EXHIBIT 10.1

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                             CREDIT AGREEMENT
                                     
                                   among
                                     
                       READING & BATES CORPORATION,
                                     
                       READING & BATES DRILLING CO.,
                                     
           VARIOUS SUBSIDIARIES OF READING & BATES DRILLING CO.,
                                     
                    RB DEEPWATER EXPLORATION III INC.,
                                     
                       VARIOUS LENDING INSTITUTIONS,
                                     
                     CREDIT LYONNAIS NEW YORK BRANCH,
                            as SYNDICATION AGENT
                                     
                                    and
                                     
                     CHRISTIANIA BANK OG KREDITKASSE,
                             NEW YORK BRANCH,
                                     
                          as ADMINISTRATIVE AGENT
                                     
                  _______________________________________
                                     
                       Dated as of February 24, 1998
                  _______________________________________
                                     
                                     
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                    TABLE OF CONTENTS


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

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

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

SECTION 4.  Conditions Precedent                                
           4.01  Execution of Agreement; Notes          
           4.02  No Default; Representations and Warranties   
           4.03  Officer's Certificate                  
           4.04  Opinions of Counsel                    
           4.05  Corporate Proceedings                  
           4.06  Adverse Change, etc.                   
           4.07  Litigation                             
           4.08  Approvals                              
           4.09  Fees                                   
           4.10  Security Agreement                     
           4.11  Subsidiary Guaranty                    
           4.12  Construction Contract; Refundment Guaranty; Drilling
                 Contract; Budget                             
           4.13  Compliance Certificate; Rig Valuation Report      
           4.14  Notice of Borrowing                    

SECTION 5.  Representations, Warranties and Agreements   
           5.01  Corporate Status                       
           5.02  Corporate Power and Authority          
           5.03  No Violation                           
           5.04  Litigation                             
           5.05  Use of Proceeds; Margin Regulations    
           5.06  Governmental Approvals                 
           5.07  Investment Company Act                 
           5.08  Public Utility Holding Company Act     
           5.09  True and Complete Disclosure           
           5.10  Financial Condition; Financial Statements 
           5.11  Security Interests                     
           5.12  Tax Returns and Payments               
           5.13  Compliance with ERISA                  
           5.14  Subsidiaries                           
           5.15  Patents, etc.                          
           5.16  Pollution and Other Regulations        
           5.17  Properties                             
           5.18  Labor Relations                        
           5.19  Existing Indebtedness                  
           5.20  Citizenship                            
           5.21  Rig Classification                     

SECTION 6.  Affirmative Covenants                        
           6.01  Information Covenants                  
           6.02  Books, Records and Inspections         
           6.03  Insurance                              
           6.04  Payment of Taxes                       
           6.05  Consolidated Corporate Franchises      
           6.06  Compliance with Statutes, etc.         
           6.07  Good Repair                            
           6.08  End of Fiscal Years; Fiscal Quarters   
           6.09  Use of Proceeds                        
           6.10  Additional Rig Valuations              
           6.11  Further Assurance                      

SECTION 7.  Negative Covenants                           
           7.01  Changes in Business                    
           7.02  Consolidation, Merger or Sale of Assets, etc.     
           7.03  Liens on Assets                        
           7.04  Indebtedness of Arcade                 
           7.05  Dividends; Restrictions on Subsidiaries, etc.     
           7.06  Transactions with Affiliates           
           7.07  Vessel Management                      
           7.08  Coverage Ratio                         
           7.09  Working Capital                        
           7.10  Leverage Ratio                         
           7.11  Fleet Market Value                     
           7.12  Restrictions on Amendments to Other Agreements;
                 Certain Prepayments of Other Indebtedness    

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

SECTION 9.  Definitions                                  

SECTION 10.  The Administrative Agent                    
           10.01  Appointment of the Administrative Agent
           10.02  Nature of Duties                      
           10.03  Lack of Reliance on the Administrative Agent     
           10.04  Certain Rights of the Administrative Agent  
           10.05  Reliance                              
           10.06  Indemnification                       
           10.07  The Administrative Agent in Its Individual Capacity
           10.08  Holders                               
           10.09  Resignation by the Administrative Agent 

SECTION 11.  Miscellaneous                               
           11.01  Payment of Expenses, etc.             
           11.02  Right of Setoff                       
           11.03  Notices                               
           11.04  Benefit of Agreement                  
           11.05  No Waiver; Remedies Cumulative        
           11.06  Payments Pro Rata                     
           11.07  Calculations; Computations            
           11.08  GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE;
                  WAIVER OF JURY TRIAL                         
           11.09  Counterparts                          
           11.10  Effectiveness                         
           11.11  Headings Descriptive                  
           11.12  Amendment or Waiver                   
           11.13  Survival                              
           11.14  Domicile of Loans                     
           11.15  Confidentiality                       
           11.16  Registry                              

SECTION 12.  Parent Guaranty                            
           12.01  The Guaranty                          
           12.02  Bankruptcy                            
           12.03  Nature of Liability                   
           12.04  Independent Obligation                
           12.05  Authorization                         
           12.06  Reliance                              
           12.07  Subordination                         
           12.08  Waiver                                
           12.09  Nature of Liability                   


ANNEX I    --  Commitments
ANNEX II   --  Bank Addresses
ANNEX III  --  Subsidiaries
ANNEX IV   --  Existing Indebtedness
ANNEX V    --  Existing Liens
ANNEX VI   --  Approved Shipbrokers

EXHIBIT A    --  Form of Notice of Borrowing
EXHIBIT B    --  Form of Note
EXHIBIT C    --  Form of Section 3.04(b)(ii) Certificate
EXHIBIT D-1  --  Form of Opinion of Wayne Hillin, Esq.
EXHIBIT D-2  --  Form of Opinion of White & Case
EXHIBIT E    --  Form of Officers' Certificate
EXHIBIT F    --  Form of Security Agreement
EXHIBIT G    --  Form of Subsidiary Guaranty
EXHIBIT H    --  Form of Compliance Certificate
EXHIBIT I    --  Form of Assignment and Assumption Agreement

           CREDIT AGREEMENT, dated as of February 24, 1998, among READING &
BATES  CORPORATION ("Holdings"), a Delaware corporation,  READING  &  BATES
DRILLING  CO. ("Parent"), an Oklahoma corporation, RB DEEPWATER EXPLORATION
III  INC.  (the "Borrower"), a Nevada corporation, the lending institutions
listed  from  time  to time on Annex I hereto (each a  "Bank"  and,  collec
tively, the "Banks"), CREDIT LYONNAIS NEW YORK BRANCH as syndication  agent
(the  "Syndication  Agent") and CHRISTIANIA BANK OG KREDITKASSE,  NEW  YORK
BRANCH, as administrative agent (the "Administrative Agent").  Unless other
wise  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 on any Drawdown Date, (ii) shall be
made  in  a principal amount not to exceed the applicable Drawdown  Amount,
(iii)  except as hereinafter provided, may, at the option of the  Borrower,
be  incurred and maintained as, and/or converted into, Base Rate  Loans  or
Eurodollar  Loans,  provided  that all Loans  made  as  part  of  the  same
Borrowing shall, unless otherwise specifically provided herein, consist  of
Loans  of  the  same Type, (iv) may be repaid and reborrowed in  accordance
with  the provisions hereof, (v) shall not exceed in the aggregate for  all
Banks  at  any  time outstanding, the Total Commitment and (vi)  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 at such time, equals (1) if such Bank is  a  Non-
Defaulting Bank, the Adjusted Commitment of such Bank at such time and  (2)
if  such  Bank  is a Defaulting Bank, the Commitment of such Bank  at  such
time.

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

           1.03   Notice  of Borrowing.  Whenever the Borrower  desires  to
incur  Loans under the Facility, it shall give the Administrative Agent  at
its  Notice  Office, prior to 12:00 Noon (New York time),  at  least  three
Business   Days'  prior  written  notice  (or  telephonic  notice  promptly
confirmed  in writing) of each Borrowing of Eurodollar Loans and  at  least
one  Business  Day's  prior written notice (or telephonic  notice  promptly
confirmed  in  writing) of each Borrowing of Base Rate  Loans  to  be  made
hereunder.  Each such notice (each a "Notice of Borrowing") shall be in the
form  of  Exhibit  A, shall be signed by an Authorized  Officer,  shall  be
irrevocable  and shall specify (i) the aggregate principal  amount  of  the
Loans  to  be  made pursuant to such Borrowing, (ii) the date of  Borrowing
(which  shall  be  a Business Day), (iii) whether the respective  Borrowing
shall  consist  of Base Rate Loans or (to the extent permitted)  Eurodollar
Loans  and,  if  Eurodollar  Loans, the Interest  Period  to  be  initially
applicable thereto, (iv) disbursement instructions and (v) a description in
reasonable detail of the use to which such Loan proceeds are to be  applied
in  respect of the construction of the Drillship.  The Administrative Agent
shall promptly give each Bank written notice (or telephonic notice promptly
confirmed  in  writing) of each proposed Borrowing, of such  Bank's  propor
tionate  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  available to the Administrative Agent in U.S. Dollars and immediately
available funds at the Payment Office and the Administrative Agent promptly
will make available to the Borrower by depositing to its account at the Pay
ment  Office  (or  in  accordance with any other disbursement  instructions
given  by  the Borrower) the aggregate of the amounts so made available  in
U.S.  Dollars  and immediately available funds.  Unless the  Administrative
Agent  shall have been notified by any Bank prior to the date of  Borrowing
that  such  Bank  does not intend to make available to  the  Administrative
Agent  its portion of the Borrowing or Borrowings to be made on such  date,
the  Administrative Agent may assume that such Bank has  made  such  amount
available  to the Administrative Agent on such date of Borrowing,  and  the
Administrative Agent, in reliance upon such assumption, may  (in  its  sole
discretion  and  without any obligation to do so)  make  available  to  the
Borrower  a corresponding amount.  If such corresponding amount is  not  in
fact  made  available  to the Administrative Agent by  such  Bank  and  the
Administrative  Agent  has  made  available  same  to  the  Borrower,   the
Administrative Agent shall be entitled to recover such corresponding amount
from  such Bank.  If such Bank does not pay such corresponding amount forth
with  upon  the  Administrative Agent's demand therefor, the Administrative
Agent  shall promptly (and in any event within two Business Days  from  the
date  the  Administrative Agent made such funds available to the  Borrower)
notify  the Borrower, and the Borrower shall (within two Business  Days  of
receiving  such demand) pay such corresponding amount to the Administrative
Agent.   The  Administrative Agent shall also be  entitled  to  recover  on
demand from such Bank or the Borrower, as the case may be, interest on such
corresponding   amount  in  respect  of  each  day  from  the   date   such
corresponding amount was made available by the Administrative Agent to  the
Borrower  to  the  date  such  corresponding amount  is  recovered  by  the
Administrative  Agent, at a rate per annum equal to (x)  if  paid  by  such
Bank, the overnight Federal Funds Effective Rate or (y) if paid by the  Bor
rower, the then applicable rate of interest, calculated in accordance  with
Section 1.08, for the respective Loans.

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

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

           (b)   The Note issued to each Bank shall (i) be executed by  the
Borrower,  (ii)  be  payable to the order of such Bank  and  be  dated  the
Effective  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 provided in the appropriate clause of Section 1.08 in  respect
of  the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced
thereby, (vi) be subject to mandatory repayment as provided in Section 3.02
and  (vii) be entitled to the benefits of and subject to this Agreement and
the other Credit Documents.

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

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

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

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

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

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

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

          (e)  All  computations  of  interest hereunder shall be  made  in
accordance with Section 11.07(b).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

           (c)   If  any Bank shall have determined that after the date  of
this  Agreement, the adoption or effectiveness of any applicable law,  rule
or  regulation  regarding capital adequacy, or any change therein,  or  any
change  in the interpretation or administration thereof by any governmental
authority,  central  bank or comparable agency charged  with  the  interpre
tation  or  administration thereof, or compliance by  such  Bank  with  any
request or directive 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 obligations hereunder to a level below that which such  Bank
could  have  achieved  but  for  such adoption,  effectiveness,  change  or
compliance (taking into consideration such Bank's policies with respect  to
capital  adequacy), then from time to time, within 15 days after demand  by
such  Bank  (with a copy to the Administrative Agent), the Borrower  shall,
subject  to  Section 1.12(b) (to the extent applicable), pay to  such  Bank
such  additional amount or amounts as will compensate such  Bank  for  such
reduction.   Each Bank, upon determining in good faith that any  additional
amounts will be payable pursuant to this Section 1.10(c), will give  prompt
written  notice thereof to the Borrower, which notice shall set  forth  the
basis  of the calculation of such additional amounts, although the  failure
to give any such notice shall not release or diminish any of the Borrower's
obligations to pay additional amounts pursuant to this Section 1.10(c) upon
the subsequent receipt of such notice.

           1.11   Compensation.  The Borrower shall compensate  each  Bank,
upon  its  written  request (which request shall set forth  the  basis  for
requesting  such  compensation), for all reasonable  losses,  expenses  and
liabilities (including, without limitation, any loss, expense or  liability
incurred by reason of the liquidation or reemployment of deposits or  other
funds  required by such Bank to fund its Eurodollar Loans but excluding  in
any  event  the loss of anticipated profits) which such Bank  may  sustain:
(i)  if  for  any  reason  (other  than a  default  by  such  Bank  or  the
Administrative Agent) a Borrowing of Eurodollar Loans does not occur  on  a
date  specified therefor in a Notice of Borrowing or Notice  of  Conversion
(whether  or not withdrawn by the Borrower or deemed withdrawn pursuant  to
Section 1.10(a)); (ii) if any prepayment, repayment or conversion of any of
its  Eurodollar Loans (including as a result of Section 1.10  or  the  last
paragraph  of Section 8) occurs on a date which is not the last day  of  an
Interest Period applicable thereto; (iii) if any prepayment of any  of  its
Eurodollar  Loans  is  not  made  on any date  specified  in  a  notice  of
prepayment given by the Borrower; or (iv) as a consequence of (x) any other
default by the Borrower to repay its Eurodollar Loans when required by  the
terms  of  this  Agreement  or (y) an election  made  pursuant  to  Section
1.10(b).

           1.12  Change of Lending Office; Limitation on Indemnities.   (a)
Each Bank agrees that, upon the occurrence of any event giving rise to  the
operation of Section 1.10(a)(ii) or (iii), 1.10(c) or 3.04 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 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 1.12 shall  affect
or postpone any of the obligations of the Borrower or the right of any Bank
provided in Section 1.10 or 3.04.

           (b)  Notwithstanding anything in this Agreement to the contrary,
to  the extent any notice required by Section 1.10 or 3.04 is given by  any
Bank  more than 90 days after such Bank obtained, or reasonably should have
obtained,  knowledge  of the occurrence of the event  giving  rise  to  the
additional costs of the type described in such Section, such Bank shall not
be  entitled  to  compensation under Section 1.10 or 3.04 for  any  amounts
incurred or accruing prior to the giving of such notice to the Borrower.

           1.13   Replacement  of Banks.  (x)  Upon the occurrence  of  any
event giving rise to the operation of Section 1.10(a)(ii) or (iii), 1.10(c)
or 3.04 with respect to any Bank which results in such Bank charging to the
Borrower increased costs in excess of those being generally charged by  the
other Banks or such Bank becoming incapable of making Eurodollar Loans, (y)
if  a  Bank  becomes  a Defaulting Bank and/or (z) as provided  in  Section
11.12(b),  in  the  case of a refusal by a Bank to consent  to  a  proposed
change,  waiver,  discharge or termination with respect to  this  Agreement
which has been approved by the Required Banks, the Borrower shall have  the
right, if no Default or Event of Default then exists, to replace such  Bank
(the  "Replaced  Bank")  with  one or more  other  Eligible  Transferee  or
Transferees  reasonably  acceptable to the Administrative  Agent,  none  of
which  Transferees shall constitute a Defaulting Bank at the time  of  such
replacement  (collectively, the "Replacement Bank"), provided that  (i)  at
the  time of any replacement pursuant to this Section 1.13, the Replacement
Bank  shall  enter  into  one or more Assignment and Assumption  Agreements
pursuant  to Section 11.04(b) (and with all fees payable pursuant  to  said
Section 11.04(b) to be paid by the Replacement Bank) pursuant to which  the
Replacement Bank shall acquire all of the Commitments and outstanding Loans
of  the  Replaced  Bank  and, in connection therewith,  shall  pay  to  the
Replaced Bank in respect thereof an amount equal to the principal  of,  and
all  accrued  interest on, all outstanding Loans of the 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.  Fees; Commitments.

          2.01 Fees.  (a)  The Borrower agrees to pay to the Administrative
Agent  a  commitment commission ("Commitment Commission") pro rata for  the
account  of each Non-Defaulting Bank for the period from and including  the
Effective  Date  to, but not including, the date the Total  Commitment  has
been  terminated, which Commitment Commission shall be equal to  0.20%  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 shall pay to the Administrative Agent (x)  on
the Effective Date for its own account and/or for distribution to the Banks
such  Fees  as  heretofore  agreed  in writing  by  the  Borrower  and  the
Administrative Agent and (y) for its own account such other fees as  agreed
to  in writing between the Borrower and the Administrative Agent, when  and
as due.

           (c)   All computations of Fees shall be made in accordance  with
Section 11.07(b).

           2.02   Voluntary Reduction of Commitments.  Upon at least thirty
Days'  prior written notice (or telephonic notice confirmed in writing)  to
the   Administrative  Agent  at  its  Notice  Office  (which   notice   the
Administrative  Agent shall promptly transmit to each of  the  Banks),  the
Borrower shall have the right, without premium or penalty, to terminate  or
partially  reduce the Total Unutilized Commitment, provided  that  (w)  any
such termination shall apply to proportionately and permanently reduce  the
Commitment  of  each  Bank, (x) no such reduction  shall  reduce  any  Non-
Defaulting Bank's Commitment to an amount that is less than the outstanding
Loans  of such Bank and (y) any partial reduction pursuant to this  Section
2.02 shall be in the amount of at least $5,000,000.

           2.03  Mandatory Adjustments of Commitments, etc.  (a)  The Total
Commitment  shall terminate on the earlier of (i) the Maturity  Date,  (ii)
February 28, 1998, unless the Effective Date has occurred on or before such
date,  (iii) unless the Required Banks otherwise consent, the date on which
any  Change  of  Control  occurs and (iv) the date  upon  which  long  term
financing for the Drillship is obtained.

           (b)   In  addition to any other mandatory commitment  reductions
pursuant to this Section 2.03, the Total Commitment shall terminate on  the
date upon which any of the Construction Contract, the Drilling Contract  or
the  Refundment  Guaranty is either terminated or  the  terms  thereof  are
materially changed in a manner adverse to the interests of the Banks.

           (c)   Notwithstanding anything to the contrary contained herein,
and  in  addition to any other mandatory commitment reductions pursuant  to
this Section 2.03, the Total Commitment shall terminate on the date of  any
Collateral Disposition.

           (d)   Each  reduction of the Total Commitment pursuant  to  this
Section 2.03 shall apply proportionately to the Commitment of each Bank.

          SECTION 3.  Payments.

           3.01   Voluntary Prepayments.  The Borrower shall have the right
to  prepay Loans in whole or in part, without premium or penalty, from time
to time on the following terms and conditions:  (i) the Borrower shall give
the   Administrative  Agent  at  the  Payment  Office  written  notice  (or
telephonic  notice promptly confirmed in writing) of its intent  to  prepay
the  Loans,  the amount of such prepayment and (in the case  of  Eurodollar
Loans)  the specific Borrowing or Borrowings pursuant to which made,  which
notice shall be given by the Borrower at least five Business Days prior  to
the  date  of  such  prepayment of Loans, which notice  shall  promptly  be
transmitted  by  the Administrative Agent to each of the Banks;  (ii)  each
partial  prepayment  of  any Borrowing shall be in an  aggregate  principal
amount  of at least $1,000,000 and, if greater, in an integral multiple  of
$100,000, provided that no partial prepayment of Eurodollar Loans made  pur
suant  to  a Borrowing shall reduce the aggregate principal amount  of  the
Loans  outstanding pursuant to such Borrowing to an amount  less  than  the
Minimum  Borrowing  Amount;  (iii) Eurodollar Loans  may  only  be  prepaid
pursuant  to  this  Section 3.01 on the last day  of  the  Interest  Period
applicable  thereto; and (iv) each prepayment in respect of any Loans  made
pursuant  to  a Borrowing shall be applied pro rata among the  Banks  which
made  such  Loans, provided that at the Borrower's election  in  connection
with any prepayment of Loans pursuant to this Section 3.01, such prepayment
shall not be applied to any Loans of a Defaulting Bank.

          3.02  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 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.

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

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

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

          (B)  Application:

           With  respect  to each prepayment of Loans required  by  Section
3.02, the Borrower may designate the Types of Loans which are to be prepaid
and  the  specific Borrowing or Borrowings pursuant to which made, provided
that  (i) Eurodollar Loans may only be repaid if no Base Rate Loans of Non-
Defaulting  Banks remain outstanding; (ii) if any prepayment of  Eurodollar
Loans  made  pursuant  to a single Borrowing shall reduce  the  outstanding
Loans  made  pursuant to such Borrowing to an amount less than the  Minimum
Borrowing  Amount for such Borrowing, such Borrowing shall  be  immediately
converted into Base Rate Loans; and (iii) each prepayment of any Loans made
by  Non-Defaulting Banks pursuant to a Borrowing shall be applied pro  rata
among the Non-Defaulting Banks which made such Loans.  In the absence of  a
designation  by  the Borrower as described in the preceding  sentence,  the
Administrative Agent shall, subject to the above, make such designation  in
its  sole  discretion with a view, but no obligation, to minimize  breakage
costs  owing under Section 1.11.  Notwithstanding the foregoing  provisions
of  this Section 3.02(B), if at any time the mandatory prepayment of  Loans
pursuant to Section 3.02(A) above would result, after giving effect to  the
procedures set forth above, in the Borrower incurring breakage costs  under
Section  1.11 as a result of Eurodollar Loans being prepaid other  than  on
the  last  day  of  an  Interest Period applicable thereto  (the  "Affected
Eurodollar Loans"), then the Borrower may in its sole discretion  initially
deposit  a  portion (up to 100%) of the amounts that otherwise  would  have
been   paid  in  respect  of  the  Affected  Eurodollar  Loans   with   the
Administrative Agent (which deposit must be equal in amount to  the  amount
of  the  Affected Eurodollar Loans not immediately prepaid) to be  held  as
security for the obligations of the Borrower hereunder pursuant to  a  cash
collateral  agreement  to be entered into in form and substance  reasonably
satisfactory to the Administrative Agent and shall provide for  investments
satisfactory to the Administrative Agent and the Borrower, with  such  cash
collateral   to   be  directly  applied  upon  the  first  occurrence   (or
occurrences) thereafter of the last day of an Interest Period applicable to
the relevant Loans that are Eurodollar Loans (or such earlier date or dates
as  shall  be  requested by the Borrower), to repay an aggregate  principal
amount  of  such Loans equal to the Affected Eurodollar Loans not initially
prepaid  pursuant to this sentence.  Notwithstanding anything  to  the  con
trary   contained  in  the  immediately  preceding  sentence,  all  amounts
deposited as cash collateral pursuant to the immediately preceding sentence
shall be held for the sole benefit of the Banks whose Loans would otherwise
have  been  immediately  prepaid with the amounts deposited  and  upon  the
taking  of any action by the Administrative Agent or the Banks pursuant  to
the  remedial provisions of Section 8, any amounts held as cash  collateral
pursuant  to  this  Section 3.02(B) shall, subject to the  requirements  of
applicable law, be immediately applied to the Loans.

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

           3.04   Net  Payments.  (a)  All payments made  by  the  Borrower
hereunder  or  under any Note will be made without setoff, counterclaim  or
other  defense.  Except as provided in Section 3.04(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  jurisdic
tion 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  pur
suant  to  the  laws of the jurisdiction in which the principal  office  or
applicable lending office of such Bank is located or under the laws of  any
political subdivision or taxing authority of any such jurisdiction in which
the  principal office or applicable lending office of such Bank is  located
and  for  any withholding of taxes as such Bank shall determine are payable
by, or withheld from, such Bank in respect of such amounts so paid to or on
behalf  of  such Bank pursuant to the preceding sentence and in respect  of
any  amounts  paid to or on behalf of such Bank pursuant to this  sentence.
The  Borrower will furnish to the Administrative Agent within 45 days after
the  date the payment of any Taxes is due pursuant to applicable law  certi
fied  copies of tax receipts evidencing such payment by the Borrower.   The
Borrower  agrees  to indemnify and hold harmless each Bank,  and  reimburse
such  Bank upon its written request, for the amount of any Taxes so  levied
or imposed and paid by such Bank.

           (b)   Each Bank that is not a United States person (as such term
is  defined  in Section 7701(a)(30) of the Code) agrees to deliver  to  the
Borrower  and  the  Administrative Agent on or prior to the  date  of  this
Agreement, or in the case of a Bank that is an assignee or transferee of an
interest under this Agreement pursuant to Section 1.13 or 11.04 (unless the
respective  Bank  was already a Bank hereunder immediately  prior  to  such
assignment or transfer), on the date of such assignment or transfer to such
Bank,  (i)  two  accurate and complete original signed copies  of  Internal
Revenue  Service Form 4224 or 1001 (or successor forms) certifying to  such
Bank's  entitlement to a complete exemption from United States  withholding
tax  with respect to payments to be made under this Agreement and under any
Note,  or  (ii) if the Bank is not a "bank" within the meaning  of  Section
881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service
Form  1001  or  4224  pursuant  to clause  (i)  above,  (x)  a  certificate
substantially  in the form of Exhibit D (any such certificate,  a  "Section
3.04(b)(ii) Certificate") and (y) two accurate and complete original signed
copies  of Internal Revenue Service Form W-8 (or successor form) certifying
to  such  Bank's  entitlement to a complete exemption  from  United  States
withholding tax with respect to payments of interest to be made under  this
Agreement and under any Note.  In addition, each Bank agrees that from time
to time after the date of this Agreement, when a lapse in time or change in
circumstances renders the previous certification obsolete or inaccurate  in
any   material   respect,  it  will  deliver  to  the  Borrower   and   the
Administrative Agent two new accurate and complete original  signed  copies
of  Internal Revenue Service Form 4224 or 1001, or Form W-8 and  a  Section
3.04(b)(ii) Certificate, as the case may be, and such other forms as may be
required in order to confirm or establish the entitlement of such Bank to a
continued exemption from or reduction in United States withholding tax with
respect  to  payments  under  this Agreement and  any  Note,  or  it  shall
immediately notify the Borrower and the Administrative Agent of its  inabil
ity  to deliver any such Form or Certificate, in which case such Bank shall
not  be  required  to  deliver  such Form or Certificate.   Notwithstanding
anything  to  the  contrary contained in Section 3.04(a),  but  subject  to
Section  11.04(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
3.04(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 3.04(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  3.04  and
except  as  set  forth  in  Section 11.04(b), the Borrower  agrees  to  pay
additional  amounts and to indemnify each Bank in the manner set  forth  in
Section  3.04(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
Administrative Agent any reasonably available applicable IRS tax form  (rea
sonably  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 3.04 shall be  subject  to
Section 1.12(b) (to the extent applicable).

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

           4.01   Execution of Agreement; Notes.  The Effective Date  shall
have  occurred  as  provided in Section 11.10 and  there  shall  have  been
delivered  to  the Administrative Agent for the account of  each  Bank  the
appropriate Note executed by the Borrower, and in the amount, maturity  and
as otherwise provided herein.

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

            4.03   Officer's  Certificate.   On  the  Effective  Date,  the
Administrative  Agent  shall have received a certificate  dated  such  date
signed by the President or any Vice President of the Borrower stating  that
there has been no Material Adverse Change in the financial condition of the
Borrower  or  of Holdings and its Subsidiaries taken as a whole  since  the
date  of the last audited financial statements provided by Holdings or  the
Borrower  to  the  Administrative Agent and  that  all  of  the  applicable
conditions set forth in Sections 4.02, 4.06, 4.07(a) and 4.08 exist  as  of
such date.

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

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

           (b)   On the Effective Date, all corporate and legal proceedings
and  all instruments and agreements in connection with the transactions con
templated  by  this  Agreement  and the other  Credit  Documents  shall  be
reasonably satisfactory in form and substance to the Administrative  Agent,
and the Administrative Agent shall have received all information and copies
of  all  certificates, documents and papers, including good standing  certi
ficates  and  any  other records of corporate proceedings and  governmental
approvals,  if  any,  which the Administrative Agent  may  have  reasonably
requested  in connection therewith, such documents and papers, where  appro
priate, to be certified by proper corporate or governmental authorities.

           4.06   Adverse  Change,  etc.  From December  31,  1996  to  the
Effective Date, nothing shall have occurred (and neither the Banks nor  the
Administrative Agent shall have become aware of any facts or conditions not
previously  known)  which the Administrative Agent or  the  Required  Banks
shall  determine  (a)  has, or is reasonably likely  to  have,  a  material
adverse effect on the rights or remedies of the Banks or the Administrative
Agent,  or  on  the  ability of Holdings, the Borrower  or  any  Subsidiary
Guarantor to perform their respective obligations to them, or (b)  has,  or
is reasonably likely to have, a Material Adverse Effect.

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

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

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

           4.10   Security Agreement.  On the Effective Date  the  Security
Agreement  in  the form of Exhibit F (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 and
the Financing Statements (Form UCC-1 and/or UCC-3) of each jurisdiction  as
may  be necessary to perfect the security interests purported to be created
by  the  Security  Agreement shall be in full  force  and  effect  and  the
Collateral Agent shall have received 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.

          4.11  Subsidiary Guaranty.  On the Effective Date, the Subsidiary
Guaranty  in  the  form of Exhibit G (as modified, amended or  supplemented
from  time  to  time in accordance with the terms hereof and  thereof,  the
"Subsidiary Guaranty") shall be in full force and effect.

           4.12   Construction   Contract;  Refundment  Guaranty;  Drilling
Contract;  Budget.  On or prior to the Effective Date, the  Borrower  shall
have furnished to the Administrative Agent a true and complete copy of  (i)
the Construction Contract, (ii) the Refundment Guaranty, (iii) the Drilling
Contract  and (iv) the Budget, each of which shall be in form and substance
satisfactory to the Administrative Agent in all respects.

           4.13   Compliance  Certificate; Rig Valuation  Report.   On  the
Effective  Date,  the Borrower shall have delivered to  the  Administrative
Agent (i) a compliance certificate in the form of Exhibit L to the Existing
Credit  Agreement indicating that the Borrower is current with  respect  to
its  obligations  under the Existing Credit Agreement and is  otherwise  in
compliance with all the terms and conditions thereof and (ii) a report from
an  Approved Shipbroker setting forth the Market Value of the rigs owned by
Wholly-Owned Subsidiaries of Holdings to the extent necessary to  establish
pro  forma  compliance with Section 7.11, assuming the  Facility  is  fully
funded.

           4.14  Notice of Borrowing.  The Administrative Agent shall  have
received  a  Notice of Borrowing conforming to the requirements of  Section
1.03.

           The  acceptance  of  the  benefits of each  Credit  Event  shall
constitute  a representation and warranty by each Credit Party which  is  a
party  to this Agreement to the Administrative Agent and each of the  Banks
that  all  of  the  conditions  specified above  which  are  applicable  in
accordance with their express terms at the time of such acceptance exist as
of  that time.  All of the certificates, legal opinions and other documents
and papers referred to in this Section 4, unless otherwise specified, shall
be  delivered  to  the Administrative Agent at its Notice  Office  for  the
account  of  each  of  the Banks and, except for the Notes,  in  sufficient
counterparts  or copies for each of the Banks and shall be satisfactory  in
form and substance to the Administrative Agent.

          SECTION 5.  Representations, Warranties and Agreements.  In order
to  induce  the  Banks to enter into this Agreement and to make  the  Loans
provided  for herein, each Credit Party which is a party hereto  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 5 are  true  and  correct  in  all
material  respects on and as of the date of each such Credit  Event  unless
such  representation and warranty expressly indicates that it is being made
as  of any specific date, in which case such representations and warranties
shall be true and correct in all material respects as of such date):

           5.01   Corporate Status.  Each Credit Party (i) is a duly  organ
ized  and validly existing corporation in good standing under the  laws  of
the  jurisdiction  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  any  Credit
Party  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.

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

            5.03   No  Violation.   Neither  the  execution,  delivery  and
performance by any Credit Party of the Credit Documents to which  it  is  a
party  nor  compliance  with  the terms and  provisions  thereof,  nor  the
consummation  of the transactions contemplated therein (i) will  contravene
any  applicable  provision  of any law, statute, rule,  regulation,  order,
writ, injunction or decree of any court or governmental instrumentality  of
the  United States or any State thereof, (ii) will result in any breach  of
any  of the terms, covenants, conditions or provisions of, or constitute  a
default under, or (other than pursuant to the Security Agreement) result in
the  creation or imposition of (or the obligation to create or impose)  any
Lien upon any of the property or assets of any Credit Party pursuant to the
terms  of,  any material indenture, mortgage, deed of trust,  agreement  or
other instrument to which any Credit Party 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 any
Credit Party.

           5.04   Litigation.  There are no actions, suits  or  proceedings
pending  or, to the best knowledge of any Credit Party which is a party  to
this Agreement 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.

           5.05  Use of Proceeds; Margin Regulations.  (a)  The proceeds of
all Loans shall be used by the Borrower to finance the interim construction
costs,   including  owner  furnished  equipment  and  capitalized  interest
expenses,  of  constructing  a 103,000 metric tons  displacement  drillship
(Hull No. 1255) (the "Drillship") pursuant to the Construction Contract.

          (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.

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

           5.07  Investment Company Act.  None of Holdings, the 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.

           5.08  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 meaning of the Public Utility Holding Company Act of  1935,  as
amended.

           5.09   True  and  Complete Disclosure.  All factual  information
(taken  as  a  whole) heretofore or contemporaneously furnished  by  or  on
behalf of Holdings, the Borrower or any of their respective Subsidiaries in
writing  to  the  Administrative Agent or any Bank for purposes  of  or  in
connection  with this Agreement or any transaction contemplated herein  is,
and  all  other  such  factual information (taken  as  a  whole)  hereafter
furnished  by or on behalf of any such Person in writing to any  Bank  will
be, true and accurate in all 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 any Credit Party which is a  party  to
this  Agreement  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.

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

           (b)  (i)   The  consolidated balance sheet of Holdings  and  its
Subsidiaries  at December 31, 1996 and the related consolidated  statements
of  operations  and  cash flows of Holdings and its  Subsidiaries  for  the
fiscal  year,  as the case may be, ended as of said date, which  have  been
examined  by Arthur Andersen LLP, independent certified public accountants,
who  delivered an unqualified opinion in respect therewith,  and  (ii)  the
consolidated balance sheet of Holdings and its Subsidiaries as of September
30,  1997,  copies of which have heretofore been furnished  to  each  Bank,
present fairly the financial position of such entities at the dates of said
statements  and  the results for the period covered thereby  in  accordance
with  GAAP  (or, in the case of the balance sheet, presents  a  good  faith
estimate  of  the  consolidated financial condition  of  Holdings  and  its
Subsidiaries  at  the date thereof), except to the extent provided  in  the
notes  to  said financial statements and, in the case of the September  30,
1997 statements, subject to normal and recurring year-end audit adjustment.
All such financial statements (other than the aforesaid balance sheet) have
been  prepared in accordance with GAAP consistently applied except  to  the
extent  provided  in the notes to said financial statements.   Nothing  has
occurred  since December 31, 1996 that has had or is reasonably  likely  to
have a Material Adverse Effect.

           (c)   Except  as reflected in the financial statements  and  the
notes  thereto described in Section 5.10(b), there were as of the Effective
Date  no  liabilities or obligations with respect to Holdings, the 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, 1996 in the ordinary course of business consistent with past practices.

           5.11  Security Interests.  On and after the Effective Date,  the
Security Agreement 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 Security Agreement), and subject to no other  Liens
(except that the Collateral may be subject to Permitted Liens), in favor of
the  Collateral  Agent  for  the benefit  of  the  Banks.   No  filings  or
recordings are required in order to perfect the security interests  created
under  the Security Agreement except for filings or recordings required  in
connection with the Security Agreement which shall have been made  upon  or
prior  to  (or  are  the  subject  of  arrangements,  satisfactory  to  the
Administrative  Agent, for filing on or promptly after  the  date  of)  the
execution and delivery thereof.

           5.12   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.

           5.13   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 of their respective Subsidiaries 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  not
reasonably  be expected to have a Material Adverse Effect, no lien  imposed
under  the  Code or ERISA on the assets of any Credit Party  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.

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

           5.15   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 respective businesses  taken
as a whole as presently conducted.

           5.16  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 Effective Date, under
any  Environmental  Law  have been secured and Holdings  and  each  of  its
Subsidiaries is in substantial compliance therewith, except such  licenses,
permits,  registrations or approvals the failure to  secure  or  to  comply
therewith  is  not  likely  to  have a Material  Adverse  Effect.   Neither
Holdings  nor  any  of its Subsidiaries is in any respect in  noncompliance
with, breach of or default under any writ, order, judgment, injunction,  or
decree  to  which  Holdings or such Subsidiary is a party  or  which  would
affect  the  ability  of Holdings or such Subsidiary to  operate  any  Real
Property, offshore drilling rig or other facility and no event has occurred
and  is  continuing which, with the passage of time or the giving of notice
or  both,  would constitute noncompliance, breach of or default thereunder,
except  in each such case, such noncompliance, breaches or defaults as  are
not likely to, in the aggregate, have a Material Adverse Effect.  There are
as  of  the Effective Date no Environmental Claims pending or, to the  best
knowledge  of  any Credit Party which is a party to this Agreement,  threat
ened,  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  transfer
ability under any Environmental Law, except in each such case, such Environ
mental 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  knowledge  of any Credit Party which  is  a  party  to  this
Agreement,  such  occurrence or event individually or in the  aggregate  is
reasonably likely to have a Material Adverse Effect.

          5.17  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  Subsidi
aries as referred to in Section 5.10(b), free and clear of all Liens, other
than  (i) as referred to in the consolidated balance sheet or in the  notes
thereto or (ii) Permitted Liens.

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

           5.18  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 knowledge of any Credit Party which is a party to this Agreement,
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  knowledge  of  any Credit Party which is a party to  this  Agreement,
threatened against Holdings or any of its Subsidiaries and (iii)  no  union
representation petition existing with respect to the employees of  Holdings
or  any  of its Subsidiaries and no union organizing activities are  taking
place,  except with respect to any matter specified in clause (i), (ii)  or
(iii)  above,  either  individually or in the aggregate,  such  as  is  not
reasonably likely to have a Material Adverse Effect.

           5.19   Existing Indebtedness.  Annex IV sets forth  a  true  and
complete  list of all Indebtedness of Holdings and each of its Subsidiaries
on  the  Effective  Date  and  which is to  remain  outstanding  after  the
Effective Date (excluding the Loans, 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 guarantees such debt.

          5.20  Citizenship.  Each Credit Party which owns and/or  operates
offshore  drilling vessel(s) is qualified to own and operate such  drilling
vessel(s)  under the laws of the respective jurisdiction(s) in  which  such
drilling vessel(s) is/are registered.

          5.21  Rig Classification.  Each offshore drilling vessel owned or
leased by Holdings and its Subsidiaries is classified in the highest  class
available  for  vessels  of its age and type with the  American  Bureau  of
Shipping, Inc. or another internationally recognized classification society
reasonably  acceptable to the Administrative Agent, free  of  any  material
outstanding  requirements or recommendations, other than such  requirements
or  recommendations  which  if not cured by the  owner  thereof  would  not
materially diminish such vessel's value.

           SECTION 6.  Affirmative Covenants.  Each Credit Party which is a
party to this Agreement covenants and agrees that on the Effective Date and
thereafter  for  so  long as this Agreement is in  effect  (and  until  the
Commitments  have  terminated,  no Notes are  outstanding  and  the  Loans,
together  with interest, Fees and all other Obligations incurred hereunder,
are paid in full):

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

           (a)  Annual Financial Statements.  (i) 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 and (ii) within 180 days after the close of
     each  fiscal year of the Borrower, the consolidated balance  sheet  of
     the  Borrower and its Subsidiaries, as at the end of such fiscal  year
     and  the related consolidated statements of operations and cash  flows
     for   such  fiscal  year;  in  each  case  including  the  amount   of
     Consolidated  Capital Expenditures made during such fiscal  year,  set
     ting  forth comparative consolidated figures for the preceding  fiscal
     year,  and, in the case of financial statements delivered pursuant  to
     clause   (i)   above,   examined  by  independent   certified   public
     accountants of recognized national standing whose opinion shall not be
     qualified  as to the scope of audit and as to the status  of  Holdings
     and  its  Subsidiaries as a going concern, together with a certificate
     of  such  accounting firm stating that in the course  of  its  regular
     audit  of  the business of Holdings and the Borrower, which audit  was
     conducted  in  accordance with generally accepted auditing  standards,
     such accounting firm has obtained no knowledge of any Default or Event
     of  Default which has occurred and is continuing or, if in the opinion
     of  such  accounting  firm  such a Default or  Event  of  Default  has
     occurred and is continuing, a statement as to the nature thereof.

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

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

           (d)  Construction Report  Within 10 days after the close of each
     fiscal month of Holdings, a report (in form and substance satisfactory
     to  the Administrative Agent) detailing the then current status of the
     construction  of  the Drillship, together with an updated  budget  and
     timetable  and  analysis  of  any construction  delays  and/or  budget
     overruns.

           (e)  Compliance Certificate.  At the time of the delivery of the
     financial  statements  provided for in Sections  6.01(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 H to the effect that no Default or Event of Default exists or,
     if  any  Default or Event of Default does exist, specifying the nature
     and extent thereof, which certificate shall set forth the calculations
     required  to establish whether Holdings and its Subsidiaries  were  in
     compliance  with  the provisions of Section 7 as at the  end  of  such
     fiscal period.

          (f)  Notice of Default or Litigation.  Promptly, and in any event
     within (x) three Business Days after any Credit Party which is a party
     to  this Agreement 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 any of its Subsidiaries  proposes
     to  take  with  respect thereto and (y) ten Business  Days  after  any
     Credit  Party  which  is a party to this Agreement  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  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  any Credit Party which is a party to this Agreement  by
     its independent accountants in connection with any annual, interim  or
     special audit made by it of the books of any Credit Party which  is  a
     party to this Agreement.

           (h)  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).

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

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

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

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

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

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

           6.07   Good Repair.  Except for offshore drilling rigs currently
under  or  scheduled  to be repaired or which have  been  damaged  or  have
suffered  a  casualty  as  to which (within a reasonable  period  of  time)
Holdings  and/or  the  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 7.02, see that from time to  time  there
are made in such properties and equipment all necessary and proper repairs,
renewals, replacements, extensions, additions, betterments and improvements
thereto  to the extent and in the manner useful or customary for  companies
in similar businesses.

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

           6.09  Use of Proceeds.  All proceeds of the Loans shall be  used
as provided in Section 5.05.

          6.10  Additional Rig Valuations.  At any time as may be requested
by  the  Administrative Agent on behalf of the Required Banks  (but  in  no
event  in  excess  of three times in any fiscal year of  Holdings  (without
taking  into  account  the right of Holdings or the Borrower  to  retain  a
second  Approved  Shipbroker  in  accordance  with  immediately  succeeding
sentence))  and  at the expense of the Borrower, Holdings or  the  Borrower
shall  retain the Approved Shipbroker requested by the Administrative Agent
to  supply an updated written report setting forth the Market Value of  the
Fleet  (or  a  portion  thereof)  at  such  time,  which  report  shall  be
substantially in the form delivered pursuant to Section 4.13(ii) and  shall
confirm compliance with Section 7.11.  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  the  Fleet.  Promptly upon receipt thereof Holdings  and/or  the
Borrower shall deliver copies of each such report to the Banks.

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

           (b)  Each Credit Party which is a party to this Agreement agrees
that each action required above by this Section 6.11 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 Administrative Agent or the Required  Banks,
provided  that in no event shall any Credit Party be required to  take  any
action,  other  than  using its reasonable commercial efforts  without  any
material  expenditure,  to  obtain consents or  other  actions  from  third
parties with respect to its compliance with this Section 6.11.

           6.12   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  7.  Negative Covenants.  Each Credit Party which  is  a
party  to  this  Agreement  hereby covenants and  agrees  that  as  of  the
Effective  Date and thereafter for so long as this Agreement is  in  effect
and until the Commitments have terminated, no Notes are outstanding and the
Loans,  together  with  interest, Fees and all other  Obligations  incurred
hereunder, are paid in full:

           7.01  Changes in Business.  Holdings and the Borrower will  not,
and  Holdings will not permit any of its Subsidiaries to, materially  alter
the  character of the business of Holdings and its Subsidiaries taken as  a
whole  from  that conducted on the Effective Date (including  any  material
expansion   outside  of  the  offshore  contract  drilling  and  production
business), provided that this Section 7.01 shall not restrict the  engaging
in  business  ancillary  to the offshore contract drilling  and  production
business  or the fulfillment by the Borrower or any other Credit  Party  of
their respective obligations under the Construction Contract.

          7.02  Consolidation, Merger or Sale of Assets, etc.  Holdings and
the  Borrower will not, and Holdings will not permit any Guarantor 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  7.02(a),
     Holdings,  Parent and/or the Borrower shall provide the Administrative
     Agent  with ten Business Days' notice prior to such transfer, and  the
     Borrower or such Subsidiary, as the case may be, owning the Collateral
     after such transfer shall take all action reasonably requested by  the
     Collateral  Agent 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) 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 and (y) no  such
     sale or disposition shall constitute the sale or disposition of all or
     substantially  all  of  the  combined  assets  of  Holdings  and   its
     Subsidiaries taken as a whole; 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  7.02, such Collateral shall be sold or otherwise disposed of  free
and  clear  of  the  Liens  created  by the  Security  Agreement,  and  the
Administrative Agent, the Collateral Agent shall be authorized to take  any
actions deemed appropriate in order to effect the foregoing.

          7.03  Liens on Assets.  Holdings will not and will not permit any
of  its Subsidiaries to, create, incur, assume or suffer to exist any  Lien
upon  or  with respect to any of its assets, whether now owned or hereafter
acquired, or sell any such assets subject to an understanding or agreement,
contingent  or  otherwise, to repurchase such assets  (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 asset under any similar recording or notice statute; except
that the following shall be permitted:

           (a)   Liens on assets granted pursuant to or otherwise permitted
     by the Existing Credit Agreement;

           (b)   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;

           (c)   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;

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

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

           (f)   Liens  arising from judgments, decrees or attachments  (or
     securing  of  appeal bonds with respect thereto)  to  the  extent  not
     covered  by  insurance,  so  long  as the  obligations  in  connection
     therewith  do not exceed $5,000,000 in the aggregate and otherwise  in
     circumstances not constituting an Event of Default under Section 8.08;

           (g)   any  interest or title of a lessor or charterer under  any
     lease  or  charter (i) in existence on the Effective 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; and

           (i)  Liens on Rig 41 and the Earnings and insurances relating to
     Rig 41 securing Title XI Financing incurred pursuant to the Borrower's
     upgrade or refit of Rig 41.

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

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

         (ii)   Indebtedness  incurred  pursuant  to  the  Existing  Credit
     Agreement;

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

        (iv)   Indebtedness evidenced by Capitalized Lease  Obligations  so
     long   as   the  aggregate  principal  amount  of  Capitalized   Lease
     Obligations outstanding at any time pursuant to this Section 7.04 does
     not exceed $1,000,000 in the aggregate; and

        (v)  Indebtedness subject to Liens permitted under Section 7.03(e).

              7.05      Dividends;     Restrictions    on     Subsidiaries,
etc.   (a)   Holdings will not, and will not permit any of its Subsidiaries
to,  declare or pay any dividends (other than dividends (i) payable  solely
in  capital  stock  of  Holdings  or rights  in  respect  thereof  or  (ii)
constituting  spin-offs  of  divisions  or  direct  or  indirect  operating
subsidiaries  of  Holdings (other than Arcade and the  Borrower  and  their
direct  or  indirect  Subsidiaries)) or return any capital  to,  the  stock
holders 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 pay or make Dividends on any issue of preferred
     stock whether now existing or hereafter issued; and

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

           (b)   Holdings and the Borrower will not, and Holdings will  not
permit  any Guarantor to, create or otherwise cause or suffer to exist  any
encumbrance or restriction which prohibits or otherwise restricts  (A)  the
ability  of  any Guarantor to (a) pay dividends or make other distributions
or  pay any Indebtedness owed to the Borrower or any Guarantor, or (b) make
loans or advances to the Borrower or any Subsidiary Guarantor, (c) transfer
any of its properties or assets to the Borrower or any Guarantor or (B) the
ability of the Borrower or any Guarantor 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) the Existing Credit Agreement;

      (iii) applicable law;

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

         (v)  any  restriction or encumbrance with respect to  a  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 Guarantor, so long as such sale or disposition  is
     permitted under this Agreement; and

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

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

          7.07  Vessel Management.  Holdings shall not and shall not permit
any  of  its  Subsidiaries to, contract out the management  of  a  material
portion of the Fleet to third parties.

           7.08  Coverage Ratio.  Holdings will not permit the ratio of (i)
Consolidated EBITDAR to (ii) the sum of Consolidated Interest Expense  plus
Consolidated  Rent  Expense  for  any period  of  four  consecutive  fiscal
quarters  of  Holdings (taken as one accounting period)  to  be  less  than
3.50:1.00.

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

           7.10   Leverage  Ratio.  Holdings will not permit  the  Leverage
Ratio at the end of any fiscal quarter to be greater than 0.50:1.00.

          7.11  Fleet Market Value.  Holdings will not permit the aggregate
Market Value of the portion of the Fleet owned by Wholly-Owned Subsidiaries
of  Holdings  at  any  time  to  be less  than  1.6  times  the  amount  of
Consolidated Funded Indebtedness.

           7.12   Restrictions  on Amendments to Other Agreements;  Certain
Prepayments  of  Other  Indebtedness.   Holdings  shall  not   permit   the
Construction Contract or the Refundment Guaranty to be amended in  any  way
which  may be adverse to the interests of the Banks without the consent  of
the Required Banks.

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

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

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

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

           8.04   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 performance of any agreement or condition relating to any
such  Indebtedness or contained in any instrument or agreement  evidencing,
securing  or relating thereto, or any other event shall occur or  condition
exist,  the effect of which default or other event or condition results  in
acceleration or the renegotiation of the material payment terms of any such
Indebtedness  to  become  due prior to its stated maturity,  (b)  any  such
Indebtedness of Holdings or any of its Subsidiaries shall be declared to be
due  and  payable,  or  required to be prepaid other than  by  a  regularly
scheduled  required  prepayment,  prior to  the  stated  maturity  thereof,
provided that it shall not constitute an Event of Default pursuant to  this
Section 8.04 unless the aggregate principal amount of such Indebtedness  in
default exceeds $5,000,000 at any one time or (c) an "Event of Default" (as
defined in the Existing Credit Agreement) shall occur; or

           8.05   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, dissolution, 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

           8.06   Security  Agreement.  (i) The Security  Agreement  shall,
after  the  execution and delivery thereof, cease to be in full  force  and
effect,  or  shall  cease to give the Collateral Agent the  Liens,  rights,
powers  and  privileges purported to be created thereby  in  favor  of  the
Collateral  Agent 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 the Security Agreement  and
such  default (unless such default creates an Event of Default under clause
(i) above) shall continue unremedied for a period of at least 30 days after
notice  to the Borrower by the Administrative Agent or the Required  Banks;
or

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

           8.08   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

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

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

then,  and in any such event, and at any time thereafter, if any  Event  of
Default shall then be continuing, the Administrative Agent shall, upon  the
written  request of the Required Banks, by written notice to the  Borrower,
take  any or all of the following actions, without prejudice to the  rights
of  the Administrative Agent or any Bank to enforce its claims against  any
Credit  Party,  except  as  otherwise specifically  provided  for  in  this
Agreement (provided that, if an Event of Default specified in Section  8.05
shall occur with respect to the Borrower, the result which would occur upon
the  giving  of written notice by the Administrative Agent as specified  in
clauses (i) and (ii) below shall occur automatically without the giving  of
any  such  notice):  (i) declare the Total Commitment terminated, whereupon
the  Commitment of each Bank shall forthwith terminate immediately and  any
Commitment  Commission  or any other Fees shall forthwith  become  due  and
payable without any other notice of any kind; (ii) declare the principal of
and  any accrued interest in respect of all Loans and all obligations owing
hereunder  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;  and (iv) apply any amounts held as cash collateral pursuant  to
Section 3.02 or this Section 8 to repay Obligations.

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

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

           "Adjusted  Percentage" shall mean (x) at a  time  when  no  Bank
Default exists, for each Bank such Bank's Percentage and (y) at a time when
a Bank Default exists (i) for each Bank that is a Defaulting Bank, zero and
(ii) for each Bank that is a Non-Defaulting Bank, the percentage determined
by  dividing  such  Bank's Commitment at such time by  the  Adjusted  Total
Commitment at such time, it being understood that all references herein  to
Commitments  and  the Adjusted Total Commitment at a time  when  the  Total
Commitment  or  Adjusted Total Commitment, as the case  may  be,  has  been
terminated  shall  be  references  to the  Commitments  or  Adjusted  Total
Commitment, as the case may be, in effect immediately prior to such  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  3.02(A)(a)  or
otherwise, the aggregate outstanding principal amount of Loans of all  Non-
Defaulting Banks exceeds the Adjusted Total Commitment; (B) the changes  to
the  Adjusted  Percentage that would have become effective upon  the  occur
rence  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 aggregate outstanding
principal  amount of the Loans of all Non-Defaulting Banks 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 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  equalling  such  Bank's
Commitment at such time.

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

           "Administrative Agent" shall have the meaning  provided  in  the
first  paragraph of this Agreement and shall include any successor  to  the
Administrative Agent appointed pursuant to Section 10.09.

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

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

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

          "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 VI, as such Annex may be revised from  time
to  time  at  the  request of the Required Banks with the  consent  of  the
Borrower, which consent shall not be unreasonably withheld.

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

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

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

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

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

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

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

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

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

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

           "Budget"  shall  mean a breakdown in reasonable  detail  of  the
projected  costs  and  disbursements related to  the  construction  of  the
Drillship through completion and delivery.

           "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 GAAP) 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.Section  9601
et seq.

           "Change  of Control" shall mean (a) Holdings shall at  any  time
cease  to  own  100%  of  the  capital stock  of  Parent  or,  directly  or
indirectly, the Borrower or any Guarantor, (b) any "person" (as  such  term
is  used  in Sections 13(d) and 14(d) of the Exchange Act) other  than  R&B
Falcon Corporation, 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, (c) 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 R&B Falcon Corporation  or  (d)
during any period of two consecutive years individuals who at the beginning
of such period constituted the Board of Directors of R&B Falcon Corporation
(together  with any new directors whose election by such Board of Directors
or  whose  nomination  for  election by  the  stockholders  of  R&B  Falcon
Corporation  was approved by a vote of a majority of the directors  of  R&B
Falcon  Corporation 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 R&B Falcon Corporation 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
and  any cash collateral delivered to the Collateral Agent pursuant to this
Agreement.

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

           "Collateral  Disposition" shall mean the sale, loss,  assignment
(other  than to the Administrative Agent) or other disposition by  Holdings
or any of its Subsidiaries of any of the Security Agreement Collateral.

           "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 2.02, 2.03 and/or 8 or (y) adjusted from time to  time
as a result of assignments to or from such Bank pursuant to Section 11.04.

           "Commitment  Commission"  shall have  the  meaning  provided  in
Section 2.01(a).

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

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

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

           "Consolidated EBIT" shall mean, for any period, (A) the  sum  of
the amounts for such period of (i) Consolidated Net Income, (ii) provisions
for  taxes  based  on  income, (iii) Consolidated  Interest  Expense,  (iv)
amortization  or  write-off  of  deferred financing  costs  to  the  extent
deducted in determining Consolidated Net Income and (v) losses on sales  of
assets (excluding sales in the ordinary course of business) and other extra
ordinary  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, (iv) Consolidated Rent Expense, all as
determined  on  a  consolidated basis in accordance with GAAP,  (v)  merger
related  expenses actually incurred by, and allocated to Holdings  and  its
Subsidiaries in accordance with GAAP, in connection with the Falcon Merger,
in  an  aggregate maximum amount not to exceed $45,000,000 and (vi) charges
against  earnings relating to any loss on the disposal of the  discontinued
oil  and gas operations of Reading & Bates Development Co., in an aggregate
maximum amount not to exceed $80,000,000.

           "Consolidated Funded Indebtedness" shall mean, all  Indebtedness
of  Holdings  and  its Subsidiaries calculated on a consolidated  basis  in
accordance  with  GAAP;  provided that with respect  to  calculations  made
pursuant  to  Section  7.10  only, Consolidated Funded  Indebtedness  shall
exclude  (i)  up to $200,000,000 of unsecured subordinated debt  issued  by
Holdings  in  one or more public offerings following the Initial  Borrowing
Date,  which  shall (x) mature after the Maturity Date, (y)  not  have  any
principal  payments  prior  to the Maturity Date,  and  (z)  be  explicitly
subordinated  to this Facility and (ii) up to a maximum of $100,000,000  in
the  aggregate of residual value guarantees related to the financing of the
two  drillships  being  constructed  pursuant  to  joint  ventures  between
affiliates  of  Reading  & Bates Corporation and  Conoco  (the  "Conoco  JV
Ships"),  provided that the underlying obligations of such  residual  value
guarantees shall not mature prior to the date which is 12 months after  the
Maturity Date and provided further that, with respect to calculations  made
pursuant  to Section 7.11 only, Consolidated Funded Indebtedness shall  not
include  up to a maximum of $150,000,000 in the aggregate of guarantees  by
Holdings  or any of its Wholly-Owned Subsidiaries related to the  financing
of the Conoco JV Ships for so long as Holdings maintains its present direct
or indirect joint venture interest in such Conoco JV Ships.

          "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, provided  that,  for
the  quarterly  test periods ending on December 31, 1997, March  31,  1998,
June  30,  1998 and September 30, 1998 exclusively, Consolidated Net  Worth
shall  be increased by adding thereto, (i) merger related expenses actually
incurred  by, and allocated to Holdings and its Subsidiaries in  accordance
with  GAAP,  in connection with the Falcon Merger, in an aggregate  maximum
amount not to exceed $45,000,000 and (vi) charges against earnings relating
to  any loss on the disposal of the discontinued oil and gas operations  of
Reading  &  Bates Development Co., in an aggregate maximum  amount  not  to
exceed $80,000,000.

           "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.

           "Construction Contract" shall mean the Contract for Construction
and  Sale of a 103,000 Metric Tons Displacement Drillship (Hull No.  1255),
dated  September  5,  1997, between Reading & Bates Drilling  Co.,  Samsung
Heavy  Industries  Co.,  Ltd. and Samsung Corporation,  together  with  any
Exhibits or ancillary documents related thereto.

           "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 and  the
Security Agreement and any documents executed in connection therewith.

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

          "Credit Party" shall mean Holdings, Parent, the Borrower and each
other 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 7.05.

          "Drawdown Amount" shall mean (i) with respect to any Borrowing to
occur  on  the Initial Borrowing Date, the total amount of bona fide  costs
and  expenses  then due and outstanding in connection with the construction
of  the  Drillship, plus all bona fide projected expenses which will mature
prior  to  the  next  succeeding  Drawdown  Date  in  connection  with  the
construction  of  the  Drillship,  (ii)  with  respect  to  any  subsequent
Borrowing  to occur on a Drawdown Date occurring on the first Business  Day
of  a  calendar month, the total amount of bona fide expenses then due  and
outstanding and bona fide projected expenses scheduled to come  due  during
such  calendar month (less any amounts of prior Borrowings not  theretofore
applied  to  pay  expenses  incurred pursuant to the  construction  of  the
Drillship)  and  (iii) with respect to any Borrowing made  to  pay  amounts
owing  to  Samsung,  an amount equal to the amount then owing  to  Samsung,
provided  that such Borrowing shall be accompanied by payment  instructions
facilitating direct payment to Samsung of such amount by the Administrative
Agent for the account of the Borrower.

           "Drawdown  Date"  shall mean each of (i) the  Initial  Borrowing
Date, (ii) the first Business Day of each calendar month to occur prior  to
the Maturity Date and (iii) the date upon which each payment required to be
made to Samsung pursuant to the Construction Contract becomes due.

           "Drilling  Contract"  shall mean Contract No.  ANS028290,  dated
October 27, 1997, among the Parent and Statoil Exploration (US) Inc.

          "Drillship" shall have the meaning provided in Section 5.05.

           "Effective  Date"  shall have the meaning  provided  in  Section
11.10.

           "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).

            "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  author
ities  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
limitation,  CERCLA;  RCRA;  the Federal Water Pollution  Control  Act,  as
amended, 33 U.S.C. Section 1251 et seq.; the Toxic Substances Control  Act,
15 U.S.C. Section  7401  et seq.; the Clean Air Act, 42 U.S.C. Section 7401
et seq.; the Safe  Drinking Water Act, 42 U.S.C. Section  3808 et seq.; the
Oil  Pollution  Act  of  1990,  33  U.S.C.  Section  2701  et  seq. and any
applicable state  and local or foreign counterparts or equivalents.

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

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

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

          "Eurodollar Margin" shall be equal to 0.60% per annum.

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

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

           "Existing  Credit  Agreement" shall mean the  Credit  Agreement,
dated  as of November 13, 1996 and Amended and Restated as of July 3, 1996,
by  and  among Holdings, the Borrower, various lending institutions, Banque
Indosuez and Credit Lyonnais, New York Branch, as Documentation Agents  and
Christiania Bank og Kreditkasse, New York Branch, as Administrative Agent.

           "Existing  Indebtedness"  shall have  the  meaning  provided  in
Section 5.19.

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

           "Falcon  Merger"  shall  mean the  merger  of  Reading  &  Bates
Corporation and Falcon Drilling, with each such company becoming a  wholly-
owned subsidiary of R&B Falcon Corporation.

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

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

           "Fleet" shall mean any and all offshore drilling rigs or vessels
owned from time to time by Holdings and its Wholly-Owned Subsidiaries.

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

          "GAAP" shall mean generally accepted accounting principles in the
United  States  of America as in effect on the date of this  Agreement;  it
being understood and agreed that determinations in accordance with GAAP for
purposes of Section 7, including defined terms as used therein, are subject
(to the extent provided therein) to Section 11.07(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, 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 Holdings, Parent and each Subsidiary  of
Parent, other than the Borrower, which becomes a party to this Agreement or
any other Guaranty.

           "Guaranty" shall mean the Parent Guaranty pursuant to Section 12
hereof and any other guaranty executed in connection herewith.

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

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

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

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

           "Initial Borrowing Date" shall mean the first date upon which  a
Borrowing is made pursuant to this Agreement.

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

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

           "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.

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

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

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

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

          "Market Value" shall mean as of any date of calculation the value
as  of  such date of any offshore drilling rig or other vessel provided  in
the  most  recent  valuation report delivered in  connection  with  Section
5.13(ii) or 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 December 31, 1998.

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

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

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

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

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

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

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

            "Parent  Guarantors"  shall  mean  Holdings,  Parent  and  each
Subsidiary of Parent, other than the Borrower and its Subsidiaries which is
or becomes a party to this Agreement.

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

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

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

           "Permitted Liens" shall mean Liens described in Section  7.03(a)
through (i).

           "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 Subsid
iary of Holdings or an ERISA Affiliate.

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

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

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

           "Refundment  Guaranty"  shall  mean  the  Letter  of  Refundment
Guaranty, dated as of September 12, 1997, issued by The Export-Import  Bank
of  Korea  in  favor  of  Parent  to support  the  obligations  of  Samsung
Corporation and Samsung Heavy Industries under the Construction Contract.

          "Register" shall have the meaning provided in Section 11.16.

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

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

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

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

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

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

           "Required Banks" shall mean Non-Defaulting Banks whose  outstand
ing Commitments (or, if after the Total Commitment has been terminated, out
standing  Loans) constitute greater than 50% of the Adjusted Total Commitme
nt  (or,  if  after  the  Total Commitment has been terminated,  the  total
outstanding Loans of Non-Defaulting Banks at such time).

           "Samsung"  shall mean Samsung Corporation and/or  Samsung  Heavy
Industries Co., Ltd.

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

          "Section 3.04(b)(ii) Certificate" shall have the meaning provided
in Section 3.04(b)(ii).

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

           "Security Agreement" shall have the meaning provided in  Section
4.10.

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

           "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.

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

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

          "Taxes" shall have the meaning provided in Section 3.04(a).

           "Title  XI  Financing"  shall mean  financing  provided  by,  or
guaranteed  by,  the  U.S.  Maritime  Administration  under  its  Title  XI
Shipbuilding Loan Guarantor Program.

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

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

           "Total  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.

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

          "UCC" shall mean the Uniform Commercial Code.

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

           "Unutilized Commitment" for each Bank, shall mean the excess  of
(i)  the Commitment of such Bank over (ii) the aggregate outstanding princi
pal amount of Loans made by such Bank at such time.

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

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

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

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

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

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

          SECTION 10.  The Administrative Agent.

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

           (b)   For  purposes of this Section 10, the term "Administrative
Agent"  shall  include  CBK  in  its  capacity  as  Collateral  Agent   and
Administrative Agent.

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

          10.03   Lack  of Reliance on the Administrative Agent.   Independ
ently and without reliance upon the Administrative Agent, each Bank and the
holder of each Note, to the extent it deems appropriate, has made and shall
continue  to  make (i) its own independent investigation of  the  financial
condition  and affairs of Holdings and its Subsidiaries in connection  with
the making and the continuance of the Loans and the taking or not taking of
any  action in connection herewith and (ii) its own appraisal of the credit
worthiness  of  Holdings  and its Subsidiaries  and,  except  as  expressly
provided  in  this Agreement, the Administrative Agent shall not  have  any
duty  or  responsibility, 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
Administrative Agent shall not be responsible to any Bank or the holder  of
any  Note  for  any  recitals, statements, information, representations  or
warranties  herein  or  in  any  document,  certificate  or  other  writing
delivered  in  connection  herewith or for  the  execution,  effectiveness,
genuineness, validity, enforceability, perfection, collectibility, priority
or  sufficiency of this Agreement or any other Credit Document or the finan
cial 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.

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

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

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

          10.07  The Administrative Agent in Its Individual Capacity.  With
respect  to  its  obligation  to  make  Loans  under  this  Agreement,  the
Administrative Agent shall have the rights and powers specified herein  for
a  "Bank" and may exercise the same rights and powers as though it were not
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 Administrative Agent in its  indi
vidual  capacity.  The Administrative Agent may accept deposits from,  lend
money  to,  and  generally engage in any kind of banking,  trust  or  other
business with Holdings or its Subsidiaries or any Affiliate thereof  as  if
it were not performing the duties specified herein, and may accept fees and
other  consideration from Holdings or any of its Subsidiaries for  services
in  connection with this Agreement and otherwise without having to  account
for the same to the Banks.

          10.08  Holders.  The Administrative Agent may deem and treat  the
payee  of any Note as the owner thereof for all purposes hereof unless  and
until  a written notice of the assignment, transfer or endorsement thereof,
as  the  case may be, shall have been filed with the Administrative  Agent.
Any  request, authority or consent of any 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.

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

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

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

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

          SECTION 11.  Miscellaneous.

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

          11.02   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 authorized at any time or from time to time,  without  pre
sentment, 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 11.06(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, liabilities or claims,
or any of them, shall be contingent or unmatured.

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

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

         11.04  Benefit of Agreement.  (a)  This Agreement shall be binding
upon  and  inure  to  the benefit of and be enforceable by  the  respective
successors  and assigns of the parties hereto, provided that  the  Borrower
may  not  assign  or  transfer any of its rights or  obligations  hereunder
without the prior written consent of the Banks.  Each Bank may at any  time
grant  participations in any of its rights hereunder or under  any  of  the
Notes  to another financial institution, provided that in the case  of  any
such  participation, the participant shall not have any rights  under  this
Agreement  or  any of the other Credit Documents (the participant's  rights
against such Bank in respect of such participation to be those set forth in
the  agreement  executed by such Bank in favor of the participant  relating
thereto)  and  all  amounts  payable by the  Borrower  hereunder  shall  be
determined as if such Bank had not sold such participation, except that the
participant shall be entitled to the benefits of Sections 1.10 and 3.04  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, 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  mandatory  reduction in the Total Commitment, or a mandatory prepayment,
shall not constitute a change in the terms of any Commitment), (ii) release
all  or  substantially  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
hereunder to its Affiliate or to another Bank, and (y) with the consent  of
the  Administrative  Agent and the Borrower (which  consent  shall  not  be
unreasonably  withheld),  any Bank may assign  all  or  a  portion  of  its
outstanding Commitment and its rights and obligations hereunder to  one  or
more  Eligible Transferees.  No assignment pursuant to the immediately  pre
ceding  sentence  shall  to  the  extent  such  assignment  represents   an
assignment to an institution other than one or more Banks hereunder, be  in
an  aggregate  amount less than $5,000,000 unless the entire Commitment  of
the assigning Bank is so assigned.  If any Bank so sells or assigns all  or
a  part  of its rights hereunder or under the Notes, any reference in  this
Agreement  or  the Notes to such assigning Bank shall thereafter  refer  to
such  Bank and to the respective assignee to the extent of their respective
interests  and  the respective assignee shall have, to the extent  of  such
assignment  (unless  otherwise  provided  therein),  the  same  rights  and
benefits  as  it  would  if it were such assigning Bank.   Each  assignment
pursuant  to this Section 11.04(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 Administrative Agent a nonrefundable
assignment  fee  of  $3,500  and (y) to a Bank,  either  the  assigning  or
assignee  Bank  shall  pay  to  the Administrative  Agent  a  nonrefundable
assignment  fee  of $1,500, and at the time of any assignment  pursuant  to
this Section 11.04(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  Effective  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 11.04,
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  11 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.

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

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

           (b)   Each  of the Banks agrees that, if it should  receive  any
amount  hereunder  (whether  by  voluntary  payment,  by  realization  upon
security,  by  the  exercise of the right of setoff or  banker's  lien,  by
counterclaim  or  cross action, by the enforcement of any right  under  the
Credit  Documents, or otherwise) which is applicable to the payment of  the
principal  of,  or  interest on, the Loans 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 pay
ment  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 11.06(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.

          11.07  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 writ
ing by Holdings or the Borrower to the Banks), provided that (x) except  as
otherwise specifically provided herein, all computations determining compli
ance  with  Section  7, including definitions used therein,  shall  utilize
accounting principles and policies in effect at the time of the preparation
of,  and  in conformity with those used to prepare, the December  31,  1996
historical financial statements of Holdings delivered to the Banks pursuant
to Section 5.10(b) and (y) that if at any time the computations determining
compliance  with  Section  7 utilize accounting principles  different  from
those  utilized  in the financial statements furnished to the  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.

         11.08  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 EXE
CUTION  AND  DELIVERY OF THIS AGREEMENT, HOLDINGS AND THE  BORROWER  HEREBY
IRREVOCABLY  ACCEPT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY,  GENER
ALLY  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 11.03, SUCH SERVICE TO BECOME EFFECTIVE  30
DAYS  AFTER  SUCH MAILING.  NOTHING HEREIN SHALL AFFECT THE  RIGHT  OF  THE
ADMINISTRATIVE AGENT, ANY BANK OR THE HOLDER OF ANY NOTE TO  SERVE  PROCESS
IN  ANY  OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS  OR
OTHERWISE   PROCEED  AGAINST  HOLDINGS  OR  THE  BORROWER  IN   ANY   OTHER
JURISDICTION.

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

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

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

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

         11.11  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.

          11.12  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, 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  Commit
ment  of  any  Bank over the amount thereof then in effect (it being  under
stood that a waiver of any condition, covenant, Default or Event of Default
shall  not constitute a change in the terms of any Commitment of any Bank),
(iii) release or permit the release of (x) all or substantially all of  the
Security  Agreement  Collateral or (y) the Guaranty of Holdings  or  Parent
pursuant to Section 12, (iv) amend, modify or waive any provision  of  this
Section  11.12,  (v) reduce the percentage specified in the  definition  of
Required  Banks (it being understood and agreed that, with the  consent  of
the  Required  Banks,  additional extensions of  credit  pursuant  to  this
Agreement  may  be  included  in the determination  of  Required  Banks  on
substantially the same basis as the Commitments (and related extensions  of
credit) are included on the Effective Date), (vi) consent to the assignment
or transfer by the Borrower of any of its rights and obligations under this
Agreement  or  (vii) waive, change the timing or amount of, or  extend  any
mandatory reduction in the Total Commitment.  No provision of Sections  10,
or  any  other  provisions  relating to the  Administrative  Agent  may  be
modified without the consent of the Administrative Agent.

           (b)   If,  in  connection  with  any  proposed  change,  waiver,
discharge  or  termination to any of the provisions of  this  Agreement  as
contemplated  by clauses (i) through (vii), inclusive, of  the  proviso  to
Section  11.12(a), the consent of the Required Banks is  obtained  but  the
consent of one or more of such other Banks whose consent is required is not
obtained, then the Borrower shall have the right to replace each such  non-
consenting  Bank  or  Banks  (so long as all non-consenting  Banks  are  so
replaced)  with one or more Replacement Banks pursuant to Section  1.13  so
long  as  at  the  time  of such replacement, each  such  Replacement  Bank
consents to the proposed change, waiver, discharge or 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 11.12(a)(ii).

          11.13   Survival.   All indemnities set forth  herein  including,
without  limitation,  in Section 1.10, 1.11, 3.04,  10.06  or  11.01  shall
survive  the  execution and delivery of this Agreement and the  making  and
repayment of the Loans.

          11.14   Domicile of Loans.  Each Bank may transfer and carry  its
Loans  at,  to  or  for  the account of any branch  office,  subsidiary  or
Affiliate of such Bank, provided that the Borrower shall not be responsible
for  costs  arising  under  Section 1.10 or 3.04 resulting  from  any  such
transfer (other than a transfer pursuant to Section 1.12(a)) to the  extent
not otherwise applicable to such Bank prior to such transfer.

         11.15  Confidentiality.  Subject to Section 11.04, 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 practices and in any event may make disclosure reasonably  re
quired  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  11.15) or as required or requested by any governmental  agency  or
representative thereof or pursuant to legal process, provided that,  unless
specifically prohibited by applicable law or court order, each  Bank  shall
notify  the Borrower of any request by any governmental agency or  represen
tative  thereof  (other  than  any  such  request  in  connection  with  an
examination  of  the financial condition of such Bank by such  governmental
agency)  for  disclosure  of  any  such  non-public  information  prior  to
disclosure of such information, and provided further that in no event shall
any  Bank  be  obligated or required to return any materials  furnished  by
Holdings or any Subsidiary.

           11.16    Registry.    The   Borrower   hereby   designates   the
Administrative Agent to serve as the Borrower's agent, solely for  purposes
of  this Section 11.16, to maintain a register (the "Register") on which it
will  record  the Commitments from time to time of each of the  Banks,  the
Loans  made  by  each of the Banks and each repayment  in  respect  of  the
principal  amount  of the Loans of each Bank.  Failure  to  make  any  such
recordation,  or  any  error  in  such recordation  shall  not  affect  the
Borrower's obligations in respect of such Loans.  With respect to any Bank,
the  transfer  of  the  Commitments of such Bank  and  the  rights  to  the
principal  of, and interest on, any Loan made pursuant to such  Commitments
shall  not  be  effective until such transfer is recorded on  the  Register
maintained  by the Administrative Agent with respect to ownership  of  such
Commitments  and Loans and prior to such recordation all amounts  owing  to
the  transferor  with respect to such Commitments and  Loans  shall  remain
owing to the transferor.  The registration of assignment or transfer of all
or   part  of  any  Commitments  and  Loans  shall  be  recorded   by   the
Administrative  Agent  on  the Register only upon  the  acceptance  by  the
Administrative  Agent of a properly executed and delivered  Assignment  and
Assumption  Agreement pursuant to Section 11.04(b).   Coincident  with  the
delivery   of   such  an  Assignment  and  Assumption  Agreement   to   the
Administrative  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 12.  Parent Guaranty.

           12.01  The Guaranty.  In order to induce the Banks to enter into
this  Agreement  and to extend credit hereunder and in recognition  of  the
direct  benefits  to  be received by Holdings and Parent  (each  a  "Parent
Guarantor" and collectively, the "Parent Guarantors") from the proceeds  of
the  Loans, each Parent Guarantor hereby agrees with the Banks as  follows:
each  Parent  Guarantor  hereby jointly and severally  unconditionally  and
irrevocably  guarantees, as primary obligor and not merely  as  surety  the
full  and  prompt payment when due, whether upon maturity, acceleration  or
otherwise, of any and all of the Guaranteed Obligations of the Borrower  to
the  Guaranteed Creditors.  If any or all of the Guaranteed Obligations  of
the Borrower to the Guaranteed Creditors becomes due and payable hereunder,
each Parent Guarantor unconditionally promises to pay such indebtedness  to
the  Guaranteed Creditors, or order, on demand, together with any  and  all
expenses  which may be incurred by the Guaranteed Creditors  in  collecting
any  of  the  Guaranteed  Obligations.  If claim  is  ever  made  upon  any
Guaranteed  Creditor  for repayment or recovery of any  amount  or  amounts
received in payment or on account of any of the Guaranteed Obligations  and
any of the aforesaid payees repays all or part of said amount by reason  of
(i)  any judgment, decree or order of any court or administrative body  hav
ing  jurisdiction  over  such payee or any of  its  property  or  (ii)  any
settlement or compromise of any such claim effected by such payee with  any
such  claimant (including the Borrower), then and in such event each Parent
Guarantor  agrees  that  any such judgment, decree,  order,  settlement  or
compromise shall be binding upon each Parent Guarantor, notwithstanding any
revocation  of this Guaranty or any other instrument evidencing any  liabil
ity  of  the Borrower, and each Parent Guarantor shall be and remain liable
to  the aforesaid payees hereunder for the amount so repaid or recovered to
the same extent as if such amount had never originally been received by any
such payee.

            12.02    Bankruptcy.   Additionally,  each   Parent   Guarantor
unconditionally and irrevocably guarantees the payment of any  and  all  of
the  Guaranteed  Obligations of the Borrower to  the  Guaranteed  Creditors
whether or not due or payable by the Borrower upon the occurrence of any of
the  events specified in Section 8.05, and unconditionally promises to  pay
such  indebtedness  to the Guaranteed Creditors, or order,  on  demand,  in
lawful money of the United States.

           12.03   Nature  of  Liability.  The  liability  of  each  Parent
Guarantor  hereunder is exclusive and independent of any  security  for  or
other  guaranty  of  the  Guaranteed Obligations of  the  Borrower  whether
executed  by  such Parent Guarantor, any other guarantor or  by  any  other
party, and the liability of each Parent Guarantor hereunder is not 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
dissolution,  termination or increase, decrease or change in  personnel  by
the  Borrower, or (e) any payment made to the Guaranteed Creditors  on  the
Guaranteed  Obligations which any such Guaranteed Creditor  repays  to  the
Borrower pursuant to court order in any bankruptcy, reorganization, arrange
ment,  moratorium  or  other  debtor relief  proceeding,  and  each  Parent
Guarantor  waives any right to the deferral or modification of  its  obliga
tions hereunder by reason of any such proceeding.

           12.04   Independent Obligation.  The obligations of each  Parent
Guarantor  hereunder  are  independent of  the  obligations  of  any  other
guarantor,  any  other  party or the Borrower, and  a  separate  action  or
actions may be brought and prosecuted against each Parent Guarantor whether
or  not  action is brought against any other guarantor, any other party  or
the Borrower and whether or not any other guarantor, any other party or the
Borrower  be  joined in any such action or actions.  Each Parent  Guarantor
waives, to the full 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 each Parent Guarantor.

           12.05   Authorization.    Each Parent Guarantor  authorizes  the
Guaranteed 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 Guaranteed Creditors;

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

           (g)  consent to or waive any breach of, or any act, omission  or
     default under, this Agreement, any other Credit Document or any of the
     instruments or agreements referred to herein or therein, or  otherwise
     amend,  modify or supplement this Agreement, any other Credit Document
     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  any  Parent Guarantor from its liabilities  under  this
     Guaranty.

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

           12.07   Subordination.  Any of the indebtedness of the  Borrower
now  or  hereafter owing to any Parent Guarantor is hereby subordinated  to
the  Guaranteed  Obligations  of  the  Borrower  owing  to  the  Guaranteed
Creditors; and if the Agent so requests at a time when an Event of  Default
exists, all such indebtedness of the Borrower to any Parent Guarantor shall
be  collected,  enforced  and received by such  Parent  Guarantor  for  the
benefit of the Guaranteed Creditors and be paid over to the Agent on behalf
of the Guaranteed Creditors on account of the Guaranteed Obligations of the
Borrower to the Guaranteed Creditors, but without affecting or impairing in
any  manner  the liability of such Parent Guarantor under the  other  provi
sions  of this Guaranty.  Prior to the transfer by any Parent Guarantor  of
any note or negotiable instrument evidencing any of the indebtedness of the
Borrower  to such Parent Guarantor, such Parent Guarantor shall  mark  such
note  or  negotiable instrument with a legend that the same is  subject  to
this subordination.  Without limiting the generality of the foregoing, each
Parent  Guarantor hereby agrees with the Guaranteed Creditors that it  will
not  exercise  any right of subrogation which it may at any time  otherwise
have  as a result of this Guaranty (whether contractual, under Section  509
of  the Bankruptcy Code or otherwise) until all Guaranteed Obligations have
been irrevocably paid in full in cash.

           12.08  Waiver.  (a)  Each Parent Guarantor waives any right  (ex
cept  as  shall be required by applicable statute and cannot be waived)  to
require  any  Guaranteed Creditor 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  any  Guaranteed  Creditor's   power
whatsoever.  Each Parent Guarantor 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  lia
bility  of  the  Borrower  other than payment in  full  of  the  Guaranteed
Obligations.  The Guaranteed Creditors may, at their election, foreclose on
any  security  held  by  the  Agent, the  Collateral  Agent  or  any  other
Guaranteed  Creditor 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 Guaranteed Creditors may have against the Borrower  or
any other party, or any security, without affecting or impairing in any way
the  liability of any Parent Guarantor hereunder except to the  extent  the
Guaranteed  Obligations have been paid.  Each Parent Guarantor  waives  any
defense arising out of any such election by the Guaranteed Creditors,  even
though  such  election operates to impair or extinguish any right  of  reim
bursement  or subrogation or other right or remedy of such Parent Guarantor
against the Borrower or any other party or any security.

           (b)  Each Parent Guarantor 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.   Each  Parent
Guarantor assumes all responsibility for being and keeping itself  informed
of  the  Borrower's financial condition and assets, and of  all  other  cir
cumstances   bearing  upon  the  risk  of  nonpayment  of  the   Guaranteed
Obligations and the nature, scope and extent of the risks which such Parent
Guarantor  assumes  and incurs hereunder, and agrees  that  the  Guaranteed
Creditors  shall have no duty to advise any Parent Guarantor of information
known to them regarding such circumstances or risks.

           12.09  Nature of Liability.  It is the desire and intent of each
Parent  Guarantor and the Guaranteed Creditors that this Guaranty shall  be
enforced  against  each Parent Guarantor to the fullest extent  permissible
under  the laws and public policies applied in each jurisdiction  in  which
enforcement  is  sought.   If,  however,  and  to  the  extent  that,   the
obligations  of  any  Parent  Guarantor  under  this  Guaranty   shall   be
adjudicated to be invalid or unenforceable for any reason (including,  with
out limitation, because of any applicable state or federal law relating  to
fraudulent  conveyances or transfers), then the amount  of  the  Guaranteed
Obligations of such Parent Guarantor shall be deemed to be reduced and such
Parent Guarantor shall pay the maximum amount of the Guaranteed Obligations
which would be permissible under applicable law.


                    *             *            *

           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:  (281) 496-5000
Facsimile:  (281) 496-0285

                                     READING & BATES DRILLING CO.


                                     By_________________________
                                       Name:
                                       Title:


                                     RB DEEPWATER EXPLORATION III INC.

  
                                     By_________________________
                                       Name:
                                       Title:

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

  
                                     By__________________________
                                       Name:
                                       Title:


                                     By__________________________
                                       Name:
                                       Title:

                                     CREDIT LYONNAIS NEW YORK BRANCH,
                                     Individually and as Syndication Agent


                                     By__________________________
                                       Name:
                                       Title:

                                     SKANDINAVISKA ENSKILDA BANKEN AB (Publ.)


                                     By__________________________
                                       Name:
                                       Title:

                                     CREDIT AGRICOLE INDOSUEZ


                                     By__________________________
                                       Name:
                                       Title:

                                     BANK OF NOVA SCOTIA


                                     By__________________________
                                       Name:
                                       Title:



                                                               ANNEX I
 
                             COMMITMENTS

     INSTITUTION                                       COMMITMENT

Christiania Bank og Kreditkasse                        $37,500,000

Credit Lyonnais                                        $37,500,000

Skandinaviska Enskilda Banken                          $25,000,000

Credit Agricole Indosuez                               $25,000,000

Bank of Nova Scotia                                    $25,000,000
                                                      ------------
     Total                                            $150,000,000


                                                                  ANNEX II


                           BANK ADDRESSES


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

                                 1301 Avenue of the Americas
                                 New York, NY  10019
                                 Attention:  Loan Administration

                                 with a copy to:


Credit Lyonnais                  1000 Louisiana
                                 Suite 5360
                                 Houston, Texas  77002
                                 Attn:  Page Dillehunt
                                 Tel. No.:  (713) 751-0500
                                 Fax No.:  (713) 751-0307

Skandinaviska Enskilda Banken AB (publ.)     Rosenkrantz Gate 22
                                 0123 Oslo, Norway
                                 Attn:  Jan Sjoli
                                 Tel. No.:  47-22-827-000
                                 Fax No.:  47-22-827-104

Credit Agricole Indosuez         Ruselokkveien 6
                                 0120 Oslo, Norway
                                 Attn:  Bjorn Hundevadt-Gulbrandsen
                                 Tel. No.:  47-22-833-050
                                 Fax No.:  47-22-833-055

Bank of Nova Scotia              1100 Louisiana, Suite 3000
                                 Houston, TX  77002
                                 Attn:  Jamie Conn
                                 Tel. No.:  (713) 752-0900
                                 Fax No.:  (713) 752-2425