section 4.02,
the Borrower may designate the Types of  Loans which are to be prepaid and the
specific Borrowing or  Borrowings pursuant  to which made,  provided that  (i)
Eurodollar Loans  may only be repaid  if no Base Rate  Loans of Non-Defaulting
Banks  remain outstanding;  (ii) if  any prepayment  of Eurodollar  Loans made
pursuant  to  a  single Borrowing  shall  reduce  the  outstanding Loans  made
pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount
for  such Borrowing, such Borrowing  shall be immediately  converted into Base
Rate Loans;  and (iii)  each prepayment  of any  Loans made  by Non-Defaulting
Banks  pursuant to  a  Borrowing shall  be  applied pro  rata  among the  Non-
Defaulting Banks which made  such Loans.  In  the absence of a  designation by
the  Borrower as described in the preceding sentence, the Administrative Agent
shall, subject to the above, make such designation in its sole discretion with
a view,  but no  obligation, to  minimize breakage  costs owing under  Section
1.11.  Notwithstanding the foregoing provisions of this Section 4.02(B), if at
any time the mandatory prepayment  of Loans pursuant to Section 4.02(A)  above
would result,  after giving effect to  the procedures set forth  above, in the
Borrower incurring breakage costs under Section 1.11 as a result of Eurodollar
Loans  being  prepaid  other than  on  the  last  day  of an  Interest  Period
applicable thereto (the "Affected Eurodollar Loans"), then the Borrower may in
its sole  discretion initially deposit a  portion (up to 100%)  of the amounts
that otherwise  would have been  paid in  respect of  the Affected  Eurodollar
Loans with  the Administrative Agent (which deposit must be equal in amount to
the  amount of  the Affected Eurodollar  Loans not immediately  prepaid) to be
held as security  for the obligations of the Borrower  hereunder pursuant to a
cash collateral agreement to be entered  into in form and substance reasonably
satisfactory to the  Administrative Agent  and shall  provide for  investments
satisfactory  to the  Administrative Agent  and the  Borrower, with  such cash
collateral to be directly  applied upon the first occurrence  (or occurrences)
thereafter of  the last day of  an Interest Period applicable  to the relevant
Loans that  are Eurodollar Loans  (or such earlier date  or dates as  shall be
requested  by the Borrower),  to repay an  aggregate principal  amount of such
Loans equal to the Affected Eurodollar Loans not initially prepaid pursuant to
this  sentence.   Notwithstanding anything  to the  contrary contained  in the
immediately  preceding  sentence, all  amounts  deposited  as cash  collateral
pursuant to  the immediately  preceding sentence  shall be  held for  the sole
benefit of the Banks whose Loans would otherwise have been immediately prepaid
with  the  amounts  deposited  and  upon  the taking  of  any  action  by  the
Administrative  Agent  or the  Banks pursuant  to  the remedial  provisions of
Section 9,  any amounts  held  as cash  collateral  pursuant to  this  Section
4.02(B) shall, subject to  the requirements of applicable law,  be immediately
applied to the Loans.

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

            4.04  Net  Payments.  (a)  All  payments   made  by  the  Borrower
hereunder or under any Note will be made without setoff, counterclaim or other
defense.  Except  as provided in  Section 4.04(b), all  such payments will  be
made free and clear of, and  without deduction or withholding for, any present
or future taxes, levies,  imposts, duties, fees, assessments or  other charges
of  whatever nature  now or hereafter  imposed by  any jurisdiction  or by any
political subdivision or taxing  authority thereof or therein with  respect to
such  payments (but  excluding, except  as provided  in the  second succeeding
sentence, any tax imposed on or measured by the net income or net profits of a
Bank  pursuant to  the laws of  the jurisdiction  in which it  is organized or
managed and controlled or  the jurisdiction in  which the principal office  or
applicable lending office of such  Bank is located or any  subdivision thereof
or  therein) and all interest,  penalties or similar  liabilities with respect
thereto  (all   such  non-excluded  taxes,  levies,   imposts,  duties,  fees,
assessments or other charges being  referred to collectively as "Taxes").   If
any Taxes are so levied or imposed, the Borrower agrees to pay the full amount
of  such Taxes, and  such additional amounts,  if any, as may  be necessary so
that  every payment of all amounts due under this Agreement or under any Note,
after withholding  or deduction for  or on account of  any Taxes, will  not be
less than the amount provided for herein or in such Note.  If any  amounts are
payable  by the  Borrower  in  respect  of Taxes  pursuant  to  the  preceding
sentence, the Borrower agrees to reimburse each Bank, upon the written request
of  such Bank,  for taxes  imposed on  or measured  by the  net income  or net
profits of such  Bank pursuant to the  laws of the  jurisdiction in which  the
principal office or applicable lending office of such Bank is located or under
the laws  of  any  political  subdivision or  taxing  authority  of  any  such
jurisdiction in which  the principal  office or applicable  lending office  of
such Bank  is located  and for any  withholding of  taxes as  such Bank  shall
determine  are payable  by, or  withheld from,  such Bank  in respect  of such
amounts so  paid  to or  on behalf  of  such Bank  pursuant  to the  preceding
sentence and  in respect of  any amounts  paid to  or on behalf  of such  Bank
pursuant to this  sentence.  The  Borrower will furnish to  the Administrative
Agent  within 45 days after the date the  payment of any Taxes is due pursuant
to applicable law  certified copies of tax receipts evidencing such payment by
the Borrower.   The Borrower agrees to indemnify and  hold harmless each Bank,
and reimburse such Bank upon its written request, for the amount of any  Taxes
so levied or imposed and paid by such Bank.

            (b)  Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees to deliver  to the Borrower
and  the Administrative Agent on or prior to the date of this Agreement, or in
the case of a Bank that is an assignee or transferee of an interest under this
Agreement pursuant to  Section 1.13 or  12.04 (unless the respective  Bank was
already a Bank hereunder immediately prior to such assignment or transfer), on
the date  of such assignment  or transfer to such  Bank, (i) two  accurate and
complete original signed copies of Internal  Revenue Service Form 4224 or 1001
(or  successor  forms) certifying  to such  Bank's  entitlement to  a complete
exemption from  United States withholding  tax with respect to  payments to be
made under this  Agreement and under any  Note, or (ii) if  the Bank is not  a
"bank"  within the  meaning of  Section 881(c)(3)(A)  of  the Code  and cannot
deliver  either Internal Revenue Service Form 1001  or 4224 pursuant to clause
(i) above, (x) a certificate substantially in the form of Exhibit  D (any such
certificate,  a "Section  4.04(b)(ii) Certificate")  and (y) two  accurate and
complete  original  signed copies  of Internal  Revenue  Service Form  W-8 (or
successor  form) certifying to such Bank's entitlement to a complete exemption
from United States withholding tax with  respect to payments of interest to be
made under this Agreement  and under any Note.  In addition,  each Bank agrees
that from time to time after the date of  this Agreement, when a lapse in time
or  change in  circumstances renders  the previous  certification obsolete  or
inaccurate in  any material respect, it  will deliver to the  Borrower and the
Administrative Agent two new  accurate and complete original signed  copies of
Internal  Revenue  Service Form  4224  or  1001, or  Form  W-8  and a  Section
4.04(b)(ii)  Certificate, as the case  may be, and such  other forms as may be
required  in order to confirm or  establish the entitlement of  such Bank to a
continued  exemption from or reduction  in United States  withholding tax with
respect to payments under this Agreement and any Note, or it shall immediately
notify  the Borrower and the Administrative Agent  of its inability to deliver
any  such Form  or  Certificate.   Notwithstanding  anything to  the  contrary
contained  in Section  4.04(a),  but  subject  to  Section  12.04(b)  and  the
immediately  succeeding sentence, (x) the  Borrower shall be  entitled, to the
extent it is required to do so by law, to deduct or withhold income or similar
taxes imposed  by the  United States (or  any political subdivision  or taxing
authority thereof or  therein) from  interest, fees or  other amounts  payable
hereunder for the account of any Bank  which is not a United States person (as
such term  is defined  in Section  7701(a)(30) of the  Code) for  U.S. Federal
income tax  purposes to  the extent  that such  Bank has  not provided  to the
Borrower  U.S.  Internal  Revenue  Service  Forms that  establish  a  complete
exemption from such deduction or withholding and (y) the Borrower shall not be
obligated pursuant to  Section 4.04(a) hereof to gross-up payments  to be made
to a Bank in respect of income  or similar taxes imposed by the United  States
if (I) such Bank has not provided to the Borrower the Internal Revenue Service
Forms required to be provided to the Borrower pursuant to this Section 4.04(b)
or (II) in the case of a payment, other  than interest, to a Bank described in
clause (ii) above, to the  extent that such Forms do not  establish a complete
exemption from withholding  of such  taxes.  Notwithstanding  anything to  the
contrary contained in the preceding sentence or elsewhere in this Section 4.04
and  except as  set forth  in  Section 12.04(b),  the Borrower  agrees to  pay
additional amounts  and to indemnify each Bank in the manner set forth in Sec-
tion 4.04(a) (without regard to the identity of the jurisdiction requiring the
deduction or withholding) in respect of any amounts deducted or withheld by it
as described  in the immediately preceding sentence as a result of any changes
after the  date of this Agreement in  any applicable law, treaty, governmental
rule, regulation, guideline or order, or in the interpretation thereof, relat-
ing to  the deducting or withholding of income or similar Taxes, provided such
Bank shall provide to the Borrower and the Administrative Agent any reasonably
available  applicable IRS tax form  (reasonably similar in  its simplicity and
lack of detail to IRS Form 1001) necessary or appropriate for the exemption or
reduction in the rate of such U.S. federal withholding tax.

            (c)  The provisions  of  this Section  4.04  shall be  subject  to
Section 1.12(b) (to the extent applicable).

            SECTION 5.  Conditions Precedent.  The  obligation of the Banks to
make each Loan hereunder, and the obligation of the Letter of Credit Issuer to
issue Letters of Credit hereunder, is subject, at the time of each such Credit
Event (except as otherwise hereinafter indicated), to the satisfaction of each
of the following conditions:

            5.01  Execution  of   Agreement.  On  or  prior  to   the  Initial
Borrowing Date,  (i) the  Effective Date  shall have occurred  as provided  in
Section  12.10 and (ii) there shall have  been delivered to the Administrative
Agent  for  the account  of each  Bank the  appropriate  Note executed  by the
Borrower, and in the amount, maturity and as otherwise provided herein.

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

            5.03  Officer's  Certificate.  On the Initial  Borrowing Date, the
Administrative  Agent shall have received a certificate dated such date signed
by the President or  any Vice President of the Borrower stating that there has
been no  Material Adverse Change in the financial condition of the Borrower or
of Holdings and its Subsidiaries taken as  a whole since the date of the  last
audited  financial  statements provided  by Holdings  or  the Borrower  to the
Administrative  Agent and that all  of the applicable  conditions set forth in
Sections 5.02, 5.08(a) and 5.18 exist as of such date.

            5.04  Opinions of  Counsel.  On  the Initial  Borrowing Date,  the
Administrative  Agent   shall  have   received  opinions,  addressed   to  the
Administrative  Agent and each  of the Banks  and dated the  Initial Borrowing
Date, from  (i) Wayne  Hillin, Esq.,  General Counsel to  the Credit  Parties,
which  opinion shall cover the matters contained  in Exhibit E-1, (ii) White &
Case, special counsel to  the Administrative Agent, which opinion  shall cover
the matters contained in Exhibit E-2 and (iii) from local counsel satisfactory
to the Administrative  Agent as  the Administrative Agent  may request,  which
opinions shall cover the perfection of the security interests granted pursuant
to the Security  Documents and such other matters incident to the transactions
contemplated herein as  the Administrative  Agent may  reasonably request  and
shall be in form and substance satisfactory to the Administrative Agent.

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

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

            5.06  Existing  Indebtedness  Agreements.    On or  prior  to  the
Initial Borrowing Date,  there shall have been delivered to  the Banks copies,
certified as true  and correct by  an appropriate officer  of the Borrower  or
Holdings, as  the case  may be,  of all agreements  evidencing or  relating to
Existing Indebtedness  (the "Existing Indebtedness Agreements"),  all of which
shall be in form and substance satisfactory to the Administrative Agent.

            5.07  Adverse Change, etc.  From December  31, 1995 to the Initial
Borrowing  Date, nothing shall  have occurred (and  neither the  Banks nor the
Administrative Agent shall  have become aware  of any facts or  conditions not
previously known) which the  Administrative Agent or the Required  Banks shall
determine (a) has, or is reasonably likely to have, a  material adverse effect
on the rights or remedies  of the Banks or the Administrative Agent, or on the
ability of Holdings, the Borrower or any Subsidiary Guarantor to perform their
respective obligations to them, or (b) has, or is reasonably likely to have, a
Material Adverse Effect.

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

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

            5.10   Fees.   On the Initial  Borrowing Date, the  Borrower shall
have  paid to  the Administrative Agent  and the  Banks all  Fees and expenses
agreed upon by such parties to be paid on or prior to such date.

            5.11  Security  Agreement.   On  the Initial  Borrowing Date  each
Mortgagor shall  have  duly  authorized,  executed and  delivered  a  Security
Agreement and Assignment of Earnings and  Insurances in the form of Exhibit G,
together with  such changes (or with such other documents) as may be requested
by the Collateral Agent in connection with local law (as  modified, amended or
supplemented from  time  to time  in  accordance with  the terms  thereof  and
hereof, the  "Security  Agreement") covering  all  of the  Security  Agreement
Collateral  (except  Security  Agreement   Collateral  relating  to  the  C.E.
Thornton,  which  Security  Agreement  Collateral shall  be  assigned  to  the
Collateral Agent in accordance with Section 7.12(a)), together with:

           (i)  executed copies  of  Financing Statements  (Form UCC-1  and/or
      UCC-3) or  appropriate local equivalent  in appropriate form  for filing
      under  the UCC or appropriate  local equivalent of  each jurisdiction as
      may  be  necessary to  perfect the  security  interests purported  to be
      created by the Security Agreement;

          (ii)  certified copies  of Requests for Information  or Copies (Form
      UCC-11),  or equivalent  reports,  each of  a  recent date  listing  all
      effective  financing  statements  that  name Reading &  Bates  Offshore,
      Limited as debtor and that are filed in the jurisdictions referred to in
      clause  (i) above,  together with  copies of  such financing  statements
      (none of which shall cover the Collateral except (x)  those with respect
      to  which appropriate  termination  statements executed  by the  secured
      lender thereunder have been delivered to the Collateral Agent and (y) to
      the extent evidencing Permitted Liens); and

         (iii)  evidence  that all other  recordings and  filings of,  or with
      respect to, the  Security Agreement, and  all other actions,  as may  be
      necessary  or,  in the  opinion of  the  Collateral Agent,  desirable to
      perfect  the security interests intended  to be created  by the Security
      Agreement have been completed  (it being understood and agreed  that UCC
      financing statements  and termination statements  shall be filed  in the
      appropriate  governmental office  within three  Business Days  after the
      Initial Borrowing Date); 

and the Security Agreement and such other documents shall be in full force and
effect.

            5.12  Subsidiary Guaranty.   On  the Initial Borrowing  Date, each
Subsidiary  of the  Borrower which  owns a Mortgaged  Rig (each  a "Subsidiary
Guarantor") shall  have duly authorized,  executed and delivered  a Subsidiary
Guaranty in the form of  Exhibit H (as modified, amended or  supplemented from
time to time in accordance with the terms hereof and  thereof, the "Subsidiary
Guaranty"), and the Subsidiary Guaranty shall be in full force and effect.

            5.13  Mortgages.  (a)  On   the   Initial  Borrowing   Date,  each
Mortgagor  shall have  duly authorized,  executed and delivered  the following
document  or  documents to  which  it  is a  party  (as  modified, amended  or
supplemented from  time  to time  in  accordance with  the terms  thereof  and
hereof, the "Mortgages"):

           (i)  with  respect to  the US  Rigs, substantially  in the  form of
      Exhibit  I-1 (as amended, modified or supplemented  from time to time in
      accordance with the terms hereof and thereof, the "US Mortgage");

          (ii)  with respect to the Panamanian Rigs, substantially in the form
      of Exhibit I-2 (as  amended, modified or supplemented from  time to time
      in  accordance  with  the  terms hereof  and  thereof,  the  "Panamanian
      Mortgage");

         (iii)  with  respect to the Australian Rig, substantially in the form
      of Exhibit I-3  (as amended, modified or supplemented  from time to time
      in  accordance  with  the  terms  hereof and  thereof,  the  "Australian
      Mortgage"); and

            (b)  On  the  Initial  Borrowing  Date,  all  actions   necessary,
desirable or otherwise reasonably requested by the Collateral Agent to provide
the  Collateral Agent with a perfected first priority security interest in all
Collateral purported to be covered by the Mortgages shall have been taken.

            5.14  Evidence of Lien, etc.   On the Initial Borrowing  Date, the
Administrative  Agent  shall  have  received  (i) United  States  Coast  Guard
certificates  of  ownership  showing  (or  confirmation  updating   previously
reviewed certificates and indicating) that the US Rig Jack Bates is registered
in the  ownership of the Borrower, the  US Rig W.D. Kent  is registered in the
ownership  of Reading  & Bates  Exploration Co.,  the US  Rig D.R.  Stewart is
registered  in the ownership  of Reading &  Bates Exploration Co.,  the US Rig
F.G. McClintock is  registered in the  ownership of Reading &  Bates Offshore,
Limited,  the US  Rig Randolph  Yost  is registered  in the  ownership of  the
Borrower,  the  US Rig  J.T.  Angel  is registered  in  the  ownership of  the
Borrower, the US  Rig Roger W.  Mowell is registered  in the ownership of  the
Borrower, the US  Rig Harvey H. Ward is registered in the ownership of HRB Rig
Corporation, and  the US Rig George H. Galloway is registered in the ownership
of  Reading  & Bates  Offshore,  Limited,  each subject  to  the  Lien of  the
respective  US  Mortgage  and free  of  all  other  Liens  of record,  (ii)  a
certificate  of the Director General of the  Public Registry of Panama showing
(or  confirmation updating  previously  reviewed certificates  and indicating)
that the  Panamanian  Rig Charley  Graves is  registered in  the ownership  of
Reading and Bates Borneo Drilling Co., Ltd., the Panamanian Rig J.W. McLean is
registered  in the  ownership of the  Borrower, and  the Panamanian  Rig 41 is
registered in the ownership of the  Borrower, each subject to the Lien  of the
respective Panamanian Mortgage and free of all other Liens of record and (iii)
a certificate of  the Shipping  Registration Office of  Australia showing  (or
confirmation updating  previously reviewed certificates  indicating) that  the
Australian Rig Ron Tappmeyer is registered in the ownership of Reading & Bates
(A) Pty. Ltd., and subject to the Lien of the Australian  Mortgage and free of
all other Liens of record.

            5.15  Rig Reports; Drilling  Contracts.   (a) On or  prior to  the
Initial Borrowing Date, the Administrative Agent shall have received:  

           (i)  evidence  satisfactory  to  the  Collateral  Agent  that  each
      Mortgaged  Rig is classified in the highest  class available for rigs of
      its  age and type with the American  Bureau of Shipping, Inc. or another
      internationally recognized classification society  reasonably acceptable
      to the Collateral  Agent, free of any material  outstanding requirements
      or recommendations; and

          (ii)  reports  from  Approved Shipbrokers  setting forth  the Market
      Value of each Mortgaged Rig, which combined  value of all Mortgaged Rigs
      shall not be less than $480 million.

            (b)  On the Initial Borrowing Date, the Administrative Agent shall
have received  true and  correct copies  of all  current and pending  drilling
contracts relating to the Mortgaged Rigs and the Arcade Rigs.

            5.16  Insurance  Report.   On or  prior to  the Initial  Borrowing
Date,  the Administrative  Agent shall  have received  a detailed  report from
Soriero  &  Company, Inc.,  or another  firm  of independent  marine insurance
brokers acceptable to  the Administrative  Agent and the  Required Banks  with
respect to the insurance  maintained by the Mortgagors in connection  with the
Mortgaged Rigs and by Arcade  with respect to the Arcade Rigs, together with a
certificate  from such broker certifying  that such insurances  (i) are placed
with  such  insurance companies  and/or  underwriters  and/or  clubs, in  such
amounts, against such risks, and in such form, as are normally insured against
by  similarly situated  insureds and  as are  necessary or  advisable for  the
protection  of the Security  Trustee or the Administrative  Agent, as the case
may be, as mortgagee and (ii) conform with the requirements of the Mortgages.

            5.17  Pledge Agreement.   On the Initial  Borrowing Date, Holdings
shall have duly  authorized, executed and delivered a Pledge  Agreement in the
form of Exhibit J (as modified, supplemented or amended from time to time, the
"Pledge  Agreement")  and shall  have delivered  to  the Collateral  Agent, as
Pledgee,  all the Pledged  Stock referred to  therein then owned  by Holdings,
together  with  executed and  undated stock  powers  relating to  such Pledged
Stock.

            5.18  Refinancing; Existing Credit Agreement.  (a)  On or prior to
the  Initial  Borrowing  Date or  concurrently  with  the  Credit Events  then
occurring, the total  commitments under the  Existing Credit Agreements  shall
have been  terminated, and  all loans and  notes issued thereunder  shall have
been repaid  in full, together  with interest  thereon, all letters  of credit
issued  thereunder shall  have been  terminated or  assumed hereunder  and all
other amounts owing thereunder shall have been repaid in full and the Existing
Credit  Agreements shall have  been terminated and  be of no  further force or
effect except  for continuing  indemnification  obligations and  reimbursement
obligations under letters of  credit assumed hereunder.  The Borrower shall be
entitled  to utilize  this Facility  to terminate  the commitments,  repay the
loans  and terminate any letters  of credit (not  otherwise assumed hereunder)
under the Existing  Credit Agreements.   The Administrative  Agent shall  have
received evidence in form,  scope and substance reasonably satisfactory  to it
that the matters set forth in this Section 5.18(a) have been satisfied on such
date.

            (b)  On or  prior to  the Initial Borrowing  Date or  concurrently
with the Credit Events then occurring, the creditors under the Existing Credit
Agreements shall have terminated and released all security interests and Liens
on the  assets owned by,  Holdings, the  Borrower or any  of its  Subsidiaries
granted in connection with the Existing Credit Agreements.  The Administrative
Agent shall have received such releases  of security interests in and Liens on
the assets  owned by Holdings, the  Borrower and its Subsidiaries  as may have
been reasonably requested by the Administrative Agent, which releases shall be
in form  and substance reasonably  satisfactory to  the Administrative  Agent.
Without limiting the  foregoing, there  shall have been  delivered (i)  proper
termination  statements (Form UCC-3 or  the appropriate equivalent) for filing
under the UCC of each jurisdiction  where a financing statement (Form UCC-1 or
the appropriate equivalent) was  filed with respect to Holdings,  the Borrower
or any of its Subsidiaries in  connection with the security interests  created
with  respect to the Existing  Credit Agreement and  the documentation related
thereto, (ii) terminations or assignments of any security interest in, or Lien
on, any patents, trademarks, copyrights, or similar interests of Holdings, the
Borrower or any of its Subsidiaries on which filings have  been made and (iii)
terminations  of all mortgages, leasehold mortgages and deeds of trust created
with respect to property of Holdings, the Borrower or any of its Subsidiaries,
in each case  to secure the obligations under the  Existing Credit Agreements,
all  of which shall  be in form  and substance reasonably  satisfactory to the
Administrative Agent.

            5.19  Compliance Certificate.  On  the Initial Borrowing Date, and
subject  to Section  5.18  above, the  Borrower shall  have  delivered to  the
Administrative Agent a compliance certificate in  the form of Exhibit L to the
Existing Credit Agreement indicating that the Borrower is current with respect
to  its obligations under  the Existing Credit  Agreement and is  otherwise in
compliance with all the terms and conditions thereof.

            The  acceptance  of  the  benefits  of  each  Credit  Event  shall
constitute  a representation and  warranty by Holding and  the Borrower to the
Administrative  Agent and  each  of  the  Banks that  all  of  the  conditions
specified above which are applicable in accordance with their express terms at
the time  of such acceptance exist as of that  time.  All of the certificates,
legal opinions and other documents  and papers referred to in this  Section 5,
unless  otherwise specified, shall be delivered to the Administrative Agent at
its Notice  Office for the  account of each of  the Banks and,  except for the
Notes, in sufficient counterparts or copies for each of the Banks and shall be
satisfactory in form and substance to the Administrative Agent.

            SECTION 6.  Representations, Warranties and  Agreements.  In order
to  induce the Banks  to enter into this  Agreement and to  make the Loans and
issue and/or participate  in Letters of  Credit provided for  herein, each  of
Holdings and the Borrower  makes the following representations and  warranties
to, and agreements with, the  Banks, all of which shall survive  the execution
and delivery of this Agreement and the making of the Loans (with the making of
each Credit Event thereafter  being deemed to constitute a  representation and
warranty that the  matters specified in this Section 6 are true and correct in
all material respects on and as  of the date of each such Credit  Event unless
such representation and  warranty expressly indicates that it is being made as
of any specific date, in which  case such representations and warranties shall
be true and correct in all material respects as of such date):

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

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

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

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

            6.05  Use  of Proceeds; Margin  Regulations.  (a)  The proceeds of
all  Loans shall be utilized to provide  for the general corporate purposes of
Holdings, the Borrower and their respective Subsidiaries.

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

            6.06  Governmental  Approvals.  Except  for the  orders, consents,
approvals,  licenses,  authorizations, validations,  recordings, registrations
and exemptions that have already been duly made or obtained and remain in full
force  and effect,  no  order, consent,  approval, license,  authorization, or
validation  of, or  filing  (other than  the  filing of  Form UCC-1  Financing
Statements or the appropriate  equivalents, which such filing, if  this repre-
sentation is being  made more than ten days after  the Initial Borrowing Date,
has  been made), recording or registration with,  or exemption by, any foreign
or  domestic  governmental or  public body  or  authority, or  any subdivision
thereof, is  required to authorize or  is required in connection  with (i) the
execution,  delivery  and  performance of  any  Credit  Document  or (ii)  the
legality, validity, binding effect or enforceability of any Credit Document.

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

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

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

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

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

            (c)  Except as reflected in the financial statements and the notes
thereto  described in Section 6.10(b), there  were as of the Initial Borrowing
Date no liabilities  or obligations with respect to  Holdings, the Borrower or
any of their respective  Subsidiaries of a nature (whether  absolute, accrued,
contingent or otherwise and  whether or not due) which, either individually or
in aggregate,  would be material to  Holdings and its Subsidiaries  taken as a
whole,  except as incurred  subsequent to  December 31,  1995 in  the ordinary
course of business consistent with past practices.  

            (d)  On  and as  of  the  Initial  Borrowing Date,  the  financial
projections, together  with adjustments  thereto, previously delivered  to the
Administrative Agent and the Banks (the "Projections") have been prepared on a
basis  consistent with the financial statements referred to in Section 6.10(a)
(other than as set forth or presented  in such Projections), and there are  no
statements or  conclusions in any of  the Projections which are  based upon or
include information known to Holdings or the Borrower to be  misleading in any
material respect or  which fail to take into account  material information not
otherwise  disclosed  in writing  to the  Administrative  Agent and  the Banks
regarding  the matters  reported  therein.   On  the Initial  Borrowing  Date,
Holdings  and the Borrower believed  that the Projections  were reasonable and
attainable.

            6.11  Security  Interests.  On  and  after the  Initial  Borrowing
Date, each of the Security Documents creates, as security  for the Obligations
purported  to be secured thereby,  a valid and  enforceable perfected security
interest in  and Lien on all of the  Collateral subject thereto, to the extent
perfection of a security interest or Lien is governed by  Article 8 or Article
9  of the  UCC (as  defined in  the applicable  Security Documents),  the Ship
Mortgage  Act (as  defined in  the U.S.  Mortgages), or  comparable provisions
under the  laws of  the Republic of  Panama and  Australia, and subject  to no
other Liens (except that the Collateral may be subject to Permitted Liens), in
favor of the Collateral Agent or the Security Trustee, as the case may be, for
the benefit of the Banks.   No filings or recordings are required in  order to
perfect  the security interests created under any Security Document except for
filings or recordings required  in connection with any such  Security Document
which  shall  have been  made  upon  or  prior  to  (or  are  the  subject  of
arrangements,  satisfactory  to the  Administrative  Agent, for  filing  on or
promptly after the date of) the execution and delivery thereof.

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

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

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

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

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

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

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

            6.17  Properties.  (a)  Holdings and each  of its Subsidiaries has
title  to all  material  properties  owned  by  them  including  all  property
reflected in the consolidated  balance sheet of Holdings and  its Subsidiaries
as referred to in Section 6.10(b), free and clear of all Liens, other than (i)
as  referred to in the  consolidated balance sheet or  in the notes thereto or
(ii) Permitted Liens.

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

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

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

            6.20  Citizenship.    The  Mortgagors  are qualified  to  own  and
operate the Mortgaged Rigs under  the laws of the United States,  the Republic
of Panama and Australia, as may be applicable.

            6.21  Rig  Classification.   Each offshore  drilling rig  owned or
leased  by Holdings and  its Subsidiaries is  classified in  the highest class
available for rigs of its  age and type with the American Bureau  of Shipping,
Inc. or  another internationally recognized  classification society reasonably
acceptable  to  the  Collateral  Agent,   free  of  any  material  outstanding
requirements  or recommendations, other than (i) with respect to any Mortgaged
Rig, as permitted under the Mortgage relating thereto and (ii) with respect to
any other rigs, such requirements or recommendations which if not cured by the
owner thereof would not materially diminish such rig's value.

            SECTION  7.  Affirmative  Covenants.  Holdings  and  the  Borrower
covenant and  agree that on the  Initial Borrowing Date and  thereafter for so
long  as  this  Agreement  is  in  effect  (and  until  the  Commitments  have
terminated, no  Letters of Credit or  Notes are outstanding and  the Loans and
Unpaid  Drawings,  together  with interest,  Fees  and  all other  Obligations
incurred hereunder, are paid in full):

            7.01  Information  Covenants.  Holdings  and/or the  Borrower will
furnish to each Bank:

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

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

            (c)  Rig  Status Report.   As soon  as available and  in any event
      within  60 days  after the  end of  the first  three fiscal  quarters of
      Holdings and within 90 days after the end of the  fourth fiscal quarter,
      a report  (in form satisfactory  to the Administrative  Agent) detailing
      (i)(A) the  then current location of each  of the offshore drilling rigs
      owned or leased by  Holdings and its Subsidiaries, (B)  the then current
      term of and  parties to any contract of any  such offshore drilling rig,
      and (C) the then current  day rate with respect to any such contract and
      (ii) for the previous  fiscal quarter, the average day rates  and utili-
      zation for each such offshore drilling rig.

            (d)  Forecast; etc.  Not more than  60 days after the commencement
      of each fiscal  year of  Holdings, a forecast  which includes an  income
      statement, balance sheet  and cash  flow statement of  Holdings and  its
      Subsidiaries for each of the  four fiscal quarters of such fiscal  year,
      including a breakdown of  revenues, operating expenses, utilizations and
      Consolidated  Capital Expenditure assumptions for each offshore drilling
      rig owned or leased by Holdings and its Subsidiaries.

            (e)  Compliance Certificate.  At  the time of the  delivery of the
      financial  statements  provided  for  in  Sections 7.01(a)  and  (b),  a
      certificate of Holdings and/or  the Borrower signed by its  chief finan-
      cial  officer, controller  or other  Authorized Officer  in the  form of
      Exhibit K to the  effect that no Default or Event  of Default exists or,
      if any Default or Event of Default does exist, specifying the nature and
      extent thereof, which certificate shall  set forth the calculations  re-
      quired  to establish  whether  Holdings  and  its Subsidiaries  were  in
      compliance with the provisions of Section 8 as at the end of such fiscal
      period or year, as the case may be.

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

            (g)  Auditors'   Reports.  Promptly   upon  receipt   thereof  and
      following  such time  as management  shall have  had reasonable  time to
      respond thereto, a  copy of  each formal report  or "management  letter"
      submitted  to Holdings or the Borrower by its independent accountants in
      connection with any  annual, interim or special audit made  by it of the
      books of Holdings or the Borrower.

            (h)  Insurance  Report.   On  or before  each  anniversary of  the
      Initial Borrowing  Date, a  report from Holdings  and/or the  Borrower's
      independent maritime insurance broker as required by the Mortgages.

            (i)  Annual Rig Valuation Report.  At  the time of the delivery of
      the financial statements provided for in Section 7.01(a), an updated rig
      valuation report from an  Approved Shipbroker setting forth the  current
      Market Value of each Mortgaged Rig.

            (j)  SEC Reports.   Promptly upon transmission  thereof, copies of
      any material filings  and registration with, and reports to,  the SEC by
      Holdings  or any  of  its  Subsidiaries  and  copies  of  all  financial
      statements,  proxy statements, notices and reports as Holdings or any of
      its  Subsidiaries shall  generally send  to analysts  or all  holders of
      their  capital stock in their capacity as  such holders (in each case to
      the  extent  not theretofore  delivered to  the  Banks pursuant  to this
      Agreement).

            (k)  Other Information.  From time to time, such other information
      or documents (financial or otherwise) as the Administrative Agent on its
      own behalf or on behalf of the Required Banks may reasonably request.

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

            7.03  Insurance.  In addition to any requirements set forth in the
Mortgages, Holdings will, and will  cause each of its Subsidiaries to,  at all
times maintain  in  full  force and  effect  insurance in  such  amounts  with
carriers of such insurance  industry ratings, covering such risks  and liabil-
ities  and  with  such  deductibles  or  self-insured  retentions  as  are  in
accordance  with normal  industry  practice for  similarly situated  insureds.
Holdings will,  and will  cause each  of its Subsidiaries  to, furnish  on the
Initial Borrowing Date and  annually thereafter to the Administrative  Agent a
summary of the insurance  carried together with certificates of  insurance and
other evidence of such insurance.

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

            7.05  Consolidated  Corporate  Franchises.  Holdings will  do, and
will cause each  of its Subsidiaries to  do, or cause  to be done, all  things
necessary  to preserve  and  keep  in full  force  and effect  its  existence,
material rights and  authority, unless the failure to do  so is not reasonably
likely  to have  a  Material Adverse  Effect,  provided that  any  transaction
permitted by Section 8.02 will not constitute a breach of this Section 7.05.

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

            7.07  Good  Repair.  Except for  offshore drilling  rigs currently
under or scheduled to be repaired or which have  been damaged or have suffered
a casualty  as to which (within  a reasonable period of  time) Holdings and/or
the Borrower have not made a determination whether to replace or repair, or if
the  determination  to replace  or  repair has  been  made, as  to  which such
replacement or  repairs  are  being  undertaken, subject  to  availability  of
equipment, materials and/or  repair facilities, Holdings will, and  will cause
each of its Subsidiaries to, keep its properties and equipment  used or useful
in  its business,  in whomsoever's  possession they  may  be, in  good repair,
working order and condition,  normal wear and tear  excepted, and, subject  to
Section 8.02, see that from time to time there are made in such properties and
equipment   all  necessary   and  proper   repairs,  renewals,   replacements,
extensions, additions, betterments and improvements  thereto to the extent and
in the manner useful or customary for companies in similar businesses.

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

            7.09  Use of Proceeds.  All proceeds of the Loans shall be used as
provided in Section 6.05.

            7.10  Earnings Concentration Account.  The Borrower shall maintain
with  Christiania  Bank   og  Kreditkasse,  Grand  Cayman   Branch,  on  terms
substantially similar to those in effect  prior to the Initial Borrowing Date,
an  account (the  "Concentration  Account") into  which  the Earnings  of  the
Borrower  and  the Subsidiary  Guarantors arising  from  the operation  of the
Mortgaged  Rigs  shall  be deposited  and  maintained  as  cash collateral  in
accordance  with the Security Agreement.   Funds in  the Concentration Account
shall  be  released from  time to  time to  the  Borrower upon  the Borrower's
request  (which request shall be implied by  any withdrawal by the Borrower of
funds  from the  Concentration  Account), unless  and until  such time  as the
Administrative  Agent,  following  the  occurrence of  an  Event  of  Default,
requires that said monies be held as security or applied by the Administrative
Agent,  for the benefit of itself and  the Banks, as it may direct, whereafter
the Borrower shall procure such funds  and ensure that such funds are  held as
security  or applied in accordance  with the directions  of the Administrative
Agent.

            7.11  Additional  Rig Valuations.  At any time as may be requested
by the Administrative Agent on  behalf of the Required Banks (but  in no event
in excess of  three times in any fiscal year of  Holdings (without taking into
account  the right  of Holdings or  the Borrower  to retain  a second Approved
Shipbroker in  accordance with immediately  succeeding sentence))  and at  the
expense of  the Borrower, Holdings or  the Borrower shall  retain the Approved
Shipbroker  requested by the Administrative  Agent to supply  a written report
setting forth  the Market Value of each Mortgaged Rig  at such time.  Holdings
or the Borrower may retain a second Approved Shipbroker of its own choosing at
such  time and at  its own expense  to supply a second  written report setting
forth the Market Value of such  Mortgaged Rigs.  Promptly upon receipt thereof
Holdings and/or the Borrower shall  deliver copies of each such report  to the
Banks.  

            7.12  Further  Assurances.  (a)  The  Total  Commitment  shall  be
reduced in accordance with Section 3.03(f) if the following conditions are not
satisfied (as determined in good faith by the Administrative Agent): 

           (i)  Mortgage.  HRB  Rig  Corporation shall  have  duly authorized,
      executed and delivered a US Mortgage with respect  to the C.E. Thornton,
      substantially  in the  form  of  Exhibit  I-1  hereto  and  all  actions
      necessary, desirable or otherwise reasonably requested by the Collateral
      Agent  to provide the Security  Trustee with a  perfected first priority
      security interest in the C.E. Thornton shall have been taken.

          (ii)  Evidence of  Lien, etc.  The Administrative  Agent shall  have
      received  a certificate of the U.S. Coast Guard showing (or confirmation
      updating previously  reviewed certificates  and indicating) that  the US
      Rig C.E. Thornton is registered in the ownership of HRB Rig Corporation,
      and subject  to the Lien of the US Mortgage  and free of all other Liens
      of record.

         (iii)  Security Agreement.   HRB Rig Corporation  shall have executed
      and  delivered a counterpart of  the Security Agreement  with respect to
      the  earnings of and insurance maintained on the C.E. Thornton, together
      with:

                  (1)  executed  copies  of Financing  Statements  (Form UCC-1
            and/or UCC-3) or appropriate  local equivalent in appropriate form
            for filing under the  UCC or appropriate local equivalent  of each
            jurisdiction  as  may  be  necessary to  perfect  the  assignments
            purported to be created thereby;

                  (2)  evidence that  all other recordings and  filings of, or
            with respect to, such assignment, and all other actions, as may be
            necessary or, in the opinion of the Collateral Agent, desirable to
            perfect the assignment  intended to be  created thereby have  been
            completed (it  being understood that UCC  financing statements and
            termination   statements  shall   be  filed  in   the  appropriate
            governmental  office  within   three  Business  Days  after   such
            assignment);

      and  the Security  Agreement  shall be  in  full force  and effect  with
      respect to  the  Security  Agreement  Collateral relating  to  the  C.E.
      Thornton.

            (b)  Holdings  and the Borrower will, and will cause each of their
respective Subsidiaries to,  at the  expense of the  Borrower, make,  execute,
endorse,  acknowledge,  file and/or  deliver to  the  Collateral Agent  or the
Security  Trustee, as  the  case may  be,  from time  to  time such  vouchers,
invoices,  schedules, confirmatory assignments,  conveyances, financing state-
ments, transfer endorsements, powers  of attorney, certificates, real property
surveys, reports and  other assurances  or instruments and  take such  further
steps  relating to  the  Collateral as  the Collateral  Agent or  the Security
Trustee, as the case may be, may reasonably require.  

            (c)  Holdings  and the  Borrower agree  that each  action required
above by this Section 7.12 shall be  completed as soon as possible, but in  no
event later  than 60 days after  such action is  requested to be taken  by the
Administrative Agent or  the Required Banks,  provided that in no  event shall
Holdings or the Borrower  be required to take any action, other than using its
reasonable  commercial efforts  without  any material  expenditure, to  obtain
consents or  other actions from third  parties with respect to  its compliance
with this Section 7.12.

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

            SECTION  8.  Negative Covenants.  Holdings and the Borrower hereby
covenant and agree that as of the Initial Borrowing Date and thereafter for so
long as this Agreement is in effect and until the Commitments have terminated,
no  Letters  of Credit  or  Notes are  outstanding  and the  Loans  and Unpaid
Drawings, together  with interest,  Fees and  all  other Obligations  incurred
hereunder, are paid in full:

            8.01  Changes in  Business.  Holdings  and the Borrower  will not,
and will not permit  any of their respective Subsidiaries to, materially alter
the  character of  the business of  Holdings and  its Subsidiaries  taken as a
whole  from  that  conducted at  the  Initial  Borrowing  Date (including  any
material  expansion outside of  the offshore contract  drilling and production
business),  provided that this Section 8.01 shall not restrict the engaging in
business ancillary to the offshore contract drilling and production business.

            8.02  Consolidation, Merger or Sale of Assets, etc.  Holdings  and
the Borrower  will not, and will  not permit any of  the Subsidiary Guarantors
to, wind  up, liquidate or dissolve its affairs, or enter into any transaction
of merger  or consolidation, sell or otherwise dispose of all or substantially
all of its property  or assets or of any Collateral or agree  to do any of the
foregoing at any future time, except that the following shall be permitted:

            (a)  (i) any Subsidiary of Holdings  (other than the Borrower) may
      be merged  or consolidated  with or  into,  or be  liquidated into,  the
      Borrower (so long as the Borrower  is the surviving corporation) or  any
      Guarantor (so long as  such Guarantor is the surviving  corporation) and
      (ii) all  or any part of the business, properties and assets of Holdings
      or any  of its Subsidiaries  (other than the Borrower)  may be conveyed,
      leased, sold  or transferred  to the Borrower  or any  Guarantor or  any
      Subsidiary  of  the Borrower  or any  Guarantors,  provided that  if any
      Collateral  is transferred  pursuant to  this Section  8.02(a), Holdings
      and/or  the Borrower  shall provide  the Administrative  Agent with  ten
      Business Days' notice prior to  such transfer, and the Borrower or  such
      Subsidiary,  as  the  case may  be,  owning  the  Collateral after  such
      transfer shall  take all action  reasonably requested by  the Collateral
      Agent and/or the Security  Trustee in respect of the  continued priority
      and perfection of such Collateral;

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

            (c)  other sales or  dispositions of assets provided that  (x) the
      Total Commitment shall be reduced as required  by Section 3.03(c) in the
      case  of the sale or  disposition of assets  constituting Collateral and
      (y) each such sale or disposition  shall be in an amount at least  equal
      to  the  fair  market  value thereof  (as  determined  by  the Board  of
      Directors of the Borrower in the case of sales in excess of $20,000,000)
      and  for proceeds consisting  solely of not  less than 100%  cash in the
      case  of  assets  constituting  Collateral  and  (z)  no  such  sale  or
      disposition  shall  constitute  the  sale  or  disposition  of   all  or
      substantially  all   of  the  combined   assets  of  Holdings   and  its
      Subsidiaries taken together; and

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

            To the extent any Collateral is  sold or otherwise disposed of (to
any Person other  than Holdings  and its  Subsidiaries) as  permitted by  this
Section 8.02, such Collateral shall be  sold or otherwise disposed of free and
clear of the  Liens created by the Security  Documents, and the Administrative
Agent, the  Collateral Agent and the  Security Trustee shall  be authorized to
take any actions deemed appropriate in order to effect the foregoing.

            8.03  Liens  on  Collateral; Arcade  Drilling.  Holdings  will not
permit Arcade to create,  incur, assume or suffer to exist  any Lien or assign
any right to receive income, or file or permit the filing of any UCC Financing
Statement  or any other similar notice of  Lien under any similar recording or
notice statute, and  Holdings and the Borrowers will not,  and will not permit
any of their  respective Subsidiaries to, create,  incur, assume or suffer  to
exist  any Lien upon or  with respect to any  Collateral, whether now owned or
hereafter acquired, or sell any such Collateral subject to an understanding or
agreement, contingent  or otherwise, to repurchase  such Collateral (including
sales of accounts receivable or notes with  recourse to Holdings or any of its
Subsidiaries) or  assign any right  to receive income,  or file or  permit the
filing of any financing statement under the UCC or any other similar notice of
Lien on  any Collateral under any similar  recording or notice statute; except
that the following shall be permitted:

            (a)  Liens  for taxes  not  yet  due  or  Liens  for  taxes  being
      contested  in  good  faith  and  by  appropriate  proceedings for  which
      adequate  reserves with respect  thereto, in accordance  with GAAP, have
      been established;

            (b)  Liens imposed  by  law which  were incurred  in the  ordinary
      course  of business,  such as  carriers', warehousemen's  and mechanics'
      Liens,  statutory landlord's  Liens,  maritime Liens  and other  similar
      Liens arising in the ordinary  course of business, and (x) which  do not
      in the aggregate materially detract from the value of such Collateral or
      materially impair the  use thereof in the  operation of the  business of
      Holdings,  the Borrower or any  of their respective  Subsidiaries or (y)
      which  are  being contested  in  good faith  by  appropriate proceedings
      (including  the providing of bail), which proceedings have the effect of
      preventing the forfeiture or sale of the Collateral subject to such Lien
      or  procuring the  release of the  Collateral subject to  such Lien from
      arrest or detention;

            (c)  Liens created by or  pursuant to this Agreement or  the other
      Credit Documents;

            (d)  Liens permitted under  the express terms of the  Mortgages or
      other Security Documents;

            (e)  Liens existing  on the Initial  Borrowing Date and  listed on
      Annex  VIII,  without giving  effect  to  any  subsequent extensions  or
      renewals thereof;

            (f)  Liens  arising from  judgments,  decrees or  attachments  (or
      securing of appeal bonds with respect thereto) to the extent not covered
      by insurance, so long as the obligations in connection  therewith do not
      exceed $5,000,000  in the aggregate  and otherwise in  circumstances not
      constituting an Event of Default under Section 9.08;

            (g)  any  interest or  title of  a lessor  or charterer  under any
      lease  or charter (i)  in existence on the  Initial Borrowing Date, (ii)
      among  Holdings  and/or  any  of its  Subsidiaries  or  (iii)  otherwise
      permitted by this Agreement; and

            (h)  immaterial  Liens on any Real Property of  Holdings or any of
      its Subsidiaries.

            8.04  Indebtedness of Arcade.  Holdings will not permit  Arcade to
contract, create, incur, assume or suffer to exist any Indebtedness, except:

           (i)  Indebtedness incurred pursuant to this Agreement and the other
      Credit Documents;

          (ii)  Indebtedness of Arcade existing  on the Effective Date to  the
      extent the  same is listed on Annex VII, but no refinancings or renewals
      thereof;

         (iii)  Indebtedness evidenced  by  Capitalized Lease  Obligations  so
      long as the  aggregate principal amount of Capitalized Lease Obligations
      outstanding at  any time pursuant to  this Section 8.04  does not exceed
      $1,000,000 in the aggregate; and

          (iv)  Indebtedness subject to Liens permitted under Section 8.03(e).

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

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

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

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

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

           (i) this Agreement and the other Credit Documents;

          (ii) applicable law;

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

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

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

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

            8.07  Vessel Management; Registry.  Holdings and the Borrower will
not, and will not  permit any of their Subsidiaries to, (i) change the overall
management  of  any  of  the  Mortgaged  Rigs from  Holdings  or  any  of  its
Subsidiaries or (ii) change the national registry of any Mortgaged Rig.

            8.08  Coverage Ratio.  Holdings  will not permit the  ratio of (i)
Consolidated EBITDAR to  (ii) the  sum of Consolidated  Interest Expense  plus
Consolidated Rent Expense for  any period of four consecutive  fiscal quarters
of Holdings (taken as one accounting period) to be less than 2.50:1.00.

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

            8.10  Leverage Ratio.  Holdings will not permit the Leverage Ratio
(i) at the  end of any fiscal quarter ending prior  to the date which is three
years after  the date of this Agreement to  be greater than 0.50:1.00 and (ii)
at  the  end of  any  fiscal  quarter ending  thereafter  to  be greater  than
0.40:1.00.

            8.11  Collateral Maintenance.  (a)  Holdings shall not  permit the
Market Value of  the Mortgaged Rigs at any time to  be less than 1.6 times the
Total Commitment in effect from time to time.

            (b)  Holdings will not (i) permit  its percentage ownership of the
total capital  stock of Arcade at any  time to be reduced  below 74.4% or (ii)
pledge any Arcade  shares now held or hereafter acquired by Holdings or any of
its Subsidiaries to any Person other than the Collateral Agent.

            SECTION 9.  Events of Default.  Upon the occurrence  of any of the
following specified events (each an "Event of Default"):

            9.01  Payments.  The Borrower  shall (i)  default  in the  payment
when due of any principal of the Loans and such default shall continue for two
or  more Business Days  or (ii) default,  and such default  shall continue for
three or  more Business Days after  notice by the Administrative  Agent or the
Required Banks, in the payment when due of any Unpaid Drawing, any interest on
the Loans or  any Fees or any other amounts owing hereunder or under any other
Credit Document; or

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

            9.03  Covenants.  Holdings  or the  Borrower shall (a)  default in
the due performance  or observance by  it of any  term, covenant or  agreement
contained in Section 7.08 or Section  8 or (b) default in the  due performance
or  observance by  it of  any term,  covenant or  agreement (other  than those
referred to  in Section 9.01,  9.02 or clause (a)  of this Section  9.03) con-
tained in  this Agreement and  such default  shall continue  unremedied for  a
period of at  least 30 days after notice to the Borrower by the Administrative
Agent or the Required Banks; or

            9.04  Default Under Other Agreements.  (a)  Holdings, the Borrower
or any of their respective Subsidiaries shall (i) default in  any payment with
respect to any Indebtedness (other than the Obligations) beyond the  period of
grace, if  any, applicable thereto or  (ii) default in the  observance or per-
formance of any agreement  or condition relating to  any such Indebtedness  or
contained  in  any instrument  or agreement  evidencing, securing  or relating
thereto, or  any other  event shall  occur or condition  exist, the  effect of
which default  or other  event  or condition  results in  acceleration or  the
renegotiation of the material payment terms of any such Indebtedness to become
due prior to its stated maturity; or (b) any such Indebtedness of Holdings  or
any of  its Subsidiaries shall be declared to  be due and payable, or required
to be prepaid other  than by a regularly scheduled required  prepayment, prior
to the stated maturity thereof, provided that it shall not constitute an Event
of Default pursuant to this Section 9.04 unless the aggregate principal amount
of such Indebtedness in default exceeds $5,000,000 at any one time; or

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

            9.06  Security Documents.  (i) Any Security Document  shall, after
the execution and delivery  thereof, cease to be in full  force and effect, or
shall cease to give the Collateral Agent or the Security Trustee,  as the case
may  be, the  Liens, rights,  powers  and privileges  purported to  be created
thereby in favor of the Collateral Agent or  the Security Trustee, as the case
may be, or (ii) any Credit Party shall default in any respect in the  due per-
formance  or observance of any  term, covenant or agreement  on its part to be
performed or observed pursuant to any such Security  Document and such default
(unless such default creates an Event of Default under clause (i) above) shall
continue  unremedied for a  period of  at least  30 days  after notice  to the
Borrower by the Administrative Agent or the Required Banks; or

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

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

            9.09  Citizenship.  Any Mortgagor  shall cease to be  qualified to
own and operate  the Mortgaged Rigs under  the laws of the  United States, the
Republic of Panama or Australia, as may be applicable; or

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

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

then, and  in any  such event,  and at any  time thereafter,  if any  Event of
Default shall then  be continuing,  the Administrative Agent  shall, upon  the
written request of the Required Banks, by written notice to the Borrower, take
any  or all of the  following actions, without prejudice  to the rights of the
Administrative  Agent or any  Bank to  enforce its  claims against  any Credit
Party,  except  as  otherwise  specifically  provided  for  in this  Agreement
(provided that, if  an Event of Default specified in  Section 9.05 shall occur
with  respect to the Borrower, the result which would occur upon the giving of
written notice  by the Administrative  Agent as  specified in clauses  (i) and
(ii) below shall occur automatically  without the giving of any such  notice):
(i)  declare the Total Commitment terminated, whereupon the Commitment of each
Bank shall forthwith  terminate immediately and  any Commitment Commission  or
any other Fees shall forthwith become due and payable without any other notice
of any kind; (ii) declare the principal of and any accrued interest in respect
of all Loans and  all obligations owing hereunder (including  Unpaid Drawings)
and  thereunder to  be,  whereupon the  same shall  become, forthwith  due and
payable without presentment, demand, protest or other notice of any kind,  all
of which are hereby waived by each Credit Party; (iii)  enforce, as Collateral
Agent (or direct the Collateral Agent to enforce), any or all of the Liens and
security  interests created pursuant to the Security Documents; (iv) terminate
any Letter of Credit which may be terminated in accordance with its terms; (v)
direct the  Borrower to pay  (and the Borrower  hereby agrees upon  receipt of
such  notice, or  upon the  occurrence of  any Event  of Default  specified in
Section 9.05 in  respect of the Borrower, it will pay) to the Collateral Agent
at the Payment Office such additional amounts of  cash, to be held as security
for the Borrower's reimbursement  obligations in respect of Letters  of Credit
then outstanding equal to the aggregate Stated Amount of all Letters of Credit
then outstanding; and (vi) apply any amounts held as cash collateral  pursuant
to Section 4.02 or this Section 9 to repay Obligations.

            SECTION  10.  Definitions.  As  used  herein, the  following  terms
shall  have  the  meanings  herein  specified  unless  the  context  otherwise
requires.   Defined terms  in  this Agreement  shall include  in the  singular
number the plural and in the plural the singular:

            "Adjusted Commitment"  for each Non-Defaulting Bank  shall mean at
any time the product of such Bank's Adjusted Percentage and the Adjusted Total
Commitment.

            "Adjusted  Percentage" shall  mean  (x) at  a  time when  no  Bank
Default exists, for each Bank such Bank's Percentage and (y) at a time  when a
Bank Default exists (i) for each Bank that is a Defaulting Bank, zero and (ii)
for  each Bank that  is a  Non-Defaulting Bank,  the percentage  determined by
dividing such Bank's Commitment at such time by the Adjusted  Total Commitment
at  such time, it being  understood that all  references herein to Commitments
and  the Adjusted  Total Commitment  at a  time when  the Total  Commitment or
Adjusted Total  Commitment, as the case  may be, has been  terminated shall be
references to the  Commitments or Adjusted Total  Commitment, as the case  may
be, in  effect immediately prior  to such  termination, provided  that (A)  no
Bank's Adjusted Percentage shall change upon the occurrence of a Bank  Default
from that  in effect immediately prior  to such Bank Default  if, after giving
effect to such  Bank Default and any repayment of Loans  at such time pursuant
to Section 4.02(A)(a)  or otherwise, the sum of (i)  the aggregate outstanding
principal amount of Loans of all Non-Defaulting Banks plus (ii)  the Letter of
Credit Outstandings, exceeds the Adjusted Total Commitment; (B) the changes to
the Adjusted Percentage that  would have become effective upon  the occurrence
of a Bank Default  but that did not become  effective as a result of  the pre-
ceding  clause  (A)  shall  become  effective on  the  first  date  after  the
occurrence of the relevant Bank Default on which the sum of  (i) the aggregate
outstanding principal amount  of the  Loans of all  Non-Defaulting Banks  plus
(ii) the Letter of Credit  Outstandings is equal to or less  than the Adjusted
Total Commitment; and (C)  if (i) a Non-Defaulting Bank's  Adjusted Percentage
is changed pursuant to the preceding clause (B) and (ii) any repayment of such
Bank's Loans,  or of Unpaid Drawings  with respect to Letters  of Credit, that
were made  during the period  commencing after the  date of the  relevant Bank
Default and ending on the date of  such change to its Adjusted Percentage must
be returned  to the  Borrower  as a  preferential or  similar  payment in  any
bankruptcy or similar proceeding of the Borrower, then the change to such Non-
Defaulting Bank's  Adjusted Percentage  effected pursuant to  said clause  (B)
shall be reduced to that positive change,  if any, as would have been made  to
its Adjusted Percentage if  (x) such repayments had not been  made and (y) the
maximum change  to its Adjusted Percentage  would have resulted in  the sum of
the  outstanding principal  of Loans made  by such  Bank plus  such Bank's new
Adjusted  Percentage of the outstanding  principal amount of  Letter of Credit
Outstandings equalling such Bank's Commitment at such time. 

            "Adjusted  Total Commitment"  shall  mean at  any  time the  Total
Commitment less the aggregate Commitments of all Defaulting Banks.

            "Administrative  Agent" shall  have  the meaning  provided in  the
first paragraph  of  this Agreement  and shall  include any  successor to  the
Administrative Agent appointed pursuant to Section 11.09.

            "Affected  Eurodollar Loan"  shall  have the  meaning provided  in
Section 4.02(B).

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

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

            "Applicable Eurodollar  Margin" shall  be equal to  the percentage
per annum set  forth below  opposite Holdings' applicable  Leverage Ratio,  as
calculated for the last day  of the fiscal quarter last ended;  provided that,
in the event a change in the Applicable Eurodollar  Margin is to be made, such
change shall  not become effective until the  date on which the Administrative
Agent receives written notice from the Borrower indicating that such change is
warranted:


                                                   Applicable
               Leverage Ratio                  Eurodollar Margin

            Equal to or less than
              0.25:1.00                        0.65% per annum

            Greater than 0.25:1:00             0.85% per annum.

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

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

            "Approved  Shipbroker"  shall  mean   each  of  the   first-class,
international, independent, sale-and-purchase Shipbrokers of offshore drilling
units listed on Annex  IX, as such Annex may  be revised from time to  time at
the request  of the  Required Banks  with the consent  of the  Borrower, which
consent shall not be unreasonably withheld.

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

            "Arcade Rigs" shall have the meaning provided in Section 3.03(e).

            "Assignment and  Assumption Agreement" shall  mean the  Assignment
and Assumption Agreement substantially in the form of Exhibit L (appropriately
completed).

            "Australian  Rig"  shall mean  the  offshore  drilling vessel  Ron
Tappmeyer.

            "Authorized  Officer" shall  mean any officer  of Holdings  or the
Borrower designated as such in writing to the Administrative Agent by Holdings
or the Borrower.

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

            "Bank  Default" shall  mean (i)  the refusal  (which has  not been
retracted) of a Bank to make available its portion of any Loans or to fund its
portion  of any  unreimbursed payment  under Section  2.04(c)  or (ii)  a Bank
having notified the Administrative  Agent and/or the Borrower that it does not
intend to  comply with  the obligations  under Section  1.01 or  under Section
2.04(c), in the case of either (i) or (ii) as a result of the appointment of a
receiver or conservator with respect to  such Bank at the direction or request
of any regulatory agency or authority.

            "Bankruptcy Code" shall have the meaning provided in Section 9.05.

            "Base Rate"  shall  mean  the higher  of  (i)  the  Administrative
Agent's Prime Rate, and (ii) 0.50% per annum above the Federal Funds Effective
Rate.

            "Base  Rate Loan"  shall mean  each Loan  bearing interest  at the
rates provided in Section 1.08(a).

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

            "Borrowing" shall mean the incurrence of one Type of Loan pursuant
to the Facility  by the Borrower  from all of the  Banks with respect  to such
Facility on a pro rata basis on a given date (or resulting from conversions on
a  given date),  having in  the  case of  Eurodollar Loans  the same  Interest
Period; provided that  Base Rate  Loans incurred pursuant  to Section  1.10(b)
shall be considered included in any related Borrowing of Eurodollar Loans.

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

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

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

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

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

            "Cash  Proceeds"  shall  mean,  with  respect  to  any  Collateral
Disposition, the aggregate cash  payments (including any cash received  by way
of deferred payment  pursuant to a note  receivable issued in connection  with
such Collateral Disposition, other  than the portion of such  deferred payment
constituting interest, but only as and when so received) received by  Holdings
and/or any Subsidiary from such Collateral Disposition.

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

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

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

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

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

            "Collateral" shall mean all  of the Security Agreement Collateral,
the Pledged Stock as defined in the Pledge Agreement, the "Rig"  as defined in
each  of the  Mortgages and  any cash  collateral delivered to  the Collateral
Agent pursuant to this Agreement.

            "Collateral Agent"  shall mean the Administrative  Agent acting as
collateral agent for the Banks.

            "Collateral  Disposition" shall  mean  (i) the  sale, transfer  or
other voluntary  disposition by the  Borrower or  any Guarantor to  any Person
other than the Borrower or  any Guarantor of any asset of the Borrower or such
Guarantor constituting Collateral or (ii) any Total Loss of any Mortgaged Rig.

            "Commitment" shall mean, with respect to each Bank, the amount set
forth opposite such Bank's name in Annex I directly below  the column entitled
"Commitment,"  as the same may  be (x) reduced  from time to  time pursuant to
Sections 3.02, 3.03 and/or  9 or (y) adjusted from time to time as a result of
assignments to or from such Bank pursuant to Section 12.04.

            "Commitment  Commission"  shall  have   the  meaning  provided  in
Section 3.01(a).

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

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

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

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

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

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

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

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

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

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

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

            "Credit  Documents"  shall mean  this  Agreement,  the Notes,  the
Security  Documents and each Guaranty and any documents executed in connection
therewith.

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

            "Credit  Party"  shall  mean   Holdings,  the  Borrower  and  each
Subsidiary Guarantor.

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

            "Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.

            "Dividends" shall have the meaning provided in Section 8.05.

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

            "Earnings" shall  have the  definition provided   in the  Security
Agreement.

            "Effective Date" shall have the meaning provided in Section 12.10.

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

            "Employee Benefit Plan" shall have the meaning provided in Section
5.06(i).

            "Employment Agreements" shall have the meaning provided in Section
5.06(vi).

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

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

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

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

            "Eurodollar Loans"  shall mean each  Loan bearing interest  at the
rates provided in Section 1.08(b).

            "Eurodollar Rate" shall mean with  respect to each Interest Period
for a  Loan, the  offered  rate (rounded  upward to  the nearest  1/16 of  one
percent) for deposits  of Dollars for a period equivalent to such period at or
about 11:00  A.M. (London time)  on the second  London Banking Day  before the
first  day  of such  period as  is displayed  on  Telerate page  3750 (British
Bankers' Association Interest  Settlement Rates)  (or such other  page as  may
replace  such  page  3750  on  such  system or  on  any  other  system  of the
information  vendor  for the  time being  designated  by the  British Bankers'
Association  to calculate the BBA Interest Settlement  Rate (as defined in the
British  Bankers'  Association's Recommended  Terms  and  Conditions ("BBAIRS"
terms) dated  August 1985)), provided that if on such  date no such rate is so
displayed, the Eurodollar Rate for such period shall be the rate quoted to the
Administrative Agent as the offered rate  for deposits of Dollars in an amount
approximately equal  to the amount in relation to which the Eurodollar Rate is
to be determined for a period equivalent  to such period by prime banks in the
London Interbank  Market at or  about 11:00 A.M.  (London time) on  the second
Banking Day before the first day of such period.

            "Event of Default" shall have the meaning provided in Section 9.

            "Existing  Credit Agreements"  shall  mean the  Credit  Agreement,
dated  as of  April 30,  1996, by  and among  Holdings, the  Borrower, various
lending  institutions,  Credit Lyonnais,  New  York  Branch, as  Co-Agent  and
Christiania Bank og Kreditkasse, as Agent, and the Loan Agreement, dated as of
May 25, 1995, by and among  The CIT Group/Equipment Financing, Inc., Reading &
Bates Offshore, Limited and Holdings.

            "Existing Indebtedness" shall have the meaning provided in Section
6.19.

            "Existing Indebtedness Agreements" shall have the meaning provided
in Section 5.06.

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

            "Facility" shall  mean the credit facility  established under this
Agreement, evidenced by the Total Commitment.

            "Facing Fee" shall have the meaning provided in Section 3.01(c).

            "Federal  Funds Effective  Rate"  shall  mean  for any  period,  a
fluctuating  interest rate  equal  for each  day  during  such period  to  the
weighted average of  the rates  on overnight Federal  Funds transactions  with
members of  the Federal Reserve System  arranged by Federal  Funds brokers, as
published for such day  (or, if such day is  not a Business Day, for  the next
preceding Business Day) by the Federal  Reserve Bank of New York, or,  if such
rate is not so published  for any day which is a Business Day,  the average of
the  quotations  for   such  day   on  such  transactions   received  by   the
Administrative Agent from three Federal  Funds brokers of recognized  standing
selected by the Administrative Agent.

            "Fees"  shall mean all amounts payable pursuant to, or referred to
in, Section 3.01.

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

            "GAAP" shall mean generally  accepted accounting principles in the
United States of America as  in effect on the date of this Agreement; it being
understood and agreed that determinations in accordance with GAAP for purposes
of  Section 8, including  defined terms as  used therein, are  subject (to the
extent provided therein) to Section 12.07(a).

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

            "Guarantor" shall mean each Subsidiary Guarantor and Holdings.

            "Guaranty" shall mean the guaranty of Holdings pursuant to Section
13 hereof and the Subsidiaries Guaranty.

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

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

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

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

            "Initial  Borrowing  Date"  shall mean  the  date  upon  which the
initial Borrowing of Loans occurs.

            "Interest Period" with respect to any Loan shall mean the interest
period applicable thereto, as determined pursuant to Section 1.09.

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

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

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

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

            "Letter  of Credit Fee" shall have the meaning provided in Section
3.01(b).

            "Letter  of   Credit  Issuer"  shall  mean   Christiania  Bank  og
Kreditkasse, New York Branch.

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

            "Letter  of Credit  Request" shall  have  the meaning  provided in
Section 2.02(a).

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

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

            "Loan" shall have the meaning provided in Section 1.01.

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

            "Market Value"  shall mean as of any date of calculation the value
as of such date  of any offshore drilling rig or other  vessel provided in the
most recent valuation report delivered in connection with Section 5.15(ii) and
Section 7.11, or in the  case two reports have been supplied as  of such date,
the arithmetic mean of the values provided in such reports.

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

            "Maturity  Date" shall mean the date that is the fifth anniversary
of the Effective Date.

            "Minimum Borrowing Amount" shall mean $1,000,000.

            "Mortgage" shall have the meaning provided in Section 5.13(b).

            "Mortgaged  Rigs"   shall  mean  and  include  the  US  Rigs,  the
Panamanian Rigs and the Australian Rig.

            "Mortgagor" shall mean each Credit Party party to a Mortgage.

            "Non-Defaulting Bank" shall mean each Bank other than a Defaulting
Bank.

            "Note" shall have the meaning provided in Section 1.05(a).

            "Notice of Borrowing"  shall have the meaning  provided in Section
1.03.

            "Notice  of Conversion" shall have the meaning provided in Section
1.06.

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

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

            "Panamanian Mortgage"  shall have the meaning  provided in Section
5.13(a).

            "Panamanian Rigs" shall mean the offshore drilling vessels Charley
Graves, J.W. McLean, and Rig 41.

            "Participant" shall have the meaning provided in Section 2.04(a). 

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

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

            "Percentage" shall mean  for each Bank the  percentage obtained by
dividing such  Bank's Commitment by the Total Commitment, provided that if the
Total Commitment has  been terminated,  the Percentage of  each Bank shall  be
determined  by  dividing such  Bank's  Commitment  immediately  prior to  such
termination by the Total Commitment immediately prior to such termination.

            "Permitted Liens"  shall mean  Liens described in  Section 8.03(a)
through (g).

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

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

            "Pledge  Agreement" shall  have  the meaning  provided in  Section
5.17.

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

            "Projections" shall have the meaning set forth in Section 6.10(d).

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

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

            "Register" shall have the meaning provided in Section 12.16.

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

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

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

            "Replaced Bank" shall have the meaning provided in Section 1.12.

            "Replacement  Bank" shall  have  the meaning  provided in  Section
1.12.

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

            "Required Banks" shall mean Non-Defaulting Banks whose outstanding
Commitments  (or,  if after  the Total  Commitment  has been  terminated, out-
standing  Loans and Adjusted Percentage of Letter of Credit Outstandings) con-
stitute greater  than 50% of the  Adjusted Total Commitment (or,  if after the
Total  Commitment has  been terminated,  the total  outstanding Loans  of Non-
Defaulting  Banks and the aggregate Adjusted Percentages of all Non-Defaulting
Banks of the total Letter of Credit Outstandings at such time).

            "Scheduled Commitment Reduction" shall  have the meaning  provided
in Section 3.03(b).

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

            "Section 4.04(b)(ii) Certificate" shall have  the meaning provided
in Section 4.04(b)(ii).

            "Secured  Creditors"  shall  have  the meaning  set  forth  in the
Security Documents.

            "Security Agreement"  shall have  the meaning provided  in Section
5.11.

            "Security Agreement  Collateral"  shall mean  all "Collateral"  as
defined in the Security Agreement.

            "Security  Documents"   shall  mean   and  include   the  Security
Agreement, the Pledge Agreement and each Mortgage.

            "Security Trustee" shall mean Christiania Bank og Kreditkasse, New
York Branch, as trustee for the Banks with respect to  the U.S. Mortgages, and
any successor trustee appointed in accordance with the terms hereof.

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

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

            "Subsidiary Guarantor" shall mean  each Subsidiary of the Borrower
which owns a Mortgaged Rig and executes the Subsidiary Guaranty.

            "Subsidiary Guaranty"  shall have the meaning  provided in Section
5.12.

            "Substitute  Basis" shall  have  the meaning  provided in  Section
1.09(b).

            "Taxes" shall have the meaning provided in Section 4.04(a).

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

            "Total  Commitment"  shall  mean, at  any  time,  the  sum of  the
Commitments of each of the Banks.

            "Total  Loss"  shall  mean any  "Total  Loss"  as  defined in  any
Mortgage.

            "Total  Unutilized Commitment"  shall mean,  at any time,  (i) the
Total  Commitment at such  time less (ii)  the sum of  the aggregate principal
amount of  all Loans at such  time plus the  Letter of Credit  Outstandings at
such time.

            "Type" shall mean any type of Loan  determined with respect to the
interest option applicable thereto, i.e., a Base Rate Loan or Eurodollar Loan.

            "UCC" shall mean the Uniform Commercial Code.

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

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

            "Unutilized Commitment" for  each Bank, shall  mean the excess  of
(i) the  Commitment of such Bank over  (ii) the sum of  (x) the aggregate out-
standing principal amount of Loans made by  such Bank plus (y) an amount equal
to  such Bank's  Adjusted Percentage of  the Letter of  Credit Outstandings at
such time.

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

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

            "US Mortgage" shall have the meaning provided in Section 5.13(a).

            "US  Rigs" shall  mean the offshore  drilling vessels  Jack Bates,
D.R. Stewart,  W.D. Kent, F.G. McClintock, Randolph Yost, J.T. Angel, Roger W.
Mowell, Harvey H. Ward, George H. Galloway and C.E. Thornton.

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

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

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

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

            SECTION 11.  The Administrative Agent and the Security Trustee.

            11.01 Appointment of  the Administrative  Agent  and the  Security
Trustee.  (a)  The Banks hereby designate Christiania Bank og Kreditkasse, New
York Branch  as Administrative Agent  to act  as specified herein  and in  the
other Credit Documents.   Each  Bank hereby irrevocably  authorizes, and  each
holder of any Note by the acceptance of such Note shall be deemed  irrevocably
to authorize, the Administrative Agent to take such action on its behalf under
the provisions of  this Agreement, the  other Credit  Documents and any  other
instruments and agreements referred to herein or therein and  to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated  to or required of the Administrative  Agent by the terms hereof and
thereof  and such  other powers  as are  reasonably incidental  thereto.   The
Administrative Agent may perform any of its duties hereunder by or through its
respective officers, directors, agents, employees or Affiliates. 

            (b)  Each of  the Banks  irrevocably appoints Christiania  Bank og
Kreditkasse, New  York Branch  as security trustee  solely for the  purpose of
holding legal title to the Mortgages of each of the U.S. Rigs on behalf of the
Banks with regard  to the (i) security,  powers, rights, titles, benefits  and
interests (both present and future) constituted by and conferred  on the Banks
or any  of  them or  for the  benefit  thereof under  or  pursuant to  the  US
Mortgages  (including,  without  limitation,  the benefit  of  all  covenants,
undertakings, representations,  warranties  and  obligations  given,  made  or
undertaken to  any Bank in  the US Mortgages),  (ii) all moneys,  property and
other assets paid or  transferred to or vested in any Bank or any agent of any
Bank or received or recovered  by any Bank or  any agent of any Bank  pursuant
to,  or in connection with, the US Mortgages, whether from the Borrower or any
Guarantor or any other person and  (iii) all money, investments, property  and
other  assets at any time representing or  deriving from any of the foregoing,
including  all  interest,  income and  other  sums  at  any  time received  or
receivable by any Bank or any agent of any Bank in respect of the same (or any
part thereof).  CBK hereby accepts such appointment as security trustee.

            (c)  For  purposes of  this Section  11, the  term "Administrative
Agent" shall include CBK  in its capacity as Collateral  Agent, Administrative
Agent and Security Trustee.

            11.02  Nature of Duties.  The Administrative Agent shall  not have
any  duties or  responsibilities  except those  expressly  set forth  in  this
Agreement  and the other Credit  Documents.  Neither  the Administrative Agent
nor any of its respective officers, directors, agents, employees or Affiliates
shall be  liable for any  action taken or omitted  by it or  them hereunder or
under any other Credit Document or in connection herewith or therewith, unless
caused by its or their gross negligence or  willful misconduct.  The duties of
the Administrative Agent shall be mechanical and administrative in nature; the
Administrative Agent shall not have  by reason of this Agreement or  any other
Credit Document a fiduciary relationship in respect of any Bank  or the holder
of  any Note;  and nothing  in this  Agreement or  any other  Credit Document,
expressed  or implied, is  intended to or  shall be so construed  as to impose
upon the Administrative Agent  any obligations in respect of this Agreement or
any other Credit Document except as expressly set forth herein or therein.

            11.03  Lack of Reliance on the Administrative Agent. Independently
and without reliance upon  the Administrative Agent, each Bank  and the holder
of each Note, to the extent it deems appropriate, has made and shall  continue
to make (i)  its own independent investigation of the  financial condition and
affairs of Holdings and its Subsidiaries in connection with the making and the
continuance  of  the Loans  and issuance  and/or  participation in  Letters of
Credit and the taking  or not taking of any action  in connection herewith and
(ii) its  own appraisal of the  creditworthiness of Holdings  and its Subsidi-
aries  and, except as expressly provided in this Agreement, the Administrative
Agent shall not have any duty or responsibility, either initially or on a con-
tinuing basis, to provide any Bank or  the holder of any Note with any  credit
or  other information with respect thereto, whether coming into its possession
before  the making  of the  Loans or  at any  time or  times thereafter.   The
Administrative Agent shall not be responsible to any Bank or the holder of any
Note for any recitals,  statements, information, representations or warranties
herein or in any  document, certificate or other writing delivered  in connec-
tion  herewith or  for  the execution,  effectiveness, genuineness,  validity,
enforceability, perfection,  collectibility, priority or  sufficiency of  this
Agreement or  any other Credit Document or the financial condition of Holdings
and its Subsidiaries or be required to make any inquiry  concerning either the
performance or  observance of any  of the  terms, provisions or  conditions of
this  Agreement or any  other Credit Document,  or the  financial condition of
Holdings and its  Subsidiaries or the  existence or possible existence  of any
Default or Event of Default.

            11.04  Certain Rights  of  the   Administrative  Agent.    If  the
Administrative  Agent shall request instructions from  the Required Banks with
respect  to any act  or action (including  failure to act)  in connection with
this Agreement or any other Credit Document, the Administrative Agent shall be
entitled to  refrain from such act or taking  such action unless and until the
Administrative Agent shall have received instructions from the Required Banks;
and the Administrative Agent shall not incur liability to any Person by reason
of so  refraining.  Without limiting  the foregoing, neither any  Bank nor the
holder  of any  Note shall  have any  right of  action whatsoever  against the
Administrative Agent  as a result  of the Administrative  Agent acting or  re-
fraining from acting  hereunder or under any  other Credit Document  in accor-
dance with the instructions of the Required Banks.

            11.05  Reliance.  The  Administrative Agent  shall be  entitled to
rely,  and  shall  be fully  protected  in relying,  upon  any  note, writing,
resolution,  notice,  statement, certificate,  telex,  teletype or  telecopier
message, cablegram,  radiogram, order or  other document or  telephone message
signed, sent or made by  any Person that the Administrative Agent  believed to
be the proper  Person, and, with  respect to all  legal matters pertaining  to
this  Agreement and  any other Credit  Document and  its duties  hereunder and
thereunder, upon advice of counsel selected by the Administrative Agent (which
may be counsel for Holdings and/or the Borrower).

            11.06  Indemnification. To the  extent the Administrative Agent is
not reimbursed  and indemnified by the Borrower,  the Banks will reimburse and
indemnify  the  Administrative  Agent,   in  proportion  to  their  respective
"percentages" as used in determining the  Required Banks, for and against  any
and all liabilities, obligations, losses, damages, penalties, claims, actions,
judgments,  suits,  costs, expenses  or  disbursements of  whatsoever  kind or
nature  which  may  be  imposed  on,  asserted  against  or  incurred  by  the
Administrative Agent  in performing its  respective duties hereunder  or under
any other  Credit Document,  in any way  relating to  or arising  out of  this
Agreement or any other Credit Document;  provided that no Bank shall be liable
for  any portion of such liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, suits,  costs, expenses or disbursements resulting
from the Administrative Agent's gross negligence or willful misconduct.

            11.07  The Administrative Agent in Its Individual  Capacity.  With
respect   to  its  obligation  to   make  Loans  under   this  Agreement,  the
Administrative Agent shall have  the rights and powers specified herein  for a
"Bank" and may exercise the same rights and powers as though it were  not per-
forming the duties specified  herein; and the term "Banks,"  "Required Banks,"
"holders of  Notes" or  any similar  terms shall, unless  the context  clearly
otherwise  indicates,  include  the  Administrative Agent  in  its  individual
capacity.  The  Administrative Agent may accept deposits from,  lend money to,
and generally  engage in any  kind of  banking, trust or  other business  with
Holdings or  its Subsidiaries  or  any Affiliate  thereof as  if  it were  not
performing  the duties  specified  herein,  and  may  accept  fees  and  other
consideration from Holdings or any of its Subsidiaries for services in connec-
tion with this Agreement and otherwise without having to account  for the same
to the Banks.

            11.08  Holders. The  Administrative Agent may  deem and treat  the
payee of  any Note as  the owner thereof  for all  purposes hereof unless  and
until a written notice  of the assignment, transfer or endorsement thereof, as
the case may be,  shall have been  filed with the  Administrative Agent.   Any
request, authority or consent of any Personwho, at the time of making such re-
quest or giving such authority or consent, is the holder of  any Note shall be
conclusive  and  binding on  any  subsequent holder,  transferee,  assignee or
indorsee, as the case  may be, of such Note or of any  Note or Notes issued in
exchange therefor.

            11.09  Resignation  by  the  Administrative  Agent.     (a)    The
Administrative Agent may resign from the performance of all its functions  and
duties hereunder and/or under the other Credit Documents at any time by giving
15 Business Days' prior  written notice to the Borrower  and the Banks.   Such
resignation  shall   take  effect   upon  the   appointment  of   a  successor
Administrative  Agent pursuant to  clauses (b) and  (c) below  or as otherwise
provided below.

            (b)  Upon any such notice of resignation, the Required Banks shall
appoint  a successor Administrative Agent hereunder or thereunder who shall be
a commercial bank or trust company reasonably acceptable to the Borrower.

            (c)  If  a successor Administrative  Agent shall not  have been so
appointed within such 15  Business Day period, the Administrative  Agent, with
the consent of  the Borrower,  shall then appoint  a successor  Administrative
Agent  who shall serve as  Administrative Agent hereunder  or thereunder until
such time, if  any, as the Required  Banks appoint a successor  Administrative
Agent as provided above.

            (d)  If no successor Administrative  Agent has been appointed pur-
suant to clause (b) or (c) above by the 20th Business Day after the  date such
notice   of  resignation   was  given   by   the  Administrative   Agent,  the
Administrative  Agent's resignation  shall become  effective and  the Required
Banks  shall thereafter  perform all  the duties  of the  Administrative Agent
hereunder and/or under any other  Credit Document until such time, if  any, as
the Required Banks appoint a successor Administrative Agent as provided above.

            SECTION 12.  Miscellaneous.

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

            12.02  Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such  rights, if an Event of  Default then exists, each  Bank is hereby autho-
rized  at any time or from time  to time, without presentment, demand, protest
or other notice  of any kind to the Borrower or  to any other Person, any such
notice being  hereby expressly waived, to set off and to appropriate and apply
any and  all deposits (general or  special) and any other  Indebtedness at any
time held or owing by such  Bank (including without limitation by branches and
agencies of such Bank wherever located) to or for the credit or the account of
the Borrower against and on account of the Obligations and  liabilities of the
Borrower to  such Bank under this Agreement  or under any of  the other Credit
Documents, including, without limitation, all interests in  Obligations of the
Borrower purchased  by such Bank pursuant  to Section 12.06(b),  and all other
claims of  any nature  or description  arising out of  or connected  with this
Agreement or  any other Credit Document,  irrespective of whether or  not such
Bank shall have made any demand hereunder and  although said Obligations, lia-
bilities or claims, or any of them, shall be contingent or unmatured.

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

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

            12.04  Benefit of Agreement.  (a) This  Agreement shall be binding
upon  and  inure to  the  benefit  of and  be  enforceable  by the  respective
successors  and assigns of the parties  hereto, provided that the Borrower may
not assign or transfer any of  its rights or obligations hereunder without the
prior  written consent  of  the  Banks.   Each  Bank  may  at any  time  grant
participations in  any of its  rights hereunder or under  any of the  Notes to
another  financial  institution,  provided  that  in  the  case  of  any  such
participation,  the participant shall not have any rights under this Agreement
or any of  the other Credit  Documents (the participant's rights  against such
Bank in respect of  such participation to be those set forth  in the agreement
executed by  such Bank in favor  of the participant relating  thereto) and all
amounts payable by the Borrower hereunder shall be determined as  if such Bank
had not sold such participation, except that the participant shall be entitled
to the benefits of Sections 1.10 and 4.04 of this Agreement to the extent that
such Bank would be entitled to such benefits if the participation had not been
entered into  or sold,  and, provided  further, that no  Bank shall  transfer,
grant  or  assign any  participation under  which  the participant  shall have
rights to  approve any amendment to  or waiver of this Agreement  or any other
Credit Document except to the extent such amendment or waiver would (i) extend
the final scheduled maturity of any Loan or Note in which such  participant is
participating (it being understood  that any waiver of the  application of any
prepayment  or  the  method  of  any application  of  any  prepayment  to, the
Scheduled Commitment Reductions shall not constitute an extension of the final
maturity date), or reduce  the rate or extend the time  of payment of interest
or Fees  thereon (except in connection  with a waiver of  the applicability of
any post-default increase in  interest rates), or reduce the  principal amount
thereof,  or  increase  such   participant's  participating  interest  in  any
Commitment over the amount thereof then  in effect (it being understood that a
waiver of any condition, covenant,  Default or Event of Default or of a manda-
tory reduction in the Total  Commitment, or a mandatory prepayment, shall  not
constitute a  change in the terms of any Commitment), (ii) release all or sub-
stantially  all of  the  Collateral  or (iii)  consent  to the  assignment  or
transfer  by the  Borrower of  any of  its rights  and obligations  under this
Agreement.

            (b)  Notwithstanding the foregoing, (x) any Bank may assign all or
a portion of its  outstanding Commitment and its rights  and obligations here-
under  to its Affiliate or  to another Bank,  and (y) with the  consent of the
Administrative Agent and the Borrower (which consent shall not be unreasonably
withheld), any Bank may assign all or a portion of  its outstanding Commitment
and its rights and obligations hereunder to one or  more Eligible Transferees.
No  assignment pursuant  to the  immediately preceding  sentence shall  to the
extent such assignment represents  an assignment to an institution  other than
one or  more Banks hereunder, be  in an aggregate amount  less than $5,000,000
unless  the entire Commitment  of the assigning  Bank is so assigned.   If any
Bank so sells or  assigns all or a part  of its rights hereunder or  under the
Notes, any  reference in this  Agreement or the  Notes to such  assigning Bank
shall thereafter  refer to such  Bank and  to the respective  assignee to  the
extent of their respective  interests and the respective assignee  shall have,
to the extent of such assignment (unless otherwise provided therein), the same
rights  and benefits  as  it would  if  it were  such  assigning Bank.    Each
assignment pursuant to this Section 12.04(b) shall be effected  by the assign-
ing  Bank and  the  assignee  Bank  executing  an  Assignment  and  Assumption
Agreement.  In  the event of any  such assignment (x) to a  commercial bank or
other financial  institution  not  previously a  Bank  hereunder,  either  the
assigning  or the  assignee  Bank  shall pay  to  the  Administrative Agent  a
nonrefundable assignment fee of $3,500 and (y) to a Bank, either the assigning
or  assignee  Bank  shall pay  to  the  Administrative  Agent a  nonrefundable
assignment fee of $1,500,  and at the time of any assignment  pursuant to this
Section 12.04(b),  (i) Annex I  shall be deemed to  be amended to  reflect the
Commitment  of the  respective  assignee  (which  shall  result  in  a  direct
reduction to the Commitment of the assigning Bank) and of the other Banks, and
(ii)  if any  such  assignment occurs  after  the Initial  Borrowing Date,  if
requested by the assigning Bank and the assignee Bank, the Borrower will issue
new Notes to  the respective assignee and to the  assigning Bank in conformity
with  the requirements of Section 1.05.   Each Bank and  the Borrower agree to
execute  such documents  (including,  without limitation,  amendments to  this
Agreement and the other Credit Documents)  as shall be necessary to effect the
foregoing.  Nothing in this clause (b) shall prevent or prohibit any Bank from
pledging its Notes or Loans to a Federal Reserve Bank in support of borrowings
made by such Bank from such Federal Reserve Bank.

            (c)  Notwithstanding any  other provisions of this  Section 12.04,
no transfer  or  assignment  of  the interests  or  obligations  of  any  Bank
hereunder  or any grant  of participation therein  shall be permitted  if such
transfer, assignment or grant would require Holdings or the Borrower to file a
registration statement  with the SEC or  to qualify the Loans  under the "Blue
Sky" laws of any State.

            (d)  Each   Bank  initially   party   to  this   Agreement  hereby
represents,  and each  Person that  became a  Bank pursuant  to  an assignment
permitted by this Section 12 will, upon its becoming party  to this Agreement,
represent that it is a commercial lender, other financial institution or other
"accredited" investor (as  defined in SEC  Regulation D) which makes  loans in
the ordinary course of its business and that it will make or acquire Loans for
its own account in the ordinary course of such business, provided that subject
to the  preceding clauses (a) and (b), the disposition of any promissory notes
or other evidences of or interests in Indebtedness held by  such Bank shall at
all times be within its exclusive control.

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

            12.06  Payments  Pro  Rata.  (a) The  Administrative Agent  agrees
that promptly  after its  receipt of  each payment  from or  on behalf  of any
Credit Party in respect of any Obligations of the Borrower or any other Credit
Party hereunder, it shall distribute such payment to the Banks (other than any
Bank that  has  expressly waived  its  right to  receive  its pro  rata  share
thereof)  pro  rata  based  upon  their  respective  shares,  if  any,  of the
Obligations with respect to which such payment was received.

            (b)  Each  of  the Banks  agrees that,  if  it should  receive any
amount hereunder  (whether by voluntary payment, by realization upon security,
by the exercise  of the right of setoff  or banker's lien, by  counterclaim or
cross  action, by the enforcement of any  right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on,  the Loans, Unpaid  Drawings or Fees, of  a sum which  with respect to the
related sum or  sums received by other  Banks is in a  greater proportion than
the total of such Obligation then owed and due to such Bank bears to the total
of such Obligation then owed and due  to all of the Banks immediately prior to
such receipt,  then such Bank receiving such excess payment shall purchase for
cash without  recourse or  warranty from  the other Banks  an interest  in the
Obligations of the  Borrower or any other Credit Party,  respectively, to such
Banks in such amount as shall result in a proportional participation by all of
the Banks in  such amount, provided that if all or  any portion of such excess
amount  is thereafter  recovered  from  such  Bank,  such  purchase  shall  be
rescinded and  the purchase price restored to the extent of such recovery, but
without interest.

            (c)   Notwithstanding anything  to the contrary  contained herein,
the provisions of the preceding Sections 12.06(a) and (b) shall  be subject to
the express provisions of  this Agreement which require, or  permit, differing
payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks.

            12.07  Calculations; Computations.  (a)  The financial  statements
to be  furnished to the  Banks pursuant hereto shall  be made and  prepared in
accordance  with GAAP  consistently  applied throughout  the periods  involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by Holdings  or  the Borrower  to  the Banks),  provided  that (x)  except  as
otherwise specifically  provided herein, all  computations determining compli-
ance  with  Section  8,  including definitions  used  therein,  shall  utilize
accounting  principles and policies in  effect at the  time of the preparation
of, and  in conformity  with  those used  to prepare,  the  December 31,  1995
historical financial statements of Holdings delivered to the Banks pursuant to
Section  6.10(b)  and (y)  that if  at any  time the  computations determining
compliance with Section 8  utilize accounting principles different  from those
utilized  in the financial statements  furnished to the  Banks, such financial
statements shall be accompanied by reconciliation work-sheets.

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

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

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

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

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

            12.10  Effectiveness. This Agreement shall become effective on the
date (the  "Effective Date") on which  Holdings, the Borrower and  each of the
Banks shall have signed a  copy hereof (whether the same or  different copies)
and  shall have delivered the same to  the Administrative Agent at the Payment
Office of the  Administrative Agent or, in the  case of the Banks,  shall have
given to the Administrative Agent  telephonic (confirmed in writing),  written
telex or facsimile transmission notice (actually received) at such office that
the same has been signed and mailed to it.

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

            12.12  Amendment  or Waiver. (a)  Neither  this Agreement  nor any
other Credit Document nor any terms hereof or thereof may  be changed, waived,
discharged or  terminated unless such change, waiver, discharge or termination
is in writing signed by the Borrower and the Required Banks, provided  that no
such  change, waiver, discharge or  termination shall, without  the consent of
each  Bank (other  than a  Defaulting Bank)  affected thereby, (i)  extend the
Maturity Date (it being understood  that any waiver of the application  of any
prepayment of the Loans or the method  of application of any prepayment to the
Scheduled Commitment Reductions, shall not  constitute any such extension), or
reduce the  rate or extend the  time of payment  of interest (other than  as a
result of waiving the  applicability of any post-default increase  in interest
rates) or Fees thereon,  or reduce the principal amount thereof, (ii) increase
the  Commitment of any Bank  over the amount thereof  then in effect (it being
understood that  a  waiver of  any condition,  covenant, Default  or Event  of
Default shall  not constitute a change  in the terms of any  Commitment of any
Bank), (iii) release or permit the  release of (x) any Mortgaged Rig  from the
Lien of  the respective  Security Documents  or (y)  the Guaranty of  Holdings
pursuant to Section 13 or the Guaranty  of any Subsidiary Guarantor so long as
such Subsidiary Guarantor continues to  own any Mortgaged Rig (except, in  the
case  of  both (x)  and  (y)  above,  as  expressly  provided  in  the  Credit
Documents), (iv) amend, modify  or waive any provision of  this Section 12.12,
(v) reduce the  percentage specified in the  definition of Required  Banks (it
being understood  and agreed  that, with  the consent  of the  Required Banks,
additional extensions of credit pursuant to this  Agreement may be included in
the determination  of Required Banks  on substantially the  same basis  as the
Commitments (and related extensions  of credit) are included on  the Effective
Date), (vi) consent  to the assignment or transfer  by the Borrower of  any of
its rights and  obligations under  this Agreement or  (vii) waive, change  the
timing or amount of, or extend any mandatory reduction in the Total Commitment
including, without limitation, a Scheduled Commitment Reduction.  No provision
of Sections 2 or 11, or any  other provisions relating to the Letter of Credit
Issuer or  the Administrative Agent may be modified without the consent of the
Administrative Agent.

            (b)  If, in connection with any proposed change, waiver, discharge
or  termination to any of the provisions  of this Agreement as contemplated by
clauses (i) through (vii), inclusive, of the proviso to Section 12.12(a),  the
consent of the  Required Banks is obtained  but the consent of one  or more of
such other Banks whose consent is required is not obtained,  then the Borrower
shall have  the right to  replace each such  non-consenting Bank or  Banks (so
long as all non-consenting Banks are so replaced) with one or more Replacement
Banks  pursuant to Section  1.13 so long  as at the time  of such replacement,
each  such Replacement Bank consents to the proposed change, waiver, discharge
or  termi-nation; provided  that the  Borrower  shall not  have  the right  to
replace a Bank solely  as a result of the exercise of  such Bank's rights (and
the withholding of  any required  consent by  such Bank)  pursuant to  Section
12.12(a)(ii). 

            12.13  Survival.  All indemnities  set  forth   herein  including,
without limitation, in Section  1.10, 1.11, 2.05, 4.04,  11.06 or 12.01  shall
survive  the execution  and  delivery of  this Agreement  and  the making  and
repayment of the Loans.

            12.14  Domicile  of Loans.  Each  Bank may transfer and  carry its
Loans at, to or for the account of any  branch office, subsidiary or Affiliate
of such  Bank, provided that the  Borrower shall not be  responsible for costs
arising under Section  1.10 or 4.04  resulting from  any such transfer  (other
than  a transfer  pursuant  to Section  1.12(a)) to  the extent  not otherwise
applicable to such Bank prior to such transfer.

            12.15  Confidentiality.  Subject to Section 12.04, the Banks shall
hold  all non-public information obtained pursuant to the requirements of this
Agreement in accordance with its customary procedure for handling confidential
information of this nature and in accordance with safe and sound banking prac-
tices and  in any event  may make disclosure  reasonably required by  any bona
fide transferee or participant in connection with the contemplated transfer of
any Loans or participation therein (so  long as such transferee or participant
agrees  to be bound by the provisions of this Section 12.15) or as required or
requested  by any governmental agency or representative thereof or pursuant to
legal process, provided that, unless specifically prohibited by applicable law
or court order,  each Bank  shall notify the  Borrower of  any request by  any
governmental agency or represen-tative thereof (other than any such request in
connection with an examination of the financial condition of such Bank by such
governmental agency) for disclosure  of any such non-public information  prior
to disclosure of such information, and provided further that in no event shall
any  Bank be  obligated  or  required to  return  any materials  furnished  by
Holdings or any Subsidiary.

            12.16  Registry. The Borrower hereby designates the Administrative
Agent to  serve as the Borrower's  agent, solely for purposes  of this Section
12.16,  to maintain a  register (the "Register")  on which it  will record the
Commitments from time to time of each of the  Banks, the Loans made by each of
the Banks and each repayment  in respect of the principal amount  of the Loans
of  each Bank.   Failure to make  any such  recordation, or any  error in such
recordation shall not  affect the  Borrower's obligations in  respect of  such
Loans.  With respect to any Bank, the transfer of the Commitments of such Bank
and the rights to the principal of, and interest on, any Loan made pursuant to
such Commitments shall not be effective until such transfer is recorded on the
Register maintained by the  Administrative Agent with respect to  ownership of
such Commitments  and Loans and prior to such recordation all amounts owing to
the transferor  with respect to such Commitments  and Loans shall remain owing
to  the transferor.  The registration of assignment or transfer of all or part
of any  Commitments and Loans shall be recorded by the Administrative Agent on
the  Register only  upon  the  acceptance by  the  Administrative  Agent of  a
properly executed  and delivered Assignment and  Assumption Agreement pursuant
to Section 12.04(b).  Coincident  with the delivery of such an  Assignment and
Assumption Agreement  to the  Administrative Agent  for acceptance and  regis-
tration of  assignment  or transfer  of all  or part  of  a Loan,  or as  soon
thereafter  as practicable, the  assigning or transferor  Bank shall surrender
the Note evidencing such Loan, and thereupon one or more new Notes in the same
aggregate principal amount shall be issued to the assigning or transferor Bank
and/or the new Bank.

            SECTION 13.  Holdings Guaranty.

            13.01  The Guaranty.  In order to induce  the Banks to enter  into
this Agreement and to extend credit hereunder and in recognition of the direct
benefits  to be received by  Holdings from the  proceeds of the  Loans and the
issuance of  the Letters of Credit,  Holdings hereby agrees with  the Banks as
follows:   Holdings hereby unconditionally and irrevocably guarantees as prim-
ary obligor and  not merely as surety  the full and  prompt payment when  due,
whether upon maturity,  by acceleration or  otherwise, of any  and all of  the
Guaranteed Obligations  of the Borrower to  the Secured Creditors.   If any or
all  of the  Guaranteed Obligations of  the Borrower to  the Secured Creditors
becomes due  and payable hereunder,  Holdings unconditionally promises  to pay
such indebtedness to the Secured Creditors, on order, or demand, together with
any  and all reasonable  expenses which may be  incurred by the Administrative
Agent  or  the  Secured   Creditors  in  collecting  any  of   the  Guaranteed
Obligations.

            13.02  Bankruptcy.   Additionally,  Holdings  unconditionally  and
irrevocably   guarantees  the  payment  of  any  and  all  of  the  Guaranteed
Obligations of the  Borrower to the Secured Creditors whether  or not then due
or payable by the  Borrower upon the occurrence in respect  of the Borrower of
any of  the events specified in Section 9.05, and unconditionally and irrevoc-
ably promises to pay  such Guaranteed Obligations to the Secured Creditors, on
order, or demand, in lawful money of the United States.  Holdings' guaranty of
the payment  of  any and  all of  the Guaranteed  Obligations hereunder  shall
constitute a guaranty of payment, and not of collection. 

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

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

            13.05  Waiver of Notice,  etc.   Holdings hereby waives  notice of
acceptance of this Guaranty and notice of any liability to which it may apply,
and  waives promptness,  diligence, presentment,  demand of  payment, protest,
notice of  dishonor or nonpayment of  any such liabilities, suit  or taking of
other action  by the  Administrative Agent,  any  Bank, the  Letter of  Credit
Issuer, the Collateral  Agent or the Security  Trustee against, and  any other
notice to, any party  liable thereon (including Holdings, any  other guarantor
or the Borrower).

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

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

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

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

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

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

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

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

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

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

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

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

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


                         *             *            *


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

Address:                      READING & BATES CORPORATION

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


                              READING & BATES DRILLING CO.



                              By                                   
                                   Name:  
                                   Title: 


                              CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
                              BRANCH,
                              Individually  and as Administrative Agent



                              By                                   
                                   Name:  
                                   Title: 


                              By                                   
                                   Name:
                                   Title:


                              BANQUE INDOSUEZ,
                              Individually and as Documentation Agent



                              By                                   
                                   Name:
                                   Title:


                              CREDIT LYONNAIS NEW YORK BRANCH,
                              Individually and as Documentation Agent



                              By                                   
                                   Name:
                                   Title:


                              SKANDINAVISKA ENSKILDA BANKEN AB (publ.),
                              Individually and as Co-Manager



                              By                                   
                                   Name:
                                   Title:


                              THE FUJI BANK LIMITED,
                              Individually and as Co-Manager



                              By                                   
                                   Name:
                                   Title:

                              BANK AUSTRIA



                              By                                   
                                   Name:
                                   Title:


                              THE BANK OF TOKYO-MITSUBISHI LTD.



                              By                                   
                                   Name:
                                   Title:


                              MEESPIERSON N.V.



                              By                                   
                                   Name:
                                   Title:


                              SANWA BANK



                              By                                   
                                   Name:
                                   Title:


                              FIRST NATIONAL BANK OF COMMERCE



                              By                                   
                                   Name:
                                   Title:


                              THE SUMITOMO BANK LIMITED



                              By                                   
                                   Name:
                                   Title:



                                                                     ANNEX I



                                      COMMITMENTS

                            Bank                         Commitment

                Christiania Bank                         $65,000,000
                Banque Indosuez                          $35,000,000
                Credit Lyonnais                          $35,000,000
                Skandinaviska Enskilda                   $32,000,000
                Fuji Bank                                $32,000,000
                Bank Austria                             $18,500,000
                Bank of Tokyo-Mitsubishi                 $18,500,000
                Mees Pierson                             $18,500,000
                Sanwa Bank                               $18,500,000
                First NBC                                $13,500,000
                Sumitomo Bank                            $13,500,000
                      Total                             $300,000,000
                             

                                                                     ANNEX II


                                    BANK ADDRESSES



Christiania Bank og Kreditkasse,        11 West 42nd Street
New York Branch                         7th Floor
                                        New York, NY  10036
                                        Attn:  Hans Chr. Kjelsrud
                                        Tel. No.:  (212) 827-4800
                                        Fax No.:   (212) 827-4888


Credit Lyonnais                         1000 Louisiana
New York Branch                         Suite 5360
                                        Houston, Texas  77002
                                        Attn:  Diane Scott
                                        Tel. No.:  (713) 751-0500
                                        Fax No.:  (713) 751-0307


Banque Indosuez                         Representative Office Norway
                                        Ruselokkveien 6
                                        0120 Oslo, Norway
                                        Attn:  Mr. Bjorn Hundevadt-Gulbrandsen
                                               Mr. Hans Jorgen Wibstad
                                        Tel. No.: 011 47 22 83 30 50
                                        Fax No.:  011 47 22 83 30 55


Mees Pierson                            Camomile Court
                                        23 Camomile Street
                                        London EC3A 7PP
                                        Attn:  Harris Antoniou
                                        Tel. No.: 44 171 444 8789
                                        Fax No.:  44 171 444 8810


The Fuji Bank Limited                   Houston Agency
                                        1 Houston Center, Suite 4100
                                        1221 McKinney Street
                                        Houston, TX  77010
                                        Attn:  Mark E. Polasek
                                        Tel. No.: (713) 650-7863 or
                                                  (713) 759-1800
                                        Fax No.:  (713)759-0048

First National Bank of Commerce         210 Baronne Street
                                        P.O. Box 60279
                                        New Orleans, LA  70160-0279
                                        Attn:  Joshua C. Cummings
                                               Mr. Jesse Shannon
                                               Anthony Restell
                                        Tel. No.: (504) 561-1361
                                        Fax No.:  (504) 561-1316


Sanwa Bank                              Dallas Agency 1
                                        220 Ross Avenue
                                        Suite 4100W
                                        Dallas, TX  75201
                                        Attn:  Matt Patrick
                                               Erik Reimer
                                        Tel. No.: (214) 744-555
                                                  (214) 665-0243
                                        Fax No.:  (214) 741-6535


Bank Austria                            565 Fifth Avenue
                                        New York, NY  10017
                                        Attn:  Paul H. Deerin
                                               Jonathan Bakker
                                        Tel. No.: (212) 880-1033
                                                  (212) 880-1074
                                        Fax No.:  (212) 880-1040


Skandinaviska Enskilda Banken AB        Rosenkrantz GT 22
                                        Box 1843 Vika
                                        N-0123 Oslo, Norway
                                        Attn:  Bjarte Boe
                                               Snorre Krogstad
                                        Tel. No.: 47 22 82 70 04
                                                  47 22 82 70 05
                                        Fax No.:  47 22 82 71 11

The Bank of Tokyo-Mitsubishi Ltd.       Houston Agency
                                        1100 Louisiana, Suite 2800
                                        Houston, TX  77002
                                        Attn:  Deanna Breland
                                        Tel. No.: (713) 655-3810
                                        Fax No.:  (713) 65-0116


The Sumitomo Bank Limited               Houston Agency
                                        700 Louisiana Street, Suite 1750
                                        Houston, TX  77002
                                        Attn: Robert Johnson
                                              William R. McKown
                                        Tel. No.: (713) 238-8235
                                        Fax No.:  (713) 759-0020