Document:

<PAGE>

                                 LOAN AGREEMENT

                   ($20,000,000 U.S. REVOLVING LOAN FACILITY,

                  $5,000,000 CANADIAN REVOLVING LOAN FACILITY,

                    $10,000,000 U.K. REVOLVING LOAN FACILITY

                                       AND

                         $45,000,000 TERM LOAN FACILITY)

                           DATED AS OF MARCH 15, 2004

                                      AMONG

                                NATCO GROUP INC.,
                                AS U.S. BORROWER,

                               NATCO CANADA, LTD.,
                              AS CANADIAN BORROWER,

                              AXSIA GROUP LIMITED,
                                AS U.K. BORROWER,

                     WELLS FARGO BANK, NATIONAL ASSOCIATION,
                       AS U.S. AGENT AND CO-LEAD ARRANGER,

                                HSBC BANK CANADA,
                                AS CANADIAN AGENT

                                 HSBC BANK PLC,
                                 AS U.K. AGENT,

                                 COMERICA BANK,
                  AS SYNDICATIONS AGENT AND AS CO-LEAD ARRANGER

                                       AND

                       THE OTHER LENDERS NOW OR HEREAFTER
                                 PARTIES HERETO
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
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                                                                                    Page
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1.       Definitions...............................................................   1
     1.1      Certain Defined Terms................................................   1
     1.2      Miscellaneous........................................................  32
2.       Commitments; Loans; BA's and Letters of Credit............................  32
     2.1      Loans and BA's.......................................................  32
     2.2      Letters of Credit....................................................  34
     2.3      Certain Provisions Relating to Bankers' Acceptances..................  39
     2.4      Terminations, Reductions or Reallocations of Commitments.............  43
     2.5      Commitment Fees......................................................  45
     2.6      Several Obligations..................................................  46
     2.7      Notes................................................................  46
     2.8      Use of Proceeds......................................................  47
     2.9      Currency Fluctuations................................................  47
3.       Borrowings, Prepayments and Interest Options..............................  48
     3.1      Borrowings...........................................................  48
     3.2      Prepayments..........................................................  48
     3.3      Interest Options.....................................................  52
4.       Payments; Pro Rata Treatment; Computations, Etc...........................  57
     4.1      Payments.............................................................  57
     4.2      Pro Rata Treatment...................................................  58
     4.3      Certain Actions, Notices, Etc........................................  59
     4.4      Non-Receipt of Funds by Any Agent....................................  60
     4.5      Sharing of Payments, Etc.............................................  61
5.       Conditions Precedent......................................................  61
     5.1      Initial Loans, Letters of Credit and Bankers' Acceptances............  61
     5.2      All Loans, Letters of Credit and Bankers' Acceptances................  63
6.       Representations and Warranties............................................  64
     6.1      Organization.........................................................  64
     6.2      Financial Statements.................................................  64
     6.3      Enforceable Obligations; Authorization...............................  65
     6.4      Other Debt...........................................................  65
     6.5      Litigation...........................................................  65
     6.6      Title................................................................  65
     6.7      Taxes................................................................  65
     6.8      Regulations U and X..................................................  65
     6.9      Subsidiaries.........................................................  66
     6.10     No Untrue or Misleading Statements...................................  66
     6.11     ERISA................................................................  66
     6.12     Investment Company Act...............................................  66
     6.13     Public Utility Holding Company Act...................................  66
     6.14     Solvency.............................................................  66
     6.15     Fiscal Year..........................................................  66
     6.16     Compliance...........................................................  66
</TABLE>

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     6.17     Environmental Matters................................................  67
     6.18     Collateral Covered...................................................  67
     6.19     Property of Excluded Subsidiaries and Certain Foreign Subsidiaries...  67
7.       Affirmative Covenants.....................................................  67
     7.1      Taxes, Existence, Regulations, Property, Etc.........................  68
     7.2      Financial Statements and Information.................................  68
     7.3      Financial Tests......................................................  69
     7.4      Inspection...........................................................  69
     7.5      Further Assurances...................................................  70
     7.6      Books and Records....................................................  70
     7.7      Insurance............................................................  70
     7.8      Notice of Certain Matters............................................  70
     7.9      Capital Adequacy.....................................................  71
     7.10     ERISA Information and Compliance.....................................  71
     7.11     Additional Security Documents........................................  72
8.       Negative Covenants........................................................  72
     8.1      Borrowed Money Indebtedness..........................................  73
     8.2      Liens................................................................  73
     8.3      Contingent Liabilities...............................................  73
     8.4      Mergers, Consolidations and Dispositions of Assets...................  73
     8.5      Redemption, Dividends and Distributions..............................  74
     8.6      Nature of Business...................................................  74
     8.7      Transactions with Related Parties....................................  75
     8.8      Loans and Investments................................................  75
     8.9      Subsidiaries.........................................................  75
     8.10     Export/Import Credit Facilities......................................  76
     8.11     Organizational Documents.............................................  76
     8.12     Unfunded Liabilities.................................................  76
     8.13     Sale/Leasebacks......................................................  76
     8.14     Acquisitions.........................................................  76
     8.15     Negative Pledges.....................................................  76
     8.16     Synthetic Repurchases of Equity or Debt..............................  77
     8.17     Property of Excluded Subsidiaries and Certain Foreign Subsidiaries...  77
     8.18     Limitation on Capital Expenditures...................................  77
9.       Defaults..................................................................  77
     9.1      Events of Default....................................................  77
     9.2      Right of Setoff......................................................  80
     9.3      Collateral Account...................................................  80
     9.4      Preservation of Security for Letter of Credit Liabilities............  80
     9.5      Currency Conversion After Maturity...................................  81
     9.6      Remedies Cumulative..................................................  81
10.      Agents....................................................................  81
     10.1     Appointment, Powers and Immunities...................................  81
     10.2     Reliance.............................................................  83
     10.3     Defaults.............................................................  83
     10.4     Material Written Notices.............................................  84
     10.5     Rights as a Lender...................................................  84
</TABLE>

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     10.6     Indemnification......................................................  84
     10.7     Non-Reliance on Agents and Other Lenders.............................  84
     10.8     Failure to Act.......................................................  85
     10.9     Resignation or Removal of Agent......................................  85
     10.10    No Partnership.......................................................  86
     10.11    Authority of Agent...................................................  86
     10.12    Syndications Agent...................................................  86
11.      Miscellaneous.............................................................  87
     11.1     Waiver...............................................................  87
     11.2     Notices..............................................................  87
     11.3     Expenses, Etc........................................................  87
     11.4     Indemnification......................................................  88
     11.5     Amendments, Etc......................................................  89
     11.6     Successors and Assigns...............................................  90
     11.7     Limitation of Interest...............................................  92
     11.8     Survival.............................................................  93
     11.9     Captions.............................................................  93
     11.10    Counterparts.........................................................  93
     11.11    Governing Law........................................................  93
     11.12    Severability.........................................................  94
     11.13    Tax Forms; Net Payments..............................................  94
     11.14    Interest Act (Canada)................................................  95
     11.15    Judgment Currency....................................................  95
     11.16    Conflicts Between This Agreement and the Other Loan Documents........  95
     11.17    Limitation on Charges; Substitute Lenders; Non-Discrimination........  95
     11.18    WAIVER OF JURY TRIAL.................................................  96
     11.19    Confidentiality......................................................  96
     11.20    USA Patriot Act Notice...............................................  97
     11.21    Amendment and Restatement............................................  97
</TABLE>

                                      iii
<PAGE>
EXHIBITS

         A-1 -- Request for Extension of Credit (U.S. Borrower)
         A-2 -- Request for Extension of Credit (Canadian Borrower)
         A-3 -- Request for Extension of Credit (U.K. Borrower)
         B -- Rate Designation Notice
         C -- Canadian Revolving Note
         D -- U.S. Revolving Note
         E -- Assignment and Acceptance
         F -- Compliance Certificate
         G -- Bankers' Acceptance Notice
         H -- Canadian Dollar Revolving Note
         I -- Borrowing Base Certificate
         J -- Term Note
         K -- U.K. Revolving Note

SCHEDULES

         1.1A - Existing Guaranties
         1.1B - Excluded Real Property
         6.5 -  Litigation
         6.9 - Subsidiaries
         6.11 - Certain Unfunded Liabilities
         8.5 - Preferred Stock, Warrants

                                       iv
<PAGE>
                                 LOAN AGREEMENT

        THIS LOAN AGREEMENT is made and entered into as of March 15, 2004 (the
"Effective Date"), by and among NATCO GROUP INC., a Delaware corporation (the
"U.S. Borrower"); NATCO CANADA, LTD., a corporation formed under the laws of the
Province of Ontario (the "Canadian Borrower"); AXSIA GROUP LIMITED, a company
incorporated in England and Wales under the Companies Act of the United Kingdom
(the "U.K. Borrower"); each of the lenders which is or may from time to time
become a party hereto (individually, a "Lender" and, collectively, the
"Lenders", which terms shall include U.S. Lenders, Canadian Lenders and U.K.
Lenders); WELLS FARGO BANK, NATIONAL ASSOCIATION ("Wells Fargo"), as agent for
the U.S. Lenders (in such capacity, together with its successors in such
capacity, the "U.S. Agent") and as Co-Lead Arranger; HSBC BANK CANADA ("HSBC
Canada"), as agent for the Canadian Lenders (in such capacity, together with its
successors in such capacity, the "Canadian Agent"); HSBC BANK PLC ("HSBC U.K."),
as agent for the U.K. Lenders (in such capacity, together with its successors in
such capacity, the "U.K. Agent") and; COMERICA BANK, as Syndications Agent and
as Co-Lead Arranger.

        The parties hereto agree as follows:

1.      Definitions.

        1.1 Certain Defined Terms.

        In this Agreement, terms defined above shall have the meanings ascribed
to them above. Unless a particular term, word or phrase is otherwise defined or
the context otherwise requires, capitalized terms, words and phrases used herein
or in the Loan Documents (as hereinafter defined) have the following meanings
(all definitions that are defined in this Agreement or in the Loan Documents in
the singular have the same meanings when used in the plural and vice versa):

        Acceptance Fee means the fee payable in Canadian Dollars to each
Canadian Lender in respect of the Bankers' Acceptances accepted by such Canadian
Lender computed in accordance with Section 2.3(c).

        Accounts, Equipment, General Intangibles and Inventory shall have the
respective meanings assigned to them in Section 9.102 of the Uniform Commercial
Code enacted in the State of Texas as Sections 1 through 11 of the Texas
Business and Commerce Code, in force on the Effective Date.

        Additional Collateral shall have the meaning ascribed to such term in
Section 7.8 hereof.

        Additional Collateral Event shall have the meaning ascribed to such term
in Section 7.8 hereof.

        Additional Interest means the aggregate of all amounts accrued or paid
pursuant to the Notes or any of the other Loan Documents (other than interest on
the Notes at the Stated Rate and any Acceptance Fee) which, under applicable
laws, are or may be deemed to constitute
<PAGE>
interest on the indebtedness evidenced by the Notes or any other amounts owing
under any Loan Document.

        Adjusted LIBOR means, with respect to each Interest Period applicable to
a LIBOR Borrowing, a rate per annum equal to the quotient, expressed as a
percentage, of (a) LIBOR with respect to such Interest Period divided by (b)
1.0000 minus the Eurodollar Reserve Requirement in effect on the first day of
such Interest Period.

        Affiliate means any Person controlling, controlled by or under common
control with any other Person. For purposes of this definition, "control"
(including "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or otherwise.

        Agents means U.S. Agent, Canadian Agent and U.K. Agent, collectively.

        Agreement means this Loan Agreement, as it may from time to time be
amended, modified, restated or supplemented.

        Annual Financial Statements means the annual financial statements of a
Person, including all notes thereto, which statements shall include a balance
sheet as of the end of the fiscal year relating thereto and an income statement
and a statement of cash flows for such fiscal year, all setting forth in
comparative form the corresponding figures from the previous fiscal year, all
prepared in conformity with GAAP in all material respects, and accompanied by
the opinion of independent certified public accountants of recognized national
standing, which shall state that such financial statements present fairly in all
material respects the financial position of such Person and, if such Person has
any Subsidiaries, its consolidated Subsidiaries as of the date thereof and the
results of its operations for the period covered thereby in conformity with
GAAP. As to U.S. Borrower only, Annual Financial Statements shall also include
unaudited consolidating financial statements for U.S. Borrower and its
Subsidiaries, each in Proper Form, certified by the chief financial officer or
other authorized officer of U.S. Borrower as presenting fairly in all material
respects the consolidating financial position of U.S. Borrower and its
Subsidiaries.

        Applicable BA Discount Rate means, as applicable to a Bankers'
Acceptance being purchased by any Canadian Lender on any day, the percentage
discount rate (expressed to two decimal places and rounded upward, if necessary,
to the nearest 1/100th of 1%) quoted by the Canadian Agent as that at which the
Canadian Agent would, in accordance with normal practice, at or about 12:00 noon
(Toronto, Ontario time), on such day, be prepared to purchase Bankers'
Acceptances in an amount and having a maturity date comparable to the amount and
maturity date of such Bankers' Acceptances.

        Applicable Canadian Pension Legislation means, at any time, any federal
or provincial pension legislation then applicable to the Canadian Borrower,
including the Employment Pension Plans Act (Alberta), the Pension Benefits Act
(Ontario) and the Income Tax Act (Canada), including all regulations made
thereunder, and all rules, regulations, rulings and
<PAGE>
interpretations made or issued by any Governmental Authority having or asserting
jurisdiction in respect thereof.

        Applications means all applications and agreements for Letters of
Credit, or similar instruments or agreements, in Proper Form, now or hereafter
executed by any Person in connection with any Letter of Credit now or hereafter
issued or to be issued under the terms hereof at the request of any Person.

        Assessment Rate means, for any day, the annual assessment rate in effect
on such day that is payable by a member of the Bank Insurance Fund classified as
"well-capitalized" and within supervisory subgroup "B" (or a comparable
successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any
successor provision) to the Federal Deposit Insurance Corporation for insurance
by such Corporation of time deposits made in dollars at the offices of such
member in the United States; provided that if, as a result of any change in any
law, rule or regulation, it is no longer possible to determine the Assessment
Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall
be determined by the U.S. Agent to be representative of the cost of such
insurance to the applicable Lenders.

        Assignment and Acceptance shall have the meaning ascribed to such term
in Section 11.6(b).

        Availability Period means, for each Lender, the period from and
including the Effective Date to (but not including) the Termination Date.

        BA Discount Proceeds means in respect of any Bankers' Acceptance being
purchased by a Canadian Lender on any day under Section 2.3, an amount (rounded
to the nearest whole Canadian cent, and with one-half of one Canadian cent being
rounded up) calculated on such day by multiplying:

        (A)  the face amount of such Bankers' Acceptance; by

        (B)  the quotient equal to one divided by the sum of one plus the
product of:

             (i)   the Applicable BA Discount Rate (expressed as a decimal)
                   applicable to such Bankers' Acceptance; and

             (ii)  a fraction, the numerator of which is the number of days
                   remaining in the term of such Bankers' Acceptance and the
                   denominator of which is 365;

             with such quotient being rounded up or down to the nearest
             fifth decimal place and .000005 being rounded up.

        Bankers' Acceptance or BA means a non-interest bearing draft in Canadian
Dollars drawn by the Canadian Borrower on and accepted by a Canadian Lender and
issued for value pursuant to Section 2.3 hereof and includes a depository bill
under the DBNA and a bill of exchange under the Bills of Exchange Act (Canada).
<PAGE>
        Bankers' Acceptance Liabilities means, at any time and in respect of any
Bankers' Acceptance, the face amount thereof if still outstanding and unpaid or,
following maturity and payment thereof, the aggregate unpaid amount of all
Reimbursement Obligations at that time due and payable in respect of the payment
of such Bankers' Acceptance upon maturity.

        Bankers' Acceptance Notice has the meaning specified in Section 2.3(a).

        Bankruptcy Code means (i) the United States Bankruptcy Code, (ii) the
Bankruptcy and Insolvency Act (Canada) and (iii) the Companies' Creditors
Arrangement Act (Canada), as the same may be amended and together with any
successor statutes.

        Base Rate means, for any day, a rate per annum equal to the lesser of
(a) the then applicable Margin Percentage from time to time in effect plus the
greatest of (1) the applicable Prime Rate for that day and (2) the Federal Funds
Rate for that day plus 1/2 of 1% or (b) the Ceiling Rate. If for any reason any
applicable Agent shall have determined (which determination shall be conclusive
and binding, absent manifest error) that it is unable to ascertain the Federal
Funds Rate for any reason, including, without limitation, the inability or
failure of Agent to obtain sufficient quotations in accordance with the terms
hereof, the Base Rate shall, until the circumstances giving rise to such
inability no longer exist, be calculated without regard to that particular
component.

        Base Rate Borrowing means that portion of the principal balance of the
Loans at any time bearing interest at the Base Rate.

        Borrowed Money Indebtedness means, with respect to any Person, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments evidencing borrowed money, (iii) all obligations of such Person
under conditional sale or other title retention agreements relating to Property
purchased by such Person, (iv) all obligations of such Person issued or assumed
as the deferred purchase price of Property or services (excluding obligations of
such Person to creditors for raw materials, inventory, services and supplies and
deferred payments for services to employees and former employees incurred in the
ordinary course of such Person's business), (v) all lease obligations of such
Person which have been capitalized on the balance sheet of such Person in
accordance with GAAP, (vi) all obligations of others secured by any Lien on
Property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, equal to the lesser of the amount of such
obligation or the fair market value of such Property, (vii) Interest Rate Risk
Indebtedness of such Person, (viii) all obligations of such Person in respect of
outstanding surety bonds or letters of credit issued for the account of such
Person (or for which such Person is primarily liable) or bankers' acceptances
drawn by such Person and (ix) all guarantees of such Person.

        Borrowers means U.S. Borrower, Canadian Borrower and U.K. Borrower,
collectively.

        Borrowing Base Certificate shall mean a certificate, duly executed by
the chief executive officer, chief financial officer, treasurer or controller of
Borrowers, appropriately completed and in substantially the form of Exhibit I
hereto. Each Borrowing Base Certificate shall be effective
<PAGE>
only as accepted by U.S. Agent (and with such revisions, if any, as U.S. Agent
may reasonably require as a condition to such acceptance).

        Business Day means any day other than a day on which commercial banks
are authorized or required to close in Houston, Texas, Toronto, Ontario or
London, England.

        Calculation Date means the last Business Day of each month.

        Canadian Borrowing Base means, as at any date, the amount of the
Canadian Borrowing Base shown on the Borrowing Base Certificate then most
recently delivered pursuant to Section 7.2(f) hereof, determined by calculating
the amount equal to:

        (i)       80% of the aggregate amount of all Eligible Accounts of the
                  Canadian Borrower and its Subsidiaries (other than Excluded
                  Subsidiaries) at said date, plus

        (ii)      80% of the aggregate amount of all Milestone Billings of the
                  Canadian Borrower and its Subsidiaries (other than Excluded
                  Subsidiaries) at said date; provided that the amount
                  calculated pursuant to this clause (ii) shall not exceed 15%
                  of the Canadian Borrowing Base, plus

        (iii)     50% of the aggregate amount of all Eligible Inventory of
                  Canadian Borrower and its Subsidiaries (other than Excluded
                  Subsidiaries) at said date (determined at the lower of cost or
                  market on a consistent basis and in accordance with GAAP);
                  provided that the amount calculated pursuant to this clause
                  (iii) shall not exceed 40% of the Canadian Borrowing Base,
                  plus

        (iv)      100% of the aggregate amount of cash (or cash equivalents
                  acceptable to the U.S. Agent) delivered to Canadian Agent and
                  specifically pledged as security for the Canadian Obligations
                  pursuant to documentation satisfactory to the U.S. Agent.

In the absence of a current Borrowing Base Certificate, U.S. Agent shall
determine the Canadian Borrowing Base from time to time in its reasonable
discretion, taking into account all information reasonably available to it, and
the Canadian Borrowing Base from time to time so determined shall be the
Canadian Borrowing Base for all purposes of this Agreement until a current
Borrowing Base Certificate, in Proper Form, is furnished to and accepted by U.S.
Agent. For purposes of calculating the Canadian Borrowing Base, all amounts or
values expressed in Canadian Dollars shall be converted into Dollars at the
Exchange Rate in effect as of the date of the applicable Borrowing Base
Certificate.

        Canadian Commitment means, as to any Canadian Lender, the obligation, if
any, of such Canadian Lender to make Canadian Revolving Loans, incur or
participate in Letter of Credit Liabilities relating to Canadian Letters of
Credit and accept and purchase Bankers' Acceptances in an aggregate principal
amount at any one time outstanding up to (but not exceeding) the amount, if any,
set forth opposite such Canadian Lender's name on the signature pages hereof
<PAGE>
under the caption "Canadian Commitment", or otherwise provided for in an
Assignment and Acceptance (as the same may be increased or reduced from time to
time pursuant to Section 2.4 hereof).

        Canadian Dollars or C$ means lawful money of Canada.

        Canadian Dollar Revolving Notes means the Notes of Canadian Borrower
evidencing the Canadian Revolving Loans denominated in Canadian Dollars, in the
form of Exhibit H hereto.

        Canadian Lender means each lender party hereto with any Canadian
Commitment or any outstanding Canadian Obligations.

        Canadian Letters of Credit has the meaning assigned to such term in
Section 2.2 hereof.

        Canadian Obligations means, as at any date of determination thereof, the
sum of the following (determined without duplication): (i) the aggregate
principal amount of Canadian Revolving Loans outstanding hereunder on such date,
plus (ii) the aggregate amount of the Bankers' Acceptance Liabilities
outstanding on such date, plus (iii) the aggregate amount of Letter of Credit
Liabilities outstanding on such date relating to Canadian Letters of Credit. For
purposes of calculating the aggregate amount of Canadian Obligations, all
amounts or values expressed in Canadian Dollars shall be converted into Dollars
at the Exchange Rate in effect as of the date of determination.

        Canadian Prime Loans means Canadian Revolving Loans made pursuant to
Section 2.1(b) hereof which are denominated in Canadian Dollars.

        Canadian Prime Rate means, on any day, as to Canadian Prime Loans made
to Canadian Borrower, the greater of (a) the annual rate of interest announced
from time to time by HSBC Canada as its prime rate then in effect at its
Principal Office, being the reference rate used by HSBC Canada for determining
interest rates on commercial loans denominated in Canadian Dollars to borrowers
in Canada, and (b) an annual rate of interest equal to the sum of (i) the CDOR
Rate and (ii) 1.00% per annum. The Canadian Prime Rate is a reference rate and
does not necessarily represent the lowest or best rate or a favored rate, and
HSBC Canada, each Agent and each Lender disclaims any statement, representation
or warranty to the contrary. HSBC Canada, any Agent or any Lender may make
commercial loans or other loans at rates of interest at, above or below the
Canadian Prime Rate.

        Canadian Revolving Loan means any revolving credit loan made pursuant to
Section 2.1(b) hereof.

        Canadian Revolving Notes means the Notes of Canadian Borrower evidencing
the Canadian Revolving Loans denominated in Dollars, in the form of Exhibit C
hereto.

        Capital Expenditures means, with respect to any Person for any period,
expenditures in respect of fixed or capital assets by such Person, including
capital lease obligations incurred during such period (to the extent not already
included), which would be reflected as additions to Property, plant or equipment
on a balance sheet of such Person and its consolidated Subsidiaries,
<PAGE>
if any, prepared in accordance with GAAP; but excluding expenditures during such
period for the repair or replacement of any fixed or capital asset which was
destroyed, damaged or taken, in whole or in part, to the extent financed by the
proceeds of an insurance policy maintained by such Person or the proceeds of a
condemnation award.

        CDOR Rate means, on any day, an annual rate of interest equal to the
average 30 day rate applicable to Canadian bankers' acceptances appearing on the
"Reuters Screen CDOR Page" on such day, or if such day is not a Business Day,
then on the immediately preceding Business Day; provided, however, if such rate
does not appear on the Reuters Screen CDOR Page as contemplated, then the CDOR
Rate on any day shall be calculated as the arithmetic mean of the 30 day rates
applicable to Canadian bankers' acceptances quoted by the Canadian Lenders which
are listed in Schedule I to the Bank Act (Canada) as of 12:00 noon (Toronto,
Ontario time) on such day, or if such day is not a Business Day, then on the
immediately preceding Business Day.

        Ceiling Rate means, on any day, the maximum nonusurious rate of interest
permitted for that day by whichever of applicable United States federal or Texas
laws or, in the case of advances made in Canada by Canadian Lenders to Canadian
Borrower, whichever of applicable Canada federal or Ontario laws (or the laws of
any other jurisdiction whose usury laws are deemed to apply to the Notes or any
other Loan Documents despite the intention and desire of the express choice of
law provisions set forth herein) permits the higher interest rate, stated as a
rate per annum. On each day, if any, that the Texas Finance Code establishes the
Ceiling Rate, the Ceiling Rate shall be the "weekly ceiling" (as defined in
Section 303 of the Texas Finance Code) for that day. U.S. Agent may from time to
time, as to current and future balances, implement any other ceiling under the
Texas Finance Code by notice to Borrowers, if and to the extent permitted by the
Texas Finance Code. Without notice to Borrowers or any other Person, the Ceiling
Rate shall automatically fluctuate upward and downward as and in the amount by
which such maximum nonusurious rate of interest permitted by applicable law
fluctuates.

        Change of Control means a change resulting when any Unrelated Person or
any Unrelated Persons acting together which would constitute a Group together
with any Affiliates or Related Persons thereof (in each case also constituting
Unrelated Persons) shall at any time either (i) Beneficially Own more than 50%
of the aggregate voting power of all classes of Voting Stock of U.S. Borrower or
(ii) succeed in having sufficient of its or their nominees elected to the Board
of Directors of U.S. Borrower such that such nominees, when added to any
existing directors remaining on the Board of Directors of U.S. Borrower after
such election who is an Affiliate or Related Person of such Person or Group,
shall constitute a majority of the Board of Directors of U.S. Borrower. As used
herein (a) "Beneficially Own" means "beneficially own" as defined in Rule 13d-3
of the Securities Exchange Act of 1934, as amended, or any successor provision
thereto; provided, however, that, for purposes of this definition, a Person
shall not be deemed to Beneficially Own securities tendered pursuant to a tender
or exchange offer made by or on behalf of such Person or any of such Person's
Affiliates until such tendered securities are accepted for purchase or exchange;
(b) "Group" means a "group" for purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended; (c) "Unrelated Person" means at any time any
Person other than U.S. Borrower or any Subsidiary of U.S. Borrower and other
than any trust for any employee benefit plan of U.S. Borrower or any Subsidiary
of U.S. Borrower; (d) "Related Person" of any Person shall mean any other Person
owning (1) 5% or more of the outstanding common stock of such Person or (2) 5%
or more of the Voting Stock of such Person;
<PAGE>
and (e) "Voting Stock" of any Person shall mean capital stock of such
Personwhich ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person, whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.

        Code means the Internal Revenue Code of 1986, as amended, as now or
hereafter in effect, together with all regulations, rulings and interpretations
thereof or thereunder by the Internal Revenue Service.

        Collateral means all Property, tangible or intangible, real, personal or
mixed, now or hereafter subject to the Liens created pursuant to any of the
Security Documents.

        "Collateral Agency Agreement" means that certain Collateral Agency
Agreement dated concurrently herewith executed by and among U.S. Agent, U.K.
Agent, Canadian Agent and Wells Fargo Bank, National Association, as Collateral
Agent, as it may be amended, modified, restated, supplemented and in effect from
time to time.

        Commitment Fee Percentage means (i) on any day prior to July 1, 2004,
0.50% per annum and (ii) on and after July 1, 2004, the applicable per annum
percentage set forth at the appropriate intersection in the table shown below,
based on the Funded Debt to EBITDA Ratio as of the last day of the most recently
ended fiscal quarter of U.S. Borrower calculated by U.S. Agent as soon as
practicable after receipt by U.S. Agent of all financial reports required under
this Agreement with respect to such fiscal quarter (including a Compliance
Certificate) (provided, however, that if the Commitment Fee Percentage is
increased as a result of the reported Funded Debt to EBITDA Ratio, such increase
shall be retroactive to the date that U.S. Borrower was obligated to deliver
such financial reports to U.S. Agent pursuant to the terms of this Agreement and
provided further, however, that if the Commitment Fee Percentage is decreased as
a result of the reported Funded Debt to EBITDA Ratio, and such financial reports
are delivered to U.S. Agent not more than ten (10) calendar days after the date
required to be delivered pursuant to the terms of this Agreement, such decrease
shall be retroactive to the date that U.S. Borrower was obligated to deliver
such financial reports to U.S. Agent pursuant to the terms of this Agreement):

<TABLE>
<CAPTION>
                  Funded Debt to                               Commitment
                  EBITDA Ratio                                Fee Percentage
                  --------------                             ---------------
                  <S>                                         <C>
                  Greater than or equal to
                  2.50 to 1.00                                   0.50

                  Less than 2.50 to 1.00                        0.375
</TABLE>

        Commitment Percentage means, as to any Lender, the percentage equivalent
of a fraction the numerator of which is the amount of such Lender's U.S.
Commitment, Canadian Commitment or U.K. Commitment, as the case may be, and the
denominator of which is the aggregate amount of the U.S. Commitments, Canadian
Commitments or U.K. Commitments, as the case may be, of all Lenders.
<PAGE>
        Compliance Certificate shall have the meaning given to it in Section
7.2(c) hereof.

        Contribution Agreements means those certain Contribution Agreements
dated concurrently herewith executed by and among, respectively, (i) U.S.
Borrower and the guarantors in respect of the U.S. Obligations, (ii) Canadian
Borrower and the guarantors in respect of the Canadian Obligations and (iii)
U.K. Borrower and the guarantors in respect of the U.K. Obligations, as they may
from time to time be amended, modified, restated or supplemented.

        Controlled Group means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with any Borrower, are treated as a single employer under
Section 414 of the Code or under Applicable Canadian Pension Legislation.

        Corporation means any corporation, limited liability company,
partnership, joint venture, joint stock association, business trust and other
business entity.

        Cover for Letter of Credit Liabilities or any Bankers' Acceptance
Liabilities shall be effected by (i) delivering to U.S. Agent, Canadian Agent or
U.K. Agent, as the case may be, a letter of credit in form and substance, and
issued by a Person, acceptable to the applicable Agent in its sole discretion or
(ii) paying to U.S. Agent, Canadian Agent or U.K. Agent, as the case may be,
immediately available funds, to be held by U.S. Agent, Canadian Agent or U.K.
Agent, as the case may be, in a collateral account maintained by U.S. Agent,
Canadian Agent or U.K. Agent, as the case may be, at its Principal Office and
collaterally assigned to U.S. Agent, Canadian Agent or U.K. Agent, as the case
may be, as security for the applicable Obligations using documentation
reasonably satisfactory to U.S. Agent, Canadian Agent or U.K. Agent, as the case
may be, in the amount required by any applicable provision hereof. Such letters
of credit and amounts in such collateral account shall be retained by U.S.
Agent, Canadian Agent or U.K. Agent, as the case may be, until such time as the
applicable Letter of Credit shall have expired and the Reimbursement
Obligations, if any, with respect thereto shall have been fully satisfied or the
applicable Bankers' Acceptance shall have matured and the related Bankers'
Acceptance Liabilities shall have been fully satisfied; provided, however, that
at such time if a Default or Event of Default has occurred and is continuing,
U.S. Agent, Canadian Agent or U.K. Agent, as the case may be, shall not be
required to release such letters of credit or amounts in such collateral account
from the time of such collateral assignment until such Default or Event of
Default shall have been cured or waived.

        Currency Exchange Risk Indebtedness means all obligations and
indebtedness of any Obligor with respect to the program for the hedging of
currency exchange risk provided for in any program entered into by such Obligor
for the purpose of reducing such Obligor's exposure to currency exchange
fluctuations and not for speculative purposes, approved in writing by U.S. Agent
(such approval not to be unreasonably withheld), as it may from time to time be
amended, modified, restated or supplemented.

        DBNA means the Depository Bills and Notes Act (Canada).
<PAGE>
        Debt Service means, with respect to any Person for any period, the sum
of (i) Interest Expense for such period and (ii) scheduled principal payments on
obligations included within Borrowed Money Indebtedness for such period.

        Default means an Event of Default or an event, act or condition which
with notice or lapse of time or both would, unless cured or waived, become an
Event of Default.

        Dollars, US$ and $ means lawful money of the United States of America.

        Dual Lender means any Lender which has (either directly or through an
Affiliate) both a U.S. Commitment and either a Canadian Commitment or a U.K.
Commitment.

        EBITDA means, without duplication, for any period the consolidated net
income (excluding any extraordinary gains or losses) of U.S. Borrower and its
Subsidiaries, on a consolidated basis, plus, to the extent deducted in
calculating consolidated net income, depreciation, amortization, Non-Cash Items,
net interest expense (in accordance with GAAP) and federal, state, provincial
and foreign income tax expense plus severance, relocation and other costs
associated with the restructuring of U.S. Borrower in the fiscal year 2003 in an
aggregate amount not to exceed $1,800,000 and minus, to the extent added in
calculating consolidated net income, any Non-Cash Items. Prior to January 1,
2005, EBITDA attributable to the SACROC Facility Expansion shall be annualized.

        Eligible Accounts shall mean, as at any date of determination thereof,
each Account of a Person which is subject to a Lien created by any Security
Document and on which U.S. Agent (as to U.S. Borrower or any of its Subsidiaries
(other than Foreign Subsidiaries)) or Canadian Agent (as to any Subsidiary of
Canadian Borrower) or U.K. Agent (as to any Subsidiary of U.K. Borrower) shall
have a first-priority perfected Lien (subject only to Permitted Liens) which is
at said date payable to such Person and which complies with the following
requirements: (a) (i) the subject goods have been sold (and shipped, unless the
applicable account debtor shall have executed and delivered to the applicable
Borrower a written acceptance of the goods with a request that Borrower delay
shipping of such goods) to an account debtor on an absolute sale basis on open
account and not on consignment, on approval or on a "sale or return" basis or
subject to any other repurchase or return agreement and no material part of the
subject goods has been returned, rejected, lost or damaged (provided that the
foregoing shall not disqualify accounts arising from goods sold with usual and
customary sales warranties or having warranty claims which are not material),
(ii) the Account is stated to be payable in, or pegged to, Dollars (as to any
Eligible Accounts owned by U.S. Borrower or any of its Subsidiaries) or Canadian
Dollars (as to Canadian Borrower or any Subsidiary of Canadian Borrower) or
Euros or Pounds or other currencies approved (such approval not to be
unreasonably withheld) by U.K. Agent (as to U.K. Borrower or any Subsidiary of
U.K. Borrower) and is not evidenced by chattel paper or an instrument of any
kind (unless the applicable Agent has a perfected first priority Lien (subject
only to Permitted Liens) on such chattel paper or instrument) and said account
debtor is not insolvent or the subject of any bankruptcy or insolvency
proceedings of any kind unless the applicable Person has received a letter of
credit, bond or other financial guarantee in an amount equal to or greater than
such Account issued by a Qualified Institution and otherwise in form and
substance satisfactory to U.S. Agent; (b) the account debtor must be located in
the United States (as to any Eligible Accounts owned by U.S. Borrower or any of
its Subsidiaries (other than
<PAGE>
Foreign Subsidiaries)) or in the United States or Canada (as to Canadian
Borrower or any Subsidiary of Canadian Borrower) or in the United States or the
United Kingdom or any other jurisdiction approved in writing by U.S. Agent (such
approval not to be unreasonably withheld) (as to U.K. Borrower or any Subsidiary
of U.K. Borrower), except for (x) Accounts as to which the applicable Person has
received a letter of credit, bond or other financial guarantee in an amount
equal to or greater than such Account issued by a Qualified Institution and
otherwise in form and substance satisfactory to U.S. Agent and (y) other
Accounts approved in writing by U.S. Agent; (c) it is a valid obligation of the
account debtor thereunder and is not subject to any offset or other defense on
the part of such account debtor or to any claim on the part of such account
debtor denying liability thereunder (provided that the foregoing shall not
disqualify accounts arising from goods sold with usual and customary sales
warranties or having warranty claims which are not material); (d) it is subject
to no Lien whatsoever, except for the Liens created or permitted pursuant to the
Loan Documents; (e) it is evidenced by an invoice and shipping receipts
submitted to the account debtor in timely fashion and in the normal course of
business; (f) it has not remained unpaid beyond 90 days after the date of the
invoice; (g) it does not arise out of transactions with an employee, officer or
director of the applicable Person or any Affiliate of such Person or with an
agent of the applicable Person (unless the transaction with such Person is
conducted on an arms-length basis); (h) not more than 20% (or such higher
percentage as U.S. Agent may approve in writing for any particular account
debtor) of the other Accounts of the applicable account debtor or any of its
Affiliates fail to satisfy all of the requirements of an "Eligible Account"
(provided that, with respect to Accounts owing by Investment Grade Account
Debtors under any single project with then current Accounts in excess of
$1,000,000 which fail to satisfy all of the requirements of an "Eligible
Account", this clause shall only operate to exclude other Accounts attributable
to such project and shall not operate to exclude other Accounts of such
Investment Grade Account Debtor which are attributable to other projects); (i)
as to any Eligible Accounts owned by U.S. Borrower or any of its Subsidiaries
(other than U.K. Borrower or any of its Subsidiaries), inclusion of the
applicable Account does not cause the total Eligible Accounts with respect to
the applicable account debtor and its Affiliates, in the aggregate, to exceed
10% of the total Eligible Accounts of the applicable Borrower (or such higher
percentage as U.S. Agent may approve in writing for any particular account
debtor), (j) each of the representations and warranties set forth in the
Security Documents executed by the applicable Person with respect thereto is
true and correct in all material respects on such date and (k) acting reasonably
and in good faith and after consultation with the applicable Borrower, U.S.
Agent has not deemed such Account ineligible because of uncertainty about the
creditworthiness of the account debtor or because U.S. Agent otherwise
reasonably considers the collateral value thereof to be impaired or its ability
to realize such value to be insecure. Amounts payable to any account debtor
shall be netted out of Eligible Accounts owing by such account debtor. In the
event of any dispute under the foregoing criteria, about whether an Account is
or has ceased to be an Eligible Account, the reasonable decision of U.S. Agent,
made in good faith, shall be conclusive and binding, absent manifest error.

        Eligible Inventory shall mean, as at any date of determination thereof,
Inventory of a Person which is subject to a Lien created by any Security
Documents and on which U.S. Agent (as to U.S. Borrower or any of its
Subsidiaries (other than Foreign Subsidiaries)) or Canadian Agent (as to
Canadian Borrower or any Subsidiary of Canadian Borrower) or U.K. Agent (as to
U.K. Borrower or any Subsidiary of U.K. Borrower) shall have a first-priority
perfected Lien (subject only to Permitted Liens) and which complies with the
following requirements: (a) such
<PAGE>
Inventory shall be valued in accordance with GAAP and consist of (i) eligible
raw materials, (ii) finished goods and (iii) parts and components, provided that
all such Inventory shall be within the United States of America (as to U.S.
Borrower or any of its Subsidiaries (other than Foreign Subsidiaries)) or in the
United States of America or Canada (as to Canadian Borrower or any Subsidiary of
Canadian Borrower) or in the United States of America or the United Kingdom or
such other jurisdictions as U.K. Agent may from time to time approve (as to U.K.
Borrower or any Subsidiary of U.K. Borrower); (b) it is in good condition, meets
all standards imposed by any Governmental Authority having regulatory authority
over it, its use and/or sale and is either currently usable or currently salable
in the normal course of business of the applicable Person; (c) it is not in the
possession or control of any warehouseman, bailee, or any agent or processor for
or customer of the applicable Person or, if it is, (i) the applicable Person
shall have notified, in a manner that effectively under applicable law creates
a valid and first priority Lien in favor of the applicable Agent in such
Inventory, such warehouseman, bailee, agent, processor or customer of the
applicable Agent's Lien and (ii) such warehouseman, bailee, agent, processor or
customer has subordinated any Lien it may claim therein and agreed to hold all
such Inventory during the continuance of an Event of Default for the applicable
Agent's account subject to the applicable Agent's instructions, (d) any such
category of Inventory consisting of finished goods shall not have remained
unsold for more than one (1) year (or such longer period as U.S. Agent may
approve in writing for any particular goods), (e) each of the representations
and warranties set forth in the Security Documents executed by the applicable
Person with respect thereto is true and correct in all material respects on such
date and (f) acting reasonably and in good faith and after consultation with the
applicable Borrower, U.S. Agent has not deemed such Inventory ineligible because
U.S. Agent reasonably considers the collateral value thereof to be impaired or
its ability to realize such value to be insecure. In the event of any dispute
under the foregoing criteria, about whether a portion of Inventory is or has
ceased to be Eligible Inventory, the reasonable decision of U.S. Agent, made in
good faith, shall be conclusive and binding, absent manifest error.

        Environmental Claim means any third party (including Governmental
Authorities and employees) action, lawsuit, claim or proceeding (including
claims or proceedings at common law or under the Occupational Safety and Health
Act or similar laws relating to safety of employees) which seeks to impose
liability for (i) noise; (ii) pollution, contamination, protection or clean-up
of the air, surface water, ground water or land; (iii) solid, gaseous or liquid
waste generation, handling, treatment, storage, disposal or transportation; (iv)
exposure to Hazardous Substances; (v) the safety or health of employees or (vi)
the manufacture, processing, distribution in commerce, use, discharge or storage
of Hazardous Substances. An "Environmental Claim" includes, but is not limited
to, a common law action, as well as a proceeding to issue, modify or terminate
an Environmental Permit to the extent that such a proceeding attempts to redress
violations of an applicable permit, license, or regulation as alleged by any
Governmental Authority.

        Environmental Liabilities means all liabilities arising from any
Environmental Claim, Environmental Permit or Requirements of Environmental Law
under any theory of recovery, at law or in equity, and whether based on
negligence, strict liability or otherwise, including but not limited to
remedial, removal, response, abatement, investigative, monitoring, personal
injury and damage to Property or injuries to persons, and any other related
costs, expenses, losses, damages, penalties, fines, liabilities and obligations,
and all costs and expenses necessary to cause the
<PAGE>
issuance, reissuance or renewal of any Environmental Permit including reasonable
attorneys' fees and court costs.

        Environmental Permit means any permit, license, approval or other
authorization under any applicable Legal Requirement relating to pollution or
protection of health or the environment, including laws, regulations or other
requirements relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants or hazardous substances or toxic materials or wastes
into ambient air, surface water, ground water or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or Hazardous Substances.

        Equity Interests means shares of the capital stock, partnership
interests, membership interest in a limited liability company, beneficial
interests in a trust or other equity interests in any Borrower or any of their
Subsidiaries or other applicable Person or any warrants, options or other rights
to acquire such interests.

        ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules, regulations, rulings and
interpretations adopted by the Internal Revenue Service or the U.S. Department
of Labor thereunder and, as the context may require, Applicable Canadian Pension
Legislation.

        Eurodollar Rate means for any day during an Interest Period for a LIBOR
Borrowing a rate per annum equal to the lesser of (a) the sum of (1) the
Adjusted LIBOR in effect on the first day of such Interest Period plus (2) the
applicable Margin Percentage from time to time in effect and (b) the Ceiling
Rate. Each Eurodollar Rate is subject to adjustments for reserves, insurance
assessments and other matters as provided for in Sections 3.3 and 11.17 hereof.

        Eurodollar Reserve Requirement means, on any day, that percentage
(expressed as a decimal fraction and rounded, if necessary, to the next highest
one ten thousandth [.0001]) which is in effect on such day for determining all
reserve requirements (including, without limitation, basic, supplemental,
marginal and emergency reserves) applicable to "Eurocurrency liabilities," as
currently defined in Regulation D. Each determination of the Eurodollar Reserve
Requirement by U.S. Agent shall be conclusive and binding, absent manifest
error, and may be computed using any commercially reasonable averaging and
attribution method.

        Euros means the lawful currency for the time being of the European
Community.

        Event of Default shall have the meaning assigned to it in Section 9.1
hereof.

        Excess Cash Flow means, for any period, (i) net cash flow from
operations (other than working capital adjustments) for such period, determined
in accordance with GAAP less (ii) Capital Expenditures of U.S. Borrower and its
Subsidiaries for such period and mandatory prepayments of the Term Loans
calculated on the basis of Excess Cash Flow for such period.

        Exchange Rate means, on any day, with respect to any foreign currency in
relation to Dollars or Dollars in relation to any foreign currency, the noon
buying rate in New York City for cable transfers payable in the applicable
foreign currencies as certified to the Federal Reserve
<PAGE>
Board by the Federal Reserve Bank of New York for customs purposes on such day,
as published on such day pursuant to Federal Reserve Board Statistical Release
H.10; provided, however, that in the event that any applicable exchange rate
cannot be determined on any day by the foregoing procedure, then such exchange
rate shall be determined for such day in accordance with such commercially
reasonable procedures as the applicable Agent may elect.

        Excluded Real Property means the real Property described on Schedule
1.1B hereto.

        Excluded Subsidiaries means (i) NATCO (UK) Limited, a company
incorporated in England and Wales under the Companies Act of the United Kingdom,
(ii) NATCO Oilfield Construction, Inc., a California corporation, (iii) Oilfield
Construction Company, Inc., a California corporation, (iv) Dormant Axsia
Limited, a company incorporated in England and Wales under the Companies Act of
the United Kingdom, (v) Serck Baker Limited, a company incorporated in England
and Wales under the Companies Act of the United Kingdom, (vi) Howmar Limited, a
company incorporated in England and Wales under the Companies Act of the United
Kingdom, (vii) TEST, Inc., a Louisiana corporation, (viii) TEST Automation &
Controls, Inc., a Louisiana corporation, (ix) NATCO Acquisition Company, a
Delaware corporation, (x) The Cynara Company, a Delaware corporation, (xii)
NATCO London, Inc., a Delaware corporation and (xii) each Subsidiary of U.K.
Borrower which is not organized under the laws of the United Kingdom or any
political subdivision thereof.

        Export/Import Credit Facilities means (i) that certain International
Revolving Loan Agreement dated June 30, 1997 executed by and between National
Tank Company and JPMorgan Chase Bank and the other security documents
contemplated thereby (as the foregoing may be amended, refinanced or replaced
from time to time), and (ii) any similar credit facilities that may be entered
into by the U.S. Borrower or any of its Subsidiaries supported by the
Export-Import Bank of the United States or the Export Development Canada.

        Federal Funds Rate means, for any day, a fluctuating interest rate per
annum equal for such day 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 such day which is a
Business Day, the average of the quotations for such day on such transactions
received by U.S. Agent from three Federal funds brokers of recognized standing
selected by U.S. Agent in its sole and absolute discretion.

        Financing Statements means all such Uniform Commercial Code or Canadian
provincial personal Property security financing statements or, in the case of a
Lien created in England and Wales, completed forms 395 in accordance with
Section 395 of the Companies Act 1985, as U.S. Agent shall reasonably require,
in Proper Form, duly executed by the applicable Borrower (or any other
applicable Obligor) to give notice of and to perfect or continue perfection of
the applicable Agent's Liens in any applicable Collateral, as any of the
foregoing may from time to time be amended, modified, supplemented or restated.

        Fixed Charge Coverage Ratio means, as of any day, the ratio of (a)
EBITDA for the 12 months ending on such day less the current portion of federal,
state and provincial cash income
<PAGE>
tax expense recognized during such 12-month period to (b) the sum of (1) the
principal component of Debt Service for such 12-month period plus (2) cash
Interest Expense for such 12-month period paid by U.S. Borrower and its
Subsidiaries for such 12-month period plus (3) Permitted Dividends by U.S.
Borrower or by any Subsidiary of U.S. Borrower to any Person other than U.S.
Borrower (or a wholly-owned Subsidiary of U.S. Borrower) for such 12-month
period plus (4) actual Maintenance Capital Expenditures paid by U.S. Borrower
and its Subsidiaries for such 12-month period.

        Foreign Subsidiaries means Subsidiaries which are organized under the
laws of a jurisdiction other than the United States of America, any State of the
United States or any political subdivision thereof.

        Funded Debt means, with respect to any Person, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments evidencing
borrowed money, (iii) all obligations of such Person under conditional sale or
other title retention agreements relating to Property purchased by such Person,
(iv) all obligations of such Person issued or assumed as the deferred purchase
price of Property or services (excluding obligations of such Person to creditors
for raw materials, inventory, services and supplies and deferred payments for
services to employees and former employees incurred in the ordinary course of
such Person's business), (v) all lease obligations of such Person which have
been capitalized on the balance sheet of such Person in accordance with GAAP,
(vi) all obligations of others secured by any Lien on Property owned or acquired
by such Person, whether or not the obligations secured thereby have been
assumed, equal to the lesser of the amount of such obligation or the fair market
value of such Property, (vii) all obligations of such Person in respect of
outstanding letters of credit issued for the account of such Person (or for
which such Person is primarily liable) which support Borrowed Money Indebtedness
or in respect of outstanding bankers' acceptances drawn by such Person and
(viii) all guarantees of such Person in respect of Borrowed Money Indebtedness.

        Funded Debt to EBITDA Ratio means, as of any day, the ratio of (a)
Funded Debt of U.S. Borrower and its Subsidiaries, on a consolidated basis, as
of such day to (b) EBITDA for the 4 quarter period ending on the last day of the
most recent fiscal quarter for which financial statements are available.

        Funding Loss means, with respect to (a) any Borrower's payment of
principal of a LIBOR Borrowing on a day other than the last day of the
applicable Interest Period; (b) any Borrower's failure to borrow a LIBOR
Borrowing or to borrow funds by way of Bankers' Acceptances on the date
specified by such Borrower; (c) any Borrower's failure to make any prepayment of
the Loans (other than Base Rate Borrowings and Canadian Prime Loans) on the date
specified by such Borrower, or (d) any cessation of a Eurodollar Rate to apply
to the Loans or any part thereof pursuant to Section 3.3, in each case whether
voluntary or involuntary, any loss, expense, penalty, premium or liability
actually incurred by any Lender (including but not limited to any loss or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by any Lender to fund or maintain a Loan).

        GAAP means, as to a particular Person, such United States accounting
practice as, in the opinion of independent certified public accountants of
recognized national standing regularly
<PAGE>
retained by such Person, conforms at the time to generally accepted accounting
principles, consistently applied for all periods after the Effective Date so as
to present fairly the financial condition, and results of operations and cash
flows, of such Person. If any change in any accounting principle or practice is
required by the Financial Accounting Standards Board, all reports and financial
statements required hereunder may be prepared in accordance with such change so
long as the applicable Person provides to U.S. Agent such disclosures of the
impact of such change as U.S. Agent may reasonably require. No such change in
any accounting principle or practice shall, in itself, cause a Default or Event
of Default hereunder (but Borrowers, U.S. Agent and Lenders shall negotiate in
good faith to replace any financial covenants hereunder to the extent such
financial covenants are affected by such change in accounting principle or
practice).

        Governmental Authority means any governmental authority of the United
States of America, Canada, the United Kingdom, any State of the United States,
any Province of Canada, or of any other foreign jurisdiction and any political
subdivision of any of the foregoing, and any central bank, agency, department,
commission, board, bureau, court or other tribunal having or asserting
jurisdiction over any Agent, any Lender, any Obligor or their respective
Property.

        Guaranties means, collectively, (i) the Guaranties described on Schedule
1.1A hereto and (ii) any and all other guaranties hereafter executed in favor of
any Agent, for the benefit of U.S. Lenders, Canadian Lenders or U.K. Lenders,
relating to the Obligations, as any of them may from time to time be amended,
modified, restated or supplemented.

        Hazardous Substance means petroleum products, and any hazardous or toxic
waste or substance defined or regulated as such from time to time by any law,
rule, regulation or order described in the definition of "Requirements of
Environmental Law".

         Home Jurisdiction Withholding Taxes means withholding taxes imposed by
the United Kingdom.

        Interest Expense means, for any period, total interest expense accruing
on Borrowed Money Indebtedness of U.S. Borrower and its Subsidiaries during such
period (including interest expense attributable to capitalized leases and net
costs under interest rate swap, collar, cap or similar agreements providing
interest rate protection), determined in accordance with GAAP.

        Interest Options means the Base Rate, each Eurodollar Rate and, as to
the Canadian Dollar Revolving Notes only, the Canadian Prime Rate, and "Interest
Option" means any of them.

        Interest Payment Dates means (a) for Base Rate Borrowings and for
Canadian Prime Loans, March 31, 2004 and the last day of each March, June,
September and December thereafter prior to the Revolving Loan Maturity Date or
the Term Loan Maturity Date, as the case may be, and the Revolving Loan Maturity
Date or the Term Loan Maturity Date, as the case may be; and (b) for LIBOR
Borrowings, the end of the applicable Interest Period (and if such Interest
Period exceeds three months' duration, quarterly, commencing on the first
quarterly anniversary of the first day of such Interest Period) and the
Revolving Loan Maturity Date or the Term Loan Maturity Date, as the case may be.
<PAGE>
        Interest Period means, for each LIBOR Borrowing, a period commencing on
the date such LIBOR Borrowing began and ending on the numerically corresponding
day which is, subject to availability as set forth in Section 3.3(c)(iii), 1, 2,
3 or 6 months thereafter, as any Borrower shall elect in accordance herewith;
provided, (1) unless U.S. Agent shall otherwise consent, no Interest Period with
respect to a LIBOR Borrowing shall commence on a date earlier than three (3)
Business Days after this Agreement shall have been fully executed; (2) any
Interest Period with respect to a LIBOR Borrowing which would otherwise end on a
day which is not a Business Day shall be extended to the next succeeding
Business Day, unless such Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Business Day; (3) any
Interest Period with respect to a LIBOR Borrowing which begins on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of the appropriate calendar month; (4) no
Interest Period for a Revolving Loan shall ever extend beyond the Revolving Loan
Maturity Date and no Interest Period for a Term Loan shall ever extend beyond
the Term Loan Maturity Date, and (5) Interest Periods shall be selected by each
Borrower in such a manner that the Interest Period with respect to any portion
of the Loans which shall become due shall not extend beyond such due date.

        Interest Rate Risk Agreement means an interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or similar
arrangement entered into by U.S. Borrower for the purpose of reducing U.S.
Borrower's and its Subsidiaries' exposure to interest rate fluctuations and not
for speculative purposes, as it may from time to time be amended, modified,
restated or supplemented. To the extent Interest Rate Risk Agreements cover
Borrowed Money Indebtedness exceeding $5,000,000, in the aggregate, the prior
written approval of U.S. Agent shall be required (such approval not to be
unreasonably withheld).

        Interest Rate Risk Indebtedness means all obligations and indebtedness
of any Obligor with respect to the program for the hedging of interest rate risk
provided for in any Interest Rate Risk Agreement.

        Investment means the purchase or other acquisition of any securities or
indebtedness of, or the making of any loan, advance, transfer of Property (other
than transfers in the ordinary course of business) or capital contribution to,
or the incurring of any liability (other than trade accounts payable arising in
the ordinary course of business), contingently or otherwise, in respect of the
indebtedness of, any Person.

        Investment Grade Account Debtors means account debtors which are rated
A- or better by Standard & Poor's Ratings Services and A-3 or better by Moody's
Investors Service, Inc.

        Issuer means the issuer (or, where applicable, each issuer) of a Letter
of Credit under this Agreement.

        Legal Requirement means any law, statute, ordinance, decree,
requirement, order, judgment, rule, or regulation (or interpretation of any of
the foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority, whether presently existing or arising in the future.
<PAGE>
        Lender Affiliate means, (a) with respect to any Lender, (i) an Affiliate
of such Lender or (ii) any entity (whether a corporation, partnership, trust or
otherwise) that is engaged in making, purchasing, holding or otherwise investing
in bank loans and similar extensions of credit in the ordinary course of its
business and is administered or managed by a Lender or an Affiliate of such
Lender and (b) with respect to any Lender that is a fund which invests in bank
loans and similar extensions of credit, any other fund that invests in bank
loans and similar extensions of credit and is managed by the same investment
advisor as such Lender or by an Affiliate of such investment advisor.

        Letter of Credit Liabilities means, at any time and in respect of any
Letter of Credit, the sum of (i) the amount available for drawings under such
Letter of Credit plus (ii) the aggregate unpaid amount of all Reimbursement
Obligations at the time due and payable in respect of previous drawings made
under such Letter of Credit. For the purpose of determining at any time the
amount described in clause (i), in the case of any Letter of Credit payable in a
currency other than Dollars or Canadian Dollars, such amount shall be converted
by Agent to Dollars by any reasonable method, and such converted amount shall be
conclusive and binding, absent manifest error. For purposes of calculating the
aggregate amount of Letter of Credit Liabilities, all amounts or values
expressed in Canadian Dollars shall be converted into Dollars at the Exchange
Rate in effect as of the date of calculation.

        Letters of Credit means the U.S. Letters of Credit, the Canadian Letters
of Credit and the U.K. Letters of Credit.

        LIBOR means, for each Interest Period for any LIBOR Borrowing, the rate
per annum (rounded upwards, if necessary, to the nearest 1/16th of 1%) equal to
the average of the offered quotations appearing on Telerate Page 3750 (or if
such Telerate Page shall not be available, any successor or similar service as
may be selected by U.S. Agent and Borrowers) as of 11:00 a.m., Houston, Texas
time (in respect of a LIBOR Borrowing relating to the U.S. Loans) or 12:00 noon,
Toronto, Ontario time (in respect of a LIBOR Borrowing relating to the Canadian
Revolving Loans) or 12:00 noon, London, United Kingdom time (in respect of a
LIBOR Borrowing relating to the U.K. Revolving Loans) (or, in any case, as soon
thereafter as practicable) on the day two Business Days prior to the first day
of such Interest Period for deposits in Dollars having a term comparable to such
Interest Period and in an amount comparable to the principal amount of the LIBOR
Borrowing to which such Interest Period relates. If none of such Telerate Page
3750 nor any successor or similar service is available, then "LIBOR" shall mean,
with respect to any Interest Period for any applicable LIBOR Borrowing, the rate
of interest per annum, rounded upwards, if necessary, to the nearest 1/16th of
1%, quoted by U.S. Agent at or before 11:00 a.m., Houston, Texas time (in
respect of a LIBOR Borrowing relating to the U.S. Loans) or by Canadian Agent at
or before 12:00 noon, Toronto, Ontario time (in respect of a LIBOR Borrowing
relating to the Canadian Revolving Loans) or by U.K. Agent at or before 12:00
noon, London, United Kingdom time (in respect of a LIBOR Borrowing relating to
the U.K. Revolving Loans) (or, in any case, as soon thereafter as practicable),
on the date two Business Days before the first day of such Interest Period, to
be the arithmetic average of the prevailing rates per annum at the time of
determination and in accordance with the then existing practice in the
applicable market, for the offering to U.S. Agent, Canadian Agent or U.K. Agent,
as the case may be, by one or more prime banks selected by such Agent in its
sole
<PAGE>
discretion, in the London interbank market, of deposits in Dollars for
delivery on the first day of such Interest Period and having a maturity equal
(or as nearly equal as may be) to the length of such Interest Period and in an
amount equal (or as nearly equal as may be) to the LIBOR Borrowing to which such
Interest Period relates. Each determination by U.S. Agent of LIBOR shall be
conclusive and binding, absent manifest error, and may be computed using any
reasonable averaging and attribution method.

        LIBOR Borrowing means each portion of the principal balance of the Loans
at any time bearing interest at a Eurodollar Rate.

        Lien means any mortgage, pledge, charge, encumbrance, security interest,
collateral assignment or other lien (statutory or otherwise) or restriction of
any kind, whether based on common law, constitutional provision, statute or
contract, and shall include reservations, exceptions, encroachments, easements,
rights of way, covenants, conditions, restrictions and other title exceptions.

        Loan Documents means, collectively, this Agreement, the Notes, the
Bankers' Acceptances, the Bankers' Acceptance Notices, the Collateral Agency
Agreement, Guaranties, the Contribution Agreements, all Applications, the
Security Documents, the Notice of Entire Agreement, all instruments,
certificates and agreements now or hereafter executed or delivered by any
Obligor to any Agent or any Lender pursuant to any of the foregoing or in
connection with the Obligations or any commitment regarding the Obligations, and
all amendments, modifications, renewals, extensions, increases and
rearrangements of, and substitutions for, any of the foregoing.

        Loans means the U.S. Revolving Loans, the Canadian Revolving Loans, the
U.K. Revolving Loans and the Term Loans provided for by Section 2.1 hereof.

        Maintenance Capital Expenditures means, without duplication for any
period, the aggregate of all expenditures for maintenance of any asset that
would be classified as a fixed or capital asset on a consolidated balance sheet
of the U.S. Borrower and its Subsidiaries prepared in accordance with GAAP.

        Majority Lenders means, at any time while no Obligations are
outstanding, any three or more Lenders having greater than 50% of the aggregate
amount of U.S. Commitments, the Canadian Commitments and the U.K. Commitments,
and at any time while Obligations are outstanding, any three or more Lenders
having greater than 50% of the sum of outstanding Term Loans plus U.S.
Commitments plus Canadian Commitments plus U.K. Commitments; provided that if
all U.S. Commitments, Canadian Commitments and U.K. Commitments have terminated,
the Majority Lenders shall be any three or more Lenders having greater than 50%
of the aggregate amount of all Obligations outstanding.

        Margin Percentage means (i) on any day prior to July 1, 2004, 1.75% per
annum with respect to Base Rate Borrowings and Canadian Prime Loans and 2.75%
per annum with respect to LIBOR Borrowings and (ii) on and after July 1, 2004,
the applicable per annum percentage set forth at the appropriate intersection in
the table shown below, based on the Funded Debt to EBITDA Ratio as of the last
day of the then most recently ended fiscal quarter of U.S. Borrower
<PAGE>
calculated by U.S. Agent as soon as practicable after receipt by U.S. Agent of
all financial reports required under this Agreement with respect to such fiscal
quarter (including a Compliance Certificate) (provided, however, that if the
Margin Percentage is increased as a result of the reported Funded Debt to EBITDA
Ratio, such increase shall be retroactive to the date that U.S. Borrower was
obligated to deliver such financial reports to U.S. Agent pursuant to the terms
of this Agreement and provided further, however, that if the Margin Percentage
is decreased as a result of the reported Funded Debt to EBITDA Ratio, and such
financial reports are delivered to U.S. Agent not more than ten (10) calendar
days after the date required to be delivered pursuant to the terms of this
Agreement, such decrease shall be retroactive to the date that U.S. Borrower was
obligated to deliver such financial reports to U.S. Agent pursuant to the terms
of this Agreement):

<TABLE>
<CAPTION>
                                                          Canadian Prime Loans &
         Funded Debt to               LIBOR Borrowings     Base Rate Borrowings
         EBITDA Ratio                 Margin Percentage     Margin Percentage
         --------------               -----------------   ----------------------
         <S>                          <C>                 <C>
         Greater than or equal to
         3.00 to 1.00                       2.75                   1.75

         Greater than or equal to
         2.50 to 1.00 but less than
         3.00 to 1.00                       2.50                   1.50

         Greater than or equal to
         2.00 to 1.00 but less than
         2.50 to 1.00                       2.25                   1.25

         Less than 2.00 to 1.00             2.00                   1.00

</TABLE>

        Material Adverse Effect means any material and adverse effect (i) on the
validity or enforceability of any of the Loan Documents or any of the rights or
remedies of the Agents or the Lenders thereunder or (ii) on the business,
condition (financial or otherwise), results of operations, assets, liabilities
or prospects of U.S. Borrower and its Subsidiaries on a consolidated basis.

        Maximum Canadian Available Amount means, at any date, an amount equal to
the lesser of (i) $5,000,000 or (ii) the then effective Canadian Borrowing Base.
In connection with the application of any provision hereof using the term
"Maximum Canadian Available Amount", any amounts denominated in Canadian Dollars
shall be converted to Dollars using the then current Exchange Rate. The Maximum
Canadian Available Amount is subject to change pursuant to Section 2.4(c)
hereof.

        Maximum U.K. Available Amount means, at any date, an amount equal to the
lesser of (i) $10,000,000 or (ii) the then effective U.K. Borrowing Base. In
connection with the application of any provision hereof using the term "Maximum
U.K. Available Amount", any amounts denominated in Pounds or Euros shall be
converted to Dollars using the then current
<PAGE>
Exchange Rate. The Maximum U.K. Available Amount is subject to change pursuant
to Section 2.4(c) hereof.

        Maximum U.S. Available Amount means, at any date, an amount equal to the
lesser of (i) $20,000,000 or (ii) the then effective U.S. Borrowing Base. The
Maximum U.S. Available Amount is subject to change pursuant to Sections 2.4(c)
and (d) hereof.

        Milestone Billings means accounts for progress payments which are under
contracts entered in the ordinary course of business and that otherwise satisfy
the criteria of Eligible Accounts. Such Milestone Billings shall be supported by
written contracts (including purchase orders) that fully describe that such
billings are authorized and eligible.

        Mortgage means a mortgage, deed of trust, assignment of leases and
rents, leasehold mortgage or other security document granting a Lien on any real
Property to secure all or any part of the Obligations. Each Mortgage shall be
satisfactory in form and substance to the U.S. Agent.

        Non-Cash Items means any accounting expense associated with (i) the
write down of Goodwill, as provided in FASB 19, 109, 142, 143 and 144, (ii) the
non-cash portion of employee compensation such as, but not limited to restricted
stock and/or options to the extent that such expenses are deducted in the
calculation of consolidated net earnings, (iii) non-cash foreign exchange
adjustments and (iv) any other non-cash expenses as reasonably determined by the
U.S. Agent, in its sole discretion.

        Notes shall have the meaning assigned to such term in Section 2.7
hereof.

        Notice of Entire Agreement means a notice of entire agreement, in Proper
Form, executed by Borrowers, each other Obligor and Agents, as the same may from
time to time be amended, modified, supplemented or restated.

        Obligations means, as at any date of determination thereof, the sum of
the following: (i) the aggregate principal amount of Loans outstanding hereunder
on such date, plus (ii) the aggregate amount of the outstanding Letter of Credit
Liabilities on such date, plus (iii) the aggregate amount of outstanding
Bankers' Acceptance Liabilities on such date, plus (iv) all other outstanding
liabilities, obligations and indebtedness of any Obligor under any Loan Document
on such date. For purposes of calculating the aggregate amount of Obligations,
all amounts or values expressed in Canadian Dollars, Pounds or Euros shall be
converted into Dollars at the applicable Exchange Rate in effect as of the date
of determination and all amounts or values expressed in other currencies shall
be converted into Dollars using such commercially reasonable means of
determining the applicable exchange rate as the applicable Agent may elect.

        Obligors means each Borrower and each Person now or hereafter a party to
a Guaranty and/or a Security Agreement.

        Organizational Documents means, with respect to a corporation organized
under the laws of any State of the United States or any Province of Canada, the
certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a partnership, the
<PAGE>
partnership agreement establishing such partnership; with respect to a trust,
the instrument establishing such trust and with respect to any other Person, the
agreements or instruments pursuant to which such Person was formed and by which
such Person is governed; in each case including any and all modifications
thereof as of the date of the Loan Document referring to such Organizational
Document and any and all future modifications thereof.

        Past Due Rate means, on any day, a rate per annum equal to the lesser of
(i) the Ceiling Rate for that day or (ii) the applicable Base Rate or Canadian
Prime Rate, as the case may be, plus the Margin Percentage for Base Rate
Borrowings then in effect plus three percent (3%).

        PBGC means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA and any pension commission
or similar body or fund constituted under any Applicable Canadian Pension
Legislation.

        Permitted Dividends means (i) dividends or distributions by a Subsidiary
of U.S. Borrower to U.S. Borrower or any other Subsidiary (other than a Foreign
Subsidiary or an Excluded Subsidiary) of U.S. Borrower and dividends or
distributions by any Foreign Subsidiary of U.S. Borrower to any other Foreign
Subsidiary of U.S. Borrower, (ii) stock dividends, (iii) so long as no Default
or Event of Default shall have occurred and be continuing (or would result
therefrom) and so long as the payment required under Section 3.2(b)(2) hereof
for such fiscal year (based on Excess Cash Flow for the preceding fiscal year)
shall have been paid, dividends paid by U.S. Borrower to its shareholders for
the fiscal year 2004 and in each fiscal year thereafter in an aggregate amount
not to exceed $1,500,000.

        Permitted Investments means: (a) readily marketable securities issued or
fully guaranteed by the full faith and credit of the United States of America or
of Canada or of the United Kingdom with maturities of not more than one year;
(b) commercial paper rated "Prime 1" by Moody's Investors Service, Inc. or "A-1"
by Standard and Poor's Ratings Services or the equivalent thereof by Dominion
Bond Rating Service Limited with maturities of not more than 180 days; (c)
certificates of deposit or repurchase obligations issued by any U.S., Canadian
or United Kingdom domestic bank having capital surplus of at least $100,000,000
or by any other financial institution acceptable to the Majority Lenders, all of
the foregoing not having a maturity of more than one year from the date of
issuance thereof; (d) existing loans to the Chief Executive Officer and
President of U.S. Borrower in the aggregate amount (inclusive of principal and
interest) not exceeding $4,000,000; (e) equipment lease financing provided to
customers which are not Affiliates of U.S. Borrower or any of its Subsidiaries
in the ordinary course of business in an aggregate amount not exceeding
$5,000,000 at any one time outstanding; (f) capital contributions by U.S.
Borrower or any of its Subsidiaries to NATCO (UK) Limited in an aggregate amount
not exceeding $750,000; (g) capital contributions by National Tank Company to
Canadian Borrower in an aggregate amount not exceeding $8,000,000 so long as the
proceeds of such capital contributions are used solely to pay indebtedness owing
by Canadian Borrower to National Tank Company; (h) loans and/or capital
contributions by U.S. Borrower or any of its Subsidiaries to any Affiliate or
agent of U.S. Borrower conducting business in Angola not to exceed $600,000 in
the aggregate at any one time outstanding; and (i) loans and/or capital
contributions by U.S. Borrower or any of its Subsidiaries to any Foreign
Subsidiary of U.S. Borrower not to exceed $1,000,000 in the aggregate at any one
time outstanding (provided, however, that the aggregate of Permitted Investments
in any fiscal year under this clause (i) plus
<PAGE>
the aggregate amount of Capital Expenditures made by the U.S. Borrower and its
Subsidiaries in such fiscal year shall not exceed $10,000,000).

        Permitted Liens means each of the following: (a) Liens for taxes, but
only to the extent that payment thereof shall not at the time be due or if due,
the payment thereof is being diligently contested in good faith and adequate
reserves computed in accordance with GAAP have been set aside therefor; (b)
Liens in effect on the Effective Date and disclosed to the Lenders in the
financial statements delivered on or prior to the Effective Date pursuant to
Section 6.2 hereof or in a schedule hereto; (c) normal reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions, restrictions and
encumbrances which do not secure Borrowed Money Indebtedness and which do not
have a material adverse effect on the value or utility of the applicable
Property; (d) Liens in favor of any Agent or any Lender under the Loan
Documents, including without limitation, Liens securing Interest Rate Risk
Indebtedness or Currency Exchange Risk Indebtedness owed to one or more of the
U.S. Lenders (but not to any Person which is not, at such time, a U.S. Lender);
(e) Liens incurred or deposits made in the ordinary course of business (1) in
connection with workmen's compensation, unemployment insurance, social security
and other like laws, or (2) to secure insurance in the ordinary course of
business, the performance of bids, tenders, contracts, leases, licenses,
statutory obligations, surety, appeal and performance bonds and other similar
obligations incurred in the ordinary course of business, not, in any of the
cases specified in this clause (2), incurred in connection with the borrowing of
money, the obtaining of advances or the payment of the deferred purchase price
of Property; (f) attachments, judgments and other similar Liens arising in
connection with court proceedings, provided that the execution and enforcement
of such Liens are effectively stayed and the claims secured thereby are being
actively contested in good faith with adequate reserves made therefor in
accordance with GAAP; (g) Liens imposed by law, such as landlords', carriers',
warehousemen's, artisans', mechanics', materialmen's and vendors' liens,
incurred in good faith in the ordinary course of business and securing
obligations which are not yet due or which are being contested in good faith by
appropriate proceedings if adequate reserves with respect thereto are maintained
in accordance with GAAP; (h) zoning restrictions, easements, licenses,
reservations, provisions, covenants, conditions, waivers, and restrictions on
the use of Property, and which do not in any case singly or in the aggregate
materially impair the present value or utility of the applicable Property; (i)
Liens securing purchase money indebtedness permitted under Section 8.1 hereof
and covering the Property so purchased; (j) capital leases and sale/leaseback
transactions permitted under the other provisions of this Agreement; (k) Liens
securing the Export/Import Credit Facilities covering the "International
Collateral", as such term is defined in the Security Agreements; (l) Liens
securing the Export/Import Credit Facilities, subordinated to the Liens securing
the Obligations in a manner acceptable to U.S. Agent, covering Accounts of the
U.S. Borrower and its Subsidiaries; and (m) extensions, renewals and
replacements of Liens referred to in clauses (a) through (l) of this definition;
provided that any such extension, renewal or replacement Lien shall be limited
to the Property or assets covered by the Lien extended, renewed or replaced and
that the Borrowed Money Indebtedness secured by any such extension, renewal or
replacement Lien shall be in an amount not greater than the amount of the
indebtedness secured by the Lien extended, renewed or replaced.

        Permitted Senior Indebtedness means Borrowed Money Indebtedness in an
aggregate amount not exceeding $10,000,000 with respect to which Borrower shall
have demonstrated to the satisfaction of the U.S. Agent on a pro forma basis
that no Default or Event of Default could
<PAGE>
be reasonably expected to arise as a result of the incurrence of such Borrowed
Money Indebtedness and which (i) is unsecured, (ii) contains financial covenants
which are no more onerous than the covenants set forth herein, and (iii) does
not require for any amortization prior to the last to occur of the Term Loan
Maturity Date or the Revolving Loan Maturity Date.

        Permitted Subordinated Indebtedness means Borrowed Money Indebtedness
with respect to which Borrower shall have demonstrated to the satisfaction of
the U.S. Agent on a pro forma basis that no Default or Event of Default could be
reasonably expected to arise as a result of the incurrence of such Borrowed
Money Indebtedness and which (i) is unsecured, (ii) is subordinated to the
Obligations in a manner and pursuant to documentation acceptable to the Majority
Lenders, (iii) contains financial covenants which are no more onerous than the
covenants set forth herein, (iv) does not require for any amortization prior to
the last to occur of the Term Loan Maturity Date or the Revolving Loan Maturity
Date and (v) contains other terms and conditions standard in subordinated debt
issuances.

        Person means any individual, Corporation, trust, unincorporated
organization, Governmental Authority or any other form of entity.

        Plan means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code or any Applicable Canadian Pension Legislation and is either (a) maintained
by, or contributed to by, any Borrower or any member of the Controlled Group for
employees of any Borrower or any member of the Controlled Group or (b)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
any Borrower or any member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan years
made contributions.

        Pounds means the lawful currency for the time being of the United
Kingdom.

        Prime Rate means, on any day, (a) as to Loans made to U.S. Borrower, the
rate of interest publicly announced by Wells Fargo as its prime rate in effect
at its principal office in San Francisco, California, (b) as to Loans
denominated in Dollars made to Canadian Borrower, the base rate for that day for
Loans denominated in Dollars made in Canada quoted by HSBC Canada and (c) as to
Loans made to U.K. Borrower, the rate for that day for Loans denominated in
Dollars quoted by HSBC U.K. to prime banks in the London interbank market for
the relevant amount and the relevant period or such other rate as notified by
HSBC U.K. to U.K. Borrower. The Prime Rate is, in each case, a reference rate
and does not necessarily represent the lowest or best rate or a favored rate,
and Wells Fargo, HSBC Canada, HSBC U.K., each Agent and each Lender disclaims
any statement, representation or warranty to the contrary. Wells Fargo, HSBC
Canada, HSBC U.K., any Agent or any Lender may make commercial loans or other
loans at rates of interest at, above or below the Prime Rate.

        Principal Office means (a) as to Obligations of U.S. Borrower, the
principal office of U.S. Agent, presently located at 1000 Louisiana, 3rd Floor,
Houston, Texas 77002, (b) as to Obligations of Canadian Borrower, the principal
office of Canadian Agent, presently located at 333 - 5th Avenue S.W., Calgary,
Alberta, T2P 3B6 Canada and (c) as to Obligations of U.K.
<PAGE>
Borrower, the principal office of U.K. Agent, presently located at The Cross,
Gloucester, Gloucestershire GL1 2AP United Kingdom.

        Proper Form means in form and substance reasonably satisfactory to U.S.
Agent.

        Property means any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible.

        Qualified Institution means (a) any bank or trust company which is
organized under the laws of any country which is a member of the Organization
for Economic Cooperation and Development or any political subdivision of any
such country, and having capital, surplus and undivided profits aggregating at
least $100,000,000.00 (or its equivalent in another currency) as of the date of
such Person's most recent financial reports, and (b) any other Person approved
in writing by U.S. Agent.

        Quarterly Dates means the last day of each March, June, September and
December, provided that if any such date is not a Business Day, then the
relevant Quarterly Date shall be the next succeeding Business Day.

        Quarterly Financial Statements means the quarterly financial statements
of a Person, which statements shall include a balance sheet as of the end of the
applicable fiscal quarter and an income statement and a statement of cash flows
for such fiscal quarter and for the fiscal year to date, subject to normal
year-end adjustments, all setting forth in comparative form the corresponding
figures as of the end of and for the corresponding fiscal quarter of the
preceding year, prepared in accordance with GAAP in all material respects except
that such statements are condensed and exclude detailed footnote disclosures and
certified by the chief financial officer or other authorized officer of such
Person as fairly presenting, in all material respects, the consolidated
financial condition of such person as of such date. As to U.S. Borrower only,
Quarterly Financial Statements shall also include unaudited consolidating
financial statements for U.S. Borrower and its Subsidiaries, in Proper Form,
certified by the chief financial officer or other authorized officer of U.S.
Borrower as presenting fairly in all material respects the consolidating
financial position of U.S. Borrower and its Subsidiaries.

        Rate Designation Date means that Business Day which is (a) in the case
of Base Rate Borrowings by the U.S. Borrower, 11:00 a.m., Houston, Texas time,
in the case of Base Rate Borrowings by the Canadian Borrower, 12:00 noon,
Toronto, Ontario time, and in the case of Base Rate Borrowings by the U.K.
Borrower, 11:00 a.m., London, United Kingdom time, in each case on the date of
such borrowing and (b) in the case of LIBOR Borrowings by the U.S. Borrower,
11:00 a.m., Houston, Texas time, in the case of LIBOR Borrowings by the Canadian
Borrower, 12:00 noon, Toronto, Ontario time and in the case of LIBOR Borrowings
by the U.K. Borrower, 11:00 a.m., London, United Kingdom time, in each case on
the date three Business Days preceding the first day of any proposed Interest
Period.

        Rate Designation Notice means a written notice substantially in the form
of Exhibit B.

        Refunding Bankers' Acceptance has the meaning specified in Section
2.3(b).
<PAGE>
        Regulation D means Regulation D of the Board of Governors of the Federal
Reserve System from time to time in effect and includes any successor or other
regulation relating to reserve requirements applicable to member banks of the
U.S. Federal Reserve System.

        Regulatory Change means with respect to any Lender, any change on or
after the Effective Date in any Legal Requirement (including, without
limitation, Regulation D) or the adoption or making on or after such date of any
interpretation, directive or request applying to a class of lenders including
such Lender under any Legal Requirements (whether or not having the force of
law) by any Governmental Authority.

        Reimbursement Obligations means, as at any date, (i) the obligations of
any Borrower then outstanding, or which may thereafter arise, in respect of
Letters of Credit under this Agreement, to reimburse the applicable Issuers for
the amount paid by such Issuers in respect of any drawing under such Letters of
Credit and (ii) the obligations of the Canadian Borrower then outstanding, or
which may thereafter arise, in respect of any Bankers' Acceptance purchased by
any Canadian Lender or paid by it on maturity thereof. Except for Canadian
Letters of Credit denominated in Canadian Dollars, Reimbursement Obligations in
respect of any Letter of Credit shall at all times be payable in Dollars
notwithstanding any such Letter of Credit being payable in a currency other than
Dollars.

        Request for Extension of Credit means a request for extension of credit
duly executed by any responsible officer, which may include the president, chief
executive officer, the chief financial officer or the director of treasury of
U.S. Borrower, Canadian Borrower or U.K. Borrower, as the case may be, or any
other Person duly authorized by one of such officers, appropriately completed
and substantially in the form of Exhibit A-1 (U.S. Borrower), Exhibit A-2
(Canadian Borrower) or Exhibit A-3 (U.K. Borrower) attached hereto, as the case
may be.

        Requirements of Environmental Law means all requirements imposed by any
law (including for example and without limitation The Resource Conservation and
Recovery Act and The Comprehensive Environmental Response, Compensation, and
Liability Act), rule, regulation, or order of any federal, state or local
executive, legislative, judicial, regulatory or administrative agency, board or
authority in effect at the applicable time which relate to (i) noise; (ii)
pollution, protection or clean-up of the air, surface water, ground water or
land; (iii) solid, gaseous or liquid waste generation, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees or (vi) regulation of the manufacture, processing,
distribution in commerce, use, discharge or storage of Hazardous Substances.

        Reset Date has the meaning specified in Section 2.9(a).

        Restricted Indebtedness means Borrowed Money Indebtedness of the
Borrowers or any of their Subsidiaries, the payment, prepayment, redemption,
repurchase or defeasance of which is restricted under Article 8 hereof.

        Revolving Loan Maturity Date means the maturity of the Revolving Notes
and the other U.S. Revolving Loan Obligations, Canadian Obligations and U.K.
Obligations, March 31, 2007.
<PAGE>
        Revolving Loans means the U.S. Revolving Loans, the U.K. Revolving Loans
and the Canadian Revolving Loans.

        Revolving Notes means the U.S. Revolving Notes, the U.K. Revolving
Notes, Canadian Dollar Revolving Notes and the Canadian Revolving Notes.

        SACROC Contracts means (i) that certain Service Agreement for NATCO CO2
187 MMCFD Separation Facility for SACROC Unit dated as of November 27, 2003
executed by and between National Tank Company and Kinder Morgan CO2 Company,
L.P., (ii) that certain Service Agreement for NATCO CO2 Topping Unit Separation
Facility at SACROC dated as of March 27, 2001 executed by and between National
Tank Company and Kinder Morgan CO2 Company, L.P. and (iii) that certain Service
Agreement for Cynara CO2 Separation Facilities at SACROC dated as of June 1,
1997 executed by and between The Cynara Company and Pennzoil Exploration and
Production Company, as amended by Addendum dated as of Match 27, 2001 executed
by and between National Tank Company and Kinder Morgan CO2 Company, L.P., as the
foregoing may from time to time be amended, modified, restated or supplemented.

        SACROC Facility means the totality of National Tank Company's owned and
operated CO2, 100 MMCFD gas separation facility, CO2 topping unit separation
facility and the SACROC Facility Expansion, together with all auxiliary systems
and equipment, located in Scurry County, Texas, and servicing Kinder Morgan CO2
Company, L.P.'s SACROC unit.

        SACROC Facility Expansion means National Tank Company's owned and
operated CO2, 187 MMCFD gas separation facility, commissioned effective January
1, 2004, located in Scurry County, Texas, and servicing Kinder Morgan CO2
Company, L.P.'s SACROC unit.

        Security Agreements means (i) the security agreements, each in Proper
Form, executed or to be executed in favor of U.S. Agent, securing the U.S.
Obligations, covering all material personal Property (other than the Equity
Interests described in clauses (ii) and (iv) of this definition) of U.S.
Borrower and its Subsidiaries (other than Foreign Subsidiaries or Excluded
Subsidiaries), (ii) security agreements, each in Proper Form, executed or to be
executed in favor of U.S. Agent, securing the U.S. Obligations, covering all of
the issued and outstanding Equity Interests in any Subsidiary of U.S. Borrower
(other than Foreign Subsidiaries and Excluded Subsidiaries and other than
Subsidiaries which are wholly-owned direct Subsidiaries of Foreign Subsidiaries)
and 65% of the issued and outstanding Equity Interests in U.K. Borrower and
Canadian Borrower, (iii) security agreements, each in Proper Form, executed or
to be executed in favor of Canadian Agent, securing the Canadian Obligations,
covering all material personal Property of Canadian Borrower and each of its
Subsidiaries (including all Equity Interests in any Subsidiary of Canadian
Borrower), and (iv) security agreements, each in Proper Form, executed or to be
executed in favor of U.K. Agent, securing the U.K. Obligations, covering all
material personal Property of U.K. Borrower and each of its Subsidiaries that is
not an Excluded Subsidiary (including all Equity Interests in any Subsidiary of
U.K. Borrower which is not an Excluded Subsidiary), as the same may from time to
time be amended, modified, restated or supplemented.

        Security Documents means, collectively, the Mortgages, the Security
Agreements, the Financing Statements and any and all other security documents
now or hereafter executed and
<PAGE>
delivered by any Obligor to secure all or any part of the Obligations, as any of
them may from time to time be amended, modified, restated or supplemented.
Notwithstanding anything to the contrary set forth herein, at the option of any
Agent, the Security Documents executed by U.S. Borrower and any of its
Subsidiaries which are not Foreign Subsidiaries shall be executed in favor of
the Collateral Agent under the Collateral Agency Agreement rather than in favor
of the U.S. Agent and shall secure all of the Obligations rather than the U.S.
Obligations.

        Stated Rate means, with respect to any Lender, the effective weighted
per annum rate of interest applicable to the Loans made by such Lender;
provided, that if on any day such rate shall exceed the Ceiling Rate for that
day, the Stated Rate shall be fixed at the Ceiling Rate on that day and on each
day thereafter until the total amount of interest accrued at the Stated Rate on
the unpaid principal balances of the Notes plus the Additional Interest equals
the total amount of interest which would have accrued if there had been no
Ceiling Rate. If the Notes mature (or are prepaid) before such equality is
achieved, then, in addition to the unpaid principal and accrued interest then
owing pursuant to the other provisions of the Loan Documents, the applicable
Borrower promises to pay on demand to the order of the holder of the applicable
Note interest in an amount equal to the excess (if any) of (a) the lesser of (i)
the total interest which would have accrued on such Note if the Stated Rate had
been defined as equal to the Ceiling Rate from time to time in effect and (ii)
the total interest which would have accrued on such Note if the Stated Rate were
not so prohibited from exceeding the Ceiling Rate, over (b) the total interest
actually accrued on such Note to such maturity (or prepayment) date. Without
notice to any Borrower or any other Person, the Stated Rate shall automatically
fluctuate upward and downward in accordance with the provisions of this
definition.

        Subsidiary means, as to a particular parent Corporation, any Corporation
of which more than 50% of the indicia of equity rights (whether outstanding
capital stock or otherwise) is at the time directly or indirectly owned by, such
parent Corporation.

        Synthetic Purchase Agreement means any swap, derivative or other
agreement or combination of agreements pursuant to which any Borrower or a
Subsidiary of any Borrower is or may become obligated to make (i) any payment in
connection with a purchase by any third party from a Person other than the
applicable Borrower or a Subsidiary of the applicable Borrower of any Equity
Interest or Restricted Indebtedness or (ii) any payment (other than on account
of a permitted purchase by it of any Equity Interest or any Restricted
Indebtedness) the amount of which is determined by reference to the price or
value at any time of any Equity Interest or Restricted Indebtedness; provided
that no phantom stock or similar plan providing for payments only to current or
former directors, officers or employees of any Borrower or Subsidiaries of any
Borrower (or to their heirs or estates) shall be deemed to be a Synthetic
Purchase Agreement.

        Tangible Net Worth means, with respect to U.S. Borrower and its
Subsidiaries, tangible net worth less other non-cash comprehensive loss or
income and less notes receivable from officers and shareholders, each as
determined under GAAP.

        Taxes shall have the meaning ascribed to it in Section 4.1(d) hereof.
<PAGE>
        Termination Date means the earlier of (a) the Revolving Loan Maturity
Date or (b) the date specified by any Agent in accordance with Section 9.1
hereof.

        Term Loan means a Loan made pursuant to Section 2.1(e) hereof.

        Term Loan Lender means each U.S. Lender with any outstanding Term Loans.

        Term Loan Maturity Date means March 31, 2007.

        Term Loan Obligations means, as at any date of determination thereof,
the aggregate principal amount of Term Loans outstanding hereunder on such date.

        Term Notes means the Notes of U.S. Borrower evidencing the Term Loans,
in substantially the form of Exhibit J hereto.

        U.K. Borrowing Base means, as at any date, the amount of the U.K.
Borrowing Base shown on the Borrowing Base Certificate then most recently
delivered pursuant to Section 7.2(f) hereof, determined by calculating the
amount equal to:

        (i)   80% of the aggregate amount of all Eligible Accounts of the U.K.
              Borrower and its Subsidiaries which are Foreign Subsidiaries
              (other than Excluded Subsidiaries) at said date, plus

        (ii)  80% of the aggregate amount of all Milestone Billings of the U.K.
              Borrower and its Subsidiaries which are Foreign Subsidiaries
              (other than Excluded Subsidiaries) at said date; provided that
              the amount calculated pursuant to this clause (ii) shall not
              exceed 50% of the U.K. Borrowing Base, plus

        (iii) 50% of the aggregate amount of all Eligible Inventory of U.K.
              Borrower and its Subsidiaries which are Foreign Subsidiaries
              (other than Excluded Subsidiaries) at said date (determined at
              the lower of cost or market on a consistent basis and in
              accordance with GAAP); provided that the amount calculated
              pursuant to this clause (iii) shall not exceed 40% of the U.K.
              Borrowing Base, plus

        (iv)  100% of the aggregate amount of cash (or cash equivalents
              acceptable to the U.S. Agent) delivered to U.K. Agent and
              specifically pledged as security for the U.K. Obligations
              pursuant to documentation satisfactory to the U.S. Agent.

In the absence of a current Borrowing Base Certificate, U.S. Agent shall
determine the U.K. Borrowing Base from time to time in its reasonable
discretion, taking into account all information reasonably available to it, and
the U.K. Borrowing Base from time to time so determined shall be the U.K.
Borrowing Base for all purposes of this Agreement until a current Borrowing Base
Certificate, in Proper Form, is furnished to and accepted by U.S. Agent. For
purposes of calculating the U.K. Borrowing Base, all amounts or values expressed
in Pounds or
<PAGE>
Euros shall be converted into Dollars at the Exchange Rate in effect as of the
date of the applicable Borrowing Base Certificate.

        U.K. Commitment means, as to any U.K. Lender, the obligation, if any, of
such U.K. Lender to make U.K. Revolving Loans, incur or participate in Letter of
Credit Liabilities relating to U.K. Letters of Credit in an aggregate principal
amount at any one time outstanding up to (but not exceeding) the amount, if any,
set forth opposite such U.K. Lender's name on the signature pages hereof under
the caption "U.K. Commitment", or otherwise provided for in an Assignment and
Acceptance (as the same may be increased or reduced from time to time pursuant
to Section 2.4 hereof).

        U.K. Lender means each lender party hereto with any U.K. Commitment or
any outstanding U.K. Obligations.

        U.K. Letters of Credit has the meaning assigned to such term in Section
2.2 hereof.

        U.K. Obligations means, as at any date of determination thereof, the sum
of the following (determined without duplication): (i) the aggregate principal
amount of U.K. Revolving Loans outstanding hereunder on such date, plus (ii) the
aggregate amount of Letter of Credit Liabilities outstanding on such date
relating to U.K. Letters of Credit. For purposes of calculating the aggregate
amount of U.K. Obligations, all amounts or values expressed in Pounds or Euros
shall be converted into Dollars at the Exchange Rate in effect as of the date of
determination.

        U.K. Revolving Loan means any revolving credit loan made pursuant to
Section 2.1(c) hereof.

        U.K. Revolving Notes means the Notes of U.K. Borrower evidencing the
U.K. Revolving Loans, in the form of Exhibit K hereto.

        Unfunded Liabilities means, with respect to any Plan, at any time, the
amount (if any) by which (a) the present value of all benefits under such Plan
exceeds (b) the fair market value of all Plan assets allocable to such benefits,
all determined as of the then most recent actuarial valuation report for such
Plan, but only to the extent that such excess represents a potential liability
of any member of the Controlled Group to the PBGC or a Plan under Title IV of
ERISA and, with respect to any Plan governed by Applicable Canadian Pension
Legislation, the amount (if any) by which the solvency liabilities under such
Plan (determined in accordance with actuarial assumptions contained in the most
recent actuarial valuation report for such Plan) exceed the fair market value of
the assets of such Plan. With respect to multi-employer Plans, the term
"Unfunded Liabilities" shall also include contingent liability for withdrawal
liability under Section 4201 of ERISA or under Applicable Canadian Pension
Legislation to all multi-employer Plans to which any Borrower or any member of a
Controlled Group for employees of any Borrower contributes in the event of
complete withdrawal from such plans.

        U.S. Borrowing Base means, as at any date, the amount of the U.S.
Borrowing Base shown on the Borrowing Base Certificate then most recently
delivered pursuant to Section 7.2(f) hereof, determined by calculating the
amount equal to:
<PAGE>
        (i)    80% of the aggregate amount of all Eligible Accounts of the
               U.S. Borrower and its Subsidiaries (other than Foreign
               Subsidiaries and Excluded Subsidiaries) at said date, plus

        (ii)   80% of the aggregate amount of all Milestone Billings of the
               U.S. Borrower and its Subsidiaries (other than Foreign
               Subsidiaries and Excluded Subsidiaries) at said date; provided
               that the amount calculated pursuant to this clause (ii) shall
               not exceed 15% of the U.S. Borrowing Base, plus

        (iii)  50% of the aggregate amount of all Eligible Inventory of U.S.
               Borrower and its Subsidiaries (other than Foreign Subsidiaries
               and Excluded Subsidiaries) at said date (determined at the
               lower of cost or market on a consistent basis and in
               accordance with GAAP); provided that the amount calculated
               pursuant to this clause (iii) shall not exceed 40% of the U.S.
               Borrowing Base, plus

        (iv)   100% of the aggregate amount of cash (or cash equivalents
               acceptable to the U.S. Agent) delivered to U.S. Agent and
               specifically pledged as security for the U.S. Obligations
               pursuant to documentation satisfactory to the U.S. Agent.

In the absence of a current Borrowing Base Certificate, U.S. Agent shall
determine the U.S. Borrowing Base from time to time in its reasonable
discretion, taking into account all information reasonably available to it, and
the U.S. Borrowing Base from time to time so determined shall be the U.S.
Borrowing Base for all purposes of this Agreement until a current Borrowing Base
Certificate, in Proper Form, is furnished to and accepted by U.S. Agent.

        U.S. Commitment means, as to any U.S. Lender, the obligation, if any, of
such U.S. Lender to make U.S. Revolving Loans and incur or participate in Letter
of Credit Liabilities relating to U.S. Letters of Credit in an aggregate
principal amount at any one time outstanding up to (but not exceeding) the
amount, if any, set forth opposite such U.S. Lender's name on the signature
pages hereof under the caption "U.S. Commitment", or otherwise provided for in
an Assignment and Acceptance (as the same may be increased or reduced from time
to time pursuant to Section 2.4 hereof).

        U.S. Lender means each lender party hereto with any U.S. Commitment or
any outstanding U.S. Obligations.

        U.S. Letters of Credit shall have the meaning assigned to such term in
Section 2.2 hereof.

        U.S. Loan means a U.S. Revolving Loan or a Term Loan.

        U.S. Obligations means U.S. Revolving Loan Obligations and Term Loan
Obligations.

        U.S. Revolving Loan means a Loan made pursuant to Section 2.1(a) hereof.
<PAGE>
        U.S. Revolving Loan Obligations means, as at any date of determination
thereof, the sum of the following (determined without duplication): (i) the
aggregate principal amount of U.S. Revolving Loans outstanding hereunder on such
date plus (ii) the aggregate amount of the Letter of Credit Liabilities
outstanding on such date relating to U.S. Letters of Credit.

        U.S. Revolving Notes means the Notes of U.S. Borrower evidencing the
U.S. Revolving Loans, in the form of Exhibit D hereto.

        1.2  Miscellaneous. The words "hereof," "herein," and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement.

2.      Commitments; Loans; BA's and Letters of Credit.

        2.1  Loans and BA's. Each Lender severally agrees, subject to all of the
terms and conditions of this Agreement (including, without limitation, Sections
5.1 and 5.2 hereof), to make Loans and, in the case of Canadian Lenders, to
accept and purchase Bankers' Acceptances, as follows:

        (a)  U.S. Revolving Loans. From time to time on or after the Effective
Date and during the Availability Period, each U.S. Lender shall make loans under
this Section 2.1(a) to U.S. Borrower in an aggregate principal amount at any one
time outstanding (including its Commitment Percentage of all Letter of Credit
Liabilities relating to U.S. Letters of Credit at such time) up to but not
exceeding such U.S. Lender's Commitment Percentage of the Maximum U.S. Available
Amount. Subject to the conditions in this Agreement, any such U.S. Revolving
Loan repaid prior to the Termination Date may be reborrowed pursuant to the
terms of this Agreement; provided, that any and all such U.S. Revolving Loans
shall be due and payable in full on the Termination Date. Loans made under this
Section 2.1(a) shall be made and denominated in Dollars. The aggregate of all
U.S. Revolving Loans to be made by the U.S. Lenders in connection with a
particular borrowing shall be equal to the lesser of (i) the unutilized portion
of the U.S. Commitments or (ii) $500,000 or any integral multiple of $100,000 in
excess thereof.

        (b)  Canadian Revolving Loans. From time to time on or after the
Effective Date and during the Availability Period, each Canadian Lender shall
make loans under this Section 2.1(b) to Canadian Borrower in an aggregate
principal amount at any one time outstanding (including such Canadian Lender's
Commitment Percentage of all Bankers' Acceptance Liabilities and all Letter of
Credit Liabilities relating to Canadian Letters of Credit at such time) up to
but not exceeding such Canadian Lender's Commitment Percentage of the Maximum
Canadian Available Amount. Subject to the conditions in this Agreement, any such
Canadian Revolving Loan repaid prior to the Termination Date may be reborrowed
pursuant to the terms of this Agreement; provided, that any and all such
Canadian Revolving Loans shall be due and payable in full on the Termination
Date. Loans made under this Section 2.1(b) may, at the option of Canadian
Borrower, be made and denominated either in Dollars or in Canadian Dollars (but
all Loans to be made under a particular borrowing must be made and denominated
in the same currency). The aggregate of all Canadian Revolving Loans to be made
by the Canadian Lenders in connection with a particular borrowing shall be equal
to the lesser of (i) the unutilized portion
<PAGE>
of the Canadian Commitments or (ii) $500,000 or any integral multiple of
$100,000 in excess thereof (if the Loans are denominated in Dollars) or
C$500,000 or any integral multiple of C$100,000 in excess thereof (if the Loans
are denominated in Canadian Dollars). Notwithstanding anything else contained in
Sections 3.1, 4.3 and 5.2, the Canadian Borrower may borrow Canadian Dollars by
way of overdraft and any such Borrowings shall be deemed (i) to be an advance of
and be outstanding as a Canadian Prime Loan from the date such overdraft is
honored and (ii) to be a representation and warranty by the Canadian Borrower
that at the time any such overdraft is honored all of the conditions contained
in Section 5.2 (other than paragraph (b) thereof) have been satisfied.

        (c)  U.K. Revolving Loans. From time to time on or after the Effective
Date and during the Availability Period, each U.K. Lender shall make loans under
this Section 2.1(c) to U.K. Borrower in an aggregate principal amount at any one
time outstanding (including its Commitment Percentage of all Letter of Credit
Liabilities relating to U.K. Letters of Credit at such time) up to but not
exceeding such U.K. Lender's Commitment Percentage of the Maximum U.K. Available
Amount. Subject to the conditions in this Agreement, any such U.K. Revolving
Loan repaid prior to the Termination Date may be reborrowed pursuant to the
terms of this Agreement; provided, that any and all such U.K. Revolving Loans
shall be due and payable in full on the Termination Date. Loans made under this
Section 2.1(c) shall be made and denominated in Dollars. The aggregate of all
U.K. Revolving Loans to be made by the U.K. Lenders in connection with a
particular borrowing shall be equal to the lesser of (i) the unutilized portion
of the U.S. Commitments or (ii) $500,000 or any integral multiple of $100,000 in
excess thereof.

        (d)  Bankers' Acceptances. From time to time on or after the Effective
Date and during the Availability Period, each Canadian Lender shall accept and
purchase Bankers' Acceptances drawn on it under Section 2.3 hereof by Canadian
Borrower in an aggregate principal amount at any one time outstanding (including
such Canadian Lender's Commitment Percentage of all Canadian Revolving Loans
outstanding at such time and all Letter of Credit Liabilities relating to
Canadian Letters of Credit at such time) up to but not exceeding such Canadian
Lender's Commitment Percentage of the Maximum Canadian Available Amount. No
Bankers' Acceptance may be made or accepted on or after the Termination Date and
all outstanding Bankers' Acceptances shall mature no later than the end of the
Availability Period. Bankers' Acceptances shall be made and denominated in
Canadian Dollars.

        (e)  Term Loans. On the Effective Date, each Term Loan Lender shall make
a loan to U.S. Borrower in the amount set forth opposite such Term Loan Lender's
name on the signature pages hereof under the caption "Term Loans".

        (f)  Chapter 346 Not Applicable. Borrowers, Agents and the Lenders agree
pursuant to Chapter 346 ("Chapter 346") of the Texas Finance Code, that Chapter
346 (which relates to open-end line of credit revolving loan accounts) shall not
apply to this Agreement, the Notes or any Obligation and that neither the Notes
nor any Obligation shall be governed by Chapter 346 or subject to its provisions
in any manner whatsoever.
<PAGE>
        2.2  Letters of Credit.

        (a) Letters of Credit. Subject to the terms and conditions of this
Agreement, and on the condition that aggregate Letter of Credit Liabilities
relating to U.S. Letters of Credit shall never exceed the aggregate amount of
the U.S. Commitments and that aggregate Letter of Credit Liabilities relating to
Canadian Letters of Credit shall never exceed the aggregate amount of the
Canadian Commitments and that aggregate Letter of Credit Liabilities relating to
U.K. Letters of Credit shall never exceed the aggregate amount of the U.K.
Commitments, (i) U.S. Borrower shall have the right, in addition to U.S.
Revolving Loans provided for in Section 2.1(a) hereof, to utilize the U.S.
Commitments from time to time during the Availability Period by obtaining the
issuance of letters of credit if U.S. Borrower shall so request in the notice
referred to in Section 2.2(b)(i) hereof (such letters of credit as any of them
may be amended, supplemented, extended or confirmed from time to time, being
herein collectively called the "U.S. Letters of Credit"), Canadian Borrower
shall have the right, in addition to Canadian Revolving Loans provided for in
Section 2.1(b) hereof and Bankers' Acceptances provided for in Section 2.1(d)
hereof, to utilize the Canadian Commitments from time to time during the
Availability Period by obtaining the issuance of letters of credit if Canadian
Borrower shall so request in the notice referred to in Section 2.2(b)(i) hereof
(such letters of credit as any of them may be amended, supplemented, extended or
confirmed from time to time, being herein collectively called the "Canadian
Letters of Credit", which term shall include, if the Canadian Lenders agree,
letters of guarantee and performance bonds) and U.K. Borrower shall have the
right, in addition to U.K. Revolving Loans provided for in Section 2.1(c)
hereof, to utilize the U.K. Commitments from time to time during the
Availability Period by obtaining the issuance of letters of credit if U.K.
Borrower shall so request in the notice referred to in Section 2.2(b)(i) hereof
(such letters of credit as any of them may be amended, supplemented, extended or
confirmed from time to time, being herein collectively called the "U.K. Letters
of Credit", which term shall include, if the U.K. Lenders agree, letters of
guarantee and performance bonds) and (ii) Wells Fargo agrees to issue U.S.
Letters of Credit, HSBC Canada agrees to issue Canadian Letters of Credit and
HSBC U.K. agrees to issue U.K. Letters of Credit. The Letters of Credit will, at
the request of the applicable Borrower, be issued in currencies other than those
expressly provided for in this Agreement so long as the applicable Agent is
reasonably satisfied that such currency is readily available in the required
amounts and that such currency selection is not otherwise disadvantageous to any
Agent or any Lender. Upon the date of the issuance of a Letter of Credit, the
applicable Issuer shall be deemed, without further action by any party hereto,
to have sold to each U.S. Lender, Canadian Lender or U.K. Lender, as the case
may be, and each such U.S. Lender, Canadian Lender or U.K. Lender, as the case
may be, shall be deemed, without further action by any party hereto, to have
purchased from the applicable Issuer, a participation, to the extent of such
Lender's Commitment Percentage, in such Letter of Credit and the related Letter
of Credit Liabilities, which participation shall terminate on the earlier of the
expiration date of such Letter of Credit or the Termination Date. No Letter of
Credit shall have an expiration date after the date which is one year after the
Revolving Loan Maturity Date. Any Letter of Credit that shall have an expiration
date after the Revolving Loan Maturity Date shall be subject to Cover, such
Cover to be delivered to the applicable Agent on the later of the date of
issuance of such Letter of Credit or the date which is one (1) year prior to the
Revolving Loan Maturity Date. Wells Fargo or, with the prior approval of U.S.
Borrower, U.S. Agent and the applicable U.S. Lender, another U.S. Lender shall
be the Issuer of each U.S. Letter of Credit; HSBC Canada or, with the prior
approval of Canadian Borrower, Canadian Agent and the applicable Canadian
Lender, another
<PAGE>
Canadian Lender shall be the Issuer of each Canadian Letter of Credit
and HSBC U.K. or, with the prior approval of U.K. Borrower, U.K. Agent and the
applicable U.K. Lender, another U.K. Lender shall be the Issuer of each U.K.
Letter of Credit. Except as provided above, all U.S. Letters of Credit and U.K.
Letters of Credit shall be denominated in Dollars and all Canadian Letters of
Credit shall, at the option of Canadian Borrower, be denominated in either
Dollars or Canadian Dollars. Fees due in respect of a U.S. Letter of Credit or a
U.K. Letter of Credit shall be payable in Dollars and fees due in respect of a
Canadian Letter of Credit shall be payable (i) in Dollars, if such Letter of
Credit is denominated in Dollars and (ii) in Canadian Dollars if such Letter of
Credit is denominated in Canadian Dollars or any other currency.

        (b)  Additional Provisions. The following additional provisions shall
apply to each Letter of Credit:

             (i)  U.S. Borrower, Canadian Borrower or U.K. Borrower, as the case
        may be, shall give the appropriate Agent notice requesting each issuance
        of a Letter of Credit hereunder as provided in Section 4.3 hereof and
        shall furnish such additional information regarding such transaction as
        such Agent may reasonably request. Upon receipt of such notice, such
        Agent shall promptly notify each U.S. Lender, Canadian Lender or U.K.
        Lender, as the case may be, of the contents thereof and of such Lender's
        Commitment Percentage of the amount of such proposed Letter of Credit.

             (ii) No U.S. Letter of Credit may be issued if after giving effect
        thereto the sum of (A) the aggregate outstanding principal amount of
        U.S. Revolving Loans plus (B) the aggregate Letter of Credit Liabilities
        relating to U.S. Letters of Credit would exceed the Maximum U.S.
        Available Amount. No Canadian Letter of Credit may be issued if after
        giving effect thereto the sum of (A) the aggregate outstanding principal
        amount of Canadian Revolving Loans plus (B) the aggregate Letter of
        Credit Liabilities relating to Canadian Letters of Credit plus (C) the
        aggregate Bankers' Acceptance Liabilities would exceed the Maximum
        Canadian Available Amount. No U.K. Letter of Credit may be issued if
        after giving effect thereto the sum of (A) the aggregate outstanding
        principal amount of U.K. Revolving Loans plus (B) the aggregate Letter
        of Credit Liabilities relating to U.K. Letters of Credit would exceed
        the Maximum U.K. Available Amount. On each day during the period
        commencing with the issuance of any Letter of Credit and until such
        Letter of Credit shall have expired or been terminated, the U. S.
        Commitment, Canadian Commitment or U.K. Commitment, as the case may be,
        of each applicable Lender shall be deemed to be utilized for all
        purposes hereof, including Section 2.5(a), in an amount equal to such
        Lender's Commitment Percentage of the amount then available for drawings
        under such Letter of Credit (or any unreimbursed drawings under such
        Letter of Credit).

             (iii) Upon receipt from the beneficiary of any Letter of Credit of
        any demand for payment thereunder, the applicable Issuer shall notify
        the Agents and thereafter the U.S. Agent, the Canadian Agent or the U.K.
        Agent, as the case may be, shall promptly notify the applicable Borrower
        and each applicable Lender as to the amount to be paid as a result of
        such demand and the payment date therefor. If at any time prior to the
        earlier of the expiration date of a Letter of Credit or the Termination
        Date any applicable Issuer shall have made a payment to a beneficiary of
        a Letter of Credit in respect of a drawing
<PAGE>
        under such Letter of Credit, each applicable Lender will pay to the
        U.S. Agent, the Canadian Agent or the U.K. Agent, as the case may be,
        immediately upon demand by such Issuer at any time during the period
        commencing after such payment until reimbursement thereof in full by the
        applicable Borrower, an amount equal to such Lender's Commitment
        Percentage of such payment, together with interest on such amount for
        each day from the date of demand for such payment (or, if such demand is
        made after 11:00 a.m. Houston, Texas time (in the case of a U.S. Letter
        of Credit) or 12:00 noon Toronto, Ontario time (in the case of a
        Canadian Letter of Credit) or 11:00 a.m. London, United Kingdom time (in
        the case of a U.K. Letter of Credit) on such date, from the next
        succeeding Business Day) to the date of payment by such Lender of such
        amount at a rate of interest per annum equal to (i) in respect of U.S.
        Letters of Credit or U.K. Letters of Credit, the Federal Funds Rate,
        (ii) in respect of Canadian Letters of Credit which are denominated in
        Dollars, the Base Rate plus two percent (2%) and (iii) in respect of
        Canadian Letters of Credit which are denominated in Canadian Dollars,
        the Canadian Prime Rate plus two percent (2%). To the extent that it is
        ultimately determined that the applicable Borrower is relieved of its
        obligation to reimburse the applicable Issuer because of such Issuer's
        gross negligence or willful misconduct in determining that documents
        received under any applicable Letter of Credit comply with the terms
        thereof, the applicable Issuer shall be obligated to refund to the
        paying Lenders all amounts paid to such Issuer to reimburse Issuer for
        the applicable drawing under such Letter of Credit, together with
        interest from the date of payment by such Lender to the date of
        repayment by the Issuing Bank at the interest rates set forth above
        applicable to such Lenders.

             (iv) U.S. Borrower, the Canadian Borrower or U.K. Borrower, as the
        case may be, shall be irrevocably and unconditionally obligated
        forthwith to reimburse the appropriate Agent, on the date on which such
        Agent notifies U.S. Borrower, the Canadian Borrower or U.K. Borrower, as
        the case may be, of the date and amount of any payment by the applicable
        Issuer of any drawing or payment made under a Letter of Credit, for the
        amount paid by such Issuer upon such drawing or payment, without
        presentment, demand, protest or other formalities of any kind, all of
        which are hereby waived. Such reimbursement may, subject to satisfaction
        of the conditions in Sections 5.1 and 5.2 hereof, the limitations on
        size contained in Section 2.1 and to the Maximum U.S. Available Amount,
        Maximum Canadian Available Amount or Maximum U.K. Available Amount, as
        the case may be (after adjustment in the same to reflect the elimination
        of the corresponding Letter of Credit Liability), be made by the
        borrowing of Loans or, in the case of the Canadian Borrower, by the
        issuance, acceptance and purchase of Bankers' Acceptances. The
        applicable Agent will pay to each Lender such Lender's Commitment
        Percentage of all amounts received from U.S. Borrower, the Canadian
        Borrower or the U.K. Borrower, as the case may be, for application in
        payment, in whole or in part, of the Reimbursement Obligation in respect
        of any Letter of Credit, but only to the extent such Lender has made
        payment to the applicable Agent in respect of such Letter of Credit
        pursuant to clause (iii) above. To the extent such applicable Agent does
        not pay such Lender within the timeframes which are applicable to such
        Lenders in clause (iii) above, such applicable Agent shall pay interest
        to such Lenders at the interest rates set forth in clause (iii) above
        applicable to such Lenders for such period of delay.
<PAGE>
             (v)  U.S. Borrower, the Canadian Borrower or the U.K. Borrower, as
        the case may be, will pay to the appropriate Agent at the Principal
        Office of such Agent for the account of each applicable Lender a letter
        of credit fee with respect to each Letter of Credit equal to the greater
        of (x) $500 or (y) the Margin Percentage then in effect with respect to
        LIBOR Borrowings multiplied by the daily average amount available for
        drawings under each Letter of Credit (and computed on the basis of the
        actual number of days elapsed in a year composed of 360 days), in each
        case for the period from and including the date of issuance of such
        Letter of Credit to and including the date of expiration or termination
        thereof, such fee to be due and payable quarterly in arrears on each
        three (3) month anniversary of the issuance of the applicable Letter of
        Credit and upon expiration or termination of the applicable Letter of
        Credit. The applicable Agent will pay to each applicable Lender,
        promptly after receiving any payment in respect of letter of credit fees
        referred to in this clause (v), an amount equal to the product of such
        Lender's Commitment Percentage times the amount of such fees. In
        addition to and cumulative of the above described fees, U.S. Borrower,
        the Canadian Borrower or the U.K. Borrower, as the case may be, shall
        pay to the appropriate Agent, for the account of the applicable Issuer,
        in advance on the date of the issuance of the applicable Letter of
        Credit, a fronting fee in an amount equal to the greater of (x) $500 or
        (y) 1/8% of the face amount of the applicable Letter of Credit (such
        fronting fee to be retained by the applicable Issuer for its own
        account).

             (vi) The issuance by the applicable Issuer of each Letter of Credit
        shall, in addition to the conditions precedent set forth in Section 5
        hereof, be subject to the conditions precedent (A) that such Letter of
        Credit shall be in such form and contain such terms as shall be
        reasonably satisfactory to applicable Agent, and (B) that U.S. Borrower,
        the Canadian Borrower or the U.K. Borrower, as the case may be, shall
        have executed and delivered such Applications and other instruments and
        agreements relating to such Letter of Credit as the applicable Agent
        shall have reasonably requested and are not inconsistent with the terms
        of this Agreement. In the event of a conflict between the terms of this
        Agreement and the terms of any Application, the terms hereof shall
        control.

             (vii) Each Issuer will send to U.S. Borrower, the Canadian Borrower
        or the U.K. Borrower, as the case may be, and each applicable Lender,
        immediately upon issuance of any Letter of Credit issued by such Issuer
        or any amendment thereto, a true and correct copy of such Letter of
        Credit or amendment.

        (c)  Indemnification; Release. U.S. Borrower, the Canadian Borrower or
the U.K. Borrower, as the case may be, hereby indemnifies and holds harmless
each Agent, each Lender and each Issuer from and against any and all claims,
damages, losses, liabilities, costs or expenses which such Agent, such Lender or
such Issuer may incur (or which may be claimed against such Agent, such Lender
or such Issuer by any Person whatsoever), REGARDLESS OF WHETHER CAUSED IN WHOLE
OR IN PART BY THE NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES, in connection
with the execution and delivery of any Letter of Credit or transfer of or
payment or failure to pay under any Letter of Credit; provided that U.S.
Borrower, the Canadian Borrower or the U.K. Borrower, as the case may be, shall
not be required to indemnify or hold harmless any party seeking indemnification
for any claims, damages, losses, liabilities, costs or expenses to the extent,
but only to the extent, caused by (i)
<PAGE>
the willful misconduct or gross negligence of the party seeking
indemnification or exoneration, or (ii) the failure by the party seeking
indemnification to pay under any Letter of Credit after the presentation to it
of a request required to be paid under applicable law. U.S. Borrower, the
Canadian Borrower or the U.K. Borrower, as the case may be, hereby releases,
waives and discharges each Agent, each Lender and each Issuer from any claims,
causes of action, damages, losses, liabilities, reasonable costs or expenses
which may now exist or may hereafter arise, REGARDLESS OF WHETHER CAUSED IN
WHOLE OR IN PART BY THE NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES, by reason
of or in connection with the failure of any Agent, any Issuer or any other
Lender to fulfill or comply with its obligations to such Agent, such Lender or
such Issuer, as the case may be, hereunder (but nothing herein contained shall
affect any rights U.S. Borrower, the Canadian Borrower or the U.K. Borrower, as
the case may be, may have against such defaulting party or may have in respect
of gross negligence or willful misconduct). Nothing in this Section 2.2(c) is
intended to limit the obligations of U.S. Borrower, the Canadian Borrower or the
U.K. Borrower, as the case may be, under any other provision of this Agreement.

        (d) Additional Costs in Respect of Letters of Credit. Subject to
Sections 11.7 and 11.17 hereof, if as a result of any Regulatory Change there
shall be imposed, modified or deemed applicable any tax (other than any tax
based on or measured by net income), reserve, special deposit or similar
requirement against or with respect to or measured by reference to Letters of
Credit issued or to be issued hereunder or participations in such Letters of
Credit, and the result shall be to increase the cost to any Lender of issuing or
maintaining any Letter of Credit or any participation therein, or materially
reduce any amount receivable by any Lender hereunder in respect of any Letter of
Credit or any participation therein (which increase in cost, or reduction in
amount receivable, shall be the result of such Lender's reasonable allocation of
the aggregate of such increases or reductions resulting from such event), then
such Lender shall notify U.S. Borrower, the Canadian Borrower or the U.K.
Borrower, as the case may be, through the appropriate Agent (which notice shall
be accompanied by a statement setting forth in reasonable detail the basis for
the determination of the amount due), and within 15 Business Days after demand
therefor by such Lender through such Agent, U.S. Borrower, the Canadian Borrower
or the U.K. Borrower, as the case may be, shall pay to such Lender, from time to
time as specified by such Lender, such additional amounts as shall be sufficient
to compensate such Lender for such increased costs or reductions in amount. Such
statement as to such increased costs or reductions in amount incurred by such
Lender, submitted by such Lender to U.S. Borrower, the Canadian Borrower or the
U.K. Borrower, as the case may be, shall be conclusive as to the amount thereof,
absent manifest error, and may be computed using any reasonable averaging and
attribution method. Each Lender will notify U.S. Borrower, the Canadian Borrower
or the U.K. Borrower, as the case may be, through the appropriate Agent of any
event occurring after the date of this Agreement which will entitle such Lender
to compensation pursuant to this Section 2.2(d) as promptly as practicable after
any executive officer of such Lender obtains knowledge thereof and determines to
request such compensation, and (if so requested by U.S. Borrower, the Canadian
Borrower or the U.K. Borrower, as the case may be, through the appropriate
Agent) will designate a different lending office of such Lender for the issuance
or maintenance of Letters of Credit by such Lender or will take such other
action as U.S. Borrower, the Canadian Borrower or the U.K. Borrower, as the case
may be, may reasonably request if such designation or action is consistent with
the internal policy of such Lender and legal and regulatory restrictions, can be
undertaken at no additional cost, will avoid the need for, or reduce the
<PAGE>
amount of, such compensation and will not, in the sole opinion of such
Lender, be disadvantageous to such Lender (provided that no such U.S. Lender
shall have any obligation so to designate a different lending office which is
not located in the United States of America, no such Canadian Lender shall have
any obligation so to designate a different lending office which is not located
in Canada and no such U.K. Lender shall have any obligation so to designate a
different lending office which is not located in the United Kingdom).

        2.3  Certain Provisions Relating to Bankers' Acceptances.

        (a)  Subject to the terms and conditions hereof, each Canadian Lender
severally agrees to accept and purchase Bankers' Acceptances drawn upon it by
the Canadian Borrower denominated in Canadian Dollars. The Canadian Borrower
shall notify the Canadian Agent by irrevocable written notice (each a "Bankers'
Acceptance Notice") by 12:00 noon (Toronto, Ontario time) two (2) Business Days
prior to the proposed date of any borrowing by way of Bankers' Acceptances. Each
borrowing by way of Bankers' Acceptances shall be in a minimum aggregate face
amount of C$1,000,000.00 and integral multiples of C$100,000.00 in excess
thereof. The face amount of each Bankers' Acceptance shall be C$100,000.00 or
any integral multiple thereof. Each Bankers' Acceptance Notice shall be in the
form of Exhibit G.

             (1)  Bankers' Acceptances shall be issued and shall mature on a
        Business Day. Each Bankers' Acceptance shall have a term of
        approximately 1, 2 or 3 months or, if available, 6 months excluding days
        of grace and shall mature on a Business Day on or before the Revolving
        Loan Maturity Date and shall be in form and substance reasonably
        satisfactory to each Canadian Lender.

             (2)  Subject to Section 2.3(a)(3), Bankers' Acceptances shall be
        signed by duly authorized officers of the Canadian Borrower or, in the
        alternative, the signatures of such officers may be mechanically
        reproduced in facsimile thereon and Bankers' Acceptances bearing such
        facsimile signatures shall be binding on the Canadian Borrower as if
        they had been manually executed and delivered by such officers on behalf
        of the Canadian Borrower; notwithstanding that any person whose manual
        or facsimile signature appears on any Bankers' Acceptance may no longer
        be an authorized signatory for the Canadian Borrower on the date of
        issuance of a Bankers' Acceptance, such signature shall nevertheless be
        valid and sufficient for all purposes as if such authority had remained
        in force at the time of such issuance and any such Bankers' Acceptance
        shall be binding on the Canadian Borrower;

             (3)  In lieu of the Canadian Borrower signing Bankers' Acceptances
        in accordance with Section 2.3(a)(2) and, for so long as the power of
        attorney in Section 2.3(a)(5) is in force with respect to a given
        Canadian Lender, such Canadian Lender shall execute and deliver Bankers'
        Acceptances on behalf of the Canadian Borrower in accordance with the
        provisions thereof and, for certainty, all references herein to drafts
        drawn by the Canadian Borrower, Bankers' Acceptances executed by the
        Canadian Borrower or similar expressions shall be deemed to include
        Bankers' Acceptances executed in accordance with a power of attorney,
        unless the context otherwise requires;
<PAGE>
             (4)  If and for so long as the power of attorney referred to in
        Section 2.3(a)(5) is in force with respect to each of the Canadian
        Lenders, it is intended that pursuant to the DBNA, all Bankers'
        Acceptances accepted by the Canadian Lenders under this Agreement will
        be issued in the form of a "depository bill" (as defined in the DBNA),
        deposited with a "clearing house" (as defined in the DBNA including The
        Canadian Depository for Securities Ltd. or its nominee CDS & Co.). In
        order to give effect to the foregoing, the Canadian Agent will, subject
        to the approval of the Canadian Borrower and the Canadian Lenders,
        establish and notify the Canadian Borrower and the Canadian Lenders of
        any additional procedures, consistent with the terms of this Agreement
        and the DBNA, as are reasonably necessary to accomplish such intention,
        including:

              (i) any instrument held by the Canadian Lenders for the purposes
                  of Bankers' Acceptances will have marked prominently and
                  legibly on its face and within its text, at or before the time
                  of issue, the words "This is a depository bill subject to the
                  Depository Bills and Notes Act (Canada)";

             (ii) any reference to the authentication of the Bankers' Acceptance
                  will be removed; and

            (iii) any reference to the "bearer" will be removed and such
                  Bankers' Acceptances will not be marked with any words
                  prohibiting negotiation, transfer or assignment of it or of an
                  interest in it.

             (5)  To facilitate the issuance and acceptance of Bankers'
        Acceptances under this Agreement, the Canadian Borrower hereby appoints
        each Canadian Lender, acting by any authorized signatory of such Lender,
        as its attorney to:

              (i) to sign for and on behalf and in the name of the Canadian
                  Borrower as drawer, drafts in such Canadian Lender's standard
                  form which are depository bills as defined in the DBNA,
                  payable to a "clearing house" (as defined in the DBNA)
                  including, without limitation, The Canadian Depository For
                  Securities Limited or its nominee, CDS & Co. (the "clearing
                  house");

             (ii) for drafts which are not depository bills, to sign for and on
                  behalf and in the name of the Canadian Borrower as drawer and
                  to endorse on its behalf, Bankers' Acceptances drawn on the
                  Canadian Lender payable to the order of the undersigned or
                  payable to the order of such Canadian Lender;

            (iii) to fill in the amount, date and maturity date of such
                  Bankers' Acceptances; and

             (iv) to deposit and/or deliver such Bankers' Acceptances which have
                  been accepted by such Canadian Lender,

        provided that such acts in each case are to be undertaken by the
        Canadian Lender in question strictly in accordance with instructions
        given to such Canadian Lender by the Canadian Borrower as provided in
        this Section. For certainty, signatures of any
<PAGE>
        authorized signatory of a Canadian Lender may be mechanically
        reproduced in facsimile on Bankers' Acceptances in accordance herewith
        and such facsimile signatures shall be binding and effective as if they
        had been manually executed by such authorized signatory of such Canadian
        Lender. The communication in writing by the Canadian Borrower, or on
        behalf of the Canadian Borrower by the Canadian Agent, to the Canadian
        Lender of the instructions set out in the Bankers' Acceptance Notice
        shall constitute (a) the authorization and instruction of the Canadian
        Borrower to the Canadian Lender to sign for and on behalf and in the
        name of the Canadian Borrower as drawer the requested Bankers'
        Acceptances and to complete and/or endorse Bankers' Acceptances in
        accordance with such information as set out above and (b) the request of
        the Canadian Borrower to the Canadian Lender to accept such Bankers'
        Acceptances and deposit the same with the clearing house or deliver the
        same, as the case may be, in each case in accordance with this Agreement
        and such instructions. The Canadian Borrower acknowledges that a
        Canadian Lender shall not be obligated to accept any such Bankers'
        Acceptances except in accordance with the provisions of this Agreement.
        A Canadian Lender shall be and it is hereby authorized to act on behalf
        of the Canadian Borrower upon and in compliance with instructions
        communicated to that Canadian Lender as provided herein if the Canadian
        Lender reasonably believes such instructions to be genuine. If a
        Canadian Lender accepts Bankers' Acceptances pursuant to any such
        instructions, that Canadian Lender shall confirm particulars of such
        instructions and advise the Canadian Agent that it has complied
        therewith by notice in writing addressed to the Canadian Agent and
        served personally or sent by telecopier in accordance with the
        provisions hereof. A Canadian Lender's actions in compliance with such
        instructions, confirmed and advised to the Canadian Agent by such
        notice, shall be conclusively deemed to have been in accordance with the
        instructions of the Canadian Borrower. This power of attorney may be
        revoked by the Canadian Borrower with respect to any particular Canadian
        Lender at any time upon not less than 5 Banking Days' prior written
        notice served upon the Canadian Lender in question and the Canadian
        Agent, provided that no such revocation shall reduce, limit or otherwise
        affect the obligations of the Canadian Borrower in respect of any
        Bankers' Acceptance executed, completed, endorsed, deposited and/or
        delivered in accordance herewith prior to the time at which such
        revocation becomes effective.

             (6)  If the power of attorney in Section 2.3(a)(5) is revoked with
        respect to any Canadian Lender, the Canadian Borrower shall, from time
        to time as required by the applicable Canadian Lenders, provide to the
        Canadian Agent for delivery to each such Canadian Lender drafts drawn in
        blank by the Canadian Borrower (pre-endorsed and otherwise in fully
        negotiable form, if applicable) in quantities sufficient for each such
        Canadian Lender to fulfil its obligations hereunder. Any such pre-signed
        drafts which are delivered by the Canadian Borrower to the Canadian
        Agent or a Canadian Lender shall be held in safekeeping by the Canadian
        Agent or such Canadian Lender, as the case may be, with the same degree
        of care as if they were the Canadian Agent's or such Canadian Lender's
        property, and shall only be dealt with by the Canadian Lenders and the
        Canadian Agent in accordance herewith. No Canadian Lender shall be
        responsible or liable for its failure to make its share of any Bankers'
        Acceptances required hereunder if the cause of such failure is, in whole
        or in part, due to the failure of the Canadian Borrower to provide
<PAGE>
        such pre-signed drafts to the Canadian Agent (for delivery to such
        Canadian Lender) on a timely basis.

             (7)  Promptly following receipt of a Bankers' Acceptance Notice,
        the Canadian Agent shall so advise the Canadian Lenders and shall advise
        each Canadian Lender of the face amount of each Bankers' Acceptance to
        be accepted by it and the term thereof. The aggregate face amount of
        Bankers' Acceptances to be accepted by a Canadian Lender shall be
        determined by the Canadian Agent by reference to the respective Canadian
        Commitments of the Canadian Lenders, except that, if the face amount of
        a Bankers' Acceptance, which would otherwise be accepted by a Canadian
        Lender, would not be C$100,000.00 or an integral multiple thereof, such
        face amount shall be increased or reduced by the Canadian Agent in its
        sole and unfettered discretion to the nearest integral multiple of
        C$100,000.00.

             (8)  Each Bankers' Acceptance to be accepted by a Canadian Lender
        shall be accepted at such Canadian Lender's office shown on the
        signature pages hereof or as otherwise designated by such Canadian
        Lender from time to time.

             (9)  On the relevant borrowing date, each Canadian Lender severally
        agrees to purchase from the Canadian Borrower, at the face amount
        thereof discounted by the Applicable BA Discount Rate, any Bankers'
        Acceptance accepted by it and provide to the Canadian Agent, for the
        account of the Canadian Borrower, the BA Discount Proceeds in respect
        thereof after deducting therefrom the amount of the Acceptance Fee
        payable by the Canadian Borrower to such Canadian Lender under Section
        2.3(c) in respect of such Bankers' Acceptance.

             (10) Each Canadian Lender may at any time and from time to time
        hold, sell, rediscount or otherwise dispose of any or all Bankers'
        Acceptances accepted and purchased by it.

             (11) The Canadian Borrower waives presentment for payment and any
        other defense to payment of any amounts due to a Canadian Lender in
        respect of a Bankers' Acceptance accepted by it pursuant to this
        Agreement which might exist solely by reason of such Bankers' Acceptance
        being held, at the maturity thereof, by such Canadian Lender in its own
        right and the Canadian Borrower agrees not to claim any days of grace if
        such Canadian Lender as holder sues the Canadian Borrower on the
        Bankers' Acceptances for payment of the amount payable by the Canadian
        Borrower thereunder.

        (b)  With respect to each Bankers' Acceptance, the Canadian Borrower,
prior to the occurrence and continuation of a Default, may give irrevocable
telephone or written notice (or such other method of notification as may be
agreed upon between the Canadian Agent and the Canadian Borrower) to the
Canadian Agent at or before 12:00 noon (Toronto, Ontario time) two (2) Business
Days prior to the maturity date of such Bankers' Acceptance followed by written
confirmation electronically transmitted to the Canadian Agent on the same day,
of the Canadian Borrower's intention to issue one or more Bankers' Acceptance on
such maturity date (each a "Refunding Bankers' Acceptance") to provide for the
payment of such maturing Bankers' Acceptance (it being understood that payments
by the
<PAGE>
Canadian Borrower and fundings by the Canadian Lenders in respect of each
maturing Bankers' Acceptance and each related Refunding Bankers' Acceptance
shall be made on a net basis reflecting the difference between the face amount
of such maturing Bankers' Acceptance and the BA Discount Proceeds (net of the
applicable Acceptance Fee) of such Refunding Bankers' Acceptance). Any funding
on account of any maturing Bankers' Acceptance must be made at or before 12:00
noon (Toronto, Ontario time) on the maturity date of such Bankers' Acceptance.
If the Canadian Borrower fails to give such notice and does not otherwise pay to
the Canadian Agent all Bankers' Acceptance Liabilities on the maturity date of
any such Bankers' Acceptance, then subject to satisfaction of the conditions in
Section 5 hereof and to the Maximum Canadian Available Amount, the Canadian
Borrower shall be irrevocably deemed to have requested and to have been advanced
a Canadian Prime Loan in the face amount of such maturing Bankers' Acceptance on
the maturity date of such Bankers' Acceptance from the Canadian Lender which
accepted such maturing Bankers' Acceptance, which Canadian Prime Loan shall
thereafter bear interest as such in accordance with the provisions hereof until
paid in full.

        (c)  An Acceptance Fee shall be payable by the Canadian Borrower to each
Canadian Lender in advance (in the manner specified in Section 2.3(a)(6)) in
respect of, and as a condition precedent to the acceptance by such Canadian
Lender of, a Bankers' Acceptance to be accepted by such Canadian Lender
calculated at the rate per annum equal to the Margin Percentage applicable to
LIBOR Borrowings, calculated on the face amount of such Bankers' Acceptance and
computed on the basis of the number of days in the term of such Bankers'
Acceptance and a year of 365 days.

        2.4  Terminations, Reductions or Reallocations of Commitments.

        (a)  Mandatory. On the Termination Date, all U.S. Commitments, Canadian
Commitments and U.K. Commitments shall be terminated in their entirety.

        (b)  Optional Termination or Reduction. U.S. Borrower, Canadian Borrower
or U.K. Borrower, as the case may be, shall have the right to terminate or
reduce the unused portion of the U.S. Commitments, the Canadian Commitments or
the U.K. Commitments, as the case may be, at any time or from time to time,
provided that (i) U.S. Borrower, Canadian Borrower or U.K. Borrower, as the case
may be, shall give notice of each such termination or reduction to the
appropriate Agent as provided in Section 4.3 hereof and (ii) each such partial
reduction shall be in an integral multiple of $2,000,000. Notwithstanding the
foregoing, U.S. Borrower may not reduce the U.S. Commitments below the then
outstanding principal balance of the U.S. Revolving Loan Obligations, Canadian
Borrower may not reduce the Canadian Commitments below the then outstanding
principal balance of the Canadian Obligations and U.K. Borrower may not reduce
the U.K. Commitments below the then outstanding principal balance of the U.K.
Obligations. No termination or reduction of the Commitments pursuant to this
provision may be reinstated without the prior written approval of Agents and the
Lenders.

        (c)  Optional Increase. At any time after September 1, 2004 and so long
as no Default or Event of Default shall have occurred which is continuing, U.S.
Borrower shall have the right to increase the U.S. Commitments by an amount not
exceeding $20,000,000, in the aggregate, provided that (i) the U.S. Borrower
shall give notice of each such increase to the U.S. Agent as provided in Section
4.3 hereof, (ii) no Lender shall be required to increase its U.S. Commitment
<PAGE>
unless it shall have expressly agreed to such increase in writing (but
otherwise, no notice to or consent by any Lender shall be required,
notwithstanding anything to the contrary set forth in Section 11.5 hereof),
(iii) the addition of new U.S. Lenders shall be subject to the terms and
provisions of Section 11.6 hereof as if such new U.S. Lenders were acquiring an
interest in the U.S. Loans by assignment from an existing U.S. Lenders (to the
extent applicable, i.e. required approvals, minimum amounts, execution of new
U.S. Revolving Notes and the like), (iv) the U.S. Borrower shall execute and
deliver such additional or replacement U.S. Revolving Notes and such other
documentation (including evidence of proper authorization) as may be reasonably
requested by the U.S. Agent, any new U.S. Lenders or any U.S. Lenders which is
increasing its Commitment and (v) each such increase shall be in an aggregate
amount of at least $5,000,000. If the U.S. Borrower shall terminate or reduce
the U.S. Commitments pursuant to Section 2.4(b) hereof, it shall have no further
right to increase the U.S. Commitments pursuant to this Section. U.S. Borrower
shall be required to pay (or to reimburse each applicable U.S. Lender for) any
breakage costs incurred by any U.S. Lender in connection with the need to
reallocate existing U.S. Loans among the U.S. Lenders following any increase in
the U.S. Commitments pursuant to this provision.

        (d)  Reallocations. Subject to agreement by the Borrowers, any Dual
Lender may reallocate its existing U.S. Commitment and Canadian Commitment or
U.K. Commitment, as the case may be, so long as the sum of such U.S. Commitment
and Canadian Commitment or U.K. Commitment, as the case may be, remains
unchanged. In addition, with the prior written consent of all of the Dual
Lenders, any U.S. Lender may agree with Borrowers to convert a portion of its
U.S. Commitment into a Canadian Commitment or a U.K. Commitment, thereby
becoming a Dual Lender, any Canadian Lender may agree with Borrowers to convert
a portion of its Canadian Commitment into a U.S. Commitment and any U.K. Lender
may agree with Borrowers to convert a portion of its U.K Commitment into a U.S.
Commitment, in each case so long as (i) each Lender continues to be a U.S.
Lender with a U.S. Commitment of at least $1,000,000 and (ii) the sum of such
Lender's U.S. Commitment and Canadian Commitment or U.K. Commitment, as the case
may be, remains equal to the aggregate amount of such Lender's U.S. Commitment
and Canadian Commitment or U.K. Commitment, as the case may be, prior to such
reallocation. Borrowers shall give written notice to the Agents of any
reallocation pursuant to this provision at least ten (10) Business Days prior to
the effective date of any such reallocation. No Lender shall be required to
agree to any such reallocation, but may do so at its option, in its sole
discretion. The following conditions precedent must be satisfied prior to any
such reallocation becoming effective:

             (1)  no Default or Event of Default shall have occurred and be
        continuing;

             (2)  if, as a result of any such reallocation, the aggregate U.S.
        Revolving Loan Obligations would exceed the aggregate of all of the U.S.
        Commitments, then the U.S. Borrower shall, on the effective date of such
        reallocation, repay or prepay U.S. Revolving Loans (or provide Cover for
        Letter of Credit Liabilities relating to U.S. Letters of Credit) in
        accordance with this Agreement in an aggregate principal amount such
        that, after giving effect thereto, the aggregate U.S. Revolving Loan
        Obligations shall not exceed the aggregate of all of the U.S.
        Commitments;
<PAGE>
             (3)  if, as a result of any such reallocation, the Canadian
        Obligations would exceed the aggregate of all of the Canadian
        Commitments, then the Canadian Borrower shall, on the effective date of
        such reallocation, repay or prepay Canadian Revolving Loans (or provide
        Cover for Letter of Credit Liabilities relating to Canadian Letters of
        Credit or for Bankers' Acceptance Liabilities) in accordance with this
        Agreement in an aggregate principal amount such that, after giving
        effect thereto, the Canadian Obligations shall not exceed the aggregate
        of all of the Canadian Commitments;

             (4)  if, as a result of any such reallocation, the U.K. Obligations
        would exceed the aggregate of all of the U.K. Commitments, then the U.K.
        Borrower shall, on the effective date of such reallocation, repay or
        prepay U.K. Revolving Loans (or provide Cover for Letter of Credit
        Liabilities relating to U.K. Letters of Credit) in accordance with this
        Agreement in an aggregate principal amount such that, after giving
        effect thereto, the U.K. Obligations shall not exceed the aggregate of
        all of the U.K. Commitments;

             (5)  Borrowers shall have paid any amounts (or shall have provided
        Cover) due under Sections 2.9(c) or (d) hereof on the date of
        such reallocation;

             (6)  the Maximum Canadian Available Amount shall be adjusted to
        equal the sum of all of the Canadian Commitments after giving effect to
        such reallocation, the Maximum U.K. Available Amount shall be adjusted
        to equal the sum of all of the U.K. Commitments after giving effect to
        such reallocation and the Maximum U.S. Available Amount shall be
        adjusted to equal the sum of all of the U.S. Commitments after giving
        effect to such reallocation;

             (7)  participations by the Lenders in the outstanding Letters of
        Credit and the Letter of Credit Liabilities and the outstanding Loans of
        the Lenders shall be adjusted to give effect to such reallocation;
        provided, however, that in lieu of requiring any prepayment of any
        Bankers' Acceptances in order to make appropriate adjustments to give
        effect to such reallocations, Canadian Borrower shall be required to
        provide additional Cover for any applicable portion of the Bankers'
        Acceptance Liabilities;

             (8)  each Lender whose U.S. Commitment, Canadian Commitment or U.K.
        Commitment shall be the subject of any reallocation shall have received
        from the Borrowers a fee equal to the greater of $3,000.00 or 1/16% of
        the amount of the increase or decrease, as the case be, in its Canadian
        Commitment or U.K. Commitment, as the case may be.

        2.5  Commitment Fees.

        (a)  U.S. Borrower shall pay to U.S. Agent for the account of each U.S.
Lender, Canadian Borrower shall pay to Canadian Agent for the account of each
Canadian Lender and U.K. Borrower shall pay to U.K. Agent for the account of
each U.K. Lender, commitment fees for the Availability Period at a rate per
annum equal to the Commitment Fee Percentage. Such commitment fees shall be
computed (on the basis of the actual number of days elapsed in a year composed
of 360 days) on each day and shall be based on the excess of (x) the aggregate
amount
<PAGE>
of each Lender's U.S. Commitment, Canadian Commitment or U.K. Commitment,
as the case may be, for such day over (y) the sum of (i) the aggregate unpaid
principal balance (in Dollars) of such Lender's applicable Note or Notes on such
day plus (ii) the aggregate applicable Letter of Credit Liabilities as to such
Lender for such day plus, in the case of Canadian Lenders only, (iii) the
aggregate Bankers' Acceptance Liabilities outstanding on such day. Accrued
commitment fees shall be payable in arrears on the Quarterly Dates prior to the
Termination Date and on the Termination Date, with any Canadian Obligations
converted to Dollars at the Exchange Rate on each such date for the purposes of
each such calculation.

        (b)  All past due fees payable under this Section shall bear interest at
the Past Due Rate.

        2.6  Several Obligations. The failure of any Lender to make any Loan to
be made by it or to accept and purchase any Bankers' Acceptance required to be
so accepted and purchased by it on the date specified therefor shall not relieve
any other Lender of its obligation to make its Loan or to accept and purchase
its Bankers' Acceptance on such date, but neither any Agent nor any Lender shall
be responsible or liable for the failure of any other Lender to make a Loan or
to accept and purchase any Bankers' Acceptance or to participate in, or
co-issue, any Letter of Credit. Notwithstanding anything contained herein to the
contrary, (i) if a U.S. Lender fails to make a U.S. Revolving Loan as and when
required hereunder, then upon each subsequent event which would otherwise result
in payments of principal being made to the defaulting U.S. Lender, the amount
which would have been paid to the defaulting U.S. Lender shall be divided among
the non-defaulting U.S. Lenders ratably according to their respective Commitment
Percentages until the Obligations of each U.S. Lender (including the defaulting
U.S. Lender) are equal to such U.S. Lender's Commitment Percentage of the total
U.S. Revolving Loan Obligations, (ii) if a Canadian Lender fails to make a
Canadian Revolving Loan or accept and purchase any Bankers' Acceptance as and
when required hereunder, then upon each subsequent event which would otherwise
result in payments of principal being made to the defaulting Canadian Lender,
the amount which would have been paid to the defaulting Canadian Lender shall be
divided among the non-defaulting Canadian Lenders ratably according to their
respective Commitment Percentages until the Obligations of each Canadian Lender
(including the defaulting Canadian Lender) are equal to such Canadian Lender's
Commitment Percentage of the total Canadian Obligations and (iii) if a U.K.
Lender fails to make a U.K. Revolving Loan as and when required hereunder, then
upon each subsequent event which would otherwise result in payments of principal
being made to the defaulting U.K. Lender, the amount which would have been paid
to the defaulting U.K. Lender shall be divided among the non-defaulting U.K.
Lenders ratably according to their respective Commitment Percentages until the
Obligations of each U.K. Lender (including the defaulting U.K. Lender) are equal
to such U.K. Lender's Commitment Percentage of the total U.K. Obligations.

        2.7  Notes. The U.S. Revolving Loans made by each U.S. Lender shall be
evidenced by a single U.S. Revolving Note of U.S. Borrower in substantially the
form of Exhibit D hereto payable to the order of such U.S. Lender in a principal
amount equal to the U.S. Commitment of such U.S. Lender, and otherwise duly
completed. The Canadian Revolving Loans made by each Canadian Lender which are
denominated in Dollars shall be evidenced by a single Canadian Revolving Note of
Canadian Borrower in substantially the form of Exhibit C hereto payable to the
order of such Canadian Lender in a principal amount equal to the Canadian
Commitment of such Canadian Lender, and otherwise duly completed. The Canadian
Prime Loans made by each Canadian Lender shall be evidenced by a single Canadian
Dollar Revolving Note of Canadian Borrower in substantially the form of Exhibit
H hereto payable to the order of such Canadian Lender in a principal amount
equal to two times the Canadian Commitment of
<PAGE>
such Canadian Lender, and otherwise duly completed. The U.K. Revolving
Loans made by each U.K. Lender shall be evidenced by a single U.K. Revolving
Note of U.K. Borrower in substantially the form of Exhibit K hereto payable to
the order of such U.K. Lender in a principal amount equal to the U.K. Commitment
of such U.K. Lender, and otherwise duly completed. The Term Loans made by each
Lender shall be evidenced by a single Term Note of U.S. Borrower in
substantially the form of Exhibit J hereto payable to the order of such Lender
in a principal amount equal to the sum of the outstanding principal balance of
the Term Loans made by such Lender, and otherwise duly completed. The promissory
notes described in this Section are each, together with all renewals,
extensions, modifications and replacements thereof and substitutions therefor,
called a "Note" and collectively called the "Notes". Each Lender is hereby
authorized by each Borrower to endorse on the schedule (or a continuation
thereof) that may be attached to each Note of such Lender, to the extent
applicable, the date, amount, type of and the applicable period of interest for
each Loan made by such Lender to the applicable Borrower hereunder, and the
amount of each payment or prepayment of principal of such Loan received by such
Lender, provided, that any failure by such Lender to make any such endorsement
shall not affect the obligations of any Borrower under such Note or hereunder in
respect of such Loan.

        2.8  Use of Proceeds. The proceeds of the Loans, of the Letters of
Credit and of the acceptance and purchase of Bankers' Acceptances shall be used
by the Borrowers to refinance existing Borrowed Money Indebtedness of the
Borrowers and for acquisitions and for other working capital and general
corporate purposes. Neither any Agent nor any Lender shall have any
responsibility as to the use of any proceeds of the Loans or of the acceptance
and purchase of Bankers' Acceptances.

        2.9  Currency Fluctuations.

        (a)  Not later than 1:00 p.m. (Houston, Texas time) on each Calculation
Date, the U.S. Agent shall determine the Exchange Rate applicable to Canadian
Dollars as of such Calculation Date. For purposes of this Section and Section
3.2(b)(4) hereof, the Exchange Rate so determined shall become effective on the
first Business Day immediately following the relevant Calculation Date (a "Reset
Date").

        (b)  Not later than 4:00 p.m. (Houston, Texas time) on each Reset Date,
the U.S. Agent shall consult with the Canadian Agent and the Agents shall
determine the aggregate Canadian Obligations, the aggregate U.S. Revolving Loan
Obligations and the aggregate U.K. Obligations.

        (c)  If, on any Reset Date or on the date of any reallocation of the
U.S. Commitments, the Canadian Commitments and the U.K. Commitments pursuant to
Section 2.4(c) hereof, the sum of the aggregate U.S. Revolving Loan Obligations,
the U.K. Obligations and the Canadian Obligations exceeds the aggregate of all
of the U.S. Commitments, the Canadian Commitments and the U.K. Commitments, then
(i) the Agents shall give notice thereof to the Lenders and Borrowers and (ii)
the Borrowers shall within two (2) Business Days thereafter, repay or prepay
<PAGE>
Loans (or provide Cover for Letter of Credit Liabilities or Bankers' Acceptance
Liabilities) in accordance with this Agreement in an aggregate principal amount
sufficient to reduce the sum of the aggregate U.S. Revolving Loan Obligations,
the U.K. Obligations and the Canadian Obligations to the aggregate of all of the
U.S. Commitments, the Canadian Commitments and the U.K. Commitments.

        (d)  If, on any day prior to the Termination Date, the Canadian
Obligations exceed the aggregate of all of the Canadian Commitments, then (i)
the Canadian Agent shall give notice thereof to the Canadian Borrower and the
Canadian Lenders and (ii) within two (2) Business Days thereafter, the Canadian
Borrower shall repay or prepay Canadian Revolving Loans (or provide Cover for
Letter of Credit Liabilities relating to Canadian Letters of Credit or Bankers'
Acceptance Liabilities) in accordance with this Agreement in an aggregate
principal amount such that, after giving effect thereto, the Canadian
Obligations shall not exceed the aggregate of all of the Canadian Commitments.

3.      Borrowings, Prepayments and Interest Options.

        3.1  Borrowings. The applicable Borrower shall give the applicable Agent
notice of each borrowing to be made hereunder as provided in Section 4.3 hereof
and the applicable Agent shall promptly notify each applicable Lender of such
request. Not later than 2:00 p.m. Houston, Texas time (in the case of U.S.
Revolving Loans which are same day fundings), 11:00 a.m. Houston, Texas time (in
the case of U.S. Revolving Loans which are not same day fundings), 11:00 a.m.
Toronto, Ontario time (in the case of Canadian Revolving Loans which are not
same day fundings and Bankers' Acceptances), 1:00 p.m. Toronto, Ontario time (in
the case of Canadian Revolving Loans which are same day fundings), 11:00 a.m.
London, United Kingdom time (in the case of U.K. Revolving Loans which are not
same day fundings) or 1:00 p.m. London, United Kingdom time (in the case of U.K.
Revolving Loans which are same day fundings) on the date specified for each such
borrowing hereunder, each applicable Lender shall make available the amount of
the Loan, if any, to be made by it on such date and/or the proceeds of the
acceptance and purchase of any Bankers' Acceptances, if any, to be so accepted
and purchased by it on such date to the applicable Agent at its Principal
Office, in immediately available funds, for the account of the applicable
Borrower. Such amounts received by the applicable Agent will be held in an
account maintained by the applicable Borrower with the applicable Agent. The
amounts so received by the applicable Agent shall, subject to the terms and
conditions of this Agreement, be made available to the applicable Borrower by
wiring or otherwise transferring, in immediately available funds, such amount to
an account designated by the applicable Borrower and approved by the applicable
Agent.

        3.2  Prepayments.

        (a) Optional Prepayments. Except as provided in Section 3.3 hereof, each
Borrower shall have the right to prepay, on any Business Day, in whole or in
part, without the payment of any premium, penalty or fee, any of the Obligations
(other than Obligations relating to Bankers' Acceptances) at any time or from
time to time, provided that the applicable Borrower shall give the applicable
Agent notice of each such prepayment as provided in Section 4.3 hereof. Each
optional prepayment shall be in an amount equal to $1,000,000 (in respect of
Loans denominated in Dollars) or C$1,000,000 (in respect of Loans denominated in
Canadian Dollars) or an integral
<PAGE>
multiple of $500,000 (in respect of Loans denominated in Dollars) or
C$500,000 (in respect of Loans denominated in Canadian Dollars) in excess
thereof. Bankers' Acceptances may not be prepaid. Such optional prepayments of
Term Loans shall be applied ratably (based on outstanding principal balances) to
all Term Notes and shall be applied to scheduled principal installments in
inverse order of their maturities.

        (b)  Mandatory Prepayments and Cover. Except, in each case, as provided
in Section 3.3 hereof,

             (1)  Insurance Proceeds and Condemnation Awards.

                      (i)    Promptly following the receipt thereof by U.S.
                  Borrower or any of its Subsidiaries (other than a Borrower or
                  a Subsidiary of Canadian Borrower or U.K. Borrower which is a
                  Foreign Subsidiary), U.S. Borrower shall deposit or cause to
                  be deposited with U.S. Agent in an interest bearing account
                  (but without any obligation to maximize such interest) all of
                  the net cash proceeds of any payment or award in excess of
                  $1,000,000 made to any such Person under any policy of
                  Property insurance with respect to any Property owned by such
                  Person or pursuant to any condemnation award with respect to
                  any such Property; provided such amounts have not theretofore
                  been reasonably expended for the restoration or replacement of
                  the asset in respect of which such payment or award was made.
                  Such amounts shall be collaterally assigned to U.S. Agent as
                  security for the U.S. Obligations in a manner reasonably
                  acceptable to U.S. Agent. Upon delivery to U.S. Agent of
                  written certification by U.S. Borrower that the applicable
                  Obligor has reasonably expended amounts or committed in
                  writing to expend amounts for the restoration or replacement
                  of the asset in respect of which such payment or award was
                  made, specifying the amount expended or committed, so long as
                  no Default or Event of Default shall have occurred and be
                  continuing any such amount deposited with U.S. Agent shall be
                  released by U.S. Agent to U.S. Borrower; provided, however,
                  that, in the event that within 180 days of receipt of such
                  payment or award by U.S. Borrower, to the extent U.S. Borrower
                  shall not have actually spent or certified to U.S. Agent its
                  intention to expend a substantially equivalent amount for the
                  restoration or replacement of the asset in respect of which
                  such payment or award was made or to purchase other assets
                  that may be productively used in the business of the U.S.
                  Borrower or the applicable Subsidiary, U.S. Borrower shall
                  make a prepayment on the Term Loans (using any funds deposited
                  with U.S. Agent pursuant to this Section 3.2(b)(1) or other
                  funds) in the amount of the excess of the amount of such
                  payment or award over the amount of such expenditures and/or
                  commitment on such 180th day. Such prepayment shall be applied
                  to the Term Notes secured by the applicable Collateral and
                  shall be applied to scheduled principal installments in
                  inverse order of their maturities.

                      (ii)   In cases where the amount of the net cash proceeds
                  of any payment or award is equal to or less than $1,000,000
                  and no Default or Event of Default has occurred and is
                  continuing, such proceeds may be paid to any Obligor, and if
                  received by U.S. Agent shall be paid by U.S. Agent to U.S.
                  Borrower, for use in
<PAGE>
                  paying for replacements or repairs of or substitutes for the
                  damaged, destroyed or taken assets or in a manner otherwise
                  consistent with this Agreement.

             (2)  Excess Cash Flow. Within fifteen (15) Business Days after the
        delivery of the Annual Financial Statements pursuant to Section 7.2
        hereof with respect to the fiscal year of U.S. Borrower (commencing with
        the fiscal year ending on December 31, 2004), U.S. Borrower shall make a
        prepayment on the Term Loans in an amount equal to fifty percent (50%)
        of Excess Cash Flow for such fiscal year less (ii) optional prepayments
        made on the Term Loans during such fiscal year. Such prepayment shall be
        applied ratably to the Term Notes (based on outstanding principal
        balances) and shall be applied to scheduled principal installments in
        inverse order of their maturities. Notwithstanding the foregoing, the
        obligations to make payments under this Section 3.2(b)(2) shall cease at
        such time as the Funded Debt to EBITDA Ratio shall have been less than
        1.25 to 1.00 for two (2) consecutive fiscal quarters.

             (3)  U.S. Borrowing Base. U.S. Borrower shall from time to time on
        demand by U.S. Agent prepay the U.S. Revolving Loans (or provide Cover
        for Letter of Credit Liabilities relating to U.S. Letters of Credit) in
        such amounts as shall be necessary so that at all times the aggregate
        outstanding amount of all U.S. Revolving Loan Obligations shall be less
        than or equal to the Maximum U.S. Available Amount.

             (4)  Canadian Borrowing Base. Canadian Borrower shall from time to
        time on demand by Canadian Agent prepay the Canadian Revolving Loans (or
        provide Cover for Letter of Credit Liabilities relating to Canadian
        Letters of Credit) in such amounts as shall be necessary so that at all
        times the aggregate outstanding amount of all Canadian Obligations shall
        be less than or equal to the Maximum Canadian Available Amount
        (provided, however, that for purposes of this clause (4), the Exchange
        Rate used for conversion of Canadian Dollars into Dollars shall be the
        Exchange Rate as of the most recently occurring Calculation Date).

             (5)  U.K. Borrowing Base. U.K. Borrower shall from time to time on
        demand by U.K. Agent prepay the U.K. Revolving Loans (or provide Cover
        for Letter of Credit Liabilities relating to U.K. Letters of Credit) in
        such amounts as shall be necessary so that at all times the aggregate
        outstanding amount of all U.K. Obligations shall be less than or equal
        to the Maximum U.K. Available Amount (provided, however, that for
        purposes of this clause (5), the Exchange Rate used for conversion of
        Pounds or Euros (as the case may be) into Dollars shall be the Exchange
        Rate as of the most recently occurring Calculation Date).

             (6)  Sale of Certain Assets. An amount equal to the net proceeds in
        excess of $2,000,000 (in any fiscal year) realized from the sale of
        assets (other than real Property acquired after the date hereof and
        other than the Covington, Louisiana plant of a Subsidiary of U.S.
        Borrower which is held for sale as of the date hereof) outside of the
        ordinary course of business by U.S. Borrower or any of its Subsidiaries
        shall be applied as a prepayment on the Term Loans within forty-five
        (45) days after the receipt of such proceeds by U.S. Borrower or its
        applicable Subsidiary. An amount equal to the net proceeds in excess of
        $3,000,000 (in any fiscal year) realized from the sale of real
<PAGE>
        Property acquired after the date hereof (other than the Covington,
        Louisiana plant of a Subsidiary of U.S. Borrower which is held for sale
        as of the date hereof) by U.S. Borrower or any of its Subsidiaries shall
        be applied as a prepayment on the Term Loans within forty-five (45) days
        after the receipt of such proceeds by U.S. Borrower or its applicable
        Subsidiary. Each such prepayment shall be applied ratably to the Term
        Notes (based on outstanding principal balances) and shall be applied to
        scheduled principal installments in inverse order of their maturities.

             (7)  Equity Proceeds. An amount equal to one hundred percent (100%)
        of the net proceeds realized from the issuance of any equity securities
        by U.S. Borrower in connection with any public offering of equity
        securities shall be applied as a prepayment on the Term Loans within
        forty-five (45) days after the receipt of such proceeds by U.S.
        Borrower. Such prepayment shall be applied ratably to the Term Notes
        (based on outstanding principal balances) and shall be applied to
        scheduled principal installments in inverse order of their maturities.

             (8)  SACROC Facility. If (x) any material part of the SACROC
        Contracts shall for any reason be terminated, or shall cease to be in
        full force and effect, and shall not be replaced or reinstated in a
        manner acceptable to U.S. Agent within three (3) months or (y) Kinder
        Morgan shall, for any reason, fail to pay any amounts coming due and
        payable to U.S. Borrower or any of its Subsidiaries under any of the
        SACROC Contracts (exclusive of billing disputes being contested in good
        faith by Kinder Morgan in accordance with good industry practice) and
        such failure shall not be cured by Kinder Morgan within twenty (20) days
        after written notice thereof (exclusive of any cure by means of a waiver
        by U.S. Borrower or any of its Subsidiaries or by payment by U.S.
        Borrower or any of its Subsidiaries or any of their respective
        Affiliates) or (z) the aggregate trailing twelve (12) month payments to
        U.S. Borrower and its Subsidiaries under the SACROC Contracts shall be
        less than the aggregate annual debt service on the Term Notes for such
        twelve (12) month period for any reason, the entire unpaid principal
        balance of the Term Notes and all accrued and unpaid interest on the
        unpaid principal balance of the Term Notes shall be due and payable.

        (c)  Term Loan Amortization. The principal of the Term Notes shall be
due and payable in quarterly installments, each due on a Quarterly Date,
beginning on June 30, 2004, equal to $1,607,142.86 (in the aggregate for all
Term Notes) and allocated among the Term Loan Lenders pro rata in accordance
with the unpaid principal balances of the Term Notes held by the Term Loan
Lenders. On the Term Loan Maturity Date, the entire unpaid principal balance of
each Term Note and all accrued and unpaid interest on the unpaid principal
balance of each Term Note shall be finally due and payable.

        (d)  Interest Payments. Accrued and unpaid interest on the unpaid
principal balance of the Loans shall be due and payable on the Interest Payment
Dates.

        (e)  Payments and Interest on Reimbursement Obligations. Each Borrower
will pay to the applicable Agent for the account of each applicable Lender the
amount of each Reimbursement Obligation owed by such Borrower. Such payment
shall be due on the date on which the applicable Agent notifies the applicable
Borrower of the date and amount of the
<PAGE>
applicable payment by an Issuer of any drawing under a Letter of Credit
or on the date of maturity of any Bankers' Acceptance. The amount of any
Reimbursement Obligation may, if the applicable conditions precedent specified
in Sections 5.1 and 5.2 hereof have been satisfied, be paid with the proceeds of
Loans or, in the case of Canadian Obligations, of the acceptance and purchase or
Bankers' Acceptances. Subject to Section 11.7 hereof, each Borrower will pay to
the applicable Agent for the account of each applicable Lender interest on any
Reimbursement Obligation at (i) at the applicable Base Rate (with respect to
Reimbursement Obligations denominated in Dollars) or at the Canadian Prime Rate
(with respect to Reimbursement Obligations denominated in Canadian Dollars) plus
the applicable Margin Percentage from the date such Reimbursement Obligation
arises until the date five (5) Business Days thereafter and (ii) at the
applicable Past Due Rate thereafter until the same is paid in full.

        3.3  Interest Options

        (a)  Options Available. The outstanding principal balance of the
Canadian Dollar Revolving Notes shall bear interest at the Canadian Prime Rate
plus the applicable Margin Percentage and the outstanding principal balance of
the other Notes shall bear interest at the applicable Base Rate; provided, that
(1) all past due amounts, both principal and accrued interest, shall bear
interest at the Past Due Rate, and (2) subject to the provisions hereof, each
Borrower shall have the option of having all or any portion of the principal
balances of its Notes (other than the Canadian Dollar Revolving Notes) from
time to time outstanding bear interest at a Eurodollar Rate. The records of
Agents and each of the Lenders with respect to Interest Options, Interest
Periods and the amounts of Loans to which they are applicable shall be binding
and conclusive, absent manifest error. Interest on the amount of each advance
against the Notes shall be computed on the amount of that advance and from the
date it is made. Notwithstanding anything in this Agreement to the contrary,
for the full term of the Notes the interest rate produced by the aggregate of
all sums paid or agreed to be paid to the holders of the Notes for the use,
forbearance or detention of the debt evidenced thereby (including all interest
on the Notes at the Stated Rate plus the Additional Interest) shall not exceed
the Ceiling Rate.

        (b)  Designation and Conversion. Each Borrower shall have the right to
designate or convert its Interest Options in accordance with the provisions
hereof. Provided no Event of Default has occurred and is continuing and subject
to the last sentence of Section 3.3(a) and the provisions of Section 3.3(c),
each Borrower may elect to have a Eurodollar Rate apply or continue to apply to
all or any portion of the principal balance of its Notes (other than the
Canadian Dollar Revolving Notes). Each change in Interest Options shall be a
conversion of the rate of interest applicable to the specified portion of the
Loans, but such conversion shall not change the respective outstanding principal
balances of the applicable Notes. The Interest Options shall be designated or
converted in the manner provided below:

         (i) The applicable Borrower shall give the applicable Agent telephonic
             notice, promptly confirmed by a Rate Designation Notice (and the
             applicable Agent shall promptly inform each applicable Lender
             thereof). Each such telephonic and written notice shall specify the
             amount of the Loan and type (i.e. U.S. Revolving Loan, Canadian
             Revolving Loan, U.K. Revolving Loan or Term Loan) which is the
             subject of the designation, if any; the amount of borrowings which
             are to be converted or for which an Interest Option is designated;
             the proposed date for the
<PAGE>
             designation or conversion and the Interest Period or Periods, if
             any, selected by the applicable Borrower. Such telephonic notice
             shall be irrevocable and shall be given to the applicable Agent no
             later than the applicable Rate Designation Date.

        (ii) No more than four (4) LIBOR Borrowings shall be in effect with
             respect to the U.S. Revolving Loans at any time, no more than four
             (4) LIBOR Borrowings shall be in effect with respect to the
             Canadian Revolving Loans at any time and no more than four (4)
             LIBOR Borrowings shall be in effect with respect to the U.K.
             Revolving Loans at any time. No more than four (4) LIBOR Borrowings
             shall be in effect with respect to the Term Loans at any time. No
             single LIBOR Borrowing may include any combination of any two or
             more of U.S. Revolving Loans, Canadian Revolving Loans, U.K.
             Revolving Loans and Term Loans.

       (iii) Each designation or conversion of a LIBOR Borrowing shall occur on
             a Business Day.

        (iv) Except as provided in Section 3.3(c) hereof, no LIBOR Borrowing may
             be converted to a Base Rate Borrowing or another LIBOR Borrowing on
             any day other than the last day of the applicable Interest Period.

         (v) Each request for a LIBOR Borrowing shall be in the amount equal to
             $1,000,000 or an integral multiple of $500,000 in excess thereof.

        (vi) Each designation of an Interest Option with respect to the U.S.
             Revolving Notes shall apply to all of the U.S. Revolving Notes
             ratably in accordance with their respective outstanding principal
             balances. Each designation of an Interest Option with respect to
             the Canadian Revolving Notes shall apply to all of the Canadian
             Revolving Notes ratably in accordance with their respective
             outstanding principal balances. Each designation of an Interest
             Option with respect to the U.K. Revolving Notes shall apply to all
             of the U.K. Revolving Notes ratably in accordance with their
             respective outstanding principal balances. Each designation of an
             Interest Option with respect to the Term Notes shall apply to all
             of the Term Notes ratably in accordance with their respective
             outstanding principal balances. If any Lender assigns an interest
             in any of its Notes when any LIBOR Borrowing is outstanding with
             respect thereto, then such assignee shall have its ratable interest
             in such LIBOR Borrowing.

       (vii) The entire outstanding principal balance of the Canadian Dollar
             Revolving Notes shall bear interest at the Canadian Prime Rate.

        (c)  Special Provisions Applicable to LIBOR Borrowings.

        (i)  Options Unlawful. If the adoption of any applicable Legal
Requirement after the Effective Date or any change after the Effective Date in
any applicable Legal Requirement or in the interpretation or administration
thereof by any Governmental Authority or compliance by any Lender with any
request or directive (whether or not having the force of law) issued after the
Effective Date by any central bank or other Governmental Authority shall at any
time make it
<PAGE>
unlawful or impossible for any Lender to permit the establishment of or
to maintain any LIBOR Borrowing, the commitment of such Lender to establish such
LIBOR Borrowing shall forthwith be canceled and the applicable Borrower shall
forthwith, shall on the last day of the Interest Period relating to any
outstanding LIBOR Borrowing (or within such earlier period as may be required by
applicable law) (1) convert the LIBOR Borrowing of such Lender with respect to
which such demand was made to a Base Rate Borrowing; (2) pay all accrued and
unpaid interest to date on the amount so converted; and (3) pay any amounts
required to compensate each Lender for any additional cost or expense which any
Lender may incur as a result of such adoption of or change in such Legal
Requirement or in the interpretation or administration thereof and any Funding
Loss which any Lender may incur as a result of such conversion. If, when any
Agent so notifies any Borrower, such Borrower has given a Rate Designation
Notice specifying a LIBOR Borrowing but the selected Interest Period has not yet
begun, as to the applicable Lender such Rate Designation Notice shall be deemed
to be of no force and effect, as if never made, and the balance of the Loans
made by such Lender specified in such Rate Designation Notice shall bear
interest at the Base Rate until a different available Interest Option shall be
designated in accordance herewith.

        (ii) Increased Cost of Borrowings. Subject to Section 11.17, if the
adoption after the Effective Date of any applicable Legal Requirement or any
change after the Effective Date in any applicable Legal Requirement or in the
interpretation or administration thereof by any Governmental Authority or
compliance by any Lender with any request or directive (whether or not having
the force of law) issued after the Effective Date by any central bank or
Governmental Authority shall at any time as a result of any portion of the
principal balances of the Notes being maintained on the basis of a Eurodollar
Rate:

             (1)  subject any Lender to any Taxes, or any deduction or
                  withholding for any Taxes, on or from any payment due under
                  any LIBOR Borrowing or other amount due hereunder, other than
                  income and franchise taxes of the United States or its
                  political subdivisions or such other jurisdiction in which the
                  applicable Lender has its principal office or applicable
                  lending office; or

             (2)  change the basis of taxation of payments due from any Borrower
                  to any Lender under any LIBOR Borrowing (otherwise than by a
                  change in the rate of taxation of the overall net income of
                  such Lender); or

             (3)  impose, modify, increase or deem applicable any reserve
                  requirement (excluding that portion of any reserve requirement
                  included in the calculation of the applicable Eurodollar
                  Rate), special deposit requirement or similar requirement
                  (including, but not limited to, state law requirements)
                  against assets of any Lender, or against deposits with any
                  Lender, or against loans made by any Lender, or against any
                  other funds, obligations or other Property owned or held by
                  any Lender; or

             (4)  impose on any Lender any other condition regarding any LIBOR
                  Borrowing;
<PAGE>
and the result of any of the foregoing is to increase the cost to any Lender of
agreeing to make or of making, renewing or maintaining such LIBOR Borrowing, or
reduce the amount of principal or interest received by any Lender, then, within
15 Business Days after demand by any Agent (accompanied by a statement setting
forth in reasonable detail the applicable Lender's basis therefor), the
applicable Borrower shall pay to the applicable Agent additional amounts which
shall compensate each Lender for such increased cost or reduced amount. The
reasonable, good faith determination by any Lender of the amount of any such
increased cost, increased reserve requirement or reduced amount shall be
conclusive and binding, absent manifest error. Each Borrower shall have the
right, if it receives from any Agent any notice referred to in this paragraph,
upon three Business Days' notice to the applicable Agent (which shall notify
each affected Lender), either (i) to repay in full (but not in part) any
borrowing with respect to which such notice was given, together with any accrued
interest thereon, or (ii) to convert the LIBOR Borrowing which is the subject of
the notice to a Base Rate Borrowing; provided, that any such repayment or
conversion shall be accompanied by payment of (x) the amount required to
compensate each Lender for the increased cost or reduced amount referred to in
the preceding paragraph; (y) all accrued and unpaid interest to date on the
amount so repaid or converted, and (z) any Funding Loss which any Lender may
incur as a result of such repayment or conversion. Each Lender will notify the
applicable Borrower through the applicable Agent of any event occurring after
the date of this Agreement which will entitle such Lender to compensation
pursuant to this Section as promptly as practicable after it obtains knowledge
thereof and determines to request such compensation, and (if so requested by the
applicable Borrower through the applicable Agent) will designate a different
lending office of such Lender for the applicable LIBOR Borrowing or will take
such other action as the applicable Borrower may reasonable request if such
designation or action is consistent with the internal policy of such Lender and
legal and regulatory restrictions, will avoid the need for, or reduce the amount
of, such compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender.

        (iii)Inadequacy of Pricing and Rate Determination. If, for any reason
with respect to any Interest Period, the applicable Agent (or, in the case of
clause 3 below, the applicable Lender) shall have reasonably and in good faith
determined (which determination shall be conclusive and binding upon the
applicable Borrower, absent manifest error) that:

             (1)  such Agent is unable through its customary general practices
                  to determine any applicable Eurodollar Rate, or

             (2)  by reason of circumstances affecting the applicable market,
                  generally, such Agent is not being offered deposits in United
                  States dollars in such market, for the applicable Interest
                  Period and in an amount equal to the amount of any applicable
                  LIBOR Borrowing requested by the applicable Borrower, or

             (3)  any applicable Eurodollar Rate will not adequately and fairly
                  reflect the cost to any Lender of making and maintaining such
                  LIBOR Borrowing hereunder for any proposed Interest Period,
<PAGE>
then the applicable Agent shall give the applicable Borrower notice thereof and
thereupon, (A) any Rate Designation Notice previously given by such Borrower
designating the applicable LIBOR Borrowing which has not commenced as of the
date of such notice from such Agent shall be deemed for all purposes hereof to
be of no force and effect, as if never given, and (B) until the applicable Agent
shall notify such Borrower that the circumstances giving rise to such notice
from such Agent no longer exist, each Rate Designation Notice requesting the
applicable Eurodollar Rate shall be deemed a request for a Base Rate Borrowing,
and any applicable LIBOR Borrowing then outstanding shall be converted, without
any notice to or from the applicable Borrower, upon the termination of the
Interest Period then in effect with respect to it, to a Base Rate Borrowing.

        (iv) Funding Losses. Each Borrower shall indemnify each applicable
Lender against and hold each applicable Lender harmless from any Funding Loss
relating to Loans to such Borrower or relating to Bankers' Acceptances requested
by such Borrower. Subject to Section 11.17, this indemnity shall survive the
payment of the Notes. Within 15 Business Days after demand by any Agent
(accompanied by a certificate of the applicable Lender setting forth in
reasonable detail the amount and calculation of the amount claimed as to any
Funding Losses, which shall be conclusive and binding upon the applicable
Borrower, absent manifest error), the applicable Borrower shall pay to such
Agent, for the account of such Lender, the amount of such Funding Losses.

        (d)  Funding Offices; Adjustments Automatic; Calculation Year. Any
Lender may, if it so elects, fulfill its obligation as to any LIBOR Borrowing by
causing a branch or affiliate of such Lender to make such Loan and may transfer
and carry such Loan at, to or for the account of any branch office or affiliate
of such Lender; provided, that in such event for the purposes of this Agreement
such Loan shall be deemed to have been made by such Lender and the obligation of
the applicable Borrower to repay such Loan shall nevertheless be to such Lender
and shall be deemed held by it for the account of such branch or affiliate.
Without notice to any Borrower or any other Person, each rate required to be
calculated or determined under this Agreement shall automatically fluctuate
upward and downward in accordance with the provisions of this Agreement.
Interest at the Canadian Prime Rate or any applicable Prime Rate shall be
computed on the basis of the actual number of days elapsed in a year consisting
of 365 or 366 days, as the case may be. All other interest required to be
calculated or determined under this Agreement shall be computed on the basis of
the actual number of days elapsed in a year consisting of 360 days, unless the
Ceiling Rate would thereby be exceeded, in which event, to the extent necessary
to avoid exceeding the Ceiling Rate, the applicable interest shall be computed
on the basis of the actual number of days elapsed in the applicable calendar
year in which accrued.

        (e)  Funding Sources. Notwithstanding any provision of this Agreement to
the contrary, each Lender shall be entitled to fund and maintain its funding of
all or any part of the Loans in any manner it sees fit, it being understood,
however, that for the purposes of this Agreement all determinations hereunder
shall be made as if each Lender had actually funded and maintained each LIBOR
Borrowing during each Interest Period through the purchase of deposits having a
maturity corresponding to such Interest Period and bearing an interest rate
equal to the Eurodollar Rate for such Interest Period.
<PAGE>
4.      Payments; Pro Rata Treatment; Computations, Etc.

        4.1  Payments.

        (a)  Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
any Borrower hereunder, under the Notes and under the other Loan Documents shall
be made, without set-off or counterclaim, in (i) with respect to Bankers'
Acceptance Liabilities and Canadian Prime Loans, Canadian Dollars and (ii) in
all other cases, in Dollars, in immediately available funds, to the applicable
Agent at its Principal Office (or in the case of a successor U.S. Agent, at the
principal office of such successor U.S. Agent in the United States, in the case
of a successor Canadian Agent, at the principal office of such successor
Canadian Agent in Canada and in the case of a successor U.K. Agent, at the
principal office of such successor U.K. Agent in the United Kingdom), not later
than 11:00 a.m. Houston, Texas time (in the case of any payment by the U.S.
Borrower), 12:00 noon Toronto, Ontario time (in the case of any payment by the
Canadian Borrower) or 11:00 a.m. London, United Kingdom time (in the case of any
payment by the U.K. Borrower) on the date on which such payment shall become due
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Business Day).

        (b)  Each Borrower shall, at the time of making each payment hereunder,
under any Note or under any other Loan Document, specify to the applicable Agent
the Obligations payable by such Borrower hereunder or thereunder to which such
payment is to be applied. Each payment received by any Agent hereunder, under
any Note or under any other Loan Document for the account of a Lender shall be
paid promptly to such Lender, in immediately available funds. If any Agent fails
to send to any Lender the applicable amount by the close of business on the date
any such payment is received by such Agent if such payment is received prior to
11:00 a.m. Houston, Texas time (in the case of any payment to a U.S. Lender) or
12:00 noon Toronto, Ontario time (in the case of any payment to a Canadian
Lender) or 11:00 a.m. London, United Kingdom time (in the case of any payment to
a U.K. Lender) (or on the next succeeding Business Day with respect to payments
which are received after such time), such Agent shall pay to the applicable
Lender interest on such amount from such date at a rate of interest per annum
equal to (i) in respect of Obligations which are denominated in Dollars, the
Federal Funds Rate and (ii) in respect of Canadian Obligations which are
denominated in Canadian Dollars, the CDOR Rate. Borrowers, Lenders and Agents
acknowledge and agree that this provision and each other provision of this
Agreement or any of the other Loan Documents relating to the application of
amounts in payment of the Obligations shall be subject to the provisions of
Section 4.2(d) regarding pro rata application of amounts after an Event of
Default shall have occurred and be continuing.

        (c)  If the due date of any payment hereunder or under any other Loan
Document falls on a day which is not a Business Day, the due date for such
payments (except as otherwise provided in clause (2) of the definition of
"Interest Period") shall be extended to the next succeeding Business Day and
interest shall be payable for any principal so extended for the period of such
extension.

        (d)  All payments by any Borrower hereunder or under any other Loan
Document shall be made free and clear of and without deduction for or on account
of any present or future
<PAGE>
income, stamp, or other taxes, fees, duties, withholding or other charges
of any nature whatsoever imposed by any taxing authority excluding in
the case of each Agent, each Issuer and each Lender taxes imposed on or measured
by its net income or franchise taxes imposed by the jurisdiction in which it is
organized or through which it acts for purposes of this Agreement (such
non-excluded items being hereinafter referred to as "Taxes"). If any withholding
or deduction from any payment to be made to, or for the account of, any Agent,
any Issuer or any Lender by any Borrower hereunder or under any other Loan
Document is required in respect of any Taxes pursuant to any applicable law,
rule, or regulation, then such Borrower will (i) pay to the relevant authority
the full amount required to be so withheld or deducted; (ii) to the extent
available, promptly forward to the applicable Agent an official receipt or other
documentation reasonably satisfactory to such Agent evidencing such payment to
such authority; and (iii) pay to the applicable Agent, for the account of each
affected Person, such additional amount or amounts as are necessary to ensure
that the net amount actually received by such Person will equal the full amount
such Lender would have received had no such withholding or deduction been
required. Each such Person shall reasonably and in good faith determine such
additional amount or amounts payable to it (which determination shall, in the
absence of manifest error, be conclusive and binding on each Borrower). If any
Agent, any Issuer or any Lender becomes aware that any such withholding or
deduction from any payment to be made by any Borrower hereunder or under any
other Loan Document is required, then such Person shall promptly notify the
applicable Agent and the applicable Borrower thereof stating the reasons
therefor and the additional amount required to be paid under this Section. Each
Lender shall execute and deliver to the applicable Agent and the applicable
Borrower such forms as it may be required to execute and deliver pursuant to
Section 11.13 hereof. To the extent that any such withholding or deduction
results from a breach of a representation by a Lender set forth herein or from
the failure of a Lender to provide a form required by Section 11.13 hereof
(unless such failure is due to some prohibition under applicable Legal
Requirements), the applicable Borrower shall have no obligation to pay the
additional amount required by clause (iii) above. Anything in this Section
notwithstanding, if any Lender elects to require payment by any Borrower of any
material amount under this Section, the applicable Borrower may, within 60 days
after the date of receiving notice thereof and so long as no Default shall have
occurred and be continuing, elect to terminate such Lender as a party to this
Agreement; provided that, concurrently with such termination the applicable
Borrower shall (i) if the Agents and each of the other Lenders shall consent,
pay that Lender all principal, interest and fees and other amounts owed to such
Lender through such date of termination or (ii) have arranged for another
financial institution approved by the Agents (such approval not to be
unreasonably withheld or delayed) as of such date, to become a substitute Lender
for all purposes under this Agreement in the manner provided in Section 11.6;
provided further that, prior to substitution for any Lender, the applicable
Borrower shall have given written notice to the Agents of such intention and the
Lenders shall have the option, but no obligation, for a period of 60 days after
receipt of such notice, to increase their U.S. Commitments, Canadian Commitments
or U.K. Commitments, as the case may be, in order to replace the affected Lender
in lieu of such substitution.

        4.2  Pro Rata Treatment. Except to the extent otherwise provided herein:
(a) each borrowing from the Lenders under Section 2.1 hereof shall be made (w)
in the case of Canadian Revolving Loans, ratably from the Canadian Lenders in
accordance with their respective Canadian Commitments, (x) in the case of U.K.
Revolving Loans, ratably from the U.K. Lenders in accordance with their
respective U.K. Commitments, (y) in the case of U.S. Revolving Loans,
<PAGE>
ratably from the U.S. Lenders in accordance with their respective U.S.
Commitments and (z) in the case of Term Loans, ratably from the Term Loan
Lenders in accordance with the amounts set forth opposite their signature lines
hereto under the heading "Term Loans"; (b) each payment of commitment fees shall
be made for the account of the Lenders, and each termination or reduction of the
U.S. Commitments, Canadian Commitments or U.K. Commitments of the Lenders under
Section 2.3 hereof shall be applied, pro rata, according to the Lenders'
respective U.S. Commitments, Canadian Commitments or U.K. Commitments, as the
case may be; (c) each payment by any Borrower of principal of or interest on the
Term Loans, Canadian Revolving Loans, U.K. Revolving Loans, U.S. Revolving Loans
or any Bankers' Acceptance, as the case may be, prior to the occurrence of an
Event of Default (or after the applicable Event of Default shall have been fully
cured or waived) shall be made to the applicable Agent for the account of the
applicable Lenders pro rata in accordance with the respective unpaid principal
amounts of the Term Loans, Canadian Revolving Loans, U.K. Revolving Loans or
U.S. Revolving Loans (as the case may be) held by or Bankers' Acceptances
accepted by such Lenders; (d) each payment by any Borrower of principal of or
interest on the Term Loans, Canadian Revolving Loans, U.K. Revolving Loans, U.S.
Revolving Loans or any Bankers' Acceptance, as the case may be, while an Event
of Default shall have occurred and be continuing, shall be made to the
applicable Agent for the account of the Lenders pro rata in accordance with the
respective unpaid principal amounts of the Obligations held by the Lenders (i.e.
such payments shall be shared by all of the Lenders and not restricted to the
holders of U.S. Revolving Notes, Canadian Revolving Notes, Canadian Dollar
Revolving Notes, U.K. Revolving Notes or Term Notes, or Lenders having accepted
Bankers' Acceptances, as the case may be, regardless of any attempted contrary
designation by any Borrower), and (e) the applicable Lenders (other than the
applicable Issuer) shall purchase from the applicable Issuer participations in
each Letter of Credit to the extent of their respective Commitment Percentages.

        4.3  Certain Actions, Notices, Etc. Notices to the applicable Agent of
any termination or reduction of U.S. Commitments, Canadian Commitments or U.K.
Commitments, as the case may be, and of borrowings and optional prepayments of
Loans and requests for issuances of Letters of Credit shall be irrevocable and
shall be effective only if received by the applicable Agent not later than noon
Houston, Texas time (in the case of U.S. Revolving Loans which are same day
fundings), 11:00 a.m. Houston, Texas time (in the case of U.S. Revolving Loans
which are not same day fundings and U.S. Letters of Credit), 12:00 noon Toronto,
Ontario time (in the case of Canadian Revolving Loans which are not same day
fundings, Bankers' Acceptances and Canadian Letters of Credit), 10:00 a.m.
Toronto, Ontario time (in the case of Canadian Revolving Loans which are same
day fundings), 11:00 a.m. London, United Kingdom time (in the case of U.K.
Revolving Loans which are not same day fundings and U.K. Letters of Credit) or
10:00 a.m. London, United Kingdom time (in the case of U.K. Revolving Loans
which are same day fundings) on the number of Business Days prior to the date of
the relevant termination, reduction, borrowing and/or prepayment specified
below:

<TABLE>
<CAPTION>
                                                          Number of Business
                                                           Days Prior Notice
                                                          ------------------
        <S>                                               <C>

        Section 2.4(d) Reallocations                             10
        Termination or Reduction of U.S.

</TABLE>
<PAGE>
<TABLE>
        <S>                                               <C>
        Commitments, Canadian Commitments
        or U.K. Commitments                                       5

        Increase of U.S. Commitments (pursuant
        to Section 2.4(c) hereof)                                10

        U.S. Revolving Loan, Canadian
        Revolving Loan or U.K. Revolving

        Loan repayment                                           same day

        Base Rate Borrowings                                     same day
        and Canadian Prime Loans

        Letter of Credit issuance                                 2

        Prepayments required pursuant to
        Section 3.2(b)                                           same day

        Optional prepayment of

        Term Loan                                                 5

        Selection of a Eurodollar Rate                            3 LIBOR
                                                                  Business Days

        Bankers' Acceptances                                      2

</TABLE>

Each such notice of termination or reduction shall specify the amount of the
applicable U.S. Commitment, Canadian Commitment or U.K. Commitment to be
terminated or reduced. Each such notice of borrowing or prepayment shall specify
the amount of the Loans to be borrowed or prepaid and the date of borrowing or
prepayment (which shall be a Business Day). The applicable Agent shall promptly
notify the affected Lenders of the contents of each such notice.

        4.4 Non-Receipt of Funds by Any Agent. Unless the applicable Agent shall
have been notified by a Lender or a Borrower (the "Payor") prior to the date on
which such Lender is to make payment to such Agent of the proceeds of a Loan (or
funding of a drawing under a Letter of Credit or reimbursement with respect to
any drawing under a Letter of Credit or funding of a payment under a Bankers'
Acceptance or reimbursement with respect to any payment under a Bankers'
Acceptance) to be made by it hereunder or the applicable Borrower is to make a
payment to such Agent for the account of one or more of the Lenders, as the case
may be (such payment being herein called the "Required Payment"), which notice
shall be effective upon receipt, that the Payor does not intend to make the
Required Payment to such Agent, the applicable Agent may assume that the
Required Payment has been made and may, in reliance upon such assumption (but
shall not be required to), make the amount thereof available to the intended
recipient on such date and, if the Payor has not in fact made the Required
Payment to such Agent, the recipient of such payment (or, if such recipient is
the beneficiary of a Letter of Credit, the applicable Borrower and, if such
Borrower fails to pay the amount thereof to the applicable Agent forthwith upon
demand, the applicable Lenders ratably in proportion to their
<PAGE>
respective Commitment Percentages) shall, on demand, pay to such Agent
the amount made available by such Agent, together with interest thereon in
respect of the period commencing on the date such amount was so made available
by such Agent until the date Agent recovers such amount at a rate per annum for
such period equal to (i) in respect of Obligations which are denominated in
Dollars, the Federal Funds Rate and (ii) in respect of Canadian Obligations
which are denominated in Canadian Dollars, the CDOR Rate.

        4.5  Sharing of Payments, Etc. If a Lender shall obtain payment of any
principal of or interest on any Loan made by it under this Agreement, on any
Reimbursement Obligation or on any other Obligation then due to such Lender
hereunder, through the exercise of any right of set-off (including, without
limitation, any right of setoff or Lien granted under Section 9.2 hereof),
banker's lien, counterclaim or similar right, or otherwise, it shall promptly
purchase from the other Lenders participations in the Loans made, or
Reimbursement Obligations or other Obligations held, by the other Lenders in
such amounts, and make such other adjustments from time to time as shall be
equitable to the end that all the Lenders shall share the benefit of such
payment (net of any expenses which may be incurred by such Lender in obtaining
or preserving such benefit) pro rata in accordance with the unpaid Obligations
then due to each of them. To such end all the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if such payment is rescinded or must otherwise be restored. Each Borrower
agrees, to the fullest extent it may effectively do so under applicable law,
that any Lender so purchasing a participation in the Loans made, or
Reimbursement Obligations or other Obligations held, by other Lenders may
exercise all rights of set-off, bankers' lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender were a direct
holder of Loans, Reimbursement Obligations or other Obligations in the amount of
such participation. Nothing contained herein shall require any Lender to
exercise any such right or shall affect the right of any Lender to exercise, and
retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of any Borrower.

5.      Conditions Precedent.

        5.1  Initial Loans, Letters of Credit and Bankers' Acceptances. The
obligation of each Lender or each Issuer to make its initial Loans or issue or
participate in the initial Letter of Credit hereunder or to accept and purchase
its initial Bankers' Acceptance hereunder (whichever shall first occur) is
subject to the following conditions precedent, each of which shall have been
fulfilled or waived to the satisfaction of the Majority Lenders (or by all of
the Lenders to the extent that such waiver requires unanimous consent under
Section 11.5 hereof):

        (a)  Authorization and Status. Agents shall have received (i) copies of
the Organizational Documents of each Obligor certified as true and correct by
its secretary, assistant secretary or other equivalent officer, (ii) evidence
reasonably satisfactory to Agents of all action taken by each Obligor
authorizing the execution, delivery and performance of the Loan Documents and
all other documents related to this Agreement to which it is a party (including,
without limitation, a certificate of the secretary, assistant secretary or other
equivalent officer of each such party which is a corporation setting forth the
resolutions of its Board of Directors authorizing the transactions contemplated
thereby), and (iii) such certificates as may be appropriate to demonstrate the
qualification and good standing of each Obligor in the jurisdiction
<PAGE>
of its organization and in each other jurisdiction where the failure in
which to qualify could reasonably be expected to have a Material Adverse Effect.

        (b)  Incumbency. Each Obligor shall have delivered to Agents a
certificate in respect of the name and signature of each of the officers or
other authorized individual (i) who is authorized to sign on its behalf the
applicable Loan Documents to which it is a party related to any Loan, the
issuance of any Letter of Credit or the acceptance of any Bankers' Acceptance
and (ii) who will, until replaced by other officer(s) or other authorized
individual(s) duly authorized for that purpose, act as its representative for
the purposes of signing documents and giving notices and other communications in
connection with any Loan, the issuance of any Letter of Credit or the acceptance
of any Bankers' Acceptance. Each Agent and each Lender may conclusively rely on
such certificates until they receive notice in writing from the applicable
Obligor to the contrary.

        (c)  Notes. Agents shall have received the appropriate Notes of
Borrowers for each Lender, duly completed and executed.

        (d)  Loan Documents. Each Obligor shall have duly executed and delivered
the Loan Documents to which it is a party (in such number of copies as Agents
shall have requested). Each such Loan Document shall be in substantially the
form furnished to the Lenders prior to their execution of this Agreement,
together with such changes therein as Agents may approve.

        (e)  Security Matters. All such action as Agents shall have requested to
perfect the Liens created pursuant to the Security Documents which are in effect
as of the Effective Date shall have been taken, including, without limitation,
where applicable, the filing and recording of the Security Documents with the
appropriate Governmental Authorities. Agent shall also have received evidence
satisfactory to it that the Liens created by the Security Documents constitute
first priority Liens, except as expressly provided herein or therein, including,
without limitation, delivery of all applicable stock certificates (with stock
powers executed in blank), Uniform Commercial Code search reports and other
applicable personal property registry reports, satisfactory title evidence in
form and substance acceptable to Agent, and executed releases or assignments (as
U.S. Agent may require) of any prior Liens which are not permitted hereunder.

        (f)  Fees and Expenses. Borrowers shall have paid to Agents all unpaid
fees in the amounts previously agreed upon in writing between any Borrower and
any Agent.

        (g)  Insurance. Borrowers shall have delivered to Agents certificates of
insurance satisfactory to Agents evidencing the existence of all insurance
required to be maintained by each Obligor by this Agreement and the Security
Documents.

        (h)  Opinions of Counsel. Agents shall have received such opinions of
counsel to Obligors as Agents shall reasonably request with respect to Obligors
and the Loan Documents.

        (i)  Consents. Agents shall have received evidence satisfactory to the
Majority Lenders that all material consents of each Governmental Authority and
of each other Person, if any, reasonably required in connection with (a) the
Loans, Letters of Credit and Bankers'
<PAGE>
Acceptances and (b) the execution, delivery and performance of this Agreement
and the other Loan Documents have been satisfactorily obtained.

        (j)  Export/Import Credit Facilities. Agents shall have received copies
of the material documentation relating to the Export/Import Credit Facilities,
in Proper Form. Upon request of Agents or the Majority Lenders, such copies
shall be certified as true, correct and complete by the U.S. Borrower.

        (k)  Real Property Items. U.S. Agent shall have received brokers'
valuations of the Property covered by the Mortgages, together with evidence
reasonably satisfactory to the U.S. Agent that none of the Property covered by
the Mortgages lies in an area requiring special notices of flood hazard issues
or the purchase of flood hazard insurance and, to the extent reasonably required
by U.S. Agent with respect to Property covered by any Mortgage a policy or
policies of title insurance issued by a nationally recognized title insurance
company, insuring the Lien of each such Mortgage as a valid first Lien on the
Property described therein, free of any other Liens except as permitted
hereunder, together with such endorsements, coinsurance and reinsurance as the
U.S. Agent may reasonably request, and such surveys, abstracts and appraisals as
may be required pursuant to such Mortgages or as the U.S. Agent may reasonably
request.

        (l)  Field Exam. Agents shall have received satisfactory results from a
field exam of the Accounts and Inventory of U.S. Borrower, Canadian Borrower and
each applicable Obligor in respect of the U.S. Obligations and the Canadian
Obligations.

        (m)  Appraisals. U.S. Agent shall have received satisfactory results of
appraisals of the plant, property and equipment of U.S. Borrower each applicable
Obligor in respect of the U.S. Obligations, including an update of the 2003
Barnes & Click report with respect to the SACROC Facility.

        (n)  Environmental. To the extent required by Agents, Agents shall have
received satisfactory independent environmental engineers' environmental
reports, including a Phase 1 on the Calgary manufacturing facility and the
Electra, Texas facility, reporting on the existence of existing and potential
environmental risks along with an estimate of any applicable costs for clean up.

        (o)  SACROC Facility. U.S. Agent shall have received satisfactory
Security Agreements providing for a collateral assignment to U.S. Agent of all
rights, titles and interests of National Tank Company in and to the SACROC
Contracts.

        (p)  Other Documents. Agents shall have received such other documents
consistent with the terms of this Agreement and relating to the transactions
contemplated hereby as Agents may reasonably request.

        5.2  All Loans, Letters of Credit and Bankers' Acceptances. The
obligation of each Lender to make any Loan to be made by it hereunder or to
issue or participate in any Letter of Credit or to accept and purchase any
Bankers' Acceptance is subject to (a) the accuracy, in all material respects, on
the date of such Loan or such issuance or such acceptance and purchase of all
representations and warranties of each Obligor contained in this Agreement and
the other
<PAGE>
Loan Documents; (b) the applicable Agent shall have received the following, all
of which shall be duly executed and in Proper Form: (1) a Request for Extension
of Credit as to the Loan, Letter of Credit or Bankers' Acceptance, as the case
may be, by the time and on the Business Day specified under Section 4.3 hereof,
(2) in the case of a Letter of Credit, an Application, and (3) such other
documents as the applicable Agent may reasonably require; (c) prior to the
making of such Loan or the issuance of such Letter of Credit or the acceptance
and purchase of such Bankers' Acceptance, there shall have occurred no event
which could reasonably be expected to have a Material Adverse Effect; (d) no
Default or Event of Default shall have occurred and be continuing; and (e) the
making of such Loan or the issuance of such Letter of Credit or the acceptance
and purchase of such Bankers' Acceptance shall not be illegal or prohibited by
any applicable Legal Requirement. The submission by any Borrower of a Request
for Extension of Credit shall be deemed to be a representation and warranty that
the conditions precedent to the applicable Loan or Letter of Credit or Bankers'
Acceptance have been satisfied.

6.      Representations and Warranties.

        To induce Agents, the Issuers and the Lenders to enter into this
Agreement and to make the Loans and issue or participate in the Letters of
Credit and accept and purchase Bankers' Acceptances, U.S. Borrower, Canadian
Borrower and U.K. Borrower each represents and warrants (such representations
and warranties to survive any investigation and the making of the Loans and the
issuance of any Letters of Credit and the acceptance and purchase of any
Bankers' Acceptances) to the Lenders, Issuers and Agents as follows:

        6.1  Organization. Each Obligor (a) is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization; (b)
has all necessary power and authority to conduct its business as presently
conducted; and (c) is duly qualified to do business and in good standing in the
jurisdiction of its organization and in all jurisdictions in which the failure
to so qualify could reasonably be expected to have a Material Adverse Effect.

        6.2  Financial  Statements.  Borrowers  have  furnished  to Agents  (a)
audited consolidated financial statements (including a balance sheet) as to U.S.
Borrower that fairly present in all material respects,  in accordance with GAAP,
the  consolidated  financial  condition  and the results of  operations  of U.S.
Borrower as at the end of the fiscal years ended  December 31, 2001 and December
31, 2002; (b) unaudited  consolidating financial statements (including a balance
sheet) as to U.S.  Borrower and its  Subsidiaries  which  fairly  present in all
material  respects,  in  accordance  with  GAAP,  the  consolidating   financial
condition and the results of operations of U.S.  Borrower and its  Subsidiaries,
on a  consolidating  basis, as at the end of the fiscal years ended December 31,
2001 and December 31, 2002;  and (c) unaudited  consolidated  and  consolidating
financial  statements  (including a balance  sheet) as to U.S.  Borrower and its
Subsidiaries which fairly present in all material  respects,  in accordance with
GAAP, the consolidated and consolidating  financial condition and the results of
operations  of U.S.  Borrower and its  Subsidiaries  as at the end of the fiscal
quarters  ended March 31, 2003,  June 30, 2003,  September 30, 2003 and December
31, 2003.  No events,  conditions or  circumstances  have occurred from the date
that the financial statements were delivered to Agent through the Effective Date
which would cause said  financial  statements  to be  misleading in any material
respect.  Except for the Loan  Documents,  there are no material  instruments or
liabilities which should be reflected in such financial  statements  provided to
Agent which are not so reflected.
<PAGE>
        6.3  Enforceable Obligations; Authorization. The Loan Documents to which
the applicable Obligors are parties are legal, valid and binding obligations of
each applicable Obligor, enforceable in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency and other similar laws and
judicial decisions affecting creditors' rights generally and by general
equitable principles. The execution, delivery and performance of the Loan
Documents by the respective Obligors (a) have all been duly authorized by all
necessary corporate action; (b) are within the corporate power and authority of
each applicable Obligor; (c) do not and will not contravene or violate any Legal
Requirement applicable to any applicable Obligor or the Organizational Documents
of any applicable Obligor, the contravention or violation of which could
reasonably be expected to have a Material Adverse Effect; (d) do not and will
not result in the breach of, or constitute a default under, any material
agreement or instrument by which any Obligor or any of its Property may be
bound, and (e) do not and will not result in the creation of any Lien upon any
Property of any Obligor, except in favor of Agents as expressly contemplated
herein or therein. All necessary permits, registrations and consents for such
making and performance have been obtained. Except as otherwise expressly stated
in the Security Documents, the Liens of the Loan Documents will constitute valid
and perfected first and prior Liens on the Property described therein, subject
to no other Liens whatsoever except Permitted Liens.

        6.4  Other Debt. No Obligor is in default in the payment of any other
Borrowed Money Indebtedness or under any agreement, mortgage, deed of trust,
security agreement or lease to which it is a party and which default could
reasonably be expected to have a Material Adverse Effect.

        6.5  Litigation. Except as set forth on Schedule 6.5 hereto, there is no
material litigation or administrative proceeding, to the knowledge of any
executive officer of any Borrower, pending or threatened against, nor any
material outstanding judgment, order or decree against, any Obligor before or by
any Governmental Authority. No Obligor is in default with respect to any
judgment, order or decree of any Governmental Authority where such default could
reasonably be expected to have a Material Adverse Effect.

         6.6 Title.   Each  Obligor  has  good  and  defensible  title  to  the
Collateral,  if any,  pledged  (or  purported  to be  pledged)  by such  Obligor
pursuant to the Security  Documents,  free and clear of all Liens  (except Liens
permitted under Section 8.2 hereof).

        6.7  Taxes. Each Obligor has filed all tax returns required to have been
filed by it and paid all taxes shown thereon to be due, except those for which
extensions have been obtained and those which are being contested in good faith
or where the failure to make required filings or pay required taxes could not
reasonably be expected to have a Material Adverse Effect.

        6.8  Regulations U and X. None of the proceeds of any Loan or proceeds
from the acceptance and purchase of Bankers' Acceptances will be used for the
purpose of purchasing or carrying directly or indirectly any margin stock or for
any other purpose that would constitute this transaction a "purpose credit"
within the meaning of Regulations U and X of the Board of Governors of the
Federal Reserve System, as any of them may be amended from time to time.
<PAGE>
        6.9  Subsidiaries. As of the Effective Date, U.S. Borrower has no
Subsidiaries other than as set forth on Schedule 6.9 hereto. The percentage of
the issued and outstanding Equity Interests in each applicable Subsidiary which
is owned by U.S. Borrower or one or more of its Subsidiaries is set forth on
Schedule 6.9 hereto.

        6.10 No Untrue or Misleading Statements. No document, instrument or
other writing furnished to the Lenders by or on behalf of any Obligor in
connection with the transactions contemplated in any Loan Document contains any
untrue statement of material fact or omits to state any such fact necessary to
make the representations, warranties and other statements contained herein or in
such other document, instrument or writing not misleading in any material
respect.

        6.11 ERISA. With respect to each Plan, each Borrower and each member of
the Controlled Group have fulfilled their obligations, including obligations
under the minimum funding standards of ERISA and the Code and are in compliance
in all material respects with the provisions of ERISA and the Code. No event has
occurred which could result in a liability of any Borrower or any member of the
Controlled Group to the PBGC or a Plan (other than to make contributions in the
ordinary course) that could reasonably be expected to have a Material Adverse
Effect. There have not been any nor are there now existing any events or
conditions that would cause the Lien provided under Section 4068 of ERISA to
attach to any Property of any Borrower or any member of the Controlled Group.
Except as described on Schedule 6.11 hereto, the aggregate Unfunded Liabilities
in respect of all Plans as of the date hereof do not exceed $1,000,000. No
"prohibited transaction" has occurred with respect to any Plan.

        6.12 Investment Company Act. No Obligor is an investment company within
the meaning of the Investment Company Act of 1940, as amended, or, directly or
indirectly, controlled by or acting on behalf of any Person which is an
investment company, within the meaning of said Act.

        6.13 Public Utility Holding Company Act. No Obligor is an "affiliate" or
a "subsidiary company" of a "public utility company," or a "holding company," or
an "affiliate" or a "subsidiary company" of a "holding company," as such terms
are defined in the Public Utility Holding Company Act of 1935, as amended.

        6.14 Solvency. None of U.S. Borrower, Canadian Borrower, U.K. Borrower,
any other Obligor, U.S. Borrower and its Subsidiaries, on a consolidated basis,
Canadian Borrower and its Subsidiaries, on a consolidated basis, or U.K.
Borrower and its Subsidiaries, on a consolidated basis, is "insolvent," as such
term is used and defined in (i) the Bankruptcy Code and (ii) the fraudulent
conveyance statutes of the State of Texas or of any jurisdiction in which any of
the Collateral may be located or unable to pay its debts within the meaning of
Section 123 of the Insolvency Act 1986 (England and Wales).

        6.15 Fiscal Year. The fiscal year of each Obligor ends on December 31.

        6.16 Compliance. Each Obligor is in compliance with all Legal
Requirements applicable to it, except to the extent that the failure to comply
therewith could not reasonably be expected to have a Material Adverse Effect.
<PAGE>
        6.17 Environmental Matters. Each Obligor has, to the best knowledge of
their respective executive officers, obtained and maintained in effect all
Environmental Permits (or the applicable Person has initiated the necessary
steps to transfer the Environmental Permits into its name or obtain such
permits), the failure to obtain which could reasonably be expected to have a
Material Adverse Effect. Each Obligor and its Properties, business and
operations have been and are, to the best knowledge of their respective
executive officers, in compliance with all applicable Requirements of
Environmental Law and Environmental Permits the failure to comply with which
could reasonably be expected to have a Material Adverse Effect. Each Obligor and
its Properties, business and operations are not subject to any (A) Environmental
Claims or (B), to the best knowledge of their respective executive officers
(after making reasonable inquiry of the personnel and records of their
respective Corporations), Environmental Liabilities, in either case direct or
contingent, arising from or based upon any act, omission, event, condition or
circumstance occurring or existing on or prior to the date hereof which could
reasonably be expected to have a Material Adverse Effect. None of the officers
of any Obligor has received any notice of any violation or alleged violation of
any Requirements of Environmental Law or Environmental Permit or any
Environmental Claim in connection with its Properties, liabilities, condition
(financial or otherwise), business or operations which could reasonably be
expected to have a Material Adverse Effect. None of U.S. Borrower, Canadian
Borrower or U.K. Borrower knows of any event or condition with respect to
currently enacted Requirements of Environmental Laws presently scheduled to
become effective in the future with respect to any of the Properties of any
Obligor which could reasonably be expected to have a Material Adverse Effect,
for which the applicable Obligor has not made good faith provisions in its
business plan and projections of financial performance.

        6.18 Collateral Covered. As of the Effective Date, the Collateral
covered by the Security Documents constitutes substantially all real Property
(other than the Excluded Real Property) and substantially all material personal
Property owned by U.S. Borrower and its Subsidiaries (other than Excluded
Subsidiaries and Foreign Subsidiaries which are not Subsidiaries of Canadian
Borrower or U.K. Borrower) and all of the issued and outstanding Equity
Interests in all of the Subsidiaries of U.S. Borrower (other than Excluded
Subsidiaries and Foreign Subsidiaries which are not Subsidiaries of Canadian
Borrower or U.K. Borrower) owned by U.S. Borrower or any of its Subsidiaries
(with the Collateral being allocated among Canadian Obligations, U.K.
Obligations and U.S. Obligations as herein provided).

        6.19 Property of Excluded Subsidiaries and Certain Foreign Subsidiaries.
The aggregate value (based on the greater of book or market value) of the
Property owned by Excluded Subsidiaries or by Foreign Subsidiaries of U.S.
Borrower (other than Canadian Borrower, U.K. Borrower or their Subsidiaries) as
of the Effective Date is no greater than $7,000,000.

7.      Affirmative Covenants.

        U.S. Borrower, Canadian Borrower and U.K. Borrower each covenants and
agrees with Agents and the Lenders that prior to the payment of all Obligations
and the termination of all U.S. Commitments, Canadian Commitments and U.K.
Commitments it will do or cause to be
<PAGE>
done, and cause each other Obligor (unless limited by the language of the
applicable provision to less than all of the Obligors) to do or cause to be
done, each and all of the following:

        7.1  Taxes, Existence, Regulations, Property, Etc. At all times, except
where failure or noncompliance could not reasonably be expected to have a
Material Adverse Effect: (a) pay when due all taxes and governmental charges of
every kind upon it or against its income, profits or Property, unless and only
to the extent that the same shall be contested diligently in good faith and
adequate reserves in accordance with GAAP have been established therefor; (b) do
all things necessary to preserve its existence, qualifications, rights and
franchises; (c) comply with all applicable Legal Requirements (including without
limitation Requirements of Environmental Law) in respect of the conduct of its
business and the ownership of its Property; and (d) cause its Property to be
protected, maintained and kept in good repair, ordinary wear and tear excepted,
and make all replacements and additions to such Property as may be reasonably
necessary to conduct its business properly and efficiently in accordance with
past practices.

        7.2  Financial Statements and Information. Furnish to Agents and each
Lender each of the following: (a) as soon as available and in any event within
90 days after the end of the fiscal year 2003 and within 60 days after the end
of each fiscal year thereafter, Annual Financial Statements of U.S. Borrower;
(b) as soon as available and in any event within 45 days after the end of each
fiscal quarter during the fiscal year 2004 and within 35 days after the end of
each fiscal quarter of each fiscal year thereafter, Quarterly Financial
Statements of U.S. Borrower; (c) concurrently with the financial statements
provided for in Subsections 7.2(a) and (b) hereof, such schedules, computations
and other information, in reasonable detail, as may be reasonably required by
Agents to demonstrate compliance with the covenants set forth herein or
reflecting any non-compliance therewith as of the applicable date, all certified
and signed by a duly authorized officer of U.S. Borrower as true and correct in
all material respects to the best knowledge of such officer and, commencing with
the quarterly financial statement prepared as of March 31, 2004, a compliance
certificate ("Compliance Certificate") substantially in the form of Exhibit F
hereto, duly executed by such authorized officer; (d) by March 31 of each fiscal
year, U.S. Borrower's annual business plan for the then current fiscal year
(including their proforma balance sheets and income and cash flow projections
for such fiscal year); (e) promptly upon their becoming publicly available, each
financial statement, report, notice or definitive proxy statements sent by U.S.
Borrower to shareholders generally and each regular or periodic report and each
registration statement, prospectus or written communication (other than
transmittal letters) in respect thereof filed by U.S. Borrower with, or received
by U.S. Borrower in connection therewith from, any securities exchange or the
Securities and Exchange Commission or any successor agency; (f) (1) as of the
Effective Date and (2) within 30 days after the end of each calendar month, a
Borrowing Base Certificate as at the Effective Date or the last day of such
calendar month, together with such supporting information as U.S. Agent may
reasonably request; (g) within 30 days after (i) the end of each calendar
quarter or (ii) receipt of a request therefor (which may be given from time to
time) from U.S. Agent, (1) a listing and aging of the Accounts of (x)
U.S. Borrower and its Subsidiaries (other than Foreign Subsidiaries or Excluded
Subsidiaries), (y) the Subsidiaries of Canadian Borrower and (z) the
Subsidiaries of U.K. Borrower which are Foreign Subsidiaries (other than
Excluded Subsidiaries) as of the end of the most recently ended calendar month,
prepared in reasonable detail and containing such other information as U.S.
Agent may reasonably request (including information supporting the progress
payments included in the Eligible Accounts) and (2) a summary of the Inventory
of (x)
<PAGE>
U.S. Borrower and its Subsidiaries (other than Foreign Subsidiaries or Excluded
Subsidiaries) and (y) the Subsidiaries of Canadian Borrower as of the end of the
most recently ended calendar month, prepared in reasonable detail and containing
such other information as U.S. Agent may reasonably request; (h) from time to
time, at any time upon the request of U.S. Agent, but at the cost of the
applicable Borrower, a report of an independent collateral field examiner
approved by U.S. Agent in writing and reasonably acceptable to the applicable
Borrower (which may be, or be affiliated with, any Agent or one of the Lenders)
with respect to the Accounts and Inventory components included in the U.S.
Borrowing Base, the Canadian Borrowing Base and the U.K. Borrowing Base
(provided, however, that so long as no Event of Default has occurred and is
continuing, U.S. Agent shall not require such a report more than once per
calendar year and during the continuance of an Event of Default, U.S. Agent
shall not require such a report more than once per calendar quarter), and (i)
such other information relating to the condition (financial or otherwise),
operations, prospects or business of any Obligor as from time to time may be
reasonably requested by any Agent or any Lender. Each delivery of a financial
statement pursuant to this Section 7.2 shall constitute a restatement of the
representations contained in the last two sentences of Section 6.2.

        7.3  Financial Tests.  Have and maintain:

        (a)  Tangible Net Worth - Tangible Net Worth of not less than (1) at all
times during the period commencing on the Effective Date through and including
March 31, 2004, an amount equal to $14,566,000 and (2) at all times during each
fiscal quarter thereafter, the minimum Tangible Net Worth required as of the end
of the immediately preceding fiscal quarter plus 50% of the net income of U.S.
Borrower and its Subsidiaries, on a consolidated basis (if positive), for the
period from December 31, 2003 through the last day of the fiscal quarter ending
immediately prior to the date of such calculation plus 100% of the net proceeds
realized from the issuance of any equity securities by U.S. Borrower during that
period.

        (b)  Funded Debt to EBITDA Ratio - a Funded Debt to EBITDA Ratio of not
greater than (1) 3.50 to 1.00 at all times during the period commencing on the
date hereof through and including June 30, 2004, (2) 3.00 to 1.00 at all times
during the period commencing on July 1, 2004 through and including September 30,
2004, and (3) 2.75 to 1.00 at all times thereafter.

        (c)  Fixed Charge Coverage Ratio - a Fixed Charge Coverage Ratio of not
less than (1) 1.10 to 1.00 at all times during the period commencing on the date
hereof through and including September 30, 2004 and (2) 1.25 at all times
thereafter.

        7.4  Inspection. Permit each Agent and each Lender upon 3 Business Days'
prior notice (unless a Default or an Event of Default has occurred which is
continuing, in which case no prior notice is required) to inspect its Property
in a manner consistent with applicable safety requirements and policies of
insurance, to examine its files, books and records, except classified
governmental material, legally privileged material and material subject to a
confidentiality obligation, and make and take away copies thereof, and to
discuss its affairs with its officers and accountants, all during normal
business hours and at such intervals and to such extent as any Agent may
reasonably desire; provided that such inspection does not unreasonably interfere
with such Obligor's operations.
<PAGE>
        7.5  Further Assurances. Promptly execute and deliver, at the expense of
U.S. Borrower, Canadian Borrower or U.K. Borrower, as the case may be, any and
all other and further instruments which may be reasonably requested by any Agent
to cure any defect in the execution and delivery of any Loan Document in order
to effectuate the transactions contemplated by the Loan Documents, and in order
to grant, preserve, protect and perfect the validity and priority of the Liens
created by the Security Documents.

        7.6  Books and Records. Maintain books of record and account which
permit financial statements to be prepared in accordance with GAAP.

        7.7  Insurance. Maintain insurance on its Property with responsible
companies in such amounts, with such deductibles and against such risks as are
usually carried by owners of similar businesses and Properties in the same
general areas in which the applicable Obligor operates, and furnish each Agent
satisfactory evidence thereof promptly upon request. These insurance provisions
are cumulative of the insurance provisions of the Security Documents. Each Agent
shall be provided with a certificate showing coverages provided under the
policies of insurance and such policies shall be endorsed to the effect that
they will not be canceled for nonpayment of premium, reduced or affected in any
material manner without thirty (30) days' prior written notice to Agents.

        7.8  Notice of Certain Matters. Give Agents written notice of the
following promptly after any executive officer of U.S. Borrower, Canadian
Borrower or U.K. Borrower shall become aware of the same:

        (a)  the issuance by any applicable Governmental Authority having
jurisdiction in the matter of any injunction, order or other restraint
prohibiting, or having the effect of prohibiting, the performance of this
Agreement, any other Loan Document, or the making of the Loans or the acceptance
and purchase of Bankers' Acceptances or the initiation of any litigation, or any
claim or controversy which would reasonably be expected to result in the
initiation of any such litigation, seeking any such injunction, order or other
restraint;

        (b)  the filing or commencement of any action, suit or proceeding,
whether at law or in equity or by or before any court or any Governmental
Authority involving claims in excess of $1,000,000 or which could reasonably be
expected to result in a Default hereunder; and

        (c)  any Event of Default or Default, specifying the nature and extent
thereof and the action (if any) which is proposed to be taken with the respect
thereto.

Borrowers will also notify Agents in writing at least 30 days prior to the date
that any Obligor changes its name or the location of its chief executive office
or principal place of business or the place where it keeps its books and
records. After the Effective Date, Borrowers will notify Agents in writing at
least 45 days prior to any Borrower's or any of their Subsidiaries' (other than
Excluded Subsidiaries and other than Foreign Subsidiaries which are not
Subsidiaries of Canadian Borrower or U.K. Borrower) acquisition of any real
Property or any material personal Property having aggregate fair market value in
excess of $2,500,000, wherever located, other than the Collateral covered by the
Security Documents (such acquisition or ownership being
<PAGE>
herein called an "Additional Collateral Event" and the Property so acquired or
owned being herein called "Additional Collateral").

        7.9  Capital Adequacy. If any Lender shall have determined that the
adoption after the Effective Date or effectiveness after the Effective Date
(whether or not previously announced) of any applicable Legal Requirement
regarding capital adequacy, or any change therein after the Effective Date, or
any change in the interpretation or administration thereof after the Effective
Date by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
with any request or directive after the Effective Date regarding capital
adequacy (whether or not having the force of law) of any such Governmental
Authority, central bank or comparable agency has or would have the effect of
reducing the rate of return on such Lender's capital as a consequence of its
obligations hereunder, under the Letters of Credit, the Notes or other
Obligations held by it to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's policies with respect to capital adequacy) by an amount deemed by
such Lender to be material, then from time to time, upon satisfaction of the
conditions precedent set forth in this Section, after demand by such Lender
(with a copy to the appropriate Agent) as provided below, pay (subject to
Sections 11.7 and 11.17 hereof) to such Lender such additional amount or amounts
as will compensate such Lender for such reduction. The certificate of any Lender
setting forth such amount or amounts as shall be necessary to compensate it and
the basis thereof and reasons therefor shall be delivered as soon as practicable
to U.S. Borrower, Canadian Borrower or U.K. Borrower, as the case may be, and
shall be conclusive and binding, absent manifest error. U.S. Borrower, Canadian
Borrower or U.K. Borrower, as the case may be, shall pay the amount shown as due
on any such certificate within fifteen (15) Business Days after the delivery of
such certificate. In preparing such certificate, a Lender may employ such
assumptions and allocations of costs and expenses as it shall in good faith deem
reasonable and may use any reasonable averaging and attribution method.

        7.10 ERISA Information and Compliance. Promptly furnish to Agents: (i)
immediately upon receipt, a copy of any notice of complete or partial withdrawal
liability under Title IV of ERISA and any notice from the PBGC under Title IV of
ERISA of an intent to terminate or appoint a trustee to administer any Plan,
(ii) if requested by any Agent, promptly after the filing thereof with the
United States Secretary of Labor or the PBGC or the Internal Revenue Service or
any Governmental Authority having jurisdiction under Applicable Canadian Pension
Legislation, copies of each annual and other report or other information return
with respect to each Plan or any trust created thereunder, (iii) immediately
upon becoming aware of the occurrence of any "reportable event," as such term is
defined in Section 4043 of ERISA, for which the disclosure requirements of
Regulation Section 2615.3 promulgated by the PBGC have not been waived, or of
any "prohibited transaction," as such term is defined in Section 4975 of the
Code, in connection with any Plan or any trust created thereunder, a written
notice signed by an authorized officer of the applicable Borrower or the
applicable member of the Controlled Group specifying the nature thereof, what
action the applicable Borrower or the applicable member of the Controlled Group
is taking or proposes to take with respect thereto, and, when known, any action
taken by the PBGC, the Internal Revenue Service, the Department of Labor or any
other applicable Governmental Authority with respect thereto, (iv) promptly
after the filing or receiving thereof by any Borrower or any member of the
Controlled Group of any notice of
<PAGE>
the institution of any proceedings or other actions which may result in the
termination of any Plan, in whole or in part, and (v) each request for waiver of
the funding standards or extension of the amortization periods required by
Sections 303 and 304 of ERISA or Section 412 of the Code promptly after the
request is submitted by any Borrower or any member of the Controlled Group to
the Secretary of the Treasury, the Department of Labor, the Internal Revenue
Service or any other applicable Governmental Authority. To the extent required
under applicable statutory funding requirements, each Borrower will fund, or
will cause the applicable member of the Controlled Group to fund, all current
service pension liabilities as they are incurred under the provisions of all
Plans from time to time in effect and, in addition, with respect to Plans
governed by Applicable Canadian Pension Legislation, all special payments in
connection with solvency deficiencies or going concern Unfunded Liabilities, and
comply with all applicable provisions of ERISA, in each case, except to the
extent that failure to do the same could not reasonably be expected to have a
Material Adverse Effect. Each Borrower covenants that it shall and shall cause
each member of the Controlled Group to (1) make contributions to each Plan in a
timely manner and in an amount sufficient to comply with the contribution
obligations under such Plan and the minimum funding standards requirements of
ERISA; (2) prepare and file in a timely manner all notices and reports required
under the terms of ERISA including but not limited to annual reports; and (3)
pay in a timely manner all required PBGC premiums, in each case, except to the
extent that failure to do the same could not reasonably be expected to have a
Material Adverse Effect.

        7.11 Additional Security Documents. As soon as practicable and in any
event within 30 days after an Additional Collateral Event, Borrowers shall (a)
execute and deliver or cause to be executed and delivered Security Documents, in
Proper Form, in favor of the applicable Agent and duly executed by the
applicable Obligor, granting a first-priority Lien (except for Permitted Liens)
upon the applicable Additional Collateral securing all of the Canadian
Obligations (in the case of Canadian Borrower or any of its Subsidiaries), the
U.K. Obligations (in the case of U.K. Borrower or any of its Subsidiaries which
are Foreign Subsidiaries but which are not Excluded Subsidiaries) or the U.S.
Obligations (in the case of U.S. Borrower or any of its Subsidiaries which are
not Foreign Subsidiaries or Excluded Subsidiaries), except as U.S. Agent may
otherwise agree in order to limit recording taxes or similar charges based upon
the amount secured, and such other documents (including, without limitation, all
items reasonably required by Agents in connection with the applicable Security
Documents previously executed hereunder, all in Proper Form) as may be
reasonably required by Agents in connection with the execution and delivery of
such Security Documents; (b) deliver or cause to be delivered such other
documents or certificates consistent with the terms of this Agreement and
relating to the transactions contemplated hereby as Agents may reasonably
request, and (c) pay in full all documentary stamps, filing and recording fees,
taxes and other fees and charges payable in connection with the filing and
recording of any such Security Document.

8.      Negative Covenants.

        U.S. Borrower, Canadian Borrower and U.K. Borrower each covenants and
agrees with Agents and the Lenders that prior to the payment of all Obligations
and the termination of all U.S. Commitments, Canadian Commitments and U.K.
Commitments it will not, and will not suffer or permit any of its Subsidiaries
to, do any of the following:
<PAGE>
        8.1  Borrowed Money Indebtedness. Create, incur, suffer or permit to
exist, or assume or guarantee, directly or indirectly, or become or remain
liable with respect to any Borrowed Money Indebtedness, whether direct,
indirect, absolute, contingent or otherwise, except the following: (a) Borrowed
Money Indebtedness under this Agreement and the other Loan Documents and
Borrowed Money Indebtedness secured by Liens permitted by Section 8.2 hereof;
(b) the liabilities existing on the date of this Agreement and disclosed in the
financial statements delivered on or prior to the Effective Date pursuant to
Section 6.2 hereof, and subject to Section 8.10 hereof, all renewals, extensions
and replacements (but not increases) of any of the foregoing; (c) the Interest
Rate Risk Indebtedness; (d) purchase money indebtedness to acquire Equipment
obtained by U.S. Borrower or any of its Subsidiaries in the ordinary course of
business (or financing under leases which, in accordance with GAAP have been
recorded or should be recorded as capital leases) not exceeding $5,000,000 at
any one time outstanding, in the aggregate for all such indebtedness; (e)
purchase money indebtedness to acquire real Property obtained by U.S. Borrower
or any of its Subsidiaries (or financing under leases which, in accordance with
GAAP have been recorded or should be recorded as capital leases) not exceeding
$4,000,000 at any one time outstanding, in the aggregate for all such
indebtedness; (f) Borrowed Money Indebtedness of U.S. Borrower and its
Subsidiaries under the Export/Import Credit Facilities not exceeding $25,000,000
in the aggregate at any one time outstanding; (g) Permitted Subordinated
Indebtedness, and (h) Permitted Senior Indebtedness.

        8.2  Liens. Create or suffer to exist any Lien upon any of its Property
now owned or hereafter acquired, or acquire any Property upon any conditional
sale or other title retention device or arrangement or any purchase money
security agreement; or in any manner directly or indirectly sell, assign, pledge
or otherwise transfer any of its Accounts or General Intangibles; except: (a)
Liens created pursuant to any Loan Document; (b) Permitted Liens; (c) Liens
securing Borrowed Money Indebtedness permitted under Section 8.1(d) hereof which
does not cover any Property other than the applicable purchased Equipment and
(d) Liens securing Borrowed Money Indebtedness permitted under Section 8.1(e)
hereof which does not cover any Property other than the applicable real
Property.

        8.3  Contingent Liabilities. Directly or indirectly guarantee the
performance or payment of, or purchase or agree to purchase, or assume or
contingently agree to become or be secondarily liable in respect of, any
obligation or liability of any other Person except for (a) the endorsement of
checks or other negotiable instruments in the ordinary course of business; (b)
obligations disclosed to Agents in the financial statements delivered on or
prior to the Effective Date pursuant to Section 6.2 hereof (and all renewals,
extensions and replacements--but not increases--of such obligations after the
Effective Date); (c) those liabilities permitted under Sections 8.1 or 8.2
hereof; (d) accounts payable incurred in the ordinary course of business; (e)
performance and warranty guaranties of any Borrower or any of their Subsidiaries
entered into in the ordinary course of business; and (f) other contingent
liabilities which do not relate to Borrowed Money Indebtedness not exceeding
$2,000,000 at any one time outstanding.

        8.4  Mergers, Consolidations and Dispositions of Assets. In any single
transaction or series of transactions, directly or indirectly:

        (a)  liquidate or dissolve; provided that any Excluded Subsidiary
             may liquidate, dissolve or take action to wind-up its operations
             without any necessity for notice
<PAGE>
             to or consent by any Lender or any Agent and any other Subsidiary
             of U.S. Borrower may liquidate, dissolve or take action to wind-up
             its operations if (i) U.S. Borrower determines such action to be in
             the best interests of U.S. Borrower and its Subsidiaries; (ii)
             liquidating dividends are paid to U.S. Borrower or to a
             wholly-owned Subsidiary of U.S. Borrower; and (iii) U.S. Borrower
             gives Agents written notice of such action at least ten (10) days
             prior to taking such action;

        (b)  be a party to any merger or consolidation unless and so long as
             (i) no Default or Event of Default has occurred that is then
             continuing; (ii) immediately thereafter and giving effect thereto,
             no event will occur and be continuing which constitutes a Default,
             (iii) if an Obligor is a party to such transaction, an Obligor is
             the surviving Person; (iv) the surviving Person ratifies and
             assumes each Loan Document to which any party to such merger was a
             party; and (v) Agents are given at least 10 days' prior written
             notice of such merger or consolidation;

        (c)  sell, convey or lease all or any part of its assets, except for
             (i) sales of Inventory in the ordinary course of business; (ii)
             sales of other Property in the ordinary course of business; (iii)
             sales or other dispositions of Property outside the ordinary course
             of business having a fair market value in an aggregate amount not
             to exceed $5,000,000; (iv) sales or other dispositions of Property
             (whether or not Collateral) expressly permitted by the other terms
             of this Agreement or any Loan Document; (v) conveyances
             constituting investments in Subsidiaries permitted by Section 8.8;
             (vi) transfers of assets from any Subsidiary of U.K. Borrower to
             U.K. Borrower or to another Subsidiary of U.K. Borrower so long as
             the Liens of the Security Documents are not affected thereby and
             (vii) subject to the Borrowers' compliance with Section 3.2(b),
             dispositions occurring as the result of a casualty event or
             condemnation, or

        (d)  except for Liens in favor of Agents, pledge, transfer or
             otherwise dispose of any Equity Interest in any of U.S. Borrower's
             Subsidiaries or any Borrowed Money Indebtedness of any of U.S.
             Borrower's Subsidiaries or issue or permit any Subsidiary of U.S.
             Borrower to issue any additional Equity Interest other than stock
             evidencing a Permitted Investment or stock dividends (in each case,
             subject to a Lien in favor of Agents to the extent required
             hereby).

        8.5  Redemption, Dividends and Distributions. Except as set forth on
Schedule 8.5 hereof, at any time: (a) redeem, retire or otherwise acquire,
directly or indirectly, any Equity Interest other than Equity Interests in
wholly-owned Subsidiaries or (b) make any distributions of any Property or cash
to the owner of any of the Equity Interests in any Obligor, other than, in
either case, Permitted Dividends and Permitted Investments (and the payment of
loans owing by the Chief Executive Officer and President of the U.S. Borrower
which constitute Permitted Investments by means of transfer to U.S. Borrower of
Equity Interests in and to U.S. Borrower).

        8.6  Nature of Business. Change the nature of its business or enter into
any business which is substantially different from the business in which it is
presently engaged.
<PAGE>
        8.7  Transactions with Related Parties. Enter into any transaction or
agreement with any officer, director or holder of any Equity Interest in any
Obligor (or any Affiliate of any such Person) unless the same is upon terms
substantially similar to those obtainable from wholly unrelated sources (to the
best knowledge of Borrowers, after making reasonable inquiry).

        8.8  Loans and Investments. Make any loan, advance, extension of credit
or capital contribution to, or make or, except as permitted by Sections 8.4 or
8.9 hereof, have any Investment in, any Person, or make any commitment to make
any such extension of credit or Investment, except (a) Permitted Investments;
(b) normal and reasonable advances in the ordinary course of business to
officers and employees; (c) accounts receivable and accounts payable arising in
the ordinary course of business; (d) deposits in money market funds investing
exclusively in Permitted Investments; (e) Investments disclosed in the financial
statements delivered pursuant to Section 6.2; (f) Investments by any Obligor in
any other Obligor which is not a Foreign Subsidiary or an Excluded Subsidiary,
and (g) other Investments not to exceed $500,000 in the aggregate at any time.

        8.9  Subsidiaries. Form, create or acquire any Subsidiary, except that
U.S. Borrower (or any of its Subsidiaries) may form, create or acquire a
wholly-owned Subsidiary so long as (a) immediately thereafter and giving effect
thereto, no event will occur and be continuing which constitutes a Default; (b)
if such Subsidiary is not a Foreign Subsidiary, (1) such Subsidiary shall
execute and deliver to each Agent a Guaranty in substantially the same form as
the Guaranties executed concurrently herewith, (2) such Subsidiary shall execute
and deliver to U.S. Agent such Security Documents as U.S. Agent may reasonably
require in order to create a valid, perfected, first priority Lien upon all of
the real and material personal Property of such Subsidiary (subject to
exceptions set forth in this Agreement) securing the U.S. Obligations and (3)
the applicable owner(s) of the Equity Interests in such Subsidiary shall execute
and deliver to U.S. Agent such Security Documents as U.S. Agent may reasonably
require in order to create a valid, perfected, first priority Lien upon all of
the issued and outstanding Equity Interests in such Subsidiary; (c) if such
Subsidiary is a Subsidiary of Canadian Borrower, (1) such Subsidiary shall
execute and deliver to Canadian Agent a Guaranty in substantially the same form
as the Guaranties executed concurrently herewith in favor of Canadian Agent, (2)
such Subsidiary shall execute and deliver to Canadian Agent such Security
Documents as Canadian Agent may reasonably require in order to create a valid,
perfected, first priority Lien upon all of the real and material personal
Property of such Subsidiary (subject to exceptions set forth in this Agreement)
securing the Canadian Obligations and (3) the applicable owner(s) of the Equity
Interests in such Subsidiary shall execute and deliver to Canadian Agent such
Security Documents as Canadian Agent may reasonably require in order to create a
valid, perfected, first priority Lien upon all of the issued and outstanding
Equity Interests in such Subsidiary securing the Canadian Obligations; (d) if
such Subsidiary is a Subsidiary of U.K. Borrower and is not an Excluded
Subsidiary, (1) such Subsidiary shall execute and deliver to U.K. Agent a
Guaranty in substantially the same form as the Guaranties executed concurrently
herewith in favor of U.K. Agent, (2) such Subsidiary shall execute and deliver
to U.K. Agent such Security Documents as U.K. Agent may reasonably require in
order to create a valid, perfected, first priority Lien upon all of the real and
material personal Property of such Subsidiary (subject to exceptions set forth
in this Agreement) securing the U.K. Obligations and (3) the applicable owner(s)
of the Equity Interests in such Subsidiary shall execute and deliver to U.K.
Agent such Security Documents as U.K. Agent may reasonably require in order to
create a valid, perfected, first priority Lien upon all of the issued and
<PAGE>
outstanding Equity Interests in such Subsidiary securing the U.K. Obligations;
and (f) Agents are given at least 10 days' prior written notice of such
formation, creation or acquisition. Notwithstanding the foregoing, no Foreign
Subsidiary may form, create or acquire a Subsidiary which is not a Foreign
Subsidiary.

        8.10 Export/Import Credit Facilities. Terminate or agree to the
termination of any Export/Import Credit Facility or amend, modify or obtain or
grant a waiver of any provision of any of any Export/Import Credit Facility if
such action could reasonably be expected to have a Material Adverse Effect
(provided that no consent of any Agent or any Bank shall be required with
respect to an amendment of the Export/Import Credit Facilities which has the
sole effect of increasing the Export/Import Credit Facilities to an aggregate
amount not greater than $25,000,000).

        8.11 Organizational Documents. Amend, modify, restate or supplement any
of its Organizational Documents if such action could reasonably be expected to
have a Material Adverse Effect.

        8.12 Unfunded Liabilities. Except as described on Schedule 6.11 hereto,
incur any Unfunded Liabilities after the Effective Date or allow any Unfunded
Liabilities in excess of $1,000,000, in the aggregate, to arise or exist.

        8.13 Sale/Leasebacks. Enter into sale/leaseback transactions relating to
assets with a fair market value in excess of $4,000,000 in the aggregate or
enter into any sale/leaseback transaction relating to assets with a fair market
value in excess of $500,000 in any single transaction unless Borrowers shall
have demonstrated to the satisfaction of the U.S. Agent that no Default or Event
of Default could be reasonably expected to arise as a result of such
sale/leaseback transaction.

        8.14 Acquisitions. Acquire (a) any real Property or any material
personal Property after the Effective Date (other than acquisitions of real or
personal Property in the ordinary course of business) unless Borrowers shall
have demonstrated to the satisfaction of the U.S. Agent on a pro forma basis
that no Default or Event of Default could be reasonably expected to arise as a
result of such sale/leaseback transaction and that, after giving effect to the
applicable acquisition, at least $5,000,000 capacity shall be available for
borrowings under the U.S. Commitments or (b) any real Property or any material
personal Property after the Effective Date (other than acquisitions of real or
personal Property in the ordinary course of business) with respect to which the
aggregate consideration in any fiscal year exceeds $5,000,000.

        8.15 Negative Pledges. Except for (a) any of the Loan Documents, (b) the
Export/Import Credit Facilities, (c) customary provisions in leases, licenses,
asset sale agreements and other customary agreements not related to the Borrowed
Money Indebtedness and entered into in the ordinary course of business, and (d)
restrictions imposed by agreements governing Permitted Liens, enter into any
agreement or contract which limits or restricts in any way the granting of Liens
by U.S. Borrower or any of its Subsidiaries securing any of the Obligations.
<PAGE>
        8.16  Synthetic Repurchases of Equity or Debt. Enter into or be party
to, or make any payment under, any Synthetic Purchase Agreement unless (i) in
the case of any Synthetic Purchase Agreement related to any Equity Interest, the
payments required to be made by the Borrower or its Subsidiaries are limited to
amounts permitted to be paid under Section 8.5 hereof and (ii) in the case of
any Synthetic Purchase Agreement, the obligations of the U.S. Borrower and its
Subsidiaries thereunder are subordinated to the Obligations on terms
satisfactory to the Majority Lenders.

        8.17  Property of Excluded Subsidiaries and Certain Foreign
Subsidiaries. Permit the aggregate value (based on the greater of book or market
value) of the Property owned by Excluded Subsidiaries or by Foreign Subsidiaries
of U.S. Borrower (other than Canadian Borrower, U.K. Borrower or their
Subsidiaries) to exceed $7,000,000.

        8.18  Limitation on Capital Expenditures. Permit aggregate Capital
Expenditures of the U.S. Borrower and its Subsidiaries to exceed $10,000,000 in
any fiscal year.

9.      Defaults.

        9.1   Events of Default. If any one or more of the following events
(herein called "Events of Default") shall occur, then any Agent may (and at the
direction of the Majority Lenders, shall) do any or all of the following: (1)
without notice to U.S. Borrower, Canadian Borrower, U.K. Borrower or any other
Person, declare the U.S. Commitments, the Canadian Commitments and the U.K.
Commitments terminated (whereupon the Commitments shall be terminated) and/or
accelerate the Termination Date to a date as early as the date of termination of
the U.S. Commitments, the Canadian Commitments and the U.K. Commitments; (2)
terminate any Letter of Credit allowing for such termination, by sending a
notice of termination as provided therein and require the applicable Borrower to
provide Cover for outstanding Letters of Credit; (3) declare the principal
amount then outstanding of and the unpaid accrued interest on the Loans and
Reimbursement Obligations and all fees and all other amounts payable hereunder,
under the Notes and under the other Loan Documents to be forthwith due and
payable, whereupon such amounts shall be and become immediately due and payable,
without notice (including, without limitation, notice of acceleration and notice
of intent to accelerate), presentment, demand, protest or other formalities of
any kind, all of which are hereby expressly waived by U.S. Borrower, Canadian
Borrower and U.K. Borrower; provided that in the case of the occurrence of an
Event of Default with respect to any Obligor referred to in clause (f), (g) or
(h) of this Section 9.1, the U.S. Commitments, the Canadian Commitments and the
U.K. Commitments shall be automatically terminated and the principal amount then
outstanding of and unpaid accrued interest on the Loans and the Reimbursement
Obligations and all fees and all other amounts payable hereunder, under the
Notes and under the other Loan Documents shall be and become automatically and
immediately due and payable, without notice (including, without limitation,
notice of acceleration and notice of intent to accelerate), presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by U.S. Borrower, Canadian Borrower and U.K. Borrower, and (4) exercise
any or all other rights and remedies available to any Agent or any Lenders under
the Loan Documents, at law or in equity:

        (a)   Payments - (i) any Obligor shall fail to make any payment or
required prepayment of any installment of principal on the Loans or any
Reimbursement Obligation payable under the
<PAGE>
Notes, this Agreement or the other Loan Documents when due or (ii) any Obligor
fails to make any payment or required payment of interest with respect to the
Loans, any Reimbursement Obligation or any other fee or amount under the Notes,
this Agreement or the other Loan Documents when due and, in the case of clause
(ii) only, such failure to pay continues unremedied for a period of two Business
Days after invoice; or

        (b)   Other Obligations - any Obligor shall default in the payment when
due of any principal of or interest on any Borrowed Money Indebtedness having an
outstanding principal amount of at least $3,000,000 in the aggregate (other than
the Loans and Reimbursement Obligations) and such default shall continue beyond
any applicable period of grace and shall give rise to a right on the part of the
holder of such Borrowed Money Indebtedness to accelerate such Borrowed Money
Indebtedness; or any event or condition shall occur which results in the
acceleration of the maturity of any such Borrowed Money Indebtedness or enables
(or, with the giving of notice or lapse of time or both, would enable) the
holder of any such Borrowed Money Indebtedness or any Person acting on such
holder's behalf to accelerate the maturity thereof and such event or condition
shall not be cured within any applicable period of grace; or

        (c)   Representations and Warranties - any representation or warranty
made or deemed made by or on behalf of any Obligor in this Agreement or any
other Loan Document or in any certificate furnished or made by any Obligor to
Agents or the Lenders in connection herewith or therewith shall prove to have
been incorrect, false or misleading in any material respect as of the date
thereof or as of the date as of which the facts therein set forth were stated or
certified or deemed stated or certified; or

        (d)   Affirmative Covenants - (i) default shall be made in the due
observance or performance of any of the covenants or agreements contained in
Section 7.3 hereof or (ii) default is made in the due observance or performance
of any of the other covenants and agreements contained in Section 7 hereof or
any other affirmative covenant of any Obligor contained in this Agreement or any
other Loan Document and such default continues unremedied for a period of 30
days after (x) notice thereof is given by any Agent to U.S. Borrower, to
Canadian Borrower or to U.K. Borrower or (y) such default otherwise becomes
known to any executive officer of U.S. Borrower, to Canadian Borrower or to U.K.
Borrower, whichever is earlier; or

        (e)   Negative Covenants - default is made in the due observance or
performance by U.S. Borrower, Canadian Borrower or U.K. Borrower of any of the
covenants or agreements contained in Section 8 of this Agreement or of any other
negative covenant of any Obligor contained in this Agreement or any other Loan
Document; or

        (f)   Involuntary Bankruptcy or Receivership Proceedings - a receiver,
receiver-manager, interim receiver, monitor, conservator, liquidator or trustee
of any Obligor or of any of its Property is appointed by the order or decree of
any court or agency or supervisory authority having jurisdiction, and such
decree or order remains in effect for more than 90 days; or any Obligor is
adjudicated bankrupt or insolvent; or any of such Person's Property is
sequestered by court order and such order remains in effect for more than 90
days; or a petition is filed against any Obligor under any state or federal
bankruptcy, reorganization, arrangement, insolvency, readjustment or debt,
dissolution, liquidation or receivership law or any jurisdiction, whether now or
hereafter in effect, and is not dismissed within 90 days after such filing; or
<PAGE>
        (g)  Voluntary Petitions or Consents - any Obligor commences a
voluntary case or other proceeding or order seeking liquidation, reorganization,
arrangement, insolvency, readjustment of debt, dissolution, liquidation or other
relief with respect to itself or its debts or other liabilities under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its Property, or consents to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or
fails generally to, or cannot, pay its debts generally as they become due or
takes any corporate action to authorize or effect any of the foregoing; or

        (h)  Assignments for Benefit of Creditors or Admissions of Insolvency -
any Obligor makes an assignment for the benefit of its creditors, or admits in
writing its insolvency (including any admission of its inability to pay its
debts generally as they become due), or consents to the appointment of a
receiver, receiver-manager, interim receiver, monitor, trustee, or liquidator of
such Obligor or of all or any substantial part of its Property; or

        (i)  Undischarged Judgments - a final non-appealable judgment or
judgments for the payment of money exceeding, in the aggregate, $1,000,000
(exclusive of amounts covered by insurance) is rendered by any court or other
Governmental Authority against any Obligor and such Obligor does not discharge
the same or provide for its discharge in accordance with its terms, or procure a
stay of execution thereof within 30 days from the date of entry thereof; or

        (j)  Security Documents - any Security Document after delivery thereof,
shall cease for any reason, except to the extent permitted by the terms of this
Agreement or such Security Document, to create a valid and perfected Lien of the
first priority (subject to the Permitted Liens), required thereby on any of the
Collateral individually or in the aggregate having a fair market value in excess
of $1,000,000 purported to be covered thereby and securing that portion of the
Obligations which is therein designated as being secured, or any Obligor (or any
other Person who may have granted or purported to grant such Lien) will so state
in writing or, after the creation thereof as herein provided, Agents shall cease
to have valid, perfected, first priority Liens upon the issued and outstanding
Equity Interests in and to all Subsidiaries of U.S. Borrower to the extent
required by the terms of this Agreement; or

        (k)  Change of Control; Ownership of Subsidiaries - (i) any Person
other than U.S. Borrower or its Subsidiaries shall own any Equity Interest in
any Subsidiary of U.S. Borrower (other than directors' qualifying shares and
other than a 15% Equity Interest in NATCO Japan Co., Ltd. currently owned by
Persons other than U.S. Borrower or its Subsidiaries) or any Person other than
an Agent shall acquire any Lien on any Equity Interest in any Subsidiary of U.S.
Borrower; or (ii) any Change of Control shall occur; or

        (l)  Uninsured Loss - any Obligor shall be the subject of any uninsured
or unindemnified casualty losses exceeding, in the aggregate, $1,000,000 in any
fiscal year.

        (m)  Material Adverse Change - any event shall occur which could
reasonably be expected to have a Material Adverse Effect.
<PAGE>
        9.2  Right of Setoff. Upon the occurrence and during the continuance of
any Event of Default, each Lender is hereby authorized at any time and from time
to time, without notice to any Obligor (any such notice being expressly waived
by U.S. Borrower, Canadian Borrower, U.K. Borrower and the other Obligors), to
setoff and apply any and all deposits, whether general or special, time or
demand, provisional or final (but excluding the funds held in accounts clearly
designated as escrow or trust accounts held by U.S. Borrower, Canadian Borrower,
U.K. Borrower or any other Obligor for the benefit of Persons which are not
Affiliates of any Obligor), whether or not such setoff results in any loss of
interest or other penalty, and including without limitation all certificates of
deposit, at any time held, and any other funds or Property at any time held, and
other Borrowed Money Indebtedness at any time owing by such Lender to or for the
credit or the account of U.S. Borrower, Canadian Borrower, U.K. Borrower or any
other Obligor against any and all of the Obligations irrespective of whether or
not such Lender or any Agent will have made any demand under this Agreement, the
Notes or any other Loan Document. Should the right of any Lender to realize
funds in any manner set forth hereinabove be challenged and any application of
such funds be reversed, whether by court order or otherwise, the Lenders shall
make restitution or refund to U.S. Borrower, Canadian Borrower or U.K. Borrower
or the applicable other Obligor, as the case may be, pro rata in accordance with
their U.S. Commitments, Canadian Commitments or U.K. Commitments, as the case
may be. Each Lender agrees to promptly notify U.S. Borrower, Canadian Borrower,
U.K. Borrower and Agents after any such setoff and application, provided that
the failure to give such notice will not affect the validity of such setoff and
application. The rights of Agents and the Lenders under this Section are in
addition to other rights and remedies (including without limitation other rights
of setoff) which Agents or the Lenders may have. This Section is subject to the
terms and provisions of Sections 4.5 and 11.7 hereof. Notwithstanding anything
to the contrary contained herein or in any of the other Loan Documents, any
amounts realized under this Section which constitute an asset of any Foreign
Subsidiary shall only be applied to the payment of Canadian Obligations or U.K.
Obligations.

        9.3  Collateral Account. U.S. Borrower hereby agrees, in addition to
the provisions of Section 9.1 hereof, that upon the occurrence and during the
continuance of any Event of Default, it shall, if requested by any Agent or by
the Majority Lenders (through any Agent), pay to U.S. Agent an amount in
immediately available funds equal to the then aggregate amount available for
drawings under all outstanding U.S. Letters of Credit, which funds shall be held
by U.S. Agent as Cover. Canadian Borrower hereby agrees, in addition to the
provisions of Section 9.1 hereof, that upon the occurrence and during the
continuance of any Event of Default, it shall, if requested by any Agent or by
the Majority Lenders (through any Agent), pay to Canadian Agent an amount in
immediately available funds equal to the sum of the then aggregate amount
available for drawings under all outstanding Canadian Letters of Credit plus the
unpaid principal balance of all outstanding Bankers' Acceptances, which funds
shall be held by Canadian Agent as Cover. U.K. Borrower hereby agrees, in
addition to the provisions of Section 9.1 hereof, that upon the occurrence and
during the continuance of any Event of Default, it shall, if requested by any
Agent or by the Majority Lenders (through any Agent), pay to U.K. Agent an
amount in immediately available funds equal to the then aggregate amount
available for drawings under all outstanding U.K. Letters of Credit, which funds
shall be held by U.K. Agent as Cover.

        9.4  Preservation of Security for Letter of Credit Liabilities. In the
event that, following (i) the occurrence of an Event of Default and the exercise
of any rights available to any
<PAGE>
Agent or any Lender under the Loan Documents, and (ii) payment in full of the
principal amount then outstanding of and the accrued interest on the Loans and
Reimbursement Obligations and fees and all other amounts payable hereunder and
under the Loan Documents and all other amounts secured by the Security
Documents, any Letters of Credit or Bankers' Acceptances shall remain
outstanding and undrawn upon, the applicable Agent shall be entitled to hold
(and each Borrower and each other Obligor hereby grants and conveys to Agent a
security interest in and to) all cash or other Property ("Proceeds of Remedies")
realized or arising out of the exercise of any rights available under the Loan
Documents, at law or in equity, including, without limitation, the proceeds of
any foreclosure, as collateral for the payment of any amounts due or to become
due under or in respect of such Letters of Credit and/or such Bankers'
Acceptances. Such Proceeds of Remedies shall be held for the ratable benefit of
the U.S. Lenders, the Canadian Lenders or U.K. Lenders, as the case may be. The
rights, titles, benefits, privileges, duties and obligations of the applicable
Agent with respect thereto shall be governed by the terms and provisions of this
Agreement and, to the extent not inconsistent with this Agreement, the
applicable Security Documents. The applicable Agent may, but shall have no
obligation to, invest any such Proceeds of Remedies in such manner as such
Agent, in the exercise of its sole discretion, deems appropriate. Such Proceeds
of Remedies shall be applied to Reimbursement Obligations arising in respect of
any such Letters of Credit, the payment of any Lender's obligations under any
such Letter of Credit and/or the Obligations relating to any such Bankers'
Acceptance when such Letter of Credit is drawn upon or such Bankers' Acceptance
matures, as the case may be. Nothing in this Section shall cause or permit an
increase in the maximum amount of the Obligations permitted to be outstanding
from time to time under this Agreement. Notwithstanding anything to the contrary
contained herein or in any of the other Loan Documents, any amounts realized
under this Section which constitute an asset of any Foreign Subsidiary shall
only be applied to the payment of Canadian Obligations or U.K. Obligations.

        9.5  Currency Conversion After Maturity. At any time following the
occurrence of an Event of Default and the acceleration of the maturity of the
Obligations owed to the Canadian Lenders hereunder, the Canadian Lenders shall
be entitled to convert, with two (2) Business Days' prior notice to Canadian
Borrower, any and all or any part of the then unpaid and outstanding LIBOR
Borrowings and Base Rate Borrowings of the Canadian Borrower to Canadian Prime
Loans. Any such conversion shall be calculated so that the resulting Canadian
Prime Loans shall be the equivalent on the date of conversion of the amount of
Dollars so converted. Any accrued and unpaid interest denominated in Dollars at
the time of any such conversion shall be similarly converted to Canadian
Dollars, and such Canadian Prime Loans and accrued and unpaid interest thereon
shall thereafter bear interest in accordance with the terms hereof.

        9.6  Remedies Cumulative. No remedy, right or power conferred upon any
Agent or any Lender is intended to be exclusive of any other remedy, right or
power given hereunder or now or hereafter existing at law, in equity, or
otherwise, and all such remedies, rights and powers shall be cumulative.

10.     Agents.

        10.1 Appointment, Powers and Immunities. Each U.S. Lender hereby
irrevocably appoints and authorizes U.S. Agent to act as its agent hereunder,
under the U.S. Letters of Credit
<PAGE>
and under the other Loan Documents with such powers as are specifically
delegated to U.S. Agent by the terms hereof and thereof, together with such
other powers as are reasonably incidental thereto. Each Canadian Lender hereby
irrevocably appoints and authorizes Canadian Agent to act as its agent
hereunder, under the Canadian Letters of Credit and under the other Loan
Documents with such powers as are specifically delegated to Canadian Agent by
the terms hereof and thereof, together with such other powers as are reasonably
incidental thereto. Each U.K. Lender hereby irrevocably appoints and authorizes
U.K. Agent to act as its agent hereunder, under the U.K. Letters of Credit and
under the other Loan Documents with such powers as are specifically delegated to
U.K. Agent by the terms hereof and thereof, together with such other powers as
are reasonably incidental thereto. Any Loan Documents executed in favor of any
Agent shall be held by such Agent for the ratable benefit of the applicable
Lenders. None of the Agents ("Agents" as used in this Section 10 shall include
reference to their Affiliates and their own and their Affiliates' respective
officers, shareholders, directors, employees and agents) (a) shall have any
duties or responsibilities except those expressly set forth in this Agreement,
the Letters of Credit, and the other Loan Documents, and shall not by reason of
this Agreement or any other Loan Document be a trustee or fiduciary for any
Lender; (b) shall be responsible to any Lender for any recitals, statements,
representations or warranties contained in this Agreement, the Letters of Credit
or any other Loan Document, or in any certificate or other document referred to
or provided for in, or received by any of them under, this Agreement, the
Letters of Credit or any other Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability, execution, filing, registration,
collectibility, recording, perfection, existence or sufficiency of this
Agreement, the Letters of Credit, or any other Loan Document or any other
document referred to or provided for herein or therein or any Property covered
thereby or for any failure by any Obligor or any other Person to perform any of
its obligations hereunder or thereunder, or shall have any duty to inquire into
or pass upon any of the foregoing matters; (c) shall be required to initiate or
conduct any litigation or collection proceedings hereunder or under the Letters
of Credit or any other Loan Document except to the extent requested and
adequately indemnified by the Majority Lenders; (d) shall be responsible for any
mistake of law or fact or any action taken or omitted to be taken by it
hereunder or under the Letters or Credit or any other Loan Document or any other
document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, including, without limitation, pursuant to its
own negligence, except for its own gross negligence or willful misconduct; (e)
shall be bound by or obliged to recognize any agreement among or between any
Borrower and any Lender to which such Agent is not a party, regardless of
whether such Agent has knowledge of the existence of any such agreement or the
terms and provisions thereof; (f) shall be charged with notice or knowledge of
any fact or information not herein set out or provided to such Agent in
accordance with the terms of this Agreement or any other Loan Document; (g)
shall be responsible for any delay, error, omission or default of any mail,
telegraph, cable or wireless agency or operator, and (h) shall be responsible
for the acts or edicts of any Governmental Authority. Any Agent may employ
agents and attorneys-in-fact and none of the Agents shall be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care. Without in any way limiting any of the foregoing, each
Lender acknowledges that none of the Agents (nor any Issuer) shall have greater
responsibility in the operation of the Letters of Credit than is specified in
the Uniform Customs and Practice for Documentary Credits (1993 Revision,
International Chamber of Commerce Publication No. 500). In any foreclosure
proceeding concerning any Collateral, each holder of an Obligation if bidding
for its own account or for its own account and the accounts of other Lenders is
prohibited from including in
<PAGE>
the amount of its bid an amount to be applied as a credit against the
Obligations held by it or the Obligations held by the other Lenders; instead,
such holder must bid in cash only. However, in any such foreclosure proceeding,
(i) U.S. Agent may (but shall not be obligated to) submit a bid for all U.S.
Lenders (including itself) in the form of a credit against the U.S. Obligations,
and U.S. Agent or its designee may (but shall not be obligated to) accept title
to such collateral for and on behalf of all U.S. Lenders, (ii) Canadian Agent
may (but shall not be obligated to) submit a bid for all Canadian Lenders
(including itself) in the form of a credit against the Canadian Obligations, and
Canadian Agent or its designee may (but shall not be obligated to) accept title
to such collateral for and on behalf of all Canadian Lenders and (iii) U.K.
Agent may (but shall not be obligated to) submit a bid for all U.K. Lenders
(including itself) in the form of a credit against the U.K. Obligations, and
U.K. Agent or its designee may (but shall not be obligated to) accept title to
such collateral for and on behalf of all U.K. Lenders.

        10.2  Reliance. Each Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telegram or cable) believed by it to be genuine and correct and to
have been signed or sent by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel (which may be counsel for any
Borrower), independent accountants and other experts selected by such Agent.
None of the Agents shall be required in any way to determine the identity or
authority of any Person delivering or executing the same. As to any matters not
expressly provided for by this Agreement, the Letters of Credit, or any other
Loan Document, each Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder and thereunder in accordance with instructions
of the Majority Lenders, and any action taken or failure to act by U.S. Agent
pursuant thereto shall be binding on all of the U.S. Lenders, any action taken
or failure to act by Canadian Agent pursuant thereto shall be binding on all of
the Canadian Lenders and any action taken or failure to act by U.K. Agent
pursuant thereto shall be binding on all of the U.K. Lenders. Pursuant to
written instructions of the Majority Lenders, the Agents shall have the
authority to execute releases of the Security Documents on behalf of the Lenders
without the joinder of any Lender. If any order, writ, judgment or decree shall
be made or entered by any court affecting the rights, duties and obligations of
any Agent under this Agreement or any other Loan Document, then and in any of
such events such Agent is authorized, in its sole discretion, to rely upon and
comply with such order, writ, judgment or decree which it is advised by legal
counsel of its own choosing is binding upon it under the terms of this
Agreement, the relevant Loan Document or otherwise; and if such Agent complies
with any such order, writ, judgment or decree, then it shall not be liable to
any Lender or to any other Person by reason of such compliance even though such
order, writ, judgment or decree may be subsequently reversed, modified,
annulled, set aside or vacated.

        10.3  Defaults. None of the Agents shall be deemed to have knowledge of
the occurrence of a Default (other than the non-payment of principal of or
interest on Loans or Reimbursement Obligations) unless such Agent has received
notice from a Lender or a Borrower specifying such Default and stating that such
notice is a "Notice of Default." In the event that any Agent receives such a
Notice of Default, such Agent shall give prompt notice thereof to the Lenders
(and shall give each Lender prompt notice of each such non-payment). Each Agent
shall (subject to Section 10.7 hereof) take such action with respect to such
Notice of Default as shall be directed by the Majority Lenders and within its
rights under the Loan Documents and at law or in equity, provided that, unless
and until an Agent shall have received such directions,
<PAGE>
such Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, permitted hereby with respect to such Notice of
Default as it shall deem advisable in the best interests of the Lenders and
within its rights under the Loan Documents, at law or in equity.

        10.4  Material Written Notices. In the event that any Agent receives any
written notice of a material nature from any Borrower or any Obligor under the
Loan Documents, such Agent shall promptly inform each of the Lenders thereof.

        10.5  Rights as a Lender. With respect to their U.S. Commitments,
Canadian Commitments or U.K. Commitments, as the case may be, and the
Obligations, each of Wells Fargo, HSBC Canada and HSBC U.K., in its capacity as
a Lender hereunder, shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting in its agency
capacity, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include each Agent in its individual capacity. Each Agent may
(without having to account therefor to any Lender) accept deposits from, lend
money to and generally engage in any kind of banking, trust, letter of credit,
agency or other business with any Borrower (and any of their Affiliates) as if
it were not acting as an Agent, and each Agent may accept fees and other
consideration from any Borrower (in addition to the fees heretofore agreed to
between any Borrower and any Agent) for services in connection with this
Agreement or otherwise without having to account for the same to the Lenders.

        10.6  Indemnification. The Canadian Lenders, the U.S. Lenders and U.K.
Lenders, respectively, agree to indemnify Canadian Agent, U.S. Agent and U.K.
Agent, respectively (to the extent not reimbursed under Section 2.2(c), Section
11.3 or Section 11.4 hereof, but without limiting the obligations of any
Borrower under said Sections 2.2(c), 11.3 and 11.4), ratably in accordance with
the sum of the applicable Lenders' respective U.S. Commitments, Canadian
Commitments, U.K. Commitments and Term Loans, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever, REGARDLESS OF
WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY INDEMNIFIED PARTIES,
which may be imposed on, incurred by or asserted against the applicable Agent in
any way relating to or arising out of this Agreement, the Letters of Credit or
any other Loan Document or any other documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby (including,
without limitation, the costs and expenses which any Borrower is obligated to
pay under Sections 2.2(c), 11.3 and 11.4 hereof, interest, penalties, attorneys'
fees and amounts paid in settlement, but excluding, unless a Default has
occurred and is continuing, normal administrative costs and expenses incident to
the performance of its agency duties hereunder) or the enforcement of any of the
terms hereof or thereof or of any such other documents; provided that no Lender
shall be liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the party to be indemnified. The obligations
of the Lenders under this Section 10.6 shall survive the termination of this
Agreement and the repayment of the Obligations.

        10.7  Non-Reliance on Agents and Other Lenders. Each Lender agrees that
it has received current financial information with respect to each Borrower and
each other Obligor and that it has, independently and without reliance on any
Agent or any other Lender and based on such documents and information as it has
deemed appropriate, made its own credit analysis of
<PAGE>
each Borrower and each other Obligor and decision to enter into this
Agreement and that it will, independently and without reliance upon any Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents. None of the Agents shall be required to keep itself informed as to
the performance or observance by any Obligor of this Agreement, the Letters of
Credit or any of the other Loan Documents or any other document referred to or
provided for herein or therein or to inspect the properties or books of any
Obligor. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by an Agent hereunder, under
the Letters of Credit or the other Loan Documents, none of the Agents shall have
any duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of any
Obligor (or any of their affiliates) which may come into the possession of any
Agent.

        10.8  Failure to Act. Except for action expressly required of an Agent
hereunder, under the Letters of Credit or under the other Loan Documents, each
Agent shall in all cases be fully justified in failing or refusing to act
hereunder and thereunder unless it shall receive further assurances to its
satisfaction by the Lenders of their indemnification obligations under Section
10.6 hereof against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action.

        10.9  Resignation or Removal of Agent. Subject to the appointment and
acceptance of a successor U.S. Agent, Canadian Agent or U.K. Agent, as the case
may be, as provided below, U.S. Agent, Canadian Agent and U.K. Agent,
respectively, may resign at any time by giving notice thereof to the U.S.
Lenders, the Canadian Lenders and U.K. Lenders, respectively, and to U.S.
Borrower, Canadian Borrower and U.K. Borrower, respectively. Any Agent may be
removed at any time with or without cause by the Majority Lenders; provided,
that such Agent shall continue as U.S. Agent, Canadian Agent or U.K. Agent, as
the case may be, until such time as any successor shall have accepted
appointment hereunder as U.S. Agent, Canadian Agent or U.K. Agent, as the case
may be. Upon any such resignation or removal, (i) the Majority Lenders without
the consent of any Borrower shall have the right to appoint a successor U.S.
Agent, Canadian Agent or U.K. Agent, as the case may be, so long as such
successor U.S. Agent , Canadian Agent or U.K. Agent, as the case may be, is also
a Lender at the time of such appointment and (ii) the Majority Lenders shall
have the right to appoint a successor U.S. Agent, Canadian Agent or U.K. Agent,
as the case may be, that is not a Lender at the time of such appointment so long
as Borrowers consent to such appointment (which consent shall not be
unreasonably withheld). If no successor U.S. Agent, Canadian Agent or U.K.
Agent, as the case may be, shall have been so appointed by the Majority Lenders
and accepted such appointment within 30 days after the retiring U.S. Agent's,
Canadian Agent's or U.K. Agent's, as the case may be, giving of notice of
resignation or the Majority Lenders' removal of the retiring U.S. Agent,
Canadian Agent or U.K. Agent, as the case may be, then the retiring Agent may,
on behalf of the applicable Lenders, appoint a successor U.S. Agent, Canadian
Agent or U.K. Agent, as the case may be, without the necessity of any consent on
the part of any Borrower or any Lender. Any successor U.S. Agent shall be a bank
which has an office in the United States and a combined capital and surplus of
at least $250,000,000, any successor Canadian Agent shall be a bank which has an
office in Canada and a combined capital and surplus of at least C$250,000,000
and any successor U.K. Agent shall be a bank which has an office in the United
<PAGE>
Kingdom and a combined capital and surplus of at least (pound)100,000,000. Upon
the acceptance of any appointment as U.S. Agent, Canadian Agent or U.K. Agent,
as the case may be, hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent and the retiring Agent shall be discharged from
its duties and obligations hereunder and under any other Loan Documents. Such
successor Agent shall promptly specify by notice to Borrowers its Principal
Office referred to in Section 3.1 and Section 4 hereof. After any retiring
Agent's resignation or removal hereunder as an Agent, the provisions of this
Section 10 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.

        10.10 No Partnership. Neither the execution and delivery of this
Agreement nor any of the other Loan Documents nor any interest the Lenders,
Agents or any of them may now or hereafter have in all or any part of the
Obligations shall create or be construed as creating a partnership, joint
venture or other joint enterprise between the Lenders or among the Lenders and
any Agent. The relationship between the Lenders, on the one hand, and any Agent,
on the other, is and shall be that of principals and agent only, and nothing in
this Agreement or any of the other Loan Documents shall be construed to
constitute any Agent as trustee or other fiduciary for any Lender or to impose
on any Agent any duty, responsibility or obligation other than those expressly
provided for herein and therein.

        10.11 Authority of Agent. Each Lender acknowledges that the rights and
responsibilities of each Agent under this Agreement and the Loan Documents with
respect to any action taken by such Agent or the exercise or non-exercise by any
Agent of any option, right, request, judgment or other right or remedy provided
for herein or resulting or arising out of this Agreement and/or the other Loan
Documents shall, as between such Agent and the Lenders, be governed by this
Agreement and by such other agreements with respect thereto as may exist from
time to time among them, but, as between such Agent and the Obligors, such Agent
shall be conclusively presumed to be acting as agent for the applicable Lenders
with full and valid authority so to act or refrain from acting; and each Obligor
shall not be under any obligation, or entitlement, to make any inquiry
respecting such authority.

        10.12 Syndications Agent. Comerica Bank, in its capacity as Syndications
Agent, shall have no rights, powers, duties, obligations or liabilities under
this Agreement or any of the other Loan Documents, but to the extent that for
any reason any Person makes a claim against Comerica Bank in its capacity as
Syndications Agent and not as a Lender the indemnification provisions in
Sections 10.6 and 11.4 shall apply in connection with such claim as if Comerica
Bank was an Agent under this Agreement.
<PAGE>
11.     Miscellaneous.

        11.1  Waiver. No waiver of any Default or Event of Default shall be a
waiver of any other Default or Event of Default. No failure on the part of any
Agent or any Lender to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege under any Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The remedies
provided in the Loan Documents are cumulative and not exclusive of any remedies
provided by law or in equity.

        11.2  Notices. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made by telegraph, telecopy (confirmed
by mail), cable or other writing and telecopied, telegraphed, cabled, mailed or
delivered to the intended recipient at the "Address for Notices" specified below
its name on the signature pages hereof (or provided for in an Assignment and
Acceptance); or, as to any party hereto, at such other address as shall be
designated by such party in a notice (given in accordance with this Section) (i)
as to any Borrower, to Agents, (ii) as to U.S. Agent, to U.S. Borrower and to
each U.S. Lender, (iii) as to Canadian Agent, to Canadian Borrower and to each
Canadian Lender, (iv) as to U.K. Agent, to U.K. Borrower and to each U.K.
Lender, (v) as to any U.S. Lender, to U.S. Borrower and Agents, (vi) as to any
Canadian Lender, to Canadian Borrower and Agents and (vii) as to any U.K.
Lender, to U.K. Borrower and Agents. Except as otherwise provided in this
Agreement, all such notices or communications shall be deemed to have been duly
given when (a) transmitted by telecopier or delivered to the telegraph or cable
office, (b) personally delivered (c) one Business Day after deposit with an
overnight mail or delivery service, postage prepaid or (d) three Business Days'
after deposit in a receptacle maintained by the United States Postal Service or
Canada Post or the official postal service of the United Kingdom, as the case
may be, postage prepaid, registered or certified mail, return receipt requested,
in each case given or addressed as aforesaid.

        11.3  Expenses, Etc. Whether or not any Loan is ever made or any
Bankers' Acceptances ever accepted and purchased or any Letter of Credit ever
issued, Borrowers shall pay or reimburse within 10 Business Days after written
demand (a) (i) U.S. Agent for paying the reasonable fees and expenses of legal
counsel to U.S. Agent in the United States, in Canada and in the United Kingdom,
(ii) Canadian Agent for paying the reasonable fees and expenses of legal counsel
to Canadian Agent in Canada and (iii) U.K. Agent for paying the reasonable fees
and expenses of legal counsel to U.K. Agent in the United Kingdom, in connection
with the preparation, negotiation, execution and delivery of this Agreement
(including the exhibits and schedules hereto), the Security Documents and the
other Loan Documents and the making of the Loans and the acceptance and purchase
of Bankers' Acceptances and the issuance of Letters of Credit hereunder, and any
modification, supplement or waiver of any of the terms of this Agreement, the
Letters of Credit or any other Loan Document; (b) any Agent for any reasonable
and customary search fees, collateral audit fees and appraisal fees; (c) any
Agent for reasonable out-of-pocket expenses incurred in connection with the
preparation, documentation, administration and syndication of the Loans or any
of the Loan Documents (including, without limitation, the advertising,
marketing, printing, publicity, duplicating, mailing and similar expenses) of
the Loans and Letter of Credit Liabilities; (d) Agent for paying all transfer,
stamp, documentary or other similar taxes, assessments or charges levied by any
governmental or
<PAGE>
revenue authority in respect of this Agreement, any Letter of Credit or any
other Loan Document or any other document referred to herein or therein; (e)
any Agent for paying all costs, expenses, taxes, assessments and other charges
incurred in connection with any filing, registration, recording or perfection of
any Lien contemplated by this Agreement, any Security Document or any document
referred to herein or therein; and (f) following the occurrence and during the
continuation of an Event of Default, any Lender or any Agent for paying all
amounts reasonably expended, advanced or incurred by such Lender or such Agent
to satisfy any obligation of any Obligor under this Agreement or any other Loan
Document, to protect the Collateral, to collect the Obligations or to enforce,
protect, preserve or defend the rights of the Lenders or Agents under this
Agreement or any other Loan Document, including, without limitation, fees and
expenses incurred in connection with such Lender's or such Agent's participation
as a member of a creditor's committee in a case commenced under the Bankruptcy
Code or the Insolvency Act 1986 (England and Wales) or other similar law, fees
and expenses incurred in connection with lifting the automatic stay prescribed
in Section 362 of the Bankruptcy Code or the Insolvency Act 1986 (England and
Wales) and fees and expenses incurred in connection with any action pursuant to
Section 1129 of the Bankruptcy Code or the Insolvency Act 1986 (England and
Wales) and all other reasonable and customary out-of-pocket expenses incurred by
such Lender or such Agent in connection with such matters, together with
interest thereon at the Past Due Rate applicable to U.S. Loans on each such
amount from the due date until the date of reimbursement to such Lender or such
Agent.

        11.4  Indemnification. Borrowers, jointly and severally, shall indemnify
each Agent, each Lender and each affiliate thereof and their respective
directors, officers, employees and agents from, and hold each of them harmless
against, any and all losses, liabilities, claims or damages to which any of them
may become subject, REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE
NEGLIGENCE OF ANY INDEMNIFIED PARTIES, insofar as such losses, liabilities,
claims or damages arise out of or result from any (i) actual or proposed use by
any Borrower of the proceeds of any extension of credit (whether a Loan, a
Bankers' Acceptance or a Letter of Credit) by any Lender hereunder; (ii) breach
by any Obligor of this Agreement or any other Loan Document; (iii) violation by
any Obligor of any Legal Requirement; or (iv) investigation, litigation or other
proceeding relating to any of the foregoing, and Borrowers, jointly and
severally, shall reimburse each Agent, each Lender, and each Affiliate thereof
and their respective directors, officers, employees and agents, upon demand for
any reasonable and customary expenses (including reasonable and customary legal
fees) incurred in connection with any such investigation or proceeding;
provided, however, that none of the Borrowers shall have any obligations
pursuant to this Section with respect to any losses, liabilities, claims,
damages or expenses incurred by the Person seeking indemnification by reason of
the gross negligence or willful misconduct of that Person or with respect to any
disputes between or among any of Agents, Lenders and Issuers. Nothing in this
Section is intended to limit the obligations of any Borrower under any other
provision of this Agreement. Each Agent and each Lender, respectively, shall
indemnify Borrowers and hold Borrowers harmless from and against the gross
negligence or willful misconduct of such Agent or such Lender, as the case may
be. Nothing in this Section shall render Canadian Borrower or U.K. Borrower
liable in respect of the U.S. Obligations. In the case of any indemnification
hereunder, the applicable Agent or the respective Lender, as appropriate, shall
give written notice to the applicable Borrower of any such claim or demand being
made against an indemnified person and the applicable Borrower shall have the
non-exclusive right to join in the defense against any such
<PAGE>
claim or demand, provided that if such Borrower provides a defense, the
indemnified person shall bear its own cost of defense unless there is a conflict
of interests between such Borrower and such indemnified person. No indemnified
person may settle any claim to be indemnified without the consent of the
applicable Borrower, such consent not to be unreasonably withheld or delayed.

        11.5  Amendments, Etc. No amendment or modification of this Agreement,
the Notes or any other Loan Document shall in any event be effective against any
Borrower or any other Obligor party thereto unless the same shall be agreed or
consented to in writing by such Person. No amendment, modification or waiver of
any provision of this Agreement, the Notes or any other Loan Document, nor any
consent to any departure by any Obligor therefrom, shall in any event be
effective against the Lenders unless the same shall be agreed or consented to in
writing by the Majority Lenders, and each such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, that no amendment, modification, waiver or consent shall,
unless in writing and signed by each Lender affected thereby, do any of the
following: (a) increase any U.S. Commitments, Canadian Commitments or U.K.
Commitments of any of the Lenders (or reinstate any termination or reduction of
the U.S. Commitments, Canadian Commitments or U.K. Commitments), or subject any
of the Lenders to any additional obligations; (b) reduce the principal of, or
interest on, any Loan, Reimbursement Obligation, fee or other amount due
hereunder; (c) postpone or extend the Revolving Loan Maturity Date, the Term
Loan Maturity Date, the Termination Date, the Availability Period or any
scheduled date fixed for any payment of principal of, or interest on, any Loan,
Reimbursement Obligation, fee or other sum to be paid hereunder or waive any
Event of Default described in Section 9.1(a) hereof; (d) change the percentage
of any of the U.S. Commitments, Canadian Commitments or U.K. Commitments, as the
case may be, or of the aggregate unpaid principal amount of Obligations, or the
percentage of Lenders, which shall be required for the Lenders or any of them to
take any action under this Agreement; (e) change any provision contained in
Sections 2.2(c), 7.9, 11.3 or 11.4 hereof or this Section 11.5; (f) release any
Person from liability under a Guaranty or release all or substantially all of
the security for the Obligations or release Collateral (exclusive of Collateral
with respect to which any Agent is obligated to provide a release pursuant to
this Agreement or any of the other Loan Documents or by law) in any one (1)
calendar year ascribed an aggregate value on the most recent financial
statements of the applicable Borrower delivered to Agents in excess of
$1,000,000; (g) increase any of the fixed percentages to be multiplied by the
aggregate amounts of the components comprising the U.S. Borrowing Base, the
Canadian Borrowing Base or U.K. Borrowing Base that are described in (i) and
(ii) of the definition of the U.S. Borrowing Base, the Canadian Borrowing Base
or U.K. Borrowing Base herein, and (h) modify the provisions of Sections 4.1(b)
or 4.2 hereof regarding pro rata application of amounts after an Event of
Default shall have occurred and be continuing. Notwithstanding anything in this
Section 11.5 to the contrary, no amendment, modification, waiver or consent
shall be made with respect to Section 10 without the consent of U.S. Agent to
the extent it affects U.S. Agent, as U.S. Agent or Canadian Agent to the extent
it affects Canadian Agent, as Canadian Agent or U.K. Agent to the extent it
affects U.K. Agent, as U.K. Agent.
<PAGE>
        11.6  Successors and Assigns.

        (a)   This Agreement shall be binding upon and inure to the benefit of
Borrowers, Agents and the Lenders and their respective successors and assigns;
provided, however, that, except as permitted by Section 8.4 hereof, no Borrower
may assign or transfer any of its rights or obligations hereunder without the
prior written consent of all of the Lenders, and any such assignment or transfer
without such consent shall be null and void. Each Lender may sell participations
to any Person in all or part of any Loan or Bankers' Acceptance, or all or part
of its Notes, U.S. Commitments, Canadian Commitments or U.K. Commitments, as the
case may be, or interests in Letters of Credit or Bankers' Acceptances, in which
event, without limiting the foregoing, the provisions of the Loan Documents
shall inure to the benefit of each purchaser of a participation; provided,
however, the pro rata treatment of payments, as described in Section 4.2 hereof
and rights to compensation under Section 3.3 hereof, shall be determined as if
such Lender had not sold such participation. No Lender that sells one or more
participations to any Person shall be relieved by virtue of such participation
from any of its obligations to Borrowers under this Agreement. In the event any
Lender shall sell any participation, such Lender shall retain the sole right and
responsibility to enforce the obligations of Borrowers hereunder, including,
without limitation, the right to approve any amendment, modification or waiver
of any provision of this Agreement other than amendments, modifications or
waivers with respect to (i) any fees payable hereunder to the Lenders, (ii) the
amount of principal or the rate of interest payable on, or the dates fixed for
the scheduled repayment of principal of, any of the Obligations and (iii) the
release of the Liens on all or substantially all of the Collateral.

        (b)   Each U.S. Lender may assign to one or more U.S. Lenders or any
other Person all or a portion of its interests, rights and obligations under
this Agreement; provided, however, that (i) the aggregate amount of the U.S.
Commitments and Term Loans of the assigning U.S. Lender subject to each such
assignment shall in no event be less than $3,000,000 and (ii) other than in the
case of an assignment to another U.S. Lender (that is, at the time of the
assignment, a party hereto) or to a Lender Affiliate of such U.S. Lender or to a
Federal Reserve Bank, Agents and, so long as no Event of Default shall have
occurred and be continuing, U.S. Borrower must each give its prior written
consent, which consents shall not be unreasonably withheld. Each Canadian Lender
may assign to one or more Canadian Lenders or any other Person all or a portion
of its interests, rights and obligations under this Agreement; provided,
however, that (i) the aggregate amount of the Canadian Commitments of the
assigning Canadian Lender subject to each such assignment shall in no event be
less than $3,000,000 and (ii) other than in the case of an assignment to another
Canadian Lender (that is, at the time of the assignment, a party hereto) or to a
Lender Affiliate of such Canadian Lender, Agents and, so long as no Event of
Default shall have occurred and be continuing, Canadian Borrower must each give
its prior written consent, which consents shall not be unreasonably withheld.
Each U.K. Lender may assign to one or more U.K. Lenders or any other Person all
or a portion of its interests, rights and obligations under this Agreement;
provided, however, that (x) the aggregate amount of the U.K. Commitments of the
assigning U.K. Lender subject to each such assignment shall in no event be less
than $3,000,000 and (y) other than in the case of an assignment to another U.K.
Lender (that is, at the time of the assignment, a party hereto) or to a Lender
Affiliate of such U.K. Lender, Agents and, so long as no Event of Default shall
have occurred and be continuing, U.K. Borrower must each give its prior written
consent, which consents shall not be unreasonably withheld. After giving effect
to any assignment (other than an assignment of all of the
<PAGE>
commitments and Loans of the assigning Lender), the assigning Lender shall
have commitments and Loans aggregating at least $3,000,000 unless otherwise
agreed to by the U.S. Borrower and the U.S. Agent. As a condition precedent
to any such assignment, the parties to each such assignment shall execute and
deliver to the applicable Agent, for its acceptance an Assignment and Acceptance
in substantially the form of Exhibit E hereto (each an "Assignment and
Acceptance") with blanks appropriately completed, together with any Note or
Notes subject to such assignment and a processing and recording fee of $3,000
paid by the assignee (for which Borrowers will have no liability). Upon such
execution, delivery and acceptance, from and after the effective date specified
in each Assignment and Acceptance, (A) the assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder and (B) the Lender thereunder
shall, to the extent provided in such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto except in respect of provisions of this Agreement which survive payment
of the Obligations and termination of the U.S. Commitments, Canadian Commitments
or U.K. Commitments, as the case may be). Notwithstanding anything contained in
this Agreement to the contrary, any Lender may at any time assign all or any
portion of its rights under this Agreement and the other Loan Documents as
collateral to a Federal Reserve Bank; provided that no such assignment shall
release such Lender from any of its obligations hereunder.

        (c)   By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim, such Lender
assignor makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or any of the other Loan Documents or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any of the other Loan Documents or any other instrument or
document furnished pursuant thereto; (ii) such Lender assignor makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of any Borrower or any Obligor or the performance or
observance by any Borrower or any Obligor of any of its obligations under this
Agreement or any of the other Loan Documents to which it is a party or any other
instrument or document furnished pursuant hereto; (iii) such assignee confirms
that it has received a copy of this Agreement, together with copies of the
financial statements most recently delivered under either Section 6.2 or Section
7.2 hereof and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon any
Agent, such Lender assignor or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and the
other Loan Documents; (v) such assignee appoints and authorizes U.S. Agent,
Canadian Agent or U.K. Agent, as the case may be, to take such action as agent
on its behalf and to exercise such powers under this Agreement and the other
Loan Documents as are delegated to such Agent by the terms hereof, together with
such powers as are reasonably incidental thereto; and (vi) such assignee agrees
that it will perform in accordance with their terms all obligations that by the
<PAGE>
terms of this Agreement and the other Loan Documents are required to be
performed by it as a Lender.

        (d)   The entries in the records of each applicable Agent as to each
Assignment and Acceptance delivered to it and the names and addresses of the
Lenders and the U.S. Commitments, Canadian Commitments or U.K. Commitments of,
and principal amount of the Obligations owing to, each Lender from time to time
shall be conclusive, in the absence of manifest error, and Obligors, Agents and
the Lenders may treat each Person the name of which is recorded in the books and
records of the applicable Agent as a Lender hereunder for all purposes of this
Agreement and the other Loan Documents.

        (e)   Upon the applicable Agent's receipt of an Assignment and
Acceptance executed by an assigning Lender and the assignee thereunder, together
with any Note or Notes subject to such assignment and the written consent to
such assignment (to the extent consent is required), such Agent shall, if such
Assignment and Acceptance has been completed with blanks appropriately filled,
(i) accept such Assignment and Acceptance, (ii) record the information contained
therein in its records and (iii) give prompt notice thereof to the applicable
Borrower. Within five Business Days after receipt of notice, the applicable
Borrower, at its own expense, shall execute and deliver to the applicable Agent
new Notes payable to the order of such assignee in the appropriate amounts and,
if the assigning Lender has retained U.S. Commitments, Canadian Commitments or
U.K. Commitments, as the case may be, or Term Loans hereunder, new Notes to the
order of the assigning Lender in the appropriate amounts. Such new Notes shall
be dated the effective date of such Assignment and Acceptance and shall
otherwise be in the forms required hereunder. Thereafter, the replaced Notes
shall be surrendered to the applicable Agent by the applicable Lender or
Lenders, marked renewed and substituted and the originals thereof delivered to
the applicable Borrower (with copies to be retained by the applicable Agent).

        (f)   Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 11.6, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to any Borrower furnished to such Lender by or on behalf of
any Borrower; provided such Person agrees to maintain the confidentiality of
such information in accordance with Section 11.19.

        11.7  Limitation of Interest. U.S. Borrower, U.K. Borrower, U.S. Lenders
and U.K. Lenders intend to strictly comply with all applicable usury laws of the
United States and Texas (or the usury laws of any jurisdiction, including Canada
and the United Kingdom, whose usury laws are deemed to apply to the Notes or any
other Loan Documents despite the intention and desire of the parties to apply
the usury laws of the State of Texas). Canadian Borrower and the Canadian
Lenders intend to strictly comply with all applicable usury laws in effect in
Canada (or the usury laws of any jurisdiction, including the State of Texas,
whose usury laws are deemed to apply to the Notes or any other Loan Documents
despite the intention and desire of the parties to apply the usury laws in
effect in Canada). Accordingly, the provisions of this Section 11.7 shall govern
and control over every other provision of this Agreement or any other Loan
Document which conflicts or is inconsistent with this Section, even if such
provision declares that it controls. As used in this Section, the term
"interest" includes the aggregate of all charges, fees, benefits or other
compensation which constitute interest under applicable law, provided that, to
<PAGE>
the maximum extent permitted by applicable law, (a) any non-principal payment
shall be characterized as an expense or as compensation for something other than
the use, forbearance or detention of money and not as interest and (b) all
interest at any time contracted for, reserved, charged or received shall be
amortized, prorated, allocated and spread during the full term of the
Obligations. In no event shall Borrowers or any other Person be obligated to
pay, or any Agent, any Issuer or any Lender have any right or privilege to
reserve, receive or retain, (a) any interest in excess of the maximum amount of
nonusurious interest permitted under applicable laws or (b) total interest in
excess of the amount which such Person could lawfully have contracted for,
reserved, received, retained or charged had the interest been calculated for the
full term of the Obligations at the Ceiling Rate. None of the terms and
provisions contained in this Agreement or in any other Loan Document (including,
without limitation, Section 9.1 hereof) which directly or indirectly relate to
interest shall ever be construed without reference to this Section 11.7, or be
construed to create a contract to pay for the use, forbearance or detention of
money at an interest rate in excess of the Ceiling Rate. If the term of any
Obligation is shortened by reason of acceleration of maturity as a result of any
Default or by any other cause, or by reason of any required or permitted
prepayment, and if for that (or any other) reason any Agent, any Issuer or any
Lender at any time, including but not limited to, the stated maturity, is owed
or receives (and/or has received) interest in excess of interest calculated at
the Ceiling Rate, then and in any such event all of any such excess interest
shall be canceled automatically as of the date of such acceleration, prepayment
or other event which produces the excess, and, if such excess interest has been
paid to such Person, it shall be credited pro tanto against the then-outstanding
principal balance of the applicable Borrower's obligations to such Person,
effective as of the date or dates when the event occurs which causes it to be
excess interest, until such excess is exhausted or all of such principal has
been fully paid and satisfied, whichever occurs first, and any remaining balance
of such excess shall be promptly refunded to its payor.

        11.8  Survival. The obligations of Borrowers under Sections 2.2(c),
2.2(d), 7.9, 11.3 and 11.4 hereof and all other obligations of Borrowers in any
other Loan Document (to the extent stated therein), the obligations of each
Issuer under the last sentence of Section 2.2(b)(iii) and the obligations of the
Lenders under Sections 4.1(d), 10.6, 11.7, 11.13, 11.18 and 11.19 hereof, shall,
notwithstanding anything herein to the contrary, survive the repayment of the
Loans and Reimbursement Obligations and the termination of the U.S. Commitments,
the Canadian Commitments, the U.K. Commitments and the Letters of Credit.

        11.9  Captions. Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.

        11.10 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
agreement and any of the parties hereto may execute this Agreement by signing
any such counterpart.

        11.11 Governing Law. THIS AGREEMENT AND (EXCEPT AS THEREIN PROVIDED) THE
OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
APPLICABLE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA FROM TIME
TO TIME IN EFFECT; PROVIDED, HOWEVER, THAT, EXCEPT AS MAY BE REQUIRED UNDER
APPLICABLE
<PAGE>
LAWS, THE USURY LAWS OF THE STATE OF TEXAS OR THE UNITED STATES OF AMERICA
SHALL NOT APPLY TO LOANS MADE TO AND BANKERS ACCEPTANCES ACCEPTED IN CANADA
BY CANADIAN LENDERS DRAWN BY CANADIAN BORROWER, BUT RATHER THE USURY LAWS IN
EFFECT IN CANADA SHALL GOVERN IN SUCH CONTEXT.

        11.12 Severability. Whenever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of any Loan Document shall be invalid, illegal
or unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions of such Loan Document shall not
be affected or impaired thereby.

        11.13 Tax Forms; Net Payments.

        (a)   Each U.S. Lender which is organized under the laws of a
jurisdiction outside the United States shall, on the day of the initial
borrowing from each such U.S. Lender hereunder and from time to time thereafter
if requested by U.S. Borrower or U.S. Agent, provide U.S. Agent and U.S.
Borrower with the forms prescribed by the Internal Revenue Service of the United
States certifying as to such U.S. Lender's status for purposes of determining
exemption from United States withholding taxes with respect to all payments to
be made to such U.S. Lender hereunder or other documents satisfactory to such
U.S. Lender, U.S. Borrower and U.S. Agent indicating that all payments to be
made to such U.S. Lender hereunder are not subject to United States withholding
tax or are subject to such tax at a rate reduced by an applicable tax treaty.
Unless U.S. Borrower and U.S. Agent shall have received such forms or such
documents indicating that payments to such U.S. Lender hereunder are not subject
to United States withholding tax or are subject to such tax at a rate reduced by
an applicable tax treaty, U.S. Borrower and U.S. Agent shall be entitled to
withhold taxes from such payments at the applicable statutory rate.

        (b)   Each Canadian Lender is not a non-resident of Canada for purposes
of the Income Tax Act (Canada).

        (c)   Each U.K. Lender is a Qualifying Lender. In this Section 11.13(c),
"Qualifying Lender" means (a) a Lender which is within the charge to U.K.
corporation tax in respect of, and beneficially entitled to, a payment of
interest on a loan made by a person that was a bank for the purposes of section
349 of the Income and Corporation Taxes Act 1988 (as currently defined in
section 840A of the Income and Corporation Taxes Act) at the time the loan was
made, or (b) a Lender which is, on the date a payment of interest falls due
hereunder, resident (as defined in the appropriate double taxation agreement) in
a country with which the U.K. has a double taxation agreement giving residents
of that country exemption from U.K. taxation on interest and does not carry on a
business in the U.K. through a permanent establishment with which the payment is
effectively connected.

        (d)   Each U.K. Lender shall (i) promptly after the date hereof or
promptly after the date of an Assignment and Acceptance pursuant to which it
became a Lender and (ii) from time to time thereafter upon the obsolescence or
expiration of any previously delivered form or certificate (but only so long as
such Lender remains lawfully able to do so) provide the
<PAGE>
Borrowers and the Agents with any form or certificate that is required by any
taxing authority, or other such forms as shall be appropriate to establish,
that such Lender is (y) exempt from Home Jurisdiction Withholding Taxes on
payments pursuant to this Agreement or any other Loan Document. Each U.K. Lender
represents and warrants that such information is true and complete in all
material respects as of the date it is delivered. Each such Lender shall
promptly notify the Borrowers and the Agents if, because of any change in the
jurisdiction of organization or the principle office of such Lender, (A) it is
required to withdraw or cancel any form or certificate previously submitted by
it or any form or certificate has otherwise become ineffective or inaccurate or
(B) payments to it are or will be subject to withholding of any Home
Jurisdiction Withholding Tax to a greater or lesser extent than the extent to
which payments to it pursuant to this Agreement, the Notes or any other Loan
Document were previously subject.

        (e)   If a Lender shall receive a refund of any Taxes paid by a Borrower
pursuant to this Agreement by reason of the fact that such Taxes were not
correctly or legally asserted, such Lender shall within 90 days after receipt of
such refund pay to such Borrower the amount of such refund along with any
interest actually received by such Lender thereon, if any; provided, however,
that such payments shall be required only to the extent any Lender can
determine, in its good faith judgment, that such refunds are attributable to
payments made by or on behalf of such Borrower; and provided, further, that no
Lender shall have any obligation under this Agreement to claim or otherwise seek
to obtain any such refund, but agrees to use reasonable efforts to assist a
Borrower in doing so.

        11.14 Interest Act (Canada). Whenever interest is calculated on the
basis of a year of 360 or 365 days, for the purposes of the Interest Act
(Canada), the yearly rate of interest which is equivalent to the rate payable
hereunder is the rate payable multiplied by the actual number of days in the
year and divided by 360 or 365, as the case may be. All interest will be
calculated using the nominal rate method and not the effective rate method and
the deemed reinvestment principle shall not apply to such calculations.

        11.15 Judgment Currency. The obligation of each Borrower to make
payments on any Obligation to the Lenders or to any Agent hereunder in any
currency (the "first currency") shall not be discharged or satisfied by any
tender or recovery pursuant to any judgment expressed in or converted into any
other currency (the "second currency") except to the extent to which such tender
or recovery shall result in the effective receipt by the applicable Lender or
the applicable Agent of the full amount of the first currency payable, and
accordingly the primary obligation of each Borrower shall be enforceable as an
alternative or additional cause of action for the purpose of recovery in the
second currency of the amount (if any) by which such effective receipt shall
fall short of the full amount of the first currency payable and shall not be
affected by a judgment being obtained for any other sum due hereunder.

        11.16 Conflicts Between This Agreement and the Other Loan Documents. In
the event of any conflict between the terms of this Agreement and the terms of
any of the other Loan Documents, the terms of this Agreement shall control.

        11.17 Limitation on Charges; Substitute Lenders; Non-Discrimination.
Anything in Sections 2.2(d), 3.3(c) or 7.9 notwithstanding:
<PAGE>
              (1) No Borrower shall be required to pay to any Lender
        reimbursement or indemnification with regard to any costs or expenses
        described in such Sections, unless such Lender notifies the applicable
        Borrower of such costs or expenses within 90 days after the date paid
        or incurred;

              (2) none of the Lenders shall be permitted to pass through to
        any Borrower charges and costs under such Sections on a discriminatory
        basis (i.e., which are not also passed through by such Lender to other
        customers of such Lender similarly situated where such customer is
        subject to documents providing for such pass through); and

              (3) if any Lender elects to pass through to any Borrower any
        material charge or cost under such Sections or elects to terminate the
        availability of LIBOR Borrowings for any material period of time, the
        applicable Borrower may, within 60 days after the date of such event
        and so long as no Default shall have occurred and be continuing, elect
        to terminate such Lender as a party to this Agreement; provided that,
        concurrently with such termination such Borrower shall (i) if Agents
        and each of the other Lenders shall consent, pay that Lender all
        principal, interest and fees and other amounts owed to such Lender
        through such date of termination or (ii) have arranged for another
        financial institution approved by Agents (such approval not to be
        unreasonably withheld or delayed) as of such date, to become a
        substitute Lender for all purposes under this Agreement in the manner
        provided in Section 11.6; provided further that, prior to substitution
        for any Lender, the applicable Borrower shall have given written notice
        to Agents of such intention and the Lenders shall have the option, but
        no obligation, for a period of 60 days after receipt of such notice, to
        increase their U.S. Commitments, Canadian Commitments or U.K.
        Commitments, as the case may be, in order to replace the affected
        Lender in lieu of such substitution.

        11.18 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

        11.19 Confidentiality. Each of the Agents, Wells Fargo, HSBC Canada,
HSBC U.K. and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates' directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential),
<PAGE>
(b) to the extent requested by any regulatory authority, (c) to the extent
required by applicable laws or regulations or by any subpoena or similar
legal process, (d) to any other party to this Agreement, (e) in connection with
the exercise of any remedies hereunder or any suit, action or proceeding
relating to this Agreement or the enforcement of rights hereunder, (f) subject
to an agreement containing provisions substantially the same as those of this
Section, to (i) any actual or prospective assignee of or participant in any of
its rights or obligations under this Agreement so long as such assignee or
participant agrees to be bound by confidentiality provisions substantially
similar to this Section or (ii) any actual or prospective counterparty (or its
advisors) to any swap or derivative transaction relating to any Borrower (or any
Subsidiary of a Borrower) so long as such counterparty (and, if applicable, its
advisors) agrees to be bound by confidentiality provisions substantially similar
to this Section, (g) with the consent of the applicable Borrower or (h) to the
extent such Information (i) becomes publicly available other than as a result of
a breach of this Section or (ii) becomes available to any Agent, Wells Fargo,
HSBC Canada, HSBC U.K. or any Lender on a nonconfidential basis from a source
other than a Borrower or a Subsidiary of a Borrower. For the purposes of this
Section, "Information" means all information received from a Borrower (or any
Subsidiary of a Borrower) relating to such Borrower (or such Subsidiary) or its
business, other than any such information that is available to any Agent, Wells
Fargo, HSBC Canada, HSBC U.K. or any Lender on a nonconfidential basis prior to
such disclosure; provided that, in the case of information received after the
date hereof, such information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of Information
as provided in this Section shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord to
its own confidential information.

        11.20 USA Patriot Act Notice. Each Lender hereby notifies the Borrowers
that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L.
107-56 (signed into law October 26, 2001)) (the "Act"), it is required to
obtain, verify and record information that identifies the Borrowers, which
information includes the names and addresses of the Borrowers and other
information that will allow such Lender to identify the Borrowers in accordance
with the Act.

        11.21 Amendment and Restatement. This Agreement amends and restates in
entirety that certain Loan Agreement dated March 16, 2001 executed by and among
the Borrowers, The Chase Manhattan Bank, as U.S. Agent, Royal Bank of Canada, as
Canadian Agent, Chase Manhattan International Limited, as U.K. Agent, and
certain lenders therein named, as the same may have been amended. The U.S.
Revolving Notes have been given in renewal, extension and modification of the
revolving credit facility previously provided by the U.S. Lenders to the
Borrowers pursuant to such March 16, 2001 Loan Agreement, the U.K. Revolving
Notes have been given in renewal, extension and modification of the revolving
credit facility previously provided by the U.K. Lenders to the Borrowers
pursuant to such March 16, 2001 Loan Agreement, the Canadian Revolving Notes
have been given in renewal, extension and modification of the revolving credit
facility previously provided by the Canadian Lenders to the Borrowers pursuant
to such March 16, 2001 Loan Agreement and the Term Notes has been given in
renewal, extension and modification of the term loans previously made by the
U.S. Lenders to the Borrowers pursuant to such March 16, 2001 Loan Agreement.
From and after the Closing Date, (i) the lenders which were parties to such
March 16, 2001 Loan Agreement and which are not Lenders party hereto shall have
no further commitment or obligation to the Borrowers or any
<PAGE>
other Obligor as a lender under such March 16, 2001 Loan Agreement, as amended
and restated by this Agreement, and (ii) JPMorgan Chase Bank, Royal Bank
of Canada and J.P. Morgan Europe Limited shall each cease to be an Agent and
shall have no further obligation to the Borrowers, the other Obligor, any of the
lenders which were parties to such March 16, 2001 Loan Agreement and which are
not Lenders party hereto or any of the Lenders party hereto in the capacity of
Agent under such March 16, 2001 Loan Agreement, as amended and restated by this
Agreement.

        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.

                             NATCO GROUP INC.,
                             a Delaware corporation

                             By:  /s/ Richard W. FitzGerald
                                ----------------------------------------------
                                      Richard W. FitzGerald, Senior Vice
                                      President and Chief Financial Officer

                             NATCO CANADA, LTD., a corporation formed
                             under the laws of the Province of Ontario

                             By:  /s/ Richard W. FitzGerald
                                ----------------------------------------------
                                      Richard W. FitzGerald, Vice President

                             AXSIA GROUP LIMITED,
                             a company  incorporated  in  England  and Wales
                             under  the  Companies  Act of the United Kingdom

                             By:  /s/ Richard W. FitzGerald
                                ----------------------------------------------
                                      Richard W. FitzGerald,
                                      Authorized Signatory

                             Address for Notices:

                             Brookhollow Central III
                             2950 North Loop West, Suite 750
                             Houston, Texas 77092
                             Attention: Richard W. FitzGerald
                             Telecopy No.: (713) 683-7841
<PAGE>
        The undersigned hereby join in this Agreement to evidence their consent
to execution by Borrowers of this Agreement, to confirm that each Loan Document
now or previously executed by the undersigned applies and shall continue to
apply to this Agreement and to acknowledge that without such consent and
confirmation, Lenders would not execute this Agreement.

                             NATIONAL TANK COMPANY,  a Delaware  corporation,
                             and TOTAL  ENGINEERING  SERVICES TEAM, INC.,
                             a Louisiana corporation

                             By:  /s/ Richard W. FitzGerald
                                -------------------------------------------
                                      Richard W. FitzGerald,
                                      Senior/ Vice President and Treasurer

                             AXSIA HOLDINGS LIMITED (formerly known as Starfish
                             Acquisition Limited), a company incorporated in
                             England and Wales under the Companies Act of the
                             United Kingdom, AXSIA LIMITED, a company
                             incorporated in England and Wales under the
                             Companies Act of the United Kingdom, AXSIA SERCK
                             BAKER LIMITED, a company incorporated in England
                             and Wales under the Companies Act of the United
                             Kingdom, AXSIA HOWMAR LIMITED, a company
                             incorporated in England and Wales under the
                             Companies Act of the United Kingdom, and RICHARD
                             MOZLEY LIMITED, company incorporated in England and
                             Wales under the Companies Act of the United Kingdom

                             By:  /s/ Richard W. FitzGerald
                                ------------------------------------------------
                                   Richard W. FitzGerald, Authorized Signatory
<PAGE>
                             WELLS FARGO BANK, NATIONAL
                             ASSOCIATION, as U.S. Agent and Co-Lead
                             Arranger, Issuer of U.S. Letters of Credit, and a
                             U.S. Lender

                            By:  /s/ SCOTT GILDEA
                                 ----------------------------------
                                 Scott Gildea, Vice President

                             Address for Notices:

U.S. Commitment:             1000 Louisiana, 3rd Floor
                             Houston, Texas 77002
$5,384,500.00                Attention: Scott Gildea
                             Telecopy No.: 713-319-1087

Canadian Commitment:

$0

U.K. Commitment:

$0

Term Loans:

$12,115,500.00
<PAGE>
                             COMERICA BANK, as Syndications Agent, as Co-Lead
                             Arranger and as a U.S. Lender

                             By:     /s/ Mona M. Foch
                                -----------------------------------------------
                             Name:   Mona M. Foch
                                  ---------------------------------------------
                             Title:  Senior Vice President - Texas Division
                                   --------------------------------------------

                             Address for Notices:

U.S. Commitment:             910 Louisiana, Suite 410
                             Houston, TX  77002
$5,384,500.00                Attention: Mona Foch
                             Telecopy No.: 281-565-3750

Canadian Commitment:

$0

U.K. Commitment:

$0

Term Loans:

$12,115,500.00
<PAGE>
                             HSBC BANK PLC,
                             as U.K. Agent

                             By:    /s/ D.P.S. Hawker
                                -------------------------------------------
                             Name:  D.P.S. Hawker
                                  -----------------------------------------
                             Title: Corporate Banking Manager
                                   ----------------------------------------

                             Address for Notices:

U.S. Commitment:             The Cross
                             Gloucester, Gloucestershire GL1 2AP
$0                           United Kingdom
                             Attention:  David Hawker
                             Telecopy No.:  0044 (0) 1452 364141

Canadian Commitment:

0

U.K. Commitment:

$10,000,000.00

Term Loans:

$0
<PAGE>
                             HSBC BANK CANADA,
                             as Canadian Agent

                             By:    /s/ Malcolm Tinsley
                                -------------------------------------------
                             Name:  Malcolm Tinsley
                                  -----------------------------------------
                             Title: Senior Account Manager Commerical
                                    ---------------------------------------
                                    Financial Services
                                   ----------------------------------------

                             By:    /s/ Allison Dawhank
                                -------------------------------------------
                             Name:  Allison Dawhank
                                  -----------------------------------------
                             Title: Corporate & Institutional Banking
                                   ----------------------------------------

                             Address for Notices:

U.S. Commitment:             333 - 5th Avenue S.W.
                             Calgary, Alberta, T2P 3B6
$0                           Canada
                             Attention:  Manager
                             Telecopy No.: 403-410-7034

Canadian Commitment:

$5,000,000.00

U.K. Commitment:

$0

Term Loans:

$0
<PAGE>
                             SOUTHWEST BANK OF TEXAS, N.A.

                             By:     /s/ Carmen Dunmire
                                ------------------------------------------
                             Name:   Carmen Dunmire
                                  ----------------------------------------
                             Title:  Senior Vice President
                                   ---------------------------------------

                             Address for Notices:

U.S. Commitment:             4400 Post Oak Parkway, 4th floor
                             Houston TX 77027
$3,384,700.00                Attention:  Carmen Dunmire
                             Telecopy No.: 713-693-7475

Canadian Commitment:

$0

U.K. Commitment:

$0

Term Loans:

$7,615,300.00
<PAGE>
                             BANK OF AMERICA, N.A.

                             By:  /s/ Michael R. Chryssikos
                                ------------------------------------------
                                      Michael R. Chryssikos
                                      Vice President

                             Address for Notices:

U.S. Commitment:             700 Louisiana Street, 7th Floor
                             Houston Texas, 77002
$3,384,700.00                Attention: Sharon J. Day
                             Telecopy No.: 713-247-7748

Canadian Commitment:

$0

U.K. Commitment:

$0

Term Loans:

$7,615,300.00
<PAGE>
                             COMPASS BANK

                             By:     /s/ Richard R. Newman
                                ------------------------------------------
                             Name:   Richard R. Newman
                                  ----------------------------------------
                             Title:  Vice President
                                   ---------------------------------------

                             Address for Notices:

U.S. Commitment:             24 Greenway Plaza, Suite 1400
                             Houston, Texas 77046
$2,461,600.00                Attention: Richard Newman
                             Telecopy No.: 713-968-8211

Canadian Commitment:

$0

U.K. Commitment:

$0

Term Loans:

$5,538,400.00<PAGE>

                                                                     EXHIBIT 4.5

================================================================================

                             J. RAY MCDERMOTT, S.A.
                                    AS ISSUER

                           THE GUARANTORS PARTY HERETO

                                       AND

                              THE BANK OF NEW YORK
                                   AS TRUSTEE

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

                                    INDENTURE

                          DATED AS OF DECEMBER 9, 2003

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

                                       11%
                              SENIOR SECURED NOTES
                                    DUE 2013

================================================================================

<PAGE>

                              CROSS-REFERENCE TABLE

<TABLE>
<CAPTION>
TIA Sections                                                                       Indenture Sections
------------                                                                       ------------------
<S>                                                                              <C>
Section  310  (a)...........................................................                       7.10
              (b)...........................................................                       7.08
              (c)...........................................................                        N/A
Section  311  (a)...........................................................                       7.03
              (b)...........................................................                       7.03
              (c)...........................................................                        N/A
Section  312  ..............................................................                      13.02
              (b)...........................................................                      13.02
              (c)...........................................................                      13.02
Section  313  (a)...........................................................                       7.06
              (b)...........................................................                       7.06
              (c)...........................................................                       7.06
              (d)...........................................................                       7.06
Section  314  (a)...........................................................                    4, 4.02
              (b)...........................................................                      10.02
              (c)...........................................................                      13.04
              (d)...........................................................        10.03, 10.05, 13.04
              (e)...........................................................                      13.05
              (f)...........................................................                        N/A
Section  315  (a)...........................................................                 7.01, 7.02
              (b)...........................................................                 7.02, 7.05
              (c)...........................................................                       7.01
              (d)...........................................................                       7.02
              (e)...........................................................                 6.12, 7.02
Section  316  (a)...........................................................     2.05, 6.02, 6.04, 6.05
              (b)...........................................................                 6.06, 6.07
              (c)...........................................................                      13.02
Section  317  (a) (1).......................................................                       6.08
              (a) (2).......................................................                       6.09
              (b)...........................................................                       2.03
Section  318  ..............................................................                      13.01
</TABLE>

<PAGE>

                                    RECITALS

<TABLE>
<S>                                                                                                 <C>
                                              ARTICLE 1
                              DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01.  Definitions....................................................................       2

                                              ARTICLE 2
                                              THE NOTES

Section 2.01.  Form, Dating and Denominations; Legends........................................      28
Section 2.02.  Execution and Authentication; Exchange Notes...................................      29
Section 2.03.  Registrar, Paying Agent and Authenticating Agent; Paying
        Agent to Hold Money in Trust..........................................................      30
Section 2.04.  Replacement Notes..............................................................      30
Section 2.05.  Outstanding Notes..............................................................      31
Section 2.06.  Temporary Notes................................................................      31
Section 2.07.  Cancellation...................................................................      32
Section 2.08.  CUSIP and CINS Numbers.........................................................      32
Section 2.09.  Registration, Transfer and Exchange............................................      32
Section 2.10.  Restrictions on Transfer and Exchange..........................................      35

                                              ARTICLE 3
                                    REDEMPTION; OFFER TO PURCHASE

Section 3.01.  Optional Redemption............................................................      38
Section 3.02.  Redemption with Proceeds of Public Equity Offering.............................      38
Section 3.03.  Method and Effect of Redemption................................................      38
Section 3.04.  Offer to Purchase..............................................................      39

                                              ARTICLE 4
                                              COVENANTS

Section 4.01.  Payment Of Notes...............................................................      42
Section 4.02.  Maintenance of Office or Agency................................................      42
Section 4.03.  Existence......................................................................      43
Section 4.04.  Payment of Taxes and other Claims..............................................      43
Section 4.05.  Maintenance of Properties and Insurance; Maintenance of
        Temporary Interest Reserve............................................................      43
Section 4.06.  Limitation on Debt and Disqualified or Preferred Stock.........................      44
Section 4.07.  Limitation on Restricted Payments..............................................      48
Section 4.08.  Limitation on Liens............................................................      51
Section 4.09.  Limitation on Sale and Leaseback Transactions..................................      51
Section 4.10.  Limitation on Dividend and Other Payment Restrictions
        Affecting Restricted Subsidiaries.....................................................      52
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                 <C>
Section 4.11.  Limitation on Sale or Issuance of Equity Interests of Restricted Subsidiaries..      53
Section 4.12.  Additional Note Guaranties and Collateral After the Issue Date.................      54
Section 4.13.  Repurchase of Notes Upon a Change of Control...................................      55
Section 4.14.  Limitation on Asset Sales......................................................      55
Section 4.15.  Limitation on Transactions with Shareholders and Affiliates....................      58
Section 4.16.  Line of Business...............................................................      59
Section 4.17.  Designation of Restricted and Unrestricted Subsidiaries........................      59
Section 4.18.  Financial Reports..............................................................      61
Section 4.19.  Reports to Trustee.............................................................      62
Section 4.20.  Impairment of Security Interest; Security Document Covenants...................

                                              ARTICLE 5
                               CONSOLIDATION, MERGER OR SALE OF ASSETS

Section 5.01.  Consolidation, Merger or Sale of Assets by the Company; No Lease
        of All or Substantially All Assets....................................................      63
Section 5.02.  Consolidation, Merger or Sale of Assets by a Guarantor.........................      64

                                              ARTICLE 6
                                         DEFAULT AND REMEDIES

Section 6.01.  Events of Default..............................................................      65
Section 6.02.  Acceleration...................................................................      67
Section 6.03.  Other Remedies.................................................................      67
Section 6.04.  Waiver of Past Defaults........................................................      67
Section 6.05.  Control by Majority............................................................      67
Section 6.06.  Limitation on Suits............................................................      68
Section 6.07.  Rights of Holders to Receive Payment...........................................      68
Section 6.08.  Collection Suit by Trustee.....................................................      68
Section 6.09.  Trustee May File Proofs of Claim...............................................      69
Section 6.10.  Priorities.....................................................................      69
Section 6.11.  Restoration of Rights and Remedies.............................................      70
Section 6.12.  Undertaking for Costs..........................................................      70
Section 6.13.  Rights and Remedies Cumulative.................................................      70
Section 6.14.  Delay or Omission Not Waiver...................................................      70
Section 6.15.  Waiver of Stay, Extension or Usury Laws........................................      70

                                              ARTICLE 7
                                             THE TRUSTEE

Section 7.01.  General........................................................................      71
Section 7.02.  Certain Rights of Trustee......................................................      71
Section 7.03.  Trustee May Hold Notes.........................................................      73
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                 <C>
Section 7.04.  Trustee's Disclaimer...........................................................      74
Section 7.05.  Notice of Default..............................................................      74
Section 7.06.  Reports by Trustee to Holders..................................................      74
Section 7.07.  Compensation and Indemnity.....................................................      74
Section 7.08.  Replacement of Trustee.........................................................      75
Section 7.09.  Successor Trustee by Merger....................................................      76
Section 7.10.  Eligibility....................................................................      76
Section 7.11.  Money Held in Trust............................................................      77
Section 7.12.  Appointment of Co-Trustee......................................................      77

                                              ARTICLE 8
                                       DEFEASANCE AND DISCHARGE

Section 8.01.  Discharge of Company's Obligations.............................................      78
Section 8.02.  Legal Defeasance...............................................................      79
Section 8.03.  Covenant Defeasance............................................................      80
Section 8.04.  Application of Trust Money.....................................................      81
Section 8.05.  Repayment to Company...........................................................      81
Section 8.06.  Reinstatement..................................................................      81

                                              ARTICLE 9
                                 AMENDMENTS, SUPPLEMENTS AND WAIVERS

Section 9.01.  Amendments Without Consent of Holders..........................................      81
Section 9.02.  Amendments With Consent of Holders.............................................      82
Section 9.03.  Effect of Consent..............................................................      84
Section 9.04.  Trustee's Rights and Obligations...............................................      84
Section 9.05.  Conformity With Trust Indenture Act............................................      84
Section 9.06.  Payments for Consents..........................................................      84

                                              ARTICLE 10
                                       COLLATERAL ARRANGEMENTS

Section 10.01.  Collateral Documents..........................................................      85
Section 10.02.  Recordings and Opinions.......................................................      85
Section 10.03.  Release of Collateral.........................................................      86
Section 10.04.  Eminent Domain, Expropriation and Other Governmental Takings..................      89
Section 10.05.  Permitted Releases Not To Impair Lien; Trust Indenture Act Requirements.......      90
Section 10.06.  Suits To Protect the Collateral...............................................      91
Section 10.07.  Purchaser Protected...........................................................      91
Section 10.08.  Powers Exercisable by Receiver or Trustee.....................................      91
Section 10.09.  Disposition of Obligations Received...........................................      91
Section 10.10.  Determinations Relating to Collateral.........................................      92
Section 10.11.  Release upon Termination of the Company's Obligations.........................      92
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                <C>
Section 10.12.  Collateral Agent's Duties.....................................................      93
Section 10.13.  Additional Secured Obligations................................................      93
Section 10.14.  Pledge of Trust Moneys........................................................      93

                                              ARTICLE 11
                                     APPLICATION OF TRUST MONEYS

Section 11.01.  "Trust Moneys" Defined........................................................      93
Section 11.02.  Retirement of Notes...........................................................      94
Section 11.03.  Withdrawals of Trust Moneys...................................................      95
Section 11.04.  Powers Exercisable Notwithstanding Event of Default...........................      97
Section 11.05.  Powers Exercisable by Trustee or Receiver.....................................      97
Section 11.06.  Disposition of Notes Retired..................................................      98
Section 11.07.  Investment and Use of Trust Moneys............................................      98

                                              ARTICLE 12
                                              GUARANTIES

Section 12.01.  The Guaranties................................................................      99
Section 12.02.  Guaranty Unconditional........................................................      99
Section 12.03.  Discharge; Reinstatement......................................................     100
Section 12.04.  Waiver by the Guarantors......................................................     100
Section 12.05.  Subrogation and Contribution..................................................     100
Section 12.06.  Stay of Acceleration..........................................................     100
Section 12.07.  Limitation on Amount of Guaranty..............................................     100
Section 12.08.  Execution and Delivery of Guaranty............................................     101
Section 12.09.  Release of Guaranty...........................................................     101

                                              ARTICLE 13
                                            MISCELLANEOUS

Section 13.01.  Trust Indenture Act of 1939...................................................     101
Section 13.02.  Noteholder Communications; Noteholder Actions.................................     102
Section 13.03.  Notices.......................................................................     102
Section 13.04.  Certificate and Opinion as to Conditions Precedent............................     103
Section 13.05.  Statements Required in Certificate or Opinion.................................     103
Section 13.06.  Payment Date Other Than a Business Day........................................     104
Section 13.07.  Governing Law.................................................................     104
Section 13.08.  No Adverse Interpretation of Other Agreements.................................     104
Section 13.09.  Successors....................................................................     104
Section 13.10.  Duplicate Originals...........................................................     104
Section 13.11.  Separability..................................................................     104
Section 13.12.  Table of Contents and Headings................................................     105
Section 13.13.  No Liability of Directors, Officers, Employees, Incorporators,
        Members and Stockholders..............................................................     105
Section 13.14.  Submission to Jurisdiction....................................................     105
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                <C>
Section 13.15.  Appointment of Agent..........................................................     105
</TABLE>

<PAGE>

EXHIBITS
EXHIBIT A   Form of Note
EXHIBIT B   Form of Supplemental Indenture
EXHIBIT C   Restricted Legend
EXHIBIT D   DTC Legend
EXHIBIT E   Regulation S Certificate
EXHIBIT F   Rule 144A Certificate
EXHIBIT G   Institutional Accredited Investor Certificate
EXHIBIT H   Certificate of Beneficial Ownership

<PAGE>

         INDENTURE, dated as of December 9, 2003, between J. Ray McDermott,
S.A., a Panamanian corporation, as the Company, the Guarantors party hereto and
The Bank of New York, a New York banking corporation, as Trustee.

                                    RECITALS

         The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of up to $200,000,000 aggregate principal
amount of the Company's 11% Senior Secured Notes Due 2013, together with any
Exchange Notes issued therefor as provided herein (the "NOTES"). All things
necessary to make this Indenture a valid agreement of the Company, in accordance
with its terms, have been done, and the Company has done all things necessary to
make the Notes, when executed by the Company and authenticated and delivered by
the Trustee and duly issued by the Company, the valid obligations of the Company
as hereinafter provided.

         In addition, the Guarantors party hereto have duly authorized the
execution and delivery of this Indenture as guarantors of the Notes. All things
necessary to make this Indenture a valid agreement of each Guarantor, in
accordance with its terms, have been done, and each Guarantor has done all
things necessary to make the Note Guarantees, when the Notes are executed by the
Company and authenticated and delivered by the Trustee and duly issued by the
Company, the valid obligations of such Guarantor as hereinafter provided.

         This Indenture is subject to, and will be governed by, the provisions
of the Trust Indenture Act that are required to be a part of and govern
indentures qualified under the Trust Indenture Act.

                            THIS INDENTURE WITNESSETH

         For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, the parties hereto covenant and agree, for the equal and
proportionate benefit of all Holders, as follows:

                                        1
<PAGE>

                                    ARTICLE 1
                   DEFINITIONS AND INCORPORATION BY REFERENCE

         Section 1.01. Definitions.

         "ACQUIRED DEBT" means Debt of a Person (1) assumed by such Person from
another Person in connection with an Asset Acquisition from such other Person or
(2) existing at the time the Person merges with or into the Company or a
Restricted Subsidiary, or becomes a Restricted Subsidiary and not Incurred in
connection with, or in contemplation of, the Person merging with or into the
Company or a Restricted Subsidiary or becoming a Restricted Subsidiary.

         "ADDITIONAL INTEREST" means additional interest owed to the Holders
pursuant to the Registration Rights Agreement.

         "AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with") with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise. Notwithstanding the
foregoing, a Joint Venture that is not a Subsidiary of the Company shall not be
considered an "Affiliate" of the Company or any Restricted Subsidiary.

         "AGENT" means any Registrar, Paying Agent or Authenticating Agent.

         "AGENT MEMBER" means a member of, or a participant in, the Depositary.

         "ASSET ACQUISITION" means the acquisition by the Company or any
Restricted Subsidiary of the assets of any Person which constitute the assets of
such Person substantially as an entirety or the assets of any division,
operating unit or line of business of such Person substantially as an entirety.

         "ASSET SALE" means any sale, lease, transfer or other disposition of
any assets outside the ordinary course of business by the Company or any
Restricted Subsidiary, including by means of a merger, consolidation or similar
transaction and including any sale or issuance of the Equity Interests of any
Restricted Subsidiary (each of the above referred to in this definition as a
"disposition"), provided that the following (excluding, except in the case of
clauses (1) and (7) below, any disposition of Collateral) are not included in
the definition of "Asset Sale":

                  (1)      a disposition to the Company or a Restricted
         Subsidiary, including the sale or issuance by the Company or any
         Restricted

                                        2
<PAGE>

         Subsidiary of any Equity Interests of any Restricted Subsidiary to the
         Company or any Restricted Subsidiary;

                  (2)      the disposition by the Company or any Restricted
         Subsidiary in the ordinary course of business of (i) cash and cash
         management investments, (ii) inventory and other assets acquired and
         held for resale in the ordinary course of business, (iii) damaged, worn
         out or obsolete assets, or (iv) rights granted to others pursuant to
         leases or licenses;

                  (3)      the sale or discount of accounts receivable arising
         in the ordinary course of business in connection with the compromise or
         collection thereof;

                  (4)      a disposition governed by the provisions of Section
         5.01 or 5.02;

                  (5)      a Restricted Payment permitted under the provisions
         of Section 4.07 or a Permitted Investment;

                  (6)      any charter (bareboat or otherwise) or other lease of
         assets or property entered into in the ordinary course of business and
         with respect to which the Company or any Restricted Subsidiary is the
         charterer or lessor, except any such charter or lease that provides for
         the acquisition of such assets or property by the lessee during or at
         the termination thereof for an amount that is less than the Fair Market
         Value thereof as determined at the time the right to acquire such
         assets or property is exercised, in which case an Asset Sale shall be
         deemed to occur at the time such right is exercised;

                  (7)      the grant of any Permitted Lien and the exercise by
         any Person in whose favor a Permitted Lien is granted of any of its
         rights in respect of that Permitted Lien;

                  (8)      any Sale and Leaseback Transaction;

                  (9)      any disposition of the DB 17 vessel to CMM, for so
         long as CMM is a Joint Venture, provided that (x) such disposition is
         for Fair Market Value and (y) any note or other instrument of CMM
         received as consideration for such disposition shall bear interest at a
         market rate, to be paid at least quarterly, have a maturity of not more
         than three years after its date of issuance and be secured by a lien on
         the DB 17 vessel so disposed of;

                  (10)     the assignment of the insurance rights of the Company
         and the Restricted Subsidiaries contemplated by the Third Amended Joint
         Plan of Reorganization dated as of June 25, 2003 in the Chapter 11
         reorganization proceedings involving The Babcock & Wilcox Company in

                                        3
<PAGE>

         the United States Bankruptcy Court for the Eastern District of
         Louisiana and the related Plan Documents (as defined therein); and

                  (11)     any disposition in a transaction or series of related
         transactions of assets with a Fair Market Value of less than
         $10,000,000.

         "ATTRIBUTABLE DEBT" means, in respect of a Sale and Leaseback
Transaction the present value, discounted at the interest rate implicit in the
Sale and Leaseback Transaction, of the total obligations of the lessee for
rental payments during the remaining term of the lease in the Sale and Leaseback
Transaction.

         "AUTHENTICATING AGENT" refers to a Person engaged to authenticate the
Notes in the stead of the Trustee.

         "AVERAGE LIFE" means, with respect to any Debt, the quotient obtained
by dividing (i) the sum of the products of (x) the number of years from the date
of determination to the dates of each successive scheduled principal payment of
such Debt and (y) the amount of such principal payment by (ii) the sum of all
such principal payments.

         "BANKRUPTCY DEFAULT" has the meaning assigned to such term in Section
6.01.

         "BOARD OF DIRECTORS" means the board of directors or comparable
governing body of the Company, or any committee thereof duly authorized to act
on its behalf.

         "BOARD RESOLUTION" means a resolution duly adopted by the Board of
Directors which is certified by the Secretary or an Assistant Secretary of the
Company and remains in full force and effect as of the date of its
certification.

         "BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City or in the city where the Corporate Trust
Office of the Trustee is located are authorized by law to be closed for
business.

         "CAPITAL LEASE" means, with respect to any Person, any lease of any
property which, in conformity with GAAP, is required to be capitalized on the
balance sheet of such Person.

         "CAPITAL STOCK" means, with respect to any Person, any and all shares
of stock of a corporation, partnership interests or other equivalent interests
(however designated, whether voting or non-voting) in such Person's equity,
entitling the holder to receive a share of the profits and losses, and a
distribution of assets, after liabilities, of such Person.

                                        4
<PAGE>

         "CASH EQUIVALENTS" means:

                  (1)      United States dollars, or money in foreign currencies
         received in the ordinary course of business that are readily
         convertible into United States dollars;

                  (2)      U.S. Government Obligations with maturities not
         exceeding one year from the date of acquisition;

                  (3)      (i) demand deposits, (ii) time deposits and
         certificates of deposit with maturities of one year or less from the
         date of acquisition, (iii) bankers' acceptances with maturities not
         exceeding one year from the date of acquisition, and (iv) overnight
         bank deposits, in each case with any bank or trust company organized or
         licensed under the laws of the United States or any state thereof
         having capital, surplus and undivided profits in excess of $250 million
         whose short-term debt is rated "A-2" or higher by S&P or "P-2" or
         higher by Moody's or at least an equivalent rating category of another
         nationally recognized securities rating agency;

                  (4)      repurchase obligations with a term of not more than
         seven days for underlying securities of the type described in clauses
         (2) and (3) above entered into with any financial institution meeting
         the qualifications specified in clause (3) above;

                  (5)      commercial paper rated at least P-1 by Moody's or A-1
         by S&P or at least an equivalent rating category of another nationally
         recognized securities rating agency and maturing within 270 days after
         the date of acquisition;

                  (6)      money market funds at least 95% of the assets of
         which consist of investments of the type described in clauses (1)
         through (5) above; and

                  (7)      in the case of a Foreign Restricted Subsidiary,
         substantially similar investments, of comparable credit quality,
         denominated in the currency of any jurisdiction in which such Person
         conducts business.

         "CERTIFICATE OF BENEFICIAL OWNERSHIP" means a certificate substantially
in the form of Exhibit H.

         "CERTIFICATED NOTE" means a Note in registered individual form without
interest coupons.

         "CHANGE OF CONTROL" means:

                  (1)      any "person" or "group" (as such terms are used for
         purposes of Sections 13(d) and 14(d) of the Exchange Act), other than
         Permitted

                                        5
<PAGE>

         Holders, is or becomes the "beneficial owner" (as such term is used in
         Rule 13d-3 under the Exchange Act), directly or indirectly, of more
         than 35% of the total voting power of the Voting Stock of the Company
         or, for so long as the Company is a Subsidiary of MII, MII; or

                  (2)      with respect to each of (a) the Company and (b) for
         so long as the Company is a Subsidiary of MII, MII, individuals who on
         the Issue Date constituted the board of directors of such Person,
         together with any new directors whose election by the board of
         directors of such Person or whose nomination for election by the
         stockholders of such Person was approved by a majority of the directors
         then still in office who were either directors of such Person 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
         such Person then in office; or

                  (3)      MII ceases to own, directly or indirectly, at least
         51% of the Capital Stock of the Company; or

                  (4)      the adoption by the Board of Directors of the Company
         of a plan contemplating the liquidation or dissolution of the Company.

         "CMM" means Construcciones Maritimas Mexicanas, S.A. de C.V., a Mexican
corporation.

         "CODE" means the Internal Revenue Code of 1986.

         "COLLATERAL" means all property of the Company and the Guarantors,
whether now owned or existing or hereafter acquired, upon which a Lien is
purported to be created hereunder or under the Collateral Documents.

         "COLLATERAL AGENT" means the Trustee in its capacity as collateral
agent or mortgagee (as applicable) under the Collateral Documents.

         "COLLATERAL DOCUMENTS" means (i) the Pledge Agreement dated as of the
Issue Date among the Company, the Material Guarantors party thereto and the
Collateral Agent, (ii) each of the mortgages of the Mortgaged Vessels dated as
of the Issue Date among the applicable Mortgaged Vessel Owning Subsidiaries and
the Trustee, (iii) any replacements for or supplements to any of the foregoing,
and any other instruments or documents entered into in connection with the
establishment of rights with respect to the Collateral for the benefit of the
Trustee and the Holders, in each case as each of the foregoing may from time to
time be amended.

         "COMMISSION" means the Securities and Exchange Commission.

         "COMMON STOCK" means Capital Stock not entitled to any preference on
dividends or distributions, upon liquidation or otherwise.

                                        6
<PAGE>

         "COMPANY" means the party named as such in the first paragraph of this
Indenture or any successor obligor under this Indenture and the Notes pursuant
to Section 5.01.

         "CONSOLIDATED NET INCOME" means, for any period, the aggregate net
income (or loss) of the Company and the Restricted Subsidiaries for such period
determined on a consolidated basis in conformity with GAAP, provided that the
following (without duplication) will be excluded in computing Consolidated Net
Income:

                  (1)      the portion of the net income (or loss) for such
         period of any Person that is not a Restricted Subsidiary allocable to
         Equity Interests in such Person other than the Equity Interests owned
         by the Company or any Restricted Subsidiary; provided, however, that
         the portion of the net income (but not loss) of such Person for such
         period allocable to the Company or any Restricted Subsidiary shall be
         included in Consolidated Net Income only to the extent of the dividends
         or other distributions actually paid in cash to the Company or such
         Restricted Subsidiary by such Person during such period; provided,
         further, that there shall be included in Consolidated Net Income for
         such period any dividends or other distributions paid in cash to the
         Company or such Restricted Subsidiary by such Person in such period
         with respect to any portion of the net income of such Person allocable
         to the Company on such Restricted Subsidiary excluded from Consolidated
         Net Income in a previous fiscal period pursuant preceding provisions of
         this clause (1);

                  (2)      the net income (but not loss) of any Restricted
         Subsidiary to the extent that the declaration or payment of dividends
         or similar distributions by such Restricted Subsidiary of such net
         income would not have been permitted for the relevant period by charter
         or by any agreement, instrument, judgment, decree, order, statute, rule
         or governmental regulation applicable to such Restricted Subsidiary;

                  (3)      any net after-tax gains (but not losses) attributable
         to Asset Sales, but not any fees and expenses relating to the
         transaction giving rise thereto;

                  (4)      any net after-tax extraordinary gains (but not
         losses); but not any fees and expenses relating to the transaction
         giving rise thereto; and

                  (5)      the cumulative effect of any change in accounting
         principles since September 30, 2003.

         "CONSOLIDATED NET WORTH" means, at any date of determination, the
consolidated stockholder's equity of the Company and the Restricted
Subsidiaries, calculated excluding:

                                        7
<PAGE>

                  (1)      any amounts attributable to Disqualified Stock;

                  (2)      treasury stock;

                  (3)      all write-ups (other than (i) write-ups resulting
         from foreign currency translations, (ii) write-ups of tangible assets
         of a going concern business made in accordance with GAAP as a result of
         the acquisition of such business and (iii) write-ups that are reflected
         in consolidated net income of the Company and the Restricted
         Subsidiaries for any period ending on or before such date of
         determination) subsequent to the date of this Indenture in the book
         value of any asset; and

                  (4)      the cumulative effect of any change in accounting
         principles since September 30, 2003.

         "CORPORATE TRUST OFFICE" means the office of the Trustee at which the
corporate trust business of the Trustee is principally administered, which at
the date of this Indenture is located at 101 Barclay Street, Floor 8W, New York,
New York 10286.

         "CREDIT FACILITIES" means one or more credit facilities with banks or
other lenders, whether entered into on or after the Issue Date, providing for
revolving credit loans or term loans or the issuance of letters of credit or
bankers' acceptances or the like, together with any related documents (including
any security documents and guarantee agreements).

         "DEBT" means, with respect to any Person, without duplication,

                  (1)      all indebtedness of such Person for borrowed money;

                  (2)      all obligations of such Person evidenced by
         debentures, notes or other similar instruments;

                  (3)      all obligations of such Person in respect of letters
         of credit, bankers' acceptances or other similar instruments, excluding
         obligations in respect of trade letters of credit, bankers' acceptances
         or other similar instruments issued in respect of trade payables or
         similar obligations to the extent not drawn upon or presented, or, if
         drawn upon or presented, the resulting obligation of the Person is paid
         within 20 Business Days;

                  (4)      all obligations of such Person to pay the deferred
         and unpaid purchase price of property or services which are recorded as
         liabilities under GAAP, excluding trade payables, advances on
         contracts, deferred compensation and similar liabilities arising in the
         ordinary course of business;

                                        8
<PAGE>

                  (5)      all rent obligations of such Person as lessee under
         Capital Leases;

                  (6)      all Debt of other Persons Guaranteed by such Person
         to the extent so Guaranteed;

                  (7)      all Debt of other Persons secured by a Lien on any
         asset of such Person, whether or not such Debt is assumed by such
         Person; and

                  (8)      all obligations of such Person under Hedging
         Agreements.

The amount of Debt of any Person will be deemed to be:

                  (A)      with respect to contingent obligations, the maximum
         liability upon the occurrence of the contingency giving rise to the
         obligation;

                  (B)      with respect to Debt secured by a Lien on an asset of
         such Person but not otherwise the obligation, contingent or otherwise,
         of such Person, the lesser of (x) the Fair Market Value of such asset
         and (y) the amount of such Debt;

                  (C)      with respect to any Debt issued with original issue
         discount, the face amount of such Debt less the remaining unamortized
         portion of the original issue discount of such Debt;

                  (D)      with respect to any Hedging Agreement, the net amount
         payable if such Hedging Agreement terminated at that time due to
         default by such Person; and

                  (E)      otherwise, the outstanding principal amount thereof.

         "DEFAULT" means any event that is, or after notice or passage of time
or both would be, an Event of Default.

         "DEPOSITARY" means the depositary of each Global Note, which will
initially be DTC.

         "DISQUALIFIED EQUITY INTERESTS" means Equity Interests that by their
terms or upon the happening of any event are:

                  (1)      required to be redeemed or redeemable at the option
         of the holder prior to the Stated Maturity of the Notes for
         consideration other than Qualified Equity Interests; or

                  (2)      convertible at the option of the holder into
         Disqualified Equity Interests or exchangeable for Debt prior to the
         Stated Maturity of the Notes (including, upon the occurrence of any
         contingency);

                                        9
<PAGE>

provided that Equity Interests will not constitute Disqualified Equity Interests
solely because of provisions giving holders thereof the right to require
repurchase or redemption upon an "asset sale" or "change of control" occurring
prior to the Stated Maturity of the Notes if those provisions

                  (A)      are no more favorable to the holders than those set
         forth in Section 4.13 and Section 4.14; and

                  (B)      specifically provide that repurchase or redemption
         pursuant thereto will not be required prior to the Company's repurchase
         of the Notes as required by this Indenture.

         "DISQUALIFIED STOCK" means Capital Stock constituting Disqualified
Equity Interests.

         "DTC" means The Depository Trust Company, a New York corporation, and
its successors.

         "DTC LEGEND" means the legend set forth in Exhibit D.

         "EBITDA" means, for any period, the sum of

                  (1)      Consolidated Net Income for such period, plus

                  (2)      Fixed Charges for such period, to the extent deducted
         in calculating Consolidated Net Income for such period, plus

                  (3)      to the extent deducted in calculating Consolidated
         Net Income for such period and as determined on a consolidated basis
         for the Company and its Restricted Subsidiaries in conformity with
         GAAP:

                           (A)      income taxes and income tax adjustments
                  (whether positive or negative) for such period, other than
                  income taxes or income tax adjustments (whether positive or
                  negative) attributable to Asset Sales or extraordinary gains
                  or losses; and

                           (B)      depreciation, amortization and all other
                  noncash items reducing Consolidated Net Income for such period
                  (including impairment loss on long-lived assets, but not
                  including noncash charges in a period which reflect cash
                  expenses paid or to be paid in another period), less all
                  noncash items increasing Consolidated Net Income;

         provided that, with respect to any Restricted Subsidiary, such items
         will be added only to the extent and in the same proportion that the
         relevant Restricted Subsidiary's net income was included in calculating
         Consolidated Net Income.

                                       10
<PAGE>

         "EQUITY INTERESTS" means all Capital Stock and all warrants or options
with respect to, or other rights to purchase, Capital Stock, but excluding Debt
convertible into or exchangeable for equity.

         "EVENT OF DEFAULT" has the meaning assigned to such term in Section
6.01.

         "EXCESS PROCEEDS" has the meaning assigned to such term in Section
4.14.

         "EXCHANGE ACT" means the Securities Exchange Act of 1934.

         "EXCHANGE NOTES" means the Notes of the Company issued pursuant to this
Indenture in exchange for, and in an aggregate principal amount equal to, the
Initial Notes in compliance with the terms of the Registration Rights Agreement
and containing terms substantially identical to the Initial Notes (except that
(i) such Exchange Notes will be registered under the Securities Act and will not
be subject to transfer restrictions or bear the Restricted Legend, and (ii) the
provisions relating to Additional Interest will be eliminated).

         "EXCHANGE OFFER" means an offer by the Company to the Holders of the
Initial Notes to exchange outstanding Notes for Exchange Notes, as provided for
in the Registration Rights Agreement.

         "EXCHANGE OFFER REGISTRATION STATEMENT" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.

         "FAIR MARKET VALUE" with respect to any asset or property means the
sale value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy. Fair Market Value shall be determined
by the Board of Directors acting in good faith, which determination shall be
conclusive for all purposes of this Indenture; provided that such determination
shall not preclude the need to obtain an opinion when otherwise required in
accordance with clause (b) of the covenant set forth in Section 4.15.

         "FIXED CHARGE COVERAGE RATIO" means, on any date (the "TRANSACTION
DATE"), the ratio of:

                  (x)      the aggregate amount of EBITDA for the four most
         recent full fiscal quarters for which internal financial statements are
         available immediately preceding the date of the transaction giving rise
         to the need to calculate the Fixed Charge Coverage Ratio (the
         "REFERENCE PERIOD"); to

                  (y)      the aggregate Fixed Charges during such reference
         period.

In making the foregoing calculation:

                                       11
<PAGE>

                  (1)      pro forma effect will be given to any Debt,
         Disqualified Stock or Preferred Stock Incurred during or after the
         reference period to the extent the Debt is outstanding or is to be
         Incurred on the transaction date as if the Debt, Disqualified Stock or
         Preferred Stock had been Incurred on the first day of the reference
         period;

                  (2)      pro forma calculations of interest on Debt bearing a
         floating interest rate will be made as if the rate in effect on the
         transaction date (taking into account any Hedging Agreement applicable
         to the Debt if the Hedging Agreement has a remaining term of at least
         12 months) had been the applicable rate for the entire reference
         period;

                  (3)      Fixed Charges related to any Debt, Disqualified Stock
         or Preferred Stock no longer outstanding or to be repaid or redeemed on
         the transaction date, except for Consolidated Interest Expense accrued
         during the reference period under a revolving credit to the extent of
         the commitment thereunder (or under any successor revolving credit) in
         effect on the transaction date, will be excluded;

                  (4)      pro forma effect will be given to

                           (A)      the creation, designation or redesignation
                  of Restricted and Unrestricted Subsidiaries,

                           (B)      the acquisition or disposition of companies,
                  divisions or lines of businesses by the Company and its
                  Restricted Subsidiaries, including any acquisition or
                  disposition of a company, division or line of business since
                  the beginning of the reference period by a Person that became
                  a Restricted Subsidiary after the beginning of the reference
                  period, and

                           (C)      the discontinuation of any discontinued
                  operations but, in the case of Fixed Charges, only to the
                  extent that the obligations giving rise to the Fixed Charges
                  will not be obligations of the Company or any Restricted
                  Subsidiary following the transaction date

that have occurred since the beginning of the reference period as if such events
had occurred, and, in the case of any disposition, the proceeds thereof applied,
on the first day of the reference period. To the extent that pro forma effect is
to be given to an acquisition or disposition of a company, division or line of
business, the pro forma calculation will be based upon the most recent four full
fiscal quarters for which the relevant financial information is available.

         "FIXED CHARGES" means, for any period, the sum of:

                  (1)      Interest Expense for such period; and

                                       12
<PAGE>

                  (2)      the product of

                           (x)      cash and noncash dividends paid, declared,
                  accrued or accumulated on any Disqualified or Preferred Stock
                  of the Company or a Restricted Subsidiary, except for
                  dividends payable in the Company's Qualified Stock or paid to
                  the Company or to a Restricted Subsidiary, and

                           (y)      a fraction, the numerator of which is one
                  and the denominator of which is one minus the sum of the
                  currently effective combined Federal, state, local and foreign
                  tax rate applicable to the Company and its Restricted
                  Subsidiaries.

         "FOREIGN RESTRICTED SUBSIDIARY" means any Restricted Subsidiary that is
not formed under the laws of, or 50% or more of the assets of which are not
located in, the United States of America or any state or other political
subdivision thereof.

         "GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time.

         "GLOBAL NOTE" means a Note in registered global form without interest
coupons.

         "GUARANTEE" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Debt or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation of such other Person or (ii) entered into for purposes
of assuring in any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect such obligee against loss in respect thereof,
in whole or in part; provided that the term "Guarantee" does not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.

         "GUARANTOR" means (i) a Material Guarantor or (ii) a Restricted
Subsidiary that is a party to this Indenture or that executes a supplemental
indenture in the form of Exhibit B to this Indenture providing for the guaranty
of the payment of the Notes, or any successor obligor under a Note Guaranty
pursuant to Section 5.02, in each case unless and until such Guarantor is
released from its Note Guaranty pursuant to this Indenture.

         "GUARANTOR GROUP" has the meaning assigned to such term in Section
6.01.

                                       13
<PAGE>

         "HEDGING AGREEMENT" means (i) any interest rate swap agreement,
interest rate cap agreement or other agreement designed to protect against
fluctuations in interest rates or (ii) any foreign exchange forward contract,
currency swap agreement or other agreement designed to protect against
fluctuations in foreign exchange rates

         "HOLDER" or "NOTEHOLDER" means the registered holder of any Note.

         "INCUR" means, with respect to any Debt or Capital Stock, to incur,
create, issue, assume or Guarantee such Debt or Capital Stock. If any Person
becomes a Restricted Subsidiary on any date after the date of this Indenture
(including by redesignation of an Unrestricted Subsidiary or failure of an
Unrestricted Subsidiary to meet the qualifications necessary to remain an
Unrestricted Subsidiary), the Debt and Capital Stock of such Person outstanding
on such date will be deemed to have been Incurred by such Person on such date
for purposes of the covenant set forth in Section 4.06 but will not be
considered the sale or issuance of Equity Interests for purposes of the
covenants set forth in Section 4.11 or Section 4.14. The accretion of original
issue discount or payment of interest in kind will not be considered an
Incurrence of Debt.

         "INDENTURE" means this Indenture, as amended or supplemented from time
to time pursuant to the provisions hereof.

         "INITIAL NOTES" means the Notes issued on the Issue Date and any Notes
issued in replacement thereof, but not including any Exchange Notes issued in
exchange therefor.

         "INITIAL PURCHASER" means the initial purchaser party to a purchase
agreement with the Company relating to the sale of the Initial Notes by the
Company.

         "INSTITUTIONAL ACCREDITED INVESTOR CERTIFICATE" means a certificate
substantially in the form of Exhibit G hereto.

         "INTERCOMPANY NOTE" means the promissory note dated as of the Issue
Date, as amended, issued by the Company in the aggregate principal amount of
$90,000,000 and held by MII; provided that the Intercompany Note shall at all
times when any of the Notes are outstanding (i) not have a Stated Maturity or
otherwise require any payments thereon prior to March 15, 2014, (ii) be
subordinated to the Notes in right of payment on terms no less favorable to the
holders of the Notes than those in effect on the Issue Date and (iii) not bear
interest.

         "INTEREST", in respect of the Notes, unless the context otherwise
requires, refers to interest and Additional Interest, if any.

                                       14
<PAGE>

         "INTEREST EXPENSE" means, for any period, the consolidated interest
expense of the Company and its Restricted Subsidiaries, excluding fees related
to the issuance of the Notes, plus, to the extent not included in such
consolidated interest expense, and to the extent incurred, accrued or payable by
the Company or its Restricted Subsidiaries, without duplication, (i) interest
expense attributable to Sale and Leaseback Transactions, (ii) amortization of
debt discount and debt issuance costs but excluding amortization of deferred
financing charges incurred in respect of the Notes and the Credit Facilities,
(iii) capitalized interest, (iv) noncash interest expense, (v) commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing (other than in respect of letters of credit
relating to bid, performance and advance payment obligations incurred in the
ordinary course of business), (vi) net costs associated with Hedging Agreements
(including the amortization of fees) and (vii) any of the above expenses with
respect to Debt of another Person Guaranteed by the Company or any of its
Restricted Subsidiaries, as determined on a consolidated basis and in accordance
with GAAP.

         "INTEREST PAYMENT DATE" means each June 15 and December 15 of each
year, commencing June 15, 2004.

         "INVESTMENT" means:

                  (1)      any direct or indirect advance, loan or other
         extension of credit to another Person;

                  (2)      any capital contribution to another Person, by means
         of any transfer of cash or other property or in any other form;

                  (3)      any purchase or acquisition of Equity Interests,
         bonds, notes or other Debt, or other instruments or securities issued
         by another Person, including the receipt of any of the above as
         consideration for the disposition of assets or rendering of services;
         or

                  (4)      any Guarantee of any obligation of another Person.

         If the Company or any Restricted Subsidiary (x) sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
so that, after giving effect to that sale or disposition, such Person is no
longer a Subsidiary of the Company, or (y) designates any Restricted Subsidiary
as an Unrestricted Subsidiary in accordance with the provisions of this
Indenture, the Company or the applicable Restricted Subsidiary, as the case may
be, shall be deemed to have made an Investment in such Person at such time in an
amount equal to the Fair Market Value of the remaining Equity Interests in such
Person held by the Company or such Restricted Subsidiary.

                                       15
<PAGE>

         "ISSUE DATE" means the date on which the Original Notes are originally
issued under this Indenture.

         "JOINT VENTURE" means any Person (i) in which the Company or any
Restricted Subsidiary, directly or indirectly, owns at least 33% or more of the
Equity Interests of such Person, (ii) as to which the Company or such Restricted
Subsidiary, as the case may be, has either (a) the power to control, directly or
indirectly (whether through the exercise of voting rights, representation on the
board of directors or other governing body of such Person, the exercise of veto
rights or otherwise), any decisions by such Person with respect to the payment
of dividends or the making of distributions by such Person or (b) the right (by
contract, applicable law or otherwise) to cause the dissolution and liquidation
of such Person (including pursuant to contractual provisions governing deadlock
that may require good faith efforts to resolve any deadlock prior to any such
dissolution or liquidation), (iii) a portion of whose Equity Interests (other
than directors' qualifying shares or investments in nominal share interests with
no significant economic value by foreign nationals as mandated by applicable law
or governmental regulation) are owned by one or more Persons other than the
Company or any Affiliates of the Company and (iv) is engaged in a Permitted
Business. As of the Issue Date, the following persons constituted Joint
Ventures: Construcciones Maritimas Mexicanas, S.A. de C.V.; Initec, Astano y
McDermott International Inc., S.A.; Malmac Sdn. Bhd.; McDermott Abu Dhabi
Offshore Construction Company; McDermott Arabia Company Limited; Offshore
Hyundai International, Ltd.; Offshore Hyundai International Limited; Offshore
Pipelines Nigeria Limited; P.T. Bataves Fabricators; P.T. McDermott Indonesia;
Saudi OPMI Company Limited; Spars International, Inc.; Deep Oil Technology,
Inc.; Tallares Navales del Golfo, S.A. de C.V.; TL Marine Sdn. Bhd.; WD 140
Platform LLC; and Barmada McDermott Sdn. Bhd.

         "LIEN" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any conditional sale or other title retention
agreement or Capital Lease); provided, however that for the avoidance of doubt,
the interest of a Person as owner or lessor under charters or leases of property
shall not constitute "Liens" on or in respect of such property.

         "MATERIAL GUARANTOR" means an obligor under a Note Guaranty that is (i)
a Mortgaged Vessel Owning Subsidiary, (ii) a Wholly Owned Restricted Subsidiary
that is, or after the Issue Date becomes, a Significant Subsidiary of the
Company or (iii) a Restricted Subsidiary which directly or indirectly owns a
majority of the outstanding Capital Stock of a Mortgaged Vessel Owning
Subsidiary.

         "MATERIAL SUBSIDIARY" means, at any time, a Restricted Subsidiary which
is not at such time an obligor under a Note Guaranty but which otherwise at such
time meets the definition of "Material Guarantor."

                                       16
<PAGE>

         "MII" means McDermott International, Inc., a corporation organized
under the laws of the Republic of Panama.

         "MOODY'S" means Moody's Investors Service, Inc. and its successors.

         "MORTGAGED VESSEL OWNING SUBSIDIARY" means at any time any Restricted
Subsidiary that owns a marine vessel that is or is required to become a
Mortgaged Vessel under the terms of this Indenture and the Collateral Documents.
As of the Issue Date, the Mortgaged Vessel Owning Subsidiaries are J. Ray
McDermott Holdings, Inc., a Delaware corporation; J. Ray McDermott Inc., a
Delaware corporation; Hydro Marine Services, Inc., a Panamanian corporation; and
J. Ray McDermott International Vessels, Ltd., a Cayman Islands company.

         "MORTGAGED VESSELS" means at any time the Vessels of the Company and
the Guarantors that are required to be subject to a lien under the Collateral
Documents at such time. The Mortgaged Vessels shall consist of the following as
of the Issue Date:

<TABLE>
<CAPTION>
Vessel Name                                                Flag
-----------                                                ----
<S>                                                       <C>
DB 16                                                     U.S.A.
DB 27                                                     Panama
DB 30                                                     Panama
DB 50                                                     Panama
DB 101                                                    Panama
DLB KP1                                                   Panama
Intermac 600                                              Panama
Intermac 650                                              U.S.A.
Oceanic 93                                                U.S.A.
</TABLE>

         "NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or Cash Equivalents (including (i)
payments in respect of deferred payment obligations, when received in the form
of cash or Cash Equivalents, and (ii) proceeds from the conversion of other
consideration received when converted to cash or Cash Equivalents), net of

                                       17
<PAGE>

                  (1)      brokerage commissions and other fees and expenses
         related to such Asset Sale, including fees and expenses of counsel,
         accountants and investment bankers and sales commissions;

                  (2)      relocation expenses resulting from such Asset Sale;

                  (3)      provisions for taxes payable as a result of such
         Asset Sale;

                  (4)      payments required to be made to holders of minority
         interests in Restricted Subsidiaries as a result of such Asset Sale or
         to repay Debt outstanding at the time of such Asset Sale that is
         secured by a Lien on the property or assets sold; and

                  (5)      appropriate amounts to be provided as a reserve
         against liabilities associated with such Asset Sale, including pension
         and other post-employment benefit liabilities, liabilities related to
         environmental matters and indemnification obligations associated with
         such Asset Sale, with any subsequent reduction of the reserve other
         than by payments made and charged against the reserved amount to be
         deemed a receipt of cash.

         "NON-U.S. PERSON" means a Person that is not a U.S. person, as defined
in Regulation S.

         "NOTES" has the meaning assigned to such term in the Recitals.

         "NOTE GUARANTY" means the guaranty of the Notes by a Guarantor pursuant
to this Indenture.

         "OBLIGATIONS" means, with respect to any Debt, all obligations (whether
in existence on the Issue Date or arising afterwards, absolute or contingent,
direct or indirect) for or in respect of principal (when due, upon acceleration,
upon redemption, upon mandatory repayment or repurchase pursuant to a mandatory
offer to purchase, or otherwise), premium, interest, penalties, fees,
indemnification, reimbursement and other amounts payable and liabilities with
respect to such Debt, including all interest accrued or accruing after the
commencement of any bankruptcy, insolvency or reorganization or similar case or
proceeding at the contract rate (including, without limitation, any contract
rate applicable upon default) specified in the relevant documentation, whether
or not the claim for such interest is allowed as a claim in such case or
proceeding.

         "OFFER TO PURCHASE" has the meaning assigned to such term in Section
3.04.

         "OFFICER" means the chairman of the Board of Directors, the president
or chief executive officer, any vice president, the chief financial officer, the
treasurer or any assistant treasurer, or the secretary or any assistant
secretary, of the Company.

                                       18
<PAGE>

         "OFFICERS' CERTIFICATE" means a certificate signed in the name of the
Company (i) by the chairman of the Board of Directors, the president or chief
executive officer or a vice president and (ii) by the chief financial officer,
the treasurer or any assistant treasurer or the secretary or any assistant
secretary.

         "OFFSHORE GLOBAL NOTE" means a Global Note representing Notes issued
and sold pursuant to Regulation S.

         "OPINION OF COUNSEL" means a written opinion signed by legal counsel,
who may be an employee of or counsel to the Company.

         "ORIGINAL NOTES" means the Initial Notes and any Exchange Notes issued
in exchange therefor.

         "PAYING AGENT" refers to a Person engaged to perform the obligations of
the Trustee in respect of payments made or funds held hereunder in respect of
the Notes.

         "PERMITTED DEBT" has the meaning assigned to such term in Section 4.06.

         "PERMITTED BUSINESS" means any of the businesses in which the Company
and its Restricted Subsidiaries are engaged on the Issue Date, and any business
reasonably related, incidental, complementary or ancillary thereto.

         "PERMITTED ENCUMBRANCES" means:

                  (1)      Liens securing the Notes or any Note Guaranties;

                  (2)      Liens imposed by law, such as maritime, landlords',
         carriers', vendors', warehousemen's and mechanics' liens, in each case
         for sums not yet due or being contested in good faith and by
         appropriate proceedings;

                  (3)      Liens in respect of taxes and other governmental
         assessments and charges which are not yet due or which are being
         contested in good faith and by appropriate proceedings;

                  (4)      judgment liens, and Liens securing appeal bonds or
         letters of credit issued in support of or in lieu of appeal bonds, so
         long as no Event of Default then exists under paragraph (6) of Section
         6.01;

                  (5)      Liens in favor of customs and revenue authorities
         arising as a matter of law to secure payment of customs duties in
         connection with the importation of goods; and

                                       19
<PAGE>

                  (6)      Liens on assets of the Company or any Restricted
         Subsidiary arising as a result of a Sale and Leaseback Transaction
         otherwise permitted under this Indenture.

         "PERMITTED HOLDERS" means MII and its controlled Affiliates.

         "PERMITTED INVESTMENTS" means:

                  (1)      Investments existing on the Issue Date;

                  (2)      any Investment in the Company (including any
         Investment in the Notes) or in a Restricted Subsidiary of the Company
         that is a Guarantor that is engaged in a Permitted Business;

                  (3)      any Investment in Cash Equivalents;

                  (4)      any Investment by the Company or any Subsidiary of
         the Company in a Person, if as a result of such Investment,

                           (A)      such Person becomes a Restricted Subsidiary
                  of the Company that is a Guarantor engaged in a Permitted
                  Business, or

                           (B)      such Person is merged or consolidated with
                  or into, or transfers or conveys substantially all its assets
                  to, or is liquidated into, the Company or a Restricted
                  Subsidiary that is a Guarantor engaged in a Permitted
                  Business;

                  (5)      Investments received as noncash consideration in an
         Asset Sale made pursuant to and in compliance with the provisions of
         Section 4.14;

                  (6)      Investments received from CMM as noncash
         consideration in the disposition transaction referred to in clause (9)
         of the definition of "Asset Sale";

                  (7)      any Investment acquired (or to the extent acquired)
         in exchange for Qualified Stock of the Company;

                  (8)      Hedging Agreements otherwise permitted under this
         Indenture;

                  (9)      (i) receivables owing to the Company or any
         Restricted Subsidiary, and contracts in progress of the Company or any
         Restricted Subsidiary, in either case if created or acquired in the
         ordinary course of business, (ii) prepaid expenses and deposits created
         or made in the ordinary course of business, (iii) Cash Equivalents or
         other cash management investments or liquid or portfolio securities
         pledged as

                                       20
<PAGE>

         collateral pursuant to the provisions of Section 4.08, (iv)
         endorsements for collection or deposit in the ordinary course of
         business, and (v) securities, instruments or other obligations received
         in compromise or settlement of debts created in the ordinary course of
         business, or by reason of a composition or readjustment of debts or
         reorganization of another Person, or in satisfaction of claims or
         judgments;

                  (10)     extensions of credit to customers and suppliers in
         the ordinary course of business (other than those referred to in clause
         (8) above), not in excess of $2,000,000 outstanding at any time;

                  (11)     charters of marine vessels in the ordinary course of
         business;

                  (12)     payroll, travel and other loans or advances to, or
         Guarantees issued to support the obligations of, officers and
         employees, in each case in the ordinary course of business, not in
         excess of $5,000,000 outstanding at any time;

                  (13)     Investments in evidences of indebtedness, securities
         or other property received from another Person by the Company or any
         Restricted Subsidiary in connection with any bankruptcy proceeding or
         by reason of a composition or readjustment of Debt or a reorganization
         of such Person or as a result of foreclosure, perfection or enforcement
         of any Lien in exchange for evidences of indebtedness, securities or
         other property of such Person held by the Company or any Restricted
         Subsidiary, or for other liabilities or obligations of such other
         Person to the Company or any Restricted Subsidiary that were created in
         accordance with the terms of this Indenture;

                  (14)     Investments in Joint Ventures made after the Issue
         Date pursuant to binding agreements (including, without limitation, put
         or call arrangements and right of first refusal arrangements with
         respect to Equity Interests in Joint Ventures) existing on the Issue
         Date, not in excess of $10,000,000 for all such Investments;

                  (15)     in addition to Investments listed above, Investments
         in an aggregate amount, taken together with all other Investments made
         in reliance on this clause, not to exceed $30,000,000 (net of, with
         respect to the Investment in any particular Person made pursuant to
         this clause, the cash return thereon received after the Issue Date as a
         result of any sale for cash, repayment, redemption, liquidating
         distribution or other cash realization (not included in Consolidated
         Net Income) not to exceed the amount of such Investments in such Person
         made after the Issue Date in reliance on this clause); and

                                       21
<PAGE>

                  (16)     any Guarantee of the Debt of any Person, so long as
         such Guarantee is permitted by Section 4.06.

         "PERMITTED LIENS" means

                  (1)      Liens existing on the Issue Date;

                  (2)      Liens in favor of the Company or any Restricted
         Subsidiary;

                  (3)      Liens on assets or properties, other than Collateral,
         securing Obligations under or with respect to the Credit Facilities and
         Hedge Agreements entered into with respect to Debt under the Credit
         Facilities;

                  (4)      pledges or deposits under worker's compensation laws,
         unemployment insurance laws or similar legislation, or good faith
         deposits in connection with bids, tenders, contracts or leases, or to
         secure public or statutory obligations, surety bonds, customs duties
         and the like, or for the payment of rent, in each case incurred in the
         ordinary course of business and not securing Debt;

                  (5)      Permitted Encumbrances;

                  (6)      Liens securing reimbursement obligations with respect
         to letters of credit that encumber documents and other property
         relating to such letters of credit and the proceeds thereof;

                  (7)      Liens securing obligations relating to performance,
         surety and customs bonds and other similar instruments obtained in the
         ordinary course of business;

                  (8)      survey exceptions, encumbrances, easements or
         reservations of, or rights of others for, licenses, rights of way,
         sewers, electric lines, telegraph and telephone lines and other similar
         purposes, or zoning or other restrictions as to the use of real
         property, not interfering in any material respect with the conduct of
         the business of the Company and its Restricted Subsidiaries;

                  (9)      Liens securing assets under construction arising from
         progress or partial payments by a customer of the Company or any
         Restricted Subsidiary relating to such assets;

                  (10)     licenses or leases or subleases as licensor, lessor
         or sublessor of any of its property, including intellectual property,
         in the ordinary course of business;

                  (11)     customary Liens in favor of trustees and escrow
         agents, and netting and setoff rights, banker's liens and the like in
         favor of financial

                                       22
<PAGE>

         institutions and counterparties to financial obligations and
         instruments, including Hedging Agreements;

                  (12)     Liens on assets pursuant to merger agreements, stock
         or asset purchase agreements and similar agreements in respect of the
         disposition of such assets;

                  (13)     options, put and call arrangements, rights of first
         refusal and similar rights (i) relating to Investments in Subsidiaries,
         Joint Ventures, partnerships and the like or (ii) provided for in
         contracts or agreements entered into the ordinary course of business;

                  (14)     Liens incurred in the ordinary course of business
         securing obligations not in excess of $10,000,000 not securing Debt and
         not in the aggregate materially detracting from the value of the
         properties or their use in the operation of the business of the Company
         and its Restricted Subsidiaries;

                  (15)     Liens (including the interest of a lessor under a
         Capital Lease) on property that secure Debt Incurred for the purpose of
         financing all or any part of the purchase price or cost of construction
         or improvement of such property and which attach within 365 days after
         the date of such purchase or the completion of construction or
         improvement;

                  (16)     Liens on property of a Person at the time such Person
         becomes a Restricted Subsidiary of the Company, provided such Liens
         were not created in contemplation thereof and do not extend to any
         other property of the Company or any Restricted Subsidiary;

                  (17)     Liens on property at the time the Company or any of
         the Restricted Subsidiaries acquires such property, including any
         acquisition by means of a merger or consolidation with or into the
         Company or a Restricted Subsidiary of such Person, provided such Liens
         were not created in contemplation thereof and do not extend to any
         other property of the Company or any Restricted Subsidiary;

                  (18)     Liens securing Debt or other obligations of the
         Company or a Restricted Subsidiary to the Company or a Restricted
         Subsidiary;

                  (19)     Liens securing Hedging Agreements so long as such
         Hedging Agreements relate to Debt that is, and is permitted to be under
         this Indenture, secured by a Lien on (i) the same property securing
         such Hedging Agreements or (ii) the property described in clause (b)(1)
         under Section 4.06;

                                       23
<PAGE>

                  (20)     any pledge of the Capital Stock of an Unrestricted
         Subsidiary to secure Debt of such Unrestricted Subsidiary, to the
         extent such pledge constitutes an Investment permitted under Section
         4.07;

                  (21)     Liens incurred or assumed in connection with the
         issuance of revenue bonds the interest on which is tax-exempt under the
         Internal Revenue Code;

                  (22)     extensions, renewals or replacements of any Liens
         referred to in clauses (1), (2), (14), (15) or (16) of this definition,
         or in clause (4) of the definition of Permitted Encumbrances, in
         connection with the refinancing of the obligations secured thereby,
         provided that such Lien does not extend to any other property and,
         except as contemplated by the definition of "Permitted Refinancing
         Debt," the amount secured by such Lien is not increased;

                  (23)     Liens with respect to Joint Ventures or other similar
         arrangements to secure the obligations of one Joint Venture party to
         another, provided that such Liens do not secure Debt;

                  (24)     Liens resulting from the deposit of funds or
         evidences of Debt in trust for the purpose of defeasing Debt of the
         Company or any Restricted Subsidiary, which defeasance is otherwise
         permitted under this Indenture; and

                  (25)     other Liens not permitted by the foregoing securing
         obligations in an aggregate amount not exceeding $30,000,000 at any
         time outstanding.

         "PERMITTED REFINANCING DEBT" has the meaning assigned to such term in
Section 4.06.

         "PERSON" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity, including a
government or political subdivision or an agency or instrumentality thereof.

         "PREFERRED STOCK" means, with respect to any Person, any and all
Capital Stock which is preferred as to the payment of dividends or
distributions, upon liquidation or otherwise, over another class of Capital
Stock of such Person.

         "PRINCIPAL" of any Debt means the principal amount of such Debt (or if
such Debt was issued with original issue discount, the face amount of such Debt
less the remaining unamortized portion of the original issue discount of such
Debt), together with, unless the context otherwise indicates, any premium then
payable on such Debt.

                                       24
<PAGE>

         "PUBLIC EQUITY OFFERING" means an underwritten primary public offering,
after the Issue Date, of Qualified Stock of the Company pursuant to an effective
registration statement under the Securities Act other than an issuance
registered on Form S-4 or S-8 or any successor thereto or any issuance pursuant
to employee benefit plans or otherwise in compensation to officers, directors or
employees.

         "QUALIFIED EQUITY INTERESTS" means all Equity Interests of a Person
other than Disqualified Equity Interests.

         "QUALIFIED STOCK" means all Capital Stock of a Person other than
Disqualified Stock.

         "REFINANCE" has the meaning assigned to such term in Section 4.06.

         "REGISTER" has the meaning assigned to such term in Section 2.09.

         "REGISTRAR" means a Person engaged to maintain the Register.

         "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated on or about the Issue Date between the Company and the Initial Purchaser
with respect to the Initial Notes.

         "REGULAR RECORD DATE" for the interest payable on any Interest Payment
Date means the June 1 or December 1 (whether or not a Business Day) next
preceding such Interest Payment Date.

         "REGULATION S" means Regulation S under the Securities Act.

         "REGULATION S CERTIFICATE" means a certificate substantially in the
form of Exhibit E hereto.

         "RESTRICTED LEGEND" means the legend set forth in Exhibit C.

         "RESTRICTED PAYMENT" has the meaning assigned to such term in Section
4.07.

         "RESTRICTED PERIOD" means the relevant 40-day distribution compliance
period as defined in Regulation S.

         "RESTRICTED SUBSIDIARY" means any Subsidiary of the Company other than
a Joint Venture or an Unrestricted Subsidiary.

         "RULE 144A" means Rule 144A under the Securities Act.

         "RULE 144A CERTIFICATE" means a certificate substantially in the form
of Exhibit F hereto.

                                       25
<PAGE>

         "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc. and its successors.

         "SALE AND LEASEBACK TRANSACTION" means, with respect to any Person, an
arrangement whereby such Person enters into a lease of property sold by such
Person to the lessor in contemplation of such lease (other than a lease entered
into solely for the purpose of permitting such Person to complete its
commitments under any contractual arrangement with a customer of such Person in
existence at the time of the sale to the lessor).

         "SECURED OBLIGATIONS" means the due and punctual payment by the Company
of (i) the Obligations and (ii) all other monetary obligations of the Company to
any Secured Party, in each case under this Indenture, the Notes and each of the
Collateral Documents, including obligations to pay fees, expense reimbursement
obligations and indemnification obligations, whether primary, secondary, direct,
contingent, fixed or otherwise (including monetary obligations incurred during
the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding).

         "SECURED PARTY" means the Trustee, each Holder, the beneficiaries of
each indemnification obligation undertaken by the Company or any Guarantor
hereunder or under any Collateral Document and the successors and assigns of
each of the foregoing

         "SECURITIES ACT" means the Securities Act of 1933.

         "SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.

         "SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 (w) of Regulation
S-X promulgated under the Securities Act, as such regulation is in effect on the
Issue Date.

         "STATED MATURITY" means (i) with respect to any Debt, the date
specified as the fixed date on which the final installment of principal of such
Debt is due and payable or (ii) with respect to any scheduled installment of
principal of or interest on any Debt, the date specified as the fixed date on
which such installment is due and payable as set forth in the documentation
governing such Debt, not including any contingent obligation to repay, redeem or
repurchase prior to the regularly scheduled date for payment.

         "SUBORDINATED DEBT" means any Debt of the Company or any Guarantor
which is subordinated in right of payment to the Notes or the Note Guaranty, as
applicable, pursuant to a written agreement to that effect.

                                       26
<PAGE>

         "SUBSIDIARY" means with respect to any Person, any corporation,
association or other business entity of which more than 50% of the outstanding
Voting Stock is owned, directly or indirectly, by, or, in the case of a
partnership, the sole general partner or the managing partner or the only
general partners of which are, such Person and one or more Subsidiaries of such
Person (or a combination thereof). Unless otherwise specified, "Subsidiary"
means a Subsidiary of the Company.

         "TRUST MONEYS" has the meaning set forth in Section 11.01.

         "TRUSTEE" means the party named as such in the first paragraph of this
Indenture or any successor trustee under this Indenture pursuant to Article 7.

         "TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939.

         "U.S. GLOBAL NOTE" means a Global Note that bears the Restricted Legend
representing Notes issued and sold pursuant to Rule 144A.

         "U.S. GOVERNMENT OBLIGATIONS" means obligations issued or directly and
fully guaranteed or insured by the United States of America or by any agency or
instrumentality thereof, provided that the full faith and credit of the United
States of America is pledged in support thereof.

         "UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company that at
the time of determination has previously been designated, and continues to be,
an Unrestricted Subsidiary in accordance with the provisions of Section 4.17.

         "VOTING STOCK" means, with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.

         "WHOLLY OWNED RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of
which 100% of the outstanding Equity Interests is owned by the Company and/or
another Wholly Owned Restricted Subsidiary. For purposes of this definition, any
directors' qualifying shares or investments by foreign nationals mandated by
applicable law or governmental regulation shall be disregarded in determining
the ownership of a Restricted Subsidiary.

         SECTION 1.02. Rules of Construction. Unless the context otherwise
requires or except as otherwise expressly provided,

                  (1)      an accounting term not otherwise defined has the
         meaning assigned to it in accordance with GAAP;

                  (2)      "herein," "hereof" and other words of similar import
         refer to this Indenture as a whole and not to any particular Section,
         Article or other subdivision;

                                       27
<PAGE>

                  (3)      all references to Sections or Articles or Exhibits
         refer to Sections or Articles or Exhibits of or to this Indenture
         unless otherwise indicated;

                  (4)      references to agreements or instruments, or to
         statutes or regulations, are to such agreements or instruments, or
         statutes or regulations, as amended from time to time (or to successor
         statutes and regulations); and

                  (5)      in the event that a transaction meets the criteria of
         more than one category of permitted transactions or listed exceptions
         the Company may classify such transaction as it, in its sole
         discretion, determines.

                                    ARTICLE 2
                                    THE NOTES

         Section 2.01 . Form, Dating and Denominations; Legends. (a) The Notes
and the Trustee's certificate of authentication will be substantially in the
form attached as Exhibit A. The terms and provisions contained in the form of
the Notes annexed as Exhibit A constitute, and are hereby expressly made, a part
of this Indenture. The Notes may have notations, legends or endorsements
required by law, rules of or agreements with national securities exchanges to
which the Company is subject, or usage. Each Note will be dated the date of its
authentication. The Notes will be issuable in denominations of $1,000 in
principal amount and any multiple of $1,000 in excess thereof.

         (b) (1) Except as otherwise provided in paragraph (c), Section
2.10(b)(3), (b)(5), or (c) or Section 2.09(b)(4), each Initial Note will bear
the Restricted Legend.

                  (2)      Each Global Note, whether or not an Initial Note,
         will bear the DTC Legend.

                  (3)      Initial Notes offered and sold in reliance on any
         exception under the Securities Act other than Regulation S and Rule
         144A will be issued, and upon the request of the Company to the
         Trustee, Initial Notes offered and sold in reliance on Rule 144A may be
         issued, in the form of Certificated Notes.

                  (4)      Exchange Notes will be issued, subject to Section
         2.09(b), in the form of one or more Global Notes.

         (c) (1) If the Company determines (upon the advice of counsel and such
other certifications and evidence as the Company may reasonably require) that a
Note is eligible for resale pursuant to Rule 144(k) under the Securities Act (or
a
                                       28
<PAGE>

successor provision) and that the Restricted Legend is no longer necessary or
appropriate in order to ensure that subsequent transfers of the Note (or a
beneficial interest therein) are effected in compliance with the Securities Act,
or

                  (2)    after an Initial Note is

                           (x)      sold pursuant to an effective registration
                  statement under the Securities Act, pursuant to the
                  Registration Rights Agreement or otherwise, or (y) is validly
                  tendered for exchange into an Exchange Note pursuant to an
                  Exchange Offer

the Company may instruct the Trustee to cancel the Note and issue to the Holder
thereof (or to its transferee) a new Note of like tenor and amount, registered
in the name of the Holder thereof (or its transferee), that does not bear the
Restricted Legend, and the Trustee will comply with such instruction.

         (d)      By its acceptance of any Note bearing the Restricted Legend
(or any beneficial interest in such a Note), each Holder thereof and each owner
of a beneficial interest therein acknowledges the restrictions on transfer of
such Note (and any such beneficial interest) set forth in this Indenture and in
the Restricted Legend and agrees that it will transfer such Note (and any such
beneficial interest) only in accordance with this Indenture and such legend.

         Section 2.02 . Execution and Authentication; Exchange Notes. (a) An
Officer shall execute the Notes for the Company by facsimile or manual signature
in the name and on behalf of the Company. If an Officer whose signature is on a
Note no longer holds that office at the time the Note is authenticated, the Note
will still be valid.

         (b)      A Note will not be valid until the Trustee manually signs the
certificate of authentication on the Note, with the signature conclusive
evidence that the Note has been authenticated under this Indenture.

         (c)      At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Notes executed by the
Company to the Trustee for authentication. The Trustee will authenticate and
deliver

                  (i)      Initial Notes for original issue in the aggregate
         principal amount not to exceed $200,000,000, and

                  (ii)     Exchange Notes from time to time for issue in
         exchange for a like principal amount of Initial Notes

after the following conditions have been met:

                  (1)      Receipt by the Trustee of an Officers' Certificate
         specifying

                                       29
<PAGE>

                           (A)      the amount of Notes to be authenticated and
                  the date on which the Notes are to be authenticated,

                           (B)      whether the Notes are to be Initial Notes or
                  Exchange Notes,

                           (C)      whether the Notes are to be issued as one or
                  more Global Notes or Certificated Notes, and

                           (D)      other information the Company may determine
                  to include or the Trustee may reasonably request.

                  (2)      In the case of Exchange Notes, effectiveness of an
         Exchange Offer Registration Statement and consummation of the exchange
         offer thereunder (and receipt by the Trustee of an Officers'
         Certificate to that effect). Initial Notes exchanged for Exchange Notes
         will be cancelled by the Trustee.

         Section 2.03. Registrar, Paying Agent and Authenticating Agent; Paying
Agent to Hold Money in Trust. (a) The Company may appoint one or more Registrars
and one or more Paying Agents, and the Trustee may appoint an Authenticating
Agent, in which case each reference in this Indenture to the Trustee in respect
of the obligations of the Trustee to be performed by that Agent will be deemed
to be references to the Agent. The Company may act as Registrar or (except for
purposes of Article 8) Paying Agent. In each case the Company and the Trustee
will enter into an appropriate agreement with the Agent implementing the
provisions of this Indenture relating to the obligations of the Trustee to be
performed by the Agent and the related rights. The Company initially appoints
the Trustee as Registrar and Paying Agent.

         (b)      The Company will require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of the Holders or the Trustee all money held by the Paying Agent for the
payment of principal of and interest on the Notes and will promptly notify the
Trustee of any default by the Company in making any such payment. The Company at
any time may require a Paying Agent to pay all money held by it to the Trustee
and account for any funds disbursed, and the Trustee may at any time during the
continuance of any payment default, upon written request to a Paying Agent,
require the Paying Agent to pay all money held by it to the Trustee and to
account for any funds disbursed. Upon doing so, the Paying Agent will have no
further liability for the money so paid over to the Trustee.

         Section 2.04. Replacement Notes. If a mutilated Note is surrendered to
the Trustee or if a Holder claims that its Note has been lost, destroyed or
wrongfully taken, the Company will issue and the Trustee will authenticate a
replacement Note of like tenor and principal amount and bearing a number not

                                       30
<PAGE>

contemporaneously outstanding. Every replacement Note is an additional
obligation of the Company and entitled to the benefits of this Indenture. If
required by the Trustee or the Company, an indemnity must be furnished that is
sufficient in the judgment of both the Trustee and the Company to protect the
Company and the Trustee from any loss they may suffer if a Note is replaced. The
Company may charge the Holder for the expenses of the Company and the Trustee in
replacing a Note. In case the mutilated, lost, destroyed or wrongfully taken
Note has become or is about to become due and payable, the Company in its
discretion may pay the Note instead of issuing a replacement Note.

         Section 2.05 . Outstanding Notes. (a) Notes outstanding at any time are
all Notes that have been authenticated by the Trustee except for

                  (1)      Notes cancelled by the Trustee or delivered to it for
         cancellation;

                  (2)      any Note which has been replaced pursuant to Section
         2.04 unless and until the Trustee and the Company receive proof
         satisfactory to them that the replaced Note is held by a bona fide
         purchaser; and

                  (3)      on or after the maturity date or any redemption date
         or date for purchase of the Notes pursuant to an Offer to Purchase,
         those Notes payable or to be redeemed or purchased on that date for
         which the Trustee (or Paying Agent, other than the Company or an
         Affiliate of the Company) holds money sufficient to pay all amounts
         then due.

         (b)      A Note does not cease to be outstanding because the Company or
one of its Affiliates holds the Note, provided that in determining whether the
Holders of the requisite principal amount of the outstanding Notes have given or
taken any request, demand, authorization, direction, notice, consent, waiver or
other action hereunder, Notes owned by the Company or any Affiliate of the
Company will be disregarded and deemed not to be outstanding, (it being
understood that in determining whether the Trustee is protected in relying upon
any such request, demand, authorization, direction, notice, consent, waiver or
other action, only Notes which a Responsible Officer of the Trustee actually
knows to be so owned will be so disregarded). Notes so owned which have been
pledged in good faith may be regarded as outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect to
such Notes and that the pledgee is not the Company or any Affiliate of the
Company.

         Section 2.06 . Temporary Notes. Until definitive Notes are ready for
delivery, the Company may prepare and the Trustee will authenticate temporary
Notes. Temporary Notes will be substantially in the form of definitive Notes but
may have insertions, substitutions, omissions and other variations determined to
be appropriate by the Officer executing the temporary Notes, as evidenced by the
execution of the temporary Notes. If temporary Notes are issued, the Company

                                       31
<PAGE>

will cause definitive Notes to be prepared without unreasonable delay. After the
preparation of definitive Notes, the temporary Notes will be exchangeable for
definitive Notes upon surrender of the temporary Notes at the office or agency
of the Company designated for the purpose pursuant to Section 4.02, without
charge to the Holder. Upon surrender for cancellation of any temporary Notes the
Company will execute and the Trustee will authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes will be entitled to the
same benefits under this Indenture as definitive Notes.

         Section 2.07. Cancellation. The Company at any time may deliver to the
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and may
deliver to the Trustee for cancellation any Notes previously authenticated
hereunder which the Company has not issued and sold. Any Registrar or the Paying
Agent will forward to the Trustee any Notes surrendered to it for transfer,
exchange or payment. The Trustee will cancel all Notes surrendered for transfer,
exchange, payment or cancellation and dispose of them in accordance with its
normal procedures or the written instructions of the Company. The Company may
not issue new Notes to replace Notes it has paid in full or delivered to the
Trustee for cancellation.

         Section 2.08. CUSIP and CINS Numbers. The Company in issuing the Notes
may use "CUSIP" and "CINS" numbers, and the Trustee will use CUSIP numbers or
CINS numbers in notices of redemption or exchange or in Offers to Purchase as a
convenience to Holders, the notice to state that no representation is made as to
the correctness of such numbers either as printed on the Notes or as contained
in any notice of redemption or exchange or Offer to Purchase. The Company will
promptly notify the Trustee of any change in the CUSIP or CINS numbers.

         Section 2.09. Registration, Transfer and Exchange. (a) The Notes will
be issued in registered form only, without coupons, and the Company shall cause
the Trustee to maintain a register (the "REGISTER") of the Notes, for
registering the record ownership of the Notes by the Holders and transfers and
exchanges of the Notes.

                  (b)(1)    Each Global Note will be registered in the name of
         the Depositary or its nominee and, so long as DTC is serving as the
         Depositary thereof, will bear the DTC Legend.

                  (2)      Each Global Note will be delivered to the Trustee as
         custodian for the Depositary. Transfers of a Global Note (but not a
         beneficial interest therein) will be limited to transfers thereof in
         whole, but not in part, to the Depositary, its successors or their
         respective nominees, except (1) as set forth in Section 2.09(b)(4) and
         (2) transfers of portions

                                       32
<PAGE>

         thereof in the form of Certificated Notes may be made upon request of
         an Agent Member (for itself or on behalf of a beneficial owner) by
         written notice given to the Trustee by or on behalf of the Depositary
         in accordance with customary procedures of the Depositary and in
         compliance with this Section and Section 2.10.

                  (3)      Agent Members will have no rights under this
         Indenture with respect to any Global Note held on their behalf by the
         Depositary, and the Depositary may be treated by the Company, the
         Trustee and any agent of the Company or the Trustee as the absolute
         owner and Holder of such Global Note for all purposes whatsoever.
         Notwithstanding the foregoing, the Depositary or its nominee may grant
         proxies and otherwise authorize any Person (including any Agent Member
         and any Person that holds a beneficial interest in a Global Note
         through an Agent Member) to take any action which a Holder is entitled
         to take under this Indenture or the Notes, and nothing herein will
         impair, as between the Depositary and its Agent Members, the operation
         of customary practices governing the exercise of the rights of a holder
         of any security.

                  (4)      If (x) the Depositary notifies the Company that it is
         unwilling or unable to continue as Depositary for a Global Note and a
         successor depositary is not appointed by the Company within 90 days of
         the notice or (y) an Event of Default has occurred and is continuing
         and the Trustee has received a request from the Depositary, the Trustee
         will promptly exchange each beneficial interest in the Global Note for
         one or more Certificated Notes in authorized denominations having an
         equal aggregate principal amount registered in the name of the owner of
         such beneficial interest, as identified to the Trustee by the
         Depositary, and thereupon the Global Note will be deemed canceled. If
         such Note does not bear the Restricted Legend, then the Certificated
         Notes issued in exchange therefor will not bear the Restricted Legend.
         If such Note bears the Restricted Legend, then the Certificated Notes
         issued in exchange therefor will bear the Restricted Legend, provided
         that any Holder of any such Certificated Note issued in exchange for a
         beneficial interest in an Offshore Global Note will have the right upon
         presentation to the Trustee of a duly completed Certificate of
         Beneficial Ownership after the Restricted Period to exchange such
         Certificated Note for a Certificated Note of like tenor and amount that
         does not bear the Restricted Legend, registered in the name of such
         Holder.

         (c)      Each Certificated Note will be registered in the name of the
Holder thereof or its nominee.

         (d)      A Holder may transfer a Note (or a beneficial interest
therein) to another Person or exchange a Note (or a beneficial interest therein)
for another Note or Notes of any authorized denomination by presenting to the
Trustee a

                                       33
<PAGE>

written request therefor stating the name of the proposed transferee or
requesting such an exchange, accompanied by any certification, opinion or other
document required by Section 2.10. The Trustee will promptly register any
transfer or exchange that meets the requirements of this Section by noting the
same in the register maintained by the Trustee for the purpose; provided that

                  (x)      no transfer or exchange will be effective until it is
         registered in such register and

                  (y)      the Trustee will not be required (i) to issue,
         register the transfer of or exchange any Note for a period of 15 days
         before a selection of Notes to be redeemed or purchased pursuant to an
         Offer to Purchase, (ii) to register the transfer of or exchange any
         Note so selected for redemption or purchase in whole or in part,
         except, in the case of a partial redemption or purchase, that portion
         of any Note not being redeemed or purchased, or (iii) if a redemption
         or a purchase pursuant to an Offer to Purchase is to occur after a
         Regular Record Date but on or before the corresponding Interest Payment
         Date, to register the transfer of or exchange any Note on or after the
         Regular Record Date and before the date of redemption or purchase.
         Prior to the registration of any transfer, the Company, the Trustee and
         their agents will treat the Person in whose name the Note is registered
         as the owner and Holder thereof for all purposes (whether or not the
         Note is overdue), and will not be affected by notice to the contrary.

         From time to time the Company will execute and the Trustee will
authenticate additional Notes as necessary in order to permit the registration
of a transfer or exchange in accordance with this Section.

         No service charge will be imposed in connection with any transfer or
exchange of any Note, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than a transfer tax or other similar governmental charge
payable upon exchange pursuant to subsection (b)(4)).

                  (e) (1)  Global Note to Global Note. If a beneficial
         interest in a Global Note is transferred or exchanged for a beneficial
         interest in another Global Note, the Trustee will (x) record a decrease
         in the principal amount of the Global Note being transferred or
         exchanged equal to the principal amount of such transfer or exchange
         and (y) record a like increase in the principal amount of the other
         Global Note. Any beneficial interest in one Global Note that is
         transferred to a Person who takes delivery in the form of an interest
         in another Global Note, or exchanged for an interest in another Global
         Note, will, upon transfer or exchange, cease to be an interest in such
         Global Note and become an interest in the other Global Note and,
         accordingly, will thereafter be subject to all transfer and

                                       34
<PAGE>

         exchange restrictions, if any, and other procedures applicable to
         beneficial interests in such other Global Note for as long as it
         remains such an interest.

                  (2)      Global Note to Certificated Note. If a beneficial
         interest in a Global Note is transferred or exchanged for a
         Certificated Note, the Trustee will (x) record a decrease in the
         principal amount of such Global Note equal to the principal amount of
         such transfer or exchange and (y) deliver one or more new Certificated
         Notes in authorized denominations having an equal aggregate principal
         amount to the transferee (in the case of a transfer) or the owner of
         such beneficial interest (in the case of an exchange), registered in
         the name of such transferee or owner, as applicable.

                  (3)      Certificated Note to Global Note. If a Certificated
         Note is transferred or exchanged for a beneficial interest in a Global
         Note, the Trustee will (x) cancel such Certificated Note, (y) record an
         increase in the principal amount of such Global Note equal to the
         principal amount of such transfer or exchange and (z) in the event that
         such transfer or exchange involves less than the entire principal
         amount of the canceled Certificated Note, deliver to the Holder thereof
         one or more new Certificated Notes in authorized denominations having
         an aggregate principal amount equal to the untransferred or unexchanged
         portion of the canceled Certificated Note, registered in the name of
         the Holder thereof.

                  (4)      Certificated Note to Certificated Note. If a
         Certificated Note is transferred or exchanged for another Certificated
         Note, the Trustee will (x) cancel the Certificated Note being
         transferred or exchanged, (y) deliver one or more new Certificated
         Notes in authorized denominations having an aggregate principal amount
         equal to the principal amount of such transfer or exchange to the
         transferee (in the case of a transfer) or the Holder of the canceled
         Certificated Note (in the case of an exchange), registered in the name
         of such transferee or Holder, as applicable, and (z) if such transfer
         or exchange involves less than the entire principal amount of the
         canceled Certificated Note, deliver to the Holder thereof one or more
         Certificated Notes in authorized denominations having an aggregate
         principal amount equal to the untransferred or unexchanged portion of
         the canceled Certificated Note, registered in the name of the Holder
         thereof.

         Section 2.10. Restrictions on Transfer and Exchange. (a) The transfer
or exchange of any Note (or a beneficial interest therein) may only be made in
accordance with this Section and Section 2.09 and, in the case of a Global Note
(or a beneficial interest therein), the applicable rules and procedures of the
Depositary. The Trustee shall refuse to register any requested transfer or
exchange that does not comply with the preceding sentence.

                                       35
<PAGE>

         (b)      Subject to paragraph (c), the transfer or exchange of any Note
(or a beneficial interest therein) of the type set forth in column A below for a
Note (or a beneficial interest therein) of the type set forth opposite in column
B below may only be made in compliance with the certification requirements (if
any) described in the clause of this paragraph set forth opposite in column C
below.

<TABLE>
<CAPTION>
        A                                B                         C
<S>                              <C>                              <C>
U.S. Global Note                 U.S. Global Note                 (1)
U.S. Global Note                 Offshore Global Note             (2)
U.S. Global Note                 Certificated Note                (3)
Offshore Global Note             U.S. Global Note                 (4)
Offshore Global Note             Offshore Global Note             (1)
Offshore Global Note             Certificated Note                (5)
Certificated Note                U.S. Global Note                 (4)
Certificated Note                Offshore Global Note             (2)
Certificated Note                Certificated Note                (3)
</TABLE>

                  (1)      No certification is required.

                  (2)      The Person requesting the transfer or exchange must
         deliver or cause to be delivered to the Trustee a duly completed
         Regulation S Certificate; provided that if the requested transfer or
         exchange is made by the Holder of a Certificated Note that does not
         bear the Restricted Legend, then no certification is required.

                  (3)      The Person requesting the transfer or exchange must
         deliver or cause to be delivered to the Trustee (x) a duly completed
         Rule 144A Certificate, (y) a duly completed Regulation S Certificate or
         (z) a duly completed Institutional Accredited Investor Certificate,
         and/or an Opinion of Counsel and such other certifications and evidence
         as the Company may reasonably require in order to determine that the
         proposed transfer or exchange is being made in compliance with the
         Securities Act and any applicable securities laws of any state of the
         United States; provided that if the requested transfer or exchange is
         made by the Holder of a Certificated Note that does not bear the
         Restricted Legend, then no certification is required. In the event that
         (i) the requested transfer or exchange takes place after the Restricted
         Period and a duly completed Regulation S Certificate is delivered to
         the Trustee or (ii) a Certificated Note that does not bear the
         Restricted Legend is surrendered for transfer or exchange, upon
         transfer or exchange the Trustee will deliver a Certificated Note that
         does not bear the Restricted Legend.

                  (4)      The Person requesting the transfer or exchange must
         deliver or cause to be delivered to the Trustee a duly completed Rule
         144A Certificate.

                                       36
<PAGE>

                  (5)      Notwithstanding anything to the contrary contained
         herein, no such exchange is permitted if the requested exchange
         involves a beneficial interest in an Offshore Global Note during the
         Restricted Period. If the requested transfer involves a beneficial
         interest in an Offshore Global Note during the Restricted Period, the
         Person requesting the transfer must deliver or cause to be delivered to
         the Trustee (x) a duly completed Rule 144A Certificate or (y) a duly
         completed Institutional Accredited Investor Certificate and/or an
         Opinion of Counsel and such other certifications and evidence as the
         Company may reasonably require in order to determine that the proposed
         transfer is being made in compliance with the Securities Act and any
         applicable securities laws of any state of the United States. If the
         requested transfer or exchange involves a beneficial interest in an
         Offshore Global Note following expiration of the Restricted Period, no
         certification is required and the Trustee will deliver a Certificated
         Note that does not bear the Restricted Legend.

         (c)      No certification is required in connection with any transfer
or exchange of any Note (or a beneficial interest therein)

             (1)      after such Note is eligible for resale pursuant to Rule
         144(k) under the Securities Act (or a successor provision); provided
         that the Company has provided the Trustee with an Officer's Certificate
         to that effect, and the Company may require from any Person requesting
         a transfer or exchange in reliance upon this clause (1) an opinion of
         counsel and any other reasonable certifications and evidence in order
         to support such certificate; or

             (2)(x)   sold pursuant to an effective registration statement,
         pursuant to the Registration Rights Agreement or otherwise or (y) which
         is validly tendered for exchange into an Exchange Note pursuant to an
         Exchange Offer.

         Any Certificated Note delivered in reliance upon this paragraph will
not bear the Restricted Legend.

         (d)      The Trustee will retain copies of all certificates, opinions
and other documents received in connection with the transfer or exchange of a
Note (or a beneficial interest therein), and the Company will have the right to
inspect and make copies thereof at any reasonable time upon written notice to
the Trustee.

                                       37
<PAGE>

                                    ARTICLE 3
                          REDEMPTION; OFFER TO PURCHASE

         Section 3.01. Optional Redemption. At any time and from time to time
on or after December 15, 2008, the Company may redeem the Notes, in whole or in
part, at a redemption price equal to the percentage of principal amount set
forth below plus accrued and unpaid interest to the redemption date.

<TABLE>
<CAPTION>
  12-MONTH PERIOD
    COMMENCING
    DECEMBER 15
      IN YEAR                                   PERCENTAGE
-------------------                             ----------
<S>                                             <C>
2008                                             105.500%
2009                                             103.667%
2010                                             101.833%
2011 and thereafter                              100.000%
</TABLE>

         Section 3.02. Redemption with Proceeds of Public Equity Offering. At
any time and from time to time prior to December 15, 2006, the Company may
redeem Notes with the net cash proceeds received by the Company from any Public
Equity Offering at a redemption price equal to 111% of the principal amount plus
accrued and unpaid interest to the redemption date, in an aggregate principal
amount for all such redemptions not to exceed 35% of the original aggregate
principal amount of the Notes, provided that

         (1)      in each case the redemption takes place not later than 60 days
after the closing of the related Public Equity Offering, and

         (2)      at least 65% of the aggregate principal amount of the Notes
remains outstanding immediately thereafter (excluding Notes held by the Company
and its Subsidiaries).

         Section 3.03. Method and Effect of Redemption. (a) If the Company
elects to redeem Notes, it must notify the Trustee of the redemption date and
the principal amount of Notes to be redeemed by delivering an Officers'
Certificate at least 45 days before the redemption date (unless a shorter period
is satisfactory to the Trustee). If fewer than all of the Notes are being
redeemed, the Officers' Certificate must also specify a record date not less
than 10 days after the date of the notice of redemption is given to the Trustee,
and the Trustee will select the Notes to be redeemed pro rata, by lot or by any
other method the Trustee in its sole discretion deems fair and appropriate, in
denominations of $1,000 principal amount and multiples thereof. The Trustee will
notify the Company promptly of the Notes or portions of Notes to be called for
redemption. Notice of redemption must be sent by the Company or at the Company's
request, by the Trustee in the name and at the expense of the Company, to
Holders whose Notes are to be

                                       38
<PAGE>

redeemed at least 20 Business Days but not more than 60 days before the
redemption date.

         (b)      The notice of redemption will identify the Notes to be
redeemed and will include or state the following:

                  (1)      the redemption date;

                  (2)      the redemption price, including the portion thereof
         representing any accrued interest;

                  (3)      the place or places where Notes are to be surrendered
         for redemption;

                  (4)      Notes called for redemption must be so surrendered in
         order to collect the redemption price;

                  (5)      on the redemption date the redemption price will
         become due and payable on Notes called for redemption, and interest on
         Notes called for redemption will cease to accrue on and after the
         redemption date;

                  (6)      if any Note is redeemed in part, on and after the
         redemption date, upon surrender of such Note, new Notes equal in
         principal amount to the unredeemed portion will be issued; and

                  (7)      if any Note contains a CUSIP or CINS number, no
         representation is being made as to the correctness of the CUSIP or CINS
         number either as printed on the Notes or as contained in the notice of
         redemption and that the Holder should rely only on the other
         identification numbers printed on the Notes.

         (c)      Once notice of redemption is sent to the Holders, Notes called
for redemption become due and payable at the redemption price on the redemption
date, and upon surrender of the Notes called for redemption, the Company shall
redeem such Notes at the redemption price. Commencing on the redemption date,
Notes redeemed will cease to accrue interest. Upon surrender of any Note
redeemed in part, the Holder will receive a new Note equal in principal amount
to the unredeemed portion of the surrendered Note.

         Section 3.04. Offer to Purchase. (a) An "OFFER TO PURCHASE" means an
offer by the Company to purchase Notes as required by this Indenture. An Offer
to Purchase must be made by written offer (the "OFFER") sent to the Holders. The
Company will notify the Trustee at least 15 days (or such shorter period as is
acceptable to the Trustee) prior to sending the offer to Holders of its
obligation to make an Offer to Purchase, and the offer will be sent by the
Company or, at the Company's request, by the Trustee in the name and at the
expense of the Company.

                                       39
<PAGE>

         (b)      The offer must include or state the following as to the terms
of the Offer to Purchase:

                  (1)      the provision of this Indenture pursuant to which the
         Offer to Purchase is being made;

                  (2)      the aggregate principal amount of the outstanding
         Notes offered to be purchased by the Company pursuant to the Offer to
         Purchase (including, if less than 100%, the manner by which such amount
         has been determined pursuant to this Indenture) (the "PURCHASE
         AMOUNT");

                  (3)      the purchase price, including the portion thereof
         representing accrued interest;

                  (4)      an expiration date (the "EXPIRATION DATE") not less
         than 20 Business Days or more than 60 days after the date of the offer,
         and a settlement date for purchase (the "PURCHASE DATE") not more than
         five Business Days after the expiration date;

                  (5)      information concerning the business of the Company
         and its Subsidiaries which the Company in good faith believes will
         enable the Holders to make an informed decision with respect to the
         Offer to Purchase, at a minimum to include

                           (A)      the most recent annual and quarterly
                  financial statements and "Management's Discussion and Analysis
                  of Financial Condition and Results of Operations" for the
                  Company,

                           (B)      a description of material developments in
                  the Company's business subsequent to the date of the latest of
                  the financial statements (including a description of the
                  events requiring the Company to make the Offer to Purchase),
                  and

                           (C) if applicable, appropriate pro forma financial
                  information concerning the Offer to Purchase and the events
                  requiring the Company to make the Offer to Purchase;

                  (6)      a Holder may tender all or any portion of its Notes,
         subject to the requirement that any portion of a Note tendered must be
         in a multiple of $1,000 principal amount;

                  (7)      the place or places where Notes are to be surrendered
         for tender pursuant to the Offer to Purchase;

                  (8)      each Holder electing to tender a Note pursuant to the
         offer will be required to surrender such Note at the place or places
         specified in the offer prior to the close of business on the expiration
         date (such Note

                                       40
<PAGE>

         being, if the Company or the Trustee so requires, duly endorsed or
         accompanied by a duly executed written instrument of transfer);

                  (9)      interest on any Note not tendered, or tendered but
         not purchased by the Company pursuant to the Offer to Purchase, will
         continue to accrue;

                  (10)     on the purchase date the purchase price will become
         due and payable on each Note accepted for purchase, and interest on
         Notes purchased will cease to accrue on and after the purchase date;

                  (11)     Holders are entitled to withdraw Notes tendered by
         giving notice, which must be received by the Company or the Trustee not
         later than the close of business on the expiration date, setting forth
         the name of the Holder, the principal amount of the tendered Notes, the
         certificate number of the tendered Notes and a statement that the
         Holder is withdrawing all or a portion of the tender;

                  (12)     (i) if Notes in an aggregate principal amount less
         than or equal to the purchase amount are duly tendered and not
         withdrawn pursuant to the Offer to Purchase, the Company will purchase
         all such Notes, and (ii) if the Offer to Purchase is for less than all
         of the outstanding Notes and Notes in an aggregate principal amount in
         excess of the purchase amount are duly tendered and not withdrawn
         pursuant to the offer, the Company will purchase Notes having an
         aggregate principal amount equal to the purchase amount on a pro rata
         basis, with adjustments made in the Company's discretion so that only
         Notes in multiples of $1,000 principal amount will be purchased;

                  (13)     if any Note is purchased in part, new Notes equal in
         principal amount to the unpurchased portion of the Note will be issued;
         and

                  (14)     if any Note contains a CUSIP or CINS number, no
         representation is being made as to the correctness of the CUSIP or CINS
         number either as printed on the Notes or as contained in the offer and
         that the Holder should rely only on the other identification numbers
         printed on the Notes.

         (c)      Prior to the purchase date, the Company will accept tendered
Notes for purchase as required by the Offer to Purchase and deliver to the
Trustee all Notes so accepted together with an Officers' Certificate specifying
which Notes have been accepted for purchase. On the purchase date the purchase
price will become due and payable on each Note accepted for purchase, and
interest on Notes purchased will cease to accrue on and after the purchase date.
The Trustee will promptly return to Holders any Notes not accepted for purchase
and send to

                                       41
<PAGE>

Holders new Notes equal in principal amount to any unpurchased portion of any
Notes accepted for purchase in part.

         (d)      The Company will comply with Rule 14e-1 under the Exchange Act
and all other applicable laws in making any Offer to Purchase, and the above
procedures will be deemed modified as necessary to permit such compliance.

                                    ARTICLE 4
                                    COVENANTS

         Section 4.01. Payment Of Notes. (a) The Company agrees to pay the
principal of and interest on the Notes on the dates and in the manner provided
in the Notes and this Indenture. Not later than 9:00 A.M. (New York City time)
on the due date of any principal of or interest on any Notes, or any redemption
or purchase price of the Notes, the Company will deposit with the Trustee (or
Paying Agent) money in immediately available funds sufficient to pay such
amounts, provided that if the Company or any Affiliate of the Company is acting
as Paying Agent, it will, on or before each due date, segregate and hold in a
separate trust fund for the benefit of the Holders a sum of money sufficient to
pay such amounts until paid to such Holders or otherwise disposed of as provided
in this Indenture. In each case the Company will promptly notify the Trustee of
its compliance with this paragraph.

         (b)      An installment of principal or interest will be considered
paid on the date due if the Trustee (or Paying Agent, other than the Company or
any Affiliate of the Company) holds on that date money designated for and
sufficient to pay the installment. If the Company or any Affiliate of the
Company acts as Paying Agent, an installment of principal or interest will be
considered paid on the due date only if paid to the Holders.

         (c)      The Company agrees to pay interest on overdue principal, and
overdue installments of interest at the rate per annum specified in the Notes.

         (d)      Payments in respect of the Notes represented by the Global
Notes are to be made by wire transfer of immediately available funds to the
accounts specified by the Holders of the Global Notes. With respect to
Certificated Notes, the Company will make all payments by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each Holder's registered
address.

         Section 4.02. Maintenance of Office or Agency. The Company will
maintain in the Borough of Manhattan, the City of New York, an office or agency
where Notes may be surrendered for registration of transfer or exchange or for
presentation for payment and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Company hereby

                                       42
<PAGE>

initially designates the Corporate Trust Office of the Trustee as such office of
the Company. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company fails to maintain any such required office or agency or fails
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served to the Trustee.

         The Company may also from time to time designate one or more other
offices or agencies where the Notes may be surrendered or presented for any of
such purposes and may from time to time rescind such designations. The Company
will give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.

         Section 4.03. Existence. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence and
the existence of each of its Restricted Subsidiaries in accordance with their
respective organizational documents, and the material rights, licenses and
franchises of the Company and each Restricted Subsidiary; provided that the
Company is not required to preserve any such right, license or franchise, or the
existence of any Restricted Subsidiary (including any Guarantor, subject to any
applicable provisions of Article 5), if the maintenance or preservation thereof
is no longer desirable in the conduct of the business of the Company and its
Restricted Subsidiaries taken as a whole; and provided further that this Section
does not prohibit any transaction otherwise permitted by Sections 4.14, 5.01 or
5.02.

         Section 4.04. Payment of Taxes and other Claims. The Company will pay
or discharge, and cause each of its Subsidiaries to pay or discharge before the
same become delinquent (i) all material taxes, assessments and governmental
charges levied or imposed upon the Company or any Subsidiary or its income or
profits or property, and (ii) all material lawful claims for labor, materials
and supplies that, if unpaid, might by law become a Lien (other than a Permitted
Lien) upon the property of the Company or any Subsidiary, other than any such
tax, assessment, charge or claim the amount, applicability or validity of which
is being contested in good faith by appropriate proceedings and for which
adequate reserves (to the extent required in accordance with GAAP) have been
established.

         Section 4.05. Maintenance of Properties and Insurance; Maintenance of
Temporary Interest Reserve. (a) The Company will cause all tangible personal
properties used in the conduct of its business or the business of any of its
Restricted Subsidiaries to be maintained and kept in good condition, repair and
working order as in the judgment of the Company may be necessary so that the
business of the Company and its Restricted Subsidiaries may be properly
conducted at all times; provided that nothing in this Section prevents the
Company or any Restricted Subsidiary from discontinuing the use, operation or
maintenance of any of such property or disposing of any such property, if such
discontinuance or disposal is, in the judgment of the Company, desirable in the

                                       43
<PAGE>

conduct of the business of the Company and its Restricted Subsidiaries taken as
a whole; provided further that, with respect to the Mortgaged Vessels, the
Company will, or will cause the Mortgaged Vessel Owning Subsidiaries to,
maintain and keep such Mortgaged Vessels in such condition, repair and working
order as is required by the Collateral Documents (in lieu of complying with this
Section 4.05(a)).

         (b)      The Company will provide or cause to be provided, for itself
and its Restricted Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds customarily insured against
by corporations similarly situated and owning like properties, including, but
not limited to, commercial general liability insurance, with reputable insurers,
in such amounts, with such deductibles and by such methods as are customary for
corporations similarly situated in the industry in which the Company and its
Restricted Subsidiaries are then conducting business; provided that, with
respect to the Mortgaged Vessels, the Company shall be required to provide or
cause to be provided only such insurance as is required by the Collateral
Documents (in lieu of complying with this Section 4.05(b)).

         (c)      At all times from the Issue Date until the last to occur of
(i) the acceptance by the customer under the existing construction contract for
the offshore production platform known as Devils Tower to which the Company or
one or more of its Subsidiaries is a party (as such contract may hereafter be
amended or supplemented) and (ii) the acceptance by the customer under the
existing construction contract for the offshore production platform known as
Front Runner to which the Company or one or more of its Subsidiaries is a party
(as such contract may hereafter be amended or supplemented), the Company shall
maintain, in a separate account, cash reserves sufficient to pay, in full, the
next two succeeding payments of interest on the Notes as provided in the Notes
and this Indenture.

         Section 4.06. Limitation on Debt and Disqualified or Preferred Stock.
ERROR! BOOKMARK NOT DEFINED. The Company

                  (1)      will not, and will not permit any of its Restricted
         Subsidiaries to, Incur any Debt; and

                  (2)      will not, and will not permit any Restricted
         Subsidiary to, Incur any Disqualified Stock, and will not permit any of
         its Restricted Subsidiaries to Incur any Preferred Stock (other than
         Disqualified or Preferred Stock of Restricted Subsidiaries held by the
         Company and/or a Restricted Subsidiary, so long as it is so held);

provided that the Company or any Guarantor may Incur Debt and the Company or any
Guarantor may Incur Disqualified Stock if, on the date of the Incurrence, after

                                       44
<PAGE>

giving effect to the Incurrence and the receipt and application of the proceeds
therefrom, the Fixed Charge Coverage Ratio is not less than 2.25:1.0.

         (b)      Notwithstanding the foregoing, the Company and, to the extent
provided below, any Restricted Subsidiary may Incur any of the following
("PERMITTED DEBT"):

                  (1)      Debt of the Company or any Restricted Subsidiary
         pursuant to Credit Facilities; provided that the aggregate principal
         amount at any time outstanding does not exceed the greater of (X)
         $100,000,000 and (Y) the sum for the Company and its Restricted
         Subsidiaries of 80% of accounts receivable and 50% of inventory,
         including Guarantees of such Debt by the Company or any Restricted
         Subsidiary; provided, further, that, for purposes of this limitation,
         borrowings under the Credit Facilities that are used to provide cash
         collateral for letters of credit issued under the Credit Facilities
         will not be considered to be Debt for purposes of this clause (1) to
         the extent that the Obligations under such letters of credit are
         considered to be Debt under this clause (1);

                  (2)      Debt of the Company or any Restricted Subsidiary to
         the Company or any Restricted Subsidiary so long as such Debt continues
         to be owed to the Company or a Restricted Subsidiary and which, if the
         obligor is the Company or a Guarantor, is subordinated in right of
         payment to the Notes;

                  (3)      Debt of the Company pursuant to the Notes and Debt of
         any Guarantor pursuant to a Note Guaranty of the Notes;

                  (4)      (i) Debt of the Company under the Intercompany Note
         and (ii) any other Debt of the Company or any Restricted Subsidiary
         outstanding on the Issue Date (and, for purposes of clause (5)(D)
         below, not otherwise constituting Permitted Debt)

                  (5)      Debt ("PERMITTED REFINANCING DEBT") constituting an
         extension or renewal of, replacement of, or substitution for, or issued
         in exchange for, or the net proceeds of which are used to repay,
         redeem, repurchase, refinance or refund, including by way of defeasance
         (all of the above, for purposes of this clause, "refinance") then
         outstanding Debt in an amount not to exceed the principal amount of the
         Debt so refinanced, plus any associated premiums, fees and expenses;
         provided that

                           (A)      in case the Debt to be refinanced is
                  subordinated in right of payment to the Notes, the new Debt,
                  by its terms or by the terms of any agreement or instrument
                  pursuant to which it is outstanding, is expressly made
                  subordinate in right of payment to

                                       45
<PAGE>

                  the Notes at least to the extent that the Debt to be
                  refinanced is subordinated to the Notes,

                           (B)      the new Debt does not have a Stated Maturity
                  prior to the Stated Maturity of the Debt to be refinanced, and
                  the Average Life of the new Debt is at least equal to the
                  remaining Average Life of the Debt to be refinanced,

                           (C)      in no event may Debt of the Company or any
                  Guarantor be refinanced pursuant to this clause by means of
                  any Debt of any Restricted Subsidiary that is not a Guarantor,
                  and

                           (D)      Debt Incurred pursuant to clauses (1), (2),
                  (6), (7), (10), (11), (12), (13) and (14) may not be
                  refinanced pursuant to this clause;

                  (6)      Hedging Agreements of the Company or any Restricted
         Subsidiary entered into in the ordinary course of business for the
         purpose of limiting risks associated with the business of the Company
         and its Restricted Subsidiaries and not for speculation;

                  (7)      Debt of the Company or any Restricted Subsidiary with
         respect to letters of credit, bankers' acceptances, bonds and other
         similar instruments issued in the ordinary course of business and not
         supporting other Debt, including letters of credit supporting
         performance, surety, customs, appeal or similar bonds or
         indemnification, adjustment of purchase price or similar obligations
         incurred in connection with the acquisition or disposition of any
         business or assets;

                  (8)      Acquired Debt, provided that after giving effect to
         the Incurrence thereof, the Company could Incur at least $1.00 of Debt
         under the Fixed Charge Coverage Ratio test set forth in paragraph (a)
         of this covenant;

                  (9)      Debt of the Company or any Restricted Subsidiary,
         which may include Capital Leases, Incurred on or after the Issue Date
         no later than 180 days after the date of purchase or completion of
         construction or improvement of property for the purpose of financing
         all or any part of the purchase price or cost of construction or
         improvement, provided that the principal amount of any Debt Incurred
         pursuant to this clause may not exceed (a) $20,000,000 less (b) the
         aggregate outstanding amount of Permitted Refinancing Debt Incurred to
         refinance Debt Incurred pursuant to this clause;

                  (10)     up to $2,000,000 aggregate principal amount of Debt
         of the Company issued in connection with the purchase, redemption,
         acquisition

                                       46
<PAGE>

         or other retirement for value of Equity Interests of MII held by
         officers, directors or employees or former directors, officers or
         employees (or their estates or beneficiaries under their estates), upon
         death, disability, retirement, severance or termination of employment
         or service or pursuant to any agreement under which the Equity
         Interests were issued, provided that payments in respect of such Debt
         are treated when made as Restricted Payments;

                  (11)     Debt of the Company and any Restricted Subsidiary
         consisting of the Guarantee of Debt of Joint Ventures not to exceed
         $25,000,000 in aggregate principal amount at any time outstanding;
         provided that as and to the extent the Company or such Restricted
         Subsidiary, as the case may be, shall be entitled pursuant to the terms
         of any agreement then in effect, to reimbursement, indemnity or
         contribution from any Person (other than the Company or any of its
         Subsidiaries or the Joint Ventures) that the Company reasonably deems
         to be solvent for amounts as to which the Company or such Restricted
         Subsidiary, as the case may be, may become liable for or have to pay
         pursuant to such guarantee of Debt of a Joint Venture, such amount, but
         not the remaining amount, shall not be treated for the purpose of the
         foregoing limitation as having been guaranteed;

                  (12)     Debt of the Company or any Guarantor consisting of
         Guarantees of Debt of the Company or any Guarantor Incurred under any
         other clause of this covenant; and

                  (13)     additional Debt of the Company or any Restricted
         Subsidiary incurred on or after the Issue Date not otherwise permitted
         hereunder in an aggregate principal amount at any time outstanding not
         to exceed $25,000,000 (which may include any Debt incurred for any
         purpose, including but not limited to the purposes referred to in
         clauses (1) through (12) above).

For purposes of determining compliance with this Section 4.06:

                  (a)      in the event that an item of proposed Debt (including
         Acquired Debt) meets the criteria of more than one of the categories of
         Permitted Debt described in clauses (1) through (13) above, or is
         entitled to be incurred pursuant to the first paragraph of this
         covenant, the Company will be permitted to classify (or later
         reclassify in whole or in part) such item of Debt in any manner that
         complies with this covenant;

                  (b)      the accrual of interest, the accretion or
         amortization of original issue discount and the payment of interest on
         any Debt in the form of additional Debt with the same terms will not be
         deemed to be an incurrence of Debt for purposes of this covenant;
         provided, in each such

                                       47
<PAGE>

         case, that the amount thereof is included in the computation of Fixed
         Charges as accrued; and

                  (c)      for the purposes of determining compliance with any
         dollar-denominated restriction on the incurrence of Debt denominated in
         a foreign currency, the dollar-equivalent principal amount of such Debt
         incurred pursuant thereto shall be calculated based on the relevant
         currency exchange rate in effect on the date that such Debt was
         Incurred.

         Section 4.07. Limitation on Restricted Payments. ERROR! BOOKMARK NOT
DEFINED. The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly (the payments and other actions described in the
following clauses being collectively "RESTRICTED PAYMENTS"):

                  (i)      declare or pay any dividend or make any distribution
         on its Equity Interests (other than dividends or distributions paid in
         the Company's Qualified Equity Interests) held by Persons other than
         the Company or any of its Restricted Subsidiaries;

                  (ii)     purchase, redeem or otherwise acquire or retire for
         value any Equity Interests of the Company or any Restricted Subsidiary
         held by Persons other than the Company or any of its Restricted
         Subsidiaries;

                  (iii)    repay, redeem, repurchase, defease or otherwise
         acquire or retire for value, or make any payment on or with respect to
         the Intercompany Note or any other Subordinated Debt except payments of
         interest and principal at Stated Maturity; or

                  (iv)     make any Investment other than a Permitted
         Investment;

unless, at the time of, and after giving effect to, the proposed Restricted
Payment:

                  (1)      no Default has occurred and is continuing,

                  (2)      the Company could Incur at least $1.00 of Debt under
         the first paragraph of Section 4.06, and

                  (3)      the aggregate amount expended for all Restricted
         Payments made on or after the Issue Date would not, subject to
         paragraph (c), exceed the sum of

                           (A)      50% of the aggregate amount of the
                  Consolidated Net Income (or, if the Consolidated Net Income is
                  a loss, minus 100% of the amount of the loss) accrued on a
                  cumulative basis during the period, taken as one accounting
                  period, beginning on October 1, 2003 and ending on the last
                  day of the Company's most recently

                                       48
<PAGE>

                  completed fiscal quarter for which internal financial
                  statements are available, plus

                           (B)      subject to paragraph (c), the aggregate net
                  cash proceeds received by the Company (other than from a
                  Subsidiary) after the Issue Date

                                    (i)      from the issuance and sale of its
                           Qualified Equity Interests, including by way of
                           issuance of its Disqualified Equity Interests or Debt
                           to the extent since converted into Qualified Equity
                           Interests of the Company, or

                                    (ii)     as a contribution to its common
                           equity (excluding in any event any such contribution
                           that may be effected through a conversion of the
                           Intercompany Note to equity), plus

                           (C)      an amount equal to the sum, for all
                  Unrestricted Subsidiaries, of the following:

                                    (x)      the cash return, after the Issue
                           Date, on Investments in an Unrestricted Subsidiary
                           made after the Issue Date pursuant to this paragraph
                           (a) as a result of any sale for cash, repayment,
                           redemption, liquidating distribution or other cash
                           realization (not included in Consolidated Net
                           Income), plus

                                    (y)      the portion (proportionate to the
                           Company's equity interest in such Subsidiary) of the
                           Fair Market Value of the assets less liabilities of
                           an Unrestricted Subsidiary at the time such
                           Unrestricted Subsidiary is designated a Restricted
                           Subsidiary,

                  not to exceed, in the case of any Unrestricted Subsidiary, the
                  amount of Investments made after the Issue Date by the Company
                  and its Restricted Subsidiaries in such Unrestricted
                  Subsidiary pursuant to this paragraph (a), plus

                                    (D)      the cash return, after the Issue
                           Date, on any other Investment made after the Issue
                           Date pursuant to this paragraph (a), as a result of
                           any sale for cash, repayment, redemption, liquidating
                           distribution or other cash realization (not included
                           in Consolidated Net Income), not to exceed the amount
                           of such Investment so made.

                                       49
<PAGE>

         The amount expended in any Restricted Payment, if other than in cash,
will be deemed to be the Fair Market Value of the relevant noncash assets.

         (b)      The foregoing will not prohibit:

                  (1)      the payment of any dividend within 60 days after the
         date of declaration thereof if, at the date of declaration, such
         payment would comply with paragraph (a);

                  (2)      dividends or distributions by a Restricted Subsidiary
         payable, on a pro rata basis or on a basis more favorable to the
         Company, to all holders of any class of Capital Stock of such
         Restricted Subsidiary a majority of which is held, directly or
         indirectly through Restricted Subsidiaries, by the Company;

                  (3)      the repayment, redemption, repurchase, defeasance or
         other acquisition or retirement of Subordinated Debt with the proceeds
         of, or in exchange for, Permitted Refinancing Debt;

                  (4)      the purchase, redemption or other acquisition or
         retirement of Equity Interests of the Company or any Restricted
         Subsidiary in exchange for, or out of the proceeds of a substantially
         concurrent offering of, Qualified Equity Interests of the Company or of
         a cash contribution to the common equity of the Company;

                  (5)      the repayment, redemption, repurchase, defeasance or
         other acquisition or retirement of Subordinated Debt of the Company in
         exchange for, or out of the proceeds of, a substantially concurrent
         offering of, Qualified Equity Interests of the Company or of a cash
         contribution to the common equity of the Company;

                  (6)      any Investment made in exchange for, or out of the
         net cash proceeds of, a substantially concurrent offering of Qualified
         Equity Interests of the Company or of a cash contribution to the common
         equity of the Company;

                  (7)      Investments not otherwise permitted by the other
         clauses of this paragraph (b) made after the Issue Date not to exceed
         in the aggregate $10,000,000 (net of, with respect to the Investment in
         any particular Person, the cash return thereon received after the Issue
         Date as a result of any sale for cash, repayment, redemption,
         liquidating distribution or other cash realization (not included in
         Consolidated Net Income), not to exceed the amount of Investments in
         such Person made after the Issue Date in reliance on this clause);

                  (8)      any Investment consisting of Guarantees of loans or
         advances made by one or more third-parties to any Joint Venture,
         provided

                                       50
<PAGE>

         that the aggregate amount of Investments under this clause (8) shall at
         no time exceed $15,000,000;

                  (9)      the purchase, redemption or other acquisition or
         retirement for value of Equity Interests of the Company or MII held by
         officers, directors or employees or former officers, directors or
         employees (or their estates or beneficiaries under their estates), upon
         death, disability, retirement, severance or termination of employment
         or pursuant to any agreement or employee benefit or welfare plan under
         which the Equity Interests were issued; provided that the aggregate
         cash consideration paid therefor in any twelve-month period after the
         Issue Date does not exceed an aggregate amount of $2,000,000; and

                  (10)     the assignment of insurance rights contemplated by
         clause (10) of the definition of "Asset Sale."

provided that, in the case of clauses (6), (7), (8) and (9), no Default has
occurred and is continuing or would occur as a result thereof.

         (c)      Proceeds of the issuance of Qualified Equity Interests will be
included under clause (3) of paragraph (a) only to the extent they are not
applied as described in clause (4), (5) or (6) of paragraph (b). Restricted
Payments permitted pursuant to clause (3), (4), (5) or (6) will not be included
in making the calculations under clause (3) of paragraph (a).

         Section 4.08. Limitation on Liens. The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, incur or permit to
exist any Lien of any nature whatsoever on any of its properties or assets,
whether owned at the Issue Date or thereafter acquired, other than Permitted
Liens, provided that the foregoing shall not apply, with respect to any such
property or assets (other than the Collateral), to the extent that the Company
or such Restricted Subsidiary effectively provides that the Notes are secured
equally and ratably with (or, if the obligation to be secured by the Lien is
subordinated in right of payment to the Notes or any Note Guaranty, prior to)
the obligations so secured for so long as such obligations are so secured.

         Section 4.09. Limitation on Sale and Leaseback Transactions. The
Company will not, and will not permit any Restricted Subsidiary to, enter into
any Sale and Leaseback Transaction with respect to any property or asset unless
the Company or the Restricted Subsidiary would be entitled to

                  (A)      Incur Debt in an amount equal to the Attributable
         Debt with respect to such Sale and Leaseback Transaction pursuant to
         Section 4.06, and

                                       51
<PAGE>

                  (B)      create a Lien on such property or asset securing such
         Attributable Debt without equally and ratably securing the Notes
         pursuant to Section 4.08.

         Section 4.10 . Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries. (a) Except as provided in paragraph (b), the
Company will not, and will not permit any Restricted Subsidiary to, create or
otherwise cause or permit to exist or become effective any consensual
restriction of any kind on the ability of any Restricted Subsidiary to

                  (1)      pay dividends or make any other distributions on any
         Equity Interests of the Restricted Subsidiary owned by the Company or
         any other Restricted Subsidiary,

                  (2)      pay any Debt or other obligation owed to the Company
         or any other Restricted Subsidiary,

                  (3)      make loans or advances to the Company or any other
         Restricted Subsidiary, or

                  (4)      transfer any of its property or assets to the Company
         or any other Restricted Subsidiary.

         (b)      The provisions of paragraph (a) do not apply to any
encumbrances or restrictions

                  (1)      existing on the Issue Date in this Indenture or any
         other agreements in effect on the Issue Date, and any extensions,
         renewals, replacements or refinancings of any of the foregoing;
         provided that the encumbrances and restrictions in the extension,
         renewal, replacement or refinancing, taken as a whole, are not
         materially less favorable to the Noteholders than the encumbrances or
         restrictions being extended, renewed, replaced or refinanced;

                  (2)      existing in the Credit Facilities;

                  (3)      existing under or by reason of applicable law or
         governmental regulation;

                  (4)      existing

                           (A)      with respect to any Person, or to the
                  property or assets of any Person, at the time the Person is
                  acquired by the Company or any Restricted Subsidiary, or

                                       52
<PAGE>

                           (B)      with respect to any Unrestricted Subsidiary
                  at the time it is designated or is deemed to become a
                  Restricted Subsidiary,

                  which encumbrances or restrictions (i) are not applicable to
                  any other Person or the property or assets of any other Person
                  and (ii) were not put in place in anticipation of such event
                  and any extensions, renewals, replacements or refinancings of
                  any of the foregoing; provided the encumbrances and
                  restrictions in the extension, renewal, replacement or
                  refinancing are, taken as a whole, no less favorable in any
                  material respect to the Noteholders than the encumbrances or
                  restrictions being extended, renewed, replaced or refinanced;

                  (5)      of the type described in clause (a)(4) arising or
         agreed to in the ordinary course of business (i) that restrict in a
         customary manner the chartering, subletting, assignment or transfer of
         any property or asset that is subject to a lease or license, (ii) by
         virtue of any Lien on, or agreement to transfer, option or similar
         right with respect to any property or assets of, the Company or any
         Restricted Subsidiary or (iii) not relating to Debt and that do not,
         individually or in the aggregate, detract from the value of property or
         assets of the Company or the Restricted Subsidiaries in any manner
         material to the Company and the Restricted Subsidiaries, taken as a
         whole;

                  (6)      with respect to a Restricted Subsidiary and imposed
         pursuant to an agreement that has been entered into for the sale or
         disposition of all or substantially all of the Capital Stock of, or
         property and assets of, the Restricted Subsidiary that is permitted by
         Section 4.11 and Section 4.14; or

                  (7)      required pursuant to this Indenture or any Security
         Document.

         Section 4.11. Limitation on Sale or Issuance of Equity Interests of
Restricted Subsidiaries. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, sell or issue any Equity
Interests of a Restricted Subsidiary unless

                  (1)      the sale or issuance is to the Company or a
         Restricted Subsidiary,

                  (2)      the sale or issuance is of Capital Stock representing
         directors' qualifying shares or Capital Stock required by applicable
         law to be held by a Person other than the Company or a Restricted
         Subsidiary, or

                                       53
<PAGE>

                  (3)      (i) if, after giving effect to the sale or issuance,
         the Restricted Subsidiary would no longer be a Restricted Subsidiary,
         all remaining Investments of the Company and the Restricted
         Subsidiaries in such Person (valued at an amount equal to the Company's
         remaining proportional share of the Fair Market Value of such Person's
         assets less liabilities), if deemed made at that time, would be
         permitted under Section 4.06 and (ii) the Company complies with Section
         4.14 with respect to the sale or issuance.

Notwithstanding the foregoing, the Company and its applicable Restricted
Subsidiaries may effect an issuance or transfer of up to 25% of the Equity
Interests (after giving effect to such transaction) of P.T. J. Ray McDermott
Indonesia, a company organized under the laws of Indonesia that is, as of the
Issue Date, a Restricted Subsidiary, to P.T. Sarana Interfab Mandiri, in
connection with the existing P.T. McDermott Indonesia Shareholders Agreement.
Following that issuance or transfer, P.T. J. Ray McDermott Indonesia will be a
Joint Venture.

         Section 4.12 . Additional Note Guaranties and Collateral After the
Issue Date. (a) If and for so long as any Restricted Subsidiary, directly or
indirectly, Guarantees any Debt of the Company after the Issue Date, the Company
shall concurrently cause such Restricted Subsidiary to provide a Note Guaranty,
and, if the guaranteed Debt of the Company is Subordinated Debt, the Guarantee
of such guaranteed Debt must be subordinated in right of payment to the Note
Guaranty to at least the extent that the guaranteed Debt is subordinated to the
Notes.

         (b)      If at any time after the Issue Date any Restricted Subsidiary
that is not a Guarantor on the Issue Date is or becomes a Material Subsidiary,
the Company shall cause such Restricted Subsidiary to enter into a Note Guaranty
and comply with the requirements of Section 4.12(d) applicable to it, in each
case within 10 Business Days of the date on which such Restricted Subsidiary
first becomes a Material Subsidiary.

         (c)      A Restricted Subsidiary required to provide a Note Guaranty
pursuant to paragraph (a) or (b) above shall execute a supplemental indenture in
the form of Exhibit B, and deliver an Opinion of Counsel to the Trustee to the
effect that, in the opinion of such counsel, the supplemental indenture has been
duly authorized, executed and delivered by the Restricted Subsidiary and
constitutes a valid and binding obligation of the Restricted Subsidiary,
enforceable against the Restricted Subsidiary in accordance with its terms
(subject to customary exceptions); provided that such Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials with
respect to matters of fact.

         (d)      If after the Issue Date the Company or any Restricted
Subsidiary (i) acquires any Capital Stock of a Material Subsidiary or (ii)
acquires any marine

                                       54
<PAGE>

vessel that is a Mortgaged Vessel or is required to become a Mortgaged Vessel
under the terms of this Indenture or the Collateral Documents, then the Company
or such Restricted Subsidiary (as applicable) shall, within 10 Business Days of
such acquisition, (i) execute and deliver such mortgages, pledge agreements,
other security instruments and financing statements as shall be necessary to
cause such Capital Stock or marine vessel to become Collateral subject to the
Lien of the Collateral Documents for the benefit of the Noteholders, subject
only to Permitted Encumbrances, and (ii) cause to be delivered one or more
Opinions of Counsel with respect to such Collateral substantially to the effect
that, in the opinion of such counsel, subject to customary qualifications, the
Company has taken the actions referred to in Section 10.02(a).

         Section 4.13. Repurchase of Notes Upon a Change of Control. (a) Not
later than 30 days following a Change of Control, the Company will make an Offer
to Purchase all outstanding Notes at a purchase price equal to 101% of the
principal amount plus accrued interest to the date of purchase.

         Section 4.14. Limitation on Asset Sales. (a) Asset Sales of
Collateral. The Company will not, and will not permit any Restricted Subsidiary
to, make any Asset Sale of Collateral unless the following conditions are met:

                  (1)      The Asset Sale is for Fair Market Value.

                  (2)      Except, in the case of the Asset Sale of one or more
         Mortgaged Vessels, to the extent that the Company or a Guarantor
         receives one or more marine vessels from another Person in trade or
         exchange for such Mortgaged Vessel or Mortgaged Vessels so disposed of,
         at least 75% of the consideration for such Asset Sale consists of cash
         or Cash Equivalents received at closing. (For purposes of this clause
         (2), instruments or securities received from the purchaser that are
         promptly, but in any event within 30 days of the closing, converted by
         the Company to cash or Cash Equivalents, to the extent of the cash or
         Cash Equivalents actually so received, shall be considered cash
         received at closing.)

                  (3)      in the case of the Asset Sale of one or more
         Mortgaged Vessels, any marine vessel received from another Person in
         trade or exchange for such Mortgaged Vessel or Mortgaged Vessels so
         disposed of shall concurrently with its acquisition be added to the
         Collateral pursuant to arrangements substantially similar to those made
         with respect to the Mortgaged Vessels on the Issue Date;

                  (4)      An amount equal to 100% of the Net Cash Proceeds from
         such Asset Sale is paid directly to the Trustee to be held in trust
         pursuant to Article 11 hereof and applied by the Company or a Guarantor
         (including any Restricted Subsidiary that elects to become a Guarantor
         in

                                       55
<PAGE>

         accordance with the provisions of this Indenture), at the Company's
         election, either:

                           (A)      to acquire one or more additional marine
                  vessels or Capital Stock, which such vessel or vessels or
                  Capital Stock shall concurrently with their acquisition become
                  Collateral pursuant to arrangements substantially similar to
                  those made with respect to the Collateral of the relevant type
                  on the Issue Date, or to make capital expenditures to improve
                  or repair existing Mortgaged Vessels; provided that to the
                  extent that the Collateral disposed of in such Asset Sale was
                  one or more Mortgaged Vessels or the Capital Stock of a
                  Subsidiary which directly or indirectly owned one or more
                  Mortgaged Vessels, any additional Collateral acquired pursuant
                  to this clause (A) with such Net Cash Proceeds shall be one or
                  more marine vessels;

                           (B)      to make an Offer to Purchase Notes, pro
                  rata, rounded down to the nearest $1,000, pursuant to and
                  subject to the conditions contained in this Indenture,

         in each case within 12 months from the later of the date of such Asset
         Sale of Collateral or the receipt of such Net Cash Proceeds.

Notwithstanding the foregoing provisions of this paragraph (a), the Company and
its Restricted Subsidiaries shall not be required to apply any Net Cash Proceeds
in accordance with clauses (4)(A) or (4)(B) of this paragraph (a) except to the
extent that the aggregate Net Cash Proceeds from all Asset Sales of Collateral
which is not applied in accordance with this covenant exceeds $10,000,000. Upon
completion of any Offer to Purchase under this paragraph (a), the Trustee shall
release to the Company or the relevant Guarantor any amounts by which the
aggregate amount of such Offer to Purchase exceeds the aggregate principal
amount of Notes tendered and purchased pursuant thereto.

         (b) Asset Sales not Involving Collateral. The Company will not, and
will not permit any Restricted Subsidiary to, make any Asset Sale (excluding any
Asset Sale of Collateral, which shall be governed by paragraph (a) above) unless
the following conditions are met:

                  (1)      The Asset Sale is for Fair Market Value.

                  (2)      Except, in the case of the Asset Sale of one or more
         Vessels (other than Mortgaged Vessels), to the extent that the Company
         or a Guarantor receives one or more Vessels from another Person in
         trade or exchange for the Vessel or Vessels disposed of, at least 75%
         of the consideration for such Asset Sale consists of cash or Cash
         Equivalents received at closing. (For purposes of this clause (2), the
         assumption by the

                                       56
<PAGE>

         purchaser of Debt or other obligations (other than Subordinated Debt)
         of the Company or a Restricted Subsidiary pursuant to a customary
         novation agreement, and instruments or securities received from the
         purchaser that are promptly, but in any event within 30 days of the
         closing, converted by the Company to cash or Cash Equivalents, to the
         extent of the cash or Cash Equivalents actually so received, shall be
         considered cash received at closing.)

                  (3)      Within 12 months after the receipt of any Net Cash
         Proceeds from an Asset Sale, the Net Cash Proceeds may be used

                           (A)      to permanently repay Debt other than
                  Subordinated Debt of the Company or a Guarantor or any Debt of
                  a Restricted Subsidiary that is not a Guarantor (and in the
                  case of a revolving credit, permanently reduce the commitment
                  thereunder by such amount), in each case owing to a Person
                  other than the Company or any Restricted Subsidiary, or

                           (B)      to acquire all or substantially all of the
                  assets of a Permitted Business, or a majority of the Voting
                  Stock of another Person that thereupon becomes a Restricted
                  Subsidiary engaged in a Permitted Business, or to make capital
                  expenditures or otherwise acquire long-term assets that are to
                  be used in a Permitted Business.

                  (4) The Net Cash Proceeds of an Asset Sale under this
         paragraph (b) not applied pursuant to clause (3) within 12 months of
         the Asset Sale constitute "EXCESS PROCEEDS". Excess Proceeds of less
         than $10,000,000 will be carried forward and accumulated. When
         accumulated Excess Proceeds equals or exceeds $10,000,000, the Company
         must, within 30 days thereafter, make an Offer to Purchase Notes having
         a principal amount equal to

                           (A) accumulated Excess Proceeds, multiplied by

                           (B) a fraction (x) the numerator of which is equal to
                  the outstanding principal amount of the Notes and (y) the
                  denominator of which is equal to the outstanding principal
                  amount of the Notes and all pari passu Debt similarly required
                  to be repaid, redeemed or tendered for in connection with the
                  Asset Sale,

         rounded down to the nearest $1,000. Upon completion of the Offer to
         Purchase under this paragraph (b), Excess Proceeds will be reset at
         zero.

         (c) Offer to Purchase Notes. The purchase price for the Notes for any
offer under paragraph (a) or (b) above will be 100% of the principal amount plus

                                       57
<PAGE>

accrued interest to the date of purchase. If the Offer to Purchase is for less
than all of the outstanding Notes and Notes in an aggregate principal amount in
excess of the purchase amount are duly tendered and not withdrawn pursuant to
the offer, the Company will purchase Notes having an aggregate principal amount
equal to the purchase amount on a pro rata basis, with adjustments so that only
Notes in multiples of $1,000 principal amount will be purchased.

         Section 4.15. Limitation on Transactions with Shareholders and
Affiliates. (a) the Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into, renew or extend any
transaction or arrangement including the purchase, sale, lease or exchange of
property or assets, or the rendering of any service with (x) any holder, or any
Affiliate of any holder, of 10% or more of any class of Capital Stock of the
Company or (y) any Affiliate of either the Company or any Restricted Subsidiary
(a "RELATED PARTY TRANSACTION"), except upon fair and reasonable terms no less
favorable to the Company or the Restricted Subsidiary than could be obtained in
a comparable arm's-length transaction with a Person that is not an Affiliate of
the Company.

         (b)      Prior to entering into any Related Party Transaction or series
of related Related Party Transactions with an aggregate value in excess of
$25,000,000, the Company must obtain and deliver to the Trustee a favorable
written opinion from a nationally recognized investment banking firm as to the
fairness of the transaction to the Company and its Restricted Subsidiaries from
a financial point of view.

         (c)      The foregoing paragraphs do not apply to

                  (1)      any transaction between the Company and any of its
         Restricted Subsidiaries or between Restricted Subsidiaries of the
         Company;

                  (2)      the payment of reasonable and customary regular fees
         to directors of the Company who are not employees of the Company;

                  (3)      any Restricted Payments of a type described in either
         clause (i), (ii) or (iii) of paragraph (a) of Section 4.07 if permitted
         by that section;

                  (4)      transactions or payments pursuant to any employee,
         officer or director compensation or benefit plans or arrangements
         entered into in the ordinary course of business, and loans, advances
         and Guarantees that constitute Permitted Investments pursuant to clause
         (12) of the definition of that term;

                  (5)      transactions pursuant to any contract or agreement in
         effect on the date of this Indenture, as any such contract or agreement
         may be amended, modified or replaced (including successive
         replacements) from

                                       58
<PAGE>

         time to time, so long as the amended, modified or new contract or
         agreement, taken as a whole, is no less favorable to the Company and
         its Restricted Subsidiaries than the contract or agreement being
         amended, modified or replaced, as in effect on the date of this
         Indenture;

                  (6)      the purchase, redemption, acquisition or other
         retirement for value of Equity Interests of MII held by officers,
         directors or employees or former directors, officers or employees (or
         their estates or beneficiaries under their estates), upon death,
         disability, retirement, severance or termination of employment or
         service or pursuant to any agreement under which the Equity Interests
         were issued, provided that the aggregate amount of all such payments
         does not exceed $2,000,000; or

                  (7)      the assignment of insurance rights contemplated by
         clause (10) of the definition of "Asset Sale."

         Section 4.16. Line of Business. The Company will not, and will not
permit any of its Restricted Subsidiaries, to engage in any business other than
a Permitted Business, except to an extent that so doing would not be material to
the Company and its Restricted Subsidiaries, taken as a whole.

         Section 4.17. Designation of Restricted and Unrestricted Subsidiaries.
(a) The Board of Directors may designate any Subsidiary, including a newly
acquired or created Subsidiary, to be an Unrestricted Subsidiary if it meets the
following qualifications and the designation would not cause a Default.

                  (1)      (A) The Subsidiary does not own any Disqualified
         Stock of the Company or Disqualified or Preferred Stock of a Restricted
         Subsidiary or hold any Debt of, or any Lien on any property of, the
         Company or any Restricted Subsidiary, if such Disqualified or Preferred
         Stock or Debt could not be Incurred under the provisions of Section
         4.06 or such Lien would violate the provisions of Section 4.08; and

                  (B)      the Subsidiary does not own any Voting Stock of a
         Restricted Subsidiary, and all of its Subsidiaries are Unrestricted
         Subsidiaries.

Once so designated the Subsidiary will remain an Unrestricted Subsidiary,
subject to paragraph (b).

         (b)      (1) A Subsidiary previously designated an Unrestricted
Subsidiary which fails at any time to meet the qualifications set forth in
paragraph (a) will be deemed to become at that time a Restricted Subsidiary,
subject to the consequences set forth in paragraph (d).

                                       59
<PAGE>

                  (2)      The Board of Directors may designate an Unrestricted
         Subsidiary to be a Restricted Subsidiary if the designation would not
         cause a Default.

         (c)      Upon a Restricted Subsidiary becoming an Unrestricted
Subsidiary,

                  (1)      all existing Investments of the Company and the
         Restricted Subsidiaries therein (valued at the Company's proportional
         share of the Fair Market Value of its assets less liabilities) will be
         deemed made at that time;

                  (2)      all existing Capital Stock or Debt of the Company or
         a Restricted Subsidiary held by such Unrestricted Subsidiary will be
         deemed Incurred at that time, and all Liens on property of the Company
         or a Restricted Subsidiary held by such Unrestricted Subsidiary will be
         deemed incurred at that time;

                  (3)      all existing transactions between such Unrestricted
         Subsidiary and the Company or any Restricted Subsidiary will be deemed
         entered into at that time;

                  (4)      such Unrestricted Subsidiary will be released at that
         time from its Note Guaranty, if any; and

                  (5)      such Unrestricted Subsidiary will cease to be subject
         to the provisions of this Indenture as a Restricted Subsidiary.

         (d)      Upon an Unrestricted Subsidiary becoming, or being deemed to
become, a Restricted Subsidiary,

                  (1)      all of its Debt and Disqualified or Preferred Stock
         will be deemed Incurred at that time for purposes of the covenant set
         forth in Section 4.06, but will not be considered the sale or issuance
         of Equity Interests for purposes of the covenants set forth in Section
         4.11 or Section 4.14;

                  (2)      Investments therein previously charged under the
         covenant set forth in Section 4.07 will be credited thereunder;

                  (3)      it may be required to issue a Note Guaranty pursuant
         to Section 4.12; and

                  (4)      it will become subject to the provisions of this
         Indenture as a Restricted Subsidiary.

         (e)      Any designation by the Board of Directors of the Company of a
Subsidiary as a Restricted Subsidiary or Unrestricted Subsidiary will be
evidenced

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<PAGE>

to the Trustee by promptly filing with the Trustee a copy of the Board
Resolution giving effect to the designation and an Officer's Certificate
certifying that the designation complied with the foregoing provisions.

         Section 4.18. Financial Reports. (a) Whether or not the Company is
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company must provide the Trustee and Noteholders within the time
periods specified in those sections with

                  (1)      all quarterly and annual financial information that
         would be required to be contained in a filing with the SEC on Forms
         10-Q and 10-K if the Company were required to file such forms,
         including a "Management's Discussion and Analysis of Financial
         Condition and Results of Operations" and, with respect to annual
         information only, a report on the Company's consolidated financial
         statements by the Company's certified independent accountants; provided
         that the Company shall not be required to provide separate financial
         statements of the Guarantors under this or any other provision of this
         Indenture; provided, further, that, at any time during which the
         Company is not subject to the reporting requirements of Section 13 or
         15(d) of the Exchange Act, the Company will not be required to provide
         separate financial statements or condensed consolidating financial
         information with respect to the Guarantors when providing other
         financial reports for any date or period if the Company provides an
         Officers' Certificate to the Trustee which states that (i) the combined
         consolidating total assets of the Company and all Guarantors is 75% or
         more of the consolidated total assets of the Company and its
         consolidated Subsidiaries and (ii) the combined consolidating revenues
         less cost of operations of the Company and all Guarantors is 75% or
         more of the consolidated revenues less cost of operations of the
         Company and its consolidated Subsidiaries, considered for such date or
         period as applicable; and

                  (2)      all current reports on Form 8-K that would be
         required to be filed with the SEC if the Company were required to file
         such reports, provided that, for so long as the Company is a
         consolidated subsidiary of MII, the Company may satisfy this obligation
         by delivering all such current reports of MII.

         In addition, the Company will make such information and reports
available to securities analysts and prospective investors upon request.

         (b)      For so long as any of the Initial Notes remain outstanding and
constitute "restricted securities" under Rule 144, the Company will furnish to
the holders of such Notes and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.

                                       61
<PAGE>

         (c)      All obligors on the Notes will comply with Section 314(a) of
the Trust Indenture Act.

         (d)      Delivery of these reports and information to the Trustee is
for informational purposes only and the Trustee's receipt of them will not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).

         Section 4.19. Reports to Trustee. (a) The Company will deliver to the
Trustee within 120 days after the end of each fiscal year a certificate from the
principal executive or financial officer of the Company stating that such
officer has conducted or supervised a review of the activities of the Company
and its Restricted Subsidiaries and their performance under this Indenture and
that, based upon such review, the Company has fulfilled its obligations
hereunder or, if there has been a Default during such fiscal year, specifying
the Default and its nature and status.

         (b)      The Company will deliver to the Trustee, as soon as possible
and in any event within 30 days after the president or chief executive officer
or the chief financial officer of the Company becomes aware of the occurrence of
a Default, an Officers' Certificate setting forth the details of the Default,
and the action which the Company proposes to take with respect thereto.

         (c)      The Company will notify the Trustee when any Notes are listed
on any national securities exchange and of any delisting.

         Section 4.20. Impairment of Security Interest; Security Document
Covenants. The Company will not, and will not permit any of its Restricted
Subsidiaries, to take any action, or knowingly or negligently omit to take any
action, which action or omission might or would have the result of materially
impairing the security interest with respect to the Collateral for the benefit
of the Trustee and the Noteholders; provided that any release of Collateral in
accordance with the provisions of this Indenture and the Collateral Documents
(or any other action taken by the Company or any of its Restricted Subsidiaries
which is expressly permitted by the provisions of this Indenture or any of the
Collateral Documents) will not be deemed to impair the security under this
Indenture. Without limiting the foregoing, the Company will and will cause each
Guarantor party to any of the Collateral Documents (for so long as it is a
Guarantor) to perform its obligations and covenants under the Collateral
Documents.

                                       62
<PAGE>

                                    ARTICLE 5
                     CONSOLIDATION, MERGER OR SALE OF ASSETS

         Section 5.01. Consolidation, Merger or Sale of Assets by the Company;
No Lease of All or Substantially All Assets. (a) The Company will not

                  (i)      consolidate with or merge with or into any Person, or

                  (ii)     sell, convey, transfer, or otherwise dispose of its
         assets as an entirety or substantially an entirety, in one transaction
         or a series of related transactions, to any Person or

                  (iii)    permit any Person to merge with or into the Company
         unless

                           (1)      either (x) the Company is the continuing
                  Person or (y) the resulting, surviving or transferee Person is
                  a corporation organized and validly existing under the laws of
                  Panama or the United States of America or any jurisdiction
                  thereof and expressly assumes all of the obligations of the
                  Company under this Indenture, the Collateral Documents, the
                  Notes and, if the Exchange Offer with respect to the Initial
                  Notes has not been completed, the Registration Rights
                  Agreement, pursuant to a supplemental indenture and other
                  appropriate documents;

                           (2)      immediately after giving effect to the
                  transaction, no Default has occurred and is continuing;

                           (3)      immediately after giving effect to the
                  transaction on a pro forma basis, the Company or the
                  resulting, surviving or transferee Person has a Consolidated
                  Net Worth without taking into account any purchase accounting
                  adjustments equal to or greater than the Consolidated Net
                  Worth of the Company immediately prior to such transaction;

                           (4)      immediately after giving effect to the
                  transaction on a pro forma basis, the Company or the resulting
                  surviving or transferee Person could Incur at least $1.00 of
                  Debt under the covenant set forth in the first paragraph of
                  Section 4.06; and

                           (5)      the Company delivers to the Trustee an
                  Officers' Certificate and an Opinion of Counsel, each stating
                  that the consolidation, merger or transfer and the
                  supplemental indenture (if any) comply with this Indenture;
                  provided that, such Opinion of Counsel may rely on an
                  Officers' Certificate or certificates of public officials with
                  respect to matters of fact;

                                       63
<PAGE>

provided, that clauses (2) through (4) do not apply (i) to the consolidation or
merger of the Company with or into a Restricted Subsidiary or the consolidation
or merger of a Restricted Subsidiary with or into the Company or (ii) if, in the
good faith determination of the Board of Directors, whose determination is
evidenced by a Board Resolution, the purpose of the transaction is to change the
jurisdiction of incorporation of the Company.

         (b)      the Company shall not lease its assets as an entirety or
substantially as an entirety, whether in one transaction or a series of related
transactions, to one or more other Persons.

         (c)      Upon the consummation of any transaction effected in
accordance with these provisions, if the Company is not the continuing Person,
the resulting, surviving or transferee Person will succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture and the Notes with the same effect as if such successor Person
had been named as the Company in this Indenture. Upon such substitution, and
except in the case of a sale, conveyance, transfer or disposition of less than
all its assets to one Person, the Company will be released from its obligations
under this Indenture, the Collateral Documents, the Registration Rights
Agreement, and the Notes.

         Section 5.02. Consolidation, Merger or Sale of Assets by a Guarantor.
(a) No Guarantor may

                  (i)      consolidate with or merge with or into any Person, or

                  (ii)     sell, convey, transfer or dispose of its assets as an
         entirety or substantially as an entirety, in one transaction or a
         series of related transactions, to any Person, or

                  (iii)    permit any Person to merge with or into the Guarantor
         unless

                           (A)      the other Person is the Company or any
                  Restricted Subsidiary that is Guarantor or becomes a Guarantor
                  concurrently with the transaction); or

                           (B)      (1) either (x) the Guarantor is the
                  continuing Person or (y) the resulting, surviving or
                  transferee Person expressly assumes all of the obligations of
                  the Guarantor under its Note Guaranty and under any applicable
                  Collateral Documents, pursuant to a Supplemental Indenture and
                  other appropriate documents; and

                                    (2)      immediately after giving effect to
                           the transaction, no Default has occurred and is
                           continuing; or

                                       64
<PAGE>

                           (C)      the transaction constitutes a sale or other
                  disposition (including by way of consolidation or merger) of
                  the Guarantor or the sale or disposition of the assets of the
                  Guarantor as an entirety or substantially as an entirety (in
                  each case other than to the Company or a Restricted
                  Subsidiary) otherwise permitted by this Indenture.

                                    ARTICLE 6
                              DEFAULT AND REMEDIES

         Section 6.01. Events of Default. An "EVENT OF DEFAULT" occurs if

         (1)      the Company defaults in the payment of the principal of any
Note when the same becomes due and payable at its Stated Maturity, upon
acceleration or redemption, or otherwise (other than pursuant to an Offer to
Purchase);

         (2)      the Company defaults in the payment of interest (including any
Additional Interest) on any Note when the same becomes due and payable, and the
default continues for a period of 30 days;

         (3)      the Company fails to make an Offer to Purchase and thereafter
accept and pay for Notes tendered when and as required pursuant to Section 4.13
or Section 4.14 or the Company fails to comply with the provisions of Section
5.01;

         (4)      the Company or any Material Guarantor defaults in the
performance of or breaches any other covenant or agreement of the Company or
such Guarantor in this Indenture or under the Notes or the Collateral Documents
and the default or breach continues for a period of 60 consecutive days after
written notice to the Company by the Trustee or to the Company and the Trustee
by the holders of 25% or more in aggregate principal amount of the Notes;

         (5)      there occurs with respect to any Debt of the Company or any of
its Restricted Subsidiaries having an outstanding principal amount of
$10,000,000 or more in the aggregate for all such Debt of all such Persons (i)
an event of default that results in such Debt being due and payable prior to its
scheduled maturity or (ii) failure to make a principal payment when due and such
defaulted payment is not made, waived or extended within the applicable grace
period;

         (6)      one or more final judgments or orders of any court or courts
for the payment of money are rendered against the Company or any of its
Restricted Subsidiaries and are not paid or discharged, settled or fully bonded
and there is a period of 60 consecutive days following entry of the final
judgment or order that causes the aggregate amount for all such final judgments
or orders outstanding and not paid or discharged against all such Persons to
exceed $10,000,000 (in

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excess of amounts which the Company's insurance carriers have agreed to pay
under applicable policies) during which a stay of enforcement, by reason of a
pending appeal or otherwise, is not in effect;

         (7)      an involuntary case or other proceeding is commenced against
the Company or any Material Guarantor (or any group of Guarantors that would,
taken together, be a "Material Guarantor" as defined in clause (iii) of the
definition of "Material Guarantor" (for purposes of this Section 6.01, a
"GUARANTOR GROUP")) with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such involuntary
case or other proceeding remains undismissed and unstayed for a period of 60
days; or an order for relief is entered against the Company or any Material
Guarantor (or Guarantor Group) under the U.S. federal bankruptcy laws as now or
hereafter in effect;

         (8)      the Company or any Material Guarantor (or Guarantor Group) (i)
commences a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (ii) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Material Guarantor (or Guarantor Group) or for all or substantially all of the
property and assets of the Company or any Material Guarantor (or Guarantor
Group) or (iii) effects any general assignment for the benefit of creditors (an
event of default specified in clause (7) or (8) a "BANKRUPTCY DEFAULT");

         (9)      any Note Guaranty of a Material Guarantor ceases to be in full
force and effect, other than in accordance the terms of this Indenture, and such
ineffectiveness continues for a period of 30 consecutive days after written
notice to the Company by the Trustee or to the Company and the Trustee by the
holders of 25% or more in aggregate principal amount of the Notes; or a Material
Guarantor denies or disaffirms its obligations under its Note Guaranty, or

         (10)     with respect to any Collateral with an aggregate fair market
value of $10,000,000 or more, (A) the security interest under the Security
Documents, at any time, ceases to be in full force and effect or is
unenforceable for any reason other than in accordance with their terms and the
terms of this Indenture and other than the satisfaction in full of all
obligations under this Indenture and discharge of this Indenture, and such
ineffectiveness continues for a period of 30 consecutive days after written
notice to the Company by the Trustee or to the Company and the Trustee by the
holders of 25% or more in aggregate principal amount of the Notes, or (B) the
Company or any Material Guarantor asserts in writing that any such security
interest is invalid or unenforceable.

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         Section 6.02. Acceleration. (a) If an Event of Default, other than a
bankruptcy default with respect to the Company, occurs and is continuing under
this Indenture, the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding, by written notice to the Company
(and to the Trustee if the notice is given by the Holders), may, and the Trustee
at the request of such Holders shall, declare the principal of and accrued
interest on the Notes to be immediately due and payable. Upon a declaration of
acceleration, such principal and interest will become immediately due and
payable. If a bankruptcy default occurs with respect to the Company, the
principal of and accrued interest on the Notes then outstanding will become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.

         (b)      The Holders of a majority in principal amount of the
outstanding Notes by written notice to the Company and to the Trustee may waive
all past defaults and rescind and annul a declaration of acceleration and its
consequences if

                  (1)      all existing Events of Default, other than the
         nonpayment of the principal of, premium, if any, and interest on the
         Notes that have become due solely by the declaration of acceleration,
         have been cured or waived, and

                  (2)      the rescission would not conflict with any judgment
         or decree of a court of competent jurisdiction.

         Section 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue, in its own name or as Trustee of an express
trust, any available remedy by proceeding at law or in equity to collect the
payment of principal of and interest on the Notes or to enforce the performance
of any provision of the Notes or this Indenture. The Trustee may maintain a
proceeding even if it does not possess any of the Notes or does not produce any
of them in the proceeding.

         Section 6.04. Waiver of Past Defaults. Except as otherwise provided in
Sections 6.02, and 9.02, the Holders of a majority in principal amount of the
outstanding Notes may, by notice to the Trustee, waive an existing Default and
its consequences. Upon such waiver, the Default will cease to exist, and any
Event of Default arising therefrom will be deemed to have been cured, but no
such waiver will extend to any subsequent or other Default or impair any right
consequent thereon.

         Section 6.05. Control by Majority. The Holders of a majority in
aggregate principal amount of the outstanding Notes may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee. However, the Trustee

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may refuse to follow any direction that conflicts with law or this Indenture or
any Collateral Document, that may involve the Trustee in personal liability, or
that the Trustee determines in good faith may be unduly prejudicial to the
rights of Holders of Notes not joining in the giving of such direction, and may
take any other action it deems proper that is not inconsistent with any such
direction received from Holders of Notes.

         Section 6.06. Limitation on Suits. A Holder may not institute any
proceeding, judicial or otherwise, with respect to this Indenture, the Notes or
the Collateral Documents, or for the appointment of a receiver or trustee, or
for any other remedy under this Indenture or the Notes, unless:

                  (1)      the Holder has previously given to the Trustee
         written notice of a continuing Event of Default;

                  (2)      Holders of at least 25% in aggregate principal amount
         of outstanding Notes have made written request to the Trustee to
         institute proceedings in respect of the Event of Default in its own
         name as Trustee under this Indenture;

                  (3)      Holders have offered to the Trustee indemnity
         reasonably satisfactory to the Trustee against any costs, liabilities
         or expenses to be incurred in compliance with such request;

                  (4)      the Trustee for 60 days after its receipt of such
         notice, request and offer of indemnity has failed to institute any such
         proceeding; and

                  (5)      during such 60-day period, the Holders of a majority
         in aggregate principal amount of the outstanding Notes have not given
         the Trustee a direction that is inconsistent with such written request.

         Section 6.07. Rights of Holders to Receive Payment. Notwithstanding
anything to the contrary, the right of a Holder of a Note to receive payment of
principal of or interest on its Note on or after the Stated Maturities thereof,
or to bring suit for the enforcement of any such payment on or after such
respective dates, may not be impaired or affected without the consent of that
Holder.

         Section 6.08. Collection Suit by Trustee. If an Event of Default in
payment of principal or interest specified in clause (1) or (2) of Section 6.01
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust for the whole amount of principal and accrued
interest remaining unpaid, together with interest on overdue principal and
overdue installments of interest, in each case at the rate specified in the
Notes, and such further amount as is sufficient to cover the costs and expenses
of collection, including the reasonable compensation, expenses, disbursements
and advances of

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the Trustee, its agents and counsel and any other amounts due the Trustee
hereunder.

         Section 6.09. Trustee May File Proofs of Claim. The Trustee may file
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee hereunder) and the Holders
allowed in any judicial proceedings relating to the Company or any Guarantor or
their respective creditors or property, and is entitled and empowered to
collect, receive and distribute any money, securities or other property payable
or deliverable upon conversion or exchange of the Notes or upon any such claims.
Any custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, if the Trustee consents to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agent and counsel, and any other amounts due the
Trustee hereunder. Nothing in this Indenture will be deemed to empower the
Trustee to authorize or consent to, or accept or adopt on behalf of any Holder,
any plan of reorganization, arrangement, adjustment or composition affecting the
Notes or the rights of any Holder thereof, or to authorize the Trustee to vote
in respect of the claim of any Holder in any such proceeding.

         Section 6.10. Priorities. If the Trustee collects any money pursuant
to this Article or the Collateral Agent collects any amounts pursuant to any
Collateral Document, such amounts shall be paid in the following order:

                  First: to the Trustee and the Collateral Agent, for all
         amounts due hereunder or under the Collateral Documents;

                  Second: to Holders for amounts then due and unpaid for
         principal of and interest on the Notes, ratably, without preference or
         priority of any kind, according to the amounts due and payable on the
         Notes for principal and interest;

                  Third: to the ratable payment of all other Obligations under
         this Indenture until all obligations shall have been paid in full; and

                  Fourth: to the Company or as a court of competent jurisdiction
         may direct.

         provided that the Collateral owned by a Guarantor and any proceeds
thereof shall be applied pursuant to the foregoing clauses first, second and
third only to the extent permitted by the limitation in Section 12.07. The
Trustee, upon

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written notice to the Company, may fix a record date and payment date for any
payment to Holders pursuant to this Section.

         Section 6.11. Restoration of Rights and Remedies. If the Trustee or
any Holder has instituted a proceeding to enforce any right or remedy under this
Indenture and the proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to the Holder, then, subject
to any determination in the proceeding, the Company, any Guarantors, the Trustee
and the Holders will be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Company, any
Guarantors, the Trustee and the Holders will continue as though no such
proceeding had been instituted.

         Section 6.12. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court may require any party
litigant in such suit (other than the Trustee) to file an undertaking to pay the
costs of the suit, and the court may assess reasonable costs, including
reasonable attorneys fees and expenses, against any party litigant (other than
the Trustee) in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a
suit by a Holder to enforce payment of principal of or interest on any Note on
the respective due dates, or a suit by Holders of more than 10% in principal
amount of the outstanding Notes.

         Section 6.13. Rights and Remedies Cumulative. No right or remedy
conferred or reserved to the Trustee or to the Holders under this Indenture is
intended to be exclusive of any other right or remedy, and all such rights and
remedies are, to the extent permitted by law, cumulative and in addition to
every other right and remedy hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or exercise of any right or remedy hereunder,
or otherwise, will not prevent the concurrent assertion or exercise of any other
appropriate right or remedy.

         Section 6.14. Delay or Omission Not Waiver. No delay or omission of
the Trustee or of any Holder to exercise any right or remedy accruing upon any
Event of Default will impair any such right or remedy or constitute a waiver of
any such Event of Default or an acquiescence therein. Every right and remedy
given by this Article or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.

         Section 6.15. Waiver of Stay, Extension or Usury Laws. The Company
covenants, to the extent that it may lawfully do so, that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Company from paying all or any portion of the
principal of,

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or interest on the Notes as contemplated herein, wherever enacted, now or at any
time hereafter in force, or that may affect the covenants or the performance of
this Indenture. The Company hereby expressly waives, to the extent that it may
lawfully do so, all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.

                                    ARTICLE 7
                                   THE TRUSTEE

         Section 7.01. General. (a) The duties and responsibilities of the
Trustee are as provided by the Trust Indenture Act and as set forth herein.
Whether or not expressly so provided, every provision of this Indenture relating
to the conduct or affecting the liability of or affording protection to the
Trustee is subject to this Article.

         (b)      Except during the continuance of an Event of Default, the
Trustee and Collateral Agent need perform only those duties that are
specifically set forth in this Indenture or the Collateral Documents and no
others, and no implied covenants or obligations will be read into this Indenture
or the Collateral Documents against the Trustee and Collateral Agent. In case an
Event of Default has occurred and is continuing, the Trustee or Collateral Agent
shall exercise those rights and powers vested in it by this Indenture or the
Collateral Documents, and use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.

         (c)      No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct.

         Section 7.02. Certain Rights of Trustee. Subject to Trust Indenture
Act Sections 315(a) through (d):

                  (1)      The Trustee may conclusively rely, and will be
         protected in acting or refraining from acting, upon any resolution,
         certificate, statement, instrument, opinion, report, notice, request,
         direction, consent, order, bond, debenture, note, other evidence of
         indebtedness or other paper or document believed by it to be genuine
         and to have been signed or presented by the proper Person. The Trustee
         need not investigate any fact or matter stated in the document, but, in
         the case of any document which is specifically required to be furnished
         to the Trustee pursuant to any provision hereof, the Trustee shall
         examine the document to determine whether it conforms to the
         requirements of this Indenture (but need not confirm or investigate the
         accuracy of mathematical calculations or other

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<PAGE>

         facts stated therein). The Trustee, in its discretion, may make further
         inquiry or investigation into such facts or matters as it sees fit.

                  (2)      Before the Trustee acts or refrains from acting on a
         request or direction from the Company, it may require an Officers'
         Certificate or an Opinion of Counsel conforming to Section 13.05 and
         the Trustee will not be liable for any action it takes or omits to take
         in good faith in reliance on the certificate or opinion.

                  (3)      The Trustee may act through its attorneys and agents
         and will not be responsible for the misconduct or negligence of any
         agent appointed with due care.

                  (4)      The Trustee will be under no obligation to exercise
         any of the rights or powers vested in it by this Indenture at the
         request or direction of any of the Holders, unless such Holders have
         offered to the Trustee reasonable security or indemnity satisfactory to
         it against the costs, expenses and liabilities that might be incurred
         by it in compliance with such request or direction.

                  (5)      The Trustee will not be liable for any action it
         takes or omits to take in good faith that it believes to be authorized
         or within its rights or powers or for any action it takes or omits to
         take in accordance with the direction of the Holders in accordance with
         Section 6.05 relating to the time, method and place of conducting any
         proceeding for any remedy available to the Trustee, or exercising any
         trust or power conferred upon the Trustee, under this Indenture.

                  (6)      The Trustee may consult with counsel, and the advice
         of such counsel or any Opinion of Counsel will be full and complete
         authorization and protection in respect of any action taken, suffered
         or omitted by it hereunder in good faith and in reliance thereon.

                  (7)      No provision of this Indenture will require the
         Trustee to expend or risk its own funds or otherwise incur any
         financial liability in the performance of its duties hereunder, or in
         the exercise of its rights or powers, unless it receives indemnity
         satisfactory to it against any loss, liability or expense.

                  (8)      The Trustee shall not be liable for any action taken,
         suffered, or omitted to be taken by it in good faith and reasonably
         believed by it to be authorized or within the discretion or rights or
         powers conferred upon it by this Indenture.

                  (9)      In no event shall the Trustee be responsible or
         liable for special, indirect, or consequential loss or damage of any
         kind whatsoever

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<PAGE>

         (including, but not limited to, loss of profit), irrespective of
         whether the Trustee has been advised of the likelihood of such loss or
         damage and regardless of the form of action.

                  (10)     The Trustee shall not be deemed to have notice of any
         Default or Event of Default unless a Responsible Officer of the Trustee
         has actual knowledge thereof or unless written notice of any event
         which is in fact such a default is received by the Trustee at the
         Corporate Trust Office, and such notice references the Notes and this
         Indenture.

                  (11)     The rights, privileges, protections, immunities and
         benefits given to the Trustee, including, without limitation, its right
         to be indemnified, are extended to, and shall be enforceable by, the
         Trustee in each of its capacities hereunder (including, for the
         avoidance of doubt, its capacity as Collateral Agent), and each agent,
         custodian and other Person employed to act hereunder.

                  (12)     The Trustee may request that the Company deliver an
         Officers' Certificate setting forth the names of individuals and/or
         titles of officers authorized at such time to take specified actions
         pursuant to this Indenture, which Officers' Certificate may be signed
         by any Person authorized to sign an Officers' Certificate, including
         any Person specified as so authorized in any such certificate
         previously delivered and not superseded.

         Section 7.03. Trustee May Hold Notes. The Trustee, in its individual
or any other capacity, may become the owner or pledgee of Notes and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not the Trustee. Any Agent may do the same with like rights.
However, the Trustee is subject to Trust Indenture Act Sections 310(b) and 311.
For purposes of Trust Indenture Act Section 311(b)(4) and (6):

                  (a)      "CASH TRANSACTION" means any transaction in which
         full payment for goods or securities sold is made within seven days
         after delivery of the goods or securities in currency or in checks or
         other orders drawn upon banks or bankers and payable upon demand; and

                  (b)      "SELF-LIQUIDATING PAPER" means any draft, bill of
         exchange, acceptance or obligation which is made, drawn, negotiated or
         incurred for the purpose of financing the purchase, processing,
         manufacturing, shipment, storage or sale of goods, wares or merchandise
         and which is secured by documents evidencing title to, possession of,
         or a lien upon, the goods, wares or merchandise or the receivables or
         proceeds arising from the sale of the goods, wares or merchandise
         previously constituting the security, provided the security is received
         by the Trustee simultaneously with the creation of the creditor
         relationship arising from the making,

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<PAGE>

         drawing, negotiating or incurring of the draft, bill of exchange,
         acceptance or obligation.

         Section 7.04. Trustee's Disclaimer. The Trustee (i) makes no
representation as to the validity or adequacy of this Indenture or the Notes,
(ii) is not accountable for the Company's use or application of the proceeds
from the Notes and (iii) is not responsible for any statement in the Notes other
than its certificate of authentication.

         Section 7.05. Notice of Default. If any Default occurs and is
continuing and is known to the Trustee, the Trustee will send notice of the
Default to each Holder within 90 days after it occurs, unless the Default has
been cured or waived; provided that, except in the case of a default in the
payment of the principal of or interest on any Note, the Trustee may withhold
the notice if and so long as the board of directors, the executive committee or
a trust committee of directors of the Trustee in good faith determines that
withholding the notice is in the interest of the Holders. Notice to Holders
under this Section will be given in the manner and to the extent provided in
Trust Indenture Act Section 313(c).

         Section 7.06. Reports by Trustee to Holders. Within 60 days after each
May 15, beginning with May 15, 2005, the Trustee will mail to each Holder, as
provided in Trust Indenture Act Section 313(c), a brief report dated as of such
May 15, if required by Trust Indenture Act Section 313(a), and file such reports
with each stock exchange upon which its Notes are listed and with the Commission
as required by Trust Indenture Act Section 313(d). The Trustee shall also comply
with Section 313(b) of the Trust Indenture Act.

         Section 7.07. Compensation and Indemnity. (a) The Company will pay the
Trustee compensation as agreed upon in writing for its services. The
compensation of the Trustee is not limited by any law on compensation of a
Trustee of an express trust. The Company will reimburse the Trustee upon request
for all reasonable out-of-pocket expenses, disbursements and advances incurred
or made by the Trustee, whether hereunder, under the Notes or under the
Collateral Documents, including

                  (i)      the reasonable compensation and expenses of the
         Trustee's agents and counsel, except for any such expense, disbursement
         or advances as may be attributable to its negligence or bad faith;

                  (ii)     the amount of any taxes that the Collateral Agent may
         have been required to pay by reason of the Liens granted pursuant to
         the Collateral Documents or to free any Collateral from any Lien
         thereon other than Permitted Encumbrances; and

                  (iii)    transfer taxes and fees and expenses of counsel and
         other experts that the Collateral Agent may reasonably incur in
         connection with

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<PAGE>

         (x) the administration or enforcement of the Collateral Documents,
         including such expenses as are incurred to preserve the value of the
         Collateral or any validity, perfection, rank or value of any Lien
         granted pursuant to the Collateral Documents, (y) the collection, sale
         or other disposition of any Collateral or (z) the exercise by the
         Collateral Agent of any of its rights or powers under the Collateral
         Documents.

         (b)      The Company and the Guarantors, jointly and severally, will
indemnify the Trustee for, and hold it harmless against, any loss or liability
or expense incurred by it without negligence or bad faith on its part arising
out of or in connection with the acceptance or administration of this Indenture
and the Collateral Documents and its duties under this Indenture, the Notes and
the Collateral Documents, including the costs and expenses of defending itself
against any claim or liability and of complying with any process served upon it
or any of its officers in connection with the exercise or performance of any of
its powers or duties under this Indenture, the Notes and the Collateral
Documents.

         (c)      To secure the Company's payment obligations in this Section,
the Trustee will have a lien prior to the Notes on all money or property held or
collected by the Trustee, in its capacity as Trustee, except money or property
held in trust to pay principal of, and interest on particular Notes.

         Section 7.08. Replacement of Trustee. (a) (1) The Trustee may resign
at any time by written notice to the Company.

                  (2)      The Holders of a majority in principal amount of the
         outstanding Notes may remove the Trustee by written notice to the
         Trustee and the Company.

                  (3)      If the Trustee is no longer eligible under Section
         7.10 or in the circumstances described in Trust Indenture Act Section
         310(b), any Holder that satisfies the requirements of Trust Indenture
         Act Section 310(b) may petition any court of competent jurisdiction for
         the removal of the Trustee and the appointment of a successor Trustee.

                  (4)      The Company may remove the Trustee if: (i) the
         Trustee is no longer eligible under Section 7.10; (ii) the Trustee is
         adjudged a bankrupt or an insolvent; (iii) a receiver or other public
         officer takes charge of the Trustee or its property; or (iv) the
         Trustee becomes incapable of acting.

A resignation or removal of the Trustee and appointment of a successor Trustee
will become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.

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<PAGE>

         (b)      If the Trustee resigns or is removed, or if a vacancy exists
in the office of Trustee for any reason, the Company will promptly appoint a
successor Trustee. If the successor Trustee does not deliver its written
acceptance within 30 days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Company or the Holders of a majority in principal amount
of the outstanding Notes may petition at the expense of the Company any court of
competent jurisdiction for the appointment of a successor Trustee.

         (c)      Upon delivery by the successor Trustee of a written acceptance
of its appointment to the retiring Trustee and to the Company, (i) the retiring
Trustee will transfer all property held by it as Trustee to the successor
Trustee, subject to the lien provided for in Section 7.07, (ii) the resignation
or removal of the retiring Trustee will become effective, and (iii) the
successor Trustee will have all the rights, powers and duties of the Trustee
under this Indenture. Upon request of any successor Trustee, the Company will
execute any and all instruments for fully and vesting in and confirming to the
successor Trustee all such rights, powers and trusts. The Company will give
notice of any resignation and any removal of the Trustee and each appointment of
a successor Trustee to all Holders, and include in the notice the name of the
successor Trustee and the address of its Corporate Trust Office.

         (d)      Notwithstanding replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.07 will continue for the
benefit of the retiring Trustee.

         (e)      The Trustee agrees to give the notices provided for in, and
otherwise comply with, Trust Indenture Act Section 310(b).

         Section 7.09. Successor Trustee by Merger. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all of its
corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act will be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee in
this Indenture, provided, however, that in the case of a corporation succeeding
to all or substantially all the corporate trust business of the Trustee, such
successor corporation shall expressly assume all of the Trustee's liabilities
hereunder. In case any Notes shall have been authenticated, but not delivered,
by the Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such authentication and
deliver the Securities so authenticated with the same effect as if such
successor Trustee had itself authenticated such Notes.

         Section 7.10. Eligibility. This Indenture must always have a Trustee
that satisfies the requirements of Trust Indenture Act Section 310(a) and has a
combined capital and surplus of at least $25,000,000 as set forth in its most
recent published annual report of condition.

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<PAGE>

         Section 7.11. Money Held in Trust. The Trustee will not be liable for
interest on any money received by it except as it may agree with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law and except for money held in trust under
Article 8.

         Section 7.12. Appointment of Co-Trustee. (a) Notwithstanding any other
provisions of this Indenture, at any time, for the purpose of meeting any legal
requirement of any jurisdiction in which any part of the Collateral may at the
time be located, the Trustee shall have the power and may execute and deliver
all instruments necessary to appoint one or more Persons to act as a co-trustee
or co-trustees, or separate trustee or separate trustees, of all or any part of
the Collateral, and to vest in such Person or Persons, in such capacity and for
the benefit of the Holders, such title to the Collateral, or any part hereof,
and subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Trustee may consider necessary or
desirable. No co-trustee or separate trustee hereunder shall be required to meet
the terms of eligibility as a successor trustee under Section 7.08 and no notice
to Holders of the appointment of any co-trustee or separate trustee shall be
required under that section.

         (b)      Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:

                  (1)      all rights, powers, duties and obligations conferred
         or imposed upon the trustee shall be conferred or imposed upon and
         exercised or performed by the Trustee and such separate trustee or
         co-trustee jointly (it being understood that such separate trustee or
         co-trustee is not authorized to act separately without the trustee
         joining in such act), except to the extent that under any law of any
         jurisdiction in which any particular act or acts are to be performed
         the Trustee shall be incompetent or unqualified to perform such act or
         acts, in which event such rights, powers, duties and obligations
         (including the holding of title to the Collateral or any portion
         thereof in any such jurisdiction) shall be exercised and performed
         singly by such separate trustee or co-trustee, but solely at the
         direction of the Trustee;

                  (2)      no trustee hereunder shall be personally liable by
         reason of any act or omission of any other trustee hereunder; and

                  (3)      the Trustee may at any time accept the resignation of
         or remove any separate trustee or co-trustee.

         (c)      Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Section

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7.12. Each separate trustee and co-trustee, upon its acceptance of the trusts
conferred, shall be vested with the estates or property specified in its
instrument of appointment, either jointly with the Trustee or separately, as may
be provided therein, subject to all the provisions of this Indenture,
specifically including every provision of this Indenture relating to the conduct
of, affecting the liability of, or affording protection or rights (including the
rights to compensation, reimbursement and indemnification hereunder) to, the
Trustee. Every such instrument shall be filed with the Trustee.

         (d)      Any separate trustee or co-trustee may at any time constitute
the Trustee its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Indenture on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.

                                    ARTICLE 8
                            DEFEASANCE AND DISCHARGE

         Section 8.01. Discharge of Company's Obligations. (a) Subject to
paragraph (b), the Company's obligations under the Notes and this Indenture, and
each Guarantor's obligations under its Note Guaranty, will terminate if:

                  (1)      all Notes previously authenticated and delivered
         (other than (i) destroyed, lost or stolen Notes that have been replaced
         or (ii) Notes that are paid pursuant to Section 4.01 or (iii) Notes for
         whose payment money or U.S. Government Obligations have been held in
         trust and then repaid to the Company pursuant to Section 8.05) have
         been delivered to the Trustee for cancellation and the Company has paid
         all sums payable by it hereunder; or

                  (2)      (A)     the Notes mature within one year, or all
                  of them are to be called for redemption within one year under
                  arrangements satisfactory to the Trustee for giving the notice
                  of redemption,

                           (B)      the Company irrevocably deposits in trust
                  with the Trustee, as trust funds solely for the benefit of the
                  Holders, money or U.S. Government Obligations or a combination
                  thereof sufficient, in the opinion of a nationally recognized
                  firm of independent public accountants or a nationally
                  recognized investment banking or appraisal firm, expressed in
                  a written certificate delivered to the Trustee, without
                  consideration of any reinvestment, to pay principal of and
                  interest on the Notes to

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<PAGE>

                  maturity or redemption, as the case may be, and to pay all
                  other sums payable by it hereunder,

                           (C)      no Default has occurred and is continuing on
                  the date of the deposit,

                           (D)      the deposit will not result in a breach or
                  violation of, or constitute a default under, this Indenture or
                  any other agreement or instrument to which the Company is a
                  party or by which it is bound, and

                           (E)      the Company delivers to the Trustee an
                  Officers' Certificate and an Opinion of Counsel, in each case
                  stating that all conditions precedent provided for herein
                  relating to the satisfaction and discharge of this Indenture
                  have been complied with; provided that, such Opinion of
                  Counsel may rely on an Officers' Certificate or certificates
                  of public officials with respect to matters of fact.

         (b)      After satisfying the conditions in clause (1), only the
Company's obligations under Section 7.07 will survive. After satisfying the
conditions in clause (2), only the Company's obligations in Sections 2.04, 4.01,
4.02, 7.07, 7.08, 8.05 and 8.06 will survive. In either case, the Trustee upon
request will acknowledge in writing the discharge of the Company's obligations
under the Notes and this Indenture other than the surviving obligations.

         Section 8.02. Legal Defeasance. After the 91st day following the
deposit referred to in clause (1), the Company will be deemed to have paid and
will be discharged from its obligations in respect of the Notes and this
Indenture, other than its obligations in Sections 2.02, 2.03, 2.04, 2.09, 2.10,
4.01, 4.02, 7.07, 7.08, 8.05 and 8.06, and each Guarantor's obligations under
its Note Guaranty will terminate, provided the following conditions have been
satisfied:

                  (1)      The Company has irrevocably deposited in trust with
         the Trustee, as trust funds solely for the benefit of the Holders,
         money or U.S. Government Obligations or a combination thereof
         sufficient, in the opinion of a nationally recognized firm of
         independent public accountants or a nationally recognized investment
         banking or appraisal firm, expressed in a written certificate delivered
         to the Trustee, without consideration of any reinvestment, to pay
         principal of and interest on the Notes to maturity or redemption, as
         the case may be, provided that any redemption before maturity has been
         irrevocably provided for under arrangements satisfactory to the
         Trustee.

                  (2)      No Default has occurred and is continuing on (i) the
         date of the deposit or (ii) the last day of the 91-day period following
         the deposit.

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<PAGE>

                  (3)      The deposit will not result in a breach or violation
         of, or constitute a default under, this Indenture or any other
         agreement or instrument to which the Company is a party or by which it
         is bound.

                  (4)      The Company has delivered to the Trustee

                           (A)      either (x) a ruling received from the
                  Internal Revenue Service to the effect that the Holders will
                  not recognize income, gain or loss for U.S. federal income tax
                  purposes as a result of the defeasance and will be subject to
                  U.S. federal income tax on the same amount and in the same
                  manner and at the same times as would otherwise have been the
                  case or (y) an Opinion of Counsel, based on a change in law
                  after the date of this Indenture, to the same effect as the
                  ruling described in clause (x), and

                           (B)      an Opinion of Counsel to the effect that (i)
                  the creation of the defeasance trust does not violate the
                  Investment Company Act of 1940, (ii) the Holders have a valid
                  first priority Note interest in the trust funds (subject to
                  customary exceptions), and (iii) after the passage of 91 days
                  following the deposit, the trust funds will not be subject to
                  the effect of Section 547 of the United States Bankruptcy Code
                  or Section 15 of the New York Debtor and Creditor Law.

                  (5)      The Company has delivered to the Trustee an Officers'
         Certificate and an Opinion of Counsel, in each case stating that all
         conditions precedent provided for herein relating to the defeasance
         have been complied with; provided that any such Opinion of Counsel may
         rely on an Officers' Certificate or certificates of public officials
         with respect to matters of fact.

         Prior to the end of the 91-day period, none of the Company's
obligations under this Indenture will be discharged. Thereafter, the Trustee
upon request will acknowledge in writing the discharge of the Company's
obligations under the Notes and this Indenture except for the surviving
obligations specified above.

         Section 8.03. Covenant Defeasance. After the 91st day following the
deposit referred to in clause (1), the Company's obligations set forth in
Section 4.03 through 4.20, inclusive, and Article 5, and each Guarantor's
obligations under its Note Guaranty, will terminate, and clauses (2), (3), (4),
(5), (6), (9) and (10) of Section 6.01 will no longer constitute Events of
Default, provided the following conditions have been satisfied:

                  (1)      The Company has complied with clauses (1), (2), (3),
         4(B) and (5) of Section 8.02; and

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<PAGE>

                  (2)      the Company has delivered to the Trustee an Opinion
         of Counsel to the effect that the Holders will not recognize income,
         gain or loss for U.S. federal income tax purposes as a result of the
         defeasance and will be subject to U.S. federal income tax on the same
         amount and in the same manner and at the same times as would otherwise
         have been the case.

         Except as specifically stated above, none of the Company's obligations
under this Indenture will be discharged.

         Section  8.04. Application of Trust Money. Subject to Section 8.05,
the Trustee will hold in trust the money or U.S. Government Obligations
deposited with it pursuant to Section 8.01, 8.02 or 8.03, and apply the
deposited money and the proceeds from deposited U.S. Government Obligations to
the payment (either directly or through any Paying Agent, other than the Company
or any Affiliate of the Company) of principal of and interest on the Notes in
accordance with the Notes and this Indenture. Such money and U.S. Government
Obligations need not be segregated from other funds except to the extent
required by law.

         Section  8.05. Repayment to Company. Subject to Sections 7.07, 8.01,
8.02 and 8.03, the Trustee will promptly pay to the Company upon request any
excess money held by the Trustee at any time and thereupon be relieved from all
liability with respect to such money. The Trustee will pay to the Company upon
request any money held for payment with respect to the Notes that remains
unclaimed for two years. After payment to the Company, Holders entitled to such
money must look solely to the Company for payment, unless applicable law
designates another Person, and all liability of the Trustee with respect to such
money will cease.

         Section  8.06. Reinstatement. If and for so long as the Trustee is
unable to apply any money or U.S. Government Obligations held in trust pursuant
to Section 8.01, 8.02 or 8.03 by reason of any legal proceeding or by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Company's obligations
under this Indenture and the Notes will be reinstated as though no such deposit
in trust had been made. If the Company makes any payment of principal of or
interest on any Notes because of the reinstatement of its obligations, it will
be subrogated to the rights of the Holders of such Notes to receive such payment
from the money or U.S. Government Obligations held in trust.

                                   ARTICLE 9
                       AMENDMENTS, SUPPLEMENTS AND WAIVERS

         Section  9.01. Amendments Without Consent of Holders. (a) The Company
and the Trustee (including in its capacity as Collateral Agent) may

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amend or supplement this Indenture, the Notes and the Collateral Documents
without notice to or the consent of any Noteholder

                  (1)      to cure any ambiguity, defect or inconsistency in
         this Indenture, the Notes or the Collateral Documents;

                  (2)      to comply with Section 5.01 or 5.02;

                  (3)      to comply with any requirements of the Commission in
         connection with the qualification of this Indenture under the Trust
         Indenture Act;

                  (4)      to evidence and provide for the acceptance of an
         appointment hereunder by a successor Trustee;

                  (5)      to provide for uncertificated Notes in addition to or
         in place of certificated Notes, provided that the uncertificated Notes
         are issued in registered form for purposes of Section 163(f) of the
         Code, or in a manner such that the uncertificated Notes are described
         in Section 163(f)(2)(B) of the Code;

                  (6)      to provide for any Guarantee of the Notes, to secure
         the Notes or to confirm and evidence the release, termination or
         discharge of any Guarantee of or Lien securing the Notes when such
         release, termination or discharge is permitted by this Indenture; or

                  (7)      to make any other change that does not materially and
         adversely affect the rights of any Holder.

         Section  9.02. Amendments With Consent of Holders. (a) Except as
otherwise provided in Sections 6.02, 6.04 and 6.07 or paragraph (b), the Company
and the Trustee may amend this Indenture and the Notes with the written consent
of the Holders of a majority in principal amount of the outstanding Notes, and
the Holders of a majority in principal amount of the outstanding Notes by
written notice to the Trustee may waive future compliance by the Company with
any provision of this Indenture or the Notes.

         (b)      Notwithstanding the provisions of paragraph (a), without the
consent of each Holder affected, an amendment or waiver may not

                  (1)      reduce the principal amount of or change the Stated
         Maturity of any installment of principal of any Note,

                  (2)      reduce the rate of or change the Stated Maturity of
         any interest payment on any Note,

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                  (3)      reduce the amount payable upon the redemption of any
         Note or change the time of any mandatory redemption or, in respect of
         an optional redemption, the times at which any Note may be redeemed or,
         once notice of redemption has been given, the time at which it must
         thereupon be redeemed,

                  (4)      after the time an Offer to Purchase is required to
         have been made, reduce the purchase amount or purchase price, or extend
         the latest expiration date or purchase date thereunder,

                  (5)      make any Note payable in money other than that stated
         in the Note,

                  (6)      impair the right of any Holder to receive any
         principal payment or interest payment on such Holder's Notes, on or
         after the Stated Maturity thereof, or to institute suit for the
         enforcement of any such payment,

                  (7)      make any change in the percentage of the principal
         amount of the Notes required for amendments or waivers,

                  (8)      modify or change any provision of this Indenture
         affecting the ranking of the Notes or any Note Guaranty in a manner
         adverse to the Holders of the Notes,

                  (9)      make any change to provisions of Article 10 or the
         Collateral Documents that would effect a release (other than releases
         effected in accordance with the terms in effect on the Issue Date of
         this Indenture and Collateral Documents) of all or any substantial part
         of the Collateral or

                  (10)     make any change in any Note Guaranty that would
         adversely affect the Noteholders or effect a release of all or any
         substantial portion of the Note Guaranties (in either case, other than
         releases effected in accordance with the terms of this Indenture in
         effect on the Issue Date);

provided that the provisions of Section 4.13 and Section 4.14 may, except as
provided above, be amended or waived with the consent of Holders holding not
less than 66?% in aggregate principal amount of the Notes.

         (c)      It is not necessary for Noteholders to approve the particular
form of any proposed amendment, supplement or waiver, but is sufficient if their
consent approves the substance thereof.

         (d)      An amendment, supplement or waiver under this Section will
become effective on receipt by the Trustee of written consents from the Holders
of the requisite percentage in principal amount of the outstanding Notes. After
an amendment, supplement or waiver under this Section becomes effective, the

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<PAGE>

Company will send to the Holders affected thereby a notice briefly describing
the amendment, supplement or waiver. The Company will send supplemental
indentures to Holders upon request. Any failure of the Company to send such
notice, or any defect therein, will not, however, in any way impair or affect
the validity of any such supplemental indenture or waiver.

         Section  9.03. Effect of Consent. (a) After an amendment, supplement
or waiver becomes effective, it will bind every Holder unless it is of the type
requiring the consent of each Holder affected pursuant to the provisions of this
Indenture. If the amendment, supplement or waiver is of the type requiring the
consent of each Holder affected, the amendment, supplement or waiver will bind
each Holder that has consented to it and every subsequent Holder of a Note that
evidences the same debt as the Note of the consenting Holder.

         (b)      If an amendment, supplement or waiver changes the terms of a
Note, the Trustee may require the Holder to deliver it to the Trustee so that
the Trustee may place an appropriate notation of the changed terms on the Note
and return it to the Holder, or exchange it for a new Note that reflects the
changed terms. The Trustee may also place an appropriate notation on any Note
thereafter authenticated. However, the effectiveness of the amendment,
supplement or waiver is not affected by any failure to annotate or exchange
Notes in this fashion.

         Section  9.04. Trustee's Rights and Obligations. The Trustee is
entitled to receive, and will be fully protected in relying upon, an Opinion of
Counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article is authorized or permitted by this
Indenture. If the Trustee has received such an Opinion of Counsel, it shall sign
the amendment, supplement or waiver so long as the same does not adversely
affect the rights of the Trustee. The Trustee may, but is not obligated to,
execute any amendment, supplement or waiver that affects the Trustee's own
rights, duties or immunities under this Indenture.

         Section  9.05. Conformity With Trust Indenture Act. Every supplemental
Indenture executed pursuant to this Article shall conform to the applicable
requirements of the Trust Indenture Act.

         Section  9.06. Payments for Consents. Neither the Company nor any of
its Subsidiaries or Affiliates may, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to any
Holder for or as an inducement to any consent, waiver or amendment of any of the
terms or provisions of this Indenture or the Notes unless such consideration is
offered to be paid or agreed to be paid to all Holders of the Notes that
consent, waive or agree to amend such term or provision within the time period
set forth in the solicitation documents relating to the consent, waiver or
amendment.

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                                   ARTICLE 10
                             COLLATERAL ARRANGEMENTS

         Section  10.01. Collateral Documents. (a) The due and punctual payment
of the principal and interest on the Notes when and as the same shall be due and
payable, whether on an interest payment date, at maturity, by acceleration,
repurchase, redemption or otherwise, and interest on the overdue principal of
and interest on the Notes and performance of all other Secured Obligations of
the Company and the Guarantors to the Holders or the Trustee under this
Indenture, the Notes and the Collateral Documents, according to the terms
hereunder or thereunder, are secured as provided in the Collateral Documents,
which define the terms of the Liens that secure the Secured Obligations. The
Trustee and the Company hereby acknowledge and agree that the Trustee or the
Collateral Agent, as the case may be, holds the Collateral in trust for the
benefit of the Trustee and the Holders, in each case pursuant to the terms of
the Collateral Documents. Each Holder, by accepting a Note, consents and agrees
to the terms of the Collateral Documents (including the provisions providing for
foreclosure and release of Collateral) as the same may be in effect or may be
amended from time to time in accordance with its terms and authorizes and
directs the Collateral Agent to enter into the Collateral Documents and to
perform its obligations and exercise its rights thereunder in accordance
therewith. The Company will do or cause to be done all such acts and things as
may be required by the next sentence of this Section 10.01, to assure and
confirm to the Trustee and the Collateral Agent the security interest in the
Collateral contemplated hereby, by the Collateral Documents or any part thereof,
as from time to time constituted, so as to render the same available for the
security and benefit of this Indenture and of the Notes secured hereby,
according to the intent and purposes herein expressed. The Company shall take,
and shall cause its Restricted Subsidiaries to take, any and all actions
reasonably required to cause the Collateral Documents to create and maintain (to
the extent contemplated hereunder or thereunder), as security for the Secured
Obligations of the Company and the Guarantors, a valid and enforceable perfected
first-priority Lien and security interest (subject to Permitted Encumbrances) in
and on all the Collateral, in favor of the Collateral Agent for the benefit of
the Holders; it being understood that the Trustee and Collateral Agent shall
have no duty with respect to such actions.

         (b)      The Trustee hereby appoints the Collateral Agent as its agent
under the Collateral Documents, and the Collateral Agent is hereby authorized to
act on behalf of the Trustee, with full authority and powers of the Trustee
hereunder.

         Section  10.02. Recordings and Opinions. (a) Promptly following the
Issue Date, the Company shall furnish to the Trustee an Opinion of Counsel to
the effect that (i) in the opinion of such counsel, such action has been taken
with respect to the recording, registering and filing of or with respect to this
Indenture and the Collateral Documents and all other instruments of further
assurance as is necessary to make effective the Lien of the Collateral Documents
in the Collateral

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<PAGE>

and referencing the details of such action; or (ii) in the opinion of such
counsel, no such action is necessary to make such Lien effective; provided that
any such Opinion of Counsel may rely on an Officers' Certificate or certificates
of public officials with respect to matters of fact.

         (b)      The Company shall furnish to the Trustee on or before December
15 in each year beginning with December 15, 2004, an Opinion of Counsel dated as
of such date, either: (i) to the effect that, in the opinion of such counsel,
such action has been taken with respect to the recordings, registerings,
filings, re-recordings, re-registerings and re-filings of or with respect to
this Indenture and the Collateral Documents as is necessary to maintain the Lien
of the Collateral Documents in the Collateral and reciting the details of such
action or referencing to prior Opinions of Counsel in which such details are
given; or (ii) to the effect that, in the opinion of such counsel, no such
action is necessary to maintain such Lien.

         (c)      All Opinions of Counsel delivered pursuant to this Section
10.02 may contain assumptions, qualifications, exceptions and limitations as are
appropriate and customary for similar opinions relating to the nature of the
Collateral.

         (d)      The Company shall otherwise comply with the provisions of TIA
314(b).

         Section  10.03. Release of Collateral. (a) Upon the request of the
Company to the Trustee pursuant to an Officers' Certificate certifying that all
conditions precedent hereunder have been met and that no Event of Default has
occurred and is continuing, the Company and the Guarantors will be entitled,
without the consent of the Holders, to the release of any Collateral from the
Liens securing the Notes and the Subsidiary Guarantees

                  (1)      to enable the Company or any Restricted Subsidiary to
         consummate any sale, conveyance or other disposition of any assets
         (other than Trust Moneys, which are subject to release from the Lien of
         this Indenture and the Collateral Documents as provided under Article
         11) in compliance with Section 4.14 (or in a transaction not subject to
         Section 4.14) to any Person other than the Company or a Restricted
         Subsidiary; provided, however, that the Lien of this Indenture and the
         Collateral Documents will not be released pursuant to this Section
         10.03(a) if such sale, conveyance or disposition is made as part of a
         transaction governed by Section 5.01;

                  (2)      pursuant to an amendment, waiver or supplement
         effected in accordance with Article 9.

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<PAGE>

         (b)      Any Officers' Certificate requesting a release of Collateral
under Section 10.03(a) shall (i) describe with particularity the items of
property proposed to be covered by the release, (ii) state that such release is
in compliance with the terms of this Indenture and (iii) be accompanied by an
Opinion of Counsel, which may be rendered by internal counsel to the Company, to
the effect that, in the opinion of such counsel, the Company has complied with
the requirements of TIA Section 314(d); provided that any such Opinion of
Counsel may rely on an Officers' Certificate or certificates of public officials
with respect to matters of fact. In the event of any release of any Collateral
from Liens securing the Notes pursuant to Section 10.03(a), promptly after the
receipt of such Officers' Certificate and accompanying Opinion of Counsel, the
Trustee and the Collateral Agent shall execute and deliver such documents as the
Company shall reasonably request to effectuate the release of such Liens and to
evidence such release.

         (c)      Subject to Section 10.03(d), in the event of any release of
Collateral in connection with the sale, conveyance or disposition of Collateral,
the Company or a Restricted Subsidiary of the Company shall deposit with the
Trustee the Net Cash Proceeds from such sale, conveyance or disposition (except
Net Cash Proceeds from any sale, conveyance or disposition which is not
required, or cannot be required through the passage of time or otherwise, to be
used to repurchase or redeem or make an Offer to Purchase Notes hereunder). All
cash or Cash Equivalents received by the Trustee pursuant to this Section 10.03
shall be held by the Trustee as Trust Moneys under Article 11 subject to
application as therein provided.

         (d)      (i) In the event of any sale, exchange or disposition of
Collateral that results in the release of such Collateral pursuant to clause (a)
of this Section 10.03:

                  (A)      to the extent that the amount of Net Cash Proceeds
         resulting from such sale, exchange or disposition is less than
         $10,000,000, so long as no Event of Default shall have occurred and be
         continuing and subject to the limitations set forth in clause (iii)
         below, the Company is not required to deposit such Net Cash Proceeds
         with the Trustee as Trust Moneys as contemplated by this Section 10.03;
         and

                  (B)      to the extent that the amount of Net Cash Proceeds
         resulting from such sale, exchange or disposition is greater than or
         equal to $10,000,000, the Company and its Restricted Subsidiaries will
         be required to deposit the full amount of such Net Cash Proceeds with
         the Trustee as Trust Moneys as contemplated by this Section 10.03;
         provided, however, that so long as no Event of Default shall have
         occurred and be continuing and subject to the limitations set forth in
         clause (iii) below, the Company may withdraw Net Cash Proceeds (either
         in one withdrawal or a series of withdrawals) from the amounts held by
         the Trustee or Collateral Agent

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<PAGE>

         pursuant to Article 11 and apply such Net Cash Proceeds in any manner
         not prohibited by the terms of this Indenture.

         (ii) Net Cash Proceeds arising from the sale, exchange or disposition
of Collateral that is not deposited with the Trustee pursuant to clause (A)
above or is withdrawn pursuant to clause (B) above are referred to collectively
as "RELEASED PROCEEDS". Released Proceeds shall not be subject to the Lien and
security interest created hereunder or by the Collateral Documents.

         (iii) Notwithstanding anything to the contrary set forth in this
Section 10.03(d), at no time may the aggregate amount of Released Proceeds which
have not yet been applied in accordance with the terms of this Indenture exceed
$10,000,000.

         (iv) The Company shall be permitted to retain Net Cash Proceeds from
the sale, exchange or other disposition of Collateral pursuant to clause
(d)(i)(A), and such Net Cash Proceeds shall be released from the Lien and
security interest created hereunder or by the Collateral Documents, only to the
extent that, simultaneously with the consummation of such sale, lease,
conveyance or disposition, the Company has delivered to the Trustee and the
Collateral Agent an Officers' Certificate that contains:

                  (1) a statement that a sale, lease, conveyance or other
         disposition of Collateral has occurred;

                  (2) a description of the Collateral that was the subject of
         the transaction and the consideration received in respect of such
         Collateral in the transaction;

                  (3) a statement that no Event of Default has occurred and is
         continuing;

                  (4) a statement that the aggregate amount of Released Proceeds
         outstanding immediately following the consummation of such transaction
         will not exceed $10,000,000; and

                  (5) a covenant on behalf of the Company that the Released
         Proceeds that are the subject of the transaction will be applied by the
         Company in the manner contemplated by Section 4.14 within the time
         periods specified in such section.

         (v) The Company shall be permitted to withdraw Net Cash Proceeds from
the sale, exchange or other disposition of, or other proceeds from, Collateral
pursuant to clause (d)(i)(B), and the Trustee and Collateral Agent shall release
such Net Cash Proceeds from the Lien and security interest created hereunder or
by the Collateral Documents, only to the extent that, at least three Business
Days

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<PAGE>

prior to the date of such withdrawal and release, the Company has delivered to
the Trustee and Collateral Agent an Officers' Certificate that contains:

                  (1) a statement as to the aggregate amount of Net Cash
         Proceeds to be withdrawn and released pursuant to clause (d)(i)(B);

                  (2) a statement that no Event of Default has occurred and is
         continuing;

                  (3) a statement that the aggregate amount of Released Proceeds
         outstanding immediately following such withdrawal and release will not
         exceed $10,000,000; and

                  (4) a covenant on behalf of the Company that the Released
         Proceeds that are the subject of such withdrawal and release will be
         applied by the Company in the manner contemplated by Section 4.14
         within the time periods specified in such section.

         (vi) Upon the occurrence of any Event of Default, the Company shall
immediately deposit all Released Proceeds that have not yet been applied in the
manner contemplated by Section 4.14 with the Trustee and the Collateral Agent as
Trust Moneys pursuant to Article 11, and such Released Proceeds shall
immediately become part of the Collateral and become subject to the Lien and
security interest created hereunder or by the Collateral Documents.

         Section  10.04. Eminent Domain, Expropriation and Other Governmental
Takings. If any of the Collateral is taken by eminent domain, expropriation or
other similar governmental taking or is sold pursuant to the exercise by any
governmental authority of any right which it may then have to purchase, or to
designate a purchaser or to order a sale of, all or any part of the Collateral,
the Trustee and the Collateral Agent shall release the property so taken or
purchased from the Liens of this Indenture and the Collateral Documents (and to
execute and deliver such documents as the Company shall reasonably request to
effectuate the release of such Liens) at the Company's sole cost and expense,
but only upon receipt by the Trustee and the Collateral Agent of the following:

                  (1) an Officers' Certificate stating that such property has
         been taken by eminent domain, expropriation or other similar
         governmental taking and the amount of the award therefor, or that such
         property has been sold pursuant to a right vested in a governmental
         authority to purchase, or to designate a purchaser, or order a sale of
         such property and the amount of the proceeds of such sale, that the
         amount of the proceeds of the property so sold is not less than the
         amount to which the Company or the applicable Guarantor is legally
         entitled under the terms of such right to purchase or designate a
         purchaser, or under the order or orders directing

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         such sale, as the case may be, and that all conditions precedent herein
         provided for relating to such release have been complied with;

                  (2) an undertaking by the Company to hold as Trust Moneys,
         subject to the disposition thereof pursuant to Article 11 hereof (and,
         at the election of the Company, subject to Section 10.03(d)), the award
         for such property or the proceeds of such sale to the extent provided
         under the Collateral Documents; and

                  (3) an Opinion of Counsel substantially to the effect that all
         conditions precedent herein provided for relating to such release have
         been complied with.

In any proceedings for the taking or purchase or sale of any part of the
Collateral, by eminent domain, expropriation or other similar governmental
taking or by virtue of any such right to purchase or designate a purchaser or to
order a sale, the Trustee or the Collateral Agent, as the case may be, may be
represented by counsel who may be counsel, at the Company's expense, for the
Company.

All cash or Cash Equivalents received by the Trustee or the Collateral Agent, as
the case may be, pursuant to this Section 10.04 shall be held by the Trustee or
the Collateral Agent, as the case may be, as Trust Moneys under Article 11
subject to application as therein provided and, at the election of the Company,
subject to Section 10.03(d). All purchase money and other obligations received
by the Trustee pursuant to this Section 10.04 shall be held by the Trustee or
the Collateral Agent, as the case may be, as Collateral subject to application
as provided in Section 10.09.

         Section  10.05. Permitted Releases Not To Impair Lien; Trust Indenture
Act Requirements. The release of any Collateral from the terms hereof and of the
Collateral Documents or the release of, in whole or in part, the Liens created
by the Collateral Documents, will not be deemed to impair the Lien on the
Collateral in contravention of the provisions hereof if and to the extent the
Collateral or Liens are released pursuant to the applicable Collateral Documents
and pursuant to the terms of this Article 10. The Trustee and each of the
Holders acknowledge that a release of Collateral or a Lien strictly in
accordance with the terms of the Collateral Documents and of this Article 10
will not be deemed for any purpose to be an impairment of the Lien on the
Collateral in contravention of the terms of this Indenture. To the extent
applicable, the Company shall cause Section 314(d) of the TIA (as modified by
exemptive relief and no-action positions issued by the Staff of the SEC from
time to time, including, without limitation, the positions set forth in Arch
Wireless Holdings, Inc. dated May 24, 2002 and Algoma Steel Inc. dated December
23, 2002) relating to the release of property or securities from the Lien hereof
and of the Collateral Documents to be complied with. Any certificate or opinion
required by Section 314(d) of the TIA may be made by an officer of

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the Company, except in cases which Section 314(d) of the TIA requires that such
certificate or opinion be made by an independent person.

         Section  10.06. Suits To Protect the Collateral. Subject to the
provisions of the Collateral Documents, the Trustee shall have the power (but
not the obligation) to institute and to maintain such suits and proceedings as
it may deem expedient to prevent any impairment of the Collateral by any acts
which may be unlawful or in violation of any of the Collateral Documents or this
Indenture, and such suits and proceedings as the Trustee, in its sole
discretion, may deem expedient to preserve or protect its interests and the
interests of the Holders in the Collateral (including power to institute and
maintain suits or proceedings to restrain the enforcement of or compliance with
any legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the Lien on the Collateral or be
prejudicial to the interests of the Holders or the Trustee).

         Section  10.07. Purchaser Protected. In no event shall any purchaser
in good faith of any property purported to be released hereunder be bound to
ascertain the authority of the Trustee to execute the release or to inquire as
to the satisfaction of any conditions required by the provisions hereof for the
exercise of such authority or to see to the application of any consideration
given by such purchaser or other transferee; nor shall any purchaser or other
transferee of any property or rights permitted by this Article 10 to be sold be
under obligation to ascertain or inquire into the authority of the Company or
the applicable Guarantor to make any such sale or other transfer.

         Section  10.08. Powers Exercisable by Receiver or Trustee. In case the
Collateral shall be in the possession of a receiver or trustee, lawfully
appointed, the powers conferred in this Article 10 upon the Company or a
Guarantor with respect to the release, sale or other disposition of such
property may be exercised by such receiver or trustee, and an instrument signed
by such receiver or trustee shall be deemed the equivalent of any similar
instrument of the Company or a Guarantor or of any officer or officers thereof
required by the provisions of this Article 10, and any such instrument need not
state that no Event of Default has occurred and is continuing; and if the
Trustee shall be in the possession of the Collateral under any provision of this
Indenture, then such powers may be exercised by the Trustee.

         Section  10.09. Disposition of Obligations Received. All purchase
money and other obligations received by the Trustee or the Collateral Agent
under this Article shall be held by the Trustee or the Collateral Agent, as the
case may be and shall be added to the Collateral. Upon payment in cash or Cash
Equivalents by or on behalf of the Company to the Trustee or the Collateral
Agent of an amount equal to the entire unpaid principal amount of any such
obligation, to the extent not constituting Net Cash Proceeds which may be
required, through the

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passage of time or otherwise, to be used to redeem or repurchase or to make an
Offer to Purchase Notes, the Trustee or the Collateral Agent, as appropriate,
shall release and transfer such obligation and any mortgage securing the same
upon receipt of any documentation that the Trustee or the Collateral Agent may
reasonably require. Any cash or Cash Equivalents received by the Trustee or the
Collateral Agent in respect of the principal of any such obligations shall be
held by the Trustee or the Collateral Agent, as the case may be, as Trust Moneys
under Article 11 subject to application as therein provided and as provided in
the Collateral Documents. Until the Notes are accelerated pursuant to Section
6.02, all interest and other income on any such obligations, when received by
the Trustee shall be paid to the Company from time to time in accordance with
Section 11.07. If the Notes have been accelerated pursuant to Section 6.02, any
such interest or other income not theretofore paid, when collected by the
Trustee, shall be applied by the Trustee in accordance with Section 6.10.

         Section  10.10. Determinations Relating to Collateral. In the event
(a) the Trustee shall receive any written request from the Company, a Guarantor
or the Collateral Agent under any Collateral Document for consent or approval
with respect to any matter or thing relating to any Collateral or the Company's
or a Guarantor's obligations with respect thereto or (b) there shall be due to
or from the Trustee or the Collateral Agent under the provisions of any
Collateral Document any material performance or the delivery of any material
instrument or (c) the Trustee shall become aware of any material nonperformance
by the Company or a Guarantor of any covenant or any material breach of any
representation or warranty of the Company or a Guarantor set forth in any
Collateral Document, then, in each such event, the Trustee shall be entitled to
hire, at the sole reasonable cost and expense of the Company, experts,
consultants, agents and attorneys to advise the Trustee on the manner in which
the Trustee should respond, or direct the Collateral Agent to respond, to such
request or render any requested performance or response to such nonperformance
or breach. The Trustee shall be fully protected in accordance with Article 7
hereof in the taking of any action recommended or approved by any such expert,
consultant, agent or attorney and by indemnification provided in accordance with
Section 6.05 and other sections of this Indenture if such action is agreed to by
Holders of a majority in principal amount of the Notes pursuant to Section 6.05
and, the Trustee may, in its sole discretion, prior to taking such action if
such action could subject it to environmental liabilities or taxation, require
(1) direction from the Holders of a majority in principal amount of the Notes in
accordance with Section 6.05 hereof and (2) indemnification in accordance with
Section 6.05.

         Section  10.11. Release upon Termination of the Company's Obligations.
In the event that the Company delivers to the Trustee, in form and substance
reasonably acceptable to it, an Officers' Certificate certifying that either (1)
all the obligations under this Indenture, the Notes and the Collateral Documents
have been satisfied and discharged by complying with the provisions of Article 8
and Section 7.07 (except for unmatured or unasserted indemnity claims pursuant
to

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Section  7.07) or by the payment in full of the Company's obligations under the
Notes, this Indenture and the Collateral Documents, and all such obligations
have been so satisfied, or (2) the Notes have been defeased pursuant to Article
8, in either case the Trustee shall deliver to the Company and the Collateral
Agent a notice stating that the Trustee, on behalf of the Holders, disclaims and
gives up any and all rights it has in or to the Collateral (other than with
respect to funds held by the Trustee pursuant to Article 8), and any rights it
has under the Collateral Documents, and upon receipt by the Collateral Agent of
such notice, the Collateral Agent shall be deemed not to hold a Lien in the
Collateral on behalf of the Trustee and the Trustee and Collateral Agent shall
release the Collateral (other than funds held by the Trustee pursuant to Article
8) from such Liens at the Company's sole cost and expense and, upon written
request by the Company, shall promptly execute and deliver such documents as the
Company shall reasonably request to effectuate the release of such Liens.

         Section  10.12. Collateral Agent's Duties. The Collateral Agent,
acting in its capacity as such, shall have only such duties with respect to the
Collateral as are set forth herein and in the Collateral Documents.

         Section  10.13. Additional Secured Obligations. If the Company at any
time Incurs any Indebtedness secured by a Lien on the Collateral, the Trustee
and the Collateral Agent are empowered to enter into such security, collateral,
intercreditor and other similar agreements as are necessary to set forth the
relative rights and obligations of the Trustee and the Collateral Agent, on the
one hand, and the agent or representative for the lenders of such Indebtedness,
on the other hand, in the Collateral.

         Section  10.14. Pledge of Trust Moneys. Upon the deposit with the
Trustee or the Collateral Agent, as applicable, of any amount as Trust Moneys as
required hereunder or any purchase money and other obligations received by the
Trustee under this Article, the Company and the Guarantors shall execute such
documents and take all such other actions as shall be necessary to grant to the
Collateral Agent for and on behalf of the Trustee and the Noteholders a
perfected first-priority Lien and security interest (subject only to Permitted
Encumbrances) in and on such Trust Moneys or purchase money or other
obligations, securing the payment in full of the Secured Obligations hereunder
and, in the case of Trust Moneys, subject to application only as set forth in
Article 11.

                                   ARTICLE 11
                           APPLICATION OF TRUST MONEYS

         Section  11.01. "Trust Moneys" Defined. All cash or Cash Equivalents
received by the Trustee or the Collateral Agent on behalf of the Trustee:

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                  (1) upon the release of Collateral from the Lien of this
         Indenture and the Collateral Documents, including all moneys received
         in respect of the principal of all purchase money, governmental and
         other obligations that constitute Collateral;

                  (2) as compensation for, or proceeds of sale of, any part of
         the Collateral taken by eminent domain or purchased by, or sold
         pursuant to an order of, a governmental authority or otherwise disposed
         of;

                  (3) as proceeds of insurance upon any part of the Collateral
         (other than any liability insurance proceeds payable to the Trustee or
         the Collateral Agent for any loss, liability or expense incurred by
         it); or

                  (4) for application under this Article as elsewhere provided
         in this Indenture or any Collateral Document;

(all such moneys being herein sometimes called "TRUST MONEYS"), shall be held by
the Trustee (or the Collateral Agent as the agent of the Trustee) for the
benefit of the Holders as a part of the Collateral, shall be held in United
States dollars or U.S. dollar denominated obligations, and, upon any entry upon
or sale of the Collateral or any part thereof pursuant to Article 6, said Trust
Moneys shall be applied in accordance with Section 6.10; but, prior to any such
entry or sale, all or any part of the Trust Moneys may be withdrawn, and shall
be released, paid or applied by the Trustee or the Collateral Agent, as
appropriate, from time to time as provided in Sections 11.02 to 11.05,
inclusive, and may be applied by the Trustee as provided in Section 11.07(b).

         Section  11.02. Retirement of Notes. The Trustee or the Collateral
Agent, as appropriate, shall apply Trust Moneys from time to time to the payment
of the principal of and interest on any Notes, at final maturity or to the
redemption thereof or the purchase thereof upon tender or in the open market or
at private sale or upon any exchange or in any one or more of such ways,
including pursuant to a redemption under Article 3 or a required Offer to
Purchase pursuant to Section 4.13 or Section 4.14, as the Company shall request,
upon receipt by the Trustee of the following:

                  (1) a resolution of the Board of Directors directing the
         application pursuant to this Section of a specified amount of Trust
         Moneys (denominated in U.S. dollars) and in case any such moneys are to
         be applied to payment, designating any Notes so to be paid and, in case
         any such moneys are to be applied to the purchase of any Notes,
         prescribing the method of purchase, the price or prices to be paid and
         the maximum principal amount at maturity of any Notes, to be purchased
         and any other provisions of this Indenture governing such purchase;

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                  (2) additional cash (denominated in U.S. dollars) to the
         extent necessary to fund the entire payment amount or purchase price,
         which cash shall be held by the Trustee in trust for such purpose;

                  (3) an Officers' Certificate, dated not more than five days
         prior to the date of the relevant application, stating that:

                  (A) no Event of Default has occurred and is continuing; and

                  (B) all conditions precedent and covenants herein provided for
                  relating to such application of Trust Moneys have been
                  complied with; and

                  (4) an Opinion of Counsel stating that, in the opinion of such
         counsel, all conditions precedent herein provided for relating to such
         application of Trust Moneys have been complied with; provided that any
         such Opinion of Counsel may rely on an Officers' Certificate or
         certificates of public officials with respect to matters of fact.

Upon compliance with the foregoing provisions of this Section, the Trustee shall
apply Trust Moneys available therefor as directed and specified by such
resolution, up to, but not exceeding, the principal amount at maturity of the
Notes to be so paid, redeemed or purchased.

A resolution of the Board of Directors expressed to be irrevocable directing the
application of Trust Moneys under this Section to the payment of the principal
of particular Notes shall for all purposes of this Indenture be deemed the
equivalent of the deposit of money with the Trustee in trust for such purpose.
Such Trust Moneys and any cash held by the Trustee pursuant to clause (b) of
this Section shall not, after compliance with the foregoing provisions of this
Section, be deemed to be part of the Collateral or Trust Moneys.

         Section  11.03. Withdrawals of Trust Moneys. (a) Trust Moneys may be
withdrawn by the Company or any Guarantor and shall be paid by the Trustee upon
a request by the Company to the Trustee by the proper officer or officers of the
Company or the applicable Guarantor to either (x) reimburse the Company or the
applicable Guarantor for expenditures made, or to pay costs incurred or to be
incurred, by the Company or the applicable Guarantor to repair, rebuild or
replace Collateral that was destroyed, damaged or taken by eminent domain,
expropriation or other similar government action or (y) be used in accordance
with the provisions of Section 4.14(a)(4)(A) hereof, in each case upon receipt
by the Trustee of the following:

                  (1) an Officers' Certificate dated not more than 30 days prior
         to the date of the application for the withdrawal and payment of such
         Trust Moneys, setting forth:

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                  (A) that expenditures have been made, or costs incurred, or
                  will be made or incurred concurrently with such withdrawal of
                  Trust Moneys, by the Company or the applicable Guarantor in a
                  specified amount for the purpose of making repairs,
                  rebuildings, improvements or replacements of the Collateral,
                  which shall be briefly described, or in accordance with
                  Section 4.14 (a)(4)(A) hereof (or reimbursing the Company for
                  out-of-pocket costs incurred by the Company and directly
                  related to such acquisition) that will be added to the
                  Collateral immediately upon their acquisition;

                  (B) that no part of such expenditures, in any previous or then
                  pending application, has been or is being made the basis for
                  the withdrawal of any Trust Moneys pursuant to this Section
                  11.03;

                  (C) that no part of such expenditures or costs has been paid
                  out of either the proceeds of insurance upon any part of the
                  Collateral not required to be paid to the Trustee or the
                  Collateral Agent, as appropriate, under the Collateral
                  Documents or any award for or the proceeds from any of the
                  Collateral being taken as described in Section 10.04 hereof,
                  as the case may be;

                  (D) that there is no outstanding indebtedness or other
                  obligation, other than costs for which payment is being
                  requested, known to the Company, after due inquiry, for the
                  purchase price or construction of such repairs, improvements
                  or replacements, or for labor, wages, materials or supplies in
                  connection with the making thereof, which, if unpaid, might
                  become the basis of a vendor's, mechanics', laborer's,
                  materialmen's, statutory or other similar Lien upon any of
                  such repairs, rebuildings, improvements or replacement, which
                  Lien would, in the opinion of the signers of such certificate,
                  materially impair the security afforded by such repairs,
                  improvements or replacement; and

                  (E) that no Event of Default has occurred and is continuing.

         (b) To the extent applicable, in connection with any withdrawal of
Trust Moneys pursuant to Section 11.03(a), the Company and each obligor shall
cause Section 314(d) of the TIA (as modified by exemptive relief and no-action
positions issued by the Staff of the SEC from time to time, including, without
limitation, the positions set forth in Arch Wireless Holdings, Inc. dated May
24, 2002 and Algoma Steel Inc. dated December 23, 2002) relating to the release
of property or securities from the Lien hereof and of the Collateral Documents
to be complied with. Any certificate or opinion required by Section 314(d) of
the TIA may be made by an officer of the Company, except in cases in which
Section

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314(d) of the TIA requires that such certificate or opinion be made by an
independent person.

         (c) Upon compliance with the foregoing provisions of this Section, the
Trustee shall pay on Company request an amount of Trust Moneys of the character
aforesaid equal to the amount of the expenditures or costs stated in the
Officers' Certificate required by paragraph (A) of subsection (1) of this
Section 11.03. Unless the Collateral Agent and Trustee shall otherwise agree,
all insurance covering the Collateral must name the Collateral Agent and Trustee
as an insured, but without liability for premiums, calls or assessments, and all
amounts of whatsoever nature payable under any insurance (to the extent covering
the Collateral) must be payable to the Collateral Agent and Trustee for
distribution, first to itself and thereafter to the relevant Guarantor, as owner
of such Collateral or others as their interests may appear. All amounts payable
under any insurance with respect to a Mortgaged Vessel involving any damage to a
Mortgaged Vessel not constituting an actual or constructive or an agreed or
compromised total loss, the insurers may pay directly for the repair, salvage or
other charges involved or, if the relevant Guarantor shall have first fully
repaired the damage or paid all of the salvage or other charges, may pay the
relevant Guarantor as reimbursement therefore; provided, however, that if such
amounts (including any franchise or deductible) are in excess of one million
United States dollars ($1,000,000), the insurers shall make such payment to the
Collateral Agent and Trustee. All payments of insurance in respect of Collateral
shall be made to the Collateral Agent and the Trustee if an Event of Default
shall have occurred or any event which with the giving of notice or the lapse of
time, or both, would constitute an Event of Default.

         Section  11.04. Powers Exercisable Notwithstanding Event of Default.
IN case an Event of Default shall have occurred and shall be continuing, the
Company, while in possession of the Collateral (other than cash, Cash
Equivalents, securities and other personal property held by, or required to be
deposited or pledged with, the Trustee hereunder or under the Collateral
Documents), may do any of the things enumerated in Section 11.02 and Section
11.03 if the Trustee in its discretion, or the Holders of a majority in
aggregate principal amount at maturity of the outstanding Notes, by appropriate
action of such Holders, shall consent to such action, in which event any
certificate filed under any of such Sections shall omit the statement to the
effect that no Event of Default has occurred and is continuing. This Section
11.04 shall not apply, however, during the continuance of an Event of Default of
the type specified in Section 6.01(1) or Section 6.01 (2).

         Section  11.05. Powers Exercisable by Trustee or Receiver. In case the
Collateral (other than any cash, Cash Equivalents, securities and other personal
property held by, or required to be deposited or pledged with, the Trustee
hereunder or under the Collateral Documents) shall be in the possession of a
receiver or trustee lawfully appointed, the powers hereinbefore in this Article
11

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conferred upon the Company and the Guarantors with respect to the withdrawal or
application of Trust Moneys may be exercised by such receiver or trustee, in
which case a certificate signed by such receiver or trustee shall be deemed the
equivalent of any Officers' Certificate required by this Article 11. Such
certificate need not state that no Event of Default has occurred and is
continuing. If the Trustee shall be in possession of any of the Collateral
hereunder or under the Collateral Documents, such powers may be exercised by the
Trustee in its sole discretion.

         Section  11.06. Disposition of Notes Retired. All Notes received by
the Trustee and for whose purchase Trust Moneys are applied under this Article
11, if not otherwise canceled, shall be promptly canceled and disposed of by the
Trustee in its customary manner.

         Section  11.07. Investment and Use of Trust Moneys. (a) Except as may
be otherwise required by the terms of the Collateral Documents or Collateral
Agency Agreement, all or any part of any Trust Moneys held by the Trustee
hereunder (except such as may be held for the account of any particular Notes)
or by the Collateral Agent on behalf of the Trustee, shall from time to time at
the direction of the Company be invested or reinvested in Cash Equivalents.
Unless an Event of Default occurs and is continuing, any interest on such Cash
Equivalents (in excess of any accrued interest paid at the time of purchase)
which may be received by the Trustee or the Collateral Agent, as appropriate,
shall be paid periodically to the Company. Such Cash Equivalents shall be held
by the Trustee as a part of the Collateral, subject to the same provisions
hereof as the cash used by it to purchase such Cash Equivalents. The Trustee
shall not be liable or responsible for any loss resulting from such investments
or sales except only for its own negligent action, its own negligent failure to
act or its own willful misconduct in complying with this Section 11.07.

         (b) If the Company or any Guarantor shall fail to perform any of its
covenants in this Indenture or under any Collateral Document, the Trustee may
(but shall not be required to), direct the Collateral Agent to, at any time and
from time to time, use, apply and advance any Trust Moneys held by it under this
Article 11 or make advances to effect performance of any such covenant on behalf
of the Company or such Guarantor as contemplated by this Indenture or the
Collateral Documents; provided, however, that the Trustee or the Collateral
Agent, as appropriate, shall not be required under any circumstances to expend
its own funds; provided further, however, that all moneys so used or advanced by
the Trustee, together (in the case of funds advanced by the Trustee) with
interest at the rate borne by the Notes shall be repaid by the Company or the
applicable Guarantor upon demand and such advances shall be secured under the
Collateral Documents prior to the Notes. For repayment of all such advances the
Trustee shall have the right to use and apply any Trust Moneys at any time held
by it under Article 11 but no such use of Trust Moneys or advance shall relieve
the Company or such Guarantor from any Default.

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         (c) Notwithstanding any other provision of this Indenture or any of the
Collateral Documents, the Trustee shall promptly notify the Company of any
receipt by the Trustee or the Collateral Agent of any Trust Moneys from any
source other than any direct payment by the Company or any of the Guarantors.

                                   ARTICLE 12
                                   GUARANTIES

         Section  12.01. The Guaranties. Subject to the provisions of this
Article, each Guarantor hereby irrevocably and unconditionally guarantees,
jointly and severally, the full and punctual payment (whether at Stated
Maturity, upon redemption, purchase pursuant to an Offer to Purchase or
acceleration, or otherwise) of the principal of, premium, if any, and interest
on, and all other amounts payable under, each Note, and the full and punctual
payment of all other amounts payable by the Company under this Indenture. Upon
failure by the Company to pay punctually any such amount, each Guarantor shall
forthwith on demand pay the amount not so paid at the place and in the manner
specified in this Indenture.

         Section  12.02. Guaranty Unconditional. Subject to the provisions of
Section 12.09, the obligations of each Guarantor hereunder are unconditional and
absolute and, without limiting the generality of the foregoing, will not be
released, discharged or otherwise affected by

                  (1)      any extension, renewal, settlement, compromise,
         waiver or release in respect of any obligation of the Company under
         this Indenture or any Note, by operation of law or otherwise;

                  (2)      any modification or amendment of or supplement to
         this Indenture or any Note;

                  (3)      any change in the corporate existence, structure or
         ownership of the Company, or any insolvency, bankruptcy, reorganization
         or other similar proceeding affecting the Company or its assets or any
         resulting release or discharge of any obligation of the Company
         contained in this Indenture or any Note;

                  (4)      the existence of any claim, set-off or other rights
         which the Guarantor may have at any time against the Company, the
         Trustee or any other Person, whether in connection with this Indenture
         or any unrelated transactions, provided that nothing herein prevents
         the assertion of any such claim by separate suit or compulsory
         counterclaim;

                  (5)      any invalidity or unenforceability relating to or
         against the Company for any reason of this Indenture or any Note, or
         any provision

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         of applicable law or regulation purporting to prohibit the payment by
         the Company of the principal of or interest on any Note or any other
         amount payable by the Company under this Indenture; or

                  (6)      any other act or omission to act or delay of any kind
         by the Company, the Trustee or any other Person or any other
         circumstance whatsoever which might, but for the provisions of this
         paragraph, constitute a legal or equitable discharge of or defense to
         such Guarantor's obligations hereunder.

         Section  12.03. Discharge; Reinstatement. Subject to the provisions of
Section 12.09, (i) each Guarantor's obligations hereunder will remain in full
force and effect until the principal of, premium, if any, and interest on the
Notes and all other amounts payable by the Company under this Indenture have
been paid in full and (ii) if at any time any payment of the principal of,
premium, if any, or interest on any Note or any other amount payable by the
Company under this Indenture is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of the Company or
otherwise, each Guarantor's obligations hereunder with respect to such payment
will be reinstated as though such payment had been due but not made at such
time.

         Section  12.04. Waiver by the Guarantors. Each Guarantor irrevocably
waives acceptance hereof, presentment, demand, protest and any notice not
provided for herein, as well as any requirement that at any time any action be
taken by any Person against the Company or any other Person.

         Section  12.05. Subrogation and Contribution. Upon making any payment
with respect to any obligation of the Company under this Article, the Guarantor
making such payment will be subrogated to the rights of the payee against the
Company with respect to such obligation, provided that the Guarantor may not
enforce either any right of subrogation, or any right to receive payment in the
nature of contribution, or otherwise, from any other Guarantor, with respect to
such payment so long as any amount payable by the Company hereunder or under the
Notes remains unpaid.

         Section  12.06. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Company under this Indenture or the Notes
is stayed upon the insolvency, bankruptcy or reorganization of the Company, all
such amounts otherwise subject to acceleration under the terms of this Indenture
are nonetheless payable by the Guarantors hereunder forthwith on demand by the
Trustee or the Holders.

         Section  12.07. Limitation on Amount of Guaranty. Notwithstanding
anything to the contrary in this Article, each Guarantor, and by its acceptance
of Notes, each Holder, hereby confirms that it is the intention of all such
parties that the Note Guaranty of such Guarantor not constitute a fraudulent
conveyance or transfer under applicable fraudulent conveyance or

                                      100

<PAGE>

transfer provisions of the United States Bankruptcy Code or any comparable
provision of foreign or state law. To effectuate that intention, the Trustee,
the Holders and the Guarantors hereby irrevocably agree that the obligations of
each Guarantor under its Note Guaranty are limited to the maximum amount that
would not render the Guarantor's obligations subject to avoidance under
applicable fraudulent conveyance or transfer provisions of the United States
Bankruptcy Code or any comparable provision of foreign or state law.

         Section  12.08. Execution and Delivery of Guaranty. The execution by
each Guarantor of this Indenture (or a supplemental indenture in the form of
Exhibit B) evidences the Note Guaranty of such Guarantor, whether or not the
person signing as an officer of the Guarantor still holds that office at the
time of authentication of any Note. The delivery of any Note by the Trustee
after authentication constitutes due delivery of the Note Guaranty set forth in
this Indenture on behalf of each Guarantor.

         Section  12.09. Release of Guaranty. The Note Guaranty of a Guarantor
will terminate upon

                  (1)      a sale or other disposition (including by way of
         consolidation or merger) of the Guarantor or the sale or disposition of
         the Guarantor's assets substantially as an entirety (other than to the
         Company or a Restricted Subsidiary) or the dissolution of the
         Guarantor, in each case as permitted by this Indenture,

                  (2)      the designation in accordance with this Indenture of
         the Guarantor as an Unrestricted Subsidiary, or

                  (3)      defeasance or discharge of the Notes, as provided in
         Article 8.

         Upon delivery by the Company to the Trustee of an Officers' Certificate
and an Opinion of Counsel to the foregoing effect, the Trustee will execute any
documents reasonably required in order to evidence the release of the Guarantor
from its obligations under its Note Guaranty.

                                   ARTICLE 13
                                  MISCELLANEOUS

         Section  13.01. Trust Indenture Act of 1939. This Indenture shall
incorporate and be governed by the provisions of the Trust Indenture Act that
are required to be part of and to govern indentures qualified under the Trust
Indenture Act.

                                      101

<PAGE>

         Section  13.02. Noteholder Communications; Noteholder Actions. (a) The
rights of Holders to communicate with other Holders with respect to this
Indenture or the Notes are as provided by the Trust Indenture Act, and the
Company and the Trustee shall comply with the requirements of Trust Indenture
Act Sections 312(a) and 312(b). Neither the Company nor the Trustee will be held
accountable by reason of any disclosure of information as to names and addresses
of Holders made pursuant to the Trust Indenture Act.

                  (b) (1)Any request, demand, authorization, direction, notice,
         consent to amendment, supplement or waiver or other action provided by
         this Indenture to be given or taken by a Holder (an "act") may be
         evidenced by an instrument signed by the Holder delivered to the
         Trustee. The fact and date of the execution of the instrument, or the
         authority of the person executing it, may be proved in any manner that
         the Trustee deems sufficient.

                  (2)      The Trustee may make reasonable rules for action by
         or at a meeting of Holders, which will be binding on all the Holders.

         (c)      Any act by the Holder of any Note binds that Holder and every
subsequent Holder of a Note that evidences the same debt as the Note of the
acting Holder, even if no notation thereof appears on the Note. Subject to
paragraph (d), a Holder may revoke an act as to its Notes, but only if the
Trustee receives the notice of revocation before the date the amendment or
waiver or other consequence of the act becomes effective.

         (d)      The Company may, but is not obligated to, fix a record date
(which need not be within the time limits otherwise prescribed by Trust
Indenture Act Section 316(c)) for the purpose of determining the Holders
entitled to act with respect to any amendment or waiver or in any other regard,
except that during the continuance of an Event of Default, only the Trustee may
set a record date as to notices of default, any declaration or acceleration or
any other remedies or other consequences of the Event of Default. If a record
date is fixed, those Persons that were Holders at such record date and only
those Persons will be entitled to act, or to revoke any previous act, whether or
not those Persons continue to be Holders after the record date. No act will be
valid or effective if such act is taken more than 90 days after the record date,
if any, set for that act pursuant to this Section 13.02(d).

         Section  13.03. Notices. (a) Any notice or communication to the
Company will be deemed given if in writing (i) when delivered in person or (ii)
five days after mailing when mailed by first class mail, or (iii) when sent by
facsimile transmission, with transmission confirmed. Notices or communications
to a Guarantor will be deemed given if given to the Company. Any notice to the
Trustee will be effective only upon receipt. In each case the notice or
communication should be addressed as follows:

                                      012

<PAGE>

         if to the Company:

                  J. Ray McDermott, S.A.
                  757 North Eldridge Parkway
                  Houston, Texas 77079
                  Telecopier No.: (281) 870-5015
                  Attention: General Counsel

         if to the Trustee or the Collateral Agent:

                  The Bank of New York
                  101 Barclay Street, Floor 8W
                  New York, New York 10286
                  Telecopier No.: (212) 815-5707
                  Attention: Corporate Trust Administration

The Company or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.

         (b)      Except as otherwise expressly provided with respect to
published notices, any notice or communication to a Holder will be deemed given
when mailed to the Holder at its address as it appears on the Register by first
class mail or, as to any Global Note registered in the name of DTC or its
nominee, as agreed by the Company, the Trustee and DTC. Copies of any notice or
communication to a Holder, if given by the Company, will be mailed to the
Trustee at the same time. Defect in mailing a notice or communication to any
particular Holder will not affect its sufficiency with respect to other Holders.

         (c)      Where this Indenture provides for notice, the notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and the waiver will be the equivalent of the notice. Waivers
of notice by Holders must be filed with the Trustee, but such filing is not a
condition precedent to the validity of any action taken in reliance upon such
waivers.

         Section  13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any action
under this Indenture, the Company will furnish to the Trustee such certificates
and opinions as may be required under the Trust Indenture Act. Each such
certificate or opinion shall be given in the form of an Officers' Certificate,
if to be given by an officer of the Company, or an Opinion of Counsel, if to be
given by counsel, and shall comply with the requirements of the Trust Indenture
Act and any applicable requirements set forth in this Indenture.

         Section  13.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance by the Company with a
condition or covenant provided for in this Indenture must include:

                                      103

<PAGE>

                  (1)      a statement that each person signing the certificate
         or opinion has read the covenant or condition and the related
         definitions;

                  (2)      a brief statement as to the nature and scope of the
         examination or investigation upon which the statement or opinion
         contained in the certificate or opinion is based;

                  (3)      a statement that, in the opinion of each such person,
         that person has made such examination or investigation as is necessary
         to enable the person to express an informed opinion as to whether or
         not such covenant or condition has been complied with; and

                  (4)      a statement as to whether or not, in the opinion of
         each such person, such condition or covenant has been complied with,
         provided that an Opinion of Counsel may rely on an Officers'
         Certificate or certificates of public officials with respect to matters
         of fact.

         Section  13.06. Payment Date Other Than a Business Day. If any payment
with respect to a payment of any principal of, premium, if any, or interest on
any Note (including any payment to be made on any date fixed for redemption or
purchase of any Note) is due on a day which is not a Business Day, then the
payment need not be made on such date, but may be made on the next Business Day
with the same force and effect as if made on such date, and no interest will
accrue for the intervening period.

         Section  13.07. Governing Law. This Indenture, including any Note
Guaranties, and the Notes shall be governed by, and construed in accordance
with, the laws of the State of New York.

         Section  13.08. No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture or loan or debt
agreement of the Company or any Subsidiary of the Company, and no such indenture
or loan or debt agreement may be used to interpret this Indenture.

         Section  13.09. Successors. All agreements of the Company or any
Guarantor in this Indenture and the Notes will bind its successors. All
agreements of the Trustee in this Indenture will bind its successor.

         Section  13.10. Duplicate Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.

         Section  13.11. Separability. In case any provision in this Indenture
or in the Notes is invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or
impaired thereby.

                                      101

<PAGE>

         Section  13.12. Table of Contents and Headings. The Table of Contents,
Cross-Reference Table and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part of this Indenture and in no way modify or restrict any of the
terms and provisions of this Indenture.

         Section  13.13. No Liability of Directors, Officers, Employees,
Incorporators, Members and Stockholders. No director, officer, employee,
incorporator, member or stockholder of the Company or any Guarantor, as such,
will have any liability for any obligations of the Company or such Guarantor
under the Notes, any Note Guaranty or this Indenture or for any claim based on,
in respect of, or by reason of, such obligations. Each Holder of Notes by
accepting a Note waives and releases all such liability. This waiver and release
are part of the consideration for issuance of the Notes.

         Section  13.14. Submission to Jurisdiction. To the fullest extent
permitted by applicable law, the Company hereby irrevocably and unconditionally
submits to the jurisdiction of any New York State or United States Federal court
sitting in New York City over any suit, action or proceeding arising out of or
relating to this Indenture or any Note. The Company irrevocably and
unconditionally waives, to the fullest extent permitted by applicable law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in such a court and any claim that any
such suit, action or proceeding brought in such a court has been brought in an
inconvenient forum. To the extent that the Company has or hereafter may acquire
any immunity from jurisdiction of any court or from any legal process with
respect to itself or its property, the Company irrevocably waives, to the
fullest extent permitted by applicable law, such immunity in respect of its
obligations hereunder or under any Note. The Company agrees that final judgment
in any such suit, action or proceeding brought in such a court shall be
conclusive and binding upon the Company and, to the extent permitted by
applicable law, may be enforced in any court to the jurisdiction of which the
Company is subject by a suit upon such judgment or in any manner provided by
applicable law; provided that service of process is effected upon the Company in
the manner specified in the following subsection or as otherwise permitted by
applicable law.

         Section  13.15. Appointment of Agent. As long as any of the Notes
remain outstanding, the Company will at all times have an authorized agent in
the United States, upon whom process may be served in any legal action or
proceeding arising out of or relating to this Indenture or any Note. Service of
process upon such agent and written notice of such service mailed or delivered
to the Company shall, to the fullest extent permitted by applicable law, be
deemed in every respect effective service of process upon the Company in any
such legal action or proceeding. The Company hereby irrevocably appoints CT
Corporation System as its agent for such purpose, and covenants and agrees that
service of process in any suit, action or proceeding may be made upon it at the
office of such agent at 111

                                      105

<PAGE>

Eighth Avenue, 13th Floor, New York, New York 10011. Notwithstanding the
foregoing, the Company may, with prior written notice to the Trustee, terminate
the appointment of CT Corporation System and appoint another agent for the above
purposes so that the Company shall at all times have an agent for the above
purposes in the United States.

                                      106

<PAGE>

                                   SIGNATURES

         IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the date first written above.

                                 J. RAY MCDERMOTT, S.A.
                                 as Issuer

                                      By:    /s/Francis S. Kalman
                                             -----------------------------------
                                             Name: Francis S. Kalman
                                             Title: Executive Vice President
                                                   and Chief Financial Officer

<PAGE>

                                 THE BANK OF NEW YORK
                                 as Trustee

                                 By: /s/Remo Reale
                                     -----------------------------------
                                     Name:  Remo Reale
                                     Title: Vice President

<PAGE>

                                     CHARTERING COMPANY (SINGAPORE) PTE.
                                       LTD.
                                     EASTERN MARINE SERVICES, INC.
                                     HYDRO MARINE SERVICES, INC.
                                     J. RAY MCDERMOTT, INC.
                                     J. RAY MCDERMOTT (AUST.) HOLDING PTY.
                                        LIMITED
                                     J. RAY MCDERMOTT ENGINEERING
                                        HOLDINGS, INC.
                                     J. RAY MCDERMOTT FAR EAST, INC.
                                     J. RAY MCDERMOTT HOLDINGS, INC.
                                     J. RAY MCDERMOTT INTERNATIONAL, INC.
                                     J. RAY MCDERMOTT INTERNATIONAL
                                        SERVICES LIMITED
                                     J. RAY MCDERMOTT INTERNATIONAL
                                        VESSELS, LTD.
                                     J. RAY MCDERMOTT INVESTMENTS B.V.
                                     J. RAY MCDERMOTT MIDDLE EAST, INC.
                                     MCDERMOTT CASPIAN CONTRACTORS,
                                         NC.
                                     MCDERMOTT FAR EAST, INC.
                                     MCDERMOTT GULF OPERATING
                                         COMPANY, INC.
                                     MCDERMOTT INDUSTRIES (AUST.) PTY
                                         LIMITED
                                     MCDERMOTT INTERNATIONAL MARINE
                                         INVESTMENTS N.V.
                                     MCDERMOTT OLD JV OFFICE, INC.
                                     MCDERMOTT SOUTH EAST ASIA PTE. LTD.
                                     MCDERMOTT WEST INDIES COMPANY
                                     MENTOR ENGINEERING CONSULTANTS
                                         LIMITED
                                     MENTOR SUBSEA TECHNOLOGY SERVICES,
                                         INC.
                                     NORTH ATLANTIC VESSEL, INC.
                                     OPI VESSELS, INC.
                                     SPARTEC, INC.
                                     VARSY INTERNATIONAL N.V.

                                     By:    /s/Francis S. Kalman
                                           ----------------------------------
                                            Name: Francis S. Kalman
                                            Title: Authorized Representative

<PAGE>

                                 FIRST EMIRATES TRADING CORPORATION
                                 J. RAY MCDERMOTT DIVING
                                    INTERNATIONAL, INC.
                                 J. RAY MCDERMOTT EASTERN
                                    HEMISPHERE LIMITED
                                 J. RAY MCDERMOTT ENGINEERING, LLC
                                 J. RAY MCDERMOTT UNDERWATER
                                    SERVICES, INC.
                                 MCDERMOTT MARINE CONSTRUCTION
                                    LIMITED
                                 MCDERMOTT MARINE UK LIMITED
                                 MCDERMOTT OVERSEAS, INC.

                                 By:   /s/James R. Easter
                                       ---------------------------------
                                       Name: James R. Easter
                                       Title:Authorized Representative

<PAGE>

                                      MCDERMOTT HOLDINGS (U.K.) LIMITED

                                      By:    /s/Rudolph D. Hargis Jr.
                                             -----------------------------------
                                             Name: Rudolph D. Hargis Jr.
                                             Title: Authorized Representative

<PAGE>

                        J. RAY MCDERMOTT CONTRACTORS, INC.
                        MCDERMOTT OFFSHORE SERVICES
                         COMPANY, INC.
                        OCEANIC RED SEA COMPANY

                        By:    /s/Liane K. Hinrichs
                               ---------------------------------
                               Name: Liane K. Hinrichs
                               Title: Authorized Representative

<PAGE>

                                                                       EXHIBIT A

                                 [FACE OF NOTE]

                             J. RAY MCDERMOTT, S.A.

11% Senior Secured Note Due 2013

                                                   [CUSIP]  [CINS] _____________

No.                                                                $____________

         J. Ray McDermott, S.A., a Panamanian corporation (the "COMPANY", which
term includes any successor under the Indenture hereinafter referred to), for
value received, promises to pay to ____________________, or its registered
assigns, the principal sum of ____________ DOLLARS ($______) [or such other
amount as indicated on the Schedule of Exchange of Notes attached hereto] on
December 15, 2013.

         Interest Rate:....11% per annum.

         Interest Payment Dates: June 15 and December 15, commencing June 15,
2004.

         Regular Record Dates: June 1 and December 1.

         Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which will for all purposes have the same effect as
if set forth at this place.

                                      A-1

<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.

Date:                            J. RAY MCDERMOTT, S.A.

                                 By:  __________________________________________
                                      Name:
                                      Title:

                                      A-2

<PAGE>

                (Form of Trustee's Certificate of Authentication)

         This is one of the 11% Senior Secured Notes Due 2013 described in the
Indenture referred to in this Note.

                                                THE BANK OF NEW YORK, as Trustee

                                                By: ____________________________
                                                     Authorized Signatory

                                      A-3

<PAGE>

                             [REVERSE SIDE OF NOTE]

                             J. RAY MCDERMOTT, S.A.

11% Senior Secured Note Due 2013

1.       Principal and Interest.

         The Company promises to pay the principal of this Note on December 15,
2013.

         The Company promises to pay interest on the principal amount of this
Note on each interest payment date, as set forth on the face of this Note, at
the rate of 11% per annum (subject to adjustment as provided below).

         Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the June 1 or December 1 immediately preceding
the interest payment date) on each interest payment date, commencing June 15,
2004.

         The Holder of this Note is entitled to the benefits of the Registration
Rights Agreement, dated December 9, 2003, between the Company and the Initial
Purchasers named therein (the "REGISTRATION RIGHTS AGREEMENT"). In the event
that neither the Exchange Offer Registration Statement (as defined in the
Registration Rights Agreement) nor the Shelf Registration Statement (as defined
in the Registration Rights Agreement) is declared effective on or prior to June
6, 2004 (the "EFFECTIVENESS DEADLINE"), the interest rate on this Note will
increase by a rate of 0.50% per annum until the Exchange Offer Registration
Statement or the Shelf Registration Statement is declared effective by the
Commission. Unless the Shelf Registration Statement shall have become effective,
in the event that the Exchange Offer is not consummated on or prior to July 6,
2004, or 30 days after the Effectiveness Deadline, the interest rate on this
Note will increase by a rate of 0.50% per annum until the Exchange Offer is
consummated; provided, however, that on the effectiveness of the Shelf
Registration Statement, any such increased interest will cease to accrue. The
interest rate on this Note will not increase by more than 0.50% per annum
notwithstanding the Company's failure to meet more than one of these
requirements.

         Interest on this Note will accrue from the most recent date to which
interest has been paid on this Note (or, if there is no existing default in the
payment of interest and if this Note is authenticated between a regular record
date and the next interest payment date, from such interest payment date) or, if
no interest has been paid, from the date of issuance. Interest will be computed
in the basis of a 360-day year of twelve 30-day months.

         The Company will pay interest on overdue principal, premium, if any,
and interest at a rate per annum that is 2% in excess of the rate of interest
that is

                                      A-4

<PAGE>

 applicable to the Notes. Interest not paid when due and any interest on
principal, premium or interest not paid when due will be paid to the Persons
that are Holders on a special record date, which will be the 15th day preceding
the date fixed by the Company for the payment of such interest, whether or not
such day is a Business Day. At least 15 days before a special record date, the
Company will send to each Holder and to the Trustee a notice that sets forth the
special record date, the payment date and the amount of interest to be paid.

2.       Indentures; Note Guaranty.

         This is one of the Notes issued under an Indenture dated as of December
9, 2003 (as amended from time to time, the "INDENTURE"), among the Company, the
Guarantors party thereto and The Bank of New York, as Trustee. Capitalized terms
used herein are used as defined in the Indenture unless otherwise indicated. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act. The Notes are subject to
all such terms, and Holders are referred to the Indenture and the Trust
Indenture Act for a statement of all such terms. To the extent permitted by
applicable law, in the event of any inconsistency between the terms of this Note
and the terms of the Indenture, the terms of the Indenture will control.

         The Notes are general unsecured obligations of the Company. The
Indenture limits the original aggregate principal amount of the Notes to
$200,000,000. This Note is guaranteed, as set forth in the Indenture.

3.       Redemption and Repurchase; Discharge Prior to Redemption or Maturity.

         This Note is subject to optional redemption, and may be the subject of
an Offer to Purchase, as further described in the Indenture. There is no sinking
fund or mandatory redemption applicable to this Note.

         If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Notes to redemption or maturity, the Company
may in certain circumstances be discharged from the Indenture and the Notes or
may be discharged from certain of its obligations under certain provisions of
the Indenture.

4.       Registered Form; Denominations; Transfer; Exchange.

         The Notes are in registered form without coupons in denominations of
$1,000 principal amount and any multiple of $1,000 in excess thereof. A Holder
may register the transfer or exchange of Notes in accordance with the Indenture.
The Trustee may require a Holder to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. Pursuant to the Indenture, there are certain periods during which

                                      A-5

<PAGE>

the Trustee will not be required to issue, register the transfer of or exchange
any Note or certain portions of a Note.

5.       Defaults and Remedies.

         If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding may declare all the Notes to be due and
payable. If a bankruptcy or insolvency default with respect to the Company
occurs and is continuing, the Notes automatically become due and payable.
Holders may not enforce the Indenture or the Notes except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Notes. Subject to certain limitations, Holders of
a majority in aggregate principal amount of the Notes then outstanding may
direct the Trustee in its exercise of remedies.

6.       Amendment and Waiver.

         Subject to certain exceptions, the Indenture and the Notes may be
amended, or default may be waived, with the consent of the Holders of a majority
in aggregate principal amount of the Notes then outstanding. Without notice to
or the consent of any Holder, the Company and the Trustee may amend or
supplement the Indenture or the Notes to, among other things, cure any
ambiguity, defect or inconsistency.

7.       Authentication.

         This Note is not valid until the Trustee (or Authenticating Agent)
signs the certificate of authentication on the other side of this Note.

8.       Governing Law.

         This Note shall be governed by, and construed in accordance with, the
laws of the State of New York.

9.       Abbreviations.

         Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A/ (= Uniform Gifts to Minors
Act).

         The Company will furnish a copy of the Indenture to any Holder upon
written request and without charge.

                                      A-6

<PAGE>

                            [FORM OF TRANSFER NOTICE]

         FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto

Insert Taxpayer Identification No.

            ___________________________________________________________________
            ___________________________________________________________________
            ___________________________________________________________________
            Please print or typewrite name and address including zip code of
            assignee
            ___________________________________________________________________
            ___________________________________________________________________
            ___________________________________________________________________

     the within Note and all rights thereunder, hereby irrevocably constituting
     and appointing

     __________________________________________________________________________
     __________________________________________________________________________
attorney to transfer said Note on the books of the Company with full power of
substitution in the premises.

                                      A-7

<PAGE>

[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES BEARING A RESTRICTED
LEGEND]

         In connection with any transfer of this Note occurring prior to
______________, the undersigned confirms that such transfer is made without
utilizing any general solicitation or general advertising and further as
follows:

                                    Check One

[ ]      (1) This Note is being transferred to a "qualified institutional buyer"
in compliance with Rule 144A under the Securities Act of 1933, as amended and
certification in the form of Exhibit F to the Indenture is being furnished
herewith.

[ ]      (2) This Note is being transferred to a Non-U.S. Person in compliance
with the exemption from registration under the Securities Act of 1933, as
amended, provided by Regulation S thereunder, and certification in the form of
Exhibit E to the Indenture is being furnished herewith.

                                       or

[ ]      (3) This Note is being transferred other than in accordance with (1)
or (2) above and documents are being furnished which comply with the conditions
of transfer set forth in this Note and the Indenture.

         If none of the foregoing boxes is checked, the Trustee is not obligated
to register this Note in the name of any Person other than the Holder hereof
unless and until the conditions to any such transfer of registration set forth
herein and in the Indenture have been satisfied.

Date:
        _________________________
                                     ___________________________________________
                                     Seller
                                     By ________________________________________

                           NOTICE: The signature to this assignment must
                           correspond with the name as written upon the face of
                           the within-mentioned instrument in every particular,
                           without alteration or any change whatsoever.

                                      A-8

<PAGE>

Signature Guarantee:(5)

                          By _________________________________________
                          To be executed by an executive officer

_______________________

         (5)Signatures must be guaranteed by an "ELIGIBLE GUARANTOR INSTITUTION"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Association Medallion Program
("STAMP") or such other "SIGNATURE GUARANTEE PROGRAM" as may be determined by
the Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.

                                      A-9

<PAGE>

                       OPTION OF HOLDER TO ELECT PURCHASE

         If you wish to have all of this Note purchased by the Company pursuant
to Section 4.13 or Section 4.14 of the Indenture, check the box:9

         If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.13 or Section 4.14 of the Indenture, state the amount (in
original principal amount) below:

                  $___________________.

Date:_____________

Your Signature:______________________________

(Sign exactly as your name appears on the other side of this Note)

Signature Guarantee:(1)______________________________

__________________

         (5)Signatures must be guaranteed by an "ELIGIBLE GUARANTOR INSTITUTION"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Association Medallion Program
("STAMP") or such other "SIGNATURE GUARANTEE PROGRAM" as may be determined by
the Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.

                                      A-10

<PAGE>

                         SCHEDULE OF EXCHANGES OF NOTES

The following exchanges of a part of this Global Note for Physical Notes or a
part of another Global Note have been made:

<TABLE>
<CAPTION>
                     AMOUNT OF DECREASE   AMOUNT OF INCREASE   PRINCIPAL AMOUNT OF
                        IN PRINCIPAL         IN PRINCIPAL       THIS GLOBAL NOTE
                           AMOUNT               AMOUNT          FOLLOWING SUCH           SIGNATURE OF
                       OF THIS GLOBAL      OF THIS GLOBAL        DECREASE (OR        AUTHORIZED  OFFICER OF
 DATE OF EXCHANGE           NOTE               NOTE                INCREASE)                TRUSTEE
-----------------    ------------------   ------------------   -----------------     ----------------------
<S>                  <C>                  <C>                  <C>                   <C>
</TABLE>

                                      A-11

<PAGE>

                                                                       EXHIBIT B

                             SUPPLEMENTAL INDENTURE

                          dated as of __________, ____

                                      among

                             J. RAY MCDERMOTT, S.A.,

                          The Guarantor(s) Party Hereto

                                       and

                              THE BANK OF NEW YORK,
                                   as Trustee

                             ______________________

                                       11%
                            Senior Secured Notes due
                                      2013

<PAGE>

         THIS SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), entered
into as of __________, ____, among J. Ray McDermott, S.A., a Panamanian
corporation (the "COMPANY"), [insert each Guarantor executing this Supplemental
Indenture and its jurisdiction of incorporation] (each an "Undersigned") and The
Bank of New York, as trustee (the "TRUSTEE").

                                    RECITALS

         WHEREAS, the Company, the Guarantors party thereto and the Trustee
entered into the Indenture, dated as of December 9, 2003 (the "INDENTURE"),
relating to the Company's 11% Senior Secured Notes Due 2013 (the "NOTES");

         WHEREAS, as a condition to the Trustee entering into the Indenture and
the purchase of the Notes by the Holders, the Company agreed, under certain
circumstances described in the Indenture, to cause certain newly acquired or
created Restricted Subsidiaries to provide Note Guaranties.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and intending to be legally bound, the parties to this
Supplemental Indenture hereby agree as follows:

         Section 1. Capitalized terms used herein and not otherwise defined
herein are used as defined in the Indenture.

         Section 2. Each Undersigned, by its execution of this Supplemental
Indenture, agrees to be a Guarantor under the Indenture and to be bound by the
terms of the Indenture applicable to Guarantors, including, but not limited to,
Article 12 thereof.

         Section 3. This Supplemental Indenture shall be governed by and
construed in accordance with the laws of the State of New York.

         Section 4. This Supplemental Indenture may be signed in various
counterparts which together will constitute one and the same instrument.

         Section 5. This Supplemental Indenture is an amendment supplemental to
the Indenture and the Indenture and this Supplemental Indenture will henceforth
be read together.

                                      B-1

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.

                                          J. RAY MCDERMOTT, S.A., as Issuer

                                          By: __________________________________

                                              Name:
                                              Title:

                                          [GUARANTOR]

                                          By: __________________________________

                                              Name:
                                              Title:

                                          THE BANK OF NEW YORK, as Trustee

                                          By: __________________________________

                                              Name:
                                              Title:

                                      B-2

<PAGE>

                                                                       EXHIBIT C

                                RESTRICTED LEGEND

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE ACQUIRER (1) REPRESENTS THAT (A)
IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A "QUALIFIED INSTITUTIONAL BUYER"
(WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) AND THAT IT EXERCISES
SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH SUCH ACCOUNT, (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (WITHIN THE MEANING OF RULE 501(a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR
(C) IT IS NOT A U.S. PERSON (WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT) AND (2) AGREES FOR THE BENEFIT OF J. RAY MCDERMOTT, S.A. THAT IT
WILL NOT OFFER, SELL PLEDGE OR OTHERWISE TRANSFER THIS NOTE OR ANY BENEFICIAL
INTEREST HEREIN, EXCEPT IN ACCORDANCE WITH THE SECURITIES ACT AND ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND ONLY (A) TO J. RAY
MCDERMOTT, S.A., (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BECOME
EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D) IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT, (E) IN A PRINCIPAL AMOUNT OF NOT LESS THAN $100,000, TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, DELIVERS TO THE TRUSTEE A DULY
COMPLETED AND SIGNED CERTIFICATE (THE FORM OF WHICH MAY BE OBTAINED FROM THE
TRUSTEE) RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE, OR (F) PURSUANT
TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
OR ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.

PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH (2)(C) ABOVE OR
(2)(D) ABOVE, A DULY COMPLETED AND SIGNED CERTIFICATE (THE FORM OF WHICH MAY BE
OBTAINED FROM THE TRUSTEE) MUST BE DELIVERED TO THE TRUSTEE. PRIOR TO THE
REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH (2)(E) OR (F) ABOVE, THE COMPANY
RESERVES THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS,
CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO
DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION IS MADE
AS TO THE AVAILABILITY OF ANY RULE 144 EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.

                                      C-1

<PAGE>

                                                                       EXHIBIT D

                                   DTC LEGEND

         UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

         [TRANSFERS OF THIS GLOBAL NOTE ARE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE ARE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE TRANSFER PROVISIONS OF THE INDENTURE.]

                                       D1

<PAGE>

                                                                       EXHIBIT E

                            Regulation S Certificate

                                                               __________,______

The Bank of New York
101 Barclay Street, Floor 8W
New York, New York 10286
Attention: Corporate Trust Administration

        Re:    J. Ray McDermott, S.A.
               11% Senior Secured
               Notes due 2013 (the "NOTES")
               Issued under the Indenture (the "INDENTURE") dated as
               as of December 9, 2003 relating to the Notes

Ladies and Gentlemen:

         Terms are used in this Certificate as used in Regulation S ("Regulation
S") under the Securities Act of 1933, as amended (the "Securities Act"), except
as otherwise stated herein.

         [CHECK A OR B AS APPLICABLE.]

[ ] A.   This Certificate relates to our proposed transfer of $____ principal
         amount of Notes issued under the Indenture. We hereby certify as
         follows:

                  1.       The offer and sale of the Notes was not and will not
                           be made to a person in the United States (unless such
                           person is excluded from the definition of "U.S.
                           person" pursuant to Rule 902(k)(2)(vi) or the account
                           held by it for which it is acting is excluded from
                           the definition of "U.S. person" pursuant to Rule
                           902(k)(2)(i) under the circumstances described in
                           Rule 902(h)(3)) and such offer and sale was not and
                           will not be specifically targeted at an identifiable
                           group of U.S. citizens abroad.

                  2.       Unless the circumstances described in the
                           parenthetical in paragraph 1 above are applicable,
                           either (a) at the time the buy order was originated,
                           the buyer was outside the United States or we and any
                           person acting on our behalf reasonably believed that
                           the buyer was outside the United States or (b) the
                           transaction was executed in, on or through the
                           facilities

                                      E-1

<PAGE>

                           of a designated offshore securities market, and
                           neither we nor any person acting on our behalf knows
                           that the transaction was pre-arranged with a buyer in
                           the United States.

                  3.       Neither we, any of our affiliates, nor any person
                           acting on our or their behalf has made any directed
                           selling efforts in the United States with respect to
                           the Notes.

                  4.       The proposed transfer of Notes is not part of a plan
                           or scheme to evade the registration requirements of
                           the Securities Act.

                  5.       If we are a dealer or a person receiving a selling
                           concession, fee or other remuneration in respect of
                           the Notes, and the proposed transfer takes place
                           during the Restricted Period (as defined in the
                           Indenture), or we are an officer or director of the
                           Company or an Initial Purchaser (as defined in the
                           Indenture), we certify that the proposed transfer is
                           being made in accordance with the provisions of Rule
                           904(b) of Regulation S.

[ ]B.    This Certificate relates to our proposed exchange of $____ principal
         amount of Notes issued under the Indenture for an equal principal
         amount of Notes to be held by us. We hereby certify as follows:

                  1.       At the time the offer and sale of the Notes was made
                           to us, either (i) we were not in the United States or
                           (ii) we were excluded from the definition of "U.S.
                           person" pursuant to Rule 902(k)(2)(vi) or the account
                           held by us for which we were acting was excluded from
                           the definition of "U.S. person" pursuant to Rule
                           902(k)(2)(i) under the circumstances described in
                           Rule 902(h)(3); and we were not a member of an
                           identifiable group of U.S. citizens abroad.

                  2.       Unless the circumstances described in paragraph 1(ii)
                           above are applicable, either (a) at the time our buy
                           order was originated, we were outside the United
                           States or (b) the transaction was executed in, on or
                           through the facilities of a designated offshore
                           securities market and we did not pre-arrange the
                           transaction in the United States.

                  3.       The proposed exchange of Notes is not part of a plan
                           or scheme to evade the registration requirements of
                           the Securities Act.

                                      E-2

<PAGE>

         You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.

                                          Very truly yours,

                                          [NAME OF SELLER (FOR TRANSFERS)
                                             OR OWNER (FOR EXCHANGES)]
                                           By:__________________________________
                                              Name:
                                              Title:
                                              Address:

Date: _________________

                                      E-3

<PAGE>

                                                                       EXHIBIT F

                              Rule 144A Certificate

                                                               _________, ______

The Bank of New York
101 Barclay Street, Floor 8W
New York, New York 10286
Attention: Corporate Trust Administration

        Re:   J. Ray McDermott, S.A.
              11% Senior Secured
              Notes due 2013 (the "NOTES")
              Issued under the Indenture (the "INDENTURE") dated as
              as of December 9, 2003 relating to the Notes

Ladies and Gentlemen:

         TO BE COMPLETED BY PURCHASER IF (1) ABOVE IS CHECKED.

         This Certificate relates to:

         [CHECK A OR B AS APPLICABLE.]

[ ]      A.     Our proposed purchase of $____ principal amount of Notes issued
                under the Indenture.

[ ]      B.     Our proposed exchange of $____ principal amount of Notes
                issued under the Indenture for an equal principal amount of
                Notes to be held by us.

         We and, if applicable, each account for which we are acting in the
aggregate owned and invested more than $100,000,000 in securities of issuers
that are not affiliated with us (or such accounts, if applicable), as of
_________, 200_, which is a date on or since close of our most recent fiscal
year. We and, if applicable, each account for which we are acting, are a
qualified institutional buyer within the meaning of Rule 144A ("Rule 144A")
under the Securities Act of 1933, as amended (the "Securities Act"). If we are
acting on behalf of an account, we exercise sole investment discretion with
respect to such account. We are aware that the transfer of Notes to us, or such
exchange, as applicable, is being made in reliance upon the exemption from the
provisions of Section 5 of the Securities Act provided by Rule 144A. Prior to
the date of this Certificate we have received such information regarding the
Company as we have requested pursuant to Rule 144A(d)(4) or have determined not
to request such information.

                                      F-1

<PAGE>

         You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.

                                          Very truly yours,

                                          [NAME OF PURCHASER (FOR
                                             TRANSFERS) OR OWNER (FOR
                                             EXCHANGES)]
                                          By:___________________________________
                                             Name:
                                             Title:
                                             Address:

Date: _________________

                                      F-2

<PAGE>

                                                                       EXHIBIT G

                  Institutional Accredited Investor Certificate

The Bank of New York
101 Barclay Street, Floor 8W
New York, New York 10286
Attention: Corporate Trust Administration

        Re:   J. Ray McDermott, S.A.
              11% Senior Secured
              Notes due 2013 (the "NOTES")
              Issued under the Indenture (the "INDENTURE") dated as
              as of December 9, 2003 relating to the Notes

Ladies and Gentlemen:

         This Certificate relates to:

         [CHECK A OR B AS APPLICABLE.]

    [ ]  A.       Our proposed purchase of $____ principal amount of Notes
                  issued under the Indenture.

    [ ]  B.       Our proposed exchange of $____ principal amount of Notes
                  issued under the Indenture for an equal principal amount of
                  Notes to be held by us.

         We hereby confirm that:

         1.       We are an institutional "accredited investor" within the
                  meaning of Rule 501(a)(1), (2), (3) or (7) under the
                  Securities Act of 1933, as amended (the "Securities Act") (an
                  "Institutional Accredited Investor").

         2.       Any acquisition of Notes by us will be for our own account or
                  for the account of one or more other Institutional Accredited
                  Investors as to which we exercise sole investment discretion.

         3.       We have such knowledge and experience in financial and
                  business matters that we are capable of evaluating the merits
                  and risks of an investment in the Notes and we and any
                  accounts for which we are acting are able to bear the economic
                  risks of and an entire loss of our or their investment in the
                  Notes.

                                      G-1

<PAGE>

       4.         We are not acquiring the Notes with a view to any distribution
                  thereof in a transaction that would violate the Securities Act
                  or the securities laws of any State of the United States or
                  any other applicable jurisdiction; provided that the
                  disposition of our property and the property of any accounts
                  for which we are acting as fiduciary will remain at all times
                  within our and their control.

       5.         We acknowledge that the Notes have not been registered under
                  the Securities Act and that the Notes may not be offered or
                  sold within the United States or to or for the benefit of U.S.
                  persons except as set forth below.

       6.         The principal amount of Notes to which this Certificate
                  relates is at least equal to $100,000.

       We agree for the benefit of the Company, on our own behalf and on behalf
of each account for which we are acting, that such Notes may be offered, sold,
pledged or otherwise transferred only in accordance with the Securities Act and
any applicable securities laws of any State of the United States and only (a) to
the Company, (b) pursuant to a registration statement which has become effective
under the Securities Act, (c) to a qualified institutional buyer in compliance
with Rule 144A under the Securities Act, (d) in an offshore transaction in
compliance with Rule 904 of Regulation S under the Securities Act, (e) in a
principal amount of not less than $100,000, to an Institutional Accredited
Investor that, prior to such transfer, delivers to the Trustee a duly completed
and signed certificate (the form of which may be obtained from the Trustee)
relating to the restrictions on transfer of the Notes or (f) pursuant to an
exemption from registration provided by Rule 144 under the Securities Act or any
other available exemption from the registration requirements of the Securities
Act.

       Prior to the registration of any transfer in accordance with (c) or (d)
above, we acknowledge that a duly completed and signed certificate (the form of
which may be obtained from the Trustee) must be delivered to the Trustee. Prior
to the registration of any transfer in accordance with (e) or (f) above, we
acknowledge that the Company reserves the right to require the delivery of such
legal opinions, certifications or other evidence as may reasonably be required
in order to determine that the proposed transfer is being made in compliance
with the Securities Act and applicable state securities laws. We acknowledge
that no representation is made as to the availability of any Rule 144 exemption
from the registration requirements of the Securities Act.

       We understand that the Trustee will not be required to accept for
registration of transfer any Notes acquired by us, except upon presentation of
evidence satisfactory to the Company and the Trustee that the foregoing
restrictions on transfer have been complied with. We further understand that the
Notes acquired by us will be in the form of definitive physical certificates and
that

                                      G-2

<PAGE>

such certificates will bear a legend reflecting the substance of the preceding
paragraph. We further agree to provide to any person acquiring any of the Notes
from us a notice advising such person that resales of the Notes are restricted
as stated herein and that certificates representing the Notes will bear a legend
to that effect.

       We agree to notify you promptly in writing if any of our acknowledgments,
representations or agreements herein ceases to be accurate and complete.

       We represent to you that we have full power to make the foregoing
acknowledgments, representations and agreements on our own behalf and on behalf
of any account for which we are acting.

       You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.

                                          Very truly yours,

                                          [NAME OF PURCHASER (FOR
                                             TRANSFERS) OR OWNER (FOR
                                             EXCHANGES)]

                                          By:___________________________________

                                             Name:
                                             Title:
                                             Address:

Date: _________________

                                      G-3

<PAGE>

       Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:

By:  _________________________________

Date:  ________________________________

Taxpayer ID number:  __________________

                                      G-4

<PAGE>

                                                                       EXHIBIT H

                   [COMPLETE FORM I OR FORM II AS APPLICABLE.]

                                    [FORM I]

                       Certificate of Beneficial Ownership

To:  The Bank of New York
     101 Barclay Street, Floor 8W
     New York, New York 10286
     Attention: Corporate Trust Administration OR

     [Name of DTC Participant]

    Re:    J. Ray McDermott, S.A.
           11% Senior Secured
           Notes due 2013 (the "NOTES")
           Issued under the Indenture (the "INDENTURE") dated as
           as of December 9, 2003 relating to the Notes

Ladies and Gentlemen:

     We are the beneficial owner of $____ principal amount of Notes issued under
the Indenture and represented by an Offshore Global Note (as defined in the
Indenture).

     We hereby certify as follows:

     [CHECK A OR B AS APPLICABLE.]

  [ ] A. We are a non-U.S. person (within the meaning of Regulation S under the
         Securities Act of 1933, as amended).

  [ ] B. We are a U.S. person (within the meaning of Regulation S under the
         Securities Act of 1933, as amended) that purchased the Notes in a
         transaction that did not require registration under the Securities Act
         of 1933, as amended.

     You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.

                                      H-1

<PAGE>

                                          Very truly yours,

                                          [NAME OF BENEFICIAL OWNER]

                                          By:___________________________________

                                             Name:
                                             Title:
                                             Address:

Date: _________________

                                    [FORM II]

                       Certificate of Beneficial Ownership

To:  The Bank of New York
     101 Barclay Street, Floor 8W
     New York, New York 10286
     Attention: Corporate Trust Administration

Re:  J.Ray McDermott, S.A.
     11% Senior Secured
     Notes due 2013 (the "NOTES")
     Issued under the Indenture (the "INDENTURE") dated as
     as of December 9, 2003 relating to the Notes

Ladies and Gentlemen:

     This is to certify that based solely on certifications we have received in
writing or by electronic transmission from Institutions appearing in our records
as persons being entitled to a portion of the principal amount of Notes
represented by an Offshore Global Note issued under the above-referenced
Indenture, that as of the date hereof, $____ principal amount of Notes
represented by the Offshore Global Note being submitted herewith for exchange is
beneficially owned by persons that are either (i) non-U.S. persons (within the
meaning of Regulation S under the Securities Act of 1933, as amended) or (ii)
U.S. persons that purchased the Notes in a transaction that did not require
registration under the Securities Act of 1933, as amended.

     We further certify that (i) we are not submitting herewith for exchange any
portion of such Offshore Global Note excepted in such certifications and (ii) as
of the date hereof we have not received any notification from any Institution to
the effect that the statements made by such Institution with respect to any
portion of

                                      H-2

<PAGE>

such Offshore Global Note submitted herewith for exchange are no longer true and
cannot be relied upon as of the date hereof.

     You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.

                                          Yours faithfully,

                                          [Name of DTC Participant]

                                          By: __________________________________

                                               Name:
                                               Title:
                                               Address:

Date: _________________

                                      H-3

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