Exhibit 10.85
                                                                              


                               CREDIT AGREEMENT


                                     among

                        READING AND BATES CORPORATION,

                         READING & BATES DRILLING CO.,

                         VARIOUS LENDING INSTITUTIONS,

                       CREDIT LYONNAIS NEW YORK BRANCH,
                                  AS CO-AGENT

                                      and

                       CHRISTIANIA BANK OG KREDITKASSE,
                               NEW YORK BRANCH,

                                   as AGENT

                     ____________________________________


                          Dated as of April 30, 1996

                     ____________________________________

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                               TABLE OF CONTENTS
                                                                          Page

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

SECTION 2.  Letters of Credit . . . . . . . . . . . . . . . . . . . . . .    9
      2.01  Letters of Credit . . . . . . . . . . . . . . . . . . . . . .    9
      2.02  Letter of Credit Requests; Request for
               Issuance of Letter of Credit . . . . . . . . . . . . . . .   10
      2.03  Agreement to Repay Letter of Credit Payments  . . . . . . . .   11
      2.04  Letter of Credit Participations . . . . . . . . . . . . . . .   11
      2.05  Increased Costs . . . . . . . . . . . . . . . . . . . . . . .   13
      2.06  Indemnities . . . . . . . . . . . . . . . . . . . . . . . . .   14

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

SECTION 4.  Payments  . . . . . . . . . . . . . . . . . . . . . . . . . .   17
      4.01  Voluntary Prepayments . . . . . . . . . . . . . . . . . . . .   17
      4.02  Mandatory Prepayments . . . . . . . . . . . . . . . . . . . .   18
      4.03  Method and Place of Payment . . . . . . . . . . . . . . . . .   19
      4.04  Net Payments  . . . . . . . . . . . . . . . . . . . . . . . .   19

SECTION 5.  Conditions Precedent  . . . . . . . . . . . . . . . . . . . .   22
      5.01  Execution of Agreement  . . . . . . . . . . . . . . . . . . .   22
      5.02  No Default; Representations and Warranties;
               No Collateral Disposition of Jack Bates  . . . . . . . . .   22
      5.03  Officer's Certificate . . . . . . . . . . . . . . . . . . . .   22
      5.04  Opinions of Counsel . . . . . . . . . . . . . . . . . . . . .   22
      5.05  Corporate Proceedings . . . . . . . . . . . . . . . . . . . .   22
      5.06  Existing Indebtedness Agreements  . . . . . . . . . . . . . .   23
      5.07  Adverse Change, etc.  . . . . . . . . . . . . . . . . . . . .   23
      5.08  Litigation  . . . . . . . . . . . . . . . . . . . . . . . . .   23
      5.09  Approvals . . . . . . . . . . . . . . . . . . . . . . . . . .   23
      5.10  Fees  . . . . . . . . . . . . . . . . . . . . . . . . . . . .   24
      5.11  Security Agreement  . . . . . . . . . . . . . . . . . . . . .   24
      5.12  Subsidiary Guaranty . . . . . . . . . . . . . . . . . . . . .   24
      5.13  Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . .   25
      5.14  Evidence of Lien, etc.  . . . . . . . . . . . . . . . . . . .   25
      5.15  Vessel Trust Indenture  . . . . . . . . . . . . . . . . . . .   26
      5.16  Rig Reports; Drilling Contracts . . . . . . . . . . . . . . .   26
      5.17  Insurance Report  . . . . . . . . . . . . . . . . . . . . . .   26
      5.18  Collateral Assignments of Insurances  . . . . . . . . . . . .   27
      5.19  Earnings Concentration Account  . . . . . . . . . . . . . . .   27
      5.20  Refinancing; Existing Credit Agreement  . . . . . . . . . . .   28
      5.21  Compliance Certificate  . . . . . . . . . . . . . . . . . . .   29

SECTION 6.  Representations, Warranties and Agreements  . . . . . . . . .   29
      6.01  Corporate Status  . . . . . . . . . . . . . . . . . . . . . .   29
      6.02  Corporate Power and Authority . . . . . . . . . . . . . . . .   29
      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 . . . . . . . . . . . . . . . . . . . . . . .   35
      6.19  Existing Indebtedness . . . . . . . . . . . . . . . . . . . .   36
      6.20  Citizenship . . . . . . . . . . . . . . . . . . . . . . . . .   36
      6.21  Rig Classification  . . . . . . . . . . . . . . . . . . . . .   36

SECTION 7.  Affirmative Covenants . . . . . . . . . . . . . . . . . . . .   36
      7.01  Information Covenants . . . . . . . . . . . . . . . . . . . .   36
      7.02  Books, Records and Inspections  . . . . . . . . . . . . . . .   39
      7.03  Insurance . . . . . . . . . . . . . . . . . . . . . . . . . .   39
      7.04  Payment of Taxes  . . . . . . . . . . . . . . . . . . . . . .   39
      7.05  Consolidated Corporate Franchises . . . . . . . . . . . . . .   39
      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  Additional Rig Valuations . . . . . . . . . . . . . . . . . .   40
      7.11  Further Assurances  . . . . . . . . . . . . . . . . . . . . .   41
      7.12  ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . .   41

SECTION 8.  Negative Covenants  . . . . . . . . . . . . . . . . . . . . .   42
      8.01  Changes in Business . . . . . . . . . . . . . . . . . . . . .   42
      8.02  Consolidation, Merger or Sale of Assets, etc. . . . . . . . .   42
      8.03  Liens on Collateral . . . . . . . . . . . . . . . . . . . . .   43
      8.04  Dividends; Restrictions on Subsidiaries, etc. . . . . . . . .   44
      8.05  Transactions with Affiliates  . . . . . . . . . . . . . . . .   46
      8.06  Vessel Management; Registry . . . . . . . . . . . . . . . . .   46
      8.07  Coverage Ratio  . . . . . . . . . . . . . . . . . . . . . . .   47
      8.08  Working Capital . . . . . . . . . . . . . . . . . . . . . . .   47
      8.09  Leverage Ratio  . . . . . . . . . . . . . . . . . . . . . . .   47
      8.10  Collateral Maintenance  . . . . . . . . . . . . . . . . . . .   47

SECTION 9.  Events of Default . . . . . . . . . . . . . . . . . . . . . .   47
      9.01  Payments  . . . . . . . . . . . . . . . . . . . . . . . . . .   47
      9.02  Representations, etc. . . . . . . . . . . . . . . . . . . . .   47
      9.03  Covenants . . . . . . . . . . . . . . . . . . . . . . . . . .   47
      9.04  Default Under Other Agreements  . . . . . . . . . . . . . . .   48
      9.05  Bankruptcy, etc.  . . . . . . . . . . . . . . . . . . . . . .   48
      9.06  Security Documents  . . . . . . . . . . . . . . . . . . . . .   48
      9.07  Guaranty  . . . . . . . . . . . . . . . . . . . . . . . . . .   49
      9.08  Judgments . . . . . . . . . . . . . . . . . . . . . . . . . .   49
      9.09  Citizenship . . . . . . . . . . . . . . . . . . . . . . . . .   49
      9.10  Employee Benefit Plans  . . . . . . . . . . . . . . . . . . .   49
      9.11  Change of Control . . . . . . . . . . . . . . . . . . . . . .   49

SECTION 10.  Definitions  . . . . . . . . . . . . . . . . . . . . . . . .   50

SECTION 11.  The Agent  . . . . . . . . . . . . . . . . . . . . . . . . .   68
      11.01  Appointment  . . . . . . . . . . . . . . . . . . . . . . . .   68
      11.02  Nature of Duties . . . . . . . . . . . . . . . . . . . . . .   68
      11.03  Lack of Reliance on the Agent  . . . . . . . . . . . . . . .   68
      11.04  Certain Rights of the Agent  . . . . . . . . . . . . . . . .   69
      11.05  Reliance . . . . . . . . . . . . . . . . . . . . . . . . . .   69
      11.06  Indemnification  . . . . . . . . . . . . . . . . . . . . . .   69
      11.07  The Agent in Its Individual Capacity . . . . . . . . . . . .   70
      11.08  Holders  . . . . . . . . . . . . . . . . . . . . . . . . . .   70
      11.09  Resignation by the Agent . . . . . . . . . . . . . . . . . .   70

SECTION 12.  Miscellaneous  . . . . . . . . . . . . . . . . . . . . . . .   71
      12.01  Payment of Expenses, etc.  . . . . . . . . . . . . . . . . .   71
      12.02  Right of Setoff  . . . . . . . . . . . . . . . . . . . . . .   72
      12.03  Notices  . . . . . . . . . . . . . . . . . . . . . . . . . .   72
      12.04  Benefit of Agreement . . . . . . . . . . . . . . . . . . . .   73
      12.05  No Waiver; Remedies Cumulative . . . . . . . . . . . . . . .   74
      12.06  Payments Pro Rata  . . . . . . . . . . . . . . . . . . . . .   75
      12.07  Calculations; Computations . . . . . . . . . . . . . . . . .   75
      12.08  GOVERNING LAW; SUBMISSION TO
                JURISDICTION; VENUE; WAIVER OF JURY TRIAL   . . . . . . .   76
      12.09  Counterparts . . . . . . . . . . . . . . . . . . . . . . . .   77
      12.10  Effectiveness  . . . . . . . . . . . . . . . . . . . . . . .   77
      12.11  Headings Descriptive . . . . . . . . . . . . . . . . . . . .   77
      12.12  Amendment or Waiver  . . . . . . . . . . . . . . . . . . . .   77
      12.13  Survival . . . . . . . . . . . . . . . . . . . . . . . . . .   78
      12.14  Domicile of Loans  . . . . . . . . . . . . . . . . . . . . .   78
      12.15  Confidentiality  . . . . . . . . . . . . . . . . . . . . . .   78
      12.16  Registry . . . . . . . . . . . . . . . . . . . . . . . . . .   79

SECTION 13.  Holdings Guaranty  . . . . . . . . . . . . . . . . . . . . .   79
      13.1  The Guaranty  . . . . . . . . . . . . . . . . . . . . . . . .   79
      13.2  Bankruptcy  . . . . . . . . . . . . . . . . . . . . . . . . .   80
      13.3  Nature of Liability . . . . . . . . . . . . . . . . . . . . .   80
      13.4  Independent Obligation  . . . . . . . . . . . . . . . . . . .   80
      13.5  Waiver of Notice, etc.  . . . . . . . . . . . . . . . . . . .   80
      13.6  Authorization . . . . . . . . . . . . . . . . . . . . . . . .   81
      13.7  Reliance  . . . . . . . . . . . . . . . . . . . . . . . . . .   82
      13.8  Subordination . . . . . . . . . . . . . . . . . . . . . . . .   82
      13.9  Waiver  . . . . . . . . . . . . . . . . . . . . . . . . . . .   82

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 I-4   --  Form of Bahamian Mortgage
EXHIBIT J     --  Form of Vessel Trust Indenture
EXHIBIT K     --  Form of Collateral Assignment of Insurance
EXHIBIT L     --  Form of Compliance Certificate 
EXHIBIT M     --  Form of Assignment and Assumption Agreement


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            CREDIT  AGREEMENT, dated  as of  April 30,  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"), CREDIT LYONNAIS  NEW YORK BRANCH, as co-agent (the
"Co-Agent") and  CHRISTIANIA BANK  OG KREDITKASSE, NEW  YORK BRANCH,  as agent
(the "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) may be repaid
and  reborrowed  in accordance  with the  provisions  hereof, (iii)  shall not
exceed  in the  aggregate for  all Banks  at any  time outstanding,  the Total
Commitment and (iv) 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.
More than  one Borrowing may be incurred on any  day, provided that at no time
shall there be outstanding more than eight Borrowings.

            1.03  Notice of Borrowing.  Whenever the Borrower desires to incur
Loans under the Facility, it shall give  the 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
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) the Interest
Period to be initially applicable thereto and  (iv) disbursement instructions.
The Agent shall promptly give  each Bank written notice (or  telephonic notice
promptly confirmed in writing) of each proposed Borrowing, of such Bank's pro-
portionate  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  Agent in  U.S. Dollars  and immediately  available funds  at the
Payment  Office and the 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 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 Agent its
portion of the Borrowing or  Borrowings to be made on such date, the Agent may
assume that such Bank has made such amount available to the Agent on such date
of  Borrowing, and the  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 Agent by such Bank and the Agent has made available same
to the  Borrower, the  Agent shall be  entitled to recover  such corresponding
amount from such Bank.   If such Bank  does not pay such  corresponding amount
forthwith upon the Agent's  demand therefor, the Agent shall promptly  (and in
any event within  two Business Days from  the date the  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 Agent.   The 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 Agent to the Borrower  to the date such corresponding amount
is recovered by the 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 Bor-
rower, the then  applicable rate  of interest, calculated  in accordance  with
Section 1.07, 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 Section  1.07 in  respect of  the Loans  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  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.

            1.07  Interest.  (a)  The  unpaid principal  amount  of each  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 Margin plus the relevant Eurodollar Rate.

            (b)  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 Eurodollar Rate
in effect from  time to time plus  the sum of (i)  2% and (ii) the  Applicable
Margin, 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.

            (c)  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) 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 occur-
ring three months  after the first day of such Interest Period and (ii) on any
prepayment  (on the amount prepaid),  at maturity (whether  by acceleration or
otherwise) and, after such maturity, on demand.

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

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

            1.08  Interest  Periods.  (a)  At the  time the  Borrower  gives a
Notice of  Borrowing in respect  of a  Borrowing (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,  it shall  have the right  to elect  by giving the
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, provided
that:

           (i)  the initial  Interest Period for any  Borrowing shall commence
      on  the  date  of such  Borrowing  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 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 in excess of  one month may  be elected at
      any time when a Default or Event  of Default is then in existence if the
      Agent or the  Required Banks have  determined that such  an election  at
      such time would be disadvantageous to the Banks; and

         (vii)  except  as required  by clause  (vi) above,  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  elect a new Interest Period to be  applicable to the respective
Borrowing as  provided above, the Borrower  shall be deemed to  have elected a
one month Interest Period.

            1.09  Increased  Costs, Illegality,  etc.  (a)  In the  event that
any Bank  shall have  determined (which  determination shall,  absent manifest
error, be final  and conclusive and  binding upon all  parties hereto) at  any
time, that such Bank shall incur  increased costs or reductions in the amounts
received or receivable  hereunder with respect  to any 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
applicable 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, then, and in  any such event, such Bank 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 Agent of  such determination (which notice the Agent shall
promptly transmit to each of the other Banks).  Thereafter the Borrower shall,
subject to Section 1.11(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 compen-
sate 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).  At  any time  that any  Loan  is affected  by the
circumstances described in this  Section 1.09(a), the Borrower may  either (i)
if the affected Loan is then  being made pursuant to a Borrowing, cancel  said
Borrowing by  giving  the  Agent  telephonic  notice  (confirmed  promptly  in
writing) thereof  no later than the  next Business Day after  the Borrower was
notified by  a Bank pursuant to this Section  1.09(a), or (ii) if the affected
Loan  is then outstanding,  upon at least  three Business Days'  notice to the
Agent, and with the consent of the Agent and the other Banks prepay such Loans
and cancel the Commitment of such Bank, provided that if more than one Bank is
affected  at  such time,  then all  affected Banks  must  be treated  the same
pursuant to this Section 1.09(a).

            (b)   If prior to the first day  of any Interest Period, the Agent
shall have determined 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 bases
provided within the definition  of Eurodollar Rate, the Agent  shall forthwith
give notice thereof to the Borrower  and the Banks, whereupon, until the Agent
notifies the  Borrower that the  circumstances giving  rise to such  notice no
longer exist, (i) the Total Unutilized Commitment shall not be available to be
borrowed hereunder and  (ii) the rate  of interest applicable to  any affected
Loans  then outstanding shall be  determined in accordance  with the following
provisions  of this Section 1.09(b).  During the 30 days following the date of
any notice given to the Borrower pursuant to the preceding sentence the Agent,
the Banks and the Borrower shall negotiate in good faith in order to arrive at
a mutually acceptable alternative basis for determining the interest rate from
time to  time applicable to the  affected Loans (the "Substitute  Basis").  If
within the 30 days following the date of any such notice to the  Borrower, the
Agent, the  Banks and the Borrower  shall agree upon a  Substitute Basis, such
Substitute  Basis shall be retroactive to and  effective from the first day of
the then  current Interest  Period until  and including the  last day  of such
Interest Period.  If after 30 days from the date of such notice, the Banks and
the Borrower shall  have failed to  agree upon a  Substitute Basis, then  each
Bank shall  certify  in  writing  to  the Borrower  through  the  Agent  (such
certification to be conclusive and binding on all of the parties hereto absent
manifest  error) the interest rate  at which such Bank is  prepared to make or
maintain its affected Loan for such Interest Period, it being  understood that
such Bank's interest rate shall be at a rate per annum equal to the sum of the
Applicable Margin plus a rate which adequately and fairly reflects the cost to
such Bank of  obtaining the funds necessary to maintain  its affected Loan for
such Interest Period,  such interest rate to  be retroactive to and  effective
from  the first  day  of such  Interest  Period.   If no  Substitute  Basis is
established, upon receipt  of notice of the interest rates  at which the Banks
are prepared to make or maintain their respective affected Loans, the Borrower
shall  have the right (i) exercisable upon  ten Business Days' prior notice to
any  Bank through the  Agent (A) to  continue to borrow  Loans at the interest
rates so advised by  the respective Banks (as such rates may be modified, from
time  to time, at  the outset  of each subsequent  Interest Period) or  (B) to
prepay in full the affected Loans of any Bank (at which time the Commitment of
such  Bank  shall be  permanently  reduced  by the  amount  of such  payment),
together  with  accrued interest  thereon at  the  interest rate  certified in
writing by such  Bank as provided above,  whereupon such affected Loans  shall
become due and payable on the date specified by the Borrower in such notice or
(ii) to substitute any Bank pursuant to the provisions of, and subject to  the
conditions contained in, Section 1.12.

            (c)   If,  after the date of  this Agreement, the  adoption 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 any Bank (or its  applicable lending
office) with any request or directive (whether or not having the force of law)
of  any  such authority,  central  bank  or comparable  agency  shall  make it
unlawful or impossible for any Bank to make, maintain or fund  any Loan and/or
fulfill its  Commitment  and such  Bank  shall so  notify  the Agent  and  the
Borrower, the  Agent shall forthwith give  notice thereof to  the other Banks.
Upon  the giving of  any such notice  to the Agent  and the Borrower,  (i) the
Commitment of such Bank shall be permanently reduced by an amount equal to the
aggregate principal amount of such Bank's affected Loans, or terminated if all
of such  Bank's Loans are so  affected, and (ii) the Borrower  shall prepay in
full the affected Loans of  such Bank, together with accrued  interest thereon
and,  in  the event  of a  termination of  such  Bank's Commitment,  any other
amounts which may be due to such Bank under this Agreement,  on either (i) the
last day of the then current  Interest Period applicable to each such affected
Loans if such  Bank may lawfully continue  to maintain and fund such  Loans to
such  day  or (ii)  immediately  if such  Bank  may not  lawfully  continue to
maintain and fund such Loans to such day.

            (d)  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 Agent),  the Borrower  shall, subject  to Section  1.11(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  Section
1.09(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 1.09(c) upon the subsequent receipt of such notice.

            0.1  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  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 Agent) a Borrowing does not occur on
a  date specified therefor in a Notice  of Borrowing (whether or not withdrawn
by the Borrower or deemed withdrawn  pursuant to Section 1.09(a)); (ii) if any
prepayment or repayment  of any of its Loans (including as a result of Section
1.09 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 Loans is not made on  any date specified in a notice of  prepayment
given by the Borrower; or  (iv) as a consequence  of any other default by  the
Borrower to repay its Loans when required by the terms of this Agreement.

            0.2  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 1.09, 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 operation  of any such  Section.
Nothing in this  Section 1.11 shall affect or postpone  any of the obligations
of the Borrower  or the right of  any Bank provided  in Section 1.09, 2.05  or
4.04.

            (b)  Notwithstanding anything  in this Agreement to  the contrary,
to the extent  any notice required by Section  1.09, 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 1.09,  2.05 or  4.04 for  any amounts
incurred or accruing prior to the giving of such notice to the Borrower.

            0.3  Replacement of Banks.  (x)  Upon the occurrence of any  event
giving rise to the operation of Section 1.09, 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  or maintaining 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
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 1.12,  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  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 outstanding 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").   Schedule 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)  $20,000,000  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 Margin  plus the Eurodollar 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 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  out-
standing 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  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 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  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 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 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  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   of 1%  per annum, computed at
such  rate  for each  day,  on  the daily  amount  of  such Bank's  Unutilized
Commitment.  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 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 1% of 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 1/4 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  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 Agent and (y) for
its own account such  other fees as agreed to in  writing between the Borrower
and the 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
Agent at its Notice Office (which notice the 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 pur-
suant 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) May
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 1, 1997                        $8,500,000
             November 1, 1997                   $8,500,000

             May 1, 1998                        $8,500,000

             November 1, 1998                   $8,500,000
             May 1, 1999                        $8,500,000

             November 1, 1999                   $8,500,000
             May 1, 2000                        $8,500,000

             November 1, 2000                   $8,500,000

             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 amount of Total Commitment then
in  effect  shall be  permanently  reduced by  an  amount equal  to  the Total
Commitment then in  effect multiplied by the percentage set  forth on Annex IV
hereto adjacent to the name  of the Mortgaged Rig which is the subject of such
Collateral  Disposition  under  the   heading  "Percentage  Reduction".    Any
reduction  to  the Total  Commitment pursuant  to  this Section  3.03(c) shall
reduce the remaining  Scheduled Commitment  Reductions pro rata  based on  the
then remaining amounts of Scheduled Commitment Reductions.  

            (d)  In  the case of any Collateral Disposition involving the Jack
Bates,  the Total  Commitment shall terminate  on the  date which  is ten days
thereafter and  all Loans  and other  obligations hereunder  outstanding shall
become  due and  payable  on such  date  and the  Borrower  shall  pay to  the
Collateral Agent at the Payment  Office an amount of cash equal to  the Stated
Amount of  all Letters of  Credit outstanding to be  held as security  for the
Borrower's obligations in respect thereof.

            (e)  Each  reduction  of the  Total  Commitment  pursuant to  this
Section 3.03 shall apply proportionately to the Commitment of each Bank.

            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
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 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 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 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) Loans prepaid pursuant to
this  Section 4.01 on any date other than  the last day of the Interest Period
applicable thereto shall be subject to Section 1.10; 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  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  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 sub-
stance reasonably  satisfactory  to  the Agent  (which  shall  permit  certain
investments  in Cash Equivalents satisfactory to the 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.

            (d)  On  the  date  which   is  ten  days  after  any   Collateral
Disposition  involving the Jack Bates, the outstanding principal amount of the
Loans 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  specific Borrowing or  Borrowings pursuant to
which made, provided that 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 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  1.10.   Notwith-
standing 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 1.10 as a result of Loans being prepaid
other  than on  the last  day of  an Interest  Period applicable  thereto (the
"Affected  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  Loans with the Agent  (which deposit must be
equal in amount to the  amount of the Affected 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  Agent  and  shall provide  for  investments
satisfactory to  the 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  (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  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 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.

            1.01  Method  and   Place  of   Payment.    Except   as  otherwise
specifically  provided herein, all payments under this Agreement shall be made
to the  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 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.

            1.02  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  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  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 1.12 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 suc-
cessor  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 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
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 inter-
est, 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 Section 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, relating to the deducting or withholding of income or
similar Taxes,  provided such Bank shall provide to the Borrower and the 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 1.11(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 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;  No Collateral
Disposition of  Jack Bates.  At the time  of each Credit Event  and also after
giving  effect thereto, (i) there shall exist  no Default or Event of Default,
(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) and (iii) there shall not have occurred any
Collateral Disposition with respect to the US Rig Jack Bates.

            5.03  Officer's Certificate.  On  the Initial Borrowing  Date, the
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 Agent
and that all of the applicable  conditions set forth in Sections 5.02, 5.08(a)
and 5.20 exist as of such date.

            5.04  Opinions  of  Counsel.  On the  Initial Borrowing  Date, the
Agent  shall have received  opinions, addressed to  the 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 Agent,
which opinion  shall cover the matters contained in Exhibit E-2 and (iii) from
local counsel satisfactory to the Agent as the Agent may  request, which opin-
ions 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 Agent may reasonably  request and shall be in form
and substance satisfactory to the Agent.

            5.05  Corporate Proceedings.  (a)  On  the Initial Borrowing Date,
the 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 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 Agent,  and the  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 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 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
Agent shall have become aware of any facts or conditions not previously known)
which the Agent or  the Required Banks shall determine (a) has,  or is reason-
ably likely to  have, a material adverse  effect on the rights  or remedies of
the Banks  or the 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 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
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  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 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
Credit Party shall  have duly  authorized, executed and  delivered a  Security
Agreement 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, 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 such Credit Party or a division
      or operating unit  of any such Person, 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 Rig, 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

           (iv)  with respect  to the Bahamian 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  "Bahamian
      Mortgage").

            (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
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.  and the  US  Rig D.R.  Stewart  is registered  in  the
ownership of Reading & Bates Exploration Co.,  each subject to the Lien of the
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., and  subject to the  Lien of the  Panamanian Mortgage and
free  of  all other  Liens  of record,  (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 and
(iv) a  certificate of the Bahamas  Maritime Authority of The  Bahamas showing
(or confirmation  updating previously reviewed  certificates indicating)  that
the Bahamian Rig  J.W. McLean is registered in the  ownership of the Borrower,
and  subject to the Lien of the Bahamian  Mortgage and free of all other Liens
of record.

            5.15  Vessel Trust Indenture.  (a)  On the Initial Borrowing Date,
each Mortgagor  which owns a US Rig shall  have acknowledged and agreed to the
terms  of a trust indenture substantially  in the form set  forth as Exhibit J
(as amended, modified or supplemented from time to time in accordance with the
terms hereof and thereof, the "Vessel Trust Indenture").

            (b)  On  the  Initial  Borrowing  Date,  the  Trustee  shall  have
delivered to  the Agent a declaration of  United States citizenship (form 899)
satisfactory to the Agent.

            5.16  Rig Reports; Drilling  Contracts.   (a) On or  prior to  the
Initial Borrowing Date, the 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 $200 million.

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

            5.17  Insurance  Report.   On  or prior  to the  Initial Borrowing
Date, the Agent shall have received  a detailed report from Soriero & Company,
Inc.,  or another firm of  independent marine insurance  brokers acceptable to
the Agent and the Required  Banks with respect to the insurance  maintained by
the  Mortgagors in  connection  with  the  Mortgaged  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 Trustee or the Agent,  as the case may be, as mortgagee  and
(ii) conform with the requirements of the Mortgages.

            5.18  Collateral  Assignments  of  Insurances.    On  the  Initial
Borrowing  Date, each Mortgagor shall have executed and delivered a collateral
assignment of insurance  substantially in the form set forth  as Exhibit K (as
amended, modified  or supplemented from  time to  time in accordance  with the
terms  hereof  and thereof,  the  "Collateral Assignment  of  Insurance") with
respect  to  the insurance  maintained by  such  Mortgagor on  the Collateral,
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 assignments purported  to be created by
      each Collateral Assignment of Insurance; 

          (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 any Mortgagor or a division or
      operating  unit of  such Person,  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);

         (iii)  evidence  that all  other recordings and  filings of,  or with
      respect  to, each  Collateral  Assignment of  Insurance,  and all  other
      actions, as may be necessary or, in the opinion of the Collateral Agent,
      desirable  to perfect  the assignments  intended to  be created  by each
      Collateral  Assignment  of  Insurance  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 each Collateral Assignment of Insurance shall be in full force and effect.

            5.19   Earnings Concentration Account.   On or  before the Initial
Borrowing Date, the Borrower  shall have established with Christiania  Bank og
Kreditkasse,  Grand Cayman  Branch,  on terms  reasonably satisfactory  to the
Agent, 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
Agent, following  the occurrence of  an Event  of Default, requires  that said
monies be held as security or applied  by the Agent, for the benefit of itself
and the  Banks, or as it may direct, whereafter the Borrower shall procure and
ensure that such monies are held as security or applied in accordance with the
directions of the Agent.

            5.20  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  Agreement 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  Agreement 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 Facility.  The Agent shall have received evidence in
form, scope  and substance reasonably satisfactory to  it that the matters set
forth in this Section 5.20(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
Agreement  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 Agreement.   The 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 reason-
ably requested  by the Agent,  which releases shall  be in form  and substance
reasonably satisfactory to the  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 Agreement, all of which shall
be in form and substance reasonably satisfactory to the Agent.

            5.21  Compliance Certificate.  On  the Initial Borrowing Date, the
Borrower shall have  delivered to the  Agent a compliance  certificate in  the
form of  Exhibit  D  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
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  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 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, Australia, or the Bahamas (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 Agent or any Bank for purposes of or in  connection with this Agreement
or any transaction contemplated herein is, and all other such factual informa-
tion (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 material respects on
the date as of which such information is dated or certified and not incomplete
by omitting  to state  any material  fact necessary  to make  such information
(taken as a whole)  not misleading at such time in  light of the circumstances
under  which such  information was provided.   The  Projections and  pro forma
financial  information contained  in such  materials are  based on  good faith
estimates and  assumptions believed  by such Persons  to be reasonable  at the
time made, it being recognized by the 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  pro  forma
consolidated balance sheet of Holdings and  its Subsidiaries as of [March  31,
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 pro forma balance sheet, presents a good faith estimate of the
consolidated pro forma 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 March  31, 1996 statements, sub-
ject  to normal and  recurring year-end audit adjustment.   All such financial
statements  (other than  the  aforesaid pro  forma  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  dated as  of March  8, 1996,  together with  adjustments thereto,
previously delivered to the 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 mis-
leading in  any material respect or  which fail to take  into account material
information  not otherwise  disclosed in writing  to the Agents  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 Mortgages), or comparable provisions under the
laws of the Republic  of Panama, Australia, and The Bahamas, and subject to no
other Liens (except that the Collateral may be subject to Permitted Liens), in
favor  of the  Collateral Agent or  the 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  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 applicable  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, Australia and The Bahamas, 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 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 utilization 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 L 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 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 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 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 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  Additional  Rig Valuations.  At any time as may be requested
by the Agent  at the request of the Required Banks  (but in no event less than
annually and not more than  three times in any fiscal year of Holdings) and at
the expense of the Borrower (without taking into account the right of Holdings
or the Borrower to retain a  second Approved Shipbroker in accordance with the
immediately succeeding  sentence), Holdings or  the Borrower shall  retain the
Approved Shipbroker requested by the 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.  

            7.11  Further  Assurances.  (a)  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 Trustee,  as the case may  be, from time to time  such
vouchers,   invoices,   schedules,   confirmatory  assignments,   conveyances,
financing statements, 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
Trustee, as the case may be, may reasonably require.  

            (b)  Holdings  and the  Borrower agree  that each  action required
above by this  Section 7.11 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
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 com-
mercial  efforts without any material expenditure, to obtain consents or other
actions from third  parties with respect  to its compliance with  this Section
7.11.

            7.12  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 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
      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  Agent, the
Collateral  Agent and  the Trustee  shall be  authorized to  take  any actions
deemed appropriate in order to effect the foregoing.

            8.03  Liens  on Collateral.  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:

            (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 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; 

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

            8.04  Dividends; Restrictions on Subsidiaries, etc.  (a)  Holdings
will not, and will not  permit any of its Subsidiaries to, declare  or pay any
dividends  (other  than  dividends (i)  payable  solely  in  capital stock  of
Holdings  or rights  in  respect thereof  or  (ii) constituting  spin-offs  of
divisions  or direct or indirect operating subsidiaries of Holdings) 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 (ii),  the
      amount  of repurchases  Holdings may make  from officers,  employees and
      directors pursuant to  this clause (ii) 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  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,  in the aggregate, 50%  of Consolidated Net
      Income on a cumulative basis beginning January 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
distributions  or pay any Indebtedness owed to  the Borrower or any Subsidiary
Guarantor,  (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.

            8.05  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.

            8.06  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.

            8.07  Coverage Ratio.  Holdings  will not permit the  ratio of (i)
Consolidated EBITDAR to  (ii) the  sum of Consolidated  Interest Expense  plus
Consolidated Rent Expense for  any period of four consecutive  fiscal quarters
of Holdings (taken as one accounting period) to be less than 2.00:1.00.

            8.08  Working  Capital.  Holdings will not  permit Working Capital
on  the last day of any two consecutive fiscal quarters of Holdings to be less
than $0.

            8.09  Leverage Ratio.  Holdings will not permit the Leverage Ratio
(i)  at the end of  any fiscal quarter  ending prior to the  date which is two
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.

            8.10  Collateral  Maintenance.  Holdings  shall  not   permit  the
Market Value of the Mortgaged Rigs at any  time to be less than 1.6 times  the
Total Commitment.

            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 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 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 $1,000,000 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 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 Trustee, as the case may be, or (ii) any
Credit Party shall default in any respect in the due performance 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 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 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, Australia and the Bahamas, 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;  (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;

            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 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 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 speci-
fied in  Section 9.05  shall occur  with respect to  the Borrower,  the result
which would occur upon the giving of written notice by  the 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 obli-
gations in respect  of Letters of Credit then outstanding  equal to the aggre-
gate 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 has been
terminated  shall  be   references  to  the  Commitments   or  Adjusted  Total
Commitment, as  the case may be,  in effect immediately prior  to such termin-
ation, 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  preceding 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.

            "Affected  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.

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

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

            "Applicable Margin" shall mean 1 % 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.

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

            "Assignor" shall mean Reading & Bates Drilling Co.

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

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

            "Bahamian Rig" shall mean the offshore drilling rig J.W. McLean.

            "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  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 regu-
latory agency or authority.

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

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

            "Borrowing" shall  mean the  incurrence of  Loans 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, and having the same Interest Period.

            "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 Collateral Assignment  of Insurance  Collateral, 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 Agent acting as collateral agent
for the Banks.

            "Collateral  Assignment  of  Insurance"  shall  have  the  meaning
provided in Section 5.18.

            "Collateral Assignment  of Insurance  Collateral"  shall mean  all
"Collateral" as defined in the Collateral Assignments of Insurance.

            "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).

            "Concentration Account" shall have the meaning provided in Section
5.19.

            "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 the current portion  of and the
accrued but unpaid interest on any Indebtedness under this Agreement or  under
the Holdings Convertible Debentures.

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

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

            "Consolidated  Indebtedness"  shall   mean,  all  Indebtedness  of
Holdings and its Subsidiaries calculated on a consolidated basis in accordance
with GAAP.

            "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 8.04.

            "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 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
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  Agreement"  shall  mean  the  Credit   Facility
Agreement,  dated as  of  November 16,  1995,  by and  among  Reading &  Bates
Drilling Co. and Reading & Bates Exploration Co. as Borrowers, Reading & Bates
Corporation  as Guarantor, the Lenders  party thereto and  Christiania Bank og
Kreditkasse, as Agent.

            "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 Agent from
three Federal Funds brokers of recognized standing selected by the 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
trade payables  and accrued  expenses, in  each case  arising in the  ordinary
course of business.

            "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 1.08.

            "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.

            "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.

            "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.

            "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  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 5.16(ii) and
Section 7.10, 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(a).

            "Mortgaged  Rigs"  shall  mean  and   include  the  US  Rigs,  the
Panamanian Rig, the Australian Rig and the Bahamian 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 Office" shall mean the office of the Agent at 11 West 42nd
Street,  7th Floor, New York, New York 10036 or such other office as the 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 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  Rig" shall  mean  the offshore  drilling rig  Charley
Graves.

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

            "Payment Office"  shall mean the  office of  the Agent at  11 West
42nd Street, 7th  Floor, New York, New York 10036 or  such other office as the
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.

            "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.

            "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 Collateral  Assignments of  Insurance, each  Mortgage  and the
Vessel Trust Indenture.

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

            "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.

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

            "Supermajority Banks" at any  time shall mean Non-Defaulting Banks
whose  outstanding  Commitments   (or,  if  the  Total  Commitment   has  been
terminated,  outstanding Loans  and Adjusted  Percentage of  Letter  of Credit
Outstandings) constitute  greater than  80% 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).

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

            "Total Capitalization"  shall  mean,  at  any  time,  the  sum  of
Consolidated 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.

            "Trustee" shall  mean Wilmington Trust Company, as trustee for the
Banks  pursuant to  the  Vessel Trust  Indenture,  and any  successor  trustee
appointed in accordance with the terms thereof.

            "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.

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

            "US Rigs" shall mean  the offshore drilling rigs Jack  Bates, D.R.
Stewart and W.D. Kent.

            "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  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.

            "Vessel  Trust  Indenture"  shall  have the  meaning  provided  in
Section 5.15.

            "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 Agent.

            11.01  Appointment.  The Banks hereby designate Christiania Bank og
Kreditkasse, New  York Branch as Agent  (for purposes of this  Section 11, the
term "Agent" shall include CBK in its capacity as Collateral Agent pursuant to
this Agreement and  the Security Documents) 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 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 Agent by the terms hereof and thereof and such other powers
as are reasonably incidental thereto.  The Agent may perform any of its duties
hereunder by or through its respective  officers, directors, agents, employees
or Affiliates. 

            11.02  Nature of Duties.  The  Agent shall not  have any duties or
responsibilities  except those expressly set  forth in this  Agreement and the
other Credit Documents.  Neither the 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 Agent shall be mechanical
and  administrative in  nature; the  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 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  Agent.  Independently  and without
reliance upon the 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 inde-
pendent 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 Subsidiaries and, except as expressly
provided in this Agreement, the Agent  shall not have any duty or responsibil-
ity, either  initially or on  a continuing 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 Agent shall not be responsible to  any Bank or
the  holder of any Note  for any recitals,  statements, information, represen-
tations or  warranties herein or in any document, certificate or other writing
delivered in connection herewith or for the execution, effectiveness, genuine-
ness,   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 Agent.   If the  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 Agent shall  be entitled to refrain from such act or tak-
ing  such action unless  and until the Agent  shall have received instructions
from the Required Banks; and the 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 Agent as a result of the  Agent acting or refraining from acting hereunder
or under any other Credit Document  in accordance with the instructions of the
Required Banks.

            11.05  Reliance. The 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 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 Agent (which may be counsel for Holdings and/or the Borrower).

            11.06  Indemnification. To the extent  the Agent is not reimbursed
and  indemnified by the Borrower,  the Banks will  reimburse and indemnify the
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 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  Agent's  gross negligence  or willful  mis-
conduct.

            11.07  The Agent in Its Individual Capacity.  With respect  to its
obligation to make Loans under this Agreement, the 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 performing  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 Agent in its indi-
vidual  capacity.   The 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  connection with  this
Agreement and otherwise without having to account for the same to the Banks.

            11.08  Holders. The 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  Agent.  Any  request, authority  or consent of  any
Person who, at  the time of making  such request 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 Agent.   (a)  The  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  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 Agent hereunder or  thereunder who shall  be a commercial
bank or trust company reasonably acceptable to the Borrower.

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

            (d)  If no successor Agent  has been appointed pursuant  to clause
(b)  or (c)  above by  the 20th  Business Day  after the  date such  notice of
resignation  was  given by  the Agent,  the  Agent's resignation  shall become
effective and the Required  Banks shall thereafter perform  all the duties  of
the Agent hereunder and/or under any other Credit Document until such time, if
any, as the Required Banks appoint a successor 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 Agent and the Co-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 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
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
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) applic-
able to any  such Real Property, offshore drilling rig,  facility or location,
or any Environmental Claim asserted against Holdings, any of its Subsidiaries,
or any Real Property, offshore drilling rig, facility or location  at any time
owned or operated  by Holdings or any of its  Subsidiaries, including, in each
case,  without limitation,  the actual  reasonable fees  and disbursements  of
counsel  and  other   consultants  incurred  in   connection  with  any   such
investigation, litigation or other proceeding (but excluding any  losses, lia-
bilities, claims,  damages or expenses to the extent incurred by reason of the
gross  negligence or willful misconduct of the  Person to be indemnified).  To
the extent that  the undertaking to indemnify, pay or  hold harmless the 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
Agent may, prior  to receipt  of written confirmation,  act without  liability
upon the basis of such telephonic notice  believed by the 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 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 1.09 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
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 there-
after 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  assigning 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 Agent a nonrefundable assignment fee  of $3,500 and (y) to a
Bank, either  the assigning or  assignee Bank shall  pay to  the Agent a  non-
refundable  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  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 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
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 Agent or the  Banks
to any other or further action in any circumstances without notice or demand.

            12.06  Payments Pro  Rata.  (a)  The  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 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 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  Agent at the Payment Office  of the
Agent or, in the  case of the Banks, shall have given  to the Agent telephonic
(confirmed in writing), written telex or facsimile transmission  notice (actu-
ally 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  or  of  a  mandatory reduction  in  the  Total  Commitment  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 (subject  to the following proviso),  (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) or (vi) consent to the assignment or transfer by the  Borrower of any of
its rights and  obligations under  this Agreement; provided  further, that  no
such  change, waiver, discharge or  termination shall, without  the consent of
the Supermajority  Banks, (1) waive, change the timing or amount of, or extend
any Scheduled Commitment Reduction,  (2) amend, modify or waive  any provision
contained  in the definition  of Supermajority Banks  or (3) amend,  modify or
waive any  provision contained in this proviso.  No provision of Sections 2 or
11, or  any other provisions  relating to the Letter  of Credit Issuer  or the
Agent may be modified without the consent of the 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 (vi), 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 1.12 so long  as at the  time of such  replacement,
each  such Replacement Bank consents to the proposed change, waiver, discharge
or termination; 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 1.09, 1.10, 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  1.09 or 4.04  resulting from any  such transfer  (other
than  a transfer  pursuant to  Section 1.11(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 representative 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 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 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 Agent on the Register only upon
the  acceptance by the  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 Agent  for
acceptance and  registration 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.

            13.1  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 Agent  or the
Secured Creditors in collecting any of the Guaranteed Obligations.

            13.2  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. 

            13.3  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 Agent or  the Secured Creditors on the
indebtedness which the Agent or such Secured Creditors repay the Borrower pur-
suant  to   court  order  in  any   bankruptcy,  reorganization,  arrangement,
moratorium or other debtor relief proceeding, and Holdings waives any right to
the  deferral or modification  of its obligations  hereunder by  reason of any
such proceeding.

            13.4  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.

            13.5  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  Agent,  any  Bank, the  Letter  of  Credit Issuer,  the
Collateral Agent  or the Trustee against,  and any other notice  to, any party
liable thereon (including Holdings, any other guarantor or the Borrower).

            13.6  Authorization. Holdings authorizes the 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.

            13.7  Reliance.  It is not necessary for  the 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 guar-
anteed hereunder.

            13.8  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
Agent and the Secured Creditors; and if  the 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 re-
ceived by Holdings for the benefit  of the Secured Creditors and be paid  over
to the 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 Guaranty.  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.  

            13.9  Waiver.  (a)  Holdings waives any right (except  as shall be
required by applicable statute and  cannot be waived) to require the  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 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 Agent and  the Secured Creditors
may,  at their election, foreclose on any security held by the Agent, the Col-
lateral 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 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 arising
out of any such election  by the 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 Agent  and the
Secured  Creditors shall have no duty  to advise Holdings of information known
to them regarding such circumstances 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 Agent


                               By                                   
                                   Name:  
                                   Title: 

                               By
                                   Name:
                                   Title:

                              CREDIT LYONNAIS NEW YORK BRANCH
                              Individually and as Co-Agent


                              By                                   
                                  Name:
                                  Title:

                              BANQUE INDOSUEZ


                              By                                   
                                  Name:
                                  Title:

                              BANK AUSTRIA AKTIENGESELLSCHAFT


                              By                                   
                                  Name:
                                  Title:

                              THE FUJI BANK, LIMITED


                              By                                   
                                  Name:
                                  Title: 

                                                                     ANNEX I


                                  COMMITMENTS

                       Bank                          Commitment
     Christiania Bank og Kreditkasse, New            $  45,000,000
        York Branch
     Credit Lyonnais New York Branch                 $  25,000,000
     Banque Indosuez                                 $  11,000,000
     Bank Austria Aktiengesellschaft                 $  11,000,000
     The Fuji Bank, Limited                          $   8,000,000

           Total                                      $100,000,000


                                                                      ANNEX II

                                BANK ADDRESSES

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

Credit Lyonnais                         1301 Avenue of the Americas
New York Branch                         New York, NY 10019
                                        Attn:  Susan Kopech, Esq.
                                        Tel. No.:  (212) 261-7052
                                        Fax No.:  (212) 459-3187

                                with a copy to:

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

Banque Indosuez                         9 Rue Louis Murat
                                        75371 Paris Cedex 08
                                        France
                                        Attn:  Francine Struxiano-Auffray
                                        Tel. No.: 011 33 1 4420 2377
                                        Fax No.:  011 33 1 4420 1934

Bank Austria Aktiengesellschaft         565 Fifth Avenue
                                        New York, NY 10017
                                        Attn:  Lynn Perri-Petrini
                                        Tel. No.: (212) 880-1171
                                        Fax No.:  (212) 880-1180

The Fuji Bank, Limited                  One Houston Center
                                        Suite 4100
                                        1221 McKinney Street
                                        Houston, Texas 77010
                                        Attn:  Mark Polasek
                                        Tel. No.: (713) 650-7863
                                        Fax No.:  (713) 759-0048