Document:

<PAGE>
                                                                     EXHIBIT 4.1

                               U.S.$250,000,000.00

                           REVOLVING CREDIT AGREEMENT

                                      Among

                              PRIDE OFFSHORE, INC.,

                                  as Borrower,

                           PRIDE INTERNATIONAL, INC.,
                          MEXICO DRILLING LIMITED LLC,
                           PRIDE CENTRAL AMERICA, LLC,
                              PRIDE DRILLING, LLC,
                             PRIDE NORTH AMERICA LLC
                        PRIDE OFFSHORE INTERNATIONAL LLC
                                       and
                             PRIDE SOUTH PACIFIC LLC

                                 as Guarantors,

                   THE LENDERS FROM TIME TO TIME PARTY HERETO,

                              as Revolving Lenders,

                         CREDIT LYONNAIS NEW YORK BRANCH

  as Administrative Agent, Collateral Agent, Issuing Bank and Swingline Lender,

                CREDIT MUTUEL - CREDIT INDUSTRIEL ET COMMERCIAL,

                    as Mandated Lead Arranger and Bookrunner,

                           NATEXIS BANQUES POPULAIRES,

             as Mandated Lead Arranger, Bookrunner and Issuing Bank,

                                     NORDEA,

                 as Lead Arranger, Bookrunner and Issuing Bank,

                                       and
                                  NEDSHIP BANK,

                                as Co-Underwriter

                                  June 20, 2002
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                                    CONTENTS

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                           REVOLVING CREDIT AGREEMENT

This Revolving Credit Agreement (this "AGREEMENT") dated as of June 20, 2002 is
among:

(1)   Pride Offshore, Inc., a Delaware corporation;

(2)   Pride International, Inc., Mexico Drilling Limited LLC, Pride Central
      America, LLC, Pride Drilling, LLC, Pride North America LLC, Pride Offshore
      International LLC and Pride South Pacific LLC;

(3)   Credit Lyonnais New York Branch (in its capacity as Administrative Agent,
      Collateral Agent, Issuing Bank and Swingline Lender);

(4)   The Revolving Lenders (as defined in this Agreement);

(5)   The Issuing Banks (as defined in this Agreement);

(6)   Credit Mutuel - Credit Industriel Et Commercial (in its capacity as
      Mandated Lead Arranger and Bookrunner) acting through respectively Banque
      de l'Economie, du Commerce et de la Monetique and Credit Industriel Et
      Commercial;

(7)   Natexis Banques Populaires (in its capacity as Mandated Lead Arranger,
      Bookrunner and Issuing Bank);

(8)   Nordea (in its capacity as Lead Arranger, Bookrunner and Issuing Bank);
      and

(9)   Nedship Bank (in its capacity as Co-Underwriter).

It is agreed as follows:

                                    SECTION 1
                                 INTERPRETATION

1.    DEFINITIONS AND INTERPRETATION

1.1   DEFINITIONS

      In this Agreement:

      "ACCEPTABLE SECURITY INTEREST" in any Property means a Lien (a) which
      exists in favour of the Collateral Agent for the benefit of the Finance
      Parties; (b) which is superior to all other Liens except Permitted Liens;
      (c) which secures the Obligations; and (d) which is perfected and
      enforceable against all Persons in

                                      -1-
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      preference to any rights of any Person therein (other than rights in
      respect of Permitted Liens).

      "ACCESSION LETTER" means a document substantially in the form set out in
      Schedule 6 (Form of Accession Letter).

      "ACQUISITION" means any Going Concern Acquisition or any Asset
      Acquisition.

      "ADDITIONAL APPRAISAL REPORT" has the meaning set forth in Clause 25.10(d)
      (Rig Appraisal Reports).

      "ADDITIONAL GUARANTOR" means a company which becomes an Additional
      Guarantor in accordance with Clause 25.12 (New Subsidiaries; Permitted
      Holding Company).

      "ADMINISTRATIVE AGENT" means Credit Lyonnais New York Branch in its
      capacity as agent of the Finance Parties pursuant to Clause 29 (Role of
      the Agents and the Arrangers), and any successor administrative agent
      pursuant to Clause 29 (Role of the Agents and the Arrangers).

      "AFFILIATE" of any Person means any other Person that, directly or
      indirectly, through one or more intermediaries, controls, is controlled
      by, or is under common control with, such Person or any Subsidiary of such
      Person. The term "control" (including the terms "controlled by" or "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 a
      Person, whether through ownership of a Control Percentage, by contract or
      otherwise.

      "AGENT" means the Administrative Agent or the Collateral Agent and
      "AGENTS" means all such Persons collectively.

      "APPRAISED VALUE PERCENTAGE" means (a) with respect to any Mortgaged
      Revolving Credit Facility Rig affected by a Collateral Disposition, one
      minus a fraction the numerator of which is the aggregate Market Value of
      all Mortgaged Revolving Credit Facility Rigs excluding such Mortgaged
      Revolving Credit Facility Rig affected by a Collateral Disposition as of
      the date of determination and the denominator of which is the aggregate
      Market Value of all Mortgaged Revolving Credit Facility Rigs including
      such Mortgaged Revolving Credit Facility Rig affected by a Collateral
      Disposition as of the date of determination (which date of determination
      shall be no later than 30 days after such Collateral Disposition has
      occurred) and (b) with respect to any Mortgaged Revolving Credit Facility
      Rig affected by a Casualty Event if the Casualty Proceeds with respect

                                      -2-
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      thereto could reasonably be expected to exceed U.S.$5,000,000, one minus a
      fraction the numerator of which is the aggregate Market Value of all
      Mortgaged Revolving Credit Facility Rigs reflecting such Casualty Event as
      of the date of determination and the denominator of which is the aggregate
      Market Value of all Mortgaged Revolving Credit Facility Rigs prior to the
      occurrence of the Casualty Event as of the date of determination (which
      date of determination shall be no later than 30 days after such Casualty
      Event has occurred).

      "APPROVED RIGBROKER" means Normarine Offshore Consultants, Inc., Johan G.
      Olsen Shipbrokers A\S or any other first-class, international,
      independent, sale and purchase offshore drilling rig broker reasonably
      acceptable to the Administrative Agent.

      "ARRANGER" means the Mandated Lead Arrangers or the Lead Arranger, and
      "ARRANGERS" means all such Persons collectively.

      "ASSET ACQUISITION" means, any transaction, or any series of related
      transactions, consummated on or after the date of this Agreement, by which
      the Parent Company or any of its Subsidiaries acquires any land or
      offshore drilling rig or vessel, or fleet of rigs or vessels, or any other
      asset the acquisition of which is not made to maintain or improve an
      existing asset.

      "AVAILABILITY PERIOD" means, in relation to a Facility, the period from
      and including the date of this Agreement to and including the Revolving
      Maturity Date.

      "AVAILABLE COMMITMENT" means, in relation to a Facility, a Revolving
      Lender's or, as the case may be, the Swingline Lender's, Commitment under
      that Facility minus:

      (a)   the amount of its participation in any outstanding Utilisations
            under that Facility; and

      (b)   in relation to any proposed Utilisation, the amount of its
            participation in any Utilisations that are due to be made under that
            Facility on or before the proposed Utilisation Date,

      other than that Revolving Lender's or, as the case may be, the Swingline
      Lender's participation in any Utilisations that are due to be repaid or
      prepaid on or before the proposed Utilisation Date.

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<PAGE>
      "AVAILABLE FACILITY" means, in relation to the Swingline Facility, the
      Swingline Lender's Available Commitment in respect of that Facility and,
      in relation to the Revolving Credit Facility, the aggregate for the time
      being of each Revolving Lender's Available Commitment in respect of the
      Revolving Credit Facility less the amount of Swingline Loans then
      outstanding other than any amount of the Swingline Loan that is due to be
      repaid or prepaid on or before the proposed Utilisation Date.

      "BOOKRUNNER" means each of Credit Mutuel - Credit Industriel Et
      Commercial, Natexis Banques Populaires and Nordea.

      "BORROWER" means Pride Offshore, Inc., a Delaware corporation.

      "BREAK COSTS" means the amount (if any) by which:

      (a)   the interest which a Revolving Lender should have received for the
            period from the date of receipt of all or any part of its
            participation in a Loan or Unpaid Sum to the last day of the current
            Interest Period in respect of that Loan or Unpaid Sum, had the
            principal amount or Unpaid Sum received been paid on the last day of
            that Interest Period;

      exceeds:

      (b)   the amount which that Revolving Lender would be able to obtain by
            placing an amount equal to the principal amount or Unpaid Sum
            received by it on deposit with a leading bank in the Relevant
            Interbank Market for a period starting on the Business Day following
            receipt or recovery and ending on the last day of the current
            Interest Period.

      "BUSINESS DAY" means a day (other than a Saturday or Sunday) on which
      banks are open for general business in London, New York and Paris and
      which is also a TARGET Day.

      "CAPITAL STOCK" means any and all shares, interests, participations or
      other equivalents (however designated) of capital stock of a corporation,
      any and all equivalent ownership interests in a Person (other than a
      corporation) and any and all warrants, rights or options to purchase any
      of the foregoing.

      "CAPITALIZED LEASE" of a Person means any lease of any Property by such
      Person as lessee which would, in accordance with GAAP, be required to be
      classified and accounted for as a capital lease on the balance sheet of
      such Person.

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      "CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
      obligations of such Person under Capitalized Leases which would be shown
      as a liability on a balance sheet of such Person prepared in accordance
      with GAAP.

      "CASH EQUIVALENTS" means (a) marketable direct obligations issued by, or
      unconditionally guaranteed by, the United States Government or government
      of a Participating Member State or issued by any agency thereof and backed
      by the full faith and credit of the United States of America or a
      Participating Member State, in each case maturing within one year from the
      date of acquisition; (b) certificates of deposit, time deposits,
      eurodollar time deposits or overnight bank deposits having maturities of
      six months or less from the date of acquisition issued by any Revolving
      Lender or by any commercial bank organized under the laws of the United
      States of America or any state thereof or of any Participating Member
      State or any province or other jurisdiction thereof having combined
      capital and surplus of not less than U.S.$500,000,000 (or the equivalent
      in any other currency); (c) commercial paper of an issuer rated at least
      A-2 by S&P or P-2 by Moody's, or carrying an equivalent rating by a
      nationally recognized rating agency, if both of the two named rating
      agencies cease publishing ratings of commercial paper issuers generally,
      and maturing within six months from the date of acquisition; (d)
      repurchase obligations of any Revolving Lender or of any commercial bank
      satisfying the requirements of clause (b) or (c) of this definition,
      having a term of not more than 30 days with respect to securities issued
      or fully guaranteed or insured by the United States government or
      government of a Participating Member State; (e) securities with maturities
      of one year or less from the date of acquisition issued or fully
      guaranteed by any state, commonwealth, territory, province or other
      jurisdiction of the United States or any other foreign country, by any
      political subdivision or taxing authority of any such state, commonwealth,
      territory, province or other jurisdiction, the securities of which state,
      commonwealth, territory, province, other jurisdiction, political
      subdivision or taxing authority (as the case may be) are rated at least A
      by S&P or A by Moody's; (f) securities with maturities of six months or
      less from the date of acquisition backed by standby letters of credit
      issued by any Revolving Lender or any commercial bank satisfying the
      requirements of clause (b) or (c) of this definition; and (g) shares of
      money market mutual or similar funds which invest exclusively in assets
      satisfying the requirements of clauses (a) through (f) of this definition.

      "CASUALTY EVENT" means, with respect to any Mortgaged Revolving Credit
      Facility Rig owned by any Person, (a) any loss or damage to, or any
      condemnation or taking of, such Mortgaged Revolving Credit Facility Rig
      other than a Total Loss of any Mortgaged Revolving Credit Facility Rig,
      for which such Person receives,

                                      -5-
<PAGE>
      anticipates recovering or has filed a claim for Casualty Proceeds or (b)
      any Lien imposed by any Governmental Authority pursuant to Environmental
      Law and that has not been released or bonded within ten Business Days
      following the applicable Credit Party's receipt of notice of such
      imposition unless such Lien is being contested in good faith and by
      appropriate proceedings.

      "CASUALTY PROCEEDS" means the proceeds of any insurance, condemnation
      award or other compensation paid or payable to any Credit Party or the
      Collateral Agent in respect of any Casualty Event, less the reasonable
      fees, taxes and expenses paid to collect such proceeds.

      "CERCLA" means the Comprehensive Environmental Response, Compensation, and
      Liability Act of 1980, as amended, state and local analogs, and all rules
      and regulations and requirements thereunder in each case as now or
      hereafter in effect.

      "CERCLIS", or the "CERCLA INFORMATION SYSTEM", means the inventory
      maintained by the EPA of sites with potential Releases of Hazardous
      Substances that have been or may need to be addressed by the CERCLA
      program.

      "CHANGE OF CONTROL" means any of (a) any acquisition pursuant to which any
      Person or group (as defined in Section 13(d)(3) or 14(d)(2) of the
      Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")) other
      than a Permitted Holding Company has become the direct or indirect
      beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more
      than 35% of the Voting Stock of the Parent Company; (b) the Parent Company
      is merged with or into or consolidated with another Person and,
      immediately after giving effect to the merger or consolidation, less than
      a majority of the outstanding voting securities entitled to vote generally
      in the election of directors or Persons who serve similar functions of the
      surviving or resulting Person are then beneficially owned (within the
      meaning of Rule 13d-3 of the Exchange Act) in the aggregate by (x) the
      stockholders of the Parent Company immediately prior to such merger or
      consolidation, or (y) if the record date has been set to determine the
      stockholders of the Parent Company entitled to vote on such merger or
      consolidation, the stockholders of the Parent Company as of such record
      date or (z) a Permitted Holding Company; (c) the Parent Company, either
      individually or in conjunction with one or more of its Subsidiaries,
      sells, conveys, transfers or leases, or its Subsidiaries sell, convey,
      transfer or lease, all or substantially all of the assets of the Parent
      Company and its Subsidiaries, taken as a whole (either in one transaction
      or a series of related transactions), including Capital Stock of its
      Subsidiaries, to any Person except as otherwise permitted by Clause 25.17
      (Merger or Consolidation; Asset Sales); (d)

                                      -6-
<PAGE>
      the liquidation or dissolution of the Parent Company, (e) the first day on
      which a majority of the individuals who constitute the Board of Directors
      of the Parent Company are not Continuing Directors or (f) the Parent
      Company shall cease to own, directly or indirectly, 100% of the Capital
      Stock of the Borrower.

      "CLOSING DATE" means the date on which the Administrative Agent delivers
      the notice referred to in Clause 4.1 (Initial Conditions Precedent).

      "CM-CIC" means Credit Mutuel - Credit Industriel Et Commercial (a brand
      name for Banque de l'Economie, du Commerce et de la Monetique).

      "CODE" means the United States Internal Revenue Code of 1986, as amended,
      reformed or otherwise modified from time to time.

      "COLLATERAL" means the Mortgaged Revolving Credit Facility Rigs and all
      other collateral as defined in each of the Security Documents.

      "COLLATERAL AGENT" means Credit Lyonnais New York Branch in its capacity
      as security trustee for the Finance Parties pursuant to Clause 29 (Role of
      the Agents and the Arrangers) and any successor collateral agent pursuant
      to Clause 29 (Role of the Agents and the Arrangers).

      "COLLATERAL DISPOSITION" means (a) the sale, transfer, contribution or
      other disposition by (i) the Borrower to any Person other than a Guarantor
      or (ii) any Guarantor to any Person other than the Borrower or any other
      Guarantor, of any Mortgaged Revolving Credit Facility Rig or (b) any Total
      Loss of any Mortgaged Revolving Credit Facility Rig.

      "COLLATERAL DISPOSITION PROCEEDS" means (a) with respect to any Collateral
      Disposition involving a sale, transfer, contribution or other disposition
      of a Mortgaged Revolving Credit Facility Rig, the gross proceeds thereof
      received by any Credit Party less the reasonable fees, taxes and expenses
      paid by such Person that are directly related to such sale and the amount
      of reserves, if any, recorded in accordance with GAAP for indemnity or
      other obligations of the Parent Company and its Subsidiaries directly
      related to such sale or the Mortgaged Revolving Credit Facility Rig and
      (b) with respect to any Collateral Disposition involving a Total Loss of a
      Mortgaged Revolving Credit Facility Rig, the proceeds of any insurance
      proceeds, condemnation award or other compensation paid or payable to any
      Credit Party or the Collateral Agent in respect of such Total Loss less
      the reasonable fees, taxes and expenses paid to collect such proceeds and
      the amount of reserves, if any, recorded in accordance with GAAP for
      indemnity or other

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      obligations of the Parent Company and its Subsidiaries directly related to
      such sale or the Mortgaged Revolving Credit Facility Rig.

      "COMMITMENT" means a Revolving Commitment or a Swingline Commitment.

      "COMMITMENT FEE RATE" means a percentage rate per annum, calculated on
      each day, equal to 40% of the Margin applicable to Revolving Credit Loans
      on such day, provided that such percentage rate per annum shall not on any
      day exceed 1.00% per annum.

      "COMPLIANCE CERTIFICATE" means a certificate substantially in the form set
      out in Schedule 7 (Form of Compliance Certificate).

      "CONFIDENTIAL INFORMATION MEMORANDUM" means the Confidential Information
      Memorandum dated May 2002 (together with all amendments and supplements
      thereto) and furnished to the initial Finance Parties in connection with
      the syndication of (a) the Term Loans made under the Term Loan Agreement
      and (b) the Revolving Commitments made hereunder.

      "CONSOLIDATED EBITDA" means, for any period of determination, (a)
      Consolidated Operating Income for such period of determination plus (b) to
      the extent deducted in determining Consolidated Operating Income,
      depreciation, amortization and other non-cash expense for such period of
      determination, and cash costs directly related to the Acquisition by the
      Parent Company of Marine Drilling Companies, Inc. and its Subsidiaries,
      each calculated on a consolidated basis in accordance with GAAP; provided,
      however, that for each transaction effected on or prior to the time of
      calculation of Consolidated EBITDA that is reasonably expected to have the
      effect of increasing or decreasing Consolidated EBITDA by at least
      $10,000,000 during the twelve month period following the transaction date,
      the Pro Forma Consolidated EBITDA of such transaction shall be included in
      Consolidated EBITDA.

      "CONSOLIDATED NET DEBT" means, at any time, the Debt of the Group less
      Unrestricted Cash, each calculated on a consolidated basis as of such
      time; provided, however, that, unless the Parent Company elects otherwise,
      the MARAD Financing shall be excluded from Consolidated Net Debt if (i)
      the MARAD Financing is non-recourse to the Parent Company and its
      Subsidiaries (other than Special Purpose Subsidiaries), (ii) neither the
      Parent Company nor any of its Subsidiaries (other than Special Purpose
      Subsidiaries) shall have any liability whatsoever, whether direct or
      indirect, contingent or otherwise, for Debt that constitutes part of the
      MARAD Financing and (iii) the provider of the MARAD

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<PAGE>
      Financing shall have no recourse to any assets of the Parent Company and
      its Subsidiaries (other than the MARAD Collateral).

      "CONSOLIDATED NET INCOME" means, for any period, the net income of the
      Parent Company and its Subsidiaries calculated on a consolidated basis for
      such period after taxes, as determined in accordance with GAAP.

      "CONSOLIDATED NET INTEREST EXPENSE" means, for any period, the cash
      interest expense of the Group (and for so long as the MARAD Financing is
      excluded from Consolidated Net Debt, including cash interest expense from
      the MARAD Financing, if any, to the extent paid by the Parent Company or
      one of its Subsidiaries other than the Special Purpose Subsidiaries
      associated with the MARAD Financing) that is not funded by further
      drawdown on, or other increase in principal amount of, the associated Debt
      less cash interest income of the Group, each calculated on a consolidated
      basis in accordance with GAAP for such period; provided, however, that for
      each transaction effected on or prior to the time of calculation of
      Consolidated Net Interest Expense that is reasonably expected to have the
      effect of increasing or decreasing Consolidated EBITDA by at least
      $10,000,000 per annum, Consolidated Net Interest Expense will be
      calculated on a pro forma basis as if any Debt associated with such
      transaction had been incurred on the first day of the period of
      determination at an interest rate equivalent to the interest rate
      associated with such Debt on the current date of determination and giving
      effect to the amortization schedule starting from the current date of
      determination.

      "CONSOLIDATED NET WORTH" means, at any time, the net worth or total
      shareholders equity of the Group on a consolidated basis determined in
      accordance with GAAP.

      "CONSOLIDATED OPERATING INCOME" means, for any period, the revenues of the
      Group for such period after operating costs and selling, general and
      administrative expenses but, for the avoidance of doubt, before taxes and
      interest, each calculated on a consolidated basis in accordance with GAAP;
      provided, however, that the effects of the MARAD Vessels will be excluded
      from Consolidated Operating Income for so long as the MARAD Financing is
      excluded from Consolidated Net Debt.

      "CONSOLIDATED TANGIBLE NET ASSETS" means, as of any date, the assets
      (other than the Intangible Assets) which would be reflected on a
      consolidated balance sheet of the Group prepared as of such date in
      accordance with GAAP.

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<PAGE>
      "CONSOLIDATED TANGIBLE NET WORTH" means, at any time, the Consolidated Net
      Worth less the aggregate book values of the Intangible Assets.

      "CONTINGENT OBLIGATION" of a Person means any agreement, undertaking or
      arrangement by which such Person assumes, guarantees, endorses,
      contingently agrees to purchase or provide funds for the payment of, or
      otherwise becomes or is contingently liable upon, the obligation or
      liability of any other Person, or agrees to maintain the net worth or
      working capital or other financial condition of any other Person, or
      otherwise assures any creditor of such other Person against loss,
      including, without limitation, any comfort letter, operating agreement,
      take-or-pay contract or the obligations of any such Person as general
      partner of a partnership with respect to the liabilities of the
      partnership.

      "CONTINUING DIRECTOR" means an individual who (a) is a member of the full
      Board of Directors of the Parent Company and (b) either (i) was a member
      of the Board of Directors of the Parent Company on the Closing Date or
      (ii) whose nomination for election or election to the Board of Directors
      of the Parent Company was approved by vote of at least two-thirds of the
      directors then still in office who were either directors on the Closing
      Date or whose election or nomination for election was previously so
      approved.

      "CONTROL PERCENTAGE" means, with respect to any Person, the percentage of
      the outstanding Capital Stock (or other ownership interests and including
      any options, warrants or similar rights to purchase such Capital Stock) of
      such Person having ordinary voting power which gives the direct or
      indirect holder of such Capital Stock or ownership interests the power to
      elect a majority of the Board of Directors (or other applicable governing
      body) of such Person.

      "CONTROLLED GROUP" means all members of a controlled group of corporations
      or other business entities and all trades (whether or not incorporated)
      under common control which, together with the Parent Company or any of its
      Subsidiaries, are treated as a single employer under Section 414 of the
      Code.

      "CO-UNDERWRITER" means Nedship Bank.

      "CREDIT DOCUMENTS" means the Term Loan Agreement and each other agreement,
      instrument or document executed by any Credit Party or any of their
      respective officers at any time in connection with the Term Loan
      Agreement.

      "CREDIT PARTY" means the Borrower and any Guarantor.

      "DEBT," for any Person, means without duplication:

                                      -10-
<PAGE>
      (a)   indebtedness of such Person for borrowed money (but, for the
            avoidance of doubt, excluding accounts payable arising in the
            ordinary course of such Person's business payable on terms customary
            in the trade which shall not remain unpaid for a period of more than
            90 days after such liabilities become due and payable);

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

      (c)   obligations of such Person to pay the deferred purchase price of
            property or services (other than accounts payable arising in the
            ordinary course of such Person's business payable on terms customary
            in the trade which shall not remain unpaid for a period of more than
            90 days after such liabilities become due and payable);

      (d)   Capitalized Lease Obligations;

      (e)   all obligations of such Person in respect of financial letters of
            credit, bank guarantees, acceptance facilities, bills of exchange or
            similar instruments which are issued upon the application of such
            Person or upon which such Person is an account party or for which
            such Person is in any way liable;

      (f)   Off-Balance Sheet Liabilities;

      (g)   indebtedness or obligations of others, whether or not assumed,
            secured by Liens or payable out of the proceeds or production from
            Property on or in respect of any Property now or hereafter owned or
            acquired by such Person, the amount of such Debt being deemed to be
            the lesser of the value of such Property and the amount of the
            obligation so secured; and

      (h)   Contingent Obligations for the Debt of another Person referred to in
            clauses (a) through (g) of this definition;

      but, for the avoidance of doubt, shall not include bid, surety or appeal
      bonds, performance bonds or other obligations of a like nature or
      performance letters of credit or similar arrangements issued for the
      account of the Parent Company or any of its Subsidiaries.

      The amount of Debt of any Person at any date shall be the outstanding
      balance at such date of all unconditional obligations as described above
      and the maximum liability, upon the occurrence of the contingency giving
      rise to the obligation, of any contingent obligations as of such date,
      less, in each case, the outstanding

                                      -11-
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      balance at such date of cash and Cash Equivalents deposited by such Person
      in restricted accounts that require the provider of such Debt to consent
      to any withdrawal.

      "DEFAULT" means an Event of Default or any event or circumstance specified
      in Clause 26 (Events of Default) which would (with the expiry of a grace
      period, the giving of notice, the making of any determination under the
      Finance Documents or any combination of any of the foregoing) be an Event
      of Default.

      "ELIGIBLE ASSIGNEE" means a Revolving Lender, an Affiliate of a Revolving
      Lender, any commercial bank organized under the laws of the United States
      or any of the countries parties to the Organization for Economic
      Cooperation and Development or any political subdivision of any thereof
      which has primary capital (or its equivalent) of not less than
      $250,000,000 (or the equivalent in any other currency), that is approved
      by the Administrative Agent, and, so long as no Default exists, is
      approved by the Borrower, in either case, such approval not to be
      unreasonably withheld.

      "ENVIRONMENT" or "ENVIRONMENTAL" shall have the meanings set forth in 43
      U.S.C. Section 9601(8) (1988).

      "ENVIRONMENTAL CLAIM" means any third party (including governmental
      agencies and employees) action, lawsuit, claim, regulatory action or
      proceeding, order, decree, consent agreement or notice of potential or
      actual responsibility or violation which seeks to impose liability under
      any Environmental Law.

      "ENVIRONMENTAL LAW" means all Legal Requirements arising from, relating
      to, or in connection with the Environment, including, without limitation,
      CERCLA, the Outer Continental Shelf Lands Act, the Federal Water Pollution
      Control Act of 1972 and the Oil Pollution Act of 1990 (as applicable)
      relating to (a) pollution, contamination, injury, destruction, loss,
      protection, cleanup, reclamation or restoration of the air, surface water,
      groundwater, land surface or subsurface strata, or other natural
      resources; (b) solid, gaseous or liquid waste generation, treatment,
      processing, recycling, reclamation, cleanup, storage, disposal or
      transportation; (c) exposure to pollutants, contaminants, hazardous,
      medical, infectious, or toxic substances, materials or wastes; or (d) the
      manufacture, processing, handling, transportation, distribution in
      commerce, use, storage or disposal of hazardous, medical, infectious, or
      toxic substances, materials or wastes.

      "ENVIRONMENTAL PERMIT" means any permit, license, order, approval or other
      authorization under Environmental Law.

                                      -12-
<PAGE>
      "EPA" means the United States Environmental Protection Agency or any
      successor thereto.

      "EQUITY ISSUANCE" means any issuance of equity securities (including any
      preferred equity securities) by the Parent Company or any of its
      Subsidiaries other than equity securities issued (a) to the Parent Company
      or one of its Subsidiaries, (b) pursuant to employee or director and
      officer stock option plans in the ordinary course of business, (c)
      pursuant to the Pride International, Inc. Direct Stock Purchase Plan or in
      connection with the Parent Company's program for the issuance and sale
      from time to time of the Parent Company's common stock pursuant to an
      agency agreement between the Parent Company and a sales agent providing
      for sales by means of ordinary brokers' transactions through the
      facilities of the New York Stock Exchange at prices prevailing at the time
      of sale less a selling commission to the sales agent, and (d) pursuant to
      the exercise of conversion rights with respect to the Parent Company's
      convertible securities outstanding on the Closing Date.

      "EQUITY ISSUANCE PROCEEDS" means, with respect to any Equity Issuance, all
      cash and Cash Equivalents received by the Parent Company or any of its
      Subsidiaries from such Equity Issuance after payment of, or provision for,
      all brokerage commissions and other reasonable out-of-pocket fees and
      expenses actually incurred.

      "ERISA" means the Employee Retirement Income Security Act of 1974, as
      amended from time-to-time.

      "EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
      Regulation D of the Federal Reserve Board, as in effect from time to time.

      "EURODOLLAR RATE RESERVE PERCENTAGE" of any Revolving Lender for the
      Interest Period for any Revolving Credit Loan means the reserve percentage
      applicable during such Interest Period (or if more than one such
      percentage shall be so applicable, the daily average of such percentages
      for those days in such Interest Period during which any such percentage
      shall be so applicable) under regulations issued from time-to-time by the
      Federal Reserve Board for determining the maximum reserve requirement
      (including, without limitation, any emergency, supplemental or other
      marginal reserve requirement) for such Revolving Lender with respect to
      liabilities or assets consisting of or including Eurocurrency Liabilities
      having a term equal to such Interest Period.

                                      -13-
<PAGE>
      "EUROPEAN FACILITY" means the Facility Agreement for a U.S.$125,000,000
      Secured Revolving Credit Facility to Pride Foramer SAS and Forasub B.V.
      arranged by Natexis Banques Populaires, as lead arranger, agent and
      security agent, Credit Industriel et Commercial, as arranger, and BNP
      Paribas and Credit Lyonnais, as co-arrangers, as the same may be amended,
      supplemented, restated or otherwise modified from time to time.

      "EVENT OF DEFAULT" means any event or circumstance specified as such in
      Clause 26 (Events of Default).

      "EXISTING BANK FACILITY" means the Amended and Restated Credit Agreement
      dated as of August 12, 1998 among Marine Drilling Companies, Inc., the
      lenders named therein, ABN AMRO Bank N.V., as administrative agent for
      such lenders, and Christiania Bank og Kreditkasse, New York Branch, as
      syndication agent, as amended.

      "EXISTING REVOLVING LENDER" has the meaning set forth in Clause 27.1
      (Assignments and Transfers by the Revolving Lenders).

      "FACILITY" means Revolving Credit Facility or the Swingline Facility.

      "FACILITY OFFICE" means the office or offices notified by a Finance Party
      to the Administrative Agent and the Borrower in writing on or before the
      date it becomes a Finance Party (or, following that date, by not less than
      five Business Days' written notice) as the office or offices through which
      it will perform its obligations under this Agreement.

      "FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
      Reserve System or any of its successors.

      "FEE LETTERS" means (a) the letter agreement dated as of March 28, 2002
      between the Administrative Agent and the Borrower, and (b) the letter
      agreement dated as of April 22, 2002 among the Mandated Lead Arrangers and
      the Borrower, each setting out the fees referred to in Clause 15 (Fees).

      "FINANCE DOCUMENT" means this Agreement, any Letter of Credit, the
      Security Documents, the Fee Letters, any Accession Letter, and any other
      document designated as such by the Administrative Agent and the Borrower.

      "FINANCE PARTY" means an Agent, an Arranger, the Co-Underwriter, a
      Bookrunner, an Issuing Bank, the Swingline Lender or a Revolving Lender.

                                      -14-
<PAGE>
      "FINANCIAL CONTRACT" of a Person means (a) any exchange-traded or
      over-the-counter futures, forward, swap or option contract or other
      financial instrument with similar characteristics or (b) any Rate Hedging
      Agreement.

      "FINANCIAL CONTRACT OBLIGATIONS" of a Person means any and all obligations
      of such Person, whether absolute or contingent and howsoever and
      whensoever created, arising, evidenced or acquired (including all
      renewals, extensions and modifications thereof and substitutions
      therefor), under (a) any and all Financial Contracts, and (b) any and all
      cancellations, buy backs, reversals, terminations or assignments of any
      Financial Contract.

      "FUND," "TRUST FUND," or "SUPERFUND" means the Hazardous Substance
      Response Trust Fund, established pursuant to 42 U.S.C. Section 9631 (1988)
      and the Post-closure Liability Trust Fund, established pursuant to 42
      U.S.C. Section 9641 (1988), which statutory provisions have been amended
      or repealed by the Superfunds Amendments and Reauthorization Act of 1986,
      and the "Fund," "Trust Fund," or "Superfund" that are now maintained
      pursuant to Section 9507 of the Code.

      "GAAP" means with respect to any financial statements of the Parent
      Company or any of its Subsidiaries, or calculations related to such
      financial statements of the Parent Company or any of its Subsidiaries,
      United States generally accepted accounting principles as in effect from
      time-to-time applied on a basis consistent with the requirements of Clause
      1.4 (Accounting Terms).

      "GOING CONCERN ACQUISITION" means, any transaction, or any series of
      related transactions, consummated on or after the date of this Agreement,
      by which the Parent Company or any of its Subsidiaries (i) acquires any
      going business or all or substantially all of the assets of any firm,
      corporation or limited liability company, or division thereof, whether
      through purchase of assets, merger, or otherwise, or (ii) directly or
      indirectly acquires (in one transaction or as the most recent transaction
      in a series of transactions) at least a majority (in number of votes) of
      the securities of a corporation which have ordinary voting power for the
      election of directors (other than securities having such power only by
      reason of the happening of a contingency) or a majority (by percentage or
      voting power) of the outstanding ownership interests of a partnership or
      limited liability company (but, for the avoidance of doubt, except in the
      case of (ii) above where such acquisition would reasonably be considered
      an Asset Acquisition).

      "GOVERNMENTAL AUTHORITY" means, as to any Person in connection with any
      subject, any foreign, supranational, national, state or provincial
      governmental authority, or any political subdivision thereof, any
      governmental or regulatory

                                      -15-
<PAGE>
      agency, department, commission, board, bureau, authority or
      instrumentality lawfully entitled to exercise any executive, judicial,
      legislative, police, regulatory or taxing authority or power or any
      government court, in each case having jurisdiction over such Person or
      such Person's Property in connection with such subject.

      "GOVERNMENTAL PROCEEDINGS" means any action or proceedings by or before
      any Governmental Authority, including, without limitation, the
      promulgation, enactment or entry of any Legal Requirement.

      "GROUP" means the Parent Company and its Subsidiaries.

      "GUARANTOR" means an Original Guarantor or an Additional Guarantor.

      "HAZARDOUS SUBSTANCE" means the substances identified as such pursuant to
      CERCLA and those regulated under any other Environmental Law, including
      without limitation pollutants, contaminants, petroleum, petroleum
      products, radionuclides, radioactive materials, and medical and infectious
      waste.

      "HAZARDOUS WASTE" means the substances regulated as such pursuant to any
      Environmental Law.

      "INDEX DEBT" means senior, unsecured, long-term indebtedness for borrowed
      money of the Parent Company that is not guaranteed by any other Person or
      subject to any other credit enhancement.

      "INITIAL MORTGAGED REVOLVING CREDIT FACILITY RIGS" means each of the
      vessels listed on Schedule 22.17.

      "INITIAL RIG APPRAISAL REPORT" has the meaning specified in Schedule 2
      (Conditions Precedent to Initial Utilisations).

      "INSURANCE POLICIES" includes (a) all insurances (including, without
      limitation, all certificates of entry in protection and indemnity and war
      risks associations or clubs) in respect of the Mortgaged Revolving Credit
      Facility Rigs, whether heretofore, now or hereafter effected, and all
      renewals of or replacements for the same, (b) all claims, returns of
      premium and other moneys and claims for moneys due and to become due under
      or in respect of said insurances, and (c) all other rights of each owner
      of a Mortgaged Revolving Credit Facility Rig under or in respect of said
      insurances.

      "INTANGIBLE ASSETS" means (a) deferred assets, other than prepaid
      insurance and prepaid taxes, (b) patents, copyrights, trademarks,
      tradenames, franchises,

                                      -16-
<PAGE>
      goodwill, experimental expenses and other similar assets which would be
      classified as intangible assets on a balance sheet prepared in accordance
      with GAAP, and (c) unamortized debt discount and expense.

      "INTERCOMPANY DEBT" means all Debt owing by any Credit Party to the Parent
      Company or any of its Subsidiaries (including any other Credit Party).

      "INTEREST COVERAGE RATIO" means, for the Group on a consolidated basis, as
      of the end of any fiscal quarter, for the then most-recently ended four
      fiscal quarters, the ratio of (a) Consolidated EBITDA to (b) Consolidated
      Net Interest Expense.

      "INTEREST PERIOD" means, in relation to a Loan, each period determined in
      accordance with Clause 13 (Interest Periods) and, in relation to an Unpaid
      Sum, each period determined in accordance with Clause 12.3 (Default
      interest).

      "INVESTMENT" of any Person means any loan, advance (other than commission,
      travel and similar advances to officers and employees, drawing accounts
      and similar expenditures or prepayments or deposits made in the ordinary
      course of business) or extension of credit that constitutes Debt of the
      Person to whom it is extended or contribution of capital by such Person;
      stocks, bonds, mutual funds, partnership interests, notes (including
      structured notes), debentures or other securities owned by such Person;
      any deposit accounts and certificates of deposit owned by such Person
      (but, for the avoidance of doubt, excluding capital expenditures of such
      Person determined in accordance with GAAP).

      "ISSUING BANK" means each of Credit Lyonnais New York Branch, Credit
      Industriel Et Commercial, Natexis Banques Populaires and Nordea.

      "ISM CODE" has the meaning set forth in Clause 22.27 (Compliance with
      Laws).

      "LEAD ARRANGER" means Nordea.

      "LEGAL REQUIREMENT" means, as to any Person, any law, statute, ordinance,
      decree, award, requirement, order, writ, judgment, injunction, rule,
      regulation (or official interpretation of any of the foregoing) of, and
      the terms of any license or permit issued by, any Governmental Authority
      which is binding on such Person.

      "LETTER OF CREDIT" means each letter of credit issued under this
      Agreement, substantially in the form (a) set out in Schedule 9 (Form of
      Letter of Credit) or (b) requested by the Borrower and reasonably
      acceptable to the Administrative Agent (with the prior consent of the
      Required Revolving Lenders) and the applicable Issuing Bank.

                                      -17-
<PAGE>
      "LETTER OF CREDIT EXPOSURE" means, at any time, the sum of (a) the
      aggregate undrawn maximum face amount of each Letter of Credit at such
      time and (b) the aggregate unpaid amount of all Reimbursement Obligations
      owing with respect to such Letters of Credit at such time.

      "LEVEL I, LEVEL II, LEVEL III, LEVEL IV, LEVEL V AND LEVEL VI", and
      individually, a "LEVEL", shall mean the level determined by the ratings by
      Moody's and S&P, respectively, applicable on such date to the Revolving
      Credit Facility:

<TABLE>
<CAPTION>
                   Level                Revolving Credit Facility Ratings
                   -----                ---------------------------------
<S>                                     <C>

                  Level I               BBB+ or higher by S&P
                                        Baa1 or higher by Moody's

                  Level II              BBB by S&P
                                        Baa2 by Moody's

                 Level III              BBB- by S&P
                                        Baa3 by Moody's

                  Level IV              BB+ by S&P
                                        Ba1 by Moody's

                  Level V               BB by S&P
                                        Ba2 by Moody's

                  Level VI              BB- or lower by S&P
                                        Ba3 or lower by Moody's
</TABLE>

      For purposes of the foregoing, (a) if neither Moody's nor S&P shall have
      in effect a rating for the Revolving Credit Facility (other than by reason
      of the circumstances referred to in the last sentence of this definition),
      then the level shall be based upon the ratings by Moody's and S&P,
      respectively, applicable on such date to the Index Debt which ratings the
      Parent Company will maintain until the Revolving Maturity Date; (b) if
      either Moody's or S&P (but not both) shall have in effect a rating for the
      Revolving Credit Facility, then the level shall be based upon that rating;
      (c) if neither Moody's nor S&P shall have in effect a rating for the
      Revolving Credit Facility or the Index Debt (other than by reason of the
      circumstances referred to in the last sentence of this definition), then
      the level shall be deemed to be Level VI; (d) if the ratings established
      or deemed to have been established by Moody's and S&P for the Revolving
      Credit Facility or the Index Debt, as the case may be, shall

                                      -18-
<PAGE>
      fall within different Levels, the Margin shall be based on the higher of
      the two ratings unless one of the two ratings is two or more Levels lower
      than the other, in which case the Margin shall be determined by reference
      to the Level next above that of the lower of the two ratings; and (e) if
      the ratings established or deemed to have been established by Moody's or
      S&P for the Revolving Credit Facility or the Index Debt, as the case may
      be, shall be changed (other than as a result of a change in the rating
      system of Moody's or S&P), such change shall be effective as of the date
      on which it is first announced or published by the applicable rating
      agency or, in the absence of such announcement or publication, on the
      effective date of such rating as determined by the Administrative Agent.
      Each change in the Margin shall apply during the period commencing on the
      effective date of such change and ending on the date immediately preceding
      the effective date of the next such change. If the rating system of
      Moody's or S&P shall change, or if both such rating agencies shall cease
      to be in the business of rating corporate debt obligations, the Borrower
      and the Finance Parties shall negotiate in good faith to amend this
      definition to reflect such changed rating system or the unavailability of
      ratings from such rating agencies and, pending the effectiveness of any
      such amendment, the Margin shall be determined by reference to the rating
      most recently in effect prior to such change or cessation.

      "LEVERAGE RATIO" means, for the Group on a consolidated basis, as of the
      end of any fiscal quarter, the ratio of (a) Consolidated Net Debt to (b)
      Consolidated EBITDA for the then most-recently ended four fiscal quarters.

      "LIBOR" means, in relation to any Revolving Credit Loan:

      (a)   the applicable Screen Rate; or

      (b)   (if no Screen Rate is available for U.S. Dollars for the Interest
            Period of that Loan) the arithmetic mean of the rates (rounded
            upwards to four decimal places) as supplied to the Administrative
            Agent at its request quoted by the Reference Banks to leading banks
            in the London interbank market,

      as of the Specified Time on the Quotation Day for the offering of deposits
in U.S. Dollars and for a period comparable to the Interest Period for that
Loan.

      "LIEN" means any mortgage, lien (statutory or other), pledge, assignment,
      charge, deed of trust, security interest, hypothecation, preference,
      deposit arrangement, encumbrance, priority or other security arrangement
      or preferential arrangement of any kind or nature whatsoever to secure or
      provide for the payment of any

                                      -19-
<PAGE>
      obligation of any Person, whether arising by contract, operation of law or
      otherwise (including, without limitation, the interest of a vendor or
      lessor under any conditional sale agreement, synthetic lease, Capitalized
      Lease or other title retention agreement having substantially the same
      economic effect as any of the foregoing); provided, however, for the
      avoidance of doubt, that negative pledge or similar agreements of a Person
      to refrain from permitting Liens and the interest of a Person as owner or
      lessor under charters or leases of Property (including, without
      limitation, drilling rigs, drillships and other vessels and platforms)
      shall not constitute "Liens" on or in respect of the Property of such
      Person.

      "LOAN" means a Revolving Credit Loan or a Swingline Loan.

      "LONDON BUSINESS DAY" means a day (other than a Saturday or Sunday) on
      which banks are open for general business in London.

      "MAINTENANCE CAPITAL EXPENDITURES" means, without duplication for any
      period, the aggregate of all expenditures for any purchase, other
      acquisition or leasing (pursuant to a Capitalized Lease) of any asset or
      additions to equipment (including replacements, capitalized repairs and
      improvements during such period) which would be classified as a fixed or
      capital asset on a consolidated balance sheet of the Group prepared in
      accordance with GAAP, excluding (a) expenditures in respect of
      Acquisitions, (b) expenditures of any proceeds of any insurance,
      condemnation award or other compensation paid or payable to the Parent
      Company or any of its Subsidiaries, in respect of any loss or damage to,
      or any condemnation or taking of, any land or offshore drilling rig or
      vessel or any other asset, less the reasonable fees, taxes and expenses
      paid to collect such proceeds, to rebuild or repair such land or offshore
      drilling rig or vessel or such other asset, (c) with respect to any sale,
      transfer, contribution or other disposition of a land or offshore drilling
      rig or vessel or any other asset, expenditures of the gross proceeds
      thereof received by the Parent Company or any of its Subsidiaries less the
      reasonable fees, taxes and expenses paid by such Person that are directly
      related to such sale, transfer, contribution or other disposition, to
      replace such land or offshore drilling rig or vessel or such other asset,
      and (d) expenditures for which the Parent Company or its Subsidiaries will
      be reimbursed directly or indirectly (including, without limitation, by
      compensation from a customer, whether in the form of a lump sum payment,
      any increase in the day rate for an offshore drilling rig or vessel or
      otherwise).

      "MANDATED LEAD ARRANGERS" means CM-CIC and Natexis Banques Populaires.

                                      -20-
<PAGE>
      "MANDATORY COST" means, in relation to any Revolving Lender, the
      percentage rate per annum notified by such Revolving Lender to or
      calculated by the Administrative Agent in accordance with Schedule 4
      (Mandatory Cost formula).

      "MARAD" means the Maritime Administration, United States of America.

      "MARAD COLLATERAL" means the MARAD Vessels, additions and accessions
      thereto, inventory relating thereto, improvements and upgrades thereof,
      all reserve and construction funds associated with any MARAD Financing and
      money and other instruments therein, MARAD Revenues, insurance and
      proceeds of any of the foregoing (including, without limitation, proceeds
      from associated contracts and insurances), and the Capital Stock of any
      Special Purpose Subsidiary that owns, whether directly or indirectly, only
      the MARAD Vessels.

      "MARAD FINANCING" means any debt obligations of the Group for the purpose
      of financing or refinancing the MARAD Vessels which, pursuant to Title XI
      of the Merchant Marine Act of 1936, as amended, are secured by a full
      faith and credit guaranty of the U.S. government, represented by the
      Secretary of Transportation, acting through MARAD

      "MARAD REVENUES" means the rights to payments and payments made under any
      contracts between the Parent Company or any of its Subsidiaries and one or
      more of their customers under which the Parent Company or any of its
      Subsidiaries uses a MARAD Vessel to perform any of its obligations under
      such contract.

      "MARAD VESSELS" means the Amethyst IV and the Amethyst V.

      "MARGIN" means, with respect to each type of Loan, the percentage rate per
      annum as set forth below for the Level in effect at such time:

<TABLE>
<CAPTION>
                    Level I   Level II   Level III   Level IV   Level V   Level VI
                    -------   --------   ---------   --------   -------   --------
<S>                 <C>       <C>        <C>         <C>        <C>       <C>
       Revolving     1.50%     1.75%       2.00%       2.25%     2.75%     3.25%
     Credit Loans

       Swingline     0.00%     0.25%       0.50%       0.75%     1.25%     1.75%
         Loans
</TABLE>

      "MARKET VALUE" means, as of any date of determination, the fair market
      value (or to the extent that the Rig Appraisal Reports, if two Rig
      Appraisal Reports are required to be delivered by this Agreement, provide
      for different fair market

                                      -21-
<PAGE>
      values, the arithmetical average of such fair market values) of each
      Mortgaged Revolving Credit Facility Rig or other offshore drilling rig or
      vessel set forth in the most recent Rig Appraisal Reports covering such
      Mortgaged Revolving Credit Facility Rig or other offshore drilling rig or
      vessel delivered to the Revolving Lenders. Each Market Value shall
      initially be calculated as of the Closing Date by reference to the Initial
      Rig Appraisal Reports. To the extent that any Rig Appraisal Report
      provides a range of fair market values for any Mortgaged Revolving Credit
      Facility Rig, then the fair market value for such of Mortgaged Revolving
      Credit Facility Rig shall be the arithmetical average of the highest and
      lowest fair market values given for such Rig in such Rig Appraisal Report.
      Concurrently with delivery of any subsequent Rig Appraisal Reports, the
      Administrative Agent shall calculate the Market Values as of the date of
      such reports. The recalculated Market Values shall become effective
      immediately upon receipt of such subsequent Rig Appraisal Reports by the
      Administrative Agent. In addition, each Market Value shall be adjusted
      from time to time to reflect any Casualty Event (if the Casualty Proceeds
      with respect thereto could reasonably be expected to exceed
      U.S.$5,000,000) or any Collateral Disposition occurring with respect to
      any Mortgaged Revolving Credit Facility Rig to reflect the amount set
      forth in the Additional Appraisal Report covering such Mortgaged Revolving
      Credit Facility Rig to be delivered by the Borrower to the Revolving
      Lenders pursuant to Clause 25.10(d) (Rig Appraisal Reports). The cost of
      any such Additional Appraisal Report shall be paid by the Borrower.

      "MATERIAL ADVERSE CHANGE" means (a) a material adverse change in the
      business, Property, condition (financial or otherwise) or results of
      operations of the Group, taken as a whole, (b) the occurrence and
      continuance of any event or circumstance which could reasonably be
      expected to have a material adverse effect on the Credit Parties' ability
      to perform their obligations under this Agreement or the other Finance
      Documents, or (c) a material adverse effect on the validity or
      enforceability against any Credit Party of any of the Finance Documents or
      the rights or remedies of the Finance Parties thereunder.

      "MATERIAL SUBSIDIARY" means (a) any wholly-owned Subsidiary of the
      Borrower that has "net assets" that constitute more than 10% of the
      combined GAAP value of the assets of the Borrower and its Subsidiaries,
      inclusive of the subject Subsidiary, on a consolidated basis at such time,
      (b) any non-wholly-owned Subsidiary of the Borrower if the percentage of
      such Subsidiary's "net assets" equal to the Borrower's ownership interest
      in such Subsidiary constitutes more than 10% of the combined GAAP value of
      the assets of the Borrower and its Subsidiaries, inclusive of the subject
      Subsidiary, on a consolidated basis at such time, (c) any

                                      -22-
<PAGE>
      Subsidiary of the Parent Company that owns any Mortgaged Revolving Credit
      Facility Rig, or (d) any Person that guarantees the Borrower's obligations
      under the Term Loan Agreement, and "Material Subsidiaries" means all such
      Subsidiaries collectively. As used herein, "net assets" means the GAAP
      value of the assets of such Subsidiary less the principal amount of Debt
      (i) which is non-recourse to the Borrower and its Subsidiaries (other than
      Special Purpose Subsidiaries), (ii) in respect of which neither the
      Borrower nor any of its Subsidiaries (other than Special Purpose
      Subsidiaries) shall have any liability whatsoever, whether direct or
      indirect, contingent or otherwise, and (iii) the provider of which shall
      have no recourse to any assets of the Parent Company and its Subsidiaries
      (other than the assets for which such Debt was incurred, the proceeds
      (including, without limitation, proceeds from associated contracts and
      insurances) of, and improvements, accessories and upgrades to, such assets
      and the Capital Stock of any Special Purpose Subsidiary that owns, whether
      directly or indirectly, such assets).

      "MERGER" means the transactions whereby the Delaware corporation formerly
      known as Pride Marine, Inc. and its former Subsidiaries are merged with
      and into the Borrower and its Subsidiaries.

      "MERGER DOCUMENTS" means each of the documents, agreements and instruments
      which evidences the Merger.

      "MOODY'S" means Moody's Investors Service, Inc., or any successor that is
      a United States credit rating organization.

      "MONTH" means a period starting on one day in a calendar month and ending
      on the numerically corresponding day in the next calendar month, except
      that:

      (a)   (subject to paragraph (c) below) if the numerically corresponding
            day is not a London Business Day, that period shall end on the next
            London Business Day in that calendar month in which that period is
            to end if there is one, or if there is not, on the immediately
            preceding London Business Day;

      (b)   if there is no numerically corresponding day in the calendar month
            in which that period is to end, that period shall end on the last
            London Business Day in that calendar month; and

      (c)   if an Interest Period begins on the last London Business Day of a
            calendar month, that Interest Period shall end on the last London
            Business Day in the calendar month in which that Interest Period is
            to end.

                                      -23-
<PAGE>
      The above rules will only apply to the last Month of any period.

      "MORTGAGED REVOLVING CREDIT FACILITY RIGS" means the Initial Mortgaged
      Revolving Credit Facility Rigs and any other offshore drilling rigs or
      vessels becoming subject to a Rig Mortgage pursuant to this Agreement,
      other than any Mortgaged Revolving Credit Facility Rig affected by a
      Casualty Event or Collateral Disposition that results in a Total Loss.

      "MORTGAGED TERM LOAN FACILITY RIGS" means the offshore drilling rigs or
      vessels securing all or a portion of the Term Loans.

      "MULTIEMPLOYER PLAN" means an employee benefit plan maintained pursuant to
      a collective bargaining agreement or any other arrangement to which the
      Parent Company or any member of the Controlled Group is a party to which
      more than one employer is obligated to make contributions.

      "NATIONAL PRIORITY LIST" means the list compiled by the EPA of sites with
      uncontrolled Hazardous Substance Releases deemed by EPA to be priorities
      for further evaluation and cleanup based on the severity of hazards
      associated with those Releases.

      "NET CASH PROCEEDS" means, with respect to any Asset Sale, all cash and
      Cash Equivalents received by the Parent Company or any of its Subsidiaries
      from such Asset Sale after (a) payment of, or provision for, all taxes,
      commissions and other reasonable out-of-pocket fees and expenses actually
      incurred; (b) payment of any outstanding obligations relating to such
      Property paid in connection with, and necessary for, any such Asset Sale;
      and (c) the amount of reserves recorded in accordance with GAAP for
      indemnity or similar obligations of the Parent Company and its
      Subsidiaries directly related to such Asset Sale or the assets sold.

      "NEW REVOLVING LENDER" has the meaning set forth in Clause 27.1
      (Assignments and transfers by the Revolving Lenders).

      "OBLIGATIONS" means all unpaid principal of the Loans, unpaid interest on
      the Loans, all accrued and unpaid fees, commissions and all expenses,
      reimbursements, indemnities (including without limitation in relation to
      Letters of Credit) and other obligations and amounts payable by the Credit
      Parties to any Finance Party under the Finance Documents.

      "OFF-BALANCE SHEET LIABILITY" of a Person means (a) any repurchase
      obligation or liability of such Person with respect to accounts or notes
      receivable sold by such Person, (b) Synthetic Lease Obligations, or (c)
      any obligation arising with respect

                                      -24-
<PAGE>
      to any other transaction which is the functional equivalent of or takes
      the place of borrowing but which does not constitute a liability on the
      balance sheets of such Person (but, for the avoidance of doubt, excluding
      any Operating Leases).

      "OPERATING LEASE" of a Person means any lease of Property (other than a
      Capitalized Lease or an Off-Balance Sheet Liability) by such Person as
      lessee which has an original term (including any required renewals and any
      renewals effective at the option of the lessor) of one year or more.

      "ORIGINAL FINANCIAL STATEMENTS" means (a) audited consolidated balance
      sheets of the Group as at December 31, 1999, December 31, 2000 and
      December 31, 2001 and the related consolidated statements of income, cash
      flow, and retained earnings of the Group for each of the fiscal years then
      ended, copies of which have been furnished to the Administrative Agent,
      and (b) the unaudited consolidated balance sheet of the Group as at March
      31, 2002, and the related consolidated statements of income, cash flow,
      and retained earnings of the Group for the fiscal quarter then ended,
      copies of which have been furnished to the Administrative Agent.

      "ORIGINAL CREDIT PARTY" means the Borrower or an Original Guarantor.

      "ORIGINAL GUARANTOR" means the Parent Company, Mexico Drilling Limited
      LLC, Pride Central America, LLC, Pride Drilling, LLC, Pride North America
      LLC, Pride Offshore International LLC and Pride South Pacific LLC.

      "ORIGINAL REVOLVING LENDER" means each Revolving Lender set forth in Part
      II of Schedule 1 (The Original Parties).

      "PARENT COMPANY" means (a) the U.S. Parent until the creation of a
      Permitted Holding Company and (b) thereafter, the Permitted Holding
      Company that is not a Subsidiary of another Permitted Holding Company.

      "PARTICIPATING MEMBER STATE" means any member state of the European
      Communities that adopts or has adopted the euro as its lawful currency in
      accordance with legislation of the European Community relating to Economic
      and Monetary Union.

      "PARTY" means a party to this Agreement.

      "PBGC" means the Pension Benefit Guaranty Corporation or any entity
      succeeding to any or all of its functions under ERISA.

      "PERMITTED HOLDING COMPANY" means (a) from and after the time the common
      stock of the U.S. Parent is not listed on a United States or non-United
      States

                                      -25-
<PAGE>
      national or regional securities exchange or traded through the National
      Association of Securities Dealers Automated Quotation System or similar
      system, a Person organized and validly existing under the laws of the
      United States of America, any state thereof or the District of Columbia,
      the Bahamas, Barbados, Bermuda, the British Virgin Islands, the Cayman
      Islands, any of the Channel Islands, France, Luxembourg, the United
      Kingdom, the Netherlands or the Netherlands Antilles that, immediately
      after such time, had substantially the same stockholders, directly or
      indirectly, as the U.S. Parent immediately prior to such time, (b) from
      and after the sale, conveyance, assignment, transfer, lease or other
      disposition of all or substantially all of the U.S. Parent's and its
      Subsidiaries' assets, the U.S. Parent and (c) each wholly-owned Subsidiary
      of another Permitted Holding Company that directly or indirectly owns the
      common stock of the U.S. Parent.

      "PLAN" means an employee benefit plan (other than a Multiemployer Plan)
      which is covered by Title IV of ERISA or subject to the minimum funding
      standards under Section 412 of the Code as to which the Parent Company or
      any member of the Controlled Group may have any liability.

      "PRO FORMA CONSOLIDATED EBITDA" means, in respect of any transaction, the
      increase or decrease in Consolidated EBITDA attributable to such
      transaction, assuming the transaction had occurred on the first day of the
      determination period, to the extent readily quantifiable by reference to
      (A) past performance, existing contractual commitments or otherwise as may
      be appropriate in the case of a Going Concern Acquisition and (B) existing
      contractual commitments in the case of an Asset Acquisition, in either
      case as set forth in a certificate from a Responsible Officer based on
      information that is reasonably acceptable to the Administrative Agent.

      "PROJECT FINANCE DEBT" means (a) Debt with respect to the two
      drilling/workover barge rigs owned by the Parent Company's Venezuelan
      Subsidiary as in effect on the date hereof, (b) Debt with respect to the
      two drillships owned by Andre Maritime Ltd. and Martin Maritime Ltd. as in
      effect on the date hereof, (c) Debt with respect to the one jack-up rig
      owned by Sonamer France SAS as in effect on the date hereof, except for
      the U.S.$10,000,000 portion which is recourse to the Parent Company and
      (d) Debt (i) incurred to finance the purchase price or construction cost
      of Property (including the cost of upgrading, refurbishing or renovating
      drilling rigs, drillships and other vessels and platforms) and related
      items (including interest added to principal), (ii) which is non-recourse
      to the Parent Company and its Subsidiaries, other than a Special Purpose
      Subsidiary, (iii) for which neither the Parent Company nor any of its
      Subsidiaries (other than a

                                      -26-
<PAGE>
      Special Purpose Subsidiary) shall have any liability whatsoever, whether
      direct or indirect, contingent or otherwise, and (iv) the provider of
      which shall have no recourse to any assets of the Parent Company and its
      Subsidiaries (other than the assets for which such Project Finance Debt
      was incurred, the proceeds (including, without limitation, proceeds from
      associated contracts and insurances) of, and improvements, accessories and
      upgrades to, such assets and the Capital Stock of any Special Purpose
      Subsidiary that owns, whether directly or indirectly, such assets).

      "PROPERTY" of any Person means any interest of such Person in any property
      or asset (whether real, personal, or mixed, tangible or intangible).

      "QUOTATION DAY" means, in relation to any period for which an interest
      rate is to be determined, two Business Days before the first day of that
      period unless market practice differs in the Relevant Interbank Market, in
      which case the Quotation Day will be determined by the Administrative
      Agent in accordance with market practice in the Relevant Interbank Market
      (and if quotations would normally be given by leading banks in the
      Relevant Interbank Market on more than one day, the Quotation Day will be
      the last of those days).

      "RATE HEDGING AGREEMENT" means an agreement, device or arrangement
      providing for payments which are related to fluctuations of interest
      rates, exchange rates or forward rates, including, but not limited to,
      dollar-denominated or cross-currency interest rate exchange agreements,
      forward currency exchange agreements, interest rate cap or collar
      protection agreements, forward rate currency or interest rate options,
      puts or warrants.

      "REFERENCE BANKS" means the principal London offices of Barclays plc, BNP
      Paribas and Citibank, N.A. or such other banks as may be appointed by the
      Administrative Agent in consultation with the Borrower.

      "REGULATIONS T, U, X AND D" means Regulations T, U, X, and D of the
      Federal Reserve Board, as the same is from time-to-time in effect, and all
      official rulings and interpretations thereunder or thereof.

      "REIMBURSEMENT OBLIGATIONS" means all of the payment obligations of the
      Borrower set forth in Clause 7.1 (Immediately payable), 7.4 (Claims under
      a Letter of Credit) or 7.5 (Indemnities).

      "RELEASE" shall have the meaning set forth in CERCLA or under any other
      Environmental Law.

                                      -27-
<PAGE>
      "RELEVANT INTERBANK MARKET" means the London interbank market.

      "RENEWAL REQUEST" means a notice substantially in the form set out in Part
      D of Schedule 3 (Requests).

      "REPORTABLE EVENT" means a reportable event as defined in Section 4043 of
      ERISA and the regulations issued under such section.

      "REQUIRED REVOLVING LENDERS" means:

      (a)   if there are no Utilisations then outstanding, a Revolving Lender or
            Revolving Lenders whose Revolving Commitments aggregate more than
            66 2/3% of the Total Revolving Commitments (or, if the Total
            Revolving Commitments have been reduced to zero, aggregated more
            than 66 2/3% of the Total Revolving Commitments immediately prior to
            the reduction); or

      (b)   at any other time, a Revolving Lender or Revolving Lenders whose
            participations in the Utilisations then outstanding aggregate more
            than 66 2/3% of all the Utilisations then outstanding.

      "REQUIRED TERM LENDERS" means, at any time, Term Lenders having more than
      50% of the aggregate unpaid principal amount of the Term Loans.

      "RESPONSE" shall have the meaning set forth in CERCLA or under any other
      Environmental Law.

      "RESPONSIBLE OFFICER" means the Chief Executive Officer, President, Chief
      Financial Officer, any Executive or Senior Vice President, or Treasurer of
      the Parent Company or the Borrower.

      "RESTRICTED CASH" means, at any time, any cash and Cash Equivalents of the
      Group which are reserved for the payment of principal and interest under
      Project Finance Debt of the Group.

      "RESTRICTED PAYMENT" means (a) the declaration or making by the Parent
      Company or any of its Subsidiaries of any dividends or other distributions
      (in cash, property, or otherwise) on, or any payment for the purchase,
      redemption or other acquisition of, any shares of any Capital Stock of
      such Person, other than dividends payable in such Person's Capital Stock,
      (b) the making by the Parent Company or any of its Subsidiaries of any
      direct or indirect payment (scheduled or otherwise) in respect of the
      principal of any Subordinated Debt, and (c) any defeasance or covenant
      defeasance, purchase, redemption, retirement or other

                                      -28-
<PAGE>
      acquisition by the Parent Company or any of its Subsidiaries in respect of
      Subordinated Debt of such Person.

      "REVOLVING CREDIT FACILITY" means the revolving credit facility made
      available under this Agreement as described in Clause 2 (The Facilities).

      "REVOLVING COMMITMENT" means:

      (a)   in relation to an Original Revolving Lender, the amount set opposite
            its name under the heading "Revolving Commitment" in Part II of
            Schedule 1 (The Original Parties) and the amount of any other
            Revolving Commitment transferred to it under this Agreement; and

      (b)   in relation to any other Revolving Lender, the amount of any
            Revolving Commitment transferred to it under this Agreement,

      to the extent not cancelled, reduced or transferred by it under this
      Agreement.

      "REVOLVING CREDIT LOAN" means a loan made or to be made under the
      Revolving Credit Facility or the principal amount outstanding for the time
      being of that loan.

      "REVOLVING CREDIT FACILITY UTILISATION" means a Revolving Credit Loan or a
      Letter of Credit.

      "REVOLVING LENDER" means:

      (a)   any Original Revolving Lender; and

      (b)   any bank, financial institution, trust, fund or other entity which
            has become a Party in accordance with Clause 27 (Changes to the
            Revolving Lenders),

      which in each case has not ceased to be a Party in accordance with the
      terms of this Agreement.

      "REVOLVING MATURITY DATE" means the third anniversary of the Closing Date
      or any later date as may be specified as the Revolving Maturity Date in
      accordance with Clause 10.3 (Extension of Revolving Maturity Date) or any
      earlier date on which the Total Revolving Commitments are reduced to zero
      or otherwise terminated pursuant to the terms hereof.

      "RIG APPRAISAL REPORT" has the meaning set forth in Clause 25.10 (Rig
      Appraisal Reports).

                                      -29-
<PAGE>
      "RIG MORTGAGES" means each of the First Preferred Fleet Mortgages (or
      other ship mortgage, fleet mortgage, naval mortgage or other agreement,
      document or instrument evidencing a grant of liens in a rig or vessel)
      executed by any Credit Party which pledges a rig or vessel owned by such
      Person to the Collateral Agent for the benefit of the Finance Parties as
      collateral for all or a portion of the Obligations, in substantially the
      form of the attached Schedule 10 (Form of Rig Mortgage) and as required to
      create an Acceptable Security Interest, in each case as the same may be
      amended, supplemented, restated or otherwise modified from time to time.

      "ROLLOVER LOAN" means one or more Revolving Credit Loans:

      (a)   made or to be made on the same day that a maturing Revolving Credit
            Loan is due to be repaid;

      (b)   the aggregate amount of which is equal to or less than the maturing
            Revolving Credit Loan; and

      (c)   made or to be made to the Borrower for the purpose of refinancing a
            maturing Revolving Credit Loan.

      "S&P" means Standard & Poor's Rating Agency the Group, a division of
      Mc-Graw Hill Companies, Inc., or any successor that is a United Stated
      credit rating organization.

      "SCREEN RATE" means the British Bankers' Association Interest Settlement
      Rate for U.S. Dollars for the relevant period displayed on the appropriate
      page of the Reuters screen. If the agreed page is replaced or service
      ceases to be available, the Administrative Agent may specify another page
      or service displaying the appropriate rate after consultation with the
      Borrower and the Revolving Lenders.

      "SEC" means the Securities and Exchange Commission, and any successor
      entity.

      "SECURITY AGREEMENTS" means the each of the Security Agreements in
      substantially the form of the attached Schedule 11 (Form of Security
      Agreement) and executed by the Credit Parties in favour of the Collateral
      Agent to secure all or a portion of the Obligations, as same may be
      amended, supplemented, restated or otherwise modified from time to time.

      "SECURITY DOCUMENTS" means the Rig Mortgages, the Security Agreements, and
      each other document, instrument or agreement executed in connection
      therewith or otherwise executed in order to secure all or a portion of the
      Obligations.

                                      -30-
<PAGE>
      "SECURITY MAINTENANCE RATIO" means, as at any date of determination, the
      ratio of (a) the aggregate Market Value of all Mortgaged Revolving Credit
      Facility Rigs as of such date to (b) the Total Revolving Commitments as of
      such date.

      "SENIOR INDENTURE" means the Indenture dated as of May 1, 1997 between the
      Parent Company and JP Morgan Chase Bank, as trustee (the "SENIOR
      TRUSTEE"), as supplemented by (a) the First Supplemental Indenture dated
      as of May 1, 1997 between the Parent Company and the Senior Trustee
      relating to U.S.$325,000,000 principal amount of 9 3/8% Senior Notes due
      2007, (b) the Second Supplemental Indenture dated as of May 26, 1999
      between the Parent Company and the Senior Trustee relating to
      U.S.$200,000,000 principal amount of 10% Senior Notes due 2009, (c) the
      Third Supplemental Indenture dated as of January 16, 2001 between the
      Parent Company and the Senior Trustee relating to U.S.$431,454,000
      principal amount at maturity of Zero Coupon Convertible Senior Debentures
      Due 2021, (d) the Fourth Supplemental Indenture dated as of September 10,
      2001 between the Parent Company and the Senior Trustee relating to the
      redomicile of the Parent Company and (e) the Fifth Supplemental Indenture
      dated as of March 4, 2002 between the Parent Company and the Senior
      Trustee relating to U.S.$300,000,000 principal amount of Convertible
      Senior Notes Due 2007 and as may be further amended, restated,
      supplemented or otherwise modified from time to time.

      "SPECIAL PURPOSE SUBSIDIARY" means any Subsidiary of the Parent Company
      whose principal purpose is to incur Debt or to become an owner of
      interests in a person created to conduct the business activities for which
      such Debt was incurred, and substantially all the fixed assets of which
      Subsidiary or person are those fixed assets being financed (or to be
      financed) in whole or in part by such Debt.

      "SPECIFIED TIME" means a time determined in accordance with Schedule 8
      (Timetables).

      "SUBORDINATED INDENTURE" means the Indenture dated as of April 1, 1998
      between the Parent Company and HSBC Bank USA, as trustee (the
      "SUBORDINATED TRUSTEE"), as supplemented by the First Supplemental
      Indenture dated as of April 24, 1998 between the Parent Company and the
      Subordinated Trustee relating to U.S.$588,145,000 principal amount at
      maturity of Zero Coupon Convertible Subordinated Debentures Due 2018 and
      the Second Supplemental Indenture dated as of September 10, 2001 between
      the Parent Company and the Subordinated Trustee relating to the redomicile
      of the Parent Company and as may be further amended, restated,
      supplemented or otherwise modified from time to time.

                                      -31-
<PAGE>
      "SUBORDINATED DEBT" means any Debt (including Debt under the Subordinated
      Indentures) of the Parent Company or any of its Subsidiaries which is
      subordinated to their respective obligations under the Finance Documents.

      "SYNTHETIC LEASE OBLIGATIONS" means any arrangement treated as an
      Operating Lease for financial accounting purposes and a financing lease
      for tax purposes.

      "SUBSIDIARY" of a Person means any corporation, association, partnership
      or other business entity of which more than 50% of the outstanding shares
      of Capital Stock (or other equivalent interests) having by the terms
      thereof ordinary voting power under ordinary circumstances to elect a
      majority of the board of directors or Persons performing similar functions
      (or, if there are no such directors or Persons, having general voting
      power) of such entity (irrespective of whether at the time Capital Stock
      (or other equivalent interests) of any other class or classes of such
      entity shall or might have voting power upon the occurrence of any
      contingency) is at the time directly or indirectly owned or controlled by
      such Person, by such Person and one or more Subsidiaries of such Person or
      by one or more Subsidiaries of such Person.

      "SWINGLINE COMMITMENT" means U.S.$25,000,000, to the extent not cancelled
      or reduced under this Agreement.

      "SWINGLINE FACILITY" means the U.S. Dollar swingline loan facility made
      available by the Swingline Lender under this Agreement as described in
      Clause 9 (Swingline Loans).

      "SWINGLINE LENDER" means a Revolving Lender that is either (a) Credit
      Lyonnais New York Branch or (b) any bank, financial institution, trust,
      fund or other entity which has become a Party in accordance with Clause 27
      (Changes to the Revolving Lenders), which in each case has not ceased to
      be a Party in accordance with the terms of this Agreement and which for
      the time being has assumed the entire Swingline Commitment in accordance
      with Clause 27.1 (Assignments and transfers by the Revolving Lenders).

      "SWINGLINE LOAN" means a loan made or to be made under the Swingline
      Facility or the principal amount outstanding for the time being of that
      loan.

      "TARGET" means Trans-European Automated Real-time Gross settlement Express
      Transfer system.

      "TARGET DAY" means a day on which payments are settled in the TARGET
      system.

                                      -32-
<PAGE>
      "TAX" means any tax, levy, impost, duty or other charge or withholding of
      a similar nature (including any penalty or interest payable in connection
      with any failure to pay or any delay in paying any of the same).

      "TAX GROUP" has the meaning set forth in Clause 22.11 (Taxes).

      "TERM LENDERS" means each lender party to the Term Loan Agreement from
      time-to-time.

      "TERM LOAN AGREEMENT" means the U.S.$200,000,000 Term Loan Agreement dated
      as of June 20, 2002 among the Borrower, the Term Lenders and Credit
      Lyonnais New York Branch, as administrative agent for the Term Lenders.

      "TERM LOAN MATURITY DATE" means June 20, 2007.

      "TERM LOANS" means the term loans made by the Term Lenders pursuant to the
      Term Loan Agreement.

      "TERM SECURED PARTIES" means the administrative agent under the Term Loan
      Agreement, the collateral agent under the Term Loan Agreement, and the
      Term Lenders.

      "TERMINATION EVENT" means (a) the occurrence of a Reportable Event with
      respect to a Plan, as described in Section 4043 of ERISA and the
      regulations issued thereunder (other than a Reportable Event not subject
      to the provision for 30-day notice to the PBGC under such regulations),
      (b) the withdrawal of any Credit Party or any of its Affiliates from a
      Plan during a plan year in which it was a "substantial employer" as
      defined in Section 4001(a)(2) of ERISA, (c) the giving of a notice of
      intent to terminate a Plan under Section 4041(c) of ERISA, (d) the
      institution of proceedings to terminate a Plan by the PBGC, or (e) any
      other event or condition which constitutes grounds under Section 4042 of
      ERISA for the termination of, or the appointment of a trustee to
      administer, any Plan.

      "TOTAL CAPITALIZATION" shall mean, at any time, the sum of Consolidated
      Net Debt at such time and Consolidated Net Worth at such time.

      "TOTAL LOSS" shall mean (a) the actual, constructive, arranged, agreed, or
      compromised total loss of any Mortgaged Revolving Credit Facility Rig; (b)
      the requisition for title or other compulsory acquisition or forfeiture of
      any Mortgaged Revolving Credit Facility Rig otherwise than by requisition
      for hire; or (c) the capture, seizure, arrest, detention or confiscation
      of any Mortgaged Revolving Credit Facility Rig by any Governmental
      Authority or by Persons acting or

                                      -33-
<PAGE>
      purporting to act on behalf of any Governmental Authority unless such
      Mortgaged Revolving Credit Facility Rig be released from such capture,
      seizure, arrest, detention or confiscation within one (1) month after the
      occurrence thereof.

      "TOTAL REVOLVING COMMITMENTS" means the aggregate of the Revolving
      Commitments, being U.S.$250,000,000 at the date of this Agreement.

      "TRANSFER CERTIFICATE" means a certificate substantially in the form set
      out in Schedule 5 (Form of Transfer Certificate) or any other form agreed
      between the Administrative Agent and the Borrower.

      "TRANSFER DATE" means, in relation to a transfer, the later of:

      (a)   the proposed Transfer Date specified in the Transfer Certificate;
            and

      (b)   the date on which the Administrative Agent executes the Transfer
            Certificate.

      "UNFUNDED LIABILITIES" means the amount (if any) by which the present
      value of all vested and unvested accrued benefits under all Plans exceeds
      the fair market value of all such Plan assets allocable to such benefits,
      all determined as of the then most recent valuation date for such Plans
      using PBGC actuarial assumptions for single employer plan terminations.

      "UNPAID SUM" means any sum due and payable but unpaid by a Credit Party
      under the Finance Documents.

      "UNRESTRICTED CASH" means, at any time, any cash and Cash Equivalents of
      the Parent Company and its Subsidiaries that is not Restricted Cash.

      "U.S. DOLLARS" or "U.S.$" means the lawful currency for the time being of
      the United States of America.

      "U.S. PARENT" means Pride International, Inc., a Delaware corporation.

      "UTILISATION" means a Loan or a Letter of Credit.

      "UTILISATION DATE" means the date on which a Utilisation is made.

      "UTILISATION REQUEST" means a notice substantially in the relevant form
      set out in Schedule 3 (Requests).

                                      -34-
<PAGE>
      "VAT" means value added tax as provided for in the United Kingdom Value
      Added Tax Act of 1994 and any other tax of a similar nature (imposed under
      any jurisdiction).

      "VOTING STOCK" means, with respect to any Person, securities of any class
      or classes of Capital Stock or other interests (including partnership
      interests) in such Person entitling the holders thereof (whether at all
      times or at the time that such class of Capital Stock has voting power by
      reason of the happening of any contingency) to vote in the election of
      members of the board of directors or comparable body of such Person.

      "WAR RISKS" includes the risk of mines, hostile force, confiscation,
      nationalization, expropriation, seizure and all risks excluded from the
      standard form of English marine policy by the free of capture and seizure
      clause.

1.2   CONSTRUCTION

(a)   Unless a contrary indication appears, any reference in this Agreement to:

      (i)   any "FINANCE PARTY", any "CREDIT PARTY" or any "PARTY" shall be
            construed so as to include its successors in title, permitted
            assigns and permitted transferees;

      (ii)  "ASSETS" includes present and future properties, revenues and rights
            of every description;

      (iii) a "FINANCE DOCUMENT" or any other agreement or instrument is a
            reference to that Finance Document or other agreement or instrument
            as amended or novated (provided, in relation to any term of this
            Agreement which is constituted by or includes a reference to a term
            or provision of the Term Loan Agreement or any other agreement or
            instrument to which the Finance Parties are not a party, such term
            or provision of this Agreement shall only be construed as a
            reference to the Term Loan Agreement or such other agreement or
            instrument as amended or novated if the Finance Parties or any of
            the Agents (on behalf of the Finance Parties) has consented to such
            amendment or variation;

      (iv)  "INDEBTEDNESS" includes any obligation (whether incurred as
            principal or as surety) for the payment or repayment of money,
            whether present or future, actual or contingent;

      (v)   a "PERSON" includes any individual, partnership, limited liability
            partnership, limited liability company, corporation (including a
            business

                                      -35-
<PAGE>
            trust), joint stock company, enterprise, trust, unincorporated
            association, joint venture or other entity, or a government or any
            political subdivision or agency, department or instrumentality
            thereof or any trustee, receiver, custodian or similar official;

      (vi)  a "REGULATION" includes any regulation, rule, official directive,
            request or guideline (whether or not having the force of law) of any
            governmental, intergovernmental or supranational body, agency,
            department or regulatory, self-regulatory or other authority or
            organisation;

      (vii) a provision of law is a reference to that provision as amended or
            re-enacted;

      (viii) save where otherwise expressly provided herein, each reference
            herein to a named statutory enactment is to a statute enacted by the
            Federal Government of the United States of America;

      (ix)  save where otherwise expressly provided herein, a time of day is a
            reference to London time; and

      (x)   a "CLAUSE" or a "SCHEDULE" shall be construed as a reference to a
            Clause or Schedule to this Agreement and references to this
            Agreement include the Schedules hereto.

(b)   Section, Clause and Schedule headings are for ease of reference only.

(c)   Unless a contrary indication appears, a term used in any other Finance
      Document or in any notice given under or in connection with any Finance
      Document has the same meaning in that Finance Document or notice as in
      this Agreement.

(d)   A Default (other than an Event of Default) is "continuing" if it has not
      been remedied or waived and an Event of Default is "continuing" if it has
      not been remedied or waived.

1.3   THIRD PARTY RIGHTS

(a)   Unless expressly provided to the contrary in a Finance Document, a Person
      who is not a Party has no right under the United Kingdom Contracts (Rights
      of Third Parties) Act 1999 (the "THIRD PARTIES ACT") to enforce or to
      enjoy the benefit of any term of this Agreement.

(b)   Notwithstanding any terms of any Finance Document, the consent of any
      Person who is not a Party is not required to waive, rescind or vary this
      Agreement at any time.

                                      -36-
<PAGE>
1.4   ACCOUNTING TERMS

(a)   Except as otherwise expressly provided herein, all accounting terms used
      herein shall be interpreted, using GAAP accounting policies and practices
      and financial reference periods that are consistent with those used in the
      preparation of the Original Financial Statements; provided, however, that
      all financial statements and certificates and reports as to financial
      matters required to be delivered to the Revolving Lenders hereunder shall
      be prepared, using GAAP accounting policies and practices and financial
      reference periods that are in effect at the time of preparation.

(b)   All calculations for the purposes of determining compliance with Clause 24
      (Financial Covenants) shall be adjusted to reflect the basis upon which
      the Original Financial Statements were prepared.

(c)   In addition, all calculations and defined accounting terms used herein
      shall, unless expressly provided otherwise, when referring to any Person,
      refer to such Person on a consolidated basis and mean such Person and its
      consolidated subsidiaries.

                                      -37-
<PAGE>
                                    SECTION 2

                                 THE FACILITIES

2.    THE FACILITIES

2.1   REVOLVING CREDIT FACILITY

      Subject to the terms of this Agreement, the Revolving Lenders make
      available to the Borrower a dollar revolving credit facility in an
      aggregate amount equal to the Total Revolving Commitments.

2.2   FINANCE PARTIES' RIGHTS AND OBLIGATIONS

(a)   The obligations of each Finance Party under the Finance Documents are
      several. Failure by a Finance Party to perform its obligations under the
      Finance Documents does not affect the obligations of any other Party under
      the Finance Documents. No Finance Party is responsible for the obligations
      of any other Finance Party under the Finance Documents.

(b)   The rights of each Finance Party under or in connection with the Finance
      Documents are separate and independent rights and any debt arising under
      the Finance Documents to a Finance Party from a Credit Party shall be a
      separate and independent debt.

(c)   A Finance Party may, except as otherwise stated in the Finance Documents,
      separately enforce its rights under the Finance Documents.

3.    PURPOSE

3.1   PURPOSE

      The Borrower shall apply all amounts borrowed by it under Revolving Credit
      Facility for general corporate purposes of the Borrower and its
      Subsidiaries (including, without limitation, distributions, loans and
      advances to the Parent Company).

3.2   MONITORING

      No Finance Party is bound to monitor or verify the application of any
      amount borrowed pursuant to this Agreement.

4.    CONDITIONS OF UTILISATION

4.1   INITIAL CONDITIONS PRECEDENT

      The Borrower may not deliver a Utilisation Request unless the
      Administrative Agent has received all of the documents and other evidence
      listed in Schedule 2 (Conditions precedent) in form and substance
      reasonably satisfactory to the

                                      -38-
<PAGE>
      Administrative Agent. The Administrative Agent shall notify the Borrower
      and the Revolving Lenders promptly upon being so satisfied. No Utilisation
      may be made if such notice from the Administrative Agent has not been
      delivered on or before June 30, 2002.

4.2   FURTHER CONDITIONS PRECEDENT

      The Revolving Lenders will only be obliged to comply with Clause 5.4
      (Revolving Lenders' participation) if on the date of the Utilisation
      Request and on the proposed Utilisation Date:

      (a)   in the case of a Rollover Loan, no Event of Default is continuing or
            would result from the proposed Loan and, in the case of any other
            Loan, no Default is continuing or would result from the proposed
            Loan; and

      (b)   each of the representations and warranties contained in Clause 22
            (Representations) hereof and in each other Finance Document to be
            made by each Credit Party are true and correct in all material
            respects before and after giving effect to the proposed Loan.

4.3   MAXIMUM NUMBER OF UTILISATIONS

      The Borrower may not deliver a Utilisation Request if as a result of the
      proposed Utilisation more than ten Revolving Credit Facility Utilisations
      would be outstanding.

4.4   REVOLVING COMMITMENT

      The amount of each Revolving Lender's participation in the principal
      amount of each outstanding Revolving Credit Loan, that Revolving Lender's
      participation in each outstanding Swingline Loan and that Revolving
      Lender's participation in the maximum face amount of each outstanding
      Letter of Credit shall not exceed, in the aggregate, that Revolving
      Lender's Revolving Commitment.

                                      -39-
<PAGE>
                                    SECTION 3

                                   UTILISATION

5.    UTILISATION - REVOLVING CREDIT FACILITY

5.1   DELIVERY OF A UTILISATION REQUEST

      The Borrower may utilise the Revolving Credit Facility by delivery to the
      Administrative Agent of a duly completed Utilisation Request in the form
      of Part A of Schedule 3 (Utilisation Request - Revolving Credit Loans) not
      later than the Specified Time.

5.2   COMPLETION OF A UTILISATION REQUEST

(a)   Each Utilisation Request is irrevocable and will not be regarded as having
      been duly completed unless:

      (i)   it specifies that it is for a Revolving Credit Loan;

      (ii)  the proposed Utilisation Date is a Business Day within the
            Availability Period applicable to the Revolving Credit Facility;

      (iii) the currency and amount of the Revolving Credit Loan comply with
            Clause 5.3 (Currency and amount); and

      (iv)  the proposed Interest Period complies with Clause 13 (Interest
            Periods).

(b)   Only one Revolving Credit Loan may be requested in each Utilisation
      Request.

5.3   CURRENCY AND AMOUNT

(a)   The currency specified in a Utilisation Request must be U.S. Dollars.

(b)   The amount of the proposed Revolving Credit Loan must be an amount which
      is not more than the Available Facility (for the Revolving Credit
      Facility) and which is a minimum of U.S.$5,000,000 and in integral
      multiples of $250,000.00 in excess thereof, or, if less, the Available
      Facility (for the Revolving Credit Facility).

5.4   REVOLVING LENDERS' PARTICIPATION

(a)   If the conditions set out in this Agreement have been met, each Revolving
      Lender shall make its participation in each Revolving Credit Loan
      available by the Utilisation Date through its Facility Office.

(b)   The amount of each Revolving Lender's participation in each Revolving
      Credit Loan will be equal to the proportion borne by its Available
      Commitment (for the Revolving Credit Facility) to the aggregate Available
      Commitments (for the

                                      -40-
<PAGE>
      Revolving Credit Facility) immediately prior to making the Revolving
      Credit Loan.

(c)   The Administrative Agent shall notify each Revolving Lender of the amount
      of each Revolving Credit Loan and the amount of its participation in that
      Loan, in each case by the Specified Time.

6.    UTILISATION - LETTERS OF CREDIT

6.1   GENERAL

(a)   In this Clause 6 and Clause 7 (Letters of Credit):

      (i)   "EXPIRY DATE" means, for a Letter of Credit, the last day of its
            Term;

      (ii)  "L/C PROPORTION" means, in relation to a Revolving Lender in respect
            of any Letter of Credit, the proportion (expressed as a percentage)
            borne by that Revolving Lender's Available Commitment (for the
            Revolving Credit Facility) to the aggregate Available Commitments
            (for the Revolving Credit Facility) immediately prior to the issue
            of that Letter of Credit, adjusted to reflect any assignment or
            transfer under this Agreement to or by that Revolving Lender;

      (iii) "RENEWAL REQUEST" means a written notice delivered to the
            Administrative Agent in accordance with Clause 6.7 (Renewal of a
            Letter of Credit); and

      (iv)  "TERM" means each period determined under this Agreement for which
            any Issuing Bank is under a liability under a Letter of Credit.

(b)   Any reference in this Agreement to:

      (i)   a "FINANCE PARTY" includes the Issuing Banks;

      (ii)  the Interest Period of a Letter of Credit will be construed as a
            reference to the Term of that Letter of Credit;

      (iii) an amount borrowed includes any amount utilised by way of a Letter
            of Credit;

      (iv)  a Utilisation made or to be made to the Borrower includes a Letter
            of Credit issued on its behalf;

      (v)   a Revolving Lender funding its participation in a Utilisation
            includes a Revolving Lender participating in a Letter of Credit;

                                      -41-
<PAGE>
      (vi)  amounts outstanding under this Agreement include amounts outstanding
            under any Letter of Credit;

      (vii) an outstanding amount of a Letter of Credit at any time is the
            maximum amount that is or may be payable by the Borrower in respect
            of that Letter of Credit at that time;

      (viii) the Borrower "PAYING", "REPAYING" or "PREPAYING" a Letter of Credit
            means:

            (A)   the Borrower providing cash cover for that Letter of Credit;

            (B)   the maximum amount payable under the Letter of Credit being
                  reduced in accordance with its terms; or

            (C)   the applicable Issuing Bank being satisfied that it has no
                  further liability under that Letter of Credit,

            and the amount by which a Letter of Credit is repaid or prepaid
            under sub-paragraphs (viii)(A) and (viii)(B) above is the amount of
            the relevant cash cover or reduction; and

      (ix)  the Borrower providing "CASH COVER" for a Letter of Credit means the
            Borrower paying an amount in the currency of the Letter of Credit to
            an account which shall (to the extent permitted by Legal
            Requirements applicable to the Borrower) be an interest bearing
            account in the name of the Borrower and the following conditions are
            met:

            (A)   the account is with the Administrative Agent (if the cash
                  cover is to be provided for all the Revolving Lenders) or with
                  a Revolving Lender (if the cash cover is to be provided for
                  that Revolving Lender);

            (B)   withdrawals from the account may only be made to pay a Finance
                  Party amounts due and payable to it under this Agreement in
                  respect of that Letter of Credit until no amount is or may be
                  outstanding under that Letter of Credit; and

            (C)   the Borrower has executed a security document over that
                  account, in form and substance satisfactory to the
                  Administrative Agent or the Finance Party with which that
                  account is held, creating a first ranking security interest
                  over that account.

                                      -42-
<PAGE>
(c)   Clause 5 (Utilisation-Revolving Credit Facility) does not apply to a
      Utilisation by way of Letters of Credit.

6.2   REVOLVING CREDIT FACILITY

      The Revolving Credit Facility may be utilised by way of Letters of Credit.

6.3   DELIVERY OF A UTILISATION REQUEST FOR LETTERS OF CREDIT

      The Borrower may request a Letter of Credit to be issued by delivery to
      the Administrative Agent of a duly completed Utilisation Request in the
      form of Part IB of Schedule 3 (Utilisation Request - Letters of Credit)
      not later than the Specified Time.

6.4   COMPLETION OF A UTILISATION REQUEST FOR LETTERS OF CREDIT

      Each Utilisation Request for a Letter of Credit is irrevocable and will
      not be regarded as having been duly completed unless:

      (a)   it specifies that it is for a Letter of Credit;

      (b)   the proposed Utilisation Date is a Business Day before the fifteenth
            Business Day prior to the Revolving Maturity Date;

      (c)   the currency and amount of the Letter of Credit comply with Clause
            6.5 (Currency and Amount);

      (d)   the form of Letter of Credit is attached;

      (e)   the Expiry Date of the Letter of Credit is not later than 10
            Business Days prior to the Revolving Maturity Date;

      (f)   the delivery instructions for the Letter of Credit are specified;

      (g)   the identity of the Issuing Bank is specified; and

      (h)   the identity of the beneficiary is reasonably acceptable to the
            applicable Issuing Bank.

6.5   CURRENCY AND AMOUNT

(a)   The currency specified in a Utilisation Request must be U.S. Dollars.

(b)   The maximum face amount of any Letter of Credit requested pursuant to this
      Clause 6 must not exceed the lesser of (i) the Available Facility (for the
      Revolving Credit Facility) and (ii) U.S.$50,000,000 less the amount of the
      Letter of Credit Exposure at the time of such Utilisation Request.

                                      -43-
<PAGE>
6.6   ISSUE OF LETTERS OF CREDIT

(a)   If the conditions set out in this Agreement have been met, including,
      without limitation, an agreement between the Borrower and the applicable
      Issuing Bank on the amount of the fronting fee specified in Clause 7.3(a)
      (Fee Payable in respect of Letters of Credit), the applicable Issuing Bank
      shall issue the Letter of Credit on the Utilisation Date.

(b)   The applicable Issuing Bank will only be obliged to comply with paragraph
      (a) above if on the date of the Utilisation Request or Renewal Request and
      on the proposed Utilisation Date:

      (i)   in the case of a Letter of Credit renewed in accordance with Clause
            6.7 (Renewal of a Letter of Credit), no Event of Default is
            continuing or would result from the proposed Utilisation and, in the
            case of any other Utilisation, no Default is continuing or would
            result from the proposed Utilisation; and

      (ii)  each of the representations and warranties contained in Clause 22
            (Representations) hereof and in each other Finance Document to be
            made by each Credit Party are true and correct in all material
            respects before and after giving effect to the proposed Utilisation.

(c)   Without prejudice to Clause 7.5(b) or (c) (Indemnities), each Revolving
      Lender shall be deemed to participate in each Letter of Credit issued or
      to be issued pursuant to this Agreement. The amount of each Revolving
      Lender's deemed participation in each Letter of Credit will be an amount
      equal to the greater of: (A) the proportion of the amount of the Letter of
      Credit borne by its Available Commitment (for the Revolving Credit
      Facility) to the aggregate Available Commitments (for the Revolving Credit
      Facility) immediately prior to the issue of the Letter of Credit or (B)
      any amount paid or payable by that Revolving Lender pursuant to Clause 7.5
      (Indemnities).

(d)   The Administrative Agent shall notify the applicable Issuing Bank and each
      Revolving Lender of the details of the requested Letter of Credit and its
      participation in that Letter of Credit by the Specified Time.

6.7   RENEWAL OF A LETTER OF CREDIT

(a)   The Borrower may request any Letter of Credit issued on its behalf be
      renewed by the relevant Issuing Bank by delivery to the Administrative
      Agent of a Renewal Request by the Specified Time.

                                      -44-
<PAGE>
(b)      The Finance Parties shall treat any Renewal Request in the same way as
         a Utilisation Request for a Letter of Credit except that the conditions
         set out in paragraphs (d) and (h) of Clause 6.4 (Completion of a
         Utilisation Request for Letters of Credit) shall not apply.

(c)      Subject to the approval of the Issuing Bank, the terms of each renewed
         Letter of Credit shall be the same as those of the relevant Letter of
         Credit immediately prior to its renewal, except that:

         (i)      its amount may be less than the amount of the Letter of Credit
                  immediately prior to its renewal; and

         (ii)     its Term shall start on the date which was the Expiry Date of
                  the Letter of Credit immediately prior to its renewal, and
                  shall end on the proposed Expiry Date specified in the Renewal
                  Request.

(d)      If the conditions set out in this Agreement have been met, the
         applicable Issuing Bank shall amend and re-issue any Letter of Credit
         pursuant to a Renewal Request.

7.       LETTERS OF CREDIT

7.1      IMMEDIATELY PAYABLE

         If a Letter of Credit or any amount outstanding under a Letter of
         Credit is expressed to be immediately payable, the Borrower shall repay
         or prepay that amount immediately.

7.2      ASSIGNMENTS AND TRANSFERS

(a)      Notwithstanding any other provision of this Agreement, the consent of
         each Issuing Bank is required for any assignment or transfer of any
         Revolving Lender's rights and/or obligations under the Revolving Credit
         Facility.

(b)      If paragraph (a) and the conditions and procedure for transfer
         specified in Clause 27 (Changes to the Revolving Lenders) are
         satisfied, then on the Transfer Date each Issuing Bank and the New
         Revolving Lender shall acquire the same obligations between themselves
         as they would have acquired and assumed had the New Revolving Lender
         been an Existing Revolving Lender with the rights and/or obligations
         acquired or assumed by it as a result of the transfer and to that
         extent each Issuing Bank and the Existing Revolving Lender shall each
         be released from further obligations to each other under this
         Agreement.

                                      -45-
<PAGE>
7.3      FEE PAYABLE IN RESPECT OF LETTERS OF CREDIT

(a)      The Borrower agrees to pay to each Issuing Bank a fronting fee in
         respect of each Letter of Credit issued by such Issuing Bank in the
         amount agreed to between such Issuing Bank and the Borrower prior to
         the delivery of a Utilisation Request for a Letter of Credit on the
         outstanding amount of each Letter of Credit issued by such Issuing
         Bank. Such fronting fee on a Letter of Credit shall be payable on the
         last day of each successive period of three months (or such shorter
         period as shall end on the Expiry Date for that Letter of Credit)
         starting on the date of issue of that Letter of Credit. In addition,
         the Borrower agrees to pay to each Issuing Bank all customary
         transaction costs and fees charged by such Issuing Bank in connection
         with the issuance of a Letter of Credit for the Borrower's account,
         such costs and fees to be due and payable on the date specified by such
         Issuing Bank in the invoice for such costs and fees.

(b)      The Borrower shall pay to the Administrative Agent (for the account of
         each Revolving Lender) a letter of credit fee in U.S. Dollars computed
         at a rate, calculated on each day, equal to the Margin applicable to
         Revolving Credit Loans on such day on the outstanding amount of each
         Letter of Credit for the period from the issue of that Letter of Credit
         until its Expiry Date. This fee shall be distributed according to each
         Revolving Lender's L/C Proportion of that Letter of Credit.

(c)      The accrued letter of credit fee on a Letter of Credit shall be payable
         on the last day of each successive period of three months (or such
         shorter period as shall end on the Expiry Date for that Letter of
         Credit) starting on the date of issue of that Letter of Credit. Accrued
         letter of credit fees are also payable to the Administrative Agent on
         the cancelled amount of any Revolving Lender's Revolving Commitment at
         the time the cancellation is effective if that Commitment is cancelled
         in full and the Letters of Credit prepaid or repaid in full.

7.4      CLAIMS UNDER A LETTER OF CREDIT

(a)      The Borrower irrevocably and unconditionally authorises each Issuing
         Bank to pay any claim made or purported to be made under a Letter of
         Credit requested by it and which appears on its face to be in order (a
         "claim").

(b)      The Borrower shall immediately on demand pay to the Administrative
         Agent for such Issuing Bank an amount equal to the amount of any claim.

(c)      The Borrower acknowledges that each of the Issuing Banks:

         (i)      is not obliged to carry out any investigation or seek any
                  confirmation from any other Person before paying a claim; and

                                      -46-
<PAGE>
         (ii)     deals in documents only and will not be concerned with the
                  legality of a claim or any underlying transaction or any
                  available set-off, counterclaim or other defence of any
                  Person.

(d)      The obligations of the Borrower under this Clause will not be affected
         by:

         (i)      the sufficiency, accuracy or genuineness of any claim or any
                  other document; or

         (ii)     any incapacity of, or limitation on the powers of, any Person
                  signing a claim or other document.

7.5      INDEMNITIES

(a)      The Borrower shall within five Business Days of demand indemnify each
         Issuing Bank against any cost, loss or liability incurred by such
         Issuing Bank (otherwise than by reason of such Issuing Bank's gross
         negligence or wilful misconduct) in acting as the Issuing Bank under
         any Letter of Credit requested by the Borrower. A certificate
         indicating the amount of such cost, loss or liability, detailing the
         calculation of such cost, loss or liability and explaining how and why
         such costs, losses or liabilities have been incurred by such Issuing
         Bank in acting as the Issuing Bank under any Letter of Credit shall be
         submitted by such Issuing Bank to the Borrower and the Administrative
         Agent and shall be prima facie evidence for all purposes, absent
         manifest error. For the avoidance of doubt, fronting fees and customary
         transaction costs and fees charged by an Issuing Bank pursuant to
         Clause 7.3(a) (Fee payable in respect of Letters of Credit) shall not
         constitute costs, losses or liabilities of the Issuing Banks required
         to be indemnified by the Borrower under this Clause 7.5.

(b)      Within three Business Days of demand, each Revolving Lender shall
         (according to its L/C Proportion) indemnify each Issuing Bank against
         any cost, loss or liability incurred by such Issuing Bank (otherwise
         than by reason of the Issuing Bank's gross negligence or wilful
         misconduct) in acting as the Issuing Bank under any Letter of Credit
         (unless such Issuing Bank has been reimbursed by a Credit Party
         pursuant to a Finance Document).

(c)      If any Revolving Lender is not permitted (by its constitutional
         documents or any applicable law) to comply with paragraph (b) above),
         then that Revolving Lender will not be obliged to comply with paragraph
         (b) and shall instead be deemed to have taken, on the date the Letter
         of Credit is issued (or if later, on the date the Revolving Lender's
         participation in the Letter of Credit is transferred or assigned to the
         Revolving Lender in accordance with the terms of this Agreement), an

                                      -47-
<PAGE>
         undivided interest and participation in the Letter of Credit in an
         amount equal to its L/C Proportion of that Letter of Credit. Within
         three Business Days of demand from the Administrative Agent, that
         Revolving Lender shall pay to the Administrative Agent (for the account
         of the applicable Issuing Bank) an amount equal to its L/C Proportion
         of the amount demanded under paragraph (b) above.

(d)      The Borrower shall within five Business Days of demand reimburse any
         Revolving Lender for any payment it makes to any Issuing Bank under
         this Clause 7.5 (Indemnities) in respect of any Letter of Credit.

(e)      The obligations of each Revolving Lender under this Clause are
         continuing obligations and will extend to the ultimate balance of sums
         payable by that Revolving Lender in respect of any Letter of Credit,
         regardless of any intermediate payment or discharge in whole or in
         part.

(f)      The obligations of any Revolving Lender under this Clause will not be
         affected by any act, omission, matter or thing which, but for this
         Clause, would reduce, release or prejudice any of its obligations under
         this Clause (without limitation and whether or not known to it or any
         other Person) including:

         (i)      any time, waiver or consent granted to, or composition with,
                  any Credit Party, any beneficiary under a Letter of Credit or
                  other Person;

         (ii)     the release of any other Credit Party or any other Person
                  under the terms of any composition or arrangement with any
                  creditor or any member of the Group;

         (iii)    the taking, variation, compromise, exchange, renewal or
                  release of, or refusal or neglect to perfect, take up or
                  enforce, any rights against, or security over assets of, any
                  Credit Party, any beneficiary under a Letter of Credit or
                  other Person or any non-presentation or non-observance of any
                  formality or other requirement in respect of any instrument or
                  any failure to realise the full value of any security;

         (iv)     any incapacity or lack of power, authority or legal
                  personality of or dissolution or change in the members or
                  status of a Credit Party, any beneficiary under a Letter of
                  Credit or any other Person;

         (v)      any amendment (however fundamental) or replacement of a
                  Finance Document, any Letter of Credit or any other document
                  or security;

                                      -48-
<PAGE>
         (vi)     any unenforceability, illegality or invalidity of any
                  obligation of any Person under any Finance Document, any
                  Letter of Credit or any other document or security; or

         (vii)    any insolvency or similar proceedings.

7.6      RIGHTS OF CONTRIBUTION

         No Credit Party will be entitled to any right of contribution or
         indemnity from any Finance Party in respect of any payment it may make
         under this Clause 7 (Letters of Credit).

7.7      ROLE OF THE ISSUING BANKS

(a)      Nothing in this Agreement constitutes any Issuing Bank as a trustee or
         fiduciary of any other Person.

(b)      None of the Issuing Banks shall be bound to account to any Revolving
         Lender for any sum or the profit element of any sum received by it for
         its own account.

(c)      Each Issuing Bank may accept deposits from, lend money to and generally
         engage in any kind of banking or other business with any member of the
         Group.

(d)      Each Issuing Bank may rely on:

         (i)      any representation, notice or document believed by it to be
                  genuine, correct and appropriately authorised; and

         (ii)     any statement made by a director, authorised signatory or
                  employee of any Person regarding any matters which may
                  reasonably be assumed to be within his knowledge or within his
                  power to verify.

(e)      Each Issuing Bank may engage, pay for and rely on the advice or
         services of any lawyers, accountants, surveyors or other experts.

(f)      Each Issuing Bank may act in relation to the Finance Documents through
         its personnel and agents.

(g)      None of the Issuing Banks is responsible for:

         (i)      the adequacy, accuracy and/or completeness of any information
                  (whether oral or written) supplied by the Agents, the
                  Arrangers, a Credit Party or any other Person given in or in
                  connection with any Finance Document or the Confidential
                  Information Memorandum; or

                                      -49-
<PAGE>
         (ii)     the legality, validity, effectiveness, adequacy or
                  enforceability of any Finance Document or any other agreement,
                  arrangement or document entered into, made or executed in
                  anticipation of or in connection with any Finance Document.

7.8      EXCLUSION OF LIABILITY

(a)      Without limiting paragraph (b) below, none of the Issuing Banks will be
         liable for any action taken by it under or in connection with any
         Finance Document, unless directly caused by its gross negligence or
         wilful misconduct.

(b)      No Party (other than the applicable Issuing Bank) may take any
         proceedings against any officer, employee or agent of such Issuing Bank
         in respect of any claim it might have against such Issuing Bank or in
         respect of any act or omission of any kind by that officer, employee or
         agent in relation to any Finance Document and any officer, employee or
         agent of such Issuing Bank may rely on this Clause subject to Clause
         1.3 (Third Party Rights) and the provisions of the Third Parties Act.

7.9      CREDIT APPRAISAL BY THE REVOLVING LENDERS

         Without affecting the responsibility of any Credit Party for
         information supplied by it or on its behalf in connection with any
         Finance Document, each Revolving Lender confirms to each Issuing Bank
         that it has been, and will continue to be, solely responsible for
         making its own independent appraisal and investigation of all risks
         arising under or in connection with any Finance Document, including but
         not limited to, those listed in paragraphs (a) to (d) of Clause 29.14
         (Credit appraisal by the Revolving Lenders).

7.10     ADDRESS FOR NOTICES

         The address, fax number and telex number (and the department or
         officer, if any, for whose attention the communication is to be made)
         of each Issuing Bank for any communication or document to be made or
         delivered under or in connection with the Finance Documents is that
         notified in writing to the Administrative Agent prior to the date of
         this Agreement or any substitute address, fax number, telex number or
         department or officer as such Issuing Bank may notify to the
         Administrative Agent by not less than five Business Days' notice.

7.11     AMENDMENTS AND WAIVERS

         Notwithstanding any other provision of this Agreement, an amendment or
         waiver which relates to the rights or obligations of any Issuing Bank
         may not be effected without the consent of such Issuing Bank.

                                      -50-
<PAGE>
8.       UTILISATION - SWINGLINE LOANS

8.1      GENERAL

(a)      In this Clause and Clause 9 (Swingline Loans):

         (i)      "FEDERAL FUNDS RATE" means, in relation to any day, the rate
                  per annum equal to:

                  (A)      the weighted average of the rates on overnight
                           Federal funds transactions with members of the US
                           Federal Reserve System arranged by Federal funds
                           brokers, as published for that day (or, if that day
                           is not a New York Business Day, for the immediately
                           preceding New York Business Day) by the Federal
                           Reserve Bank of New York; or

                  (B)      if a rate is not so published for any day which is a
                           New York Business Day, the average of the quotations
                           for that day on such transactions received by the
                           Administrative Agent from three Federal funds brokers
                           of recognised standing selected by the Administrative
                           Agent.

         (ii)     "NEW YORK BUSINESS DAY" means a day (other than a Saturday or
                  Sunday) on which banks are open for general business in New
                  York City; and

(b)      Any reference in this Agreement to:

         (i)      an "INTEREST PERIOD" includes each period determined under
                  this Agreement by reference to which interest on a Swingline
                  Loan is calculated; and

         (ii)     a "REVOLVING LENDER" includes the Swingline Lender unless the
                  context otherwise requires.

(c)      (i)      Clause 5 (Utilisation - Revolving Credit Facility);

         (ii)     Clause 12 (Interest) as it applies to the calculation of
                  interest on a Loan but not default interest on an overdue
                  amount;

         (iii)    Clause 13 (Interest Periods); and

         (iv)     Clause 14 (Changes to the calculation of interest),

         do not apply to Swingline Loans.

                                      -51-
<PAGE>
8.2      DELIVERY OF A UTILISATION REQUEST FOR SWINGLINE LOANS

(a)      The Borrower may utilise the Swingline Facility by delivery to the
         Administrative Agent of a duly completed Utilisation Request in the
         form of Part IC of Schedule 3 (Utilisation Request - Swingline Loans)
         not later than the Specified Time.

(b)      Each Utilisation Request for a Swingline Loan must be sent to the
         Administrative Agent to the address in New York City notified by the
         Administrative Agent for this purpose with a copy to its address
         referred to in Clause 34 (Notices).

8.3      COMPLETION OF A UTILISATION REQUEST FOR SWINGLINE LOANS

(a)      Each Utilisation Request for a Swingline Loan is irrevocable and will
         not be regarded as having been duly completed unless:

         (i)      it specifies that it is for a Swingline Loan;

         (ii)     the proposed Utilisation Date is a New York Business Day
                  within the Availability Period;

         (iii)    the Swingline Loan is denominated in U.S. Dollars and is for
                  an amount which (A) is not less than U.S.$1,000,000 and in
                  integral multiplies of $100,000 in excess thereof (or, if
                  less, the amount of the Available Facility for the Swingline
                  Facility) and (B) does not exceed the Available Facility for
                  the Swingline Facility;

         (iv)     the proposed Interest Period:

                  (A)      does not overrun the Revolving Maturity Date;

                  (B)      is a period of not more than thirty days; and

                  (C)      ends on a New York Business Day.

(b)      Only one Swingline Loan may be requested in each Utilisation Request.

8.4      SWINGLINE LENDER'S SWINGLINE LOANS

(a)      If the conditions set out in this Agreement are met, the Swingline
         Lender shall make each Swingline Loan available through its Facility
         Office in New York City.

(b)      The Swingline Lender will only be obliged to comply with paragraph (a)
         above if on the date of the Utilisation Request and on the proposed
         Utilisation Date:

         (i)      No Default is continuing or would result from the proposed
                  Swingline Loan; and

                                      -52-
<PAGE>
         (ii)     Each of the representations and warranties contained in Clause
                  22 (Representations) and in each other Finance Document to be
                  made by each Credit Party are true and correct in all material
                  respects before and after giving effect to the proposed
                  Swingline Loan.

(c)      The Administrative Agent shall notify the Swingline Lender of the
         amount of each Swingline Loan by the Specified Time. The Administrative
         Agent will also promptly notify the Revolving Lenders of the same.

9.       SWINGLINE LOANS

9.1      SWINGLINE

         Subject to the terms of this Agreement, the Swingline Lender will make
         available to the Borrower a U.S. Dollar swingline loan facility in an
         aggregate amount equal to the Swingline Commitment.

9.2      PURPOSE

         The Borrower shall apply all amounts borrowed by it under the Swingline
         Facility towards the general corporate purposes of the Borrower and its
         Subsidiaries (including, without limitation, distributions, loans and
         advances to the Parent Company). A Swingline Loan may not be applied in
         repayment or prepayment of another Swingline Loan.

9.3      REPAYMENT

(a)      The Borrower shall repay that Swingline Loan on the last day of its
         Interest Period.

(b)      If a Swingline Loan is not repaid on its due date, whether or not a
         Default or Event of Default has occurred and is continuing, each
         Revolving Lender must pay to the Administrative Agent for the Swingline
         Lender an amount calculated as described below within three Business
         Days of demand by the Administrative Agent.

(c)      The amount required to be paid by a Revolving Lender is the proportion
         of the Swingline Loan not repaid which the Revolving Commitment of that
         Revolving Lender bears to the Total Revolving Commitments together with
         any interest (including any default interest) accrued and unpaid on
         that amount from the Utilisation Date of the Swingline Loan to the date
         of payment by that Revolving Lender.

(d)      The Borrower shall reimburse each Revolving Lender for any payment it
         makes to any Swingline Lender under this Clause 9.3 (Repayment) on the
         date such payment is made by such Revolving Lender.

                                      -53-
<PAGE>
(e)      For the purpose of determining any amounts payable by any Credit Party
         pursuant to Clause 12.3 (Default Interest) with respect to sums due and
         payable under paragraph (d) above, references in Clause 12.3 (Default
         Interest) to a "Loan" shall be construed as references to a "Revolving
         Loan".

(f)      Any payment under this Clause 9.3 does not reduce the obligations in
         aggregate of any Credit Party.

9.4      VOLUNTARY PREPAYMENT OF SWINGLINE LOANS

(a)      The Borrower may prepay, after giving prior written notice of such
         election by 10:00 a.m. (New York time) five days (or such shorter
         period as the Swingline Lender may agree) before such prepayment date
         to the Administrative Agent stating the proposed date and aggregate
         principal amount of such prepayment, at any time the whole of any
         Swingline Loan. Any notice given by the Borrower under this Clause
         9.4(a) shall be irrevocable and the Borrower shall make the relevant
         prepayment on the proposed date of prepayment specified in such notice.

(b)      Unless a contrary indication appears in this Agreement, any part of the
         Swingline Facility which is prepaid may be reborrowed in accordance
         with the terms of this Agreement.

9.5      INTEREST

(a)      The rate of interest on each Swingline Loan for any day during its
         Interest Period is the higher of:

         (i)      the prime commercial lending rate in U.S. Dollars announced by
                  the Administrative Agent at 11:00 a.m. (New York time) and in
                  force on that day (the "PRIME RATE"); and

         (ii)     1/2 of 1 per cent. per annum over the rate per annum
                  determined by the Administrative Agent to be the Federal Funds
                  Rate (as published by the Federal Reserve Bank of New York)
                  for that day;

         plus the Margin. The Margin applicable throughout the Interest Period
         of each Swingline Loan shall be determined in accordance with the
         definition of such term on each day during the Interest Period in
         question.

(b)      The Administrative Agent shall promptly notify the Swingline Lender and
         the Borrower of the determination of the rate of interest under
         paragraph (a) above.

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<PAGE>
(c)      If any day during an Interest Period is not a New York Business Day,
         the rate of interest on a Swingline Loan on that day will be the rate
         applicable to the immediately preceding New York Business Day.

(d)      The Borrower shall pay accrued interest on each Swingline Loan made to
         it on the last day of its Interest Period.

9.6      INTEREST PERIOD

(a)      Each Swingline Loan has one Interest Period only.

(b)      The Interest Period for a Swingline Loan must be selected in the
         relevant Utilisation Request.

9.7      ADMINISTRATIVE AGENT

(a)      The Administrative Agent may perform its duties in respect of the
         Swingline Facility through any Affiliate organized under the laws of
         the United States or any state thereof acting as its agent.

(b)      Notwithstanding any other term of this Agreement and without limiting
         the liability of any Credit Party under the Finance Documents, each
         Revolving Lender shall (in proportion to its share of the Total
         Revolving Commitments or, if the Total Revolving Commitments are then
         zero, to its share of the Total Revolving Commitments immediately prior
         to their reduction to zero) pay to or indemnify the Administrative
         Agent, within three Business Days of demand, for or against any cost,
         loss or liability incurred by the Administrative Agent or its Affiliate
         (other than by reason of the Administrative Agent's or the Affiliate's
         gross negligence or wilful misconduct) in acting as Administrative
         Agent for the Swingline Facility under the Finance Documents (unless
         the Administrative Agent or its Affiliate has been reimbursed by a
         Credit Party pursuant to a Finance Document).

                                      -55-
<PAGE>
                                    SECTION 4
                     REPAYMENT, PREPAYMENT AND CANCELLATION

10.      REPAYMENT

10.1     REPAYMENT OF REVOLVING CREDIT LOANS

         The Borrower shall repay each Revolving Credit Loan on the last day of
         its Interest Period; provided that, if on any Utilisation Date, the
         Revolving Lenders are obliged to make an advance in respect of any
         Rollover Loan pursuant to Clause 5 (Utilisation - Revolving Credit
         Facility), then the advance in respect of such Rollover Loan shall be
         deemed (a) to have been made in accordance with Clause 5.4(a)
         (Revolving Lenders' participation) on the relevant Utilisation Date and
         (b) to be applied in repayment of the relevant maturing Revolving
         Credit Loan on such Utilisation Date.

10.2     REDUCTION OF REVOLVING CREDIT FACILITY

(a)      Security Maintenance Ratio. If at any time the Borrower shall fail to
         maintain a Security Maintenance Ratio of at least 2.0 to 1.0, then as
         soon as possible but in any event no later than 30 days after such
         failure, to the extent such failure is continuing, at the Borrower's
         option (i) the Borrower will, or will cause the Parent Company or one
         of its Subsidiaries (provided that such Subsidiary becomes a Credit
         Party pursuant to Clause 25.12 (New Subsidiaries; Permitted Holding
         Company) to, execute and deliver to the Collateral Agent additional Rig
         Mortgages granting an Acceptable Security Interest in such other rigs
         or vessels reasonably acceptable to the Collateral Agent (acting on the
         instruction of the Required Revolving Lenders) (together with any
         required amendments to any applicable Security Agreement and such
         evidence of corporate authority to enter into and such legal opinions
         in relation to such Security Documents as the Collateral Agent may
         reasonably request) that have a Market Value such that the Security
         Maintenance Ratio is at least 2.0 to 1.0, or (ii) at the end of such
         30-day period, the Total Revolving Commitments shall be reduced by the
         amount necessary so that the Security Maintenance Ratio is at least 2.0
         to 1.0.

(b)      Collateral Disposition.

         (i)      If any Collateral Disposition occurs with respect to any
                  Mortgaged Revolving Credit Facility Rig and the Security
                  Maintenance Ratio is at least 2.0 to 1.0 (calculated with
                  respect to the Market Values set forth in the related
                  Additional Appraisal Report and both with and without giving
                  effect to or credit for the Mortgaged Revolving Credit
                  Facility Rig affected by such Collateral Disposition or any
                  related Collateral Disposition

                                      -56-
<PAGE>
                  Proceeds), then the Total Revolving Commitments shall be
                  reduced by an amount equal to (A) the Total Revolving
                  Commitments in effect immediately prior to such Collateral
                  Disposition multiplied by (B) the Appraised Value Percentage
                  of the affected Mortgaged Revolving Credit Facility Rig,
                  effective on the 90th day following the occurrence of such
                  Collateral Disposition, unless on or before the 90th day
                  following such Collateral Disposition, the Parent Company or
                  one of its Subsidiaries shall have replaced such disposed
                  Mortgaged Revolving Credit Facility Rig with an offshore
                  drilling rig of the same or superior type, class and value (as
                  verified by a written appraisal report prepared by an Approved
                  Rigbroker setting forth the Market Value of such replacement
                  rig) as the disposed Mortgaged Revolving Credit Facility Rig
                  or with another offshore drilling rig reasonably acceptable to
                  the Collateral Agent (acting on the instruction of the
                  Required Revolving Lenders) and for which the Collateral Agent
                  has received a written appraisal report prepared by an
                  Approved Rigbroker setting forth the Market Value of such
                  replacement rig and granted an Acceptable Security Interest
                  pursuant to a Rig Mortgage in relation thereto (together with
                  any required amendments to any applicable Security Agreement
                  and such evidence of corporate authority to enter into and
                  such legal opinions in relation to such Security Documents as
                  the Collateral Agent may reasonably request).

         (ii)     If any Collateral Disposition occurs with respect to any
                  Mortgaged Revolving Credit Facility Rig and the Security
                  Maintenance Ratio is at least 2.0 to 1.0 (calculated with
                  respect to the Market Values set forth in the related
                  Additional Appraisal Report and with giving effect to or
                  credit for the Mortgaged Revolving Credit Facility Rig
                  affected by such Collateral Disposition or any related
                  Collateral Disposition Proceeds) but the Security Maintenance
                  Ratio is less than 2.0 to 1.0 (calculated with respect to the
                  Market Values set forth in the related Additional Appraisal
                  Report and without giving effect to or credit for the
                  Mortgaged Revolving Credit Facility Rig affected by such
                  Collateral Disposition or any related Collateral Disposition
                  Proceeds), then the Total Revolving Commitments shall be
                  reduced by an amount equal to (A) the Total Revolving
                  Commitments in effect immediately prior to such Collateral
                  Disposition multiplied by (B) the Appraised Value Percentage
                  of the affected Mortgaged Revolving Credit Facility Rig,
                  effective on the 30th day following the occurrence of such
                  Collateral Disposition, unless on or before the 30th day
                  following such Collateral Disposition, the Parent

                                      -57-
<PAGE>
                  Company or one of its Subsidiaries shall have replaced such
                  disposed Mortgaged Revolving Credit Facility Rig in the manner
                  described in Clause 10.2(b)(i)(1) above and complied with the
                  ancillary matters referred to therein.

         (iii)    If any Collateral Disposition occurs with respect to any
                  Mortgaged Revolving Credit Facility Rig and the Security
                  Maintenance Ratio is less than 2.0 to 1.0 (calculated with
                  respect to the Market Values set forth in the related
                  Additional Appraisal Report and both with and without giving
                  effect to or credit for the Mortgaged Revolving Credit
                  Facility Rig affected by such Collateral Disposition or any
                  related Collateral Disposition Proceeds), then the Total
                  Revolving Commitments shall first be reduced pursuant to
                  Clause 10.2(a)(ii) above and then be reduced by an amount
                  equal to (A) the Total Revolving Commitments in effect after
                  giving effect to the reduction pursuant to Clause 10.2(a)(ii)
                  multiplied by (B) the Appraised Value Percentage of the
                  affected Mortgaged Revolving Credit Facility Rig, each
                  effective on the 30th day following the occurrence of such
                  Collateral Disposition, unless on or before the 30th day
                  following such Collateral Disposition, the Parent Company or
                  one of its Subsidiaries shall have replaced such disposed
                  Mortgaged Revolving Credit Facility Rig in the manner
                  described in Clause 10.2(b)(i) above and complied with the
                  ancillary matters referred to therein.

         (iv)     Any reduction in the Revolving Commitments under this Clause
                  10.2(b) shall be reinstated if, on or before the 360th day
                  following such Collateral Disposition, the Parent Company or
                  one of its Subsidiaries shall have replaced such disposed
                  Mortgaged Revolving Credit Facility Rig in the manner
                  described in Clause 10.2(b)(i) above and complied with the
                  ancillary matters referred to therein.

         (v)      Notwithstanding the foregoing, if any Collateral Disposition
                  occurs with respect to any Mortgaged Revolving Credit Facility
                  Rig and the Security Maintenance Ratio is less than 2.0 to 1.0
                  (calculated with respect to the Market Values set forth in the
                  related Additional Appraisal Report and either with or without
                  giving effect to or credit for the Mortgaged Revolving Credit
                  Facility Rig affected by a Collateral Disposition or any
                  related Collateral Disposition Proceeds) and an Event of
                  Default (other than any Event of Default as a result of the
                  failure to maintain a Security Maintenance Ratio of at least
                  2.0 to 1.0 as a result of such Collateral Disposition) has
                  occurred and is continuing, the reduction of the Total

                                      -58-
<PAGE>
                  Revolving Commitments referred to in Clause 10.2(b) shall take
                  effect immediately upon the receipt of the related Additional
                  Appraisal Report required to be delivered as a result of such
                  Collateral Disposition.

(c)      Casualty Event.

         (i)      If any Casualty Event (if the Casualty Proceeds with respect
                  thereto could reasonably be expected to exceed U.S.$5,000,000)
                  occurs with respect to any Mortgaged Revolving Credit Facility
                  Rig and the Security Maintenance Ratio is at least 2.0 to 1.0
                  (calculated with respect to the Market Values set forth in the
                  related Additional Appraisal Report and both with and without
                  giving effect to or credit for any Casualty Proceeds but
                  giving effect to and credit for the Mortgaged Revolving Credit
                  Facility Rig as affected by such Casualty Event), then the
                  Total Revolving Commitments shall be reduced by an amount
                  equal to (A) the Total Revolving Commitments in effect
                  immediately prior to such Casualty Event multiplied by (B) the
                  Appraised Value Percentage of the affected Mortgaged Revolving
                  Credit Facility Rig, effective on the 90th day following the
                  occurrence of such Casualty Event, unless on or before the
                  90th day following such Casualty Event, (1) the Credit Party
                  who owned such affected Mortgaged Revolving Credit Facility
                  Rig shall have made all repairs to the Mortgaged Revolving
                  Credit Facility Rig that are necessary to restore such
                  Mortgaged Revolving Credit Facility Rig to the use and
                  condition of such Mortgaged Revolving Credit Facility Rig
                  prior to such Casualty Event in the sole discretion of the
                  Collateral Agent (acting on the instruction of the Required
                  Revolving Lenders), or (2) the Parent Company or one of its
                  Subsidiaries shall have replaced such affected Mortgaged
                  Revolving Credit Facility Rig with an offshore drilling rig of
                  the same or superior type, class and value (as verified by a
                  written appraisal report prepared by an Approved Rigbroker
                  setting forth the Market Value of such replacement rig) as the
                  affected Mortgaged Revolving Credit Facility Rig or with
                  another offshore drilling rig reasonably acceptable to the
                  Collateral Agent (acting on the instruction of the Required
                  Revolving Lenders) and for which the Collateral Agent has
                  received a written appraisal report prepared by an Approved
                  Rigbroker setting forth the Market Value of such replacement
                  rig and granted an Acceptable Security Interest pursuant to a
                  Rig Mortgage in relation thereto (together with any required
                  amendments to any applicable Security Agreement and such
                  evidence of corporate authority to enter into and such

                                      -59-
<PAGE>
                  legal opinions in relation to such Security Documents as the
                  Collateral Agent may reasonably request).

         (ii)     If any Casualty Event (if the Casualty Proceeds with respect
                  thereto could reasonably be expected to exceed U.S.$5,000,000)
                  occurs with respect to any Mortgaged Revolving Credit Facility
                  Rig and the Security Maintenance Ratio is at least 2.0 to 1.0
                  (calculated with respect to the Market Values set forth in the
                  related Additional Appraisal Report and with giving effect to
                  or credit for the Mortgaged Revolving Credit Facility Rig
                  affected by such Casualty Event or any related Casualty
                  Proceeds) but the Security Maintenance Ratio is less than 2.0
                  to 1.0 (calculated with respect to the Market Values set forth
                  in the related Additional Appraisal Report and without giving
                  effect to or credit for the Mortgaged Revolving Credit
                  Facility Rig affected by such Casualty Event or any related
                  Casualty Proceeds), then the Total Revolving Commitments shall
                  be reduced by an amount equal to (A) the Total Revolving
                  Commitments in effect immediately prior to such Casualty Event
                  multiplied by (B) the Appraised Value Percentage of the
                  affected Mortgaged Revolving Credit Facility Rig, effective on
                  the 30th day following the occurrence of such Casualty Event,
                  unless on or before the 30th day following such Casualty
                  Event, (1) the Credit Party who owned such affected Mortgaged
                  Revolving Credit Facility Rig shall have repaired such
                  affected Mortgaged Revolving Credit Facility Rig in the manner
                  described in Clause 10.2(c)(i)(1) above, or (2) the Parent
                  Company or one of its Subsidiaries shall have replaced such
                  affected Mortgaged Revolving Credit Facility Rig in the manner
                  described in Clause 10.2(c)(i)(2) above and complied with the
                  ancillary matters referred to therein.

         (iii)    If any Casualty Event (if the Casualty Proceeds with respect
                  thereto could reasonably be expected to exceed U.S.$5,000,000)
                  occurs with respect to any Mortgaged Revolving Credit Facility
                  Rig and the Security Maintenance Ratio is less than 2.0 to 1.0
                  (calculated with respect to the Market Values set forth in the
                  related Additional Appraisal Report and both with and without
                  giving effect to or credit for any Casualty Proceeds but
                  giving effect to and credit for the Mortgaged Revolving Credit
                  Facility Rig affected by such Casualty Event), then the Total
                  Revolving Commitments shall first be reduced pursuant to
                  Clause 10.2(a)(ii) above and then be reduced by an amount
                  equal to (A) the Total Revolving Commitments in effect after
                  giving effect to the reduction pursuant to Clause 10.2(a)(ii)
                  above multiplied by (B) the Appraised Value Percentage

                                      -60-
<PAGE>
                  of the affected Mortgaged Revolving Credit Facility Rig,
                  effective on the 30th day following the occurrence of such
                  Casualty Event, unless on or before the 30th day following
                  such Casualty Event, (1) the Credit Party who owned such
                  affected Mortgaged Revolving Credit Facility Rig shall have
                  repaired such affected Mortgaged Revolving Credit Facility Rig
                  in the manner described in Clause 10.2(c)(i)(1) above, or (2)
                  the Parent Company or one of its Subsidiaries shall have
                  replaced such affected Mortgaged Revolving Credit Facility Rig
                  in the manner described in Clause 10.2(c)(i)(2) above and
                  complied with the ancillary matters referred to therein.

         (iv)     Any reduction in the Revolving Commitments under this Clause
                  10.2(c) shall be reinstated if, on or before the 270th day
                  following such Casualty Event, (1) the Credit Party who owned
                  such affected Mortgaged Revolving Credit Facility Rig shall
                  have repaired such affected Mortgaged Revolving Credit
                  Facility Rig in the manner described in Clause 10.2(c)(i)(1)
                  above, or (2) the Parent Company or one of its Subsidiaries
                  shall have replaced such affected Mortgaged Revolving Credit
                  Facility Rig in the manner described in Clause 10.2(c)(i)(2)
                  above and complied with the ancillary matters referred to
                  therein.

         (v)      Notwithstanding the foregoing, if any Casualty Event (if the
                  Casualty Proceeds with respect thereto could reasonably be
                  expected to exceed U.S.$5,000,000) occurs with respect to any
                  Mortgaged Revolving Credit Facility Rig and the Security
                  Maintenance Ratio is less than 2.0 to 1.0 (calculated with
                  respect to the Market Values set forth in the related
                  Additional Appraisal Report and either with or without giving
                  effect to or credit for any Casualty Proceeds but giving
                  effect to and credit for the Mortgaged Revolving Credit
                  Facility Rig as affected by such Casualty Event) and an Event
                  of Default (other than any Event of Default as a result of the
                  failure to maintain a Security Maintenance Ratio of at least
                  2.0 to 1.0 as a result of such Casualty Event) has occurred
                  and is continuing, the reduction of the Total Revolving
                  Commitments referred to in Clause 10.2(c) shall take effect
                  immediately on the receipt of the related Additional Appraisal
                  Report required to be delivered as a result of such Casualty
                  Event.

(d)      Any reduction or termination of the Revolving Commitments pursuant to
         Clause 10.2(a) shall be permanent, with no obligation of the Revolving
         Lenders to reinstate such Revolving Commitments and the commitment fees
         provided for in

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         Clause 15.1 (Commitment Fee) shall thereafter be computed on the basis
         of the Revolving Commitments as so reduced. Any reduction or
         termination of the Revolving Commitments pursuant to Clause 10.2(b)
         shall be permanent if not reinstated on or before the 360th day
         following the applicable Collateral Disposition as provided in Clause
         10.2(b)(iv), with no obligation of the Revolving Lenders to reinstate
         such Revolving Commitments and the commitment fees provided for in
         Clause 15.1 (Commitment Fee) shall thereafter be computed on the basis
         of the Revolving Commitments as so reduced. Any reduction or
         termination of the Revolving Commitments pursuant to Clause 10.2(c)
         shall be permanent if not reinstated on or before the 270th day
         following the applicable Casualty Event as provided in Clause
         10.2(c)(iv), with no obligation of the Revolving Lenders to reinstate
         such Revolving Commitments and the commitment fees provided for in
         Clause 15.1 (Commitment Fee) shall thereafter be computed on the basis
         of the Revolving Commitments as so reduced. The Administrative Agent
         shall give each Revolving Lender prompt notice of any commitment
         reduction or termination.

(e)      Any reduction in the Total Revolving Commitments pursuant to this
         Clause 10.2 shall be apportioned between the Revolving Lenders pro rata
         according to proportion of the relevant amount of the reduction borne
         by each Revolving Lender's Revolving Commitment to the Total Revolving
         Commitments, immediately prior to the relevant reduction.

10.3     EXTENSION OF REVOLVING MATURITY DATE

         The Borrower may request a 364-day extension of the Revolving Maturity
         Date by submitting a request for an extension to the Administrative
         Agent (an "EXTENSION REQUEST") no earlier than 75 days and no less than
         45 days prior to the then current Revolving Maturity Date; provided,
         however, that (i) the Borrower may not submit more than one Extension
         Request during any 364-day period and not more than two Extension
         Requests in the aggregate, and (ii) no Default or Event of Default
         shall have occurred and be continuing on the date of such Extension
         Request. Each Extension Request shall be irrevocable upon the Borrower
         and constitute a representation and warranty by the Borrower that (A)
         no Default or Event of Default shall have occurred and be continuing
         and (B) each of the representations and warranties contained in Clause
         22 (Representations) hereof and in each other Finance Document to be
         made by each Credit Party are true and correct in all material respects
         on and as of the date of such Extension Request. Promptly upon receipt
         of an Extension Request, the Administrative Agent shall notify each
         Revolving Lender thereof and shall request each Revolving Lender to
         approve the Extension Request. The Borrower shall provide such
         information as the

                                      -62-
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         Administrative Agent or any Revolving Lender through the Administrative
         Agent may reasonably request in connection with evaluating such
         Extension Request. Each Revolving Lender may decide to approve or
         decline such Extension Request in its sole and absolute discretion.
         Each Revolving Lender approving the Extension Request shall deliver its
         written consent within 30 days of the date of the Extension Request.
         Any Revolving Lender not responding within 30 days shall be deemed to
         have declined the request. At the option of the Borrower, the Revolving
         Commitment of any Revolving Lender not consenting to the Extension
         Request and (if the Swingline Lender does not consent to the extension
         of the Revolving Maturity Date in respect of the Swingline Facility)
         the Swingline Commitment may (in each case) be assumed, in whole or in
         part, by one or more existing Revolving Lenders or other New Revolving
         Lenders acceptable to the Borrower and the Administrative Agent, upon
         compliance with Clause 27 (Changes to the Revolving Lenders); provided
         that, in such event, unless otherwise agreed by the assuming existing
         Revolving Lender or New Revolving Lender, the Borrower shall pay the
         U.S.$3,500 processing fee required by Clause 27.3 (Assignment or
         Transfer Fee). If such request is not approved by existing Revolving
         Lenders or New Revolving Lenders assuming all or a portion of the
         Revolving Commitments of non-consenting Revolving Lenders in the manner
         provided below holding at least 51% of the then Total Revolving
         Commitments, it shall be deemed to have been withdrawn in so far as it
         relates to the extension of the Revolving Maturity Date for the
         purposes of the Revolving Credit Facility; and if such request is not
         approved by the Swingline Lender with respect to the extension of the
         Revolving Maturity Date for the purposes of the Swingline Facility, it
         shall be deemed to have been withdrawn in so far as it relates to the
         extension of the Revolving Maturity Date for the purposes of the
         Swingline Facility. If all of the Revolving Commitments of the
         non-consenting Revolving Lenders or (as the case may be if the
         Swingline Lender does not consent to the proposed extension of the
         Revolving Maturity Date relating to the Swingline Facility) the
         Swingline Commitment are or is not replaced on or before the then
         current Revolving Maturity Date, then, at the Borrower's option, either
         (i) the Total Revolving Commitments and the Swingline Commitment shall
         terminate on the then current Revolving Maturity Date or (ii) the
         Borrower shall give prompt notice of termination on the then current
         Revolving Maturity Date of the Revolving Commitments and/or Swingline
         Commitment not so replaced to each and every Revolving Lender that has
         not consented to the Extension Request (to the extent its Revolving
         Commitment or Swingline Commitment has not been assumed), with a copy
         to the Administrative Agent, and shall prepay on the then current
         Revolving Maturity Date the Loans of such non-consenting Revolving
         Lenders on not less than five Business Days' prior notice to

                                      -63-
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         such Revolving Lenders and the Administrative Agent, which shall reduce
         the Total Revolving Commitments and, if applicable, the Swingline
         Commitment, accordingly (to the extent not assumed), and the Revolving
         Maturity Date shall be extended in accordance with this Clause 10.3 for
         the remaining Revolving Commitments of, if remaining, the Swingline
         Commitment.

11.      PREPAYMENT AND CANCELLATION

11.1     ILLEGALITY

         If it becomes unlawful in any applicable jurisdiction for a Revolving
         Lender to perform any of its obligations as contemplated by this
         Agreement or to fund or maintain its participation in any Utilisation:

         (a)      that Revolving Lender shall promptly notify the Administrative
                  Agent upon becoming aware of that event;

         (b)      upon the Administrative Agent notifying the Borrower, the
                  Commitment of that Revolving Lender will be immediately
                  cancelled; and

         (c)      the Borrower shall repay that Revolving Lender's participation
                  in the Utilisations made to the Borrower on the last day of
                  the Interest Period for each Utilisation occurring after the
                  Administrative Agent has notified the Borrower or, if earlier,
                  the date specified by the Revolving Lender in the notice
                  delivered to the Administrative Agent (being no earlier than
                  the last day of any applicable grace period permitted by law).

11.2     VOLUNTARY CANCELLATION

         The Borrower may, if it gives the Administrative Agent not less than
         five Business Days' (or such shorter period as the Required Revolving
         Lenders may agree) prior notice, cancel the whole or any part (being a
         minimum amount of U.S.$10,000,000) of the aggregate Available
         Commitments for that Facility. Any cancellation under this Clause 11.2
         shall reduce the Commitments of the Revolving Lenders rateably under
         that Facility. Any such cancellation notice, once given, shall be
         irrevocable.

11.3     VOLUNTARY PREPAYMENT OF REVOLVING CREDIT FACILITY UTILISATIONS

         The Borrower may, if it gives the Administrative Agent not less than
         three Business Days' (or such shorter period as the Required Revolving
         Lenders may agree) prior notice, prepay the whole or any part of a
         Revolving Credit Loan (but if in part, being an amount that reduces the
         amount of the Revolving Credit Loan by a minimum amount of
         U.S.$1,000,000). Any notice given by the Borrower under

                                      -64-

<PAGE>

         this Clause 11.3 shall be irrevocable and the Borrower shall make the
         relevant prepayment on the proposed date of prepayment specified in
         such notice.

11.4     MANDATORY PREPAYMENT OF REVOLVING CREDIT FACILITY UTILISATIONS

(a)      Deficiency. On any date on which the outstanding principal amount of
         the Revolving Credit Loans plus the Letter of Credit Exposure plus the
         outstanding principal amount of the Swingline Loans exceeds the Total
         Revolving Commitments, the Borrower agrees to make on such date
         mandatory prepayments of the Revolving Credit Loans and/or Swingline
         Loans in the amount of such excess plus accrued interest and Break
         Costs, or if the Revolving Credit Loans and Swingline Loans have been
         repaid in full, make deposits of cash cover to provide cash collateral
         for the Letter of Credit Exposure (to the extent of any remaining
         excess).

(b)      Collateral Disposition. Without prejudice to Clause 11.4(a) above,

         (i)      Following any Collateral Disposition, all Collateral
                  Disposition Proceeds payable to or received by the Credit
                  Parties shall on the date of receipt by such Credit Party be
                  deposited with the Collateral Agent as security for the
                  Obligations and applied in accordance with this Agreement.

         (ii)     If (A) no Event of Default has occurred and is continuing and
                  (B) a replacement for any Mortgaged Revolving Credit Facility
                  Rig affected by a Collateral Disposition or other arrangement
                  permitted by Clause 10.2(b) shall have been made within the
                  time periods provided for therein following such Collateral
                  Disposition in accordance with Clause 10.2(b), then the
                  Collateral Agent shall refund such Collateral Disposition
                  Proceeds (together with accrued interest thereon) to the
                  Borrower or any other Credit Party as appropriate.

         (iii)    If (A) no Event of Default has occurred and is continuing and
                  (B) a replacement for any Mortgaged Revolving Credit Facility
                  Rig affected by a Collateral Disposition or other arrangement
                  permitted by Clause 10.2(b) shall not have been made within
                  the time periods provided for therein following such
                  Collateral Disposition in accordance with Clause 10.2(b), then
                  the Collateral Agent shall (1) apply the Collateral
                  Disposition Proceeds in an amount equal to the lesser of (x)
                  50% of such Collateral Disposition Proceeds or (y) the
                  outstanding amount of the Loans to prepay the Swingline Loans,
                  or if the Swingline Loans have been repaid in full, prepay the
                  Revolving Credit Loans, or if the Revolving Credit Loans and
                  Swingline Loans have been repaid in full, make deposits of
                  cash cover or

                                      -65-
<PAGE>
                  provide cash collateral for the Letter of Credit Exposure and
                  (2) refund the balance (together with accrued interest) to the
                  Borrower or any other Credit Party as appropriate.

         (iv)     If an Event of Default has occurred and is continuing, the
                  Collateral Agent shall apply such Collateral Disposition
                  Proceeds in accordance with Clause 32.5 (Partial Payments).

(c)      Casualty Event. Without prejudice to Clause 11.4(a) above,

         (i)      Following any Casualty Event (if the Casualty Proceeds with
                  respect thereto could reasonably be expected to exceed
                  U.S.$5,000,000), all Casualty Proceeds payable to or received
                  by the Credit Parties in respect of such Casualty Event shall
                  on the date of receipt by such Credit Party be deposited with
                  the Collateral Agent as security for the Obligations and
                  applied in accordance with this Agreement.

         (ii)     If (A) no Event of Default has occurred and is continuing, (B)
                  the applicable Credit Party reasonably believes that all
                  necessary repairs to any Mortgaged Revolving Credit Facility
                  Rig affected by a Casualty Event can be completed within 270
                  days following such Casualty Event, and (C) during the 270-day
                  period following such Casualty Event, the applicable Credit
                  Party works diligently to complete all such repairs, then the
                  Collateral Agent shall from time to time apply such Casualty
                  Proceeds in payment for all necessary repairs to the extent
                  that the costs of such repairs shall have been paid by a
                  Credit Party upon receipt of satisfactory evidence of such
                  repairs, and following completion of such repairs within 270
                  days after the Casualty Event and no Event of Default has
                  occurred and is continuing, the Collateral Agent shall refund
                  the remainder of such Casualty Proceeds (together with accrued
                  interest thereon), if any, to the Borrower or any other
                  appropriate Credit Party.

         (iii)    If (A) no Event of Default has occurred and is continuing and
                  (B) all necessary repairs to any Mortgaged Revolving Credit
                  Facility Rig affected by a Casualty Event or other arrangement
                  permitted by Clause 10.2(c) shall not have been made within
                  270 days following such Casualty Event, then the Collateral
                  Agent shall (1) apply the Casualty Proceeds in an amount equal
                  to the lesser of (x) 50% of any Casualty Proceeds still held
                  by the Collateral Agent or (y) the outstanding amount of the
                  Loans to prepay the Swingline Loans, or if the Swingline Loans
                  have been repaid in full, prepay the Revolving Credit Loans,
                  or if the Revolving Credit Loans

                                      -66-
<PAGE>
                  and Swingline Loans have been repaid in full, make deposits of
                  cash cover or provide cash collateral for the Letter of Credit
                  Exposure and (2) refund the balance (together with accrued
                  interest thereon) to the Borrower or any other Credit Party as
                  appropriate.

         (iv)     If an Event of Default has occurred and is continuing, the
                  Collateral Agent shall apply such Casualty Proceeds in
                  accordance with Clause 32.5 (Partial Payments).

(d)      Equity Issuance. If at any time the Parent Company's Index Debt is not
         rated BBB- or higher by S&P and Baa3 or higher by Moody's, then the
         Borrower shall prepay the Swingline Loans, or if the Swingline Loans
         have been repaid in full, prepay the Revolving Credit Loans, or if the
         Revolving Credit Loans and Swingline Loans have been repaid in full,
         make deposits of cash cover or provide cash collateral for the Letter
         of Credit Exposure, by an amount equal to 50% of the Equity Issuance
         Proceeds in excess of U.S.$25,000,000 per occurrence that the Parent
         Company or any of its Subsidiaries receives from each Equity Issuance
         after the Closing Date within 30 days after the date of each such
         Equity Issuance.

11.5     RIGHT OF REPAYMENT AND CANCELLATION IN RELATION TO A SINGLE REVOLVING
         LENDER

(a)      If:

         (i)      any sum payable to any Revolving Lender by a Credit Party is
                  required to be increased under paragraph (f) of Clause 16.2
                  (Tax gross-up);

         (ii)     any Revolving Lender claims indemnification from the Borrower
                  under Clause 16.3 (Tax indemnity), Clause 16.6 (Value Added
                  Tax) or Clause 17.1 (Increased costs); or

         (iii)    any Revolving Lender notifies the Administrative Agent of its
                  Mandatory Cost under paragraph 2 of Schedule 4 (Mandatory Cost
                  formula) or its Eurodollar Rate Reserve Percentage under
                  Clause 12.4 (Additional Interest on Revolving Credit Loans),

         the Borrower may, whilst (in the case of paragraphs (i) and (ii) above)
         the circumstance giving rise to the requirement or indemnification
         continues or (in the case of paragraph (iii) above) that Mandatory Cost
         or Eurodollar Rate Reserve Percentage is greater than zero, give the
         Administrative Agent notice of cancellation of the Commitments of that
         Revolving Lender and its intention to procure the repayment of that
         Revolving Lender's participation in the Utilisations.

                                      -67-
<PAGE>
(b)      On receipt of a notice referred to in paragraph (a) above, the
         Commitments of that Revolving Lender shall immediately be reduced to
         zero.

(c)      On the last day of each Interest Period which ends after the Borrower
         has given notice under paragraph (a) above (or, if earlier, the date
         specified by the Borrower in that notice), the Borrower shall repay
         that Revolving Lender's participation in that Utilisation.

(d)      Notwithstanding the foregoing, if the Borrower elects to exercise such
         right of repayment and cancellation with respect to any Revolving
         Lender pursuant to this Clause 11.5, it shall be obligated to repay and
         cancel the Commitments of all Revolving Lenders that have made requests
         for compensation in approximately proportionate amounts pursuant to
         Clause 16.2(f), Clause 16.3, Clause 16.6, Clause 17.1, paragraph 2 of
         Schedule 4 or Clause 12.4.

11.6     RIGHT OF REPLACEMENT OF A SINGLE REVOLVING LENDER

Notwithstanding the provisions of Clause 11.5 (Right of repayment and
cancellation in relation to a single Revolving Lender), if:

(a)      any sum payable to any Revolving Lender by a Credit Party is required
         to be increased under paragraph (f) of Clause 16.2 (Tax gross-up);

(b)      any Revolving Lender claims indemnification from the Borrower under
         Clause 16.3 (Tax indemnity), Clause 16.6 (Value Added Tax) or Clause
         17.1 (Increased costs); or

(c)      any Revolving Lender notifies the Administrative Agent of its Mandatory
         Cost under paragraph 2 of Schedule 4 (Mandatory Cost formula) or its
         Eurodollar Rate Reserve Percentage under Clause 12.4 (Additional
         Interest on Revolving Credit Loans),

the Borrower may, whilst (in the case of paragraphs (a) and (b) above) the
circumstance giving rise to the requirement or indemnification continues or (in
the case of paragraph (c) above) that Mandatory Cost or Eurodollar Rate Reserve
Percentage is greater than zero, elect to replace such Revolving Lender,
provided that no Default or Event of Default shall have occurred and be
continuing at the time of such replacement, and provided further that,
concurrently with such replacement, (i) a New Revolving Lender which is
reasonably acceptable to the Borrower, the Administrative Agent and the Issuing
Banks shall agree, as of such date, to purchase for cash the Loans and other
Obligations due to such Revolving Lender and to become a Revolving Lender for
all purposes under this Agreement and to assume all obligations of such
Revolving Lender to be terminated as of such date and to comply with the
requirements of Clause 27 (Changes to the

                                      -68-
<PAGE>
Revolving Lenders) applicable to transfers, and (ii) the New Revolving Lender
shall pay to such Revolving Lender in same day funds on the day of such
replacement (A) the amount of principal outstanding to such Revolving Lender,
(B) all interest, fees and other amounts then accrued but unpaid to such
Revolving Lender by the Borrower hereunder to and including the date of
termination, including without limitation payments due to such Revolving Lender
under Clauses 16.2(f) (Tax gross-up), Clause 16.3 (Tax indemnity), Clause 17.1
(Increased costs); paragraph 2 of Schedule 4 (Mandatory Cost formula) or Clause
12.4 (Additional Interest on Revolving Credit Loans), and (C) any Break Costs
which would have been due to such Revolving Lender on the day of such
replacement under Clause 14.4 (Break Costs) had the Loans of such Revolving
Lender been prepaid on such date rather than sold to the replacement Revolving
Lender. Notwithstanding the foregoing, if the Borrower elects to exercise such
right of repayment and cancellation with respect to any Revolving Lender
pursuant to this Clause 11.5, it shall be obligated to replace all Revolving
Lenders that have made requests for compensation in approximately proportionate
amounts pursuant to Clause 16.2(f), Clause 16.3, Clause 16.6, Clause 17.1,
paragraph 2 of Schedule 4 or Clause 12.4.

11.7     RESTRICTIONS

(a)      Any notice of cancellation or prepayment given by any Party under this
         Clause 11 shall be irrevocable and, unless a contrary indication
         appears in this Agreement, shall specify the date or dates upon which
         the relevant cancellation or prepayment is to be made and the amount of
         that cancellation or prepayment.

(b)      Any prepayment under this Agreement shall be made together with accrued
         interest on the amount prepaid and, subject to any Break Costs, without
         premium or penalty.

(c)      Unless a contrary indication appears in this Agreement, any part of
         Revolving Credit Facility which is prepaid may be reborrowed in
         accordance with the terms of this Agreement.

(d)      The Borrower shall not repay or prepay all or any part of the
         Utilisations or cancel all or any part of the Commitments except at the
         times and in the manner expressly provided for in this Agreement.

(e)      No amount of the Total Revolving Commitments cancelled under this
         Agreement may be subsequently reinstated.

(f)      If the Administrative Agent receives a notice under this Clause 11 it
         shall promptly forward a copy of that notice to either the Borrower or
         the affected Revolving Lender, as appropriate.

                                      -69-
<PAGE>
(g)      All payments to be made by any Credit Party shall be made without
         condition or deduction for any counterclaim, defense, recoupment or
         setoff.

11.8     REDUCTION OF SWINGLINE COMMITMENT CONSEQUENT UPON A REDUCTION OF TOTAL
         REVOLVING COMMITMENTS

         If the result of any reduction or cancellation of the Total Revolving
         Commitments under this Agreement would be that the Total Revolving
         Commitments after such cancellation would be less than the Swingline
         Commitment, such amount of the Swingline Commitment shall be deemed to
         be cancelled as shall ensure that the Swingline Commitment is equal to
         the Total Revolving Commitments as so reduced or cancelled.

                                      -70-
<PAGE>
                                    SECTION 5
                              COSTS OF UTILISATION

12.      INTEREST

12.1     CALCULATION OF INTEREST

         The rate of interest on each Revolving Credit Loan for each Interest
         Period is the percentage rate per annum which is the aggregate of the
         applicable:

(a)      Margin; and

(b)      LIBOR.

         The Margin applicable throughout any Interest Period shall be
         determined in accordance with the definition of that term on each day
         during the Interest Period in question.

12.2     PAYMENT OF INTEREST

         The Borrower shall pay accrued interest on each Loan on the last day of
         each Interest Period (and, if the Interest Period is longer than six
         Months, on the dates falling at six monthly intervals after the first
         day of the Interest Period).

12.3     DEFAULT INTEREST

(a)      If a Credit Party fails to pay any amount payable by it under a Finance
         Document on its due date, interest shall accrue on the overdue amount
         from the due date up to the date of actual payment (both before and
         after judgment) at a rate which, subject to paragraph (b) below, is 2
         per cent higher than the rate which would have been payable if the
         overdue amount had, during the period of non-payment, constituted a
         Loan in the currency of the overdue amount for successive Interest
         Periods, each of a duration selected by the Administrative Agent
         (acting reasonably). Any interest accruing under this Clause 12.3 shall
         be immediately payable by the Credit Party on demand by the
         Administrative Agent.

(b)      If any overdue amount consists of all or part of a Loan which became
         due on a day which was not the last day of an Interest Period relating
         to that Loan:

         (i)      the first Interest Period for that overdue amount shall have a
                  duration equal to the unexpired portion of the current
                  Interest Period relating to that Loan; and

         (ii)     the rate of interest applying to the overdue amount during
                  that first Interest Period shall be 2 per cent. higher than
                  the rate which would have applied if the overdue amount had
                  not become due.

                                      -71-
<PAGE>
(c)      Default interest (if unpaid) arising on an overdue amount will be
         compounded with the overdue amount at the end of each Interest Period
         applicable to that overdue amount but will remain immediately due and
         payable.

12.4     MANDATORY COSTS; ADDITIONAL INTEREST ON REVOLVING CREDIT LOANS

(a)      The Borrower shall pay to each Revolving Lender, so long as such
         Revolving Lender shall be required to comply with the requirements of
         the Financial Services Authority (or any other authority which replaces
         all or any of its functions) or the requirements of the European
         Central Bank, additional interest on the unpaid principal amount of
         each Revolving Credit Loan of such Revolving Lender, from the effective
         date of such Loan until such principal amount is paid in full, at an
         interest rate per annum equal at all times to the Mandatory Cost for
         such Revolving Lender. A certificate indicating the amount of such
         additional interest, detailing the calculation of such additional
         interest and explaining how and why such additional interest is owing
         shall be submitted by such Revolving Lender to the Borrower and the
         Administrative Agent and shall be prima facie evidence for all
         purposes, absent manifest error.

(b)      The Borrower shall pay to each Revolving Lender, so long as such
         Revolving Lender shall be required under regulations of the Federal
         Reserve Board to maintain reserves with respect to liabilities or
         assets consisting of or including Eurocurrency Liabilities, additional
         interest on the unpaid principal amount of each Revolving Credit Loan
         of such Revolving Lender, from the effective date of such Loan until
         such principal amount is paid in full, at an interest rate per annum
         equal at all times to the remainder obtained by subtracting (A) LIBOR
         for the Interest Period for such Loan from (B) the rate obtained by
         dividing LIBOR by a percentage equal to 100% minus the Eurodollar Rate
         Reserve Percentage of such Revolving Lender for such Interest Period,
         payable on each date on which interest is payable on such Loan. Such
         additional interest payable to any Revolving Lender shall be determined
         by such Revolving Lender and notified to the Borrower through the
         Administrative Agent. A certificate indicating the amount of such
         additional interest, detailing the calculation of such additional
         interest and explaining how and why such additional interest is owing
         shall be submitted by such Revolving Lender to the Borrower and the
         Administrative Agent and shall be prima facie evidence for all
         purposes, absent manifest error.

12.5     NOTIFICATION OF RATES OF INTEREST

         The Administrative Agent shall promptly notify the Revolving Lenders
         and the Borrower of the determination of a rate of interest under this
         Agreement.

                                      -72-
<PAGE>
13.      INTEREST PERIODS

13.1     SELECTION OF INTEREST PERIODS

(a)      The Borrower shall select the Interest Period for a Loan in the
         Utilisation Request for that Loan.

(b)      Subject to this Clause 13, the Borrower may select an Interest Period
         of 1, 2, 3 or 6 Months or any other period agreed between the Borrower
         and the Administrative Agent (acting on the instructions of all the
         Revolving Lenders); provided, however, that at the Administrative
         Agent's sole discretion, the Borrower may not select any Interest
         Period longer than one Month until the satisfactory completion of the
         syndication of this Agreement by the Mandated Lead Arrangers.

(c)      An Interest Period for a Loan shall not extend beyond the Revolving
         Maturity Date.

(d)      The Interest Period for a Revolving Credit Loan shall start on the
         Utilisation Date.

(e)      A Revolving Credit Loan has one Interest Period only.

13.2     NON-BUSINESS DAYS

         If an Interest Period would otherwise end on a day which is not a
         Business Day, that Interest Period will instead end on the next
         Business Day in that calendar month (if there is one) or the preceding
         Business Day (if there is not).

14.      CHANGES TO THE CALCULATION OF INTEREST

14.1     ABSENCE OF QUOTATIONS

         Subject to Clause 14.2 (Market disruption), if LIBOR is to be
         determined by reference to the Reference Banks but a Reference Bank
         does not supply a quotation by the Specified Time on the Quotation Day,
         the applicable LIBOR shall be determined on the basis of the quotations
         of the remaining Reference Banks.

14.2     MARKET DISRUPTION

(a)      If a Market Disruption Event occurs in relation to a Loan for any
         Interest Period, then the rate of interest on each Revolving Lender's
         share of that Loan for the Interest Period shall be the rate per annum
         which is the sum of:

         (i)      the Margin;

         (ii)     the rate notified to the Administrative Agent by that
                  Revolving Lender as soon as practicable and in any event
                  before interest is due to be paid in respect of that Interest
                  Period, to be that which expresses as a percentage

                                      -73-
<PAGE>
                  rate per annum the cost to that Revolving Lender of funding
                  its participation in that Loan from whatever source it may
                  reasonably select; and

         (iii)    the Mandatory Cost, if any, applicable to that Revolving
                  Lender's participation in the Loan.

(b)      In this Agreement "Market Disruption Event" means:

         (i)      at or about noon on the Quotation Day for the relevant
                  Interest Period the Screen Rate is not available and none or
                  only one of the Reference Banks supplies a rate to the
                  Administrative Agent to determine LIBOR for U.S. Dollars for
                  the relevant Interest Period; or

         (ii)     before close of business in London on the Quotation Day for
                  the relevant Interest Period, the Administrative Agent
                  receives notifications from Revolving Lenders whose
                  participations in the relevant Loan equal or exceed 66 2/3%
                  that the cost to it or them of obtaining matching deposits in
                  the Relevant Interbank Market would be in excess of LIBOR.

14.3     ALTERNATIVE BASIS OF INTEREST OR FUNDING

(a)      If a Market Disruption Event occurs and the Administrative Agent or the
         Borrower so requires, the Administrative Agent and the Borrower shall
         enter into negotiations (for a period of not more than thirty days)
         with a view to agreeing a substitute basis for determining the rate of
         interest.

(b)      Any alternative basis agreed pursuant to paragraph (a) above shall,
         with the prior consent of all the Revolving Lenders and the Borrower,
         be binding on all Parties.

14.4     BREAK COSTS

(a)      The Borrower shall, within three Business Days of demand by a Finance
         Party, pay to that Finance Party its Break Costs attributable to all or
         any part of a Loan or Unpaid Sum being paid by the Borrower on a day
         other than the last day of an Interest Period for that Loan or Unpaid
         Sum.

(b)      Each Revolving Lender shall, as soon as reasonably practicable after a
         demand by the Administrative Agent, provide a certificate confirming
         the amount of its Break Costs for any Interest Period in which they
         accrue.

15.      FEES

                                      -74-
<PAGE>
15.1     COMMITMENT FEE

(a)      The Borrower shall pay to the Administrative Agent (for the account of
         each Revolving Lender) a fee computed at the Commitment Fee Rate on
         that Revolving Lender's Available Commitment under the Revolving Credit
         Facility for the Availability Period applicable to Revolving Credit
         Facility.

(b)      The accrued commitment fee is payable quarterly in arrears on the last
         Business Day of each March, June, September and December commencing
         June 30, 2002 and on the Revolving Maturity Date and, if cancelled in
         full, on the cancelled amount of the relevant Revolving Lender's
         Commitment at the time the cancellation is effective. For the avoidance
         of doubt, it is understood that the commitment fee referred to in this
         Clause 15.1 shall be computed with respect to a Revolving Lender's
         Available Commitment without giving effect to any temporary reductions
         of that Revolving Lender's Available Commitment pursuant to the terms
         of this Agreement until such time as such temporary reductions become
         permanent and cannot be reinstated in accordance with the terms of this
         Agreement.

15.2     ARRANGEMENT FEE

         The Borrower shall pay to the Mandated Lead Arrangers an arrangement
         fee in the amount and at the times agreed in the applicable Fee Letter.

15.3     AGENCY FEE

         The Borrower shall pay to the Administrative Agent (for its own
         account) an agency fee in the amount and at the times agreed in the
         applicable Fee Letter.

                                      -75-
<PAGE>
                                    SECTION 6
                         ADDITIONAL PAYMENT OBLIGATIONS

16.      TAX GROSS UP AND INDEMNITIES

16.1     DEFINITIONS

(a)      In this Agreement:

         "PROTECTED PARTY" means a Finance Party which is or will be subject to
         any liability, or required to make any payment, for or on account of
         Tax in relation to a sum received or receivable (or any sum deemed for
         the purposes of Tax to be received or receivable) under a Finance
         Document.

         "TAX CREDIT" means a credit against, relief or remission for, or
         repayment of any Tax.

         "TAX DEDUCTION" means a deduction or withholding for or on account of
         any Tax due with respect to a payment that a Credit Party is required
         to make under a Finance Document.

         "TAX PAYMENT" means an increased payment made by a Credit Party to a
         Finance Party under Clause 16.2 (Tax gross-up) or a payment under
         Clause 16.3 (Tax indemnity).

(b)      Unless a contrary indication appears, in this Clause 16 a reference to
         "determines" or "determined" means a determination made in the absolute
         discretion of the Person making the determination.

16.2     TAX GROSS-UP

(a)      Each Revolving Lender that is not incorporated under the laws of the
         United States of America or a state thereof agrees that it will deliver
         to the Borrower and the Administrative Agent on the Closing Date or
         upon becoming a Revolving Lender pursuant to Clause 27 (Changes to the
         Revolving Lenders) (i) two duly completed copies of United States
         Internal Revenue Service Form W-8BEN or W-8ECI or successor applicable
         form, as the case may be, certifying in each case that such Revolving
         Lender is entitled to receive payments under the Finance Documents
         without deduction and withholding of any United States federal income
         taxes; (ii) if applicable, an Internal Revenue Service Form W-8 or W-9
         or successor applicable form, as the case may be, to establish an
         exemption from United States backup withholding tax; and (iii) any
         other governmental forms which are necessary or required under an
         applicable tax treaty or otherwise by law to reduce

                                      -76-
<PAGE>
         or eliminate any withholding tax, which have been reasonably requested
         by the Borrower.

(b)      Each Revolving Lender which delivers to the Borrower and the
         Administrative Agent a Form W-8BEN or W-8ECI and Form W-8 or W-9
         pursuant to paragraph (a) above further undertakes to deliver to the
         Borrower and the Administrative Agent two further copies of Form W-8BEN
         or W-8ECI and Form W-8 or W-9, or successor applicable forms, or other
         manner of certification, as the case may be, on or before the date that
         any such form expires or becomes obsolete or after the occurrence of
         any event requiring a change in the most recent form previously
         delivered by it to the Borrower and the Administrative Agent, and such
         extensions or renewals thereof as may reasonably be requested by the
         Borrower and the Administrative Agent certifying in the case of a Form
         W-8BEN or W-8ECI that such Revolving Lender is entitled to receive
         payments under the Finance Documents without deduction or withholding
         of any United States federal income taxes.

(c)      If an event (including without limitation any change in treaty, law or
         regulation) has occurred after the date of this Agreement, but prior to
         the date on which any delivery required by paragraphs (a) and (b) above
         would otherwise be required and the event renders all such forms
         inapplicable or which would prevent any Revolving Lender from duly
         completing and delivering any such form with respect to it and such
         Revolving Lender advises the Borrower and the Administrative Agent that
         it is not capable of receiving payments without any deduction or
         withholding of United States federal income tax, and in the case of a
         Form W-8 or W-9, establishing an exemption from United States backup
         withholding tax, such Revolving Lender shall not be required to deliver
         such forms.

(d)      Except as provided in subsections (g) and (h) below, each Credit Party
         shall make all payments it is required to make to a Finance Party under
         a Finance Document without making any Tax Deduction, unless a Tax
         Deduction is required by law.

(e)      The Borrower shall promptly upon becoming aware that a Credit Party
         must make a Tax Deduction (or that there is any change in the rate or
         the basis of a Tax Deduction) notify the Administrative Agent
         accordingly. Similarly, a Revolving Lender shall notify the
         Administrative Agent on becoming so aware in respect of a payment
         payable to that Revolving Lender. If the Administrative Agent receives
         such notification from a Revolving Lender it shall notify the Borrower
         and that Credit Party.

                                      -77-
<PAGE>
(f)      If a Tax Deduction is required by law to be made by a Credit Party on
         an amount payable to a Finance Party under a Finance Document, the
         amount payable shall be increased so that the Finance Party receives an
         amount equal to the amount that (after making any Tax Deduction) would
         have been due if no Tax Deduction had been required.

(g)      A Credit Party is not required to make a Tax Payment to a Revolving
         Lender under paragraph (f) above for a Tax Deduction in respect of
         United States federal income taxes from a payment of interest on a
         Loan, if such Tax Deduction is required to be made by reason of a
         failure of such Revolving Lender to provide the requisite Internal
         Revenue Service forms in accordance with paragraphs (a), (b) or (c)
         above.

(h)      A Credit Party is not required to make an increased payment to a
         Finance Party under Paragraph (f) above with respect to any Tax
         assessed on a Finance Party:

         (i)      under the law of the jurisdiction in which that Finance Party
                  is incorporated, or, if different, the jurisdiction (or
                  jurisdictions) in which that Finance Party is treated as
                  resident for tax purposes; or

         (ii)     under the law of the jurisdiction in which that Finance
                  Party's Facility Office is located in respect of amounts
                  received or receivable in that jurisdiction

         if that Tax is imposed on or calculated by reference to the net income
         received or receivable by that Finance Party. For the avoidance of
         doubt, any Tax which is collected by withholding upon the gross amount
         of any payment to a Finance Party, without allowance of any deductions
         in calculating such Tax, shall not be treated as a Tax which is imposed
         on or calculated by reference to the net income received or receivable
         by the Finance Party.

(i)      If a Credit Party is required to make a Tax Deduction, that Credit
         Party shall make that Tax Deduction and any payment required in
         connection with that Tax Deduction within the time allowed and in the
         minimum amount required by law. For the avoidance of doubt, any Tax
         which is collected by withholding upon the gross amount of any payment
         to a Finance Party, without allowance of any deductions in calculating
         such Tax, shall not be treated as a Tax which is imposed on or
         calculated by reference to the net income received or receivable by the
         Finance Party.

(j)      Within thirty days of making either a Tax Deduction or any payment
         required in connection with that Tax Deduction, the Credit Party making
         that Tax Deduction

                                      -78-
<PAGE>
         shall deliver to the Administrative Agent for the Finance Party
         entitled to the Tax Payment evidence reasonably satisfactory to that
         Finance Party that the Tax Deduction has been made or (as applicable)
         any appropriate payment paid to the relevant taxing authority.

16.3     TAX INDEMNITY

(a)      The Borrower shall (within five Business Days of demand by the
         Administrative Agent) pay to a Protected Party an amount equal to the
         loss, liability or cost which that Protected Party determines has been
         (directly or indirectly) suffered for or on account of Tax by that
         Protected Party in respect of a Finance Document. A certificate
         indicating the amount of such loss, liability or cost, detailing the
         calculation of such loss, liability or cost and explaining how and why
         such losses, liabilities or costs have been suffered by such Protected
         Party for or on account of a Tax by that Protected Party in respect of
         a Finance Document shall be submitted by such Protected Party to the
         Borrower and the Administrative Agent and shall be prima facie evidence
         for all purposes, absent manifest error.

(b)      Paragraph (a) above shall not apply:

         (i)      with respect to any Tax assessed on a Finance Party:

                  (A)      under the law of the jurisdiction in which that
                           Finance Party is incorporated or, if different, the
                           jurisdiction (or jurisdictions) in which that Finance
                           Party is treated as resident for tax purposes; or

                  (B)      under the law of the jurisdiction in which that
                           Finance Party's Facility Office is located in respect
                           of amounts received or receivable in that
                           jurisdiction,

                  if that Tax is imposed on or calculated by reference to the
                  net income received or receivable by that Finance Party; or

         (ii)     to the extent a loss, liability or cost:

                  (A)      is compensated for by an increased payment under
                           Clause 16.2 (Tax gross-up); or

                  (B)      would have been compensated for by an increased
                           payment under Clause 16.2 (Tax gross-up) but was not
                           so compensated solely because of the application of
                           either paragraph (g) or (h) of Clause 16.2 (Tax
                           gross-up).

                                      -79-
<PAGE>
(c)      A Protected Party making, or intending to make a claim under paragraph
         (a) above shall promptly notify the Administrative Agent of the event
         which will give, or has given, rise to the claim, following which the
         Administrative Agent shall notify the Borrower.

(d)      A Protected Party shall, on receiving a payment from a Credit Party
         under this Clause 16, notify the Administrative Agent.

16.4     TAX CREDIT

         If, following any Tax Deduction, any Finance Party shall receive or be
         granted a Tax Credit, such Finance Party shall, subject to the Borrower
         having made a Tax Payment and to the extent that such Finance Party
         acting in good faith has the ability to do so without prejudicing the
         retention of the amount of such Tax Credit and without prejudice to the
         right of such Finance Party to obtain any other relief or allowance
         which may be available to it, reimburse the Borrower with such amount
         as such Finance Party shall certify to be the proportion of such Tax
         Credit as will leave such Finance Party (after such reimbursement) in
         no worse position than it would have been in had there been no Tax
         Deduction from the payment by the Borrower. Such reimbursement shall be
         made forthwith upon such Finance Party certifying that the amount of
         such Tax Credit has been received by it. Each Finance Party that has
         received a Tax Payment and received the Borrower' receipts,
         certificates or other proof evidencing the amounts (if any) paid or
         payable in respect of any Tax Deduction for which such Tax Payment has
         been made shall take account of such Tax Payment in compiling its
         relevant Tax returns.

16.5     STAMP TAXES

         The Borrower shall pay and, within five Business Days of demand,
         indemnify each Finance Party against any cost, loss or liability that
         such Finance Party incurs in relation to all stamp duty, registration
         and other similar Taxes payable in respect of any Finance Document.

16.6     VALUE ADDED TAX

(a)      All consideration expressed to be payable under a Finance Document by
         any Party to a Finance Party shall be deemed to be exclusive of any
         VAT. If VAT is chargeable on any supply made by any Finance Party to
         any Party in connection with a Finance Document, that Party shall pay
         to the Finance Party (in addition to and at the same time as paying the
         consideration) an amount equal to the amount of the VAT.

(b)      Where a Finance Document requires any Party to reimburse a Finance
         Party for any costs or expenses, that Party shall also at the same time
         pay and indemnify the

                                      -80-
<PAGE>
         Finance Party against all VAT incurred by the Finance Party in respect
         of the costs or expenses to the extent that the Finance Party
         reasonably determines that it is not entitled to credit or repayment of
         the VAT.

17.      INCREASED COSTS

17.1     INCREASED COSTS

(a)      Subject to Clause 17.3 (Exceptions) the Borrower shall, within five
         Business Days of a demand by the Administrative Agent, pay for the
         account of a Finance Party the amount of any Increased Costs incurred
         by that Finance Party or its Affiliates as a result of (i) the
         introduction of or any change in (or in the interpretation,
         administration or application of) any law or regulation or (ii)
         compliance with any law or regulation made after the date of this
         Agreement.

(b)      In this Agreement "INCREASED COSTS" means:

         (i)      a reduction in the rate of return from any Facility or Letter
                  of Credit on a Finance Party's (or its Affiliates') overall
                  capital;

         (ii)     an additional or increased cost; or

         (iii)    a reduction of any amount due and payable under any Finance
                  Document,

         which is incurred or suffered by a Finance Party or its Affiliates to
         the extent that it is attributable to that Finance Party having entered
         into its Commitment or funding or performing its obligations under any
         Finance Document.

17.2     INCREASED COST CLAIMS

(a)      A Finance Party intending to make a claim pursuant to Clause 17.1
         (Increased costs) shall notify the Administrative Agent of the event
         giving rise to the claim, following which the Administrative Agent
         shall promptly notify the Borrower.

(b)      Each Finance Party shall, as soon as practicable after a demand by the
         Administrative Agent, provide a certificate confirming the amount of
         its Increased Costs. A certificate indicating the amount of such
         Increased Costs, detailing the calculation of such Increased Costs and
         explaining how and why such Increased Costs have been suffered by such
         Finance Party to the extent that they are attributable to that Finance
         Party having entered into its Commitment or funding or performing its
         obligations under any Finance Document shall be submitted by such
         Finance Party to the Borrower and the Administrative Agent and shall be
         prima facie evidence for all purposes, absent manifest error.

                                      -81-
<PAGE>
17.3     EXCEPTIONS

(a)      Clause 17.1 (Increased costs) does not apply to the extent any
         Increased Cost is:

         (i)      attributable to a Tax Deduction required by law to be made by
                  a Credit Party;

         (ii)     compensated for by Clause 16.3 (Tax indemnity) (or would have
                  been compensated for under Clause 16.3 (Tax indemnity) but was
                  not so compensated solely because the exclusion in paragraph
                  (b) of Clause 16.3 (Tax indemnity) applied);

        (iii)     compensated for by the payment of the Mandatory Cost;

         (iv)     compensated for by Clause 12.4 (Additional Interest on
                  Revolving Credit Loans); or

         (v)      attributable to the wilful breach by the relevant Finance
                  Party or its Affiliates of any law or regulation.

(b)      In this Clause 17.3, a reference to a "TAX DEDUCTION" has the same
         meaning given to the term in Clause 16.1 (Definitions).

18.      OTHER INDEMNITIES

18.1     CURRENCY INDEMNITY

(a)      If any sum due from a Credit Party under the Finance Documents (a
         "SUM"), or any order, judgment or award given or made in relation to a
         Sum, has to be converted from the currency (the "FIRST CURRENCY") in
         which that Sum is payable into another currency (the "SECOND CURRENCY")
         for the purpose of:

         (i)      making or filing a claim or proof against that Credit Party;
                  or

         (ii)     obtaining or enforcing an order, judgment or award in relation
                  to any litigation or arbitration proceedings,

         that Credit Party shall as an independent obligation, within three
         Business Days of demand, indemnify each Finance Party to whom that Sum
         is due against any cost, loss or liability arising out of or as a
         result of the conversion including any discrepancy between (A) the rate
         of exchange used to convert that Sum from the First Currency into the
         Second Currency and (B) the rate or rates of exchange available to that
         Person at the time of its receipt of that Sum.

                                      -82-
<PAGE>
(b)      Each Credit Party waives any right it may have in any jurisdiction to
         pay any amount under the Finance Documents in a currency or currency
         unit other than that in which it is expressed to be payable.

18.2     OTHER INDEMNITIES

         The Borrower shall (or shall procure that a Credit Party will), within
         five Business Days of demand, indemnify each Finance Party against any
         cost, loss or liability incurred by that Finance Party as a result of:

         (a)      the occurrence of any Event of Default;

         (b)      a failure by a Credit Party to pay any amount due under a
                  Finance Document on its due date, including without
                  limitation, any cost, loss or liability arising as a result of
                  Clause 31 (Sharing among the Finance Parties);

         (c)      funding, or making arrangements to fund, its participation in
                  a Loan requested by the Borrower in a Utilisation Request but
                  not made by reason of the operation of any one or more of the
                  provisions of this Agreement (other than by reason of default
                  or negligence by that Finance Party); or

         (d)      a Loan (or part of a Loan) not being prepaid in accordance
                  with a notice of prepayment given by the Borrower.

18.3     INDEMNITY TO THE AGENTS

         The Borrower shall promptly indemnify the Agents against any cost, loss
         or liability incurred by any Agent (acting reasonably) as a result of:

         (a)      investigating any event which it reasonably believes is a
                  Default; or

         (b)      acting or relying on any notice, request or instruction which
                  it reasonably believes to be genuine, correct and
                  appropriately authorised.

19.      MITIGATION BY THE REVOLVING LENDERS

19.1     MITIGATION

(a)      Each Finance Party shall, in consultation with the Borrower, take all
         reasonable steps to mitigate any circumstances which arise and which
         would result in any amount becoming payable under or pursuant to, or
         cancelled pursuant to, any of Clause 11.1 (Illegality), Clause 16 (Tax
         gross-up and indemnities), Clause 17 (Increased costs) or paragraph 2
         of Schedule 4 (Mandatory Cost formula) including (but not limited to)
         transferring its rights and obligations under the Finance Documents to
         another Affiliate or Facility Office.

                                      -83-
<PAGE>
(b)      Paragraph (a) above does not in any way limit the obligations of any
         Credit Party under the Finance Documents.

19.2     LIMITATION OF LIABILITY

(a)      The Borrower shall indemnify each Finance Party for all out-of-pocket
         costs and expenses reasonably incurred by that Finance Party as a
         result of steps taken by it under Clause 19.1 (Mitigation).

(b)      A Finance Party is not obliged to take any steps under Clause 19.1
         (Mitigation) if, in the opinion of that Finance Party (acting
         reasonably), to do so might be prejudicial to it; provided that,
         without prejudice to the foregoing, a Finance Party shall not be
         obliged to take or continue to endeavour to take any such steps after
         the date falling 30 Business Days from the date such Finance Party
         notifies the Administrative Agent of the circumstances referred to in
         Clause 19.1(a) (Mitigation).

20.      COSTS AND EXPENSES

20.1     TRANSACTION EXPENSES

(a)      Except as specifically provided in the Fee Letters, the Borrower shall
         pay the Agents and the Arrangers the amount of all out-of-pocket costs
         and expenses (including legal fees) reasonably incurred by any of them
         in connection with the negotiation, preparation, printing, execution
         and syndication of this Agreement and any other documents referred to
         in this Agreement on the Closing Date.

(b)      The Borrower shall within five Business Days of demand pay the Agents
         and the Arrangers the amount of all out-of-pocket costs and expenses
         (including legal fees) reasonably incurred by any of them in connection
         with the negotiation, preparation, printing and execution of this
         Agreement and any other Finance Documents executed after the date of
         this Agreement.

20.2     AMENDMENT COSTS

         If (a) a Credit Party requests an amendment, waiver or consent or (b)
         an amendment is required pursuant to Clause 32.9 (Change of currency),
         the Borrower shall, within five Business Days of demand, reimburse the
         Administrative Agent for the amount of all out-of-pockets costs and
         expenses (including legal fees) reasonably incurred by the
         Administrative Agent in responding to, evaluating, negotiating or
         complying with that request or requirement.

                                      -84-
<PAGE>
20.3     ENFORCEMENT COSTS

         The Borrower shall, within three Business Days of demand, pay to each
         Finance Party the amount of all costs and expenses (including legal
         fees and consultant fees) incurred by that Finance Party in connection
         with the enforcement of, or the preservation of any rights under, any
         Finance Document.

                                      -85-
<PAGE>
                                    SECTION 7
                                    GUARANTEE

21.      GUARANTEE AND INDEMNITY

21.1     GUARANTEE AND INDEMNITY

         Each Guarantor irrevocably and unconditionally jointly and severally:

         (a)      guarantees to each Finance Party punctual performance by the
                  Borrower of all the Borrower's obligations under the Finance
                  Documents;

         (b)      undertakes with each Finance Party that whenever the Borrower
                  does not pay any amount when due under or in connection with
                  any Finance Document, that Guarantor shall immediately on
                  demand pay that amount as if it was the principal obligor; and

         (c)      indemnifies each Finance Party immediately on demand against
                  any cost, loss or liability suffered by that Finance Party if
                  any obligation guaranteed by it is or becomes unenforceable,
                  invalid or illegal. The amount of the cost, loss or liability
                  shall be equal to the amount which that Finance Party would
                  otherwise have been entitled to recover from the Credit
                  Parties.

21.2     LIMITATION OF LIABILITY

         Notwithstanding the foregoing, any Additional Guarantor (other than an
         Additional Guarantor that is either a Permitted Holding Company or a
         Subsidiary of the Borrower) shall be liable under this Agreement with
         respect to the Obligations only for an amount equal to (a) the
         aggregate Market Value of the Mortgaged Revolving Credit Facility Rigs
         owned by such Additional Guarantor determined as of the date of the
         most recent Rig Appraisal Reports divided by (b) the Total Revolving
         Commitments multiplied by (c) the Obligations.

21.3     CONTINUING GUARANTEE

         This guarantee is a continuing guarantee and will extend to the
         ultimate balance of sums payable by any Credit Party under the Finance
         Documents, regardless of any intermediate payment or discharge in whole
         or in part.

21.4     REINSTATEMENT

         If any payment by a Credit Party or any discharge given by a Finance
         Party (whether in respect of the obligations of any Credit Party or any
         security for those obligations or otherwise) is avoided or reduced as a
         result of insolvency or any similar event:

                                      -86-
<PAGE>
(a)      the liability of each Credit Party shall continue as if the payment,
         discharge, avoidance or reduction had not occurred; and

(b)      each Finance Party shall be entitled to recover the value or amount of
         that security or payment from each Credit Party, as if the payment,
         discharge, avoidance or reduction had not occurred.

21.5     WAIVER OF DEFENCES

         The obligations of each Guarantor under this Clause 21 will not be
         affected by an act, omission, matter or thing which, but for this
         Clause, would reduce, release or prejudice any of its obligations under
         this Clause 21 (without limitation and whether or not known to it or
         any Finance Party) including:

(a)      any time, waiver or consent granted to, or composition with, any Credit
         Party or other Person;

(b)      the release of any other Credit Party or any other Person under the
         terms of any composition or arrangement with any creditor of any member
         of the Group;

(c)      the taking, variation, compromise, exchange, renewal or release of, or
         refusal or neglect to perfect, take up or enforce, any rights against,
         or security over assets of, any Credit Party or other Person or any
         non-presentation or non-observance of any formality or other
         requirement in respect of any instrument or any failure to realise the
         full value of any security;

(d)      any incapacity or lack of power, authority or legal personality of or
         dissolution or change in the members or status of a Credit Party or any
         other Person;

(e)      any amendment (however fundamental) or replacement of a Finance
         Document or any other document or security (provided that the guarantee
         under this Clause 21 will apply to such Finance Documents or other
         document or security as amended or replaced);

(f)      any unenforceability, illegality or invalidity of any obligation of any
         Person under any Finance Document or any other document or security; or

(g)      any insolvency or similar proceedings.

                                      -87-
<PAGE>
21.6     IMMEDIATE RECOURSE

         Each Guarantor waives any right it may have of first requiring any
         Finance Party (or any trustee or agent on its behalf) to proceed
         against or enforce any other rights or security or claim payment from
         any Person before claiming from that Guarantor under this Clause 21.
         This waiver applies irrespective of any law or any provision of a
         Finance Document to the contrary.

21.7     APPROPRIATIONS

         Until all amounts which may be or become payable by the Credit Parties
         under or in connection with the Finance Documents have been irrevocably
         paid in full, each Finance Party (or any trustee or agent on its
         behalf) may:

         (a)      refrain from applying or enforcing any other moneys, security
                  or rights held or received by that Finance Party (or any
                  trustee or agent on its behalf) in respect of those amounts,
                  or apply and enforce the same in such manner and order as it
                  sees fit (whether against those amounts or otherwise) and no
                  Guarantor shall be entitled to the benefit of the same; and

         (b)      hold in an interest-bearing suspense account any moneys
                  received from any Guarantor or on account of any Guarantor's
                  liability under this Clause 21.

21.8     DEFERRAL OF GUARANTORS' RIGHTS

         Until all amounts which may be or become payable by the Credit Parties
         under or in connection with the Finance Documents have been irrevocably
         paid in full and unless the Administrative Agent otherwise directs or
         agrees, no Guarantor will exercise any rights which it may have by
         reason of performance by it of its obligations under the Finance
         Documents:

         (a)      to be indemnified by a Credit Party;

         (b)      to claim any contribution from any other guarantor of any
                  Credit Party's obligations under the Finance Documents; and/or

         (c)      to take the benefit (in whole or in part and whether by way of
                  subrogation or otherwise) of any rights of the Finance Parties
                  under the Finance Documents or of any other guarantee or
                  security taken pursuant to, or in connection with, the Finance
                  Documents by any Finance Party;

         provided, however, that notwithstanding the foregoing, a Guarantor may
         execute, verify, deliver and file any proofs of claim which may be
         necessary in order to

                                      -88-
<PAGE>
         preserve any statute of limitations with respect to the rights deferred
         in this Clause 21.8.

21.9     ADDITIONAL SECURITY

         This guarantee is in addition to and is not in any way prejudiced by
         any other guarantee or security now or subsequently held by any Finance
         Party.

21.10    NO GUARANTEE OF INDENTURE ISSUER OBLIGATIONS

         No provision of this Agreement or any other Finance Document shall
         require any Guarantor that is a Subsidiary of the Person that is the
         issuer of the existing Debt under the Senior Indenture and the
         Subordinated Indenture (on the Closing Date, such Person being the U.S.
         Parent) or any successor or assign of such Person with respect to such
         Debt to guarantee or otherwise be liable, directly or indirectly, for
         any obligation of such Person under any Finance Document.

                                      -89-
<PAGE>
                                    SECTION 8
               REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT

22.      REPRESENTATIONS

         Each Credit Party makes the representations and warranties set out in
         this Clause 22 to each Finance Party on the date of this Agreement.

22.1     EXISTENCE; SUBSIDIARIES

         Each of the Credit Parties is duly formed, validly existing, and in
         good standing (to the extent the concept of good standing is applicable
         in such jurisdiction) under the laws of the jurisdiction of its
         formation and in good standing (to the extent the concept of good
         standing is applicable in such jurisdiction) and qualified to do
         business in each jurisdiction where its ownership or lease of Property
         or conduct of its business requires such qualification and where a
         failure to be qualified could reasonably be expected to cause a
         Material Adverse Change.

22.2     POWER AND AUTHORITY

         Each of the Credit Parties has the organizational power and authority
         to execute and deliver the Finance Documents to which it is a party and
         to perform its obligations thereunder. The execution, delivery, and
         performance by the Credit Parties of this Agreement and the other
         Finance Documents to which each is a party and the consummation of the
         transactions contemplated hereby (a) have been duly authorized by all
         necessary organizational action, (b) do not contravene (i) such Credit
         Party's organizational documents, (ii) any material Legal Requirement
         binding on or affecting such Credit Party, or (iii) the provisions of
         any indenture or material instrument or agreement to which such Credit
         Party is a party or is subject, or by which it, or its Property, is
         bound, or conflict with or constitute a default thereunder, except, in
         the case of clauses (ii) and (iii), for which a prior consent, waiver,
         authorization or approval has been (or will timely be) obtained, and
         (c) will not result in or require the creation or imposition of any
         Lien prohibited by this Agreement. At the time of the making of the
         Utilisations, the Utilisations and the use of the proceeds of the
         Utilisations will (a) be within the Borrower's corporate powers, (b)
         have been duly authorized by all necessary corporate action, (c) not
         contravene (i) the Borrower's certificate of incorporation or bylaws or
         (ii) any material Legal Requirement binding on or affecting the
         Borrower, except for which a prior consent, waiver, authorization or
         approval has been (or will timely be) obtained, and (d) not result in
         or require the creation or imposition of any Lien prohibited by this
         Agreement.

22.3     AUTHORIZATION AND APPROVALS

                                      -90-
<PAGE>
        No authorization or approval or other action by, and no notice to or
        filing with, any Governmental Authority is required on the part of the
        Credit Parties for the due execution, delivery and performance by the
        Credit Parties of this Agreement and the other Finance Documents to
        which each is a party or the consummation of the transactions
        contemplated thereby, except actions by, and notices to or filings with,
        Governmental Authorities (including, without limitation, the SEC) that
        may be required in the ordinary course of business from time to time or
        that may be required to comply with the express requirements of the
        Finance Documents (including, without limitation, to effect the Merger,
        to release existing Liens on the Collateral or to comply with
        requirements to perfect, and/or maintain the perfection of, the Liens
        created for the benefit of the Finance Parties). At the time of the
        making of the Utilisations, no authorization or approval or other action
        by, and no notice to or filing with, any Governmental Authority will be
        required on the part of the Credit Parties for the borrowing of the
        Utilisations by the Borrower or the use of the proceeds of such
        Utilisations, except actions by, and notices to or filings with,
        Governmental Authorities (including, without limitation, the SEC) that
        may be required in the ordinary course of business from time to time or
        that may be required to comply with the express requirements of the
        Finance Documents (including, without limitation, to effect the Merger,
        to release existing Liens on the Collateral or to comply with
        requirements to perfect, and/or maintain the perfection of, Liens
        created for the benefit of the Finance Parties).

22.4     ENFORCEABLE OBLIGATIONS

         This Agreement and the other Finance Documents to which each of the
         Credit Parties is a party have been duly executed and delivered by such
         Credit Party. Assuming that each has been duly authorized, executed and
         delivered by the other parties thereto, each Finance Document to which
         each Credit Party is a party is the legal, valid, and binding
         obligation of such Credit Party and is enforceable against such Credit
         Party in accordance with its terms, except as such enforceability may
         be limited by any applicable bankruptcy, insolvency, reorganization,
         fraudulent conveyance, moratorium, or similar law affecting creditors'
         rights generally or general principles of equity (regardless of whether
         enforcement is considered in a proceeding in equity or at law or under
         applicable legal codes).

                                      -91-
<PAGE>
22.5     FINANCIAL STATEMENTS

(a)      The Parent Company has delivered to the Administrative Agent the
         Financial Statements, and the Financial Statements are accurate and
         complete in all material respects and present fairly in all material
         respects the consolidated financial condition of the Group as of their
         respective dates and for their respective periods in accordance with
         GAAP. As of the date of the Financial Statements, there were no
         material contingent obligations, liabilities for taxes, unusual forward
         or long-term commitments, or unrealized or anticipated losses of the
         Parent Company or any of its Subsidiaries, except as disclosed therein
         and for which adequate reserves for such items have been made in
         accordance with GAAP.

(b)      Since December 31, 2001, no Material Adverse Change has occurred.

22.6     TRUE AND COMPLETE DISCLOSURE

         All factual information (whether delivered before or after the Closing
         Date) furnished by or on behalf of the Credit Parties in writing to the
         Administrative Agent and the Revolving Lenders for purposes of or in
         connection with this Agreement, any other Finance Document or any
         transaction contemplated hereby or thereby is true and accurate in all
         material respects as of the date as of which such information is dated
         or certified (or, if not dated and certified, as of the date as of
         which such information is provided) and not incomplete by omitting to
         state any material fact necessary to make such information (taken as a
         whole) not misleading as of such time (in light of the circumstances
         and facts known at such time).

22.7     LITIGATION

         There is no pending or, to the knowledge of any Responsible Officer,
         threatened action or proceeding affecting the Parent Company or any of
         its Subsidiaries before any court, Governmental Authority or
         arbitrator, that could reasonably be expected to cause a Material
         Adverse Change or which purports to affect the legality, validity,
         binding effect or enforceability of this Agreement or any other Finance
         Document. Additionally, there is no pending or, to the knowledge of any
         Responsible Officer, threatened action or proceeding instituted against
         the Parent Company or any of its Subsidiaries which seeks to adjudicate
         the Parent Company or any of its Subsidiaries as bankrupt or insolvent,
         or seeking liquidation, winding up, reorganization, arrangement,
         adjustment, protection, relief, or composition of it or its debts under
         any law relating to bankruptcy, insolvency or reorganization or relief
         of debtors, or seeking the entry of an order for relief or the
         appointment of a receiver, trustee or other similar official for it or
         for any substantial part of its Property.

                                      -92-
<PAGE>
22.8     USE OF PROCEEDS

         The proceeds of the Loans will be used by the Borrower and its
         Subsidiaries for the purposes described in Clause 25.7 (Use of
         Proceeds). The Parent Company and its Subsidiaries are not engaged in
         the business of extending credit for the purpose of purchasing or
         carrying margin stock (within the meaning of Regulation U). No proceeds
         of any Loan will be used to purchase or carry any margin stock in
         violation of Regulation T, U or X.

22.9     INVESTMENT COMPANY ACT

         None of the Parent Company or any of its Subsidiaries is an "investment
         company" or a company "controlled" by an "investment company" within
         the meaning of the Investment Company Act of 1940, as amended.

22.10    PUBLIC UTILITY HOLDING COMPANY ACT

         None of the Parent Company or any of its Subsidiaries is a "holding
         company", or a "subsidiary company" of a "holding company", or an
         "affiliate" of a "holding company" or of a "subsidiary company" of a
         "holding company", or a "public utility", as such terms are used in the
         Public Utility Holding Company Act of 1935, as amended.

22.11    TAXES

         All material federal, state, local and foreign tax returns, reports and
         statements required to be filed (after giving effect to any extension
         granted in the time for filing) by the Parent Company or any member of
         the Controlled Group (hereafter collectively called the "Tax Group")
         have been filed with the appropriate Governmental Authorities in all
         jurisdictions in which such returns, reports and statements are
         required to be filed (except where any obligation to so file is being
         contested in good faith and by appropriate proceedings and after
         adequate reserves for such items have been made in accordance with
         GAAP), and all taxes (which are material in amount) and other
         impositions due and payable have been timely paid prior to the date on
         which any fine, penalty, interest, late charge or loss may be added
         thereto for non-payment thereof except where contested in good faith
         and by appropriate proceedings and after providing adequate reserves
         therefor. Except as disclosed in writing to the Administrative Agent
         from time to time, none of the Parent Company or any member of the Tax
         Group has given, or been requested to give, a waiver of the statute of
         limitations relating to the payment of any federal, state, local or
         foreign taxes or other impositions. None of the Property owned by the
         Parent Company or any other member of the Tax Group is Property which
         the Parent Company or any member of the Tax Group is required to treat
         as being owned by any other Person pursuant to the provisions of
         Section 168(f)(8) of the

                                      -93-
<PAGE>
         Code. Proper and accurate amounts have been withheld by the Parent
         Company and all other members of the Tax Group from their employees for
         all periods to comply in all material respects with the tax, social
         security and unemployment withholding provisions of applicable federal,
         state, local and foreign law. Timely payment of all material sales and
         use taxes required by applicable law have been made by the Parent
         Company and all other members of the Tax Group.

22.12    PENSION PLANS

         No Termination Event has occurred with respect to any Plan, and each
         Plan has complied in all material respects with and been administered
         in all material respects in accordance with applicable provisions of
         ERISA and the Code. No "accumulated funding deficiency" (as defined in
         Section 302 of ERISA) has occurred and there has been no excise tax
         imposed under Section 4971 of the Code. To the extent either any such
         action or inaction could reasonably be attributable to the Parent
         Company or to the knowledge of a Responsible Officer, no Reportable
         Event has occurred with respect to any Multiemployer Plan, and each
         Multiemployer Plan has complied in all material respects with and been
         administered in all material respects with applicable provisions of
         ERISA and the Code. The present value of all benefits vested under each
         Plan (based on the assumptions used to fund such Plan) did not, as of
         the last annual valuation date applicable thereto, exceed the value of
         the assets of such Plan allocable to such vested benefits in any amount
         that could reasonably be expected to cause a Material Adverse Change.
         None of the Parent Company or any member of the Controlled Group has
         had a complete or partial withdrawal from any Multiemployer Plan for
         which there is any material withdrawal liability. As of the most recent
         valuation date applicable thereto, none of the Parent Company or any
         member of the Controlled Group has received notice that any
         Multiemployer Plan is insolvent or in reorganization. Based upon GAAP
         existing as of the Closing Date and current factual circumstances, the
         Parent Company has no reason to believe that the annual cost during the
         term of this Agreement to the Parent Company or any of its Subsidiaries
         for post-retirement benefits to be provided to the current and former
         employees of the Parent Company or any of its Subsidiaries under
         welfare benefit plans (as defined in Section 3(1) of ERISA) could, in
         the aggregate, reasonably be expected to cause a Material Adverse
         Change.

22.13    CONDITION OF PROPERTY; CASUALTIES

         (a) Except as otherwise permitted by this Agreement, including, without
         limitation, Clause 22.16 (Environmental Condition) and the requirements
         of Clause 11.4(b) or (c), the material Property necessary for the
         conduct of business of the Group are in good repair and working
         condition, normal wear and tear excepted and (b) no

                                      -94-
<PAGE>
         member of the Group has knowingly or wilfully permitted the commission
         of waste or other injury, or released Hazardous Substances on or about
         owned or operated property, in violation of applicable Environmental
         Laws.

22.14    INSURANCE

         Each of the Group carries the insurance required to be carried under
         Clause 25.2 (Maintenance of Insurance) of this Agreement. The amount of
         acceptance of first loss in lieu of paying premiums on the Closing Date
         is not more than U.S.$10,000,000. As of the Closing Date, all of the
         Mortgaged Revolving Credit Facility Rigs have insurance covering War
         Risks.

22.15    NO DEFAULTS

         None of the Parent Company or any of its Subsidiaries is in default or
         has received any notice of default under any contract, agreement, lease
         or other instrument to which the Parent Company or any of its
         Subsidiaries is a party which is continuing and, if not cured, could
         reasonably be expected to cause a Material Adverse Change.

22.16    ENVIRONMENTAL CONDITION

Except as disclosed on the attached Schedule 22.16:

(a)      The Parent Company and its Subsidiaries (i) have obtained all material
         Environmental Permits necessary for the ownership and operation of
         their respective material Properties and the conduct of their
         respective businesses; (ii) have been and are in compliance with all
         material terms and conditions of such Environmental Permits and with
         all other material requirements of applicable Environmental Laws; (iii)
         have not received notice of any material violation or alleged violation
         of any Environmental Law or Environmental Permit; and (iv) are not
         subject to any material actual or contingent Environmental Claim.

(b)      None of the present or previously owned or operated Properties of the
         Parent Company or of any of its present or former Subsidiaries,
         wherever located, (i) has been placed on or proposed to be placed on
         the National Priorities List, CERCLIS, or, to the knowledge of any
         Responsible Officer, their state or local analogs, nor has the Parent
         Company or any of its Subsidiaries been otherwise notified of the
         designation, listing or identification of any Property of the Parent
         Company or any of its present or former Subsidiaries as a potential
         site for material removal, remediation, cleanup, closure, restoration,
         reclamation, or other material response activity under any
         Environmental Laws (except as such activities may be required by permit
         conditions); (ii) is subject to a material Lien, arising under or in
         connection with any Environmental Laws, that attaches to any revenues
         or to any

                                      -95-
<PAGE>
         Property owned or operated by the Parent Company or any of its present
         or former Subsidiaries, wherever located; or (iii) has been the site of
         any Release of Hazardous Substances or Hazardous Wastes from present or
         past operations which has caused at the site or at any third-party site
         any condition that has resulted in or could reasonably be expected to
         result in the need for Response that could cause a Material Adverse
         Change and none of the Parent Company or any of its present or former
         Subsidiaries has generated or transported or has caused to be generated
         or transported Hazardous Substances to any third party site which could
         reasonably be expected to result in the need for Response that could
         cause a Material Adverse Change.

(c)      Without limiting the foregoing, the present and future liability, if
         any, of the Parent Company or any of its Subsidiaries, which could
         reasonably be expected to arise in connection with requirements under
         Environmental Laws could not reasonably be expected to cause a Material
         Adverse Change.

22.17    TITLE TO PROPERTY, ETC.

(a)      Each of the Group has good and marketable title in all its Property,
         except where the failure to have such good and marketable title could
         not reasonably be expected to cause a Material Adverse Change, and none
         of such Property is subject to any Lien, except Permitted Liens.

(b)      Schedule 22.17 sets forth the Initial Mortgaged Revolving Credit
         Facility Rigs of the Credit Parties on the Closing Date and identifies
         the registered owner, flag, official or patent number, as the case may
         be, the home port, class, location and operating status on the Closing
         Date after giving effect to the Merger.

22.18    SECURITY INTERESTS

         On the Closing Date, all governmental actions and all other filings,
         recordings, registrations, third party consents, and other actions
         which are necessary to create and perfect the Liens provided for in the
         Security Documents will have been made, obtained, and taken in all
         relevant jurisdictions, or satisfactory arrangements will have been
         made for all governmental actions and all other filings, recordings,
         registrations, third party consents, and other actions which are
         necessary to create and perfect the Liens provided for in the Security
         Documents to be made, obtained, or taken in all relevant jurisdictions.
         Upon the filing of the Security Documents referred to in this Clause
         22.18, each of the Security Documents creates, as security for the
         Obligations purported to be secured thereby, a valid and enforceable
         perfected security interest in and Lien on all of the Collateral
         subject thereto, to the extent perfection of a security interest or
         Lien is governed by Article

                                      -96-
<PAGE>
         9 of the UCC (as defined in the applicable Security Documents) or the
         Ship Mortgage Act (as defined in the Rig Mortgages), and subject to no
         other Liens (other than Permitted Liens) in favour of the Collateral
         Agent for the ratable benefit of the Finance Parties. Except with
         respect to filings or recordings required in order to perfect the
         security interests in earnings, no filings or recordings are required
         in order to perfect the security interests created under any Security
         Document except for filings or recordings required in connection with
         any such Security Document which shall have been made upon or prior to
         (or are the subject of arrangements, satisfactory to the Collateral
         Agent, for filing on or promptly after the date of) the execution and
         delivery thereof.

22.19    SUBSIDIARIES; CORPORATE STRUCTURE

         The Subsidiaries of the Borrower listed on Schedule 22.19 constitute
         all of the Subsidiaries of the Borrower on the Closing Date after
         giving effect to the Merger. Schedule 22.19 correctly lists the names,
         ownership and jurisdictions of incorporation or formation of each of
         the Borrower's Subsidiaries as of the Closing Date after giving effect
         to the Merger.

22.20    LABOR RELATIONS

         None of the Parent Company nor its Subsidiaries is engaged in any
         unfair labor practice that could reasonably be expected to have a
         Material Adverse Change. There is (a) no unfair labor practice
         complaint pending against the Parent Company or any of its Subsidiaries
         or, to the knowledge of any Responsible Officer, threatened against any
         of them, before the National Labor Relations Board (or any successor
         United States federal agency that administers the National Labor
         Relations Act), and no grievance or arbitration proceeding arising out
         of or under any collective bargaining agreement is so pending against
         the Parent Company or any of its Subsidiaries or, to the knowledge of a
         Responsible Officer, threatened against any of them, (b) no strike,
         labor dispute, slowdown or stoppage pending against the Parent Company
         or any of its Subsidiaries or, to the knowledge of a Responsible
         Officer, threatened against the Parent Company or any of its
         Subsidiaries, and (c) no union representation petition existing with
         respect to the employees of the Parent Company or any of its
         Subsidiaries and no union organizing activities are taking place,
         except with respect to any matter specified in clause (a), (b) or (c)
         above, either individually or in the aggregate, such as could not
         reasonably be expected to have a Material Adverse Change.

22.21    MERGER

         The Borrower has delivered to the Administrative Agent true, correct,
         and complete copies of the Merger Documents as in effect on the Closing
         Date.

                                      -97-
<PAGE>
22.22    SENIOR DEBT

         The Obligations of the Parent Company under Clause 21 (Guarantee and
         indemnity) of this Agreement constitute "Senior Indebtedness" as
         defined in the Subordinated Indenture.

22.23    GUARANTORS

         All of the Borrower's Material Subsidiaries are Guarantors under Clause
         21 (Guarantee and indemnity) hereof.

22.24    CITIZENSHIP

         Each Credit Party which owns a Mortgaged Revolving Credit Facility Rig
         is qualified to own and operate such Mortgaged Revolving Credit
         Facility Rig under the laws of the jurisdiction in which any such
         Mortgaged Revolving Credit Facility Rig is flagged, if such
         qualification is required.

22.25    INTELLECTUAL PROPERTY

         The Parent Company and each of its Subsidiaries has obtained all
         material patents, trademarks, service marks, trade names, copyrights,
         licenses and other intellectual property rights, that are necessary for
         the operation of their businesses taken as a whole as presently
         conducted.

22.26    SOLVENCY

(a)      Immediately after the consummation of the transactions to occur on the
         Closing Date and after giving effect to the Term Loans to be made on
         the Closing Date and the application of the proceeds thereof, (i) the
         fair value of the assets of the Group on a consolidated basis, at a
         fair valuation, will exceed the debts and liabilities, subordinated,
         contingent or otherwise, of the Group on a consolidated basis; (ii) the
         present fair saleable value of the Property of the Group on a
         consolidated basis will be greater than the amount that will be
         required to pay the probable liability of the Group on a consolidated
         basis on their debts and other liabilities, subordinated, contingent or
         otherwise, as such debts and other liabilities become absolute and
         matured; (iii) the Group on a consolidated basis will be able to pay
         their debts and liabilities, subordinated, contingent or otherwise, as
         such debts and liabilities become absolute and matured; and (iv) the
         Group on a consolidated basis will not have unreasonably small capital
         with which to conduct the businesses in which they are engaged as such
         businesses are now conducted and are proposed to be conducted after the
         date hereof.

(b)      The Parent Company does not intend to, or to permit any of its
         Subsidiaries to, and does not believe that it or any of its
         Subsidiaries will, on a consolidated basis, incur debts beyond its
         ability to pay such debts as they mature, taking into account the

                                      -98-
<PAGE>
         timing of and amounts of cash to be received by it or any such
         Subsidiary and the timing of the amounts of cash to be payable on or in
         respect of its Debt or the Debt of such Subsidiary.

22.27    COMPLIANCE WITH LAWS

         The Parent Company and its Subsidiaries have complied with all
         applicable statutes, rules, regulations, orders and restrictions of any
         Governmental Authority having jurisdiction over the conduct of their
         respective businesses or the ownership of their respective Property
         except for any failure to comply with any of the foregoing which could
         not reasonably be expected to cause a Material Adverse Change. The
         Parent Company and its Subsidiaries are in compliance in all material
         respects with the International Maritime Organization's International
         Management Code for the Safe Operation of Ships and Pollution
         Prevention ("ISM CODE"), to the extent applicable, and have established
         and implemented a safety management system and such other procedures as
         required by the ISM Code, to the extent applicable.

22.28    REPETITION

         Each of the representations and warranties contained in this Clause 22
         hereof and in each other Finance Document to be made by each Credit
         Party are deemed to be made by each Credit Party by reference to the
         facts and circumstances then existing on:

(a)      The date of each Utilisation Request; and

(b)      In the case of an Additional Guarantor, the day on which the company
         becomes (or it is proposed that the company becomes) an Additional
         Guarantor.

23.      INFORMATION UNDERTAKINGS

         The undertakings in this Clause 23 remain in force from the date of
         this Agreement for so long as any amount is outstanding under the
         Finance Documents, any Letter of Credit is outstanding or any
         Commitment is in force.

23.1     FINANCIAL STATEMENTS

         Each Credit Party will furnish to the Administrative Agent and the
         Revolving Lenders:

(a)      (i) As soon as available and in any event not later than 45 days after
         the end of each of the first three fiscal quarters of each fiscal year
         of the Parent Company, the unaudited consolidated balance sheet of the
         Parent Company, as of the end of such quarter, and the consolidated
         statements of income and cash flows of the Parent

                                      -99-
<PAGE>
         Company, each for the fiscal quarter then ended and for the period
         commencing at the end of the previous year and ending with the end of
         such fiscal quarter, all in reasonable detail and duly certified with
         respect to such statements (subject to year-end audit adjustments) by
         an authorized financial officer of the Parent Company as having been
         prepared in accordance with GAAP, except for the absence of footnotes
         (provided that the requirements of this Clause 23.1(a) with respect to
         consolidated financial statements of the Parent Company shall be deemed
         satisfied by delivery of the Parent Company's Form 10-Q for such fiscal
         quarter) and (ii) as soon as available and in any event not later than
         45 days after the end of each of the first three fiscal quarters of
         each fiscal year of the Borrower, the unaudited consolidated balance
         sheet of the Borrower, as of the end of such quarter, and the
         consolidated statements of income of the Borrower, each for the fiscal
         quarter then ended and for the period commencing at the end of the
         previous year and ending with the end of such fiscal quarter, all in
         reasonable detail and duly certified with respect to such statements
         (subject to year-end audit adjustments) by an authorized financial
         officer of the Parent Company as having been prepared in accordance
         with GAAP, except for the absence of footnotes; and

(b)      (i) As soon as available and in any event not later than 90 days after
         the end of each fiscal year of the Borrower, copies of the annual audit
         report for such year for the Borrower, including therein the
         consolidated balance sheet of the Borrower as of the end of such fiscal
         year, consolidated statements of income, changes in owners' equity and
         cash flows for such fiscal year, and (ii) as soon as available and in
         any event not later than 90 days after the end of each fiscal year of
         the Parent Company, copies of the annual audit report for such year for
         the Parent Company, including therein the consolidated balance sheet of
         the Parent Company as of the end of such fiscal year, consolidated
         statements of income, changes in owners' equity and cash flows for such
         fiscal year, in each case certified by independent certified public
         accountants of nationally recognized standing in the United States
         reasonably acceptable to the Administrative Agent and the Required
         Revolving Lenders (provided that the requirements of this Clause
         23.1(b) with respect to consolidated financial statements of the Parent
         Company shall be deemed satisfied by delivery of the Parent Company's
         Form 10-K for such fiscal year).

23.2     COMPLIANCE CERTIFICATE

(a)      The Borrower shall supply to the Administrative Agent, with each set of
         financial statements delivered pursuant to paragraph (a) or (b) of
         Clause 23.1 (Financial statements), a Compliance Certificate setting
         out (in reasonable detail) computations as to compliance with Clause 24
         (Financial covenants) as of the date at which those financial
         statements were drawn up.

                                     -100-
<PAGE>
(b)      Each Compliance Certificate shall be signed by a Responsible Officer of
         the Parent Company.

23.3     INFORMATION: MISCELLANEOUS

         The Borrower shall supply to the Administrative Agent (in sufficient
         copies for all the Revolving Lenders, if the Administrative Agent so
         requests):

         (a)      Promptly upon receipt thereof and following such time as the
                  appropriate officers of the Parent Company shall have had
                  reasonable time to respond thereto, a copy of each formal
                  report or "management letter" submitted to the Parent Company
                  by its independent accountants in connection with any annual,
                  interim or special audit made by it of the books of the Parent
                  Company;

         (b)      On or before 45 days after the commencement of each fiscal
                  year of the Parent Company, (i) a consolidated budget of the
                  Group which includes consolidated income statements, balance
                  sheets and cash flow statements of the Group for each of the
                  four fiscal quarters of such fiscal year and (ii) a breakdown
                  of projected revenues, operating expenses, utilizations and
                  capital expenditures for each offshore drilling rig owned or
                  leased by the Group;

         (c)      On or before 45 days after the end of each fiscal quarter of
                  each fiscal year of the Parent Company, a report detailing (i)
                  the then current location of each of the Mortgaged Revolving
                  Credit Facility Rigs and each other offshore drilling rigs and
                  other vessels owned or leased by the Borrower and its
                  Subsidiaries, and the then current term of and parties to any
                  contract of any such vessels and (ii) for the previous fiscal
                  quarter, the average day rates and utilisation for each such
                  rig or vessel.

         (d)      Promptly after the giving or receipt thereof, copies of any
                  material notices given or received by any Credit Party
                  pursuant to the terms of any indenture, loan agreement, credit
                  agreement, or similar agreement;

         (e)      Promptly and in any event within 10 days after the sending or
                  filing thereof, copies of all proxy material, reports and
                  other information which the Parent Company or any of its
                  Subsidiaries sends to any holders of its respective public
                  securities generally, files with the SEC, or otherwise makes
                  available to the public or the financial community generally;

         (f)      As soon as possible and in any event within 10 days after a
                  Responsible Officer knows or has reason to know that any
                  Termination Event with

                                     -101-
<PAGE>
                  respect to any Plan has occurred, a statement of a senior
                  financial officer of the Parent Company or such Subsidiary
                  describing such Termination Event and the action, if any,
                  which the Parent Company or such Subsidiary proposes to take
                  with respect thereto;

         (g)      Promptly and in any event within 10 days after receipt thereof
                  by the Parent Company or any member of the Controlled Group
                  from the PBGC, copies of each notice received by the Parent
                  Company or any such member of the Controlled Group of the
                  PBGC's intention to terminate any Plan or to have a trustee
                  appointed to administer any Plan;

         (h)      Promptly and in any event within 10 days after receipt thereof
                  by the Parent Company or any member of the Controlled Group
                  from a Multiemployer Plan sponsor, a copy of each notice
                  received by the Parent Company or any member of the Controlled
                  Group concerning the imposition of withdrawal liability
                  pursuant to Section 4202 of ERISA in an amount that could
                  reasonably be expected to cause a Material Adverse Change;

         (i)      Promptly and in any event within 10 days after a Responsible
                  Officer becomes aware thereof, written notice of any claims,
                  proceedings, or disputes, or to the knowledge of a Responsible
                  Officer threatened, or affecting the Parent Company or any of
                  its Subsidiaries which, if adversely determined, could
                  reasonably be expected to cause a Material Adverse Change;

         (j)      Prompt written notice of any condition or event of which the
                  Parent Company or any of its Subsidiaries has knowledge, which
                  condition or event has resulted or could reasonably be
                  expected to result in a Material Adverse Change;

         (k)      Promptly upon the receipt thereof by the Parent Company or any
                  of its Subsidiaries, a copy of any form of notice, summons or
                  citation received from the EPA, or any other Governmental
                  Authority or any other third party, concerning (i) material
                  violations or alleged violations of Environmental Laws, which
                  seeks to impose liability therefor, (ii) any material action
                  or omission on the part of the Parent Company or any of its
                  Subsidiaries in connection with Hazardous Waste or Hazardous
                  Substances, (iii) any notice of potential responsibility under
                  CERCLA or any analogous law, or (iv) concerning the filing of
                  a Lien other than a Permitted Lien upon, against or in
                  connection with the Parent Company or

                                     -102-
<PAGE>
                  any of its Subsidiaries, or any of their leased or owned
                  material Property, wherever located;

         (l)      Promptly upon obtaining knowledge thereof by any Responsible
                  Officer, notice of:

                           (i)      any Casualty Event if the Casualty Proceeds
                                    with respect thereto could reasonably be
                                    expected to exceed U.S.$5,000,000 (or the
                                    equivalent in any other currency) with
                                    respect to any Mortgaged Revolving Credit
                                    Facility Rig;

                           (ii)     any Collateral Disposition;

                           (iii)    any occurrence in respect of any Mortgaged
                                    Revolving Credit Facility Rig that is or is
                                    likely, by the passing of time or otherwise,
                                    to become a Total Loss;

                           (iv)     any material requirement made by any insurer
                                    or classification society or by any
                                    competent authority which is not complied
                                    with within a reasonable time; and

                           (v)      any arrest of any Mortgaged Revolving Credit
                                    Facility Rig or the exercise or purported
                                    exercise of any Lien on any Mortgaged
                                    Revolving Credit Facility Rig;

         (m)      As soon as available and in any event not later than 90 days
                  after the end of each fiscal year of the Parent Company, a
                  report prepared by the Parent Company's independent maritime
                  insurance broker which report (i) lists all Insurance Policies
                  then in effect with respect to the Mortgaged Revolving Credit
                  Facility Rigs, (ii) specifies for each such Insurance Policy
                  (A) the amount thereof, (B) the risks insured against thereby,
                  (C) the name of the insurer and each insured party thereunder
                  and (D) the policy or other identification number thereof and
                  (iii) certifies that all such Insurance Policies are (A) in
                  full force and effect, (B) placed with such insurance
                  companies, underwriters or associations, in such amounts,
                  against such risks, and in such form, as are normally issued
                  against by Persons of similar size and established reputation
                  engaged in the same or similar businesses and similarly
                  situated and as are necessary or advisable for the protection
                  of the Collateral Agent as mortgagee, and (C) conforming to
                  the requirements of this Agreement;

                                     -103-
<PAGE>
         (n)      Upon request by the Administrative Agent, a copy of the safety
                  management manual used to describe and implement the Parent
                  Company's safety management system developed, implemented and
                  maintained in compliance with the ISM Code, if applicable;

         (o)      Prompt written notice of any material amendments,
                  modifications or terminations of the Senior Indenture, the
                  Subordinated Indenture or any other indenture, note or other
                  agreement evidencing or governing any Subordinated Debt; and

         (p)      Such other information respecting the business or Properties,
                  or the condition or operations, financial or otherwise, of the
                  Group as the Administrative Agent or any Revolving Lender may
                  from time-to-time reasonably request.

23.4     NOTIFICATION OF DEFAULT

         The Borrower shall provide to the Administrative Agent, as soon as
         possible after the occurrence of a Default known to any Responsible
         Officer which is continuing on the date of such statement, a statement
         of a Responsible Officer setting forth the details of such Default and
         the actions which the Credit Parties have taken and propose to take
         with respect thereto.

24.      FINANCIAL COVENANTS

         The undertakings in this Clause 24 remain in force from the date of
         this Agreement for so long as any amount is outstanding under the
         Finance Documents, any Letter of Credit is outstanding or any
         Commitment is in force.

24.1     LEVERAGE RATIO

         The Parent Company will not permit its Leverage Ratio at the end of any
         fiscal quarter to be greater than the following ratios for the
         following fiscal quarters:

<TABLE>
<CAPTION>
          ---------------------------------------------------------------------------------
                         Fiscal Quarters Ending                          Maximum Ratio
                         ----------------------                          -------------
          ---------------------------------------------------------------------------------
<S>                                                                      <C>
                  June 30, 2002, September 30, 2002 and                  4.75 to 1.00
                            December 31, 2002
          ---------------------------------------------------------------------------------
          March 31, 2003, June 30, 2003, September 30, 2003 and          4.00 to 1.00
                            December 31, 2003
          ---------------------------------------------------------------------------------
          March 31, 2004, June 30, 2004, September 30, 2004 and          3.50 to 1.00
                            December 31, 2004
          ---------------------------------------------------------------------------------
</TABLE>

                                     -104-
<PAGE>
<TABLE>
<S>                                                                      <C>
          ---------------------------------------------------------------------------------
                      March 31, 2005 and thereafter                      3.00 to 1.00
          ---------------------------------------------------------------------------------
</TABLE>

24.2     INTEREST COVERAGE RATIO

         The Parent Company will not permit the Interest Coverage Ratio as of
         the end of any fiscal quarter to be less than the following ratios for
         the following fiscal quarters:

<TABLE>
<CAPTION>
          ---------------------------------------------------------------------------------
                         Fiscal Quarters Ending                         Minimum Ratio
                         ----------------------                         -------------
          ---------------------------------------------------------------------------------
<S>                                                                     <C>
                  June 30, 2002, September 30, 2002 and                 3.00 to 1.00
                            December 31, 2002
          ---------------------------------------------------------------------------------
          March 31, 2003, June 30, 2003, September 30, 2003 and         3.25 to 1.00
                            December 31, 2003
          ---------------------------------------------------------------------------------
          March 31, 2004, June 30, 2004, September 30, 2004 and         4.00 to 1.00
                            December 31, 2004
          ---------------------------------------------------------------------------------
                      March 31, 2005 and thereafter                     4.50 to 1.00
          ---------------------------------------------------------------------------------
</TABLE>

24.3     MAXIMUM DEBT TO CAPITALIZATION RATIO

         The Parent Company shall not permit the ratio of (a) Consolidated Net
         Debt to (b) Total Capitalization as of the end of any fiscal quarter to
         be greater than the following ratios for the following fiscal quarters:

<TABLE>
<CAPTION>
          ---------------------------------------------------------------------------------
                         Fiscal Quarters Ending                           Maximum Ratio
                         ----------------------                           -------------
          ---------------------------------------------------------------------------------
<S>                                                                       <C>
                  June 30, 2002, September 30, 2002 and                        55%
                            December 31, 2002
          ---------------------------------------------------------------------------------
          March 31, 2003, June 30, 2003, September 30, 2003 and                50%
                            December 31, 2003
          ---------------------------------------------------------------------------------
          March 31, 2004, June 30, 2004, September 30, 2004 and                45%
                            December 31, 2004
          ---------------------------------------------------------------------------------
                      March 31, 2005 and thereafter                            35%
          ---------------------------------------------------------------------------------
</TABLE>

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24.4     MINIMUM NET WORTH

         The Parent Company shall not permit its Consolidated Net Worth as of
         the last day of any fiscal quarter to be less than the sum of (a) 80%
         of Consolidated Net Worth at the end of the fiscal quarter immediately
         preceding the Closing Date plus (b) 50% of Consolidated Net Income (if
         positive) earned in each fiscal quarter beginning with the first fiscal
         quarter ending after the Closing Date and (c) 100% of the Equity
         Issuance Proceeds from any Equity Issuance on or after the Closing
         Date.

25.      GENERAL UNDERTAKINGS

         The undertakings in this Clause 25 remain in force from the date of
         this Agreement for so long as any amount is outstanding under the
         Finance Documents, any Letter of Credit is outstanding or any
         Commitment is in force.

25.1     COMPLIANCE WITH LAWS, ETC.

         The Parent Company shall procure that each of the Group will comply
         with all Legal Requirements except where the failure to so comply could
         not reasonably be expected to cause a Material Adverse Change. Without
         limiting the generality and coverage of the foregoing, the Parent
         Company shall procure that each of the Group shall comply with all
         applicable Environmental Laws, and all laws, regulations, or directives
         with respect to equal employment opportunity and employee safety in all
         jurisdictions in which the Group does business, including, if
         applicable, the ISM Code, except where the failure to so comply could
         not reasonably be expected to cause a Material Adverse Change.

25.2     MAINTENANCE OF INSURANCE

(a)      Generally.

         (i)      Except as otherwise specifically provided below, the Parent
                  Company shall procure that each of the Group will, at their
                  own expense, maintain insurance with financially sound and
                  reputable insurance companies or associations in such amounts
                  (and with co-insurance and deductibles) as are usually insured
                  against by Persons of similar size and established reputation
                  engaged in the same or similar businesses and similarly
                  situated, including insurance against fire, casualty, business
                  interruption, injury to Persons or property and other hazards
                  normally insured against.

         (ii)     The Parent Company shall procure that each of the Group shall
                  renew all such insurance, including, without limitation, the
                  Insurance Policies, as they expire and so as to ensure that
                  there is no gap in coverage, keep the

                                     -106-
<PAGE>
                  Collateral Agent advised of the progress of such renewals, and
                  shall provide evidence of such renewal in writing to the
                  Collateral Agent as and when each such renewal is effected.

        (iii)     The Parent Company shall procure that each of the Group shall
                  punctually pay all premiums, calls, contributions or other
                  sums payable in respect of such insurance, including, without
                  limitation, the Insurance Policies and produce all relevant
                  receipts when so required by the Collateral Agent and all
                  Insurance Policies shall provide that there shall be no
                  recourse against the Collateral Agent or any other Finance
                  Party for unpaid premiums or calls.

         (iv)     The Parent Company shall procure that each of the Group shall,
                  upon the written request of the Collateral Agent, deliver to
                  the Collateral Agent true and complete copies of all such
                  insurance policies, including, without limitation, the
                  Insurance Policies.

         (v)      Upon the written request of the Collateral Agent, provided no
                  such request shall be made more frequently than once per year,
                  the Parent Company shall deliver to the Collateral Agent
                  copies of all cover notes, binders and certificates of entry
                  and all endorsements and riders supplemental thereto in
                  respect of Insurance Policies maintained pursuant to this
                  Clause 25.2.

         (vi)     None of the Credit Parties shall declare or agree with the
                  underwriters that a Mortgaged Revolving Credit Facility Rig is
                  a Total Loss without the prior written consent of the
                  Collateral Agent.

(b)      Hull and Machinery/Increased Value Insurance. With respect to hull and
         machinery/increased value insurance each of the Credit Parties shall
         insure or procure that the relevant member of the Group owning the same
         insures each Mortgaged Revolving Credit Facility Rig, or cause each
         Mortgaged Revolving Credit Facility Rig to be insured, against loss,
         damage, fire and such other perils as are customary in the industry,
         for an amount which is at least the Market Value of such Mortgaged
         Revolving Credit Facility Rig and when such amount is aggregated with
         the amount of such insurance coverage on the other Mortgaged Revolving
         Credit Facility Rigs, such aggregate amount shall be at least 200% of
         the Total Revolving Commitments (less any deductible). In addition, the
         Credit Parties shall, at their own expense, obtain, for and on behalf
         of the Collateral Agent, a mortgagee's single interest policy providing
         coverage which, when aggregated with the amount of such insurance
         coverage on the other Mortgaged Revolving Credit Facility Rigs, shall
         be at least 200% of the Total Revolving

                                     -107-
<PAGE>
         Commitments. Such insurance shall cover marine perils on hull and
         machinery, and shall be maintained in the broadest forms available (on
         reasonable commercial terms as the Credit Parties shall see fit and
         reasonably acceptable to the Collateral Agent) in the American and
         British insurance markets or in such other major international markets
         acceptable to the Collateral Agent.

(c)      Comprehensive Third Party Liability. The Credit Parties shall maintain
         insurance (or its equivalent) covering comprehensive third party
         liability on the Mortgaged Revolving Credit Facility Rigs in an
         aggregate amount not less than 100% of the Total Revolving Commitments.
         The Credit Parties shall arrange for the execution of such guarantees
         as may from time to time be required by any protection and indemnity
         (or its equivalent) association.

(d)      War Risks. The Credit Parties shall at all times maintain insurance (or
         its equivalent) covering War Risks on all of the Mortgaged Revolving
         Credit Facility Rigs; provided, however, that (i) if the premiums
         associated therewith increase by more than 30% above the premiums in
         effect on the Closing Date, as certified in writing by the Parent
         Company's independent maritime insurance broker, then the Credit
         Parties shall only be obligated to maintain insurance (or its
         equivalent) covering War Risks on Mortgaged Revolving Credit Facility
         Rigs, so that the aggregate amount of War Risk coverage is not less
         than 150% of the Total Revolving Commitments, and including, in any
         event, the Pride South Pacific and each of the Mortgaged Revolving
         Credit Facility Rigs that have a Market Value equal to or greater than
         $40,000,000 (as set forth in the most recent Rig Appraisal Reports
         covering such Mortgaged Revolving Credit Facility Rig) located outside
         of the Gulf of Mexico shall remain at all times covered against War
         Risks by insurance (or its equivalent) by the Credit Parties; and (ii)
         if from time to time, insurance (or its equivalent) covering War Risks
         becomes unavailable in certain geographical areas, as certified in
         writing by the Parent Company's independent maritime insurance broker,
         then the Credit Parties shall maintain insurance (or its equivalent)
         covering War Risks on such other unaffected Mortgaged Revolving Credit
         Facility Rigs so that the aggregate amount of War Risk coverage is not
         less than 150% of the Total Revolving Commitments. Promptly after such
         insurance (or its equivalent) covering War Risks becomes available
         again, then the Credit Parties shall reinstate the coverage set forth
         in clause (i) above. The Credit Parties shall arrange for the execution
         of such guarantees as may from time to time be required by any war
         risks association.

(e)      Mortgagee Right Insurance. If the Parent Company's Index Debt is rated
         less than BB- by S&P or Ba3 by Moody's, the Credit Parties shall
         maintain insurance (or its

                                     -108-
<PAGE>
         equivalent) covering the risks of repossession on the Mortgaged
         Revolving Credit Facility Rigs operating under charters or in
         jurisdiction implying potential repossession risks, as determined by
         the Collateral Agent or acting under the instruction of the Required
         Revolving Lenders.

(f)      United States Operations. At all times during which one or more
         Mortgaged Revolving Credit Facility Rigs is operating within the
         jurisdiction of the United States of America, the Credit Parties shall
         maintain with respect to such Mortgaged Revolving Credit Facility Rigs:

         (i)      insurance or post bonds or maintain approved evidence of
                  financial responsibility (including, without limitation,
                  qualification as a "qualified self-insurer" by the United
                  States Coast Guard) with respect to such Mortgaged Revolving
                  Credit Facility Rigs to cover the actual cost of removal of
                  discharged oil for which such Credit Party or the Collateral
                  Agent may be held strictly liable (or held liable due to
                  negligence of such Credit Party or any other Person) under the
                  Clean Water Act of 1977, as amended, the Oil Pollution Act
                  1990 (33 U.S.C.Section 2701 et seq.), as amended, or the Outer
                  Continental Shelf Lands Act, as amended, or under any other
                  Legal Requirement, including, without limitation, any
                  Environmental Law, of any Governmental Authority that, now or
                  in the future, may apply to such Mortgaged Revolving Credit
                  Facility Rigs or to the Credit Parties, such Mortgaged
                  Revolving Credit Facility Rigs or their operations; and

         (ii)     such worker's compensation or longshoremen's and harbor
                  workers' insurance as shall be required by applicable law,
                  including endorsements for foreign and Outer Continental Shelf
                  operations, borrowed servant, voluntary compensation and in
                  rem claims.

(g)      Self Insurance. The Parent Company and its Subsidiaries may maintain
         acceptance of first loss in lieu of paying premiums compatible with the
         standards set forth herein in an amount which is the lesser of (i)
         U.S.$25,000,000 or (ii) 5% of the Market Value of the Mortgaged
         Revolving Credit Facility Rigs (as set forth in the most recent Rig
         Appraisal Reports covering such Mortgaged Revolving Credit Facility
         Rigs) in the aggregate on an annualized basis after deductibles and
         self insurance retention.

(h)      Collateral Agent as Additional Insured. Other than with respect to
         worker's compensation policies, each Insurance Policy in compliance
         with this Clause 25.2 shall be endorsed showing the Collateral Agent as
         an additional insured, or a loss

                                      -109-
<PAGE>
         payee, as applicable. All Insurance Policies required by the terms of
         this Clause 25.2 shall provide that at least 30 days' (except 48 hours
         for War Risk) prior written notice be given to the Collateral Agent by
         the underwriters or association of any termination, cancellation,
         reduction or other modification of such Insurance Policy or the failure
         of the Credit Parties to pay any premium or call which could suspend
         coverage under the Insurance Policy or the payment of a claim
         thereunder. If such Insurance Policies are not maintained in full force
         and effect, then the Collateral Agent, at its option, may procure such
         insurance at the Borrower's expense. With respect to any potential
         claims under any Insurance Policy, the Collateral Agent may, but shall
         not be required to, make proof of loss under, settle and adjust any
         claims under, or direct the Borrower to take such actions at the
         reasonable direction of the Collateral Agent, and the expenses incurred
         by the Collateral Agent in the adjustment and collection of such
         proceeds shall be paid by the Borrower, provided that if no Event of
         Default exists, the Collateral Agent shall give the applicable Credit
         Party written notice and opportunity to perform prior to itself
         performing or causing to perform. The Collateral Agent shall not be
         liable or responsible for failure to collect or exercise diligence in
         the collection of any proceeds, unless directly caused by its gross
         negligence or wilful misconduct.

(i)      Application of Payments under Insurance Policies.

         (i)      Except as otherwise provided in Clause 25.2(i)(iii) below, all
                  Insurance Policies shall provide that all insurance payments
                  in respect of any Casualty Event shall be paid to the
                  Collateral Agent or, upon the prior written consent of the
                  Collateral Agent, the underwriter may pay such amounts
                  directly to the applicable Credit Party or such Person as may
                  be designated by the Credit Parties for the repair, salvage or
                  other charges relating to such Casualty Event.

         (ii)     All Casualty Proceeds or Collateral Disposition Proceeds
                  received by such Credit Party or the Collateral Agent as a
                  result of a Casualty Event or Collateral Disposition shall be
                  applied in accordance with the requirements of Clause 11.4
                  (Mandatory Prepayment of Revolving Credit Facility) and Clause
                  25.5 (Maintenance of Property).

         (iii)    Notwithstanding anything to the contrary in the other Finance
                  Documents, all insurance payments in respect of any liability
                  of the Credit Parties to third Persons or damage to Property
                  of third Persons by any Credit Party shall be paid by the
                  underwriter of such Insurance Policy directly to the Person to
                  whom such liability is owed or directly to the applicable
                  Credit

                                     -110-
<PAGE>
                  Party to reimburse it for any loss, damage or expense incurred
                  by it in connection with the event or condition giving rise to
                  such liability.

(j)      Operation of Mortgaged Revolving Credit Facility Rigs.

         (i)      The Credit Parties shall procure that each Mortgaged Revolving
                  Credit Facility Rig shall not operate in or proceed into any
                  area then excluded by trading warranties under its marine or
                  War Risk Insurance Policies (including protection and
                  indemnity or its equivalent) without satisfying the conditions
                  of the relevant Insurance Policies, evidence of which shall be
                  furnished to the Collateral Agent.

         (ii)     The Credit Parties shall not employ any Mortgaged Revolving
                  Credit Facility Rig or suffer any Mortgaged Revolving Credit
                  Facility Rig to be employed otherwise than in conformity with
                  the terms of the Insurance Policies relative to the Mortgaged
                  Revolving Credit Facility Rig (including any warranties,
                  express or implied, therein) without first obtaining the
                  consent to such employment of the insurers and complying with
                  such requirements as to extra premium or otherwise as the
                  insurers may prescribe.

         (iii)    To the extent any of the following could reasonably be
                  expected to cause a Material Adverse Change, each of the
                  Credit Parties agrees that it will not commit any act, nor
                  voluntarily suffer nor permit any act to be done, whereby any
                  Insurance Policy required hereunder shall or may be suspended,
                  impaired or defeated and will not suffer nor permit any
                  Mortgaged Revolving Credit Facility Rig to engage in any
                  voyage, nor to engage in any employment not permitted under
                  the Insurance Policies then in effect, without first covering
                  any Mortgaged Revolving Credit Facility Rig with insurance
                  satisfactory in all respects, including the amount thereof, to
                  the Collateral Agent for the voyage or the employment.

25.3     PRESERVATION OF EXISTENCE, ETC.

         Except as permitted by Clause 25.17 (Mergers or Consolidations; Asset
         Sales), each of the Credit Parties shall preserve and maintain its
         corporate existence, rights, franchises and privileges in the
         jurisdiction of its incorporation, and qualify and remain qualified as
         a foreign corporation in each jurisdiction in which qualification is
         necessary in view of its business and operations or the ownership of
         its Properties to the extent the failure to qualify could reasonably be
         expected to cause a Material Adverse Change.

                                      -111-
<PAGE>
25.4     PAYMENT OF TAXES, ETC.

         The Parent Company shall procure that each of the Group will pay and
         discharge before the same shall become delinquent, (a) all taxes,
         assessments and governmental charges or levies imposed upon it or upon
         its income or profits or Property that are material in amount, prior to
         the date on which penalties attach thereto and (b) all lawful claims
         that are material in amount which, if unpaid, might by law become a
         Lien upon its Property other than Permitted Liens; provided, however,
         that none of the Group shall be required to pay or discharge any such
         tax, assessment, charge, levy, or claim which is being contested in
         good faith and by appropriate proceedings, and with respect to which
         reserves in conformity with GAAP have been provided.

25.5     MAINTENANCE OF PROPERTY

         The Parent Company shall procure that each of the Group shall (a)
         maintain their material Property necessary for the conduct of its
         business in good repair and working condition, except for normal wear
         and tear and as otherwise permitted by this Agreement, and (b) not
         knowingly or wilfully permit the commission of waste or other injury,
         or the release of Hazardous Substances on or about the owned or
         operated property in violation of applicable Environmental Laws.
         Notwithstanding the foregoing, if a Mortgaged Revolving Credit Facility
         Rig is affected by a Casualty Event or a Collateral Disposition, the
         Borrower shall, or shall cause the Guarantor who owns such affected
         Mortgaged Revolving Credit Facility Rig, to either make all necessary
         repairs and replacements to such affected Mortgaged Revolving Credit
         Facility Rig or apply the Casualty Proceeds or Collateral Disposition
         Proceeds therefrom as provided in Clause 10.2(b) or (c), as the case
         may be.

25.6     INSPECTION

         The Parent Company shall procure that from time-to-time during regular
         business hours upon reasonable prior notice (and subject to the
         requirements of applicable insurance policies), each member of the
         Group shall (a) permit the Administrative Agent (at the request of any
         Revolving Lender) to examine and copy their books and records, (b)
         permit the Administrative Agent and the Revolving Lenders to visit and
         inspect their Properties, and (c) permit the Administrative Agent and
         Revolving Lenders to discuss the business operations and Properties of
         the Group with their officers and directors.

25.7     USE OF PROCEEDS

         The Borrower shall use the proceeds of the Loans for general corporate
         purposes of the Borrower and its Subsidiaries (including, without
         limitation, distributions,

                                     -112-
<PAGE>
         loans and advances to the Parent Company). The Borrower will not engage
         in the business of extending credit for the purpose of purchasing or
         carrying margin stock (within the meaning of Regulation U). No proceeds
         of any Revolving Loan will be used to purchase or carry any margin
         stock in violation of Regulation T, U, or X.

25.8     NATURE OF BUSINESS

         The Parent Company shall procure that neither it nor any of its
         Subsidiaries shall engage in any business if, as a result, the general
         nature of the business of the Group, taken on a consolidated basis,
         would then be substantially changed from the general nature of the
         business engaged in by the Group on the Closing Date.

25.9     BOOKS AND RECORDS

         The Parent Company will keep, and will cause each of its Subsidiaries
         to keep, adequate records and books of account in which complete
         entries will be made in accordance with GAAP (subject to year-end
         adjustments), reflecting all financial transactions of such Person. The
         Parent Company shall maintain or cause to be maintained a system of
         accounting established and administered in accordance with sound
         business practices to permit preparation of financial statements in
         conformity with GAAP, and each of the financial statements described
         herein shall be prepared from such system and records.

25.10    RIG APPRAISAL REPORTS

(a)      Within 45 days after each anniversary date of the Closing Date, the
         Borrower shall deliver to the Administrative Agent and the Revolving
         Lenders two written appraisal reports prepared by two independent
         Approved Rigbrokers setting forth the Market Value of each of the
         Mortgaged Revolving Credit Facility Rigs as of the date appraised (each
         a "RIG APPRAISAL REPORT"). The cost of each such Rig Appraisal Report
         shall be paid by the Borrower.

(b)      If the Market Value of either (i) the Mortgaged Revolving Credit
         Facility Rigs is less than 205% of the Total Revolving Commitments or
         (ii) the Mortgaged Term Loan Facility Rigs is less than 205% of the
         outstanding principal amount of the Term Loans, then the Borrower shall
         deliver to the Administrative Agent and the Revolving Lenders an
         additional set of Rig Appraisal Reports no less than 175 days and no
         more than 225 days after each anniversary date of the Closing Date
         until such time as (A) the Market Value of the Mortgaged Revolving
         Credit Facility Rigs is equal to or greater than 205% of the Total
         Revolving Commitments and (B) the Market Value of the Mortgaged Term
         Loan Facility Rigs is equal to or greater than 205% of the outstanding
         principal amount of the

                                      -113-
<PAGE>
         Term Loans. The cost of each such additional Rig Appraisal Report shall
         be paid by the Borrower.

(c)      At any time the Administrative Agent may or, at the request of the
         Required Revolving Lenders, shall request that the Borrower deliver an
         additional Rig Appraisal Report to the Revolving Lenders. Upon receipt
         of such request by the Borrower, the Borrower shall deliver such Rig
         Appraisal Report to the Administrative Agent and the Revolving Lenders
         within 30 days after receipt of such request. Unless a Default is in
         existence at the time of such request, the Revolving Lenders shall pay
         the costs of any subsequent Rig Appraisal Reports requested by the
         Administrative Agent or the Required Revolving Lenders under this
         Clause 25.10(c) during such calendar year.

(d)      Within 30 days of the occurrence of any Casualty Event if the Casualty
         Proceeds with respect thereto could reasonably be expected to exceed
         U.S.$5,000,000 or any Collateral Disposition occurring with respect to
         any Mortgaged Revolving Credit Facility Rig, the Borrower shall deliver
         to the Administrative Agent and the Revolving Lenders an additional Rig
         Appraisal Report setting forth the Market Values of the Mortgaged
         Revolving Credit Facility Rigs immediately prior to such Casualty Event
         or Collateral Disposition and the Market Values giving effect to such
         Casualty Event or Collateral Disposition (an "ADDITIONAL APPRAISAL
         REPORT"). The cost of such Rig Appraisal Report shall be paid by the
         Borrower.

(e)      The Parent Company shall procure that each Rig Appraisal Report
         delivered under this Clause 25.10 shall be in form and scope reasonably
         satisfactory to the Administrative Agent.

25.11    OPERATION OF MORTGAGED REVOLVING CREDIT FACILITY RIGS

Each Subsidiary of the Parent Company that owns or operates a Mortgaged
Revolving Credit Facility Rig shall:

(a)      (i) Comply with and satisfy all Legal Requirements of the jurisdiction
         of such Mortgaged Revolving Credit Facility Rig's home port, now or
         hereafter from time to time in effect, in order that such Mortgaged
         Revolving Credit Facility Rig shall continue to be documented pursuant
         to the laws of the jurisdiction of its home port with such endorsements
         as shall qualify such Mortgaged Revolving Credit Facility Rigs for
         participation in the trades and services to which it may be dedicated
         from time to time or (ii) not do or allow to be done anything whereby
         such documentation is or could reasonably be expected to be forfeited;

                                      -114-
<PAGE>
(b)      keep such Mortgaged Revolving Credit Facility Rig in a good and
         sufficient state of repair consistent with first-class ship-ownership
         and management practice employed by owners of vessels of similar size
         and type and so as to (i) maintain the present class of such Mortgaged
         Revolving Credit Facility Rig at its current classification by any
         first-class, recognized rating agency, including, without limitation,
         the American Bureau of Shipping, free of recommendations affecting
         class and qualifications and change of class, save those notified to
         the Collateral Agent in writing prior to the date of this Agreement and
         (ii) comply with all Legal Requirements from time to time applicable to
         such Mortgaged Revolving Credit Facility Rig and such Credit Party's
         operations except where such non-compliance will not be reasonably
         expected to cause a material adverse change on the Mortgaged Revolving
         Credit Facility Rigs, the applicable Credit Party or the Lien created
         by the Rig Mortgage;

(c)      with respect to such Mortgaged Revolving Credit Facility Rig, (i) make
         or cause to be made all repairs to or replacement of any damaged, worn
         or lost parts or equipment such that the value of such Mortgaged
         Revolving Credit Facility Rig will not be materially impaired, (ii)
         except as otherwise contemplated by this Agreement, not remove any
         material part of, or item of equipment owned by the Credit Parties
         installed on, such Mortgaged Revolving Credit Facility Rig except in
         the ordinary course of the operation and maintenance of such Mortgaged
         Revolving Credit Facility Rig unless (A) the part or item so removed is
         forthwith replaced by a suitable part or item which is in the same
         condition as or better condition than the part or item removed, is free
         from any Lien (other than Permitted Liens) in favour of any Person
         other than the Collateral Agent and becomes, upon installation on such
         Mortgaged Revolving Credit Facility Rig the property of the Credit
         Parties and subject to the security constituted by the Rig Mortgage or
         the Security Agreement or (B) the removal will not materially diminish
         the value of such Mortgaged Revolving Credit Facility Rig (provided,
         however, that this Clause 25.11(c) shall be deemed satisfied in the
         event of a Casualty Event if the Credit Parties comply with Section
         11.4(c));

(d)      submit such Mortgaged Revolving Credit Facility Rig to such periodical
         or other surveys as may be required for classification purposes and
         upon the request of the Collateral Agent supply to the Collateral Agent
         copies of all survey reports and classification certificates issued in
         respect thereof; and

(e)      promptly pay and discharge all debts, damages and liabilities
         whatsoever which have given or may give rise to maritime or possessory
         Liens (other than Permitted Liens) on or claims enforceable against
         such Mortgaged Revolving Credit Facility

                                     -115-
<PAGE>
         Rig and all tolls, dues, taxes, assessments, governmental charges,
         fines and penalties that are material in amount and lawfully charged on
         or in respect of such Mortgaged Revolving Credit Facility Rig other
         than any of the foregoing being contested in good faith and diligently
         by appropriate proceedings, and in the event of arrest of any Mortgaged
         Revolving Credit Facility Rig pursuant to legal process, or in the
         event of her detention in exercise or purported exercise of any such
         Lien or claim as aforesaid, procure, if possible, the release of such
         Mortgaged Revolving Credit Facility Rig from such arrest or detention
         forthwith upon receiving notice thereof by providing bail or otherwise
         as the circumstances may require.

(f)      If the Person operating such Mortgaged Revolving Credit Facility Rig is
         not the Borrower or a Guarantor, promptly remit all earnings received
         by such Person from any Mortgaged Revolving Credit Facility Rig back to
         the appropriate Credit Party. For the avoidance of doubt, "earnings"
         does not include operating costs and reasonable management fees as are
         customary in the industry and which are set forth and supported by a
         budget for such Mortgaged Revolving Credit Facility Rigs which will be
         delivered to the Administrative Agent on or before such time as the
         subject Rig begins operations for such Person.

25.12    NEW SUBSIDIARIES; PERMITTED HOLDING COMPANY

(a)      Within 10 days after (a) the date of the creation of any new Material
         Subsidiary of the Borrower, (b) the date that any Subsidiary of the
         Borrower that was not a Material Subsidiary becomes a Material
         Subsidiary, (c) the purchase by the Borrower or any of its Subsidiaries
         of the Capital Stock of any Person, which purchase results in such
         Person becoming a Material Subsidiary of the Borrower permitted by this
         Agreement, or (d) the transfer of a Mortgaged Revolving Credit Facility
         Rig to any wholly-owned Subsidiary of the Parent Company that is not a
         Guarantor, the Borrower shall, in each case, cause such Person to
         execute and deliver to the Collateral Agent (with sufficient originals
         for each applicable Revolving Lender) an Accession Letter, together
         with evidence of corporate authority to enter into and such legal
         opinions in relation to such Accession Letter as the Collateral Agent
         may reasonably request.

(b)      Within 10 days after the date of the creation of any Permitted Holding
         Company, the Borrower shall cause such Permitted Holding Company to
         execute and deliver to the Collateral Agent (with sufficient originals
         for each applicable Revolving Lender) an Accession Letter, together
         with evidence of corporate authority to enter into and such legal
         opinions in relation to such Accession Letter as the Collateral Agent
         may reasonably request.

                                     -116-
<PAGE>
25.13    SECURITY MAINTENANCE RATIO

         The Borrower shall at all times maintain a Security Maintenance Ratio
         of at least 2.0 to 1.0; provided, however, that this Clause 25.13 shall
         be deemed satisfied during any period in which this Clause 25.13, but
         for a Collateral Disposition or Casualty Event, would have been
         satisfied if, during such period, the Credit Parties are in compliance
         with Clause 11.4(b) or (c), as the case may be (Mandatory Prepayment of
         Revolving Credit Facility Utilisations). Notwithstanding the foregoing,
         if the Borrower is in compliance with this Clause 25.13, the Collateral
         Agent shall, at the request of the Borrower, release any Lien granted
         to or held by the Collateral Agent on or relating to the Mortgaged
         Revolving Credit Facility Rigs (other than Liens on or relating to the
         Initial Mortgaged Revolving Credit Facility Rigs) if the Borrower would
         be in compliance with this Clause 25.13 after giving effect to such
         release of Lien and no Default exists or would be caused thereby.

25.14    FURTHER ASSURANCES IN GENERAL

         The Parent Company shall, and shall cause each of the Credit Parties
         to, protect and perfect the Liens contemplated by the Security
         Documents. The Parent Company at its expense shall, and shall cause
         each of the Credit Parties to, promptly execute and deliver all such
         other and further documents, agreements and instruments in compliance
         with or accomplishment of the covenants and agreements of the Parent
         Company or any of its Subsidiaries in the Finance Documents, including,
         without limitation, the accomplishment of any condition precedent that
         may have been temporarily waived by the Revolving Lenders prior to the
         Closing Date.

25.15    LIENS, ETC.

         The Parent Company will procure that neither it nor any of its
         Subsidiaries will create, assume, incur or suffer to exist, any Lien on
         or in respect of any of its Property whether now owned or hereafter
         acquired, or assign any right to receive income therefrom, except that
         the Group may create, incur, assume and suffer to exist the following
         which are permitted liens ("PERMITTED LIENS"):

(a)      Liens for taxes, assessments or governmental charges or levies on its
         Property if the same shall not at the time be delinquent or thereafter
         can be paid without penalty, or are being contested in good faith and
         by appropriate proceedings and for which adequate reserves in
         accordance with GAAP shall have been set aside on its books;

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(b)      Liens imposed by law or arising by operation of law, including, without
         limitation, carriers', warehousemen's, mechanics' liens, maritime Liens
         and other similar Liens incurred in the ordinary course of business
         which secure payment of obligations not more than 60 days past due or
         which are being contested in good faith by appropriate proceedings and
         for which adequate reserves shall have been set aside on the books of
         the applicable Person;

(c)      Liens incurred and pledges and deposits made in the ordinary course of
         business in connection with worker's compensation, unemployment
         insurance, old age pensions, or other social security or retirement
         benefits, or similar legislation, other than any Lien imposed by ERISA;

(d)      Liens to secure the performance of bids, trade contracts and leases
         (other than Debt), statutory obligations, surety bonds, performance
         bonds and other obligations of a like nature incurred in the ordinary
         course of business not to exceed in the aggregate 25% of Unrestricted
         Cash determined at the time such deposits, statutory obligations, bonds
         or other obligations are incurred;

(e)      zoning restrictions, easements, licenses, covenants, reservations,
         restrictions on the use of Property, defects, irregularities and
         deficiencies in title to Property and such other encumbrances or
         charges against real property as are of a nature generally existing
         with respect to Property of a similar character and which, in the
         aggregate, are not substantial in amount, and which do not in any
         material way affect the marketability of the same or interfere with the
         use thereof in the business of the Parent Company or its Subsidiaries;

(f)      Liens existing on the Closing Date that either (i) secure Debt and
         other obligations that do not exceed U.S.$25,000,000 in the aggregate
         or (ii) are disclosed in writing to the Administrative Agent on or
         before the Closing Date;

(g)      Liens created by Capital Leases provided that the Liens created by any
         such Capital Lease attach only to the Property leased pursuant thereto
         and proceeds (including, without limitation, proceeds from associated
         contracts and insurances) of, and improvements, accessories and
         upgrades to, the Property leased pursuant thereto;

(h)      Liens to secure Debt, including, without limitation, Project Finance
         Debt, incurred for the purpose of financing all or a part of the
         purchase price or construction cost of Property (including the cost of
         upgrading, refurbishing or renovating drilling rigs, drillships and
         other vessels and platforms) if (A) the principal amount of the Debt
         secured by such Liens does not exceed the cost of the Property so
         acquired,

                                     -118-
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         constructed, upgraded, refurbished or renovated plus transaction costs
         related thereto, (B) such Liens do not encumber any other Property
         (other than the proceeds (including, without limitation, proceeds from
         associated contracts and insurances) of, and improvements, accessories
         and upgrades to, the Property so acquired, constructed, upgraded,
         refurbished or renovated and the Capital Stock of Special Purpose
         Subsidiaries that own, whether directly or indirectly, only the
         Property so acquired, constructed, upgraded, refurbished or renovated)
         and (C) such Liens attach no later than 12 months after the later of
         (x) commencement of commercial operation of the Property so acquired,
         constructed, upgraded, refurbished or renovated, (y) completion of the
         construction, acquisition, upgrade, improvement or renovation of such
         Property and (z) acquisition of such Property;

(i)      Liens created for the benefit of the Term Secured Parties or the
         Finance Parties;

(j)      Liens on Property of a Person existing at the time such Person is
         merged or consolidated with or into, or otherwise acquired by, the
         Parent Company or one of its Subsidiaries; provided that, (i) such
         Liens are in existence at the time the respective Persons become
         Subsidiaries of the Parent Company and were not created or increased in
         anticipation thereof and (ii) the Debt secured by such Liens (A) is
         permitted under Clause 25.16 (Debts, Guaranties and other Obligations),
         (B) secured only by such Property and the proceeds (including, without
         limitation, proceeds from associated contracts and insurances) of, and
         improvements, accessories and upgrades to, such Property and not by any
         other assets of the Parent Company and its Subsidiaries, and (C) is not
         increased in amount;

(k)      Liens on Property existing at the time of the acquisition thereof;
         provided that, (i) such Liens are in existence at the time such
         Property is acquired and were not created or increased in anticipation
         thereof and (ii) the Debt secured by such Liens (A) is permitted under
         Clause 25.16 (Debts, Guaranties and other Obligations), (B) does not
         exceed the fair market value of such Property, (C) is secured only by
         such Property and the proceeds (including, without limitation, proceeds
         from associated contracts and insurances) of, and improvements,
         accessories and upgrades to, such Property and not by any other assets
         of the Parent Company and its Subsidiaries, and (D) is not increased in
         amount;

(l)      judgment, attachment, sequestration, distress and similar Liens
         (including bonds related to judgments or litigation) not giving rise to
         an Event of Default so long as any appropriate legal proceedings which
         may have been initiated for the review of such judgment, attachment,
         sequestration, distress or similar action shall not have

                                     -119-
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         been finally terminated or the period within which such proceedings may
         be initiated shall not have expired;

(m)      rights of set-off of banks and other Persons in the ordinary course of
         banking and trading arrangements;

(n)      Liens securing reimbursement obligations under financial letters of
         credit;

(o)      Liens securing any MARAD Financing, provided that each such Lien
         encumbers only the property financed in connection with the creation of
         any such Debt and any other MARAD Collateral;

(p)      Liens on Property of any Affiliate of the Group or any other joint
         venture in favour of the Parent Company or any of its Subsidiaries;

(q)      Liens securing Debt permitted by subsections (d), (e) or (n) of Clause
         25.16 (Debts, Guaranties and Other Obligations);

(r)      Liens on Property of any Credit Party in favour of the Parent Company,
         the Borrower or any Guarantor that is a wholly-owned Subsidiary of the
         Parent Company;

(s)      Liens incurred in the ordinary course of business to secure liabilities
         to insurance carriers under insurance or other self-insurance
         arrangements in an amount not to exceed $25,000,000; and

(t)      Liens to secure any extension, renewal, refinancing, refunding or
         replacement (or successive extensions, renewals, refinancings,
         refundings or replacements), in whole or in part, of any Debt or other
         obligation secured by any Permitted Lien referred to in clauses (a)
         through (s) above, provided that the principal amount of the Debt or
         other obligation secured thereby is no greater than the greater of (i)
         the outstanding principal amount of such Debt or other obligation
         immediately before such extension, renewal, refinancing, refunding or
         replacement and (ii) the maximum commitment of such Debt or other
         obligation immediately before such extension, renewal, refinancing,
         refunding or replacement and that any such Liens are limited to the
         Property originally encumbered thereby (and the proceeds (including,
         without limitation, proceeds from associated contracts and insurances)
         of, and improvements, accessories and upgrades to, such Property).

         Notwithstanding the foregoing, the Parent Company shall not, nor shall
         it permit any of its Subsidiaries to, create, assume, incur or suffer
         to exist, any Lien on or in respect of (i) any assets relating to or
         arising from the Mortgaged Revolving Credit

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         Facility Rigs whether now owned or hereafter acquired, including,
         without limitation, any accounts receivable, inventory, equipment, and
         general intangibles (each as defined in Article 9 of the UCC) other
         than Liens in favour of the Collateral Agent for the benefit of the
         Finance Parties, (ii) the Pride Oklahoma or (iii) the Capital Stock of
         the Borrower or any of its Material Subsidiaries, except in each case,
         Permitted Liens under clauses (a) through (d), (l) and, to the extent
         relating to any of the foregoing, clause (t) above.

25.16    DEBTS, GUARANTIES AND OTHER OBLIGATIONS

         The Parent Company will not, and will not permit any of its
         Subsidiaries to, create, assume, suffer to exist or in any manner
         become or be liable, in respect of any Debt except:

(a)      Debt of the Credit Parties under the Finance Documents;

(b)      Debt of the Credit Parties under the Term Loan Agreement;

(c)      Debt existing on the date hereof that either (i) does not exceed
         U.S.$25,000,000 in the aggregate or (ii) is described in Schedule
         25.16;

(d)      Intercompany Debt, provided that if such Debt is owing to any Credit
         Party that is not a wholly-owned Subsidiary of the Parent Company or
         any other Person other than a Credit Party, (i) then such Debt shall be
         subordinated to the Obligations and the Term Loans on terms reasonably
         acceptable to the Administrative Agent and (ii) and if such
         Intercompany Debt is secured, then the Obligations will be secured by
         such Liens equally and ratably with such secured Intercompany Debt so
         long as such Intercompany Debt shall be so secured;

(e)      Debt owing by any Subsidiary of the Parent Company (other than a Credit
         Party) to the Parent Company or any of other Subsidiary of the Parent
         Company;

(f)      Debt in connection with any guarantees in favour of any protection and
         indemnity or War Risk associations to the extent such guarantees are
         required in connection with any insurance policies;

(g)      unsecured Debt of the Borrower and its Subsidiaries in the aggregate
         amount not to exceed U.S.$15,000,000 (or the equivalent in any other
         currency) in addition to all other Debt permitted by this Clause 25.16;

(h)      unsecured Debt of the Parent Company and its Subsidiaries (other than
         the Borrower and its Subsidiaries), in addition to all other Debt
         permitted by this Clause 25.16 other than Debt permitted under Clause
         25.16(g), provided, that (i) if

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         the maturity of such Debt is after the Term Loan Maturity Date, then
         the amortization of such Debt may not exceed the greater of 10% of the
         principal amount of such Debt or U.S.$25,000,000 in any fiscal year
         prior to the Term Loan Maturity Date or (ii) to the extent that such
         Debt is not permitted under subclause (i) above, then such Debt is in
         an aggregate amount not to exceed the greater of U.S.$200,000,000 (or
         the equivalent in any other currency) and 5% of Consolidated Tangible
         Net Assets;

(i)      Project Finance Debt;

(j)      unsecured Debt under the Subordinated Indenture and any other
         Subordinated Debt, provided, that either (i) such Subordinated Debt is
         on subordination terms and conditions reasonably satisfactory to the
         Administrative Agent or as contemplated by Clause 25.21(c) (Restricted
         Payments) or (ii) the amortization of such Subordinated Debt may not
         exceed the greater of 10% of the principal amount of such Subordinated
         Debt or U.S.$25,000,000 in any fiscal year prior to the Term Loan
         Maturity Date;

(k)      Debt of a Subsidiary of the Parent Company that existed at the time
         such Person became a Subsidiary of the Parent Company; provided that,
         (i) such Debt is in existence at the time the respective Persons become
         Subsidiaries of the Parent Company and was not created or increased in
         anticipation thereof, (ii) no Event of Default exists or no Default
         would be caused thereby and (iii) after giving effect to the
         transaction by which such Person became a Subsidiary of the Parent
         Company on a pro forma basis, the Parent Company would have been in
         compliance with the financial covenants set forth in Clause 24
         (Financial Covenants) as of the end of the most recent fiscal quarter;

(l)      Debt of the Parent Company or any of its Subsidiaries that represents
         the assumption by the Parent Company or that Subsidiary of Debt of
         another Person (including, without limitation, another Subsidiary of
         the Parent Company) in connection with a merger of the Parent Company
         or that Subsidiary with such other Person; provided that, (i) such Debt
         is in existence at the time the respective Persons are merged with the
         Parent Company or that Subsidiary and were not created or increased in
         anticipation thereof, (ii) no Event of Default exists or no Default
         would be caused thereby and (iii) after giving effect to such
         transaction on a pro forma basis, the Parent Company would have been in
         compliance with the financial covenants set forth in Clause 24
         (Financial Covenants) as of the end of the most recent fiscal quarter;

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<PAGE>
(m)      Debt of the Parent Company or any of its Subsidiaries incurred for the
         purpose of financing all or a part of the purchase price or
         construction cost of Property (including the cost of upgrading,
         refurbishing or renovating drilling rigs, drillships and other vessels
         and platforms) if (i) the principal amount of such Debt does not exceed
         the cost of the Property so acquired, constructed, upgraded,
         refurbished or renovated plus transaction costs related thereto, (ii)
         such Debt is incurred no later than 12 months after the latest of (A)
         commencement of commercial operation of the Property so acquired,
         constructed, upgraded, refurbished or renovated, (B) completion of the
         construction, acquisition, upgrade, improvement or renovation of such
         Property, and (C) acquisition of such Property; provided, however,
         that, if payment of the principal, interest, fees or other costs
         payable with respect to such Debt is required before the Term Loan
         Maturity Date, then, to the extent that the payment of such principal,
         interest, fees or other costs are not offset, in the aggregate, by
         payments under a contract dependent on such Property, the remaining
         aggregate principal balance (the "UNCOVERED PORTION") shall not be
         permitted under this Clause 25.16(m) (but may be permitted under
         another clause of this Clause 25.16); and provided further, for the
         avoidance of doubt, that if any part of the Uncovered Portion is,
         subsequent to incurrence, offset by payments to be made prior to the
         Term Loan Maturity Date under a contract that is dependent on such
         Property, such part shall no longer be part of the Uncovered Portion
         and shall be permitted under this Clause 25.16(m);

(n)      Debt of the Parent Company and its Subsidiaries (other than the
         Borrower and its Subsidiaries), in addition to all other Debt permitted
         by this Clause 25.16, provided, that (i) if the maturity of such Debt
         is after the Term Loan Maturity Date, then the amortization of such
         Debt may not exceed the greater of 10% of the principal amount of such
         Debt or U.S.$25,000,000 in any fiscal year prior to the Term Loan
         Maturity Date or (ii) to the extent that such Debt is not permitted
         under subclause (i) above, then such Debt is in an aggregate amount not
         to exceed the greater of U.S.$350,000,000 (or the equivalent in any
         other currency) and 10% of Consolidated Tangible Net Assets as of the
         end of the most recent fiscal quarter of the Parent Company;

(o)      unsecured Debt of the Parent Company and its Subsidiaries in addition
         to all other Debt permitted by this Clause 25.16, the proceeds of which
         are used to refinance Subordinated Debt existing on the Closing Date;

(p)      the MARAD Financing; and

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<PAGE>
(q)      any extension, renewal, refinancing, refunding or replacement (or
         successive extensions, renewals, refinancings, refundings or
         replacements), in whole or in part, of any Debt referred to in clauses
         (a) through (p) of this Clause 25.16, provided that (i) the principal
         amount of such Debt is not thereby increased (other than by the
         reasonable fees, expenses and any premium incurred in connection with
         the extension, renewal, refinancing, refunding or replacement (except
         that in connection with any refinancing, refunding or replacement of
         the European Facility, the principal amount thereof may be increased
         to, but may not exceed, U.S.$125,000,000)) and (ii) with respect to
         Subordinated Debt, except as otherwise permitted by Clause 25.16(o),
         such Subordinated Debt shall not be extended, renewed, refinanced,
         refunded or replaced except on subordination terms at least as
         favourable to the Revolving Lenders and no more restrictive on the
         Parent Company than the Subordinated Debt being extended, renewed,
         refinanced, refunded or replaced.

25.17    MERGER OR CONSOLIDATION; ASSET SALES

(a)      The Borrower shall not, nor shall it permit any Subsidiary to, merge,
         dissolve, liquidate or consolidate with or into any other Person or to
         transfer all or substantially all of its Property to any other Person,
         except that (i) a Subsidiary of the Borrower may merge with or into the
         Borrower or a wholly-owned Subsidiary of the Borrower (provided that if
         either of such Subsidiaries is a Guarantor, the surviving entity shall
         be a Guarantor), and (ii) a Subsidiary of the Borrower may transfer all
         or substantially all of its assets (upon voluntary liquidation or
         otherwise) to the Borrower or to another wholly-owned Subsidiary of the
         Borrower (provided that if the transferor in such a transaction is a
         Guarantor, then the transferee must either be the Borrower or a
         Guarantor), provided in each case that (A) no Event of Default exists
         or no Default would be caused thereby, and (B) if any Collateral is
         transferred pursuant to this Clause 25.17, the Borrower shall provide
         the Collateral Agent with ten Business Days' written notice prior to
         such transfer, and the Borrower or such Guarantor, as the case may be,
         owning the Collateral after such transfer shall ratify and confirm the
         Lien on such Collateral and shall take all action reasonably requested
         by the Collateral Agent in respect of the continued priority and
         perfection of the Lien over such Collateral.

(b)      The Parent Company shall not, in any transaction or series of
         transactions, consolidate with or merge into any other Person (other
         than a merger of a Subsidiary into the Parent Company in which the
         Parent Company is the continuing corporation), or sell, convey, assign,
         transfer, lease or otherwise dispose of all or substantially all of the
         assets of the Parent Company and its Subsidiaries, taken as a whole, to
         any Person unless (i) either (A) the Parent Company shall be

                                      -124-
<PAGE>
         the continuing Person or (B) the Person (if other than the Parent
         Company) formed by such consolidation or into which the Parent Company
         is merged, or the Person which acquires, by sale, assignment,
         conveyance, transfer, lease or other disposition, all or substantially
         all of the assets of the Parent Company and the Subsidiaries, taken as
         a whole, shall (1) be a Permitted Holding Company and (2) comply with
         the provisions of Clause 25.12(b) (New Subsidiaries; Permitted Holding
         Company), (ii) no Event of Default exists or no Default would be caused
         thereby and (iii) after giving effect to such transaction or series of
         transactions on a pro forma basis, the Parent Company would have been
         in compliance with the financial covenants set forth in Clause 24
         (Financial Covenants) as of the end of the most recent fiscal quarter.

(c)      The Parent Company shall not, nor shall it permit any of its
         Subsidiaries to, sell, transfer, assign or otherwise dispose of its
         Property to any other Person, except:

         (i)      Sales of inventory in the ordinary course of business;

         (ii)     Dispositions of obsolete or worn out property, whether now
                  owned or hereafter acquired, in the ordinary course of
                  business;

         (iii)    Dispositions of equipment to the extent that (A) such property
                  is exchanged for credit against the purchase price of similar
                  replacement property, (B) the proceeds of such disposition are
                  reasonably promptly applied to the purchase price of such
                  replacement property or (C) with respect to equipment relating
                  to Mortgaged Revolving Credit Facility Rigs, such dispositions
                  are in compliance with Clause 25.11(c) (Operation of Mortgaged
                  Revolving Credit Facility Rigs);

         (iv)     to the extent not otherwise permitted by this Clause 25.17
                  (Merger or Consolidation; Asset Sales), so long as no Event of
                  Default exists and after giving effect to such transaction on
                  a pro forma basis, no Default would be caused thereby, sales,
                  transfers, assignments or other dispositions of Property to a
                  Person other than the Parent Company or any of its
                  Subsidiaries (an "ASSET SALE") that, together with all other
                  Asset Sales (other than sales, transfers, assignments or other
                  dispositions permitted by subsections (i), (ii) and (iii)
                  above) as permitted by this Section during the twelve-month
                  period ending with the month in which any such Asset Sale
                  occurs, does not exceed U.S.$100,000,000 (or the equivalent in
                  any other currency) for the Parent Company and its
                  Subsidiaries of which no more than U.S.$10,000,000 (or the
                  equivalent in any other currency) may be attributable to the
                  Borrower and its Subsidiaries; provided, however, that

                                     -125-
<PAGE>
                  the requirements set forth in this Clause 25.17(c)(iv) shall
                  not apply if the Net Cash Proceeds from each Asset Sale are
                  used to acquire one or more replacement assets or to
                  repurchase or repay existing Debt (with a permanent reduction
                  of availability in the case of revolving credit borrowings)
                  within 180 days after the consummation of such Asset Sale;

         (v)      sales, transfers, assignments or other dispositions of any
                  Property, other than Mortgaged Revolving Credit Facility Rigs
                  or Mortgaged Term Loan Facility Rigs, to the Parent Company or
                  any of its Subsidiaries;

         (vi)     sales, transfers, assignments or other dispositions of any
                  Mortgaged Revolving Credit Facility Rig or Mortgaged Term Loan
                  Facility Rig to the Borrower or any other Guarantor; provided,
                  that (A) with respect to sales, transfers, assignments or
                  other dispositions of any Mortgaged Revolving Credit Facility
                  Rig, the Borrower or such Guarantor shall ratify, grant and
                  confirm the Liens on such Mortgaged Revolving Credit Facility
                  Rig (and other related Collateral) pursuant to such Security
                  Documents and deliver such legal opinions in relation thereto
                  as may be reasonably requested by the Collateral Agent and (B)
                  such sale, transfer, assignment or other disposition of any
                  Mortgaged Term Loan Facility Rig is made in accordance with
                  the Term Loan Agreement;

         (vii)    sales, transfers, assignments or other dispositions of any
                  Mortgaged Revolving Credit Facility Rig or Mortgaged Term Loan
                  Facility Rig to the Parent Company or any of its wholly-owned
                  Subsidiaries; provided, that (A) with respect to sales,
                  transfers, assignments or other dispositions of any Mortgaged
                  Revolving Credit Facility Rig, (1) such Subsidiary shall (x)
                  comply with the terms of Clause 25.12 (New Subsidiaries;
                  Permitted Holding Company), (y) execute and deliver a Security
                  Agreement, and (z) ratify, grant and confirm the Liens on such
                  Mortgaged Revolving Credit Facility Rig (and other related
                  Collateral) pursuant to such Security Documents and deliver
                  such legal opinions in relation thereto as may be reasonably
                  requested by the Collateral Agent, and (2) at all times, at
                  least 50% of the Market Value of the Mortgaged Revolving
                  Credit Facility Rigs must be owned by either the Borrower or a
                  Guarantor that is a wholly-owned Subsidiary of the Borrower
                  and (B) such sale, transfer, assignment or other disposition
                  of any Mortgaged Term Loan Facility Rig is made in accordance
                  with the Term Loan Agreement; and

                                     -126-
<PAGE>
         (viii)   any Collateral Disposition; provided that (A) both before and
                  immediately after giving effect to such proposed Collateral
                  Disposition, the Borrower is in compliance with Clause 25.13
                  (Security Maintenance Ratio) and (B) the Borrower complies
                  with the prepayment provisions of Clause 11.4(b) (Mandatory
                  Prepayment of Revolving Credit Facility Utilisations).

25.18    INVESTMENTS

         The Parent Company will not, nor will it permit any Subsidiary to, make
         or suffer to exist any Investments, or commitments therefor, except:

         (a)      Cash Equivalents;

         (b)      Existing Investments in Subsidiaries and other Investments in
                  existence on the date hereof and disclosed in writing to the
                  Administrative Agent on or before the Closing Date;

         (c)      Debt to the extent permitted by subsections (d) and (e) of
                  Clause 25.16 (Debts, Guaranties and other Obligations);

         (d)      Investments, the consideration for which is Capital Stock of
                  the Parent Company or any of its Subsidiaries or cash funded
                  by the issuance of Capital Stock of the Parent Company or any
                  of its Subsidiaries; provided that (i) no Event of Default
                  exists or no Default would be caused thereby and (ii) after
                  giving effect to such Investment on a pro forma basis, the
                  Parent Company would have been in compliance with the
                  financial covenants set forth in Clause 24 (Financial
                  Covenants) as of the end of the most recent fiscal quarter;

         (e)      Investments made by the Parent Company or by any of its
                  Subsidiaries in a Subsidiary of the Parent Company (or in any
                  Person that will become a Subsidiary as a result of such
                  Investment); and

         (f)      Investments not otherwise permitted by this Clause 25.18 in an
                  aggregate amount not to exceed 10% of the Consolidated
                  Tangible Net Worth as of the date of the most recent financial
                  statement delivered pursuant to Clause 23.1 (Financial
                  Statements).

25.19    TRANSACTIONS WITH AFFILIATES

         The Parent Company shall procure that neither it nor any of its
         Subsidiaries shall, directly or indirectly, enter into or permit to
         exist any transaction or series of transactions (including, but not
         limited to, the purchase, sale, lease or exchange of Property, the
         making of any investment, the giving of any guaranty or the

                                     -127-
<PAGE>
         rendering of any service) with any of their Affiliates other than the
         Parent Company or a wholly-owned Subsidiary of the Parent Company
         unless such transaction or series of transactions is on terms no less
         favourable to the Parent Company or such Subsidiary than those that
         could be obtained in a comparable arm's length transaction with a
         Person that is not such an affiliate; provided that this Clause 25.19
         shall not apply to reasonable compensation (including amounts paid
         pursuant to Plans) and indemnification paid or made available to an
         officer, director or employee of the Parent Company or any of its
         Subsidiaries for services rendered in that Person's capacity as an
         officer, director or employee or the making of any Restricted Payment
         or Investment otherwise permitted by this Agreement.

25.20    COMPLIANCE WITH ERISA

         The Parent Company shall procure that neither it nor any of its
         Subsidiaries will (a) terminate, or permit any Subsidiary to terminate,
         any Plan so as to result in any material (in the opinion of the
         Required Revolving Lenders) liability of the Parent Company or such
         Subsidiary or (b) permit to exist any occurrence of any Reportable
         Event (as defined in Title IV of ERISA), or any other event or
         condition, which presents a material (in the reasonable opinion of the
         Required Revolving Lenders) risk of such a termination by the PBGC of
         any Plan.

25.21    RESTRICTED PAYMENTS

         The Parent Company will not, nor will it permit any Subsidiary to, make
         any Restricted Payment except that:

         (a)      any Subsidiary of the Parent Company may declare and pay
                  dividends or make distributions to the Parent Company or to a
                  wholly-owned Subsidiary of the Parent Company (and, in the
                  case of a Restricted Payment by a non-wholly-owned Subsidiary,
                  to the Parent Company and any Subsidiary and to each other
                  owner of capital stock or other equity interests of such
                  Subsidiary in an amount not greater than their applicable
                  ownership interests or based on any relevant joint venture,
                  shareholders' or similar agreement);

         (b)      so long as no Event of Default exists and after giving effect
                  to such transaction on a pro forma basis, no Default would be
                  caused thereby, the Parent Company or any Subsidiary may
                  repurchase up to U.S.$100,000,000 of its Capital Stock or
                  Subordinated Debt (in the aggregate in the period prior to the
                  Term Loan Maturity Date) if, immediately after giving effect
                  to such repurchase, the aggregate amount

                                     -128-
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                  of Unrestricted Cash, the Available Facility and any unused
                  availability under the European Facility shall exceed
                  U.S.$150,000,000;

         (c)      so long as no Event of Default exists and after giving effect
                  to such transaction on a pro forma basis, no Default would be
                  caused thereby, the Parent Company or any Subsidiary may
                  repurchase or redeem Subordinated Debt in exchange for or out
                  of the net cash proceeds from the substantially concurrent
                  issuance or sale of new Subordinated Debt so long as the new
                  Subordinated Debt is subordinated in right of payment to the
                  Obligations to the same extent as the Subordinated Debt being
                  repurchased or redeemed;

         (d)      so long as no Event of Default exists and after giving effect
                  to such transaction, no Default would be caused thereby, the
                  Parent Company or any Subsidiary may repurchase or redeem
                  Subordinated Debt in exchange for or out of the net cash
                  proceeds from the substantially concurrent issuance or sale of
                  Capital Stock; and

         (e)      the Parent Company may make any scheduled payment on
                  Subordinated Debt and may make any payment (scheduled or
                  otherwise) in respect of, and may repurchase, Subordinated
                  Debt issued pursuant to the Subordinated Indenture.

25.22    MAINTENANCE OF OWNERSHIP OF SUBSIDIARIES

         Except as permitted by Clause 25.17 (Merger or Consolidation; Asset
         Sales), the Parent Company will not sell or otherwise dispose of any
         shares of Capital Stock of the Borrower, the Borrower will not sell or
         otherwise dispose of any shares of Capital Stock of any of its Material
         Subsidiaries, and neither the Borrower nor any of its Material
         Subsidiaries shall issue, sell or otherwise dispose of (other than to
         the Borrower or the Parent Company) any shares of its Capital Stock.
         Upon the sale or disposition of any Guarantor pursuant to the terms of
         this Agreement to any Person other than the Borrower or any other
         Guarantor, provided that such Guarantor does not own a Mortgaged
         Revolving Credit Facility Rig or receive any earnings from any
         Mortgaged Revolving Credit Facility Rig, the Collateral Agent will, at
         the Borrower's expense, execute and deliver to such Guarantor such
         documents as such Guarantor shall reasonably require and take any other
         actions reasonably required to evidence or effect the release of such
         Guarantor from this Agreement and the other Finance Documents.

25.23    AGREEMENTS RESTRICTING LIENS AND DISTRIBUTIONS

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         The Parent Company will not, nor will it permit any of its Subsidiaries
         to, create or otherwise cause or suffer to exist any prohibition,
         encumbrance or restriction which prohibits or otherwise restricts (a)
         the ability of any Subsidiary to (i) pay dividends or make other
         distributions or pay any Debt owed to the Parent Company or any
         Subsidiary of the Parent Company, (ii) make loans or advances to the
         Parent Company or any Subsidiary of the Parent Company, or (iii)
         transfer any of its Properties to the Parent Company or any Subsidiary
         of the Parent Company or (b) the ability of the Parent Company or any
         Subsidiary of the Parent Company to create, incur, assume or suffer to
         exist any Lien upon its Property to secure the Obligations or to become
         a guarantor of the Obligations, other than prohibitions or restrictions
         existing under or by reason of: (i) this Agreement and the other
         Finance Documents, (ii) the Term Loan Agreement and the other Credit
         Documents; (iii) the Senior Indenture; (iv) applicable Legal
         Requirements; (v) customary non-assignment provisions entered into in
         the ordinary course of business and consistent with past practices;
         (vi) any restriction or encumbrance with respect to a Subsidiary of the
         Borrower imposed pursuant to an agreement which has been entered into
         for the sale or disposition of all or substantially all of the Capital
         Stock or assets of such Subsidiary, so long as such sale or disposition
         is permitted under this Agreement; (vii) Liens, prohibitions or
         restrictions permitted by Clause 25.15 (Liens, etc.) and any documents
         or instruments governing the terms of any Debt or other obligations
         secured by any such Liens, provided that such prohibitions or
         restrictions apply only to the Property subject to such Liens, (viii)
         European Facility, (ix) Project Finance Debt and (x) MARAD Financing.

25.24    OTHER DEBT

(a)      The Parent Company will not, and will not permit any Subsidiary to,
         make any amendment or modification to the subordination provisions of
         the Subordinated Indenture or any other indenture, note or other
         agreement evidencing or governing any Subordinated Debt if such
         subordination provisions are required to be approved by the
         Administrative Agent pursuant to Clause 25.16(j)(i) (Debts, Guaranties
         and other Obligations) unless such approval has been obtained.

(b)      If any Intercompany Debt is required to be subordinated pursuant to
         Clause 25.16 (Debts, Guaranties and Other Obligations) and is not
         evidenced by a promissory note, then the Parent Company shall procure
         that each Credit Party will enter into a written subordination
         agreement on terms reasonably acceptable to the Administrative Agent.

25.25    FINANCIAL CONTRACT OBLIGATIONS

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         The Parent Company shall not, and shall not permit any of its
         Subsidiaries to, enter into any Financial Contract Obligations unless
         (a) such obligations are (or were) entered into by such Person in the
         ordinary course of business for the purpose of directly mitigating
         risks associated with liabilities, commitments, investments, assets, or
         property held or reasonably anticipated by such Person, or changes in
         the value of securities issued by such Person, and not for purposes of
         speculation or taking a "market view;" and (b) such Financial Contract
         Obligation does not contain any provision exonerating the
         non-defaulting party from its obligation to make payments on
         outstanding transactions to the defaulting party.

25.26    CHARTER AND LEASES

         The Borrower shall not, and shall not permit any of its Subsidiaries
         to, incur, assume or suffer to exist, any obligation for payments under
         Operating Leases (including, without limitation, rental payments and
         payments of taxes thereunder) with respect to any Property, except that
         the following shall be permitted: (a) obligations with respect to
         Operating Leases of offshore drilling rigs or other equipment having
         terms of twelve months or less (including options); (b) obligations
         disclosed in writing to the Administrative Agent, and amendments,
         renewals or extensions thereof on terms that are not materially less
         favourable, but in no event for a period longer, than those obligations
         disclosed in writing to the Administrative Agent on or before the
         Closing Date; (c) Operating Leases having in the aggregate rental
         payment obligations for any 12 month period prior to the Term Loan
         Maturity Date of less than U.S.$50,000,000 (or the equivalent in any
         other currency) for the Parent Company and its Subsidiaries of which no
         more than U.S.$2,000,000 (or the equivalent in any other currency) may
         be attributable to the Borrower and its Subsidiaries, in each case
         exclusive of any Synthetic Lease Obligations; (d) obligations with
         respect to operating charters or leases between Subsidiaries of the
         Parent Company; or (e) obligations as have been approved in writing by
         the Administrative Agent with the consent of the Required Revolving
         Lenders.

25.27    MAINTENANCE CAPITAL EXPENDITURES

         The Parent Company will not, nor will it permit any Subsidiary to,
         expend, or be committed to expend, in excess of 5% of Consolidated
         Tangible Net Assets for Maintenance Capital Expenditures during any one
         fiscal year on a non-cumulative basis in the aggregate for the Parent
         Company and its Subsidiaries.

25.28    LIMITATION ON CHANGES IN FISCAL PERIODS

         The Parent Company will not, and will not permit any of its
         Subsidiaries to, permit the fiscal year of the Parent Company or any
         other member of the Group to end on

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         a day other than December 31 or change the Parent Company's method of
         determining fiscal quarters.

25.29    MORTGAGED REVOLVING CREDIT FACILITY RIGS

         The Parent Company will not, nor will it permit any Subsidiary to,

         (a)      without the previous consent in writing of the Collateral
                  Agent, make any modification to any Mortgaged Revolving Credit
                  Facility Rig which would materially and adversely alter the
                  structure, type or performance characteristics of such
                  Mortgaged Revolving Credit Facility Rig or which would
                  materially reduce the value of such Mortgaged Revolving Credit
                  Facility Rig;

         (b)      employ any Mortgaged Revolving Credit Facility Rig or allow
                  her employment in any trade or business which is unlawful
                  under the laws of any relevant jurisdiction in which it is
                  located or subject or in carrying illicit or prohibited goods
                  or in any manner whatsoever which can reasonably be expected
                  to render her liable to destruction, seizure or confiscation;
                  and in the event of hostilities in any part of the world
                  (whether war be declared or not) not employ any Mortgaged
                  Revolving Credit Facility Rig or suffer her employment in
                  carrying any contraband goods or to enter or trade to any zone
                  which is declared a war zone by any Government Authority or by
                  the War Risks insurers of such Mortgaged Revolving Credit
                  Facility Rig unless there shall have been effected by the
                  Credit Parties (at their expense) such special, additional or
                  modified insurance cover as the Collateral Agent may
                  reasonably require;

         (c)      if an Event of Default has occurred and is continuing, not
                  without the previous consent of the Collateral Agent (such
                  consent not to be unreasonably withheld or delayed), undertake
                  or commence upgrades or improvements on any Mortgaged
                  Revolving Credit Facility Rig in an amount exceeding or likely
                  to exceed U.S.$5,000,000 (or the equivalent in any other
                  currency) in the aggregate unless the Person to provide such
                  upgrades or improvements shall first have given to the
                  Collateral Agent a written waiver or subordination of its
                  Liens or its equivalent, such waiver or subordination to be in
                  form and substance reasonably satisfactory to the Collateral
                  Agent;

         (d)      charter any Mortgaged Revolving Credit Facility Rig to, or
                  permit the Mortgaged Revolving Credit Facility Rig to serve
                  under any contract with, a Person included within the
                  definition of (i) "national" of a "designated

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                  foreign country," or "specially designated national" of a
                  "designated foreign country," in the Foreign Assets Control
                  Regulations or the Cuban Assets Control Regulations of the
                  United States Treasury Department, 31 C.F.R. Parts 500 and
                  515, in each case as amended, (ii) "Government of Libya",
                  "entity of the Government of Libya" or "Libyan entity" in the
                  Libyan Sanctions Regulations of the United States Treasury
                  Department, 31 C.F.R. Part 550, as amended, or (iii)
                  "Government of Iraq", "entity of the Government of Iraq" or
                  "Iraqi Government entity" in the Iraqi Sanctions Regulations,
                  56 Fed. Reg. 2112 (1991) to be codified at 31 C.F.R. Part 575,
                  as amended, all within the meaning of said Regulations or of
                  any regulations, interpretations or rulings issued thereunder,
                  or engage in any transaction that violates any provision of
                  said Regulations or that violates any provision of the Iranian
                  Transactions Regulations, 31 C.F.R. Part 560, as amended, the
                  Foreign Funds Control Regulations, 31 C.F.R. Part 520, as
                  amended, the Transaction Control Regulations, 31 C.F.R. Part
                  505, as amended, the Haitian Transaction Regulations, 31
                  C.F.R. Part 580, as amended, the Foreign Assets Control
                  Regulations, 31 C.F.R. Part 500, as amended, or Executive
                  Orders 12810 and 12831 if such transaction or violation would
                  (A) expose the Collateral Agent or any Finance Party to any
                  penalty, sanction or investigation or (B) jeopardize the Lien
                  created by the Rig Mortgages or (C) might reasonably be
                  expected to cause a material adverse effect on the Credit
                  Parties or the operation of the Mortgaged Revolving Credit
                  Facility Rigs, or call at a Cuban port to load or discharge
                  cargo or to effect repairs on the Mortgaged Revolving Credit
                  Facility Rigs;

         (e)      cause or permit any Mortgaged Revolving Credit Facility Rig to
                  be operated in any manner contrary to law (except where the
                  failure to operate in compliance with any law would not cause
                  a material adverse effect on the Credit Parties, such
                  Mortgaged Revolving Credit Facility Rig or the Lien created by
                  the applicable Rig Mortgage);

         (f)      abandon any Mortgaged Revolving Credit Facility Rig in a port
                  outside of the United States of America;

         (g)      engage in any unlawful trade or violate any law or carry any
                  cargo that shall expose any Mortgaged Revolving Credit
                  Facility Rig to forfeiture or capture;

         (h)      operate any Mortgaged Revolving Credit Facility Rig in any
                  jurisdiction or in any manner which could cause the Lien
                  created by the applicable Rig

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                  Mortgage to be rendered unenforceable or the Collateral
                  Agent's foreclosure or enforcement rights to be materially
                  impaired or hindered; or

         (i)      without giving prior written notice thereof to the Collateral
                  Agent, change the registered owner, name, flag, official or
                  patent number, as the case may be, the home port or class of
                  any Mortgaged Revolving Credit Facility Rig.

26.      EVENTS OF DEFAULT

         Each of the events or circumstances set out in Clause 26 is an Event of
         Default.

26.1     NON-PAYMENT

         The Borrower shall fail to pay any principal of any Loan (including,
         without limitation, any mandatory prepayment required by Clause 11.4
         (Mandatory Payment of Revolving Credit Facility Utilisations)) or make
         any payment pursuant to any Reimbursement Obligation when the same
         becomes due and payable, or any interest on the Loans or any fee,
         commission or other amount payable hereunder or under any other Finance
         Document within five Business Days after the same becomes due and
         payable

26.2     FINANCIAL COVENANTS

         Any requirement of Clause 24 (Financial covenants) is not satisfied.

26.3     OTHER OBLIGATIONS

         The Borrower or any other Credit Party shall (a) fail to perform or
         observe any covenant contained in Clause 25.2 (Maintenance of
         Insurance), Clause 25.15 (Liens, Etc.), Clause 25.16 (Debts, Guaranties
         and other Obligations), Clause 25.17 (Merger or Consolidation; Asset
         Sales), Clause 25.18 (Investments), Clause 25.19 (Transactions with
         Affiliates), Clause 25.20 (Compliance with ERISA), Clause 25.21
         (Restricted Payments), Clause 25.22 (Maintenance of Ownership of
         Subsidiaries), Clause 25.23 (Agreements Restricting Liens and
         Distributions), Clause 25.24 (Other Debt), Clause 25.25 (Financial
         Contract Obligations), Clause 25.26 (Charter and Leases), Clause 25.27
         (Maintenance Capital Expenditures), Clause 25.28 (Limitation on Changes
         in Fiscal Periods) or Clause 25.29 (Mortgaged Revolving Credit Facility
         Rigs) or (b) fail to perform or observe any other term or covenant set
         forth in this Agreement or in any other Finance Document (other than
         those referred to in Clause 26.1 (Non-payment) and Clause 26.2
         (Financial covenants)) such failure shall remain unremedied for 30 days
         after the earlier of (A) written notice of such default shall have been
         given to the

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         Borrower by the Administrative Agent or any Revolving Lender or (B) any
         actual knowledge of such default by a Responsible Officer.

26.4     MISREPRESENTATION

         Any representation or warranty made or deemed to be made by the
         Borrower or any other Credit Party (or any of their respective
         officers) in this Agreement, in any other Finance Document, or in any
         certificate delivered in connection with this Agreement or any other
         Finance Document shall prove to have been incorrect in any material
         respect when made or deemed to be made.

26.5     CROSS DEFAULT

(a)      Any Credit Party shall fail to pay any principal of or premium or
         interest on its Debt which is outstanding in a principal amount of at
         least U.S.$30,000,000.00 (or the equivalent in any other currency) when
         aggregated with all such Debt of the Person so in default (but
         excluding the Loans hereunder) when the same becomes due and payable
         (whether by scheduled maturity, required prepayment, acceleration,
         demand or otherwise);

(b)      any other event shall occur or condition shall exist under any
         agreement or instrument relating to Debt which is outstanding in a
         principal amount of at least U.S.$30,000,000.00 (or the equivalent in
         any other currency) when aggregated with all such Debt of the Person so
         in default (but excluding the Loans hereunder), and shall continue
         after the applicable grace period, if any, specified in such agreement
         or instrument, if the effect of such event or condition is to
         accelerate, or to permit the acceleration of, the maturity of such
         Debt; or

(c)      any such Debt shall be declared to be due and payable, or required to
         be prepaid (other than by a regularly scheduled required prepayment),
         prior to the stated maturity thereof.

26.6     INSOLVENCY

         Any Credit Party shall generally not pay its debts as such debts become
         due, or shall admit in writing its inability to pay its debts
         generally, commences negotiations with one or more of its creditors
         with a view to rescheduling any of its indebtedness which it would not
         otherwise be able to pay as it falls due or shall make a general
         assignment for the benefit of creditors; or any proceeding shall be
         instituted by or against any Credit Party seeking to adjudicate it as a
         bankrupt or insolvent, or seeking liquidation, winding up,
         reorganization, arrangement, adjustment, protection, relief, or
         composition of it or its debts under any law relating to bankruptcy,
         insolvency or reorganization or relief of debtors, or seeking the entry
         of an order for relief or the appointment of a receiver, trustee or
         other

                                     -135-
<PAGE>
         similar official for it or for any substantial part of its property
         and, in the case of any such proceeding instituted against any Credit
         Party, either such proceeding shall remain undismissed for a period of
         60 days or any of the actions sought in such proceeding shall occur; or
         any Credit Party shall take any corporate action to authorize any of
         the actions set forth above in this Clause 26.6 or any analogous
         procedure or step is taken in any jurisdiction.

26.7     JUDGMENTS

         Any judgment, decree or order for the payment of money shall be
         rendered against any Credit Party in an amount in excess of
         U.S.$20,000,000.00 (or the equivalent in any other currency) (to the
         extent not paid or fully covered by insurance less any deductible) if
         rendered solely against any Credit Party, or for which any Credit
         Party's allocated portion of which exceeds U.S.$20,000,000.00 (or the
         equivalent in any other currency) (to the extent not paid or fully
         covered by insurance less any deductible) and either (i) such judgment,
         decree or order remains unsatisfied and in effect for a period of 60
         consecutive days or more without being vacated, discharged, satisfied
         or stayed or bonded pending appeal or (ii) enforcement proceedings
         shall have been commenced by any creditor upon such judgment, decree or
         order.

26.8     TERMINATION EVENTS

         Any Termination Event with respect to a Plan shall have occurred, and,
         30 days after notice thereof shall have been given to the Borrower by
         the Administrative Agent, (i) such Termination Event shall not have
         been corrected and (ii) the then present value of such Plan's vested
         benefits exceeds the then current value of assets accumulated in such
         Plan by an amount that would reasonably be expected to cause or to have
         a Material Adverse Change (or in the case of a Termination Event
         involving the withdrawal of a "substantial employer" (as defined in
         Section 4001(a)(2) of ERISA), the withdrawing employer's proportionate
         share of such excess shall exceed such amount).

26.9     PLAN WITHDRAWALS

         The Parent Company or any member of the Controlled Group as employer
         under a Multiemployer Plan shall have made a complete or partial
         withdrawal from such Multiemployer Plan and the plan sponsor of such
         Multiemployer Plan shall have notified such withdrawing employer that
         such employer has incurred a withdrawal liability in an annual amount
         that could reasonably be expected to cause or to have a Material
         Adverse Change.

26.10    FINANCE DOCUMENTS

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<PAGE>
        Any material provision of the Finance Documents, including, without
        limitation, the provisions in Clause 21 (Guarantee and indemnity), shall
        for any reason cease to be valid and binding on the Credit Parties or
        any of the Credit Parties shall so state in writing.

26.11    SECURITY DOCUMENTS

         The Administrative Agent and the Revolving Lenders shall fail to have
         an Acceptable Security Interest in the Collateral or any material
         provision of any Security Document shall for any reason cease to be
         valid and binding on the Borrower or other Credit Parties executing
         such Security Document, or any such Person shall so state in writing.

26.12    CHANGE IN CONTROL

         A Change of Control shall occur.

26.13    QUALIFIED OPERATOR

         Any owner of a Mortgaged Revolving Credit Facility Rig shall cease to
         be qualified to own and operate such Mortgaged Revolving Credit
         Facility Rig under the laws of the United States or the jurisdiction in
         which such Mortgaged Revolving Credit Facility Rig is flagged.

26.14    CREDITORS' PROCESS

         Any expropriation, attachment, sequestration, distress or execution
         affects any asset or assets of a member of the Group having an
         aggregate value (to the extent not paid or fully covered by insurance
         less any deductible) of the greater of U.S.$200,000,000 (or the
         equivalent in one or more currencies) or 5% of Consolidated Tangible
         Net Assets as of the end of the most recent fiscal quarter of the
         Parent Company and such expropriation, attachment, sequestration,
         distress or execution remains in effect for a period of 30 consecutive
         Business Days or more without being vacated, discharged, satisfied or
         stayed or bonded.

26.15    ACCELERATION
On and at any time after the occurrence of an Event of Default which is
continuing the Administrative Agent may, and shall if so directed by the
Required Revolving Lenders, by notice to the Borrower:

(a)      cancel the Total Revolving Commitments whereupon they shall immediately
         be cancelled;

(b)      declare that all or part of the Loans, together with accrued interest,
         and all other amounts accrued or outstanding under the Finance
         Documents be immediately due and payable, whereupon they shall become
         immediately due and payable;

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(c)      declare that all or part of the Loans be payable on demand, whereupon
         they shall immediately become payable on demand by the Administrative
         Agent on the instructions of the Required Revolving Lenders; and/or

(d)      declare that full cash cover in respect of each Letter of Credit is
         immediately due and payable whereupon it shall become immediately due
         and payable.

                                     -138-
<PAGE>
                                    SECTION 9
                               CHANGES TO PARTIES

27.      CHANGES TO THE REVOLVING LENDERS

27.1     ASSIGNMENTS AND TRANSFERS BY THE REVOLVING LENDERS

Subject to this Clause 27, Clause 7.2 (Assignments and Transfers) and Clause 9.8
(Conditions of Assignment or Transfer), a Revolving Lender (the "EXISTING
REVOLVING LENDER") may:

(a)      assign any of its rights; or

(b)      transfer by novation any of its rights and obligations,

         to an Eligible Assignee (the "NEW REVOLVING LENDER"); provided that, in
         the case of the Swingline Lender, it may only assign its rights or
         transfer its rights and obligations in respect of the Swingline
         Facility if it assigns or transfers its Swingline Commitment and all
         its rights or, rights and obligations, relating thereto (including any
         outstanding Swingline Loans) in their entirety to a single existing
         Revolving Lender or, as the case may be, a single New Revolving Lender
         to which all or any of the Revolving Commitments and the rights, or
         rights and obligations, relating thereto are or will be assigned or
         transferred pursuant to this Clause 27.

27.2     CONDITIONS OF ASSIGNMENT OR TRANSFER

(a)      The consent of the Administrative Agent, and so long as no Default is
         continuing, the consent of the Borrower is required for an assignment
         or transfer by a Revolving Lender, unless the assignment or transfer is
         (i) by Credit Industriel et Commercial, Banque de l'Economie, du
         Commerce et de la Monetique, Natexis Banques Populaires, Credit
         Lyonnais New York Branch, Nordea or Nedship Bank in connection with the
         syndication of the Facilities, or (ii) to another Revolving Lender or
         an Affiliate of a Revolving Lender.

(b)      The consent of the Borrower to an assignment or transfer, where
         required, must not be unreasonably withheld or delayed. The Borrower
         will be deemed to have given its consent five Business Days after the
         Revolving Lender has requested it unless consent is expressly refused
         by the Borrower within that time.

(c)      The consent of the Borrower to an assignment or transfer may be
         withheld solely because the assignment or transfer will result in an
         increase to the Mandatory Cost, whether on the effective date of such
         assignment or transfer or thereafter.

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<PAGE>
(d)      An assignment will only be effective on receipt by the Administrative
         Agent of written confirmation from the New Revolving Lender (in form
         and substance satisfactory to the Administrative Agent) that the New
         Revolving Lender will assume the same obligations to the other Finance
         Parties as it would have been under if it was an Original Revolving
         Lender.

(e)      A transfer will only be effective if the procedure set out in Clause
         27.5 (Procedure for transfer) is complied with.

(f)      If:

         (i)      a Revolving Lender assigns or transfers any of its rights or
                  obligations under the Finance Documents or changes its
                  Facility Office; and

         (ii)     as a result of circumstances existing at the date the
                  assignment, transfer or change occurs, a Credit Party would be
                  obliged to make a payment to the New Revolving Lender or
                  Revolving Lender acting through its new Facility Office under
                  Clause 16 (Tax gross-up and indemnities) or Clause 17
                  (Increased Costs),

         then the New Revolving Lender or Revolving Lender acting through its
         new Facility Office is only entitled to receive payment under those
         Clauses to the same extent as the Existing Revolving Lender or
         Revolving Lender acting through its previous Facility Office would have
         been if the assignment, transfer or change had not occurred.

(g)      Unless such assignment is to another Revolving Lender or an Affiliate
         of a Revolving Lender, such assignment shall be in a minimum amount of
         (i) U.S.$5,000,000.00 or (ii) all of such Revolving Lender's Revolving
         Commitment, provided that, after giving effect thereto, the Existing
         Revolving Lender, if continuing to be a Revolving Lender hereunder, and
         the New Revolving Lender shall each have a Revolving Commitment of at
         least U.S.$5,000,000 unless otherwise agreed to by the Borrower and the
         Administrative Agent.

27.3     ASSIGNMENT OR TRANSFER FEE

         Except in connection with the syndication of the Facilities, the New
         Revolving Lender shall, on the date upon which an assignment or
         transfer takes effect, pay to the Administrative Agent (for its own
         account) a fee of U.S.$3500.

27.4     LIMITATION OF RESPONSIBILITY OF EXISTING REVOLVING LENDERS

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<PAGE>
(a)      Unless expressly agreed to the contrary, an Existing Revolving Lender
         makes no representation or warranty and assumes no responsibility to a
         New Revolving Lender for:

         (i)      the legality, validity, effectiveness, adequacy or
                  enforceability of the Finance Documents or any other
                  documents;

         (ii)     the financial condition of any Credit Party;

         (iii)    the performance and observance by any Credit Party of its
                  obligations under the Finance Documents or any other
                  documents; or

         (iv)     the accuracy of any statements (whether written or oral) made
                  in or in connection with any Finance Document or any other
                  document,

         and any representations or warranties implied by law are excluded.

(b)      Each New Revolving Lender shall confirm to the Existing Revolving
         Lender and the other Finance Parties that it:

         (i)      has made (and shall continue to make) its own independent
                  investigation and assessment of the financial condition and
                  affairs of each Credit Party and its related entities in
                  connection with its participation in this Agreement and has
                  not relied exclusively on any information provided to it by
                  the Existing Revolving Lender in connection with any Finance
                  Document; and

         (ii)     will continue to make its own independent appraisal of the
                  creditworthiness of each Credit Party and its related entities
                  whilst any amount is or may be outstanding under the Finance
                  Documents or any Commitment is in force.

(c)      Nothing in any Finance Document obliges an Existing Revolving Lender
         to:

         (i)      accept a re-transfer from a New Revolving Lender of any of the
                  rights and obligations assigned or transferred under this
                  Clause 27; or

         (ii)     support any losses directly or indirectly incurred by the New
                  Revolving Lender by reason of the non-performance by any
                  Credit Party of its obligations under the Finance Documents or
                  otherwise.

27.5     PROCEDURE FOR TRANSFER

(a)      Subject to the conditions set out in Clause 27.2 (Conditions of
         assignment or transfer) a transfer is effected in accordance with
         paragraph (b) below when the Administrative Agent executes an otherwise
         duly completed Transfer Certificate delivered to it by the Existing
         Revolving Lender and the New Revolving Lender.

                                     -141-
<PAGE>
         The Administrative Agent shall, as soon as reasonably practicable after
         receipt by it of a duly completed Transfer Certificate appearing on its
         face to comply with the terms of this Agreement and delivered in
         accordance with the terms of this Agreement, execute that Transfer
         Certificate.

(b)      On the Transfer Date:

         (i)      to the extent that in the Transfer Certificate the Existing
                  Revolving Lender seeks to transfer by novation its rights and
                  obligations under the Finance Documents each of the Credit
                  Parties and the Existing Revolving Lender shall be released
                  from further obligations towards one another under the Finance
                  Documents and their respective rights against one another
                  shall be cancelled (being the "DISCHARGED RIGHTS AND
                  OBLIGATIONS");

         (ii)     each of the Credit Parties and the New Revolving Lender shall
                  assume obligations towards one another and/or acquire rights
                  against one another which differ from the Discharged Rights
                  and Obligations only insofar as that Credit Party and the New
                  Revolving Lender have assumed and/or acquired the same in
                  place of that Credit Party and the Existing Revolving Lender;

         (iii)    the Agents, the Issuing Banks, the Arrangers, the New
                  Revolving Lender and other Revolving Lenders shall acquire the
                  same rights and assume the same obligations between themselves
                  as they would have acquired and assumed had the New Revolving
                  Lender been an Original Revolving Lender with the rights
                  and/or obligations acquired or assumed by it as a result of
                  the transfer and to that extent the Agents, the Issuing Banks,
                  the Arrangers and the Existing Revolving Lender shall each be
                  released from further obligations to each other under this
                  Agreement; and

         (iv)     the New Revolving Lender shall become a Party as a "Revolving
                  Lender".

27.6     DISCLOSURE OF INFORMATION

         Each of the Finance Parties 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); (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) to the extent
         required, in connection with the exercise of any

                                     -142-
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         remedies hereunder or any suit, action or proceeding relating to this
         Agreement or the enforcement of rights hereunder; (f) subject to an
         agreement for the benefit of the Credit Parties containing provisions
         substantially the same as those of this Clause 27.6 or any other
         confidentiality obligation referred to herein, to (i) any New Revolving
         Lender of or participant in, or any prospective New Revolving Lender of
         or participant in, any of its rights or obligations under this
         Agreement or (ii) any direct or indirect contractual counterparty or
         prospective counterparty (or such contractual counterparty's or
         prospective counterparty's professional advisor) to any credit
         derivative transaction relating to obligations of the Group; (g) with
         the prior written consent of the Parent Company or the Borrower; (h) to
         the extent such Information (i) becomes publicly available other than
         as a result of a breach of this Clause 27.6 or (ii) becomes available
         to any Finance Party on a nonconfidential basis from a source other
         than any member of the Group; or (i) to the National Association of
         Insurance Commissioners or any other similar organization. In addition,
         any Finance Party may disclose the existence of this Agreement and
         information about this Agreement to market data collectors, similar
         service providers to the lending industry, and service providers to the
         Finance Parties in connection with the administration and management of
         this Agreement, the other Finance Documents, the Commitments, and the
         Utilisations. For the purposes of this Clause, "Information" means all
         information received from, or on behalf of, any member of the Group
         relating to the Group or its business, other than any such information
         that is available to any Finance Party on a nonconfidential basis prior
         to disclosure by any member of the Group; provided that, in the case of
         information received from a member of the Group after the date hereof,
         such information is clearly identified in writing at the time of
         delivery as confidential. Any Person required to maintain the
         confidentiality of Information as provided in this Clause 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.

27.7     PERMITTED PARTICIPANTS

(a)      Any Revolving Lender may, in the ordinary course of its business and in
         accordance with applicable law, at any time sell or grant to one or
         more Affiliates, banks or other Persons ("PARTICIPANTS") participating
         interests in any Loans owing to such Revolving Lender, any Commitment
         of such Revolving Lender, if any, or any other interest of such
         Revolving Lender under the Finance Documents. In the event of any such
         sale or grant by a Revolving Lender of participating interests to a
         Participant, such Revolving Lender's obligations under the Finance
         Documents

                                     -143-
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         shall remain unchanged, such Revolving Lender shall remain solely
         responsible to the other parties hereto for the performance of such
         obligations, all amounts payable by the Credit Parties under this
         Agreement shall be determined as if such Revolving Lender had not sold
         or granted such participating interests, and the Credit Parties and the
         Administrative Agent shall continue to deal solely and directly with
         such Revolving Lender in connection with such Revolving Lender's rights
         and obligations under the Finance Documents.

(b)      Each Revolving Lender shall retain the sole right to approve, without
         the consent of any Participant, any amendment, modification, or waiver
         of any provision of the Finance Documents other than any amendment,
         modification, or waiver which affects any of the amendments,
         modifications or waivers referenced in Clause 38.2(a) (Exceptions).

(c)      The Borrower agree that each Participant shall be deemed to have the
         right of setoff provided in Clause 33 (Set-Off) in respect of its
         participating interest in amounts owing under the Finance Documents to
         the same extent as if the amount of its participating interest were
         owing directly to it as a Revolving Lender under the Finance Documents;
         provided, that each Revolving Lender shall retain the right of setoff
         provided in Clause 33 (Set-Off) with respect to the amount of
         participating interests sold or granted to each Participant; and
         provided further that such right of setoff shall not be exercisable
         until five Business Days after the date upon which the Borrower
         receives written notice of the fact that such Participant is a
         Participant (it being understood that neither the Administrative Agent,
         the Revolving Lender granting such participation nor the Participant
         shall be obligated to give such notice).

(d)      Any Participant may rely on this Clause 27 subject to Clause 1.3 (Third
         Party Rights) and the provisions of the Third Parties Act.

27.8     PLEDGE TO ANY FEDERAL RESERVE BANK

         Any Revolving Lender may at any time pledge or assign a security
         interest in all or any portion of its rights under this Agreement in
         favour of any Federal Reserve Bank in accordance with Regulation A of
         the Federal Reserve Board, and this Clause 27 shall not apply to any
         such pledge or assignment of a security interest; provided that no such
         pledge or assignment of a security interest shall release a Revolving
         Lender from any of its obligations hereunder or substitute any such
         pledgee or assignee for such Revolving Lender as a party hereto.

28.      CHANGES TO THE CREDIT PARTIES

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28.1     ASSIGNMENTS AND TRANSFER BY CREDIT PARTIES

         No Credit Party may assign any of its rights or transfer any of its
         rights or obligations under the Finance Documents.

28.2     REPETITION OF REPRESENTATIONS

         Delivery of an Accession Letter constitutes confirmation by the
         relevant Subsidiary that each of the representations and warranties
         contained in Clause 22 hereof and in each other Finance Document to be
         made by such Subsidiary are true and correct in all material respects
         in relation to it as at the date of delivery as if made by reference to
         the facts and circumstances then existing.

                                     -145-
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                                   SECTION 10
                               THE FINANCE PARTIES

29.   ROLE OF THE AGENTS AND THE ARRANGERS

29.1  APPOINTMENT OF THE AGENTS
(a)   Each other Finance Party appoints Credit Lyonnais New York Branch as the
      Administrative Agent to act as its agent under and in connection with the
      Finance Documents and as the Collateral Agent to act as its security
      trustee under each of the Security Documents.

(b)   Each other Finance Party authorises the Administrative Agent and the
      Collateral Agent to exercise the rights, powers, authorities and
      discretions specifically given to the Administrative Agent or the
      Collateral Agent under or in connection with the Finance Documents
      together with any other incidental rights, powers, authorities and
      discretions.

29.2  DUTIES OF THE AGENTS
(a)   The Agents shall promptly forward to a Party the original or a copy of any
      document which is delivered to such Agent for that Party by any other
      Party.

(b)   Except where a Finance Document specifically provides otherwise, an Agent
      is not obliged to review or check the adequacy, accuracy or completeness
      of any document it forwards to another Party.

(c)   If the Administrative Agent receives notice from a Party referring to this
      Agreement, describing a Default and stating that the circumstance
      described is a Default, it shall promptly notify the Finance Parties.

(d)   If the Administrative Agent is aware of the non-payment of any principal,
      interest, commitment fee or other fee payable to a Finance Party (other
      than the Administrative Agent or the Arrangers) under this Agreement it
      shall promptly notify the other Parties.

(e)   The Agents' duties under the Finance Documents are solely mechanical and
      administrative in nature.

29.3  ROLE OF THE ARRANGERS AND OTHER AGENTS
      None of the Arrangers, Bookrunners or the Co-Underwriter has any
      obligation of any kind to any other Party under or in connection with any
      Finance Document.

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29.4  NO FIDUCIARY DUTIES
(a)   Except as expressly provided in Clause 29.17, nothing in this Agreement
      constitutes any Agent, Arranger, Bookrunner or Co-Underwriter as a trustee
      or fiduciary of any other Person.

(b)   None of the Agents, the Arrangers, the Bookrunners or the Co-Underwriter
      shall be bound to account to any Revolving Lender for any sum or the
      profit element of any sum received by it for its own account.

29.5  BUSINESS WITH THE GROUP
      Any of the Agents, the Arrangers, the Bookrunners or the Co-Underwriter
      may accept deposits from, lend money to and generally engage in any kind
      of banking or other business with any member of the Group.

29.6  RIGHTS AND DISCRETIONS OF THE AGENTS
(a)   Any Agent may rely on:

      (i)   any representation, notice or document believed by it to be genuine,
            correct and appropriately authorised; and

      (ii)  any statement made by a director, authorised signatory or employee
            of any Person regarding any matters which may reasonably be assumed
            to be within his knowledge or within his power to verify.

(b)   Any Agent may assume (unless it has received notice to the contrary in its
      capacity as agent or security trustee for the Revolving Lenders) that:

      (i)   no Default has occurred (unless it has actual knowledge of a Default
            arising under Clause 26.1 (Non-payment));

      (ii)  any right, power, authority or discretion vested in any Party or the
            Required Revolving Lenders has not been exercised; and

      (iii) any notice or request made by the Borrower (other than a Utilisation
            Request or Renewal Request) is made on behalf of and with the
            consent and knowledge of all the Credit Parties.

(c)   Any Agent may engage, pay for and rely on the advice or services of any
      lawyers, accountants, surveyors or other experts.

(d)   Any Agent may act in relation to the Finance Documents through its
      personnel and agents.

                                     -147-
<PAGE>
(e)   Any Agent may disclose to any other Party any information it reasonably
      believes it has received as agent under this Agreement.

(f)   Notwithstanding any other provision of any Finance Document to the
      contrary, none of the Agents is obliged to do or omit to do anything if it
      would or might in its reasonable opinion constitute a breach of any law or
      a breach of a fiduciary duty or duty of confidentiality.

29.7  REQUIRED REVOLVING LENDERS' INSTRUCTIONS
(a)   Unless a contrary indication appears in a Finance Document, each Agent
      shall (i) exercise any right, power, authority or discretion vested in it
      as Agent in accordance with any instructions given to it by the Required
      Revolving Lenders (or, if so instructed by the Required Revolving Lenders,
      refrain from exercising any right, power, authority or discretion vested
      in it as Agent) and (ii) not be liable for any act (or omission) if it
      acts (or refrains from taking any action) in accordance with an
      instruction of the Required Revolving Lenders.

(b)   Unless a contrary indication appears in a Finance Document, any
      instructions given by the Required Revolving Lenders will be binding on
      all the Finance Parties.

(c)   Each Agent may refrain from acting in accordance with the instructions of
      the Required Revolving Lenders (or, if appropriate, the Revolving Lenders)
      until it has received such security as it may require for any cost, loss
      or liability (together with any associated VAT) which it may incur in
      complying with the instructions.

(d)   In the absence of instructions from the Required Revolving Lenders, (or,
      if appropriate, the Revolving Lenders) each Agent may act (or refrain from
      taking action) as it considers to be in the best interest of the Revolving
      Lenders.

(e)   No Agent is authorised to act on behalf of a Revolving Lender (without
      first obtaining that Revolving Lender's consent) in any legal or
      arbitration proceedings relating to any Finance Document.

29.8  RESPONSIBILITY FOR DOCUMENTATION
None of the Agents, the Arrangers, the Bookrunners or the Co-Underwriter:

(a)   is responsible for the adequacy, accuracy and/or completeness of any
      information (whether oral or written) supplied by any Agent, any Arranger,
      any Bookrunner, the Co-Underwriter, a Credit Party or any other Person
      given in or in connection with any Finance Document or the Confidential
      Information Memorandum; or

                                     -148-
<PAGE>
(b)   is responsible for the legality, validity, effectiveness, adequacy or
      enforceability of any Finance Document or any other agreement, arrangement
      or document entered into, made or executed in anticipation of or in
      connection with any Finance Document.

29.9  EXCLUSION OF LIABILITY
(a)   Without limiting paragraph (b) below, each Agent will not be liable for
      any action taken by it under or in connection with any Finance Document,
      unless directly caused by its gross negligence or wilful misconduct.

(b)   No Party (other than the Agents) may take any proceedings against any
      officer, employee or agent of such Agent in respect of any claim it might
      have against the such Agent or in respect of any act or omission of any
      kind by that officer, employee or agent in relation to any Finance
      Document and any officer, employee or agent of such Agent may rely on this
      Clause subject to Clause 1.3 (Third Party Rights) and the provisions of
      the Third Parties Act.

(c)   No Agent will be liable for any delay (or any related consequences) in
      crediting an account with an amount required under the Finance Documents
      to be paid by such Agent if such Agent has taken all necessary steps as
      soon as reasonably practicable to comply with the regulations or operating
      procedures of any recognised clearing or settlement system used by such
      Agent for that purpose.

29.10 REVOLVING LENDERS' INDEMNITY TO THE AGENTS
      Each Revolving Lender shall (in proportion to its share of the Total
      Revolving Commitments or, if the Total Commitments are then zero, to its
      share of the Total Commitments immediately prior to their reduction to
      zero) indemnify the Agents, within three Business Days of demand, against
      any cost, loss or liability incurred by such Agent (otherwise than by
      reason of such Agent's gross negligence or wilful misconduct) in acting as
      Agent under the Finance Documents (unless such Agent has been reimbursed
      by a Credit Party pursuant to a Finance Document).

29.11 RESIGNATION OF THE AGENTS
(a)   Any Agent may resign and appoint one of its Affiliates organized under the
      laws of the United States or any state thereof as successor by giving
      notice to the other Finance Parties and the Borrower.

(b)   Alternatively any Agent may resign by giving notice to the other Finance
      Parties and the Borrower, in which case the Required Revolving Lenders
      (after consultation with the Borrower) may appoint a successor Agent.

                                     -149-
<PAGE>
(c)   If the Required Revolving Lenders have not appointed a successor Agent in
      accordance with paragraph (b) above within 30 days after notice of
      resignation was given, such Agent (after consultation with the Borrower)
      may appoint a successor Agent.

(d)   The retiring Agent shall, at its own cost, make available to the successor
      Agent such documents and records and provide such assistance as the
      successor Agent may reasonably request for the purposes of performing its
      functions as Agent under the Finance Documents.

(e)   The Agent's resignation notice shall only take effect upon the appointment
      of a successor.

(f)   Upon the appointment of a successor, the retiring Agent shall be
      discharged from any further obligation in respect of the Finance Documents
      but shall remain entitled to the benefit of this Clause 29. Its successor
      and each of the other Parties shall have the same rights and obligations
      amongst themselves as they would have had if such successor had been an
      original Party.

(g)   After consultation with the Borrower, the Required Revolving Lenders may,
      by notice to any Agent, require it to resign in accordance with paragraph
      (b) above. In this event, such Agent shall resign in accordance with
      paragraph (b) above.

29.12 CONFIDENTIALITY
(a)   In acting as agent or security trustee for the Finance Parties, each Agent
      shall be regarded as acting through its agency division which shall be
      treated as a separate entity from any other of its divisions or
      departments.

(b)   If information is received by another division or department of any Agent,
      it may be treated as confidential to that division or department and such
      Agent shall not be deemed to have notice of it.

29.13 RELATIONSHIP WITH THE REVOLVING LENDERS
(a)   Each Agent may treat each Revolving Lender as a Revolving Lender, entitled
      to payments under this Agreement and acting through its Facility Office
      unless it has received not less than five Business Days prior notice from
      that Revolving Lender to the contrary in accordance with the terms of this
      Agreement.

(b)   Each Revolving Lender shall supply the Administrative Agent with any
      information required by the Administrative Agent in order to calculate the
      Mandatory Cost in accordance with Schedule 4 (Mandatory Cost formula).

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<PAGE>
29.14 CREDIT APPRAISAL BY THE REVOLVING LENDERS
      Without affecting the responsibility of any Credit Party for information
      supplied by it or on its behalf in connection with any Finance Document,
      each Revolving Lender confirms to the Agents, the Arrangers, the
      Bookrunners and the Co-Underwriter that it has been, and will continue to
      be, solely responsible for making its own independent appraisal and
      investigation of all risks arising under or in connection with any Finance
      Document including but not limited to:

(a)   the financial condition, status and nature of each member of the Group;

(b)   the legality, validity, effectiveness, adequacy or enforceability of any
      Finance Document and any other agreement, arrangement or document entered
      into, made or executed in anticipation of, under or in connection with any
      Finance Document;

(c)   whether that Revolving Lender has recourse, and the nature and extent of
      that recourse, against any Party or any of its respective assets under or
      in connection with any Finance Document, the transactions contemplated by
      the Finance Documents or any other agreement, arrangement or document
      entered into, made or executed in anticipation of, under or in connection
      with any Finance Document; and

(d)   the adequacy, accuracy and/or completeness of the Confidential Information
      Memorandum and any other information provided by the Administrative Agent,
      any Party or by any other Person under or in connection with any Finance
      Document, the transactions contemplated by the Finance Documents or any
      other agreement, arrangement or document entered into, made or executed in
      anticipation of, under or in connection with any Finance Document.

29.15 REFERENCE BANKS
      If a Reference Bank (or, if a Reference Bank is not a Revolving Lender,
      the Revolving Lender of which it is an Affiliate) ceases to be a Revolving
      Lender, the Administrative Agent shall (in consultation with the Borrower)
      appoint another Revolving Lender or an Affiliate of a Revolving Lender to
      replace that Reference Bank.

29.16 DEDUCTION FROM AMOUNTS PAYABLE BY THE AGENTS
      If any Party owes an amount to any Agent under the Finance Documents such
      Agent may, after giving notice to that Party, deduct an amount not
      exceeding that amount from any payment to that Party which such Agent
      would otherwise be obliged to make under the Finance Documents and apply
      the amount deducted in or towards satisfaction of the amount owed. For the
      purposes of the Finance

                                     -151-
<PAGE>
      Documents that Party shall be regarded as having received any amount so
      deducted.

29.17 COLLATERAL MATTERS.
(a)   The Collateral Agent is authorized on behalf of the Finance Parties,
      without the necessity of any notice to or further consent from the Finance
      Parties, from time to time, to take any actions with respect to any
      Collateral or Security Documents which may be necessary to perfect and
      maintain Acceptable Security Interests in and Liens upon the Collateral
      granted pursuant to the Security Documents. The Collateral Agent is
      further authorized on behalf of the Finance Parties, without the necessity
      of any notice to or further consent from the Finance Parties, from time to
      time, to take any action in exigent circumstances as may be reasonably
      necessary to preserve any rights or privileges of the Finance Parties
      under the Finance Documents or applicable Legal Requirements.

(b)   Each of the Finance Parties irrevocably authorizes the Collateral Agent to
      release any Lien granted to or held by the Collateral Agent upon any
      Collateral (i) upon termination of the Total Revolving Commitments and
      Swingline Commitment and irrevocable payment in full of all outstanding
      Utilisations and all other Obligations payable under this Agreement and
      under any other Finance Document; (ii) constituting Property sold or to be
      sold or disposed of as part of or in connection with any disposition
      permitted under this Agreement or the other Finance Documents; (iii)
      constituting Property in which any Credit Party owned no interest at the
      time the Lien was granted or at any time thereafter; (iv) constituting
      Property leased to any Credit Party under a lease which has expired or has
      been terminated in a transaction permitted under this Agreement or is
      about to expire and which has not been, and is not intended by such Credit
      Party to be, renewed or extended; (v) if approved, authorized or ratified
      in writing by the Required Revolving Lenders or all the Revolving Lenders,
      as the case may be, as required by Clause 38 (Amendments and Waivers); or
      (vi) as otherwise permitted by this Agreement. Upon the request of the
      Collateral Agent at any time, the Revolving Lenders will confirm in
      writing the Collateral Agent's authority to release particular types or
      items of Lien pursuant to this Clause 29.17.

(c)   In the event that any claim or Lien is asserted against any Mortgaged
      Revolving Loan Facility Rig for loss, damage or expense which is covered
      by an Insurance Policy, and it is necessary for any Credit Party to obtain
      a bond or supply other security to prevent the arrest of such Mortgaged
      Revolving Loan Facility Rig or to release the Mortgaged Revolving Loan
      Facility Rig from arrest on account of such claim or Lien, the Collateral
      Agent may, in the sole discretion of the Collateral

                                     -152-
<PAGE>
      Agent, and upon notice to the applicable Credit Party, assign to any
      Person executing a surety or guaranty bond or other agreement to save or
      release any such Mortgaged Revolving Loan Facility Rig from such arrest,
      all right, title and interest of the Collateral Agent and the other
      Finance Parties in and to the applicable Insurance Policies covering said
      loss, damage or expense, as collateral security to indemnify against
      liability under said bond or other agreement.

(d)   Each Credit Party hereby irrevocably appoints the Collateral Agent as such
      Credit Party's attorney-in-fact, with full authority to, after the
      occurrence of a Default, act for such Credit Party and in the name of such
      Credit Party to, in the Collateral Agent's discretion upon the occurrence
      and during the continuance of Default, file one or more financing or
      continuation statements, and amendments thereto, relative to all or any
      part of the Collateral (or Liens relating thereto) without the signature
      of such Credit Party where permitted by law, to receive, endorse, and
      collect any drafts or other instruments, documents, and chattel paper
      which are part of the Collateral (or Liens relating thereto), and to ask,
      demand, collect, sue for, recover, compromise, receive, and give
      acquittance and receipts for moneys due and to become due under or in
      respect of any of the Collateral (or Liens relating thereto) and to file
      any claims or take any action or institute any proceedings which the
      Collateral Agent may reasonably deem necessary or desirable for the
      collection of any of the Collateral or otherwise to enforce the rights of
      the Collateral Agent with respect to any of the Collateral (or Liens
      relating thereto). The power of attorney granted hereby is coupled with an
      interest and is irrevocable.

(e)   If any Credit Party fails to perform any covenant contained in this
      Agreement or the other Security Documents, the Collateral Agent may itself
      perform, or cause performance of, such covenant, and such Credit Party
      shall pay for the expenses of the Collateral Agent incurred in connection
      therewith in accordance with Clause 20 (Costs and Expenses).

(f)   The powers conferred on the Collateral Agent under this Agreement and the
      other Security Documents are solely to protect its interest and the
      interest of the Finance Parties in the Collateral (and Liens relating
      thereto) and shall not impose any duty upon it to exercise any such
      powers. Except for the reasonable care of any Collateral in its possession
      and the accounting for monies or other property actually received by it
      hereunder, the Collateral Agent shall have no duty as to any Collateral or
      as to the taking of any necessary steps to preserve rights against prior
      parties or any other rights pertaining to any Collateral. The Collateral
      Agent shall be deemed to have exercised reasonable care as to the custody
      and preservation of the Collateral in its possession if the Collateral is
      accorded treatment substantially

                                     -153-
<PAGE>
      equal to that which the Collateral Agent accords its own property,
      provided that the Collateral Agent shall have no responsibility for taking
      any necessary steps to preserve rights against any parties with respect to
      any Collateral.

(g)   The Collateral Agent in its capacity as trustee or otherwise shall not be
      liable (other than by reason of its gross negligence or wilful misconduct)
      for any failure, omission, or defect in perfecting the Liens constituted
      or created by any of the Finance Documents including, without limitation,
      any failure to:

      (i)   register the same in accordance with the provisions of any of the
            documents of title of any member of the Group to any of the assets
            thereby charged; or

      (ii)  effect or procure registration of or otherwise protect the security
            created by the Security Documents or any other security granted
            pursuant to this Agreement under any registration laws in any
            jurisdiction.

(h)   The Collateral Agent in its capacity as trustee or otherwise may accept
      without enquiry such title and interest as the members of the Group may
      have to their assets.

(i)   Save where the Collateral Agent holds a legal mortgage over, or over an
      interest in, real property or shares, the Collateral Agent in its capacity
      as trustee or otherwise shall not be under any obligation to hold any
      title deed, share certificates, Finance Document or any other documents in
      connection with the Finance Documents or any other documents in connection
      with the property charged by any Finance Document or any other such
      security in its own possession or to take any steps to protect or preserve
      the same. Save as provided for in this paragraph (i), the Collateral Agent
      may permit any member of the Group to retain all such title deeds, share
      certificates, Finance Documents and other documents in its possession.

(j)   Save as otherwise provided in the Finance Documents, all moneys which
      under the trusts therein contained are received by the Collateral Agent in
      its capacity as trustee or otherwise may be invested in the name of or
      under the control of the Collateral Agent in any investment for the time
      being authorised by any applicable laws for the investment by trustees of
      trust money or in any other investments which may be selected by the
      Collateral Agent. Additionally, the same may be placed on deposit in the
      name of or under control of the Collateral Agent at such bank or
      institution and upon such terms as the Collateral Agent may think fit.

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(k)   The Collateral Agent is trustee for itself and for the other Finance
      Parties in relation to the Security Documents.

(l)   The resignation or removal of the Collateral Agent in its capacity as
      trustee will not be effective until the Administrative Agent has confirmed
      that it is satisfied that everything which is required to be done to
      create in favour of the replacement Collateral Agent (in the capacity of
      trustee) effective and perfected security has been done.

(m)   The Collateral Agent in its capacity as trustee may indemnify itself and
      each attorney, agent or other Person appointed by it under any Security
      Document out of the Collateral over which security is granted pursuant to
      the Security Documents against all claims, liabilities, costs, fees,
      charges, losses and expenses incurred by it or them (other than by reason
      of such Person's gross negligence or wilful misconduct) as a result of
      taking or holding the Collateral and/or Liens relating thereto comprised
      in the Security Documents, the exercise of rights, powers or discretions
      under the Security Documents or any other act (or omission) done (or not
      done) in connection with the Security Documents.

(n)   Each of the Finance Party confirms its approval of the Security Documents
      and any security created or to be created pursuant to them and authorises
      and directs the Collateral Agent (in its capacity as trustee acting by
      itself or by such Person(s) as it may nominate) to execute and enforce
      them as trustee or as otherwise provided therein (and whether or not
      expressly in the names of the Finance Parties) on its behalf.

(o)   The Collateral Agent in its capacity as trustee may appoint any Person to
      act as a separate trustee or as a co-trustee jointly with it (a) if it
      considers such appointment to be in the interests of the Finance Parties
      or (b) for the purposes of conforming to any legal requirements,
      restrictions or conditions of any jurisdiction which the Collateral Agent
      in its capacity as trustee considers relevant.

(p)   The Collateral Agent in its capacity as trustee will give prior notice to
      the Borrower of any appointment pursuant to paragraph (o).

(q)   Any Person so appointed will have such powers, authorities and discretions
      and such duties and obligations as are conferred or imposed on it by the
      instrument of appointment and will have the same benefits under this
      Clause 29.17 as the Collateral Agent in its capacity as trustee and may
      rely on this Clause 29.17(q) subject to Clause 1.3 (Third Party Rights)
      and the provisions of the Third Parties

                                     -155-
<PAGE>
      Act. The Collateral Agent in its capacity as trustee will have power to
      remove any Person so appointed.

(r)   The Collateral Agent in its capacity as trustee may set the level of and
      pay remuneration to any Person so appointed, and any costs, charges and
      those sums, together with the expenses incurred by such Person in
      performing its functions pursuant to such appointment, will be treated as
      costs, charges and expenses incurred by the Collateral Agent in performing
      its function as trustee under the Security Documents.

(s)   The perpetuity period for any and all security trusts established in
      relation to the Security Documents shall be eighty years from the date of
      this Agreement.

(t)   The Collateral Agent in its capacity as trustee shall hold the Recoveries
      on trust for distribution to the Finance Parties in accordance with the
      provisions of this Clause 29.17 and shall hold the Collateral constituted
      by the Security Documents on trust for the Finance Parties to give effect
      to this Agreement and shall exercise its rights powers and duties under
      the Security Documents and/or this Agreement for the benefit of all
      Finance Parties.

(u)   Subject to the terms of the Security Documents and to the repayment of any
      claims having priority in law, the Recoveries shall be distributed between
      the Finance Parties in the order of priority set out Clause 32.5 (Partial
      payments).

(v)   Section 1 of the Trustee Act 2000 shall not apply to any function of the
      Collateral Agent, provided that nothing in this Agreement shall, in any
      case in which the Security Trustee has failed to show the degree of care
      and diligence required of it as trustee (having regard to the provisions
      of this Agreement or any Security Document conferring any powers,
      authorities or discretions on it) exempt the Collateral Agent from or
      indemnify it against any liability for that breach of trust.

(w)   In this Clause 29.17, "RECOVERIES" means the amounts received by the
      Collateral Agent in its capacity as trustee under the Security Documents
      in respect of the indebtedness and liabilities of the Credit Parties to
      the Finance Parties after the date on which the Collateral Agent in its
      capacity as trustee shall first enforce any part of any Security Document.

30.   CONDUCT OF BUSINESS BY THE FINANCE PARTIES
      No provision of this Agreement will:

                                     -156-
<PAGE>
(a)   interfere with the right of any Finance Party to arrange its affairs (tax
      or otherwise) in whatever manner it thinks fit;

(b)   oblige any Finance Party to investigate or claim any credit, relief,
      remission or repayment available to it or the extent, order and manner of
      any claim; or

(c)   except with respect to matters addressed by Clause 16 (Tax Gross Up and
      Indemnities) oblige any Finance Party to disclose any information relating
      to its affairs (tax or otherwise) or any computations in respect of Tax.

31.   SHARING AMONG THE FINANCE PARTIES
31.1  PAYMENTS TO FINANCE PARTIES
If a Finance Party (a "RECOVERING FINANCE PARTY") receives or recovers any
amount from a Credit Party other than in accordance with Clause 32 (Payment
mechanics) and applies that amount to a payment due under the Finance Documents
then:

(a)   the Recovering Finance Party shall, within three Business Days, notify
      details of the receipt or recovery, to the Administrative Agent;

(b)   the Administrative Agent shall determine whether the receipt or recovery
      is in excess of the amount the Recovering Finance Party would have been
      paid had the receipt or recovery been received or made by the
      Administrative Agent and distributed in accordance with Clause 32 (Payment
      mechanics), without taking account of any Tax which would be imposed on
      the Administrative Agent in relation to the receipt, recovery or
      distribution; and

(c)   the Recovering Finance Party shall, within three Business Days of demand
      by the Administrative Agent, pay to the Administrative Agent an amount
      (the "SHARING PAYMENT") equal to such receipt or recovery less any amount
      which the Administrative Agent determines may be retained by the
      Recovering Finance Party as its share of any payment to be made, in
      accordance with Clause 32.5 (Partial payments).

31.2  REDISTRIBUTION OF PAYMENTS
      The Administrative Agent shall treat the Sharing Payment as if it had been
      paid by the relevant Credit Party and distribute it between the Finance
      Parties (other than the Recovering Finance Party) in accordance with
      Clause 32.5 (Partial payments).

                                     -157-
<PAGE>
31.3  RECOVERING FINANCE PARTY'S RIGHTS
(a)   On a distribution by the Administrative Agent under Clause 31.2
      (Redistribution of payments), the Recovering Finance Party will be
      subrogated to the rights of the Finance Parties which have shared in the
      redistribution.

(b)   If and to the extent that the Recovering Finance Party is not able to rely
      on its rights under paragraph (a) above, the relevant Credit Party shall
      be liable to the Recovering Finance Party for a debt equal to the Sharing
      Payment which is immediately due and payable.

31.4  REVERSAL OF REDISTRIBUTION
If any part of the Sharing Payment received or recovered by a Recovering Finance
Party becomes repayable and is repaid by that Recovering Finance Party, then:

(a)   each Finance Party which has received a share of the relevant Sharing
      Payment pursuant to Clause 31.2 (Redistribution of payments) shall, upon
      request of the Administrative Agent, pay to the Administrative Agent for
      account of that Recovering Finance Party an amount equal to the
      appropriate part of its share of the Sharing Payment (together with an
      amount as is necessary to reimburse that Recovering Finance Party for its
      proportion of any interest on the Sharing Payment which that Recovering
      Finance Party is required to pay); and

(b)   that Recovering Finance Party's rights of subrogation in respect of any
      reimbursement shall be cancelled and the relevant Credit Party will be
      liable to the reimbursing Finance Party for the amount so reimbursed.

31.5  EXCEPTIONS
(a)   This Clause 31 shall not apply to the extent that the Recovering Finance
      Party would not, after making any payment pursuant to this Clause, have a
      valid and enforceable claim against the relevant Credit Party.

(b)   A Recovering Finance Party is not obliged to share with any other
      Revolving Lender any amount which the Recovering Finance Party has
      received or recovered as a result of taking legal or arbitration
      proceedings, if:

      (i)   it notified that other Finance Party of the legal or arbitration
            proceedings; and

      (ii)  the other Revolving Lender had an opportunity to participate in
            those legal or arbitration proceedings but did not do so as soon as
            reasonably practicable having received notice and did not take
            separate legal or arbitration proceedings.

                                     -158-
<PAGE>
                                   SECTION 11
                                 ADMINISTRATION

32.   PAYMENT MECHANICS
32.1  PAYMENTS TO THE ADMINISTRATIVE AGENT
(a)   On each date on which a Credit Party or a Revolving Lender is required to
      make a payment under a Finance Document, that Credit Party or Revolving
      Lender shall make the same available to the Administrative Agent (unless a
      contrary indication appears in a Finance Document) for value on the due
      date at the time and in such funds specified by the Administrative Agent
      as being customary at the time for settlement of transactions in the
      relevant currency in the place of payment.

(b)   Payment shall be made to such account in the principal financial centre of
      the country of that currency with such bank as the Administrative Agent
      specifies.

32.2  DISTRIBUTIONS BY THE ADMINISTRATIVE AGENT
      Each payment received by the Administrative Agent, or, as the case may be,
      the Collateral Agent, under the Finance Documents for another Party shall,
      subject to Clause 32.3 (Distributions to a Credit Party) and Clause 32.4
      (Clawback) be made available by the Administrative Agent or, as the case
      may be, the Collateral Agent, as soon as practicable after receipt to the
      Party entitled to receive payment in accordance with this Agreement (in
      the case of a Revolving Lender, for the account of its Facility Office),
      to such account as that Party may notify to the Administrative Agent or,
      as the case may be, the Collateral Agent, by not less than five Business
      Days' notice with a bank in the principal financial centre of the country
      of that currency.

32.3  DISTRIBUTIONS TO A CREDIT PARTY
      The Administrative Agent or, as the case may be, the Collateral Agent, may
      (with the consent of the Credit Party or in accordance with Clause 33
      (Set-off) apply any amount received by it for that Credit Party in or
      towards payment (on the date and in the currency and funds of receipt) of
      any amount due from that Credit Party under the Finance Documents or in or
      towards purchase of any amount of any currency to be so applied.

32.4  CLAWBACK
      (a) Where a sum is to be paid to the Administrative Agent or, as the case
      may be, the Collateral Agent, under the Finance Documents for another
      Party, the Administrative Agent or, as the case may be, the Collateral
      Agent, is not obliged to pay that sum to that other Party (or to enter
      into or perform any related exchange

                                     -159-
<PAGE>
      contract) until it has been able to establish to its satisfaction that it
      has actually received that sum.

(b)   If the Administrative Agent or, as the case may be, the Collateral Agent,
      pays an amount to another Party and it proves to be the case that the
      Administrative Agent or, as the case may be, the Collateral Agent, had not
      actually received that amount, then the Party to whom that amount (or the
      proceeds of any related exchange contract) was paid by the Administrative
      Agent or, as the case may be, the Collateral Agent, shall on demand refund
      the same to the Administrative Agent or, as the case may be, the
      Collateral Agent, together with interest on that amount from the date of
      payment to the date of receipt by the Administrative Agent, or, as the
      case may be, the Collateral Agent, calculated by such Agent to reflect its
      cost of funds.

32.5  PARTIAL PAYMENTS
(a)   If the Administrative Agent or Collateral Agent receives a payment that is
      insufficient to discharge all the amounts then due and payable by a Credit
      Party under the Finance Documents, the Administrative Agent or Collateral
      Agent shall apply that payment towards the obligations of that Credit
      Party then due and owing under the Finance Documents in the following
      order:

      (i)   first, in or towards payment pro rata of the reasonable expenses,
            liabilities, losses, costs, duties, fees, charges or other moneys
            whatsoever (together with interest payable thereon) as may have been
            paid or incurred in, about or incidental to any sale or other
            realization of Collateral, including reasonable compensation to the
            Collateral Agent and its agents and counsel, and to the ratable
            payment of any other unreimbursed reasonable expenses for which the
            Collateral Agent, the Administrative Agent, the Issuing Bank or any
            Finance Party is to be reimbursed pursuant to this Agreement or any
            other Finance Document, in each case, that are then due and payable;

      (ii)  second, in or towards payment pro rata of any accrued but unpaid
            interest then due and payable under this Agreement;

      (iii) third, in or towards payment pro rata of accrued but unpaid Agent's
            fees, commitment fees, letter of credit fees and fronting fees then
            due and payable to the Administrative Agent, the Issuing Banks and
            the Revolving Lenders under this Agreement;

                                     -160-
<PAGE>
      (iv)  fourth, in or towards payment of any principal due and payable but
            unpaid under this Agreement with respect to the Swingline Loans;

      (v)   fifth, in or towards payment pro rata of any principal due and
            payable but unpaid under this Agreement with respect to the
            Revolving Loans and any amount due and payable but unpaid under
            Clauses 7.4 (Claims under a Letter of Credit) and 7.5 (Indemnities);

      (vi)  sixth, in or towards payment pro rata of any other sum due and
            payable but unpaid under the Finance Documents;

      (vii) seventh, any excess after payment of the foregoing amounts shall be
            paid to the Borrower or any Credit Party as appropriate or to such
            other Person who may be lawfully entitled to receive such excess.

(b)   The Administrative Agent shall, if so directed by the Required Revolving
      Lenders, vary the order set out in paragraphs (a)(ii) to (iv) above.

(c)   Paragraphs (a) and (b) above will override any appropriation made by a
      Credit Party.

32.6  NO SET-OFF BY CREDIT PARTIES
      All payments to be made by a Credit Party under the Finance Documents
      shall be calculated and be made without (and free and clear of any
      deduction for) set-off or counterclaim.

32.7  BUSINESS DAYS
(a)   Any payment which is due to be made on a day that is not a Business Day
      shall be made on the next Business Day in the same calendar month (if
      there is one) or the preceding Business Day (if there is not).

(b)   During any extension of the due date for payment of any principal or
      Unpaid Sum under this Agreement interest is payable on the principal or
      Unpaid Sum at the rate payable on the original due date.

32.8  CURRENCY OF ACCOUNT
(a)   Subject to paragraphs (b) and (c) below, U.S. Dollars is the currency of
      account and payment for any sum due from a Credit Party under any Finance
      Document.

(b)   Each payment in respect of costs, expenses or Taxes shall be made in the
      currency in which the costs, expenses or Taxes are incurred.

                                     -161-
<PAGE>
(c)   Any amount expressed to be payable in a currency other than U.S. Dollars
      shall be paid in that other currency.

32.9  CHANGE OF CURRENCY
(a)   Unless otherwise prohibited by law, if more than one currency or currency
      unit are at the same time recognised by the central bank of any country as
      the lawful currency of that country, then:

      (i)   any reference in the Finance Documents to, and any obligations
            arising under the Finance Documents in, the currency of that country
            shall be translated into, or paid in, the currency or currency unit
            of that country designated by the Administrative Agent (after
            consultation with the Borrower); and

      (ii)  any translation from one currency or currency unit to another shall
            be at the official rate of exchange recognised by the central bank
            for the conversion of that currency or currency unit into the other,
            rounded up or down by the Administrative Agent (acting reasonably).

(b)   If a change in any currency of a country occurs, this Agreement will, to
      the extent the Administrative Agent (acting reasonably and after
      consultation with the Borrower) specifies to be necessary, be amended to
      comply with any generally accepted conventions and market practice in the
      Relevant Interbank Market and otherwise to reflect the change in currency.

33.   SET-OFF

A Finance Party may set off any matured obligation due from a Credit Party under
the Finance Documents (to the extent beneficially owned by that Finance Party)
against any matured obligation owed by that Finance Party to that Credit Party,
regardless of the place of payment, booking branch or currency of either
obligation. If the obligations are in different currencies, the Finance Party
may convert either obligation at a market rate of exchange in its usual course
of business for the purpose of the set-off.

34.   NOTICES

34.1  COMMUNICATIONS IN WRITING
      Any communication to be made under or in connection with the Finance
      Documents shall be made in writing and, unless otherwise stated, may be
      made by fax, letter or telex.

                                     -162-
<PAGE>
34.2  ADDRESSES
      The address, fax number and telex number (and the department or officer,
      if any, for whose attention the communication is to be made) of each Party
      for any communication or document to be made or delivered under or in
      connection with the Finance Documents is:

(a)   in the case of the Borrower, that identified with its name below;

(b)   in the case of each Revolving Lender or any other Original Credit Party,
      that notified in writing to the Administrative Agent on or prior to the
      date on which it becomes a Party; and

(c)   in the case of the Agents, that identified with its name below,

or any substitute address, fax number, telex number or department or officer as
the Party may notify to the Administrative Agent (or the Agents may notify to
the other Parties, if a change is made by an Agent) by not less than five
Business Days' notice.

<TABLE>
<S>                              <C>
        Borrower

        Address:                 5847 San Felipe, Suite 3300, Houston, Texas 77057
        Fax Number:              713-789-1430
        Telephone Number:        713-789-1400
        Attention:               Earl McNeil, Treasurer

        With a copy to:

        Address:                 16 bis, rue Grange Dame Rose, P.O. Box 100, 78143
                                 Velizy-Villacoublay, Cedex, France
        Fax Number:              011-33-1-30-70-5801
        Telephone Number:        011-33-1-30-70-5842
        Attention:               Bernard Naim, Director of International Finance

        Administrative Agent

        Address:                 1301 Avenue of the Americas, 17th Floor - Syndications
                                 New York, New York 10019
        Fax Number:              212-459-3172
        Telephone number:        212-261-7186
        Attention:               Gloria Beloti-Fields
</TABLE>

                                     -163-
<PAGE>
<TABLE>
<S>                              <C>
        Collateral Agent

        Address:                 1301 Avenue of the Americas, 17th Floor - Syndications
                                 New York, New York 10019
        Fax Number:              212-459-3172
        Telephone number:        212-261-7186
        Attention:               Gloria Beloti-Fields
</TABLE>

34.3  DELIVERY
(a)   Any communication or document made or delivered by one Person to another
      under or in connection with the Finance Documents will only be effective:

      (i)   if by way of fax, when received in legible form; or

      (ii)  if by way of letter, upon receipt; or

      (iii) if by way of telex, when despatched, but only if, at the time of
            transmission, the correct answerback appears at the start and at the
            end of the sender's copy of the notice;

      and, if a particular department or officer is specified as part of its
      address details provided under Clause 34.2 (Addresses), if addressed to
      that department or officer.

(b)   Any communication or document to be made or delivered to an Agent will be
      effective only when actually received by such Agent and then only if it is
      expressly marked for the attention of the department or officer identified
      with such Agent's signature below (or any substitute department or officer
      as such Agent shall specify for this purpose).

(c)   All notices from or to a Credit Party shall be sent through the
      Administrative Agent.

(d)   Any communication or document made or delivered to the Borrower in
      accordance with this Clause will be deemed to have been made or delivered
      to each of the Credit Parties.

34.4  NOTIFICATION OF ADDRESS, FAX NUMBER AND TELEX NUMBER
      Promptly upon receipt of notification of an address, fax number and telex
      number or change of address, fax number or telex number pursuant to Clause
      34.2 (Addresses) or changing its own address, fax number or telex number,
      the Administrative Agent shall notify the other Parties.

                                     -164-
<PAGE>
34.5  ELECTRONIC COMMUNICATION
(a)   Any communication to be made between the Administrative Agent and a
      Revolving Lender under or in connection with the Finance Documents may be
      made by electronic mail or other electronic means, if the Administrative
      Agent and the relevant Revolving Lender:

(a)   agree that, unless and until notified to the contrary, this is to be an
      accepted form of communication;

(b)   notify each other in writing of their electronic mail address and/or any
      other information required to enable the sending and receipt of
      information by that means; and

(c)   notify each other of any change to their address or any other such
      information supplied by them.

(b)   Any electronic communication made between the Administrative Agent and a
      Revolving Lender will be effective only when actually received in readable
      form and in the case of any electronic communication made by a Revolving
      Lender to the Administrative Agent only if it is addressed in such a
      manner as the Administrative Agent shall specify for this purpose.

34.6  ENGLISH LANGUAGE
(a)   Any notice given under or in connection with any Finance Document must be
      in English.

(b)   All other documents provided under or in connection with any Finance
      Document must be:

      (i)   in English; or

      (ii)  if not in English, and if so required by the Administrative Agent,
            accompanied by a certified English translation and, in this case,
            the English translation will prevail unless the document is a
            constitutional, statutory or other official document.

35.   CALCULATIONS AND CERTIFICATES

35.1  ACCOUNTS
      In any litigation or arbitration proceedings arising out of or in
      connection with a Finance Document, the entries made in the accounts
      maintained by a Finance Party are prima facie evidence of the matters to
      which they relate.

                                     -165-
<PAGE>
35.2  CERTIFICATES AND DETERMINATIONS
      Any certification or determination by a Finance Party of a rate or amount
      under any Finance Document is, in the absence of manifest error,
      conclusive evidence of the matters to which it relates.

35.3  DAY COUNT CONVENTION
      Any interest, commission or fee accruing under a Finance Document will
      accrue day to day. All computations of interest based on the Prime Rate or
      the Federal Funds Rate shall be made by the Administrative Agent on the
      basis of a year of 365 or 366 days, as the case may be, and all
      computations of interest based on LIBOR and of commissions and fees shall
      be made by the Administrative Agent, on the basis of a year of 360 days,
      in each case for the actual number of days (including the first day, but
      excluding the last day) occurring in the period for which such interest,
      commission or fees are payable.

36.   PARTIAL INVALIDITY

      If, at any time, any provision of the Finance Documents is or becomes
      illegal, invalid or unenforceable in any respect under any law of any
      jurisdiction, neither the legality, validity or enforceability of the
      remaining provisions nor the legality, validity or enforceability of such
      provision under the law of any other jurisdiction will in any way be
      affected or impaired.

37.   REMEDIES AND WAIVERS

      No failure to exercise, nor any delay in exercising, on the part of any
      Finance Party, any right or remedy under the Finance Documents shall
      operate as a waiver, nor shall any single or partial exercise of any right
      or remedy prevent any further or other exercise or the exercise of any
      other right or remedy. The rights and remedies provided in this Agreement
      are cumulative and not exclusive of any rights or remedies provided by
      law.

38.   AMENDMENTS AND WAIVERS

38.1  REQUIRED CONSENTS
(a)   Subject to Clause 38.2 (Exceptions) and as may otherwise be provided for
      herein, any term of the Finance Documents may be amended or waived only
      with the consent of the Required Revolving Lenders and the Credit Parties
      and any such amendment or waiver will be binding on all Parties.

(b)   The Administrative Agent may effect, on behalf of any Finance Party, any
      amendment or waiver permitted by this Clause.

                                     -166-
<PAGE>
38.2  EXCEPTIONS

(a)   An amendment or waiver that has the effect of changing or which relates
      to:

      (i)   the definition of "Required Revolving Lenders" in Clause 1.1
            (Definitions);

      (ii)  an extension to the date of payment of any amount under the Finance
            Documents;

      (iii) a reduction in the Margin or a reduction in the amount of any
            payment of principal, interest, fees or commission payable;

      (iv)  an increase in or, except as otherwise permitted by Clause 10.3
            (Extensions of Revolving Maturity Date) an extension of any
            Commitment;

      (v)   a change to the Borrower or Guarantors other than in accordance with
            Clause 28 (Changes to the Credit Parties) or as otherwise permitted
            by this Agreement;

      (vi)  any provision which expressly requires the consent of all the
            Revolving Lenders;

      (vii) Clause 2.2 (Revolving Lenders' rights and obligations), Clause 27
            (Changes to the Revolving Lenders) or this Clause 38;

      (viii) a release of any Guarantor from its obligations under its Clause
            21.1 (Guarantee and indemnity) except as otherwise expressly
            permitted herein; or

      (ix)  save as expressly provided in Clause 29.17(b) (Collateral Matters),
            a release of all or any portion of the Collateral and/or any Liens
            relating thereto,

      shall not be made without the prior consent of all the Revolving Lenders.

(b)   An amendment or waiver which relates to the rights or obligations of any
      Agent, any Arranger or any Issuing Bank may not be effected without the
      consent of such Agent, Arranger or Issuing Bank.

(c)   Notwithstanding the foregoing, the Borrower will not amend, alter, vary,
      supplement, terminate, revise, waive or otherwise modify any of the terms
      or provisions of, or add any new or additional terms or provisions to,
      this Agreement or any other Finance Document without the prior written
      consent of the Required Term Lenders; provided, however, that the Borrower
      may, without the prior

                                     -167-
<PAGE>
      written consent of the Required Term Lenders, (i) amend, alter, vary,
      supplement, revise or waive any of the terms or provisions of, or add any
      new or additional terms or provisions to (A) any of the Security Documents
      or (B) Clauses 4.2, 6.6(b), 8.4(b), 10.2 or 11.4 of this Agreement, (ii)
      release all or any portion of the Collateral or any Guarantor or (iii)
      make any amendment, supplement, consent or waiver which is administrative,
      immaterial or nonsubstantive in nature, not adverse to the Term Lenders
      and has been consented to by the Administrative Agent. Notwithstanding the
      foregoing, the consent of the Required Term Lenders is not required for
      the Revolving Lenders to accelerate, or to permit the acceleration of, the
      maturity of the Loans or to exercise any rights and remedies available
      under the Security Documents, the guaranties provided by the Guarantors or
      applicable law.

(d)   Any Term Lender may rely on Clause 38(c) subject to Clause 1.3 (Third
      Party Rights) and the provisions of the Third Parties Act.

39.   COUNTERPARTS

      Each Finance Document may be executed in any number of counterparts, and
      this has the same effect as if the signatures on the counterparts were on
      a single copy of the Finance Document.

                                     -168-
<PAGE>
                                   SECTION 12
                          GOVERNING LAW AND ENFORCEMENT

40.   GOVERNING LAW

      This Agreement is governed by English law.

41.   ENFORCEMENT

41.1  JURISDICTION OF ENGLISH COURTS

(a)   The courts of England have exclusive jurisdiction to settle any dispute
      arising out of or in connection with this Agreement (including a dispute
      regarding the existence, validity or termination of this Agreement) (a
      "DISPUTE").

(b)   The Parties agree that the courts of England are the most appropriate and
      convenient courts to settle Disputes and accordingly no Party will argue
      to the contrary.

(c)   This Clause 41.1 is for the benefit of the Finance Parties only. As a
      result, no Finance Party shall be prevented from taking proceedings
      relating to a Dispute in any other courts with jurisdiction. To the extent
      allowed by law, the Finance Parties may take concurrent proceedings in any
      number of jurisdictions.

41.2  SERVICE OF PROCESS

      Without prejudice to any other mode of service allowed under any relevant
      law, each Credit Party (other than a Credit Party incorporated in England
      and Wales):

      (a)   irrevocably appoints Ince & Co. as its agent for service of process
            in relation to any proceedings before the English courts in
            connection with any Finance Document; and

      (b)   agrees that failure by a process agent to notify the relevant Credit
            Party of the process will not invalidate the proceedings concerned.

      Each Credit Party expressly agrees and consents to the provisions of this
      Clause 41.

41.3  WAIVER OF JURY

      Each Credit Party, Revolving Lender and each Agent hereby irrevocably
      waives any and all right to trial by jury in respect of any legal
      proceeding, directly or indirectly, (whether sounding in tort, contract or
      otherwise) arising out of or relating to this Agreement, any other Finance
      Document, any of the transactions contemplated hereby, or the relationship
      established hereunder.

                                     -169-
<PAGE>
This Agreement has been entered into on the date stated at the beginning of this
Agreement.

                                                PRIDE OFFSHORE, INC.

                                                By:  /s/ EARL W. McNIEL
                                                   -----------------------------
                                                     Earl W. McNiel
                                                     Treasurer

                                                PRIDE INTERNATIONAL, INC.

                                                By:  /s/ EARL W. McNIEL
                                                   -----------------------------
                                                     Earl W. McNiel
                                                     Chief Financial Officer

                                                MEXICO DRILLING LIMITED LLC

                                                By:  /s/ EARL W. McNIEL
                                                   -----------------------------
                                                     Earl W. McNiel
                                                     Treasurer

                                                PRIDE CENTRAL AMERICA, LLC

                                                By:  /s/ EARL W. McNIEL
                                                   -----------------------------
                                                     Earl W. McNiel
                                                     Treasurer

                                     -170-
<PAGE>
                                                PRIDE DRILLING, LLC

                                                By:  /s/ EARL W. McNIEL
                                                   -----------------------------
                                                     Earl W. McNiel
                                                     Treasurer

                                                PRIDE NORTH AMERICA LLC

                                                By:  /s/ EARL W. McNIEL
                                                   -----------------------------
                                                     Earl W. McNiel
                                                     Treasurer

                                                PRIDE OFFSHORE INTERNATIONAL LLC

                                                By:  /s/ EARL W. McNIEL
                                                   -----------------------------
                                                     Earl W. McNiel
                                                     Treasurer

                                                PRIDE SOUTH PACIFIC LLC

                                                By:  /s/ EARL W. McNIEL
                                                   -----------------------------
                                                     Earl W. McNiel
                                                     Treasurer

                                     -171-
<PAGE>
                                         CREDIT LYONNAIS NEW YORK BRANCH, as
                                         Administrative Agent, Collateral Agent,
                                         Issuing Bank, Swingline Lender and
                                         Revolving Lender

                                         By:    /s/ BERNARD WEYMULLER
                                            ------------------------------------
                                         Name:  Bernard Weymuller
                                              ----------------------------------
                                         Title: Senior Vice President
                                               ---------------------------------

                                     -172-
<PAGE>
                                         CREDIT INDUSTRIEL ET COMMERCIAL, as
                                         Mandated Lead Arranger, Bookrunner,
                                         Issuing Bank and Revolving Lender

                                         By:    /s/ ALAIN POULET
                                            ------------------------------------
                                         Name:  Alain Poulet
                                              ----------------------------------
                                         Title: Managing Director
                                               ---------------------------------

                                         By:    /s/ JEAN-PHILIPPE GUILLON
                                            ------------------------------------
                                         Name:  Jean-Philippe Guillon
                                              ----------------------------------
                                         Title: Deputy Managing Director
                                               ---------------------------------

                                      -173-
<PAGE>
                                        BANQUE DE L'ECONOMIE, DU COMMERCE ET DE
                                        LA MONETIQUE, as Mandated Lead Arranger,
                                        Bookrunner and Revolving Lender

                                        By:    /s/ ALAIN POULET
                                           ------------------------------------
                                        Name:  Alain Poulet
                                             ----------------------------------
                                        Title: Managing Director
                                              ---------------------------------

                                     -174-
<PAGE>
                                         NATEXIS BANQUES POPULAIRES, as Mandated
                                         Lead Arranger, Bookrunner, Issuing Bank
                                         and Revolving Lender

                                         By:    /s/ ANTOINE DARGNIES
                                            ------------------------------------
                                         Name:  Antoine Dargnies
                                              ----------------------------------
                                         Title: Executive Vice President,
                                                Head of Structured Finance
                                               ---------------------------------

                                         By:    /s/ ALAIN SERRUQUES
                                            ------------------------------------
                                         Name:  Alain Serruques
                                              ----------------------------------
                                         Title: Deputy Head of Corporate Banking
                                               ---------------------------------

                                     -175-
<PAGE>
                                         NORDEA (acting through Nordea Bank
                                         Finland plc, New York Branch), as Lead
                                         Arranger, Bookrunner, Issuing Bank and
                                         Revolving Lender

                                         By:    /s/ HANS CHR. KJELSRUD
                                            ------------------------------------
                                         Name:  Hans Chr. Kjelsrud
                                              ----------------------------------
                                         Title: Senior Vice President
                                               ---------------------------------

                                         By:    /s/ RONNY BJORNADAL
                                            ------------------------------------
                                         Name:  Ronny Bjornadal
                                              ----------------------------------
                                         Title: Vice President
                                               ---------------------------------

                                     -176-
<PAGE>
                                         NEDSHIP BANK, as Co-Underwriter and
                                         Revolving Lender

                                         By: /s/ PJ ILLINGWORTH
                                            ------------------------------------
                                         Name: PJ Illingworth
                                              ----------------------------------
                                         Title: Deputy Managing Director
                                               ---------------------------------

                                      -177-
<PAGE>
                                   SCHEDULE 1
                              THE ORIGINAL PARTIES

                                     Part I
                           The Original Credit Parties

<TABLE>
<CAPTION>
            Name of Original Borrower            Registration number (or equivalent, if any)
            -------------------------            -------------------------------------------
<S>                                               <C>
Pride Offshore, Inc.                                             72-1269401
</TABLE>

<TABLE>
<CAPTION>
            Name of Original Guarantor           Registration number (or equivalent, if any)
            --------------------------           -------------------------------------------
<S>                                              <C>
Pride International, Inc.                                        76-0069030

Mexico Drilling Limited LLC                                      72-1269401

Pride Central America, LLC                                       72-1269401

Pride Drilling, LLC                                              72-1269401

Pride North America LLC                                          72-1269401

Pride Offshore International LLC                                 72-1269401

Pride South Pacific LLC                                          72-1269401
</TABLE>

                                      -1-
<PAGE>
                                     Part II
                         The Original Revolving Lenders

<TABLE>
<CAPTION>
       Name of Original                                                                    Revolving
       Revolving Lender                              Facility Office                       Commitment
       ----------------                              ---------------                       ----------
<S>                                             <C>                                     <C>
Credit Lyonnais New York Branch                 1301 Avenue of the Americas             U.S.$25,000,000
                                                New York, New York 10019

Credit Industriel et Commercial                 4, rue Gaillon                          U.S.$36,000,000
                                                75 017 Paris Cedex 02
                                                France
Banque de l'Economie, du                        34, rue du Wacken                       U.S.$24,000,000
Commerce et de la Monetique                     67 000 Strasbourg

Natexis Banques Populaires                      45 rue Saint Dominique                  U.S.$60,000,000
                                                75007 Paris
                                                France

Nordea                                          Nordea Bank Finland Plc,                U.S.$60,000,000
                                                New York Branch
                                                437 Madison Avenue,
                                                21st Floor
                                                New York, NY 10022

Nedship Bank                                    609 Fifth Avenue, Fifth Floor           U.S.$45,000,000
                                                New York, New York 10017
</TABLE>

                                       -1-
<PAGE>
                                   SCHEDULE 2
                   CONDITIONS PRECEDENT TO INITIAL UTILISATION

1.    DOCUMENTATION

(a)   this Agreement executed by the Borrower, the Original Guarantors, the
      Administrative Agent, the Collateral Agent, the Swingline Lender, the
      Revolving Lenders, the Issuing Banks, the Mandated Lead Arrangers, the
      Bookrunners, the Lead Arranger and the Co-Underwriter, and all attached
      Schedules;

(b)   the Security Agreements executed by each Credit Party that owns or
      operates one or more vessels granting to the Collateral Agent for the
      benefit of the Finance Parties a Lien in earnings from the Mortgaged
      Revolving Credit Facility Rigs and the Insurance Policies with respect to
      the Mortgaged Revolving Credit Facility Rigs to secure the Obligations, in
      each case together with UCC-1 financing statements and any other
      documents, agreements or instruments necessary to create an Acceptable
      Security Interest in such collateral;

(c)   the Rig Mortgages executed by each Credit Party that owns one or more
      vessels granting a Lien to the Collateral Agent in the Initial Mortgaged
      Revolving Credit Facility Rigs to secure the Obligations, together with
      any other documents, agreements or instruments necessary to create an
      Acceptable Security Interest in such Initial Mortgaged Revolving Credit
      Facility Rigs and the revenues therefrom;

(d)   certificates from the appropriate Governmental Authority certifying as to
      the good standing, existence and authority of each of the Credit Parties
      in all jurisdictions where required by the Administrative Agent;

(e)   certificates from a Responsible Officer of the Borrower stating that (A)
      all representations and warranties of such Person set forth in this
      Agreement and in the other Finance Documents to which it is a party are
      true and correct in all material respects; (B) no Default has occurred and
      is continuing; and (C) the conditions in this Schedule 2 have been met;

(f)   copies, certified as of the Closing Date by a Secretary or Assistant
      Secretary of each Credit Party of (A) the resolutions of the Board of
      Directors of that Credit Party approving the Finance Documents to which it
      is a party and the transactions contemplated thereby, and (B) all other
      documents evidencing other necessary corporate action and governmental
      approvals, if any, with respect to this Agreement and the other Finance
      Documents;

                                      -1-
<PAGE>
(g)   certificates of a Secretary or Assistant Secretary of each of the Credit
      Parties certifying the names and true signatures of officers of the Credit
      Parties authorized to sign this Agreement, Utilisation Requests, Renewal
      Requests, all other notices to be issued pursuant to the Finance Documents
      and the other Finance Documents to which such Credit Parties are a party;

(h)   a detailed report from the Parent Company's independent maritime insurance
      broker with respect to all Insurance Policies in effect with respect to
      the Initial Mortgaged Revolving Credit Facility Rigs, specifying for each
      such Insurance Policy the amount thereof, the risks insured against
      thereby, the name of the insurer and each insured party thereunder and the
      policy or other identification number thereof, together with a certificate
      from such broker certifying that all such Insurance Policies are (A) in
      full force and effect, (B) are placed with such insurance companies,
      underwriters or associations, in such amounts, against such risks, and in
      such form, as are normally issued against by Persons of similar size and
      established reputation engaged in the same or similar businesses and
      similarly situated and as are necessary or advisable for the protection of
      the Collateral Agent as mortgagee and (C) conform with the requirements of
      this Agreement;

(i)   a favourable opinion of Baker Botts L.L.P., counsel to the Borrower,
      substantially in the form of the attached Schedule 12;

(j)   a favourable opinion of the general counsel of the Parent Company
      substantially in the form of the attached Schedule 13;

(k)   a favourable opinion of Herbert Smith, English law counsel for the
      Arrangers substantially in the form of Schedule 14;

(l)   favourable opinions reasonably satisfactory to the Administrative Agent
      covering the items in the attached Schedule 15 from local counsel located
      in Panama and Vanuatu;

(m)   a certificate from the chief financial officer of the Parent Company
      addressed to the Administrative Agent and each of the Revolving Lenders,
      which shall be in form and in substance reasonably satisfactory to the
      Administrative Agent, regarding the matters set forth in Clause 22.26
      (Solvency);

(n)   a certificate from the chief financial officer of the Parent Company
      addressed to the Administrative Agent and each of the Revolving Lenders,
      which shall be in form and in substance reasonably satisfactory to the
      Administrative Agent and shall reaffirm that as of the Closing Date the
      projections prepared by the Borrower and included in the Confidential
      Information Memorandum are true and correct in

                                      -2-
<PAGE>
      all material respects based upon the assumptions stated therein and the
      best information reasonably available to such officer at the time such
      projections were made and shall describe any changes therein and state
      that such changes shall not, individually or in the aggregate, cause a
      Material Adverse Change to occur;

(o)   copies of each of the Merger Documents certified by the Secretary or
      Assistant Secretary of the Borrower (A) as being true and correct copies
      of such documents as of the Closing Date, and (B) as being in full force
      and effect and no material term or condition thereof shall have been
      amended, modified or waived after the execution thereof without the prior
      written consent of the Administrative Agent;

(p)   copies of each promissory note evidencing Intercompany Debt, if any;

(q)   a copy of the formal report or "management letter" submitted to the Parent
      Company by its independent accountants in connection with the annual audit
      made by it of the books of the Parent Company for the fiscal year ending
      2001; and

(r)   acknowledgment from Ince & Co. with respect to its irrevocable appointment
      by each Credit Party pursuant to Clause 41.2 (Service of process).

2.    MERGER. The Merger shall have been consummated by the Borrower and its
      Subsidiaries, and all other conditions to the Merger shall have been
      satisfied in form and substance satisfactory to the Administrative Agent.
      All legal, financial, accounting, governmental, tax and regulatory
      matters, and fiduciary aspects of the Merger and the terms, conditions and
      structure of the proposed financing must be reasonably acceptable to the
      Administrative Agent.

3.    RATING. The Administrative Agent shall have received a letter from S&P or
      Moody's confirming its rating of Index Debt as BB+ or higher or Ba2 or
      higher, as applicable.

4.    DUE DILIGENCE. The Administrative Agent and the Revolving Lenders shall
      have completed satisfactory due diligence review of the assets,
      liabilities, business, operations and condition (financial or otherwise)
      of the Group, including, but not limited, to a review of their Contingent
      Obligations, product liabilities, intellectual property, and all legal,
      financial, accounting, governmental, tax and regulatory matters, and
      fiduciary aspects of the proposed financing.

5.    PAYMENT OF FEES. On the Closing Date, the Borrower shall have paid the
      fees required to be paid to the Agents, the Arrangers, and the Revolving
      Lenders and all costs and expenses which have been invoiced and are
      payable pursuant to Clause 15 (Fees) and Clause 20 (Costs and expenses).

                                      -3-
<PAGE>
6.    OTHER INDEBTEDNESS. The Administrative Agent shall be reasonably satisfied
      that the terms, conditions and amounts of any other Debt of the Group
      complies with this Agreement. All Intercompany Debt required to be
      subordinated pursuant to Clause 25.16(d) (Debts, Guaranties and other
      Obligations) shall have been subordinated to the Obligations on terms and
      conditions satisfactory in form and substance to the Administrative Agent.

7.    TERMINATION OF EXISTING BANK FACILITY. The Finance Parties shall have
      received sufficient evidence indicating that simultaneously with the
      making of the initial Loans hereunder, the obligations of the Borrower and
      its Subsidiaries under the Existing Bank Facility will be repaid with the
      proceeds of the loans under the Term Loan Agreement and all obligations of
      the Borrower and its lenders under the Existing Bank Facility shall be
      terminated (including, without limitation, any obligations of any
      Subsidiary of the Borrower in respect of guaranties and security
      agreements executed in connection with such Existing Bank Facility but
      excluding any obligations which expressly survive the repayment of the
      amounts owing under the Existing Bank Facility) such that the Liens
      existing in respect of the Existing Bank Facility shall be terminated and
      replaced with the Liens for the benefit of the Term Secured Parities or
      the Finance Parties (as applicable) and encumbering the same Property.

8.    BUSINESS PLAN; FINANCIAL STATEMENTS. The Finance Parties shall have
      received true and correct copies of the Credit Parties and their
      Affiliates' business and financial plan for the years 2002 through 2007,
      together with a written analysis of such business and financial plan, in
      form and substance satisfactory to the Administrative Agent. The Finance
      Parties shall have received true and correct copies of the Original
      Financial Statements and such other financial information as the
      Administrative Agent may reasonably request. The actual results of
      operations for such periods shall not, individually or in the aggregate,
      differ from the results of operations projected for such period in the
      financial projections previously supplied to the Administrative Agent or
      included in the Confidential Information Memorandum in any respect that
      would cause a Material Adverse Change to occur.

9.    INITIAL RIG APPRAISAL REPORTS. The Administrative Agent shall have
      received two satisfactory appraisals (on a fair market value basis) of the
      Initial Mortgaged Revolving Credit Facility Rigs dated no more than 90
      days prior to the Closing Date (the "Initial Rig Appraisal Reports"). Such
      appraisals shall be in form and substance reasonably satisfactory to the
      Administrative Agent and shall be

                                      -4-
<PAGE>
      prepared by Approved Rigbrokers. Such appraisals shall affirm that the
      Security Maintenance Ratio is greater than or equal to 2.0 to 1.0 on the
      Closing Date.

10.   SECURITY DOCUMENTS. The Collateral Agent shall have received all
      appropriate evidence required by the Collateral Agent in its sole
      discretion necessary to determine that arrangements have been made for the
      Collateral Agent for the benefit of Finance Parties to have an Acceptable
      Security Interest in the Collateral, including, without limitation, (i)
      the delivery to the Collateral Agent of such financing statements under
      the Uniform Commercial Code for filing in such jurisdictions as the
      Collateral Agent may require, (ii) the delivery to the Collateral Agent of
      the Rig Mortgages for filing in such jurisdictions as the Collateral Agent
      may require, (iii) lien, tax and judgment searches conducted on the Credit
      Parties reflecting no Liens other than Permitted Liens against any of the
      Collateral as to which perfection of a Lien is accomplished by the filing
      of a financing statement and (iv) lien releases with respect to any
      Collateral currently subject to a Lien other than Permitted Liens.

11.   NO DEFAULT. No Default shall have occurred and be continuing or would
      result from any Utilisation or from the application of the proceeds
      therefrom.

12.   REPRESENTATIONS AND WARRANTIES. The representations and warranties
      contained in Clause 22 (Representations) hereof and in each other Finance
      Document shall be true and correct before and after giving effect to the
      Utilisations and to the application of the proceeds from such Utilisations
      from the date of such Utilisations, as though made on and as of such date.

13.   NO MATERIAL ADVERSE CHANGE. No event or events which, individually or in
      the aggregate, has had or is reasonably likely to cause a Material Adverse
      Change shall have occurred.

14.   NO PROCEEDING OR LITIGATION; NO INJUNCTIVE RELIEF. No action, suit,
      investigation or other proceeding (including, without limitation, the
      enactment or promulgation of a statute or rule) by or before any
      arbitrator or any Governmental Authority shall be threatened or pending
      and no preliminary or permanent injunction or order by a state or federal
      court shall have been entered (i) in connection with this Agreement or any
      transaction contemplated hereby or (ii) which, in any case, in the
      reasonable judgment of the Administrative Agent, could reasonably be
      expected to cause a Material Adverse Change.

15.   CONSENTS, LICENSES, APPROVALS, ETC. The Administrative Agent shall have
      received true copies (certified to be such by the Borrower or other
      appropriate

                                      -5-
<PAGE>
      party) of all consents, licenses and approvals required in accordance with
      applicable law in connection with the execution, delivery, performance,
      validity and enforceability of the Merger, this Agreement and the other
      Finance Documents. In addition, the Parent Company and Subsidiaries shall
      have all such material consents, licenses and approvals required in
      connection with the continued operation of the Group, and such approvals
      shall be in full force and effect, and all applicable waiting periods
      shall have expired without any action being taken or threatened by any
      competent authority which would restrain, prevent or otherwise impose
      adverse conditions on this Agreement and the actions contemplated hereby.

16.   ENVIRONMENTAL CERTIFICATES. The Administrative Agent shall have received
      copies of Certificates of Inspection, Certificates of Compliance, Vessel
      Certificates of Financial Responsibility (Water Pollution) or
      International Oil Pollution Prevention Certificate, each issued by the
      United States Coast Guard (or the substantial equivalent in the case of
      foreign assets) for each of the Initial Mortgaged Revolving Credit
      Facility Rigs and shall be reasonably satisfied with the contents thereof.

17.   REVOLVING COMMITMENT AVAILABILITY. On the Closing Date and immediately
      after giving effect to the transactions contemplated hereby, the
      Administrative Agent shall be satisfied with the sufficiency of the unused
      availability under the Total Revolving Commitments to meet the ongoing
      working capital needs of the Borrower and its Subsidiaries after the
      Closing Date.

18.   TERM LOAN AGREEMENT. The conditions precedent to the effectiveness of the
      Term Loan Agreement shall have been satisfied or waived in form and
      substance satisfactory to the Administrative Agent prior to or
      contemporaneously with the Closing Date.

                                      -6-
<PAGE>
                                   SCHEDULE 3
                                    REQUESTS

                                     Part A
                               Utilisation Request
                              Revolving Credit Loan

From: Pride Offshore, Inc.

To:   Credit Lyonnais New York Branch, as Administrative Agent

Dated:

Dear Sirs

               Pride Offshore, Inc. - Revolving Facility Agreement
                      dated June 20, 2002 (the "Agreement")

1.    We refer to the Agreement. This is a Utilisation Request. Terms defined in
      the Agreement have the same meanings in this Utilisation Request.

2.    We wish to borrow a Revolving Credit Loan on the following terms:

      Proposed Utilisation Date:        [      ] (or, if that is not a Business
                                        Day, the next Business Day)

      Facility to be utilised:          Revolving Credit Facility

      Amount:                           [  ] or, if less, the Available Facility

      Interest Period:                  [      ]

3.    We confirm that each condition specified in Clause 4.2 (Further conditions
      precedent) is satisfied on the date of this Utilisation Request.

4.    The proceeds of this Revolving Credit Loan should be credited to
      [account].

5.    This Utilisation Request is irrevocable.

                                Yours faithfully

                     .......................................
                            authorised signatory for
                              PRIDE OFFSHORE, INC.

                                      -1-
<PAGE>
                                     Part B
                               Utilisation Request
                                Letters Of Credit

From: Pride Offshore, Inc.

To:   Credit Lyonnais New York Branch, as Administrative Agent

Dated:

Dear Sirs

               Pride Offshore, Inc. - Revolving Facility Agreement
                      dated June 20, 2002 (the "Agreement")

1.    We refer to the Agreement. This is a Utilisation Request. Terms defined in
      the Agreement have the same meaning in this Utilisation Request. We wish
      to arrange for a Letter of Credit to be issued by [Issuing Bank]*, as the
      Issuing Bank, on the following terms:

      Proposed Utilisation Date:    [          ] (or, if that is not a Business
                                    Day, the next Business Day)

      Amount:                       [          ] or, if less, the Available
                                    Facility (for the Revolving Credit Facility)

      Term:                         [          ]

2.    We confirm that each condition specified in Clause 6.6 (Issue of Letters
      of Credit) is satisfied on the date of this Utilisation Request.

3.    We attach a copy of the proposed Letter of Credit.

4.    This Utilisation Request is irrevocable.

5.    [Delivery instructions to be specified]

                                Yours faithfully

                     ......................................

                  authorised signatory for Pride Offshore, Inc.

*     Relevant Issuing Bank to be selected by the Borrower.

                                      -2-
<PAGE>
                                     Part C
                               Utilisation Request
                                 Swingline Loan

From: Pride Offshore, Inc.

To:   Credit Lyonnais New York Branch, as Administrative Agent

Dated:

Dear Sirs

               Pride Offshore, Inc. - Revolving Facility Agreement
                      dated June 20, 2002 (the "Agreement")

1.    We refer to the Agreement. This is a Utilisation Request. Terms defined in
      the Agreement have the same meaning in this Utilisation Request. We wish
      to borrow a Swingline Loan on the following terms:

      Proposed Utilisation Date:          [        ] (or, if that is not a New
                                          York Business Day, the next New York
                                          Business Day)

      Facility to be utilised:            Swingline Facility

      Amount:                             U.S.$[         ] or, if less, the
                                          Available Facility (for the Swingline
                                          Facility)

      Interest Period:                    [        ]

2.    We confirm that each condition specified in Clause 8.4 (Swingline Lender's
      Swingline Loans) is satisfied on the date of this Utilisation Request.

3.    The proceeds of this Swingline Loan should be credited to [account].

4.    This Utilisation Request is irrevocable.

                                Yours faithfully

            .........................................................

                            authorised signatory for
                              Pride Offshore, Inc.

                                      -3-
<PAGE>
                                     Part D
                                 Renewal Request
                                Letters Of Credit

From: Pride Offshore, Inc.

To:   Credit Lyonnais New York Branch, as Administrative Agent

Dated:

Dear Sirs

               Pride Offshore, Inc. - Revolving Facility Agreement
                      dated June 20, 2002 (the "Agreement")

1.    We refer to the Agreement. This is a Renewal Request. Terms defined in the
      Agreement have the same meaning in this Renewal Request. We wish to
      arrange for Letter of Credit No. __________ to be renewed by [Issuing
      Bank]* on the following terms:

<TABLE>
<S>                                         <C>
      Proposed new Expiry Date:             [         ] (or, if that is not a Business
                                            Day, the next Business Day)

      Amount:                               {[Same amount as the amount of Letter of Credit No.
                                            __________]/[___________]**} or, if less, the
                                            Available Facility (for the Revolving Credit Facility)
</TABLE>

2.    We confirm that each condition specified in Clause 6.7 (Renewal of a
      Letter of Credit) is satisfied on the date of this Renewal Request.

3.    This Renewal Request is irrevocable.

4.    [Delivery instructions to be specified]

                                Yours faithfully

                     ......................................

                  authorised signatory for Pride Offshore, Inc.

*     Relevant Issuing Bank that issued the Letter of Credit being renewed to be
      inserted by the Borrower.

**    Specify amount is less than the amount of the current Letter of Credit.

                                      -4-
<PAGE>
                                   SCHEDULE 4
                             MANDATORY COST FORMULA

1.    The Mandatory Cost relates solely to extensions of credit in U.S. Dollars
      and is an addition to the interest rate to compensate the Revolving
      Lenders for the cost of compliance with (a) the requirements of the
      Financial Services Authority (or any other authority which replaces all or
      any of its functions) or (b) the requirements of the European Central
      Bank.

2.    Except as provided in paragraph 3 below, the Mandatory Cost for any
      Revolving Lender lending from a Facility Office in a Participating Member
      State will be the percentage notified by that Revolving Lender to the
      Administrative Agent on the first day of each Interest Period (or as soon
      as possible thereafter). The Mandatory Cost (expressed as a percentage of
      that Revolving Lender's participation in all Loans made from that Facility
      Office) for any Revolving Lender will be certified by that Revolving
      Lender in accordance with Clause 12.4 (Mandatory Costs; Additional
      Interest on Revolving Credit Loans).

3.    The Mandatory Cost for any Revolving Lender lending from a Facility Office
      in the United Kingdom will be calculated by the Administrative Agent on
      the first day of each Interest Period (or as soon as possible thereafter)
      as follows:

                     E x 0.01
                     --------   per cent. per annum.
                       300

      Where:

      E     is designed to compensate such Revolving Lender for amounts payable
            under the Fees Rules and the most recent rate of charge supplied by
            the such Revolving Lender to the Administrative Agent pursuant to
            paragraph 2 above or paragraph 5 below and expressed in pounds per
            L1,000,000.

4.    For the purposes of this Schedule:

      (a)   "FEES RULES" means the rules on periodic fees in the FSA Supervision
            Manual or such other law or regulation as may be in force from time
            to time in respect of the payment of fees for the acceptance of
            deposits;

      (b)   "FEE TARIFFS" means the fee tariffs specified in the Fee Rules under
            the activity group A.1 Deposit acceptors (ignoring any minimum fee
            or zero rated fee required pursuant to the Fee Rules but taking into
            account any applicable discount rate); and

                                       -1-
<PAGE>
      (c)   "TARIFF BASE" has the meaning given to it, and will be calculated in
            accordance with, the Fees Rules.

5.    If requested by the Administrative Agent, each Revolving Lender shall, as
      soon as practicable after publication by the Financial Services Authority,
      supply to the Administrative Agent, the rate of charge payable by that
      Revolving Lender to the Financial Services Authority pursuant to the Fees
      Rules in respect of the relevant financial year of the Financial Services
      Authority (calculated for this purpose by that Revolving Lender as being
      the average of the Fee Tariffs applicable to that Revolving Lender for
      that financial year) and expressed in pounds per L1,000,000 of the Tariff
      Base of that Revolving Lender.

6.    Each Revolving Lender shall supply any information required by the
      Administrative Agent for the purpose of calculating its Mandatory Cost. In
      particular, but without limitation, each Revolving Lender shall supply the
      following information in writing on or prior to the date on which it
      becomes a Revolving Lender:

      (a)   its jurisdiction of incorporation and the jurisdiction of its
            Facility Office; and

      (b)   any other information that the Administrative Agent may reasonably
            require for such purpose.

      Each Revolving Lender shall promptly notify the Administrative Agent in
      writing of any change to the information provided by it pursuant to this
      paragraph.

7.    The rates of charge for any Revolving Lender for the purpose of E above
      shall be determined by the Administrative Agent based upon the information
      supplied to it pursuant to paragraphs 2, 5 and 6 above.

8.    The Administrative Agent shall have no liability to any Person if such
      determination results in a Mandatory Cost which over or under compensates
      any Revolving Lender and shall be entitled to assume that the information
      provided by any Revolving Lender pursuant to paragraphs 2, 5 and 6 above
      is true and correct in all respects.

9.    Any determination by the Administrative Agent pursuant to this Schedule in
      relation to a formula, the Mandatory Cost, or any amount payable to a
      Revolving Lender shall, in the absence of manifest error, be conclusive
      and binding on all Parties.

                                      -2-
<PAGE>
10.   The Administrative Agent may from time to time, after consultation with
      the Borrower and the Revolving Lenders, determine and notify to all
      Parties any amendments which are required to be made to this Schedule in
      order to comply with any change in law, regulation or any requirements
      from time to time imposed by the Financial Services Authority or the
      European Central Bank (or, in any case, any other authority which replaces
      all or any of its functions) and any such determination shall, in the
      absence of manifest error, be conclusive and binding on all Parties.

                                      -3-
<PAGE>
                                   SCHEDULE 5
                          FORM OF TRANSFER CERTIFICATE

To:   Credit Lyonnais, New York Branch, as Administrative Agent

From: [The Existing Revolving Lender] (the "Existing Revolving Lender") and [The
       New Revolving Lender] (the "New Revolving Lender")

Dated:

               Pride Offshore, Inc. - Revolving Facility Agreement
                      dated June 20, 2002 (the "Agreement")

1.    We refer to the Agreement. This is a Transfer Certificate. Terms defined
      in the Agreement have the same meaning in this Transfer Certificate unless
      given a different meaning in this Transfer Certificate.

2.    We refer to Clause 27.5 (Procedure for transfer):

      (a)   The Existing Revolving Lender and the New Revolving Lender agree to
            the Existing Revolving Lender transferring to the New Revolving
            Lender by novation all or part of the Existing Revolving Lender's
            Commitment, [all of the Existing Revolving Lender's Swingline
            Commitment,] rights and obligations referred to in the Schedule in
            accordance with Clause 27.5 (Procedure for transfer).

      (b)   The proposed Transfer Date is [ ].

      (c)   The Facility Office and address, fax number and attention details
            for notices of the New Revolving Lender for the purposes of Clause
            34.2 (Addresses) are set out in the Schedule.

3.    The New Revolving Lender expressly acknowledges the limitations on the
      Existing Revolving Lender's obligations set out in paragraph (c) of Clause
      27.4 (Limitation of responsibility of Existing Revolving Lenders).

[4.]  The New Revolving Lender confirms that the Person beneficially entitled to
      interest payable to that Revolving Lender in respect of an advance under a
      Finance Document is entitled to receive payments under the Agreement
      without deduction or withholding of any United States federal income
      taxes.

                                      -4-
<PAGE>
[4/5] This Transfer Certificate may be executed in any number of counterparts
      and this has the same effect as if the signatures on the counterparts were
      on a single copy of this Transfer Certificate.

[5/6] This Transfer Certificate is governed by English law.

                                      -5-
<PAGE>
                                  THE SCHEDULE

              Commitment/rights* and obligations to be transferred

                           [insert relevant details]
   [Facility Office address, fax number and attention details for notices and
                         account details for payments,]

      [Existing Revolving Lender]                     [New Revolving Lender]

      By:                                             By:

      This Transfer Certificate is accepted by the Administrative Agent and the
      Transfer Date is confirmed as [           ].

      [Administrative Agent]

      By:

*     Include details of participations in the Letters of Credit to be
      transferred.

                                      -6-
<PAGE>
                                   SCHEDULE 6
                            FORM OF ACCESSION LETTER

To:   Credit Lyonnais New York Branch, as Administrative Agent

From: [Subsidiary][Permitted Holding Company] and Pride Offshore, Inc.

Dated:

Dear Sirs

               Pride Offshore, Inc. - Revolving Facility Agreement
                      dated June 20, 2002 (the "Agreement")

1.    We refer to the Agreement. This is an Accession Letter. Terms defined in
      the Agreement have the same meaning in this Accession Letter.

2.    [Subsidiary][Permitted Holding Company] agrees to become an Additional
      Guarantor pursuant to the terms of Clause 21 of the Agreement [and accede
      to the Agreement as the Parent Company]* and to be bound by the terms of
      the Agreement as an Additional Guarantor [and Parent Company] pursuant to
      Clause 25.12 (New Subsidiaries; Permitted Holding Company) of the
      Agreement. [Subsidiary][Permitted Holding Company] is a company duly
      incorporated under the laws of [name of relevant jurisdiction].

3.    Without prejudice to any other mode of service allowed under any relevant
      law, [Subsidiary][Permitted Holding Company] irrevocably appoints Ince &
      Co. as its agent for service of process in relation to any proceedings
      before the English courts in connection with any Finance Document; and
      agrees that failure by a process agent to notify [Subsidiary][Permitted
      Holding Company] of the process will not invalidate the proceedings
      concerned.

4.    [Subsidiary's][Permitted Holding Company's] administrative details are as
      follows:

      Address:

      Fax No:

      Attention:

5.    This Accession Letter is governed by English law.

*     Include if Person delivering Accession Letter is a Permitted Holding
      Company.

                                       -1-
<PAGE>
        [This Accession Letter is entered into by deed.]

        Pride Offshore, Inc.                        [Subsidiary]
                                                    [Permitted Holding Company]

                                      -2-

<PAGE>

                                   SCHEDULE 7
                         FORM OF COMPLIANCE CERTIFICATE

To:   Credit Lyonnais New York Branch, as Administrative Agent

From: Pride Offshore, Inc.

Dated:

Dear Sirs

               Pride Offshore, Inc. - Revolving Facility Agreement
                      dated June 20, 2002 (the "Agreement")

1.    We refer to the Agreement.  This is a Compliance Certificate.  Terms
      defined in the Agreement have the same meaning when used in this
      Compliance Certificate unless given a different meaning in this
      Compliance Certificate.

2.    We confirm that:  [Insert details of covenants to be certified and
      computations relating thereto]

3.    [We confirm that no Default is continuing.]*

Signed: ................................................
        Name:
        [Responsible Office of Parent
        Company]

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

*  If this statement cannot be made, the certificate should identify any Default
   that is continuing and the steps, if any, being taken to remedy it.

                                     - 1 -
<PAGE>

                                   SCHEDULE 8
                                   TIMETABLES

                                 Part I - Loans

Delivery of a duly completed            2:00 p.m. (New York time) on the
Utilisation Request (Clause 5.1         date falling four Business Days
(Delivery of a Utilisation Request))    before the proposed Utilisation Date.

Administrative Agent notifies the       5:00 p.m. (New York time) on the
Revolving Lenders of the Loan in        date falling four Business Days
accordance with Clause 5.4 (Revolving   before the proposed Utilisation Date.
Lenders' participation)

LIBOR is fixed                          Quotation Day as of 11:00 a.m.
                                        London time

                           Part II - Letters Of Credit

Delivery of a duly completed            2:00 p.m. (New York time) on the date
Utilisation Request  (Clause 6.3        falling five Business Days before the
(Delivery of a Utilisation Request for  proposed Utilisation Date.
Letters of Credit))

Administrative Agent notifies the       5:00 p.m. (New York time) on the date
applicable Issuing Bank and the         falling five Business Days before the
Revolving Lenders of the Letter of      proposed Utilisation Date.
Credit in accordance with Clause 6.6
(Issue of Letters of Credit)

Delivery of a duly completed Renewal    2:00 p.m. (New York time) on the date
Request (Clause 6.7 (Renewal of a       falling four Business Days before the
Letter of Credit)                       last day of the Term of the existing
                                        Letter of Credit

Administrative Agent notifies the       5:00 p.m. (New York time) on the date
applicable

                                     - 1 -
<PAGE>

Issuing Bank and the Revolving Lenders   falling four Business Days before the
of the Letter of Credit subject to       last day of the Term of the existing
a Renewal Request in accordance with     Letter of Credit
Clause 6.6 (Issue of Letters of Credit)

                      Part III - Swingline Loans

Delivery of a duly completed             11:00 a.m. (New York time) on the
Utilisation Request (Clause 8.2          proposed Utilisation Date which day
(Delivery of a Utilisation Request for   must be a New York Business Day.
Swingline Loans))

Administrative Agent notifies the        11:00 a.m. (New York time) on the
Swingline Lender of the amount of the    proposed Utilisation Date which day
Swingline Loan under Clause 8.4          must be a New York Business Day.
(Swingline Lender's Swingline Loan)

                                     - 2 -
<PAGE>

                                   SCHEDULE 9
                            FORM OF LETTER OF CREDIT

To:   [Beneficiary] (the "Beneficiary")

                                                                      [Date]

                Irrevocable Standby Letter of Credit no.[ ]

At the request of [              ], [Issuing bank] (the "Issuing Bank") issues
this irrevocable standby letter of credit ("Letter of Credit") in your favour on
the following terms and conditions:

1.    Definitions

      In this Letter of Credit:

      "Business Day" means a day (other than a Saturday or a Sunday) on which
      banks are open for general business in [London].

      "Demand" means a demand for a payment under this Letter of Credit in the
      form of the schedule to this Letter of Credit.

      "Expiry Date" means [                  ].

      "Total L/C Amount" means [                  ].

2.    Issuing Bank's agreement

(a)   The Beneficiary may request a drawing or drawings under this Letter of
      Credit by giving to the Issuing Bank a duly completed Demand. A Demand
      must be received by the Issuing Bank by [ ] p.m. ([London] time) on the
      Expiry Date.

(b)   Subject to the terms of this Letter of Credit, the Issuing Bank
      unconditionally and irrevocably undertakes to the Beneficiary that, within
      [ten] Business Days of receipt by it of a Demand, it must pay to the
      Beneficiary the amount demanded in that Demand.

(c)   The Issuing Bank will not be obliged to make a payment under this Letter
      of Credit if as a result the aggregate of all payments made by it under
      this Letter of Credit would exceed the Total L/C Amount.

                                     - 1 -
<PAGE>

3.    Expiry

(a)   The Issuing Bank will be released from its obligations under this Letter
      of Credit on the date (if any) notified by the Beneficiary to the Issuing
      Bank as the date upon which the obligations of the Issuing Bank under this
      Letter of Credit are released.

(b)   Unless previously released under paragraph (a) above, on [ ] p.m.
      ([London] time) on the Expiry Date the obligations of the Issuing Bank
      under this Letter of Credit will cease with no further liability on the
      part of the Issuing Bank except for any Demand validly presented under the
      Letter of Credit that remains unpaid.

(c)   When the Issuing Bank is no longer under any further obligations under
      this Letter of Credit, the Beneficiary must return the original of this
      Letter of Credit to the Issuing Bank.

4.    Payments

      All payments under this Letter of Credit shall be made in [ ] and for
      value on the due date to the account of the Beneficiary specified in the
      Demand.

5.    Delivery of Demand

      Each Demand shall be in writing, and, unless otherwise stated, may be made
      by letter, fax or telex and must be received in legible form by the
      Issuing Bank at its address and by the particular department or officer
      (if any) as follows:

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

6.    Assignment

      The Beneficiary's rights under this Letter of Credit may not be assigned
      or transferred.

7.    UCP

      Except to the extent it is inconsistent with the express terms of this
      Letter of Credit, this Letter of Credit is subject to the Uniform Customs
      and Practice for Documentary Credits (1993 Revision), International
      Chamber of Commerce Publication No. 500.

                                     - 2 -
<PAGE>

8.    Governing Law

      This Letter of Credit is governed by English law.

9.    Jurisdiction

      The courts of England have exclusive jurisdiction to settle any dispute
      arising out of or in connection with this Letter of Credit.

Yours faithfully,

[Issuing Bank]

By:

                                     - 3 -
<PAGE>

                                    SCHEDULE

                                 FORM OF DEMAND

To:   [Issuing Bank]

                                                                      [Date]

Dear Sirs

                        Standby Letter of Credit no. [ ]
           issued in favour of [Beneficiary] (the "Letter of Credit")

We refer to the Letter of Credit. Terms defined in the Letter of Credit have the
same meaning when used in this Demand.

1.    We certify that the sum of [     ] is due [and has remained
      unpaid for at least [     ] Business Days] [under [set out
      underlying contract or agreement]].  We therefore demand payment of
      the sum of [      ].

2.    Payment should be made to the following account:

      Name:____________________________________________________________________

      Account Number:__________________________________________________________

      Bank:____________________________________________________________________

3.    The date of this Demand is not later than the Expiry Date.

Yours faithfully

__________________________________              ________________________________
(Authorised Signatory)                          (Authorised Signatory)

                                For [Beneficiary]

                                     - 1 -
<PAGE>

                                   SCHEDULE 10

                                     FORM OF
                                  RIG MORTGAGE

                                                                   UNITED STATES

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

                         FIRST PREFERRED FLEET MORTGAGE

                                     [OWNER]

                                       and

                        CREDIT LYONNAIS NEW YORK BRANCH,
                               as Collateral Agent

                             For the Finance Parties
                                  Named Herein

                         Dated June 20, 2002

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

<PAGE>
                                      INDEX

<TABLE>
<CAPTION>
Section Matter                                                           Page
--------------                                                           ----
<S>                                                                      <C>
ARTICLE I      DEFINITIONS AND INTERPRETATION.......................       3

ARTICLE II     THE MORTGAGE.........................................       4

ARTICLE III    PAYMENT COVENANTS....................................       5

ARTICLE IV     PRESERVATION OF SECURITY.............................       6

ARTICLE V      COVENANTS; REPRESENTATIONS AND WARRANTIES............       8

ARTICLE VI     PROTECTION OF SECURITY...............................       9

ARTICLE VII    ENFORCEABILITY AND MORTGAGEE'S POWERS................      10

ARTICLE VIII   FURTHER ASSURANCES...................................      12

ARTICLE IX     POWER OF ATTORNEY....................................      12

ARTICLE X      EXPENSES AND INDEMNITIES.............................      13

ARTICLE XI     COMMUNICATIONS.......................................      14

ARTICLE XII    ASSIGNMENTS..........................................      15

ARTICLE XIII   WAIVER; AMENDMENT....................................      15

ARTICLE XIV    MISCELLANEOUS........................................      15

ARTICLE XV     JURISDICTION.........................................      16
</TABLE>

                                      -i-
<PAGE>

                         FIRST PREFERRED FLEET MORTGAGE

      This FIRST PREFERRED FLEET MORTGAGE (this "Mortgage") dated as
of June 20, 2002 is by [OWNER, a _____________________] having its
principal offices at 5847 San Felipe, Suite 3300, Houston, Texas
77057 (the "Owner"), in favor of CREDIT LYONNAIS NEW YORK BRANCH, a
French banking association having offices at 1301 Avenue of the
Americas, New York, New York 10019, as Collateral Agent and
mortgagee (in such capacity, the "Mortgagee") for the benefit of the
Finance Parties (as defined in the Revolving Credit Agreement
referred to below).

                                    RECITALS

      A. The Owner is the sole owner of the whole (100%) of the vessels
described on Exhibit A attached hereto and made a part hereof.

      B. Pursuant to the terms of the Revolving Credit Agreement dated as of
June 20, 2002 (as the same may be amended or supplemented from time to time, the
"Revolving Credit Agreement") and made by and among [the Owner][Pride Offshore,
Inc., a Delaware corporation (the "Borrower")], Credit Lyonnais New York Branch,
as Administrative Agent and the lenders identified in Exhibit B attached hereto
and who hereafter may become a party thereto ("Revolving Lenders"), the
Revolving Lenders agree to make available to the [Owner][Borrower] a Revolving
Credit Agreement in the maximum principal amount at any one time outstanding of
Two Hundred and Fifty Million United States Dollars (US$250,000,000) (the
"Revolving Credit Facility") in the form of Loans and Letters of Credit (each as
defined in the Revolving Credit Agreement). The Revolving Credit Agreement, and
interest, fees and commissions thereon, are to be paid and repaid, as the case
may be, as provided in the Revolving Credit Agreement. The Revolving Credit
Agreement is evidenced by the Revolving Credit Agreement and the other Finance
Documents (as defined in the Revolving Credit Agreement).

      [C. The Owner has guaranteed the Borrower's obligations owing to the
Revolving Lenders under the Finance Documents pursuant to Clause 21 of the
Revolving Credit Agreement the "Guaranty").]

      D. It is required under the terms of the Revolving Credit Agreement that
the Owner shall grant and execute this Mortgage as security for its obligations
under the [Guaranty and the Borrower's obligations under the] Revolving Credit
Agreement.

      E. Therefore, the Owner, in order to secure its obligations under the
[Guaranty and the Borrower's obligations under the] Revolving Credit Agreements
and the Finance Documents, and the performance and observance of and compliance
with all of the covenants, terms and conditions contained in this Mortgage, has
duly authorized the execution and delivery of this Mortgage under and pursuant
to 46 U.S.C. Section 31301 et seq., as amended (the "Ship Mortgage Act"), which
is entered into by the Owner in consideration of the Revolving Lenders agreeing,
at the request of the Owner [and the Borrower], to make the Revolving Credit
Agreement available to the [Owner][Borrower] and as a condition thereto and for
other good and valuable consideration provided by the Revolving Lenders (the
sufficiency of which the Owner hereby acknowledges).

<PAGE>

      NOW, THEREFORE, the Owner and the Mortgagee agree as follows:

                                   ARTICLE I
                         DEFINITIONS AND INTERPRETATION

      Section 1.1 In this Mortgage unless the context otherwise requires, the
following expressions shall have the following meanings:

      ["Borrower" has the meaning set forth in the Recitals hereof.]

      "Commitment" has the meaning set forth in the Revolving Credit
Agreement.

      "Credit Party" has the meaning set forth in the Revolving
Credit Agreement.

      "Effective Date" means the date of this Mortgage.

      "Excepted Liens" has the meaning set forth in Section 5.1(b)
hereof.

      "Finance Documents" has the meaning set forth in the Revolving
Credit Agreement.

      "Finance Party" has the meaning set forth in the Revolving
Credit Agreement.

      ["Guaranty" has the meaning set forth in the Recitals hereof.]

      "Hazardous Materials" shall mean, collectively, "Hazardous
Substance" and "Hazardous Waste" as those terms are defined in the
Revolving Credit Agreement.

      "Lien" has the meaning set forth in the Revolving Credit
Agreement.

      "Mortgage" has the meaning set forth in the first paragraph
hereof.

      "Mortgagee" has the meaning set forth in the first paragraph
hereof.

      "Owner" has the meaning set forth in the first paragraph
hereof.

      "Revolving Credit Agreement" has the meaning set forth in the
Recitals hereof.

      "Revolving Credit Facility" has the meaning set forth in the
Recitals hereof.

      "Revolving Credit Facility Period" means the period commencing
on the Effective Date and ending on the date upon which all amounts
owing under the Revolving Credit Facility and all other amounts due
to the Finance Parties pursuant to the Revolving Credit Agreement
and the other Finance Documents have been repaid in full and the
Revolving Credit Agreement has terminated.

      "Rigs" means the whole of each of the offshore drilling rigs
described on Exhibit A hereto, and includes any share or interest
therein, and their engines, generators, drilling machinery and
equipment, anchors, chains, pumps and pumping equipment, furniture
and fittings, boats, tackle, outfit, spare gear, fuel, consumable or
other stores, belongings and

<PAGE>

appurtenances whether on board or ashore and whether now owned or hereafter
acquired and all additions, improvements and replacements hereafter made in or
to said rigs or any part thereof and all of their freight, hires and earnings.

      "Secured Indebtedness" means all obligations and liabilities of the Owner
and the other Credit Parties except for the U.S. Parent (whether for principal,
interest, fees, reimbursement obligations, expenses or any other charges
whatsoever), now existing or hereafter incurred under, arising out of or in
connection with any Finance Document to which it is a party [including, without
limitation, in the case of the Owner, the Guaranty], and the due performance and
compliance by the Owner and the other Credit Parties except for the U.S. Parent
with the terms of each such Finance Document.

      "Ship Mortgage Act" has the meaning set forth in the Recitals hereof.

      "United States Dollars" and "US$" means the lawful currency of the United
States of America.

      Section 1.2 Except where otherwise expressly provided or unless the
context otherwise requires, words and expressions defined in the Revolving
Credit Agreement shall bear the same meanings when used but not otherwise
defined in this Mortgage.

      Section 1.3 In this Mortgage:

            (a) section headings are inserted for convenience only and shall not
affect the construction of this Mortgage and, unless otherwise specified, all
references to Sections are to sections of this Mortgage;

            (b) unless the context otherwise requires, words denoting the
singular number shall include the plural and vice versa;

            (c) references to Persons include bodies corporate and
unincorporated;

            (d) references to assets include property, rights and assets of
every description;

            (e) references to any document are to be construed as references to
such document as amended or supplemented from time to time; and

            (f) references to any enactment include re-enactments, amendments
and extensions thereof.

                                   ARTICLE II
                                  THE MORTGAGE

      Section 2.1 Granting Clause. In order to secure the payment of the Secured
Indebtedness and to secure the performance and observance of and compliance with
the covenants, terms and conditions contained in this Mortgage and the other
Finance Documents to which it is a party, the Owner has GRANTED, CONVEYED and
MORTGAGED and does by

<PAGE>

these presents GRANT, CONVEY and MORTGAGE unto the Mortgagee for the benefit of
the Finance Parties and their respective successors and assigns, the whole
(100%) of each Rig; TO HAVE AND TO HOLD the same unto the Mortgagee for the
benefit of the Finance Parties and their respective successors and assigns
forever, upon the terms herein set forth.

      Section 2.2 Termination. If (a) the Owner[, the Borrower] or [its][their]
respective successors and assigns shall pay or cause to be paid to the Mortgagee
and the other Finance Parties and their respective successors or assigns the
Secured Indebtedness in full as and when the same shall become due and payable
in accordance with the terms of the Revolving Credit Agreement, [the Guaranty,]
this Mortgage and the other Finance Documents; and (b) the Commitments have been
terminated, then these presents and the rights hereunder shall cease, determine
and be void and, in such event, the Mortgagee agrees by accepting this Mortgage
to furnish, execute and record, at the expense of the Owner, all such documents
as the Owner may reasonably require to discharge this Mortgage, otherwise to be
and remain in full force and effect.

      Section 2.3 Partial Release; No Waiver. If any Rig is sold, transferred,
conveyed or otherwise disposed in accordance with the Revolving Credit
Agreement, such Rig shall be released in writing by the Mortgagee from the lien
of this Mortgage and such release shall not affect the Mortgagee's lien on the
remaining Rigs. Notwithstanding anything to the contrary herein, it is not
intended that any provision of this Mortgage shall waive the preferred status of
this Mortgage and that if any provision or part thereof herein shall be
construed as waiving the preferred status of this Mortgage then such provision
shall to such extent be void and of no effect.

      Section 2.4 Owner Liable. The Owner shall remain liable to perform all the
obligations assumed by it in relation to each Rig; and until such time as the
Mortgagee or any Finance Party shall become the owner thereof following
foreclosure, neither the Mortgagee nor any other Finance Party shall be under
any obligation of any kind whatsoever in respect thereof or be under any
liability whatsoever in event of any failure by the Owner to perform its
obligations in respect thereof.

      Section 2.5 Recordation under the Ship Mortgage Act. For the purpose of
this Mortgage and its filing and recordation as required by the Ship Mortgage
Act, (i) the total amount of the Secured Indebtedness is $250,000,000.00 of
principal, plus interest, expenses and fees thereon plus the performance of
mortgage covenants; (ii) the interest of the Owner (mortgagor) in the Rigs is
100% and the interest mortgaged to the Mortgagee is 100%; (iii) the respective
addresses of the Owner (mortgagor) and Mortgagee are as set forth on the first
page of this Mortgage; and (iv) subject to the partial release provisions in
Section 2.3 above, the discharge amount of the Mortgage is the same as the total
amount, and upon receipt thereof, the Mortgagee shall release the Rigs from the
lien of this Mortgage. The Mortgagee expressly does not waive the preferred
status of this Mortgage.

<PAGE>

                                   ARTICLE III
                                PAYMENT COVENANTS

      Section 3.1 Payment Obligations. The Owner hereby covenants with the
Mortgagee and the other Finance Parties:

            (a) to pay and indemnify the Mortgagee and the other Finance Parties
for all such reasonable expenses, claims, liabilities, losses, costs, duties,
fees, charges, or other moneys as are stated in this Mortgage to be payable by
the Owner to or recoverable from the Owner by the Mortgagee and the other
Finance Parties (or in respect of which the Owner agrees in this Mortgage to
indemnify the Mortgagee and the other Finance Parties) at the times and in the
manner specified in this Mortgage;

            (b) to pay interest on any such reasonable expenses, claims,
liabilities, losses, costs, duties, fees, charges or other moneys referred to in
Section 3.1(a) from the date on which demand by the Mortgagee or any other
Finance Party is first made to the Owner to reimburse such expenses, claims,
liabilities, losses, costs, duties, fees, charges or other moneys (both before
and after any relevant judgment), at a rate per annum equal at all times to the
Prime Rate (as defined in the Revolving Credit Agreement) plus 2%; and

            (c) to pay and perform its obligations which may be or become due or
owing to the Mortgagee or any other Finance Party, as the case may be, under
this Mortgage and the other Finance Documents to which the Owner is or is to be
a party at the times and in the manner specified herein or therein.

                                   ARTICLE IV
                            PRESERVATION OF SECURITY

      Section 4.1 Owner's Covenants Concerning the Security. It is declared and
agreed that:

            (a) the security created by this Mortgage shall be held by the
Mortgagee as a continuing security for the payment of the Secured Indebtedness
and that the security so created shall not be satisfied by any intermediate
payment or satisfaction of any part of the Secured Indebtedness;

            (b) the security so created shall be in addition to and shall not in
any way be prejudiced or affected by any of the other Finance Documents;

            (c) the Mortgagee shall not have to wait for any Finance Party to
enforce any of the other Finance Documents, to the extent it may do so pursuant
to the terms thereof, before enforcing the security created by this Mortgage;

            (d) no failure or delay on the part of the Mortgagee in exercising
any right, power or privilege hereunder and no course of dealing between the
Owner and the Mortgagee or any other Finance Party shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The rights and
remedies herein

<PAGE>

expressly provided are cumulative and not exclusive of any rights or remedies
which the Mortgagee or any other Finance Party would otherwise have. No notice
to or demand on the Owner in any case shall entitle the Owner to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Mortgagee or the Finance Parties to any other or
further action in any circumstances without notice or demand; and

            (e) any waiver by the Mortgagee of any terms of this Mortgage or any
consent given by the Mortgagee under this Mortgage shall only be effective if
given in writing and then only for the purpose and upon the terms for which it
is given.

      Section 4.2 Settlements; No Waiver. Any settlement or discharge under this
Mortgage between the Mortgagee and the Owner shall be conditional upon no
security or payment to the Mortgagee or the Finance Parties or any of them by
the Owner, any Credit Party, or any other Person being avoided or set-aside or
ordered to be refunded or reduced by virtue of any provision or enactment
relating to bankruptcy, insolvency, administration or liquidation for the time
being in force and, if such condition is not satisfied, the Mortgagee shall be
entitled to recover from the Owner on demand the value of such security or the
amount of any such payment as if such settlement or discharge had not occurred.

      Section 4.3 Mortgagee's Rights Not Affected. The rights of the Mortgagee
under this Mortgage and the security hereby constituted shall not be affected by
any act, omission, matter or thing which, but for this provision, might operate
to impair, affect or discharge such rights and security, in whole or in part,
including without limitation, and whether or not known to or discoverable by the
Owner, any Credit Party, the Mortgagee, any Finance Party or any other Person:

            (a) any waiver granted to or composition with the Owner, any Credit
Party, or any other Person; or

            (b) the taking, variation, compromise, renewal or release of or
refusal or neglect to perfect or enforce any rights, remedies or securities
against any of the Owner, any Credit Party, or any other Person; or

            (c) any legal limitation, disability, incapacity or other
circumstances relating to the Owner, any Credit Party, or any other Person; or

            (d) any amendment or supplement to the Revolving Credit Agreement,
any of the other Finance Documents or any other document or security (except
that the Secured Indebtedness shall be defined by reference to the Revolving
Credit Agreement, other Finance Document or other document or security as
amended or supplemented); or

            (e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Owner, any Credit Party, or any other Person; or

            (f) the unenforceability, invalidity or frustration of any
obligations of any of the Owner, any Credit Party, or any other Person under the
Revolving Credit Agreement, any of the other Finance Documents, or any other
document or security.

<PAGE>

      Section 4.4 Moneys Received by Mortgagee. Until the Secured Indebtedness
has been unconditionally and irrevocably paid in full to the satisfaction of the
Mortgagee and the Commitments have been terminated, any moneys received,
recovered or realized under Article VII relating in whole or in part to the
Secured Indebtedness shall be held in a cash collateral account as security for
the Secured Indebtedness and applied to the Secured Indebtedness in accordance
with Section 32.5 of the Revolving Credit Agreement.

                                    ARTICLE V
                    COVENANTS; REPRESENTATIONS AND WARRANTIES

      Section 5.1 Owner's Covenants Concerning the Rigs and Other Matters. The
Owner covenants with the Mortgagee and the other Finance Parties that throughout
the Revolving Credit Facility Period the Owner will:

            (a) comply with and satisfy all the requirements and formalities
established by the Ship Mortgage Act and any other pertinent legislation of the
United States to perfect this Mortgage as a legal, valid and enforceable first
(subject only to Permitted Liens) and preferred Lien upon the Rigs and promptly
to furnish to the Mortgagee from time to time such proofs as the Mortgagee may
request for its satisfaction with respect to the compliance by the Owner with
the provisions of this subsection (a);

            (b) place, and use due diligence to retain, a properly certified
copy of this Mortgage on board each Rig with her papers and cause such certified
copy of this Mortgage to be exhibited to any and all Persons (and to any
representative of the Mortgagee on demand) having business with such Rig which
might give rise to any Lien thereon other than the Lien of this Mortgage,
Permitted Liens, Liens for wages of the crew (including the master of the Rig),
Liens for general average or salvage, Liens for wages of stevedores when
employed directly by a person listed in Section 31341 of the Ship Mortgage Act
and other maritime Liens incurred in the ordinary course of business provided
such other maritime liens are inferior to the Liens created by this Mortgage
(all such Liens herein collectively called "Excepted Liens"); and to place and
keep prominently displayed in the chart room and in the master's cabin of each
Rig a framed printed notice in plain type in English of such size that the
paragraph of reading matter shall cover a space not less than 6 inches wide and
9 inches high reading as follows:

                               NOTICE OF MORTGAGE

            This Rig is covered by a First Preferred Fleet Mortgage
            to Credit Lyonnais New York Branch, as Collateral Agent
            and Mortgagee for the benefit of the Finance Parties
            referred to in the said Mortgage under authority of the
            United States Ship Mortgage Act, as amended and
            recodified as 46 U.S.C. Section 31301 et seq. Under the
            terms of the said Mortgage neither the Owner nor any
            charterer nor the master of this Rig nor any other
            Person has any right, power or authority to create,
            incur or permit to be imposed upon this Rig any lien
            whatsoever other than for crew's wages and salvage and
            other Excepted Liens (as that term is defined in said
            Mortgage);

<PAGE>

            (c) at its sole cost and expense and at no cost to the Mortgagee,
cause this Mortgage to be duly filed with the U.S. Coast Guard National Vessel
Documentation Center in accordance with the provisions of 46 U.S.C.Section31321,
on the date hereof and subsequently duly recorded, and will otherwise comply
with and satisfy all the applicable provisions of the U.S. Code, Title 46, Ch.
301 and Ch. 313, as amended, in order to establish, record and maintain this
Mortgage as a first preferred mortgage thereunder upon the Rigs; and

            (d) do all such other acts and execute all such instruments, deeds,
conveyances, mortgages and assurances as the Mortgagee shall reasonably require
in order to subject the Rigs to the lien of this Mortgage as aforesaid.

      Section 5.2 Representations and Warranties. The Owner hereby represents
and warrants to the Mortgagee and covenants with the Mortgagee that:

            (a)   The Owner is a "citizen" of the United States of America as
defined in 46 U.S.C. Section 802, as amended, duly qualified to engage in the
United States coastwise trade and foreign commerce of the United States, and
shall remain such a citizen during the life of this Mortgage.

            (b) The Owner lawfully owns and is lawfully possessed of the whole
(100%) of each of the Rigs free from any Lien whatsoever other than the lien of
this Mortgage and Excepted Liens, and the Owner will warrant and defend the
title to, and possession of, each of the Rigs and every part thereof for the
benefit of the Mortgagee, against the claims and demands of all persons
whomsoever.

            (c) Except for Excepted Liens, prior to and as of the date of this
Mortgage, the Owner is not aware of any maritime Liens, prior mortgages or other
obligations or liability on the Rig. The Mortgagee acknowledges that is has
received written notice complying with the disclosure requirements of Section
31323 of the Ship Mortgage Act.

                                   ARTICLE VI
                             PROTECTION OF SECURITY

      Section 6.1 Mortgagee's Rights. The Mortgagee shall without prejudice to
its other rights and powers under this Mortgage and the other Finance Documents
be entitled (but not bound) at any time and as often as may be reasonably
necessary to take any such action as it may in the reasonable exercise of its
discretion think fit for the purpose of protecting or maintaining the security
created by this Mortgage and the other Finance Documents (including, without
limitation, any actions entitled under the Revolving Credit Agreement) and all
reasonable expenses, liabilities, or losses (including, without limitation,
reasonable legal fees) so incurred by the Mortgagee and the other Secured
Parties in or about the protection or maintenance of the said security together
with interest payable thereon according to Section 3.1(b) shall be repayable to
it by the Owner on demand; provided that if no Event of Default exists, the
Mortgagee shall give the Owner written notice and opportunity to take such
action on the Mortgagee's behalf prior to taking any such action; provided
further, however, to the extent this Mortgage states that the Mortgagee may take
any action during the occurrence and continuance of an Event of Default

<PAGE>

(including, without limitation, under Article VII hereof), the Mortgagee shall
not be entitled to take such action unless an Event of Default shall have
occurred and be continuing.

                                  ARTICLE VII
                      ENFORCEABILITY AND MORTGAGEE'S POWERS

      Section 7.1 Events of Default. During the continuance of any of the Events
of Default specified in the Revolving Credit Agreement but without the necessity
for any court order or declaration in any jurisdiction to the effect that an
Event of Default has occurred, the security constituted by this Mortgage shall
become immediately enforceable and the Mortgagee shall be entitled, as and when
it may see fit, to put into force and exercise all or any of the powers
possessed by it as mortgagee of the Rigs or otherwise and in particular:

            (a) to exercise all the rights and remedies in foreclosure and
otherwise given to mortgagees by applicable law including the provisions of the
Ship Mortgage Act or any other applicable law including the laws of any other
applicable jurisdiction;

            (b) to take possession of the Rigs or any of them whether actually
or constructively and/or otherwise to take control of such Rigs wherever located
and cause the Owner or any other Person in possession of the Rigs forthwith upon
demand to surrender the same to the Mortgagee without legal process and without
liability of the Mortgagee for any losses or damages incurred thereby and
without having to render accounts to the Owner in connection therewith;

            (c) to require that all policies, contracts, certificates of entry
and other records relating to the Insurance Policies (including details of and
correspondence concerning outstanding claims) be forthwith delivered to or to
the order of the Mortgagee;

            (d) to collect, recover, compromise and give a good discharge for
any and all moneys or claims for moneys then outstanding or thereafter arising
under the Insurance Policies or any Requisition Compensation and to permit any
brokers through whom collection or recovery is effected to charge the usual
brokerage therefor;

            (e) to take over or institute (if necessary using the name of the
Owner) all such proceedings in connection with any Rig, the Insurance Policies,
or any Requisition Compensation as the Mortgagee thinks reasonably necessary and
to discharge, compound, release or compromise claims against the Owner in
respect of any Rig which have given or may give rise to any charge or Lien on
such Rig or which are or may be enforceable by proceedings against such Rig;

            (f) following acceleration of the Revolving Credit Agreement, to
sell any Rig or any share therein, upon advance notice of ten (10) consecutive
days published in any newspaper authorized to publish legal notices of that kind
in the hailing port and the places of sale of the Rigs and by sending notice of
such sale at least fourteen (14) days prior to the date fixed for such sale to
the Owner, and each other Person entitled to notice under applicable Legal
Requirements, free from any claim of or by the Owner of any nature whatsoever,
and with or (subject to the rights of third parties under applicable law)
without the benefit of any charter party or other contract for her employment,
by public auction or private contract at such place

<PAGE>

and upon such commercially reasonable terms (including, without limitation, on
terms such that payment of some or all of the purchase price be deferred) as the
Mortgagee in its absolute discretion may determine with power to postpone any
such sale, without being answerable for any loss occasioned by such sale or
resulting from postponement thereof, except in the case of gross negligence or
willful misconduct, and/or itself to purchase such Rig at any such public
auction and to set off the purchase price against all or any part of the Secured
Indebtedness in the manner specified in Clause 32.5 of the Revolving Credit
Agreement; provided, however that in the event any such Rig shall be offered for
sale by private sale, no newspaper publication of notice shall be required, nor
notice of adjournment of sale;

            (g) subject to the rights of any charter, to manage, insure,
maintain and repair any Rig and to charter, employ, sail or lay up any Rig in
such manner, upon such terms and for such period as the Mortgagee deems
reasonably expedient; and for the purposes aforesaid the Mortgagee shall be
entitled to do all acts and things reasonably incidental or conducive thereto
and in particular to enter into such arrangements respecting such Rig, and the
insurance, management, maintenance, repair, classification, chartering and
employment of such Rig, in all respects as if the Mortgagee were the owner of
such Rig and without being responsible for any loss thereby incurred;

            (h) to recover from the Owner on demand any liabilities, losses and
reasonable expenses as may be incurred by the Mortgagee in or about the exercise
of the power vested in the Mortgagee under Section 7.1(g);

            (i) generally and in addition, but not in lieu of any of the above
rights, to recover from the Owner on demand any liabilities, losses and
reasonable expenses incurred by the Mortgagee in or about or incidental to the
exercise by it of any of the powers aforesaid; and

            (j) generally, take any other action or exercise any other right
permitted by applicable law.

      Section 7.2 Sufficiency of Payments Received. The Mortgagee shall not be
obliged to make any enquiry as to the nature or sufficiency of any payment
received by it under this Mortgage or to make any claim, take any action or
enforce any rights and benefits assigned to the Mortgagee by this Mortgage or to
which the Mortgagee may at any time be entitled hereunder.

      Section 7.3 Mortgagee, Secured Parties Not Liable. Neither the Mortgagee,
the Finance Parties, nor any of their agents, managers, officers, employees,
delegates and advisers shall be liable for any expense, claim, liability, loss,
cost, damage or expense incurred or arising in connection with the exercise or
purported exercise of any rights, powers and discretions under this Mortgage in
the absence of its, his, or her gross negligence or wilful misconduct.

      Section 7.4 No Mortgagee-in-Possession. To the fullest extent permitted by
law, the Mortgagee shall not by reason of the taking possession of any Rig be
liable to account as mortgagee-in-possession or for anything except actual
receipts or be liable for any loss upon realization or for any default or
omission for which a mortgagee-in-possession might be liable.

      Section 7.5 Purchaser's Rights on Sale. Upon any sale of any Rig or any
share therein by the Mortgagee, the purchaser shall not be bound to see or
inquire whether the Mortgagee's

<PAGE>

power of sale has arisen in the manner provided in this Mortgage and the sale
shall be deemed to be within the power of the Mortgagee and the receipt of the
Mortgagee for the purchase money shall effectively discharge the purchaser who
shall not be concerned with the manner of application of the proceeds of sale or
be in any way answerable therefor.

      Section 7.6 Divestiture of Owner's Rights. A sale of any Rig made in
pursuance of this Mortgage, whether under the power of sale hereby granted or
any judicial proceedings, shall operate to divest all right, title and interest
of any nature whatsoever of the Owner therein and thereto, and shall bar the
Owner, its successors and assigns, and all Persons claiming by, through or under
them. No purchaser shall be bound to inquire whether notice has been given or
whether any default has occurred, or as to the propriety of the sale, or as to
application of the proceeds thereof.

                                  ARTICLE VIII
                               FURTHER ASSURANCES

      Section 8.1 Perfection and Preservation of the Collateral. The Owner shall
execute and do all such assurances, acts and things as the Mortgagee may
reasonably require for:

            (a) perfecting or protecting the security created (or intended to be
created) by this Mortgage; or

            (b) preserving or protecting any of the rights of the Mortgagee and
the other Finance Parties under this Mortgage; or

            (c) ensuring that the security constituted by this Mortgage and the
covenants and obligations of the Owner under this Mortgage shall inure to the
benefit of any transferee, successor or assignee of the Mortgagee as is referred
to in Section 12.1; or

            (d) enforcing the security constituted by this Mortgage on or at any
time after the same shall have become enforceable; or

            (e) the exercise of any power, authority or discretion vested in the
Mortgagee under this Mortgage,

in any such case, forthwith upon demand by the Mortgagee and at the expense of
the Owner; provided, however, that, to the extent this Mortgage states that the
Mortgagee may direct the Owner to take an action during the occurrence and
continuance of an Event of Default (including, without limitation, under Section
7 hereof), the Mortgagee shall not be entitled to request the Owner to take such
action unless an Event of Default shall have occurred and be continuing.

                                   ARTICLE IX
                                POWER OF ATTORNEY

      Section 9.1 Owner's Attorney. The Owner, by way of security and in order
to more fully secure the performance of the Owner's obligations under this
Mortgage, hereby irrevocably

<PAGE>

appoints the Mortgagee as its attorney for the duration of the Revolving Credit
Facility Period for the purposes of:

            (a) doing in its name all acts and executing, signing and (if
required) registering in its name all documents which the Owner itself could do,
execute, sign or register in relation to any Rig (including without limitation,
transferring title to such Rig to a third party);

            (b) executing, signing, perfecting, doing and (if required)
registering every such further assurance document, act, or thing as is referred
to in Section 8.1; and

            (c) demanding, collecting, receiving, compromising, and suing for
all freights, hires, earnings, issues, revenues and income of any Rig; provided,
however, that such powers shall not be exercisable by or on behalf of the
Mortgagee unless an Event of Default shall have occurred and be continuing (and,
in the case exercised with respect to an action contemplated by Section 7.1(f),
unless the Loans shall have been accelerated).

      Section 9.2 Third Parties. The exercise of such power as is referred to in
Section 9.1(a) by or on behalf of the Mortgagee shall not put any Person dealing
with the Mortgagee upon any enquiry as to whether this Mortgage has become
enforceable nor shall such Person be in any way affected by notice that this
Mortgage has not become enforceable and, in relation to Sections 9.1(a), 9.1(b)
and 9.1(c), the exercise by the Mortgagee of such power shall be conclusive
evidence as against third parties of its right to exercise the same.

                                    ARTICLE X
                            EXPENSES AND INDEMNITIES

      Section 10.1 Mortgage Preparation. The Owner agrees to pay all reasonable
out-of-pocket costs and expenses of the Mortgagee in connection with the
negotiation, preparation, execution and delivery of this Mortgage and any
amendment, waiver, release or consent relating thereto (including, without
limitation, the reasonable fees and disbursements of counsel and any valuation
fees) and, after the occurrence and during the continuance of an Event of
Default, each of the Mortgagee and the Finance Parties in connection with the
enforcement of this Mortgage (including, without limitation, the actual
reasonable fees and disbursements of counsel for the Mortgagee and the Finance
Parties).

      Section 10.2 Owner's Indemnity. WITHOUT LIMITING THE FOREGOING SECTION
10.1, THE OWNER HEREBY FURTHER INDEMNIFIES THE MORTGAGEE, EACH OTHER FINANCE
PARTY, AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES AND
AGENTS FROM AND HOLDS HARMLESS AND AGREES TO DEFEND EACH OF THEM AGAINST ANY AND
ALL LOSSES, LIABILITIES, OBLIGATIONS, CLAIMS, DAMAGES, OR REASONABLE EXPENSES
INCURRED BY ANY OF THEM, AS A RESULT OF, OR ARISING OUT OF, OR IN ANY WAY
RELATED TO, OR BY REASON OF, (A) ANY INVESTIGATION, LITIGATION OR OTHER
PROCEEDING (WHETHER OR NOT THE MORTGAGEE IS A PARTY THERETO) RELATED TO THE
ENTERING INTO AND/OR PERFORMANCE OF THIS MORTGAGE HEREUNDER OR THE CONSUMMATION
OF ANY TRANSACTIONS CONTEMPLATED HEREBY, WHETHER INITIATED BY THE OWNER OR ANY
OTHER PERSON, INCLUDING WITHOUT LIMITATION, THE ACTUAL REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL INCURRED IN CONNECTION WITH ANY SUCH INVESTIGATION,

<PAGE>

LITIGATION OR OTHER PROCEEDING OR (B) ANY PERSONAL INJURY TO OR DEATH OF OR ANY
LOSS OR DAMAGE TO PROPERTY OF ANY PERSON OR (C) THE ACTUAL OR ALLEGED PRESENCE
OF HAZARDOUS MATERIALS IN THE AIR, SURFACE WATER, GROUNDWATER, SURFACE OR
SUBSURFACE OF ANY RIG, FACILITY OR LOCATION AT ANY TIME OWNED OR OPERATED BY THE
OWNER OR ANY OF ITS AFFILIATES, THE GENERATION, STORAGE, TRANSPORTATION OR
DISPOSAL OF HAZARDOUS MATERIALS AT ANY RIG, FACILITY OR LOCATION AT ANY TIME
OWNED OR OPERATED BY THE OWNER OR ANY OF ITS AFFILIATES, THE NON-COMPLIANCE OF
ANY RIG, FACILITY OR LOCATION AT ANY TIME OWNED OR OPERATED BY THE OWNER OR ANY
OF ITS AFFILIATES WITH FEDERAL, STATE AND LOCAL LAWS, REGULATIONS, AND
ORDINANCES (INCLUDING APPLICABLE PERMITS THEREUNDER) APPLICABLE TO ANY SUCH RIG,
FACILITY OR LOCATION, OR ANY VIOLATION OR ALLEGED VIOLATION OF ANY ENVIRONMENTAL
LAWS ASSERTED AGAINST THE OWNER, ANY OF ITS AFFILIATES, OR ANY RIG, FACILITY OR
LOCATION AT ANY TIME OWNED OR OPERATED BY THE OWNER OR ANY OF ITS AFFILIATES,
INCLUDING, IN EACH CASE, WITHOUT LIMITATION, THE ACTUAL REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL AND OTHER CONSULTANTS INCURRED IN CONNECTION WITH ANY
SUCH INVESTIGATION, LITIGATION OR OTHER PROCEEDING. TO THE EXTENT THAT THE
UNDERTAKING TO INDEMNIFY, PAY OR HOLD HARMLESS AND DEFEND THE MORTGAGEE SET
FORTH IN THIS SECTION 10.2 MAY BE UNENFORCEABLE BECAUSE IT IS VIOLATIVE OF ANY
LAW OR PUBLIC POLICY, THE OWNER SHALL MAKE THE MAXIMUM CONTRIBUTION TO THE
PAYMENT AND SATISFACTION OF EACH OF THE INDEMNIFIED LIABILITIES WHICH IS
PERMISSIBLE UNDER APPLICABLE LAW. SUCH OBLIGATION TO INDEMNIFY, HOLD HARMLESS
AND DEFEND THE MORTGAGEE AND OTHER PERSONS SET OUT ABOVE SHALL APPLY
IRRESPECTIVE OF THE NEGLIGENCE OR STRICT LIABILITY OF THE MORTGAGEE OR ANY OTHER
INDEMNIFIED PERSON, UNLESS SUCH LOSS OR INJURY ARISES DIRECTLY OUT OF THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF MORTGAGEE OR SUCH OTHER INDEMNIFIED PERSON.

      Section 10.3 Payment Currency. If, under any applicable law or regulation,
and whether pursuant to a judgment being made or registered against the Owner or
the liquidation of the Owner or for any other reason, any payment under or in
connection with this Mortgage is made in a currency (the "Payment Currency")
other than the currency in which such payment is due under or in connection with
this Mortgage (the "Contractual Currency"), then to the extent that the amount
of such payment actually received by the Mortgagee, when converted into the
Contractual Currency at the rate of exchange, (a) falls short of the amount due
under or in connection with this Mortgage, the Owner, as a separate and
independent obligation, shall indemnify and hold harmless the Mortgagee against
the amount of such shortfall or (b) exceeds the amount due under or in
connection with this Mortgage, the Mortgagee shall reimburse the Owner the
excess. For the purposes of this Section 10.3, "rate of exchange" means the rate
at which the Mortgagee is able on the date of such payment (or, if it is not
practicable for the Mortgagee to purchase the contractual currency with the
Payment Currency on the date of such payment, at the rate of exchange as soon
afterwards as is practicable for the Mortgagee to do so) to purchase the
Contractual Currency with the Payment Currency and shall take into account any
premium and other costs of exchange with respect thereto.

<PAGE>

                                   ARTICLE XI
                                 COMMUNICATIONS

      Section 11.1 Notices. All notices required to be given to the Mortgagee
shall be made to the following address:

                  Credit Lyonnais New York Branch
                  1301 Avenue of the Americas
                  New York, New York  10019
                  Attention: Gloria Beloti-Fields
                  17th Floor - Syndications
                  Telecopier:  212-459-3172
                  Telephone:  212-261-7186

All other notices shall be made to the addresses given in Clause 34 of the
Revolving Credit Agreement.

                                  ARTICLE XII
                                   ASSIGNMENTS

      Section 12.1 Assignees. This Mortgage shall be binding upon and shall
inure to the benefit of the Owner, the Mortgagee and the Finance Parties and
their respective transferees, successors and permitted assigns, and references
in this Mortgage to any of them shall be construed accordingly.

      Section 12.2 No Assignment by Owner. Except as permitted by the Revolving
Credit Agreement, the Owner may not assign or transfer any of the Rigs or its
rights and/or obligations under this Mortgage.

                                  ARTICLE XIII
                                WAIVER; AMENDMENT

      Section 13.1 No Waiver. None of the terms and conditions of this Mortgage
may be changed, waived, modified or varied in any manner whatsoever unless in
writing duly signed by the Owner and the Mortgagee (with the consent of either
the Required Revolving Lenders or, to the extent required by Clause 38 of the
Revolving Credit Agreement, all of the Revolving Lenders).

                                  ARTICLE XIV
                                  MISCELLANEOUS

      Section 14.1 Governing Law. This Mortgage shall be governed by the federal
maritime laws of the United States of America and to the extent necessary by the
laws of the State of New York.

      Section 14.2 No Invalidity, Etc. If at any time any one or more of the
provisions in this Mortgage is or becomes invalid, illegal or unenforceable in
any respect under any law or

<PAGE>

regulation, the validity, legality and enforceability of the remaining
provisions of this Mortgage shall not be in any way affected or impaired
thereby.

      Section 14.3 Delegation of Powers. The Mortgagee, at any time and from
time to time, may delegate by power of attorney or in any other manner to any
Person or Persons all or any of the powers, authorities and discretions which
are for the time being exercisable by the Mortgagee under this Mortgage in
relation to the Rigs. Any such delegation may be made upon such terms and
subject to such regulations as the Mortgagee may think fit. The Mortgagee shall
not be in any way liable or responsible to the Owner for any loss or damage
arising from any act, default, omission or misconduct on the part of any such
delegate (other than gross negligence or willful misconduct); provided such
delegation has been made in good faith.

      Section 14.4 Counterparts. This instrument may be executed in any number
of counterparts, and each of such counterparts shall for all purposes be deemed
to be an original.

      Section 14.5 Mortgagee. For purposes of the Ship Mortgage Act, the
"mortgagee" under this Mortgage is Credit Lyonnais New York Branch, in its
capacity as Collateral Agent.

                                   ARTICLE XV
                                  JURISDICTION

      Section 15.1 New York. Any legal action or proceeding with respect to this
Mortgage may be brought in the courts of the United States or State of New York
sitting in New York City in the Borough of Manhattan and the Owner hereby
accepts for itself and its property, generally and unconditionally, the
non-exclusive jurisdiction of such court. The Owner further irrevocably consents
to the service of process out of such court in any such action or proceeding in
the manner provided for in the Revolving Credit Agreement. Nothing herein shall
affect the right of the Mortgagee to serve process in any other manner permitted
by law or to commence legal proceedings or otherwise proceed against the Owner
in any other jurisdiction.

      Section 15.2 Power to Seize Rig or Take Action. Without prejudice to the
generality of Section 15.1, the Mortgagee shall have the right to arrest and
take action against any Rig or the Owner at whatever place such Rig or the Owner
shall be found and for the purpose of any action which the Mortgagee may bring
before the courts of such jurisdiction or other judicial authority and for the
purpose of any action which the Mortgagee may bring against such Rig, any writ,
notice, judgment or other legal process or documents may (without prejudice to
any other method of service under applicable law) be served upon the master of
such Rig (or upon anyone acting as the master) and such service shall be deemed
good service on the Owner for all purposes.

<PAGE>

      IN WITNESS whereof the Owner has caused this Mortgage to be executed the
day and year first before written.

                                       [OWNER]

                                       By:__________________________________
                                       Name:________________________________
                                       Title:_______________________________

<PAGE>

                           ACKNOWLEDGMENT OF MORTGAGE

STATE OF TEXAS          }
                        }
COUNTY OF HARRIS        }

      On this 20th day of June, 2002 before me personally appeared
______________________________ to me known who being by me duly sworn did depose
and say that he is the ______________________________, of [Owner], the company
described in and which executed the foregoing instrument; and that he signed his
name thereto pursuant to authority granted to him by the __________________ of
said company; and that said instrument is the act and deed of the company.

      And the said ___________________________ did further produce to me
sufficient proof that he is the __________________________ of said company and
that he was duly authorized by the said company to execute the foregoing
mortgage, and I the notary hereby certify that the signature of the said
______________________ on the foregoing mortgage is authentic.

                                          _____________________________________
                                                     Notary Public

<PAGE>

                                    EXHIBIT A

<TABLE>
<CAPTION>
                                                                       Official
Rig Name           Owner                              Flag              Number
--------           -----                              ----              ------
<S>                <C>                                <C>              <C>

</TABLE>

<PAGE>

                                    EXHIBIT B

                            List of Revolving Lenders

Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019

Credit Industriel et Commercial
4, rue Gaillon
75 017 Paris Cedex 02
France

Banque de l'Economie, du Commerce et de la Monetique
34, rue du Wacken
67 000 Strasbourg

Natexis Banques Populaires
45 rue Saint Dominique
75007 Paris France

Nordea Bank Finland Plc, New York Branch
437 Madison Avenue
21st Floor
New York, NY 10022

DVB Group, DVB NedshipBank
609 Fifth Avenue, Fifth Floor
New York, NY 10017 - 1021

<PAGE>

                                   SCHEDULE 11

                           FORM OF SECURITY AGREEMENT

         This Security Agreement dated as of June 20, 2002 ("Security
Agreement") is between _______________________________, a __________________
(the "Debtor"), and Credit Lyonnais New York Branch, as collateral agent
("Collateral Agent") for the Finance Parties (as defined below).

                                  INTRODUCTION

         A.       Pride Offshore, Inc., a Delaware corporation (the "Borrower"),
has entered into a Revolving Credit Agreement dated as of June 20, 2002 (as
amended, modified, supplemented or restated from time to time, the "Revolving
Credit Agreement", the defined terms of which are used in this Security
Agreement unless otherwise defined herein) together with the lenders party
thereto (the "Revolving Lenders"), and Credit Lyonnais New York Branch, as
administrative agent ("Administrative Agent") for the Revolving Lenders,
providing for the making of Loans by the Revolving Lenders and the Swingline
Lender, and the issuance of Letters of Credit by the Issuing Banks.

         B.       The Debtor has guaranteed the Borrower's obligations owing to
the Finance Parties under the Finance Documents pursuant to Clause 21 of the
Revolving Credit Agreement (the "Guaranty").](1)

         C.       Under the Credit Agreement, it is required that the Debtor
shall secure its obligations under the [Finance Documents][Guaranty] by entering
into this Security Agreement.

         Therefore, the Debtor hereby agrees with the Collateral Agent for its
benefit and the benefit of the other Finance Parties as follows:

Section 1. Definitions.

         Any terms used in this Security Agreement that are defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New York
("UCC") shall have the meanings assigned to those terms by the UCC as of the
date of this Security Agreement, unless otherwise defined in this Security
Agreement.

Section 2. Security Interest.

         2.1      Grant of Security Interest. The Debtor hereby grants to the
Collateral Agent for its benefit and the ratable benefit of the Finance Parties
a security interest in the Collateral (as defined in Section 2.2 below) to
secure the performance and payment of (a) the Obligations of the Debtor now and
hereafter existing under the Revolving Credit Agreement, and any other

---------

(1)  To be inserted in Security Agreements executed by Material Subsidiaries
     of the Borrower.
<PAGE>
Finance Documents, whether for principal, Reimbursement Obligations, interest,
fees, expenses, indemnification or otherwise (all such obligations being the
"Secured Obligations").

         2.2      Collateral. "Collateral" shall mean all of Debtor's right,
title, and interest in the following, whether now owned or hereafter created or
acquired or arising:

                  (a) Earnings. (i) (A) All rent, charterhire, day rates and
fees and other moneys and rights and claims to moneys payable to the Debtor
arising from, the Mortgaged Revolving Credit Facility Rigs listed on Schedule
2.2 attached hereto (the "Debtor Rigs"); (B) all rights of the Debtor to payment
under, and any moneys whatsoever payable to the Debtor under, any bareboat or
time charter, drilling contract, or other contract for the use or employment of
the Debtor Rigs, and all other rights and benefits whatsoever accruing to the
Debtor thereunder, including (but without prejudice to the generality of the
foregoing) all claims for damages for any breach by any charterer or other party
thereto of such bareboat or time charter, drilling contract, or other contract
for the use or employment of the Debtor Rigs; and (C) all freights, passage
moneys, hire moneys, compensation payable to the Debtor in the event of the
requisition of any Debtor Rig for hire, remuneration for salvage and towage
services, demurrage and detention moneys, and any other earnings whatsoever due
or to become due to the Debtor and all insurance proceeds payable to the Debtor
with respect to any third party liability for any loss of or damage to all or
any part of any Debtor Rig and (ii) all moneys or other compensation payable by
reason of requisition of title or for hire or other compulsory acquisition of
any Debtor Rig or its capture, seizure, arrest, detention or confiscation by any
Governmental Authority or Persons acting on behalf of any Governmental Authority
("Earnings");

                  (b) Insurance Policies. (i) All insurances (including, without
limitation, all certificates of entry in protection and indemnity and war risks
associations or clubs) in respect of the Debtor Rigs and all renewals of and
replacements for the same, (ii) all claims, returns of premium and other moneys
due and to become due under or in respect of said insurances and (iii) all other
rights of the Debtor under or in respect of said insurances; and

                  (c) Proceeds. Any proceeds of any of the foregoing Collateral,

         2.3      Debtor Remains Liable. Anything herein to the contrary
notwithstanding: (a) the Debtor shall remain liable under any contracts and
agreements included in the Collateral to the extent set forth therein to perform
its obligations thereunder to the same extent as if this Agreement had not been
executed; (b) as between the Debtor and the Collateral Agent, the exercise by
the Collateral Agent of any rights hereunder shall not release the Debtor from
any obligations under any contracts and agreement included in the Collateral;
and (c) Collateral Agent shall not have any obligation under any contracts and
agreements included in the Collateral by reason of this Agreement, nor shall
Collateral Agent be obligated to perform or fulfill any of the obligations of
the Debtor thereunder, including any obligation to make any inquiry as to the
nature or sufficiency of any payment the Debtor may be entitled to receive
thereunder, to present or file any claim, or to take any action to collect or
enforce any claim for payment thereunder.

Section 3. Representations and Warranties. The Debtor hereby represents and
warrants the following to the Collateral Agent and the Finance Parties:

                                      -2-
<PAGE>
         3.1      Debtor's Name. The true and correct name of the Debtor, is the
name of the Debtor as listed on the signature pages to this Security Agreement
or as most recently notified to the Collateral Agent pursuant to Section 4.5
hereof.

         3.2      Lien Priority and Perfection. The security interest in the
Collateral created pursuant to this Security Agreement creates a valid and
binding security interest in the Collateral, securing the performance and
payment of the Secured Obligations, and such security interests will be
perfected first priority security interests upon the filing of appropriate
financing statements naming the Debtor as debtor and Collateral Agent as
collateral agent in the jurisdictions set forth on the attached Schedule 3.2, or
as otherwise notified to the Collateral Agent, to the extent such interest may
be perfected under the UCC.

Section 4. Debtors' Covenants.

         4.1      Further Assurances. The Debtor agrees that at any time, at the
Debtor's expense, the Debtor shall promptly execute and deliver all further
instruments and documents and take all further action that may be necessary and
that the Collateral Agent may reasonably request in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable the
Collateral Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral, provided, however, that, to the extent this Agreement
states that the Collateral Agent may direct the Debtor to take an action during
the occurrence and continuance of an Event of Default (including, without
limitation, under Section 5 hereof), the Collateral Agent shall not be entitled
to request the Debtor to take such action unless an Event of Default shall have
occurred and be continuing. Without limiting the generality of the foregoing,
each Debtor will at the Collateral Agent's request (a) deliver and pledge to the
Collateral Agent duly indorsed or accompanied by duly executed instruments of
transfer or assignment, all in form and substance reasonably satisfactory to the
Collateral Agent any instrument, document or chattel paper representing any
Earnings or right to receive Earnings or arising as a result of the disposition
of any Collateral, and (b) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices as may
be reasonably necessary, and as the Collateral Agent may reasonably request, in
order to perfect and preserve the security interests granted or purported to be
granted hereby. The Debtor shall furnish to the Collateral Agent from time to
time any statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the
Collateral Agent may reasonably request.

         4.2      Insurance. Upon the request of the Collateral Agent, after the
occurrence and during the continuance of an Event of Default, the Debtor shall
execute and deliver to the Collateral Agent any additional assignments and other
documents as may be necessary or desirable to enable the Collateral Agent to
directly collect any insurance proceeds.

         4.3      Transfer of Collateral; Release of Security Interest. The
Debtor shall not sell, assign (by operation of law or otherwise), or otherwise
dispose of any of the Collateral, except as permitted by the Revolving Credit
Agreement (including, without limitation but for the avoidance of doubt, by
merger permitted under the Term Loan Agreement). The Collateral Agent shall
promptly, at the Debtor's expense, execute and deliver all further instruments
and documents, and take all further action that the Debtor may reasonably
request in order to release

                                      -3-
<PAGE>
(for itself and on behalf of the other Term Secured Lenders) its security
interest in (a) any Collateral which is disposed of in accordance with the terms
of the Revolving Credit Agreement or (b) any Collateral the release of which is
contemplated by the Term Loan Agreement or this Security Agreement (including,
without limitation, in the case of termination of this Security Agreement
according to Section 7.4 hereof).

         4.4      Change of Name, State of Incorporation. The Debtor will notify
                  the Collateral Agent in writing 15 days prior to any change in
the Debtor's name or jurisdiction of formation.

Section 5. Remedies. If any Event of Default shall have occurred and remain
uncured:

         5.1      UCC Remedies. To the extent permitted by law, the Collateral
Agent may exercise in respect of the Collateral, in addition to other rights and
remedies provided for in this Security Agreement or otherwise available to it,
all the rights and remedies of a collateral agent under the UCC (whether or not
the UCC applies to the affected Collateral).

         5.2      Assembly of Collateral. The Collateral Agent may require the
Debtor to, at the Debtor's expense, promptly assemble all or part of the
Collateral and make it available to the Collateral Agent at a place to be
designated by the Collateral Agent which is reasonably convenient to all
parties. The Collateral Agent may occupy any premises owned or leased by the
Debtor where the Collateral or any part thereof is assembled for a reasonable
period in order to effectuate its rights and remedies hereunder or under law,
without obligation to the Debtor in respect of such occupation. The Collateral
Agent shall have no obligation to take any action to assemble or otherwise take
control of the Collateral, whether for the purposes of sale or otherwise.

         5.3      Sale of Collateral. Upon at least ten Business Days prior
written notice to the Debtor of the time and place of any proposed sale or other
disposition, the Collateral Agent may sell all or part of the Collateral at a
public or private sale, at any of the Collateral Agent's offices or elsewhere,
for cash, on credit, or for future delivery, and upon such other terms as the
Collateral Agent deems commercially reasonable. The Collateral Agent shall not
be obligated to make any sale of Collateral regardless of notice of sale having
been given. The Collateral Agent may adjourn any public or private sale from
time-to-time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned in such announcement.

         5.4      Earnings. The Collateral Agent may, or may direct any Debtor
to, take any action the Collateral Agent deems necessary or advisable to enforce
collection of the Earnings including, without limitation, notifying the
corresponding account debtors or obligors of the assignment of such Earnings to
the Collateral Agent and directing such account debtors or obligors to make
payment of all amounts due or to become due directly to the Collateral Agent.
Upon such notification and direction, and at the expense of the Debtor, the
Collateral Agent may enforce collection of any such Earnings, and adjust,
settle, or compromise the amount or payment thereof in the same manner and to
the same extent as the Debtor might have done. After receipt by the Debtor of
notice that the Collateral Agent has so notified and directed an account debtor
or obligor all amounts and proceeds (including instruments) received by the
Debtor in respect of the corresponding Earnings shall be received in trust for
the benefit of the

                                      -4-
<PAGE>
Collateral Agent hereunder, shall be segregated from other funds of the Debtor,
and shall promptly be paid over to the Collateral Agent in the same form as so
received (with any necessary endorsement) to be held as Collateral. The Debtor
shall not adjust, settle, or compromise the amount or payment of any receivable,
or release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.

         5.5      Application of Collateral. The proceeds of any sale, or other
realization upon all or any part of the Collateral shall be applied by the
Collateral Agent in order set forth in Clause 32.5 of the Revolving Credit
Agreement.

Section 6. Collateral Agent as Attorney-in-Fact for Debtor.

         6.1      Attorney-In-Fact. The Debtor hereby irrevocably appoints the
Collateral Agent as the Debtor's attorney-in-fact, with full authority to, if an
Event of Default shall have occurred and be continuing (a) act for the Debtor
and in the name of the Debtor to, in the Collateral Agent's discretion if an
Event of Default shall have occurred and be continuing, file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of the Debtor where permitted
by law, (b) receive, endorse, and collect any drafts or other instruments,
documents, and chattel paper which are part of the Collateral, and (c) ask,
demand, collect, sue for, recover, compromise, receive, and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Collateral and (d) file any claims or take any action or institute any
proceedings which the Collateral Agent may reasonably deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of the Collateral Agent with respect to any of the Collateral.

         The power of attorney granted hereby is coupled with an interest and is
irrevocable.

         6.2      Collateral Agent Performance. If the Debtor fails to perform
any covenant contained herein, the Collateral Agent may itself perform, or cause
performance of, such covenant, and the Debtor shall pay for the expenses of the
Collateral Agent incurred in connection therewith in accordance with Section
7.1, provided that if no Event of Default exists, the Collateral Agent shall
give the Debtor written notice and opportunity to perform prior to itself
performing or causing to perform.

         6.3      Collateral Agent's Duties. The powers conferred on the
Collateral Agent under this Security Agreement are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the reasonable care of any Collateral in its possession
and the accounting for monies or other property actually received by it
hereunder, the Collateral Agent shall have no duty as to any Collateral or as to
the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral. The Collateral Agent shall be
deemed to have exercised reasonable care as to the custody and preservation of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Collateral Agent accords its own property,
provided that the Collateral Agent shall have no responsibility for taking any
necessary steps to preserve rights against any parties with respect to any
Collateral.

                                      -5-
<PAGE>
Section 7. Miscellaneous.

         7.1      Expenses. The Debtor shall upon demand pay to the Collateral
Agent for its benefit and the benefit of the other Finance Parties the amount
without duplication of any reasonable expenses, including the reasonable fees
and disbursements of its counsel and of any experts and agents, which the
Collateral Agent and the other Finance Parties may incur in connection with (a)
the custody, preservation, use, or operation of, or the sale, collection, or
other realization of, any of the Collateral, (b) the exercise or enforcement of
any of the rights of the Collateral Agent or any Secured Party hereunder, and
(c) the failure by the Debtor to perform or observe any of the provisions
hereof.

         7.2      Amendments; Etc. No amendment or waiver of any provision of
this Security Agreement nor consent to any departure by the Debtor from the
terms of this Security Agreement shall be effective unless the same shall be in
writing and authenticated by the Debtor, the Collateral Agent, and either, as
required by the Revolving Credit Agreement, the Required Revolving Lenders or
all the Revolving Lenders, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.

         7.3      Addresses for Notices. All notices and other communications
provided for hereunder shall be made as provided in the Revolving Credit
Agreement. All such notices and other communications shall be effective as
provided in the Revolving Credit Agreement.

         7.4      Continuing Security Interest; Transfer of Interest. Unless
earlier terminated according to Section 4.3 hereof, this Security Agreement
shall create a continuing security interest in the Collateral and shall (a)
remain in full force and effect until indefeasible payment in full and
termination of the Secured Obligations, (b) be binding upon the Debtor, the
Collateral Agent, the Finance Parties and their respective successors, and
assigns, and (c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of, and be binding upon, the Collateral Agent,
the Finance Parties, and their respective successors, transferees, and assigns.
Without limiting the generality of the foregoing clause, when any Secured Party
assigns or otherwise transfers any interest held by it under the Revolving
Credit Agreement or other Credit Document to any other Person pursuant to the
terms of the Revolving Credit Agreement or other Credit Document, that other
Person shall thereupon become vested with all the benefits held by such Secured
Party under this Security Agreement. Upon the indefeasible payment in full and
termination of the Secured Obligations, the security interest granted hereby
shall terminate and all rights to the Collateral shall revert to the Debtor to
the extent such Collateral shall not have been sold or otherwise applied
pursuant to the terms hereof.

         7.5      Choice of Law. This Security Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of New York,
except to the extent that the validity or perfection of the security interests
hereunder, or remedies hereunder, in respect of any particular Collateral are
governed by the laws of a jurisdiction other than the State of New York.

                                      -6-
<PAGE>
         The parties hereto have caused this Security Agreement to be duly
executed as of the date first above written.

                                      DEBTOR:

                                      [DEBTOR]

                                      By:
                                         -------------------------------------
                                      Name:
                                           -----------------------------------
                                      Title:
                                            ----------------------------------

                                      -7-
<PAGE>
                                      COLLATERAL AGENT:

                                      CREDIT LYONNAIS NEW YORK BRANCH,
                                      as Collateral Agent

                                      By:
                                         -------------------------------------
                                      Name:
                                           -----------------------------------
                                      Title:
                                            ----------------------------------

                                      -8-
<PAGE>
                                  SCHEDULE 2.2

                                   Debtor Rigs
<PAGE>
                                  SCHEDULE 3.2

                        List of UCC Filing Jurisdictions

<PAGE>
                                 SCHEDULE 22.17
                INITIAL MORTGAGED REVOLVING CREDIT FACILITY RIGS

<TABLE>
<CAPTION>

RIG                        REGISTERED OWNER        FLAG     OFFICIAL OR PATENT     HOME PORT     CLASS       LOCATION      OPERATING
---                        ----------------        ----     -------------------    ---------     -----       --------      ---------
                                                                  NUMBER                                                    STATUS
                                                                  ------                                                    -------
<S>                    <C>                      <C>         <C>                  <C>             <C>       <C>            <C>
Pride Alabama            Pride Offshore, Inc.       US            648034             Houma        yes           GOM        stacked
Pride Alaska             Pride Offshore, Inc.       US            649720             Houma        yes           GOM        stacked
Pride Arkansas           Pride Offshore, Inc.       US            626102             Houma        yes           GOM        stacked
Pride California         Pride Offshore, Inc.     Panama       19861-PEXT-6       Panama City     yes           GOM        stacked
Pride Colorado           Pride Offshore, Inc.       US            646539             Houma        yes           GOM        stacked
Pride Kansas             Pride Offshore, Inc.     Panama       27750-PEXT-1       Panama City     yes           GOM       operating
Pride Louisiana        Mexico Drilling Limited    Panama        9920-PEXT-6       Panama City     yes      GOM (Mexico)   operating
                                 LLC
Pride Mississippi        Pride Offshore, Inc.       US            636406             Houma        yes           GOM        stacked
Pride Nevada           Mexico Drilling Limited   Vanuatu            921            Port Vila      yes      GOM (Mexico)   operating
                                 LLC
Pride New Mexico         Pride Offshore, Inc.       US            643364             Houma        yes           GOM       operating
Pride North Dakota          Pride Offshore          US            636379            Houston       yes           GOM       operating
                          International LLC
Pride Rotterdam             Pride Offshore       Vanuatu           1127            Port Vila      yes         N. Sea      operating
                          International LLC
Pride South Carolina   Mexico Drilling Limited   Vanuatu           1225            Port Vila      yes      GOM (Mexico)   operating
                                 LLC
Pride South Pacific    Pride South Pacific LLC    Panama       6346-PEXT-11       Panama City     yes        W. Africa     stacked
Pride Tennessee             Pride Offshore          US            640126            Houston       yes           GOM        stacked
                          International LLC
Pride Texas              Pride Offshore, Inc.     Panama       27989-PEXT-1       Panama City     yes           GOM       operating
Pride Utah               Pride Offshore, Inc.     Panama       26284-PEXT-3       Panama City     yes           GOM        stacked
</TABLE>
<PAGE>
<TABLE>
<S>                    <C>                        <C>       <C>                  <C>             <C>       <C>            <C>
Pride West Virginia         Pride Offshore          US            651994            Houston       yes           GOM       operating
                          International LLC
Pride Wyoming            Pride Offshore, Inc.     Panama       23888-PEXT-1       Panama City     yes           GOM        stacked
</TABLE><PAGE>
                                                                     EXHIBIT 4.2

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

                                 $200,000,000.00

                               TERM LOAN AGREEMENT

                                      Among

                              PRIDE OFFSHORE, INC.,

                                  as Borrower,

                           PRIDE INTERNATIONAL, INC.,
                          MEXICO DRILLING LIMITED LLC,
                           PRIDE CENTRAL AMERICA, LLC,
                              PRIDE DRILLING, LLC,
                            PRIDE NORTH AMERICA LLC,
                        PRIDE OFFSHORE INTERNATIONAL LLC,
                                       and
                             PRIDE SOUTH PACIFIC LLC

                                 as Guarantors,

                   THE LENDERS FROM TIME TO TIME PARTY HERETO,

                                as Term Lenders,

                                       and

                         CREDIT LYONNAIS NEW YORK BRANCH

  as Lead Arranger, Sole Bookrunner, Administrative Agent and Collateral Agent

                                  June 20, 2002

================================================================================
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
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ARTICLE I      DEFINITIONS AND ACCOUNTING TERMS..........................     1

      Section 1.1    Certain Defined Terms...............................     1

      Section 1.2    Computation of Time Periods.........................    25

      Section 1.3    Accounting Terms....................................    25

      Section 1.4    Types of Loans......................................    25

      Section 1.5    Miscellaneous.......................................    25

ARTICLE II     THE term loan.............................................    25

      Section 2.1    Term Commitments....................................    25

      Section 2.2    Method of Borrowing.................................    25

      Section 2.3    Fees................................................    29

      Section 2.4    Repayment...........................................    29

      Section 2.5    Interest............................................    29

      Section 2.6    Prepayments.........................................    31

      Section 2.7    Funding Losses......................................    35

      Section 2.8    Increased Costs.....................................    36

      Section 2.9    Payments and Computations...........................    37

      Section 2.10   Taxes...............................................    38

      Section 2.11   Sharing of Payments, Etc............................    40

      Section 2.12   Applicable Lending Offices..........................    40

ARTICLE III    CONDITIONS OF LENDING.....................................    41

      Section 3.1    Conditions Precedent to Term Loans..................    41

      Section 3.3    Determinations Under Section 3.1....................    46

ARTICLE IV     REPRESENTATIONS AND WARRANTIES............................    46

      Section 4.1    Existence; Subsidiaries.............................    46

      Section 4.2    Power and Authority.................................    46

      Section 4.3    Authorization and Approvals.........................    47

      Section 4.4    Enforceable Obligations.............................    47

      Section 4.5    Financial Statements................................    47

      Section 4.6    True and Complete Disclosure........................    48

      Section 4.7    Litigation..........................................    48

      Section 4.8    Use of Proceeds.....................................    48

      Section 4.9    Investment Company Act..............................    48
</TABLE>
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
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      Section 4.10   Public Utility Holding Company Act..................    48

      Section 4.11   Taxes...............................................    48

      Section 4.12   Pension Plans.......................................    49

      Section 4.13   Condition of Property; Casualties...................    49

      Section 4.14   Insurance...........................................    50

      Section 4.15   No Defaults.........................................    50

      Section 4.16   Environmental Condition.............................    50

      Section 4.17   Title to Property, Etc..............................    51

      Section 4.18   Security Interests..................................    51

      Section 4.19   Subsidiaries; Corporate Structure...................    51

      Section 4.20   Labor Relations.....................................    51

      Section 4.21   Merger..............................................    52

      Section 4.22   Senior Debt.........................................    52

      Section 4.23   Guarantors..........................................    52

      Section 4.24   Citizenship.........................................    52

      Section 4.25   Intellectual Property...............................    52

      Section 4.26   Solvency............................................    52

      Section 4.27   Compliance with Laws................................    53

ARTICLE V      AFFIRMATIVE COVENANTS.....................................    53

      Section 5.1    Compliance with Laws, Etc...........................    53

      Section 5.2    Maintenance of Insurance............................    53

      Section 5.3    Preservation of Existence, Etc......................    57

      Section 5.4    Payment of Taxes, Etc...............................    57

      Section 5.5    Reporting Requirements..............................    57

      Section 5.6    Maintenance of Property.............................    61

      Section 5.7    Inspection..........................................    61

      Section 5.8    Use of Proceeds.....................................    61

      Section 5.9    Nature of Business..................................    61

      Section 5.10   Books and Records...................................    61

      Section 5.11   Rig Appraisal Reports...............................    62

      Section 5.12   Operation of Mortgaged Term Loan Facility Rigs......    62

      Section 5.13   New Subsidiaries; Permitted Holding Company.........    64
</TABLE>
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
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      Section 5.14   Additional Rigs.....................................    64

      Section 5.15   Further Assurances in General.......................    64

ARTICLE VI     NEGATIVE COVENANTS........................................    65

      Section 6.1    Liens, Etc..........................................    65

      Section 6.2    Debts, Guaranties and Other Obligations.............    68

      Section 6.3    Merger or Consolidation; Asset Sales................    70

      Section 6.4    Investments.........................................    72

      Section 6.5    Transactions With Affiliates........................    73

      Section 6.6    Compliance with ERISA...............................    73

      Section 6.7    Restricted Payments.................................    73

      Section 6.8    Maintenance of Ownership of Subsidiaries............    74

      Section 6.9    Agreements Restricting Liens and Distributions......    74

      Section 6.10   Subordinated Debt...................................    74

      Section 6.11   Financial Contract Obligations......................    75

      Section 6.12   Charter and Leases..................................    75

      Section 6.13   Maintenance Capital Expenditures....................    75

      Section 6.14   Limitation on Changes in Fiscal Periods.............    75

      Section 6.15   Mortgaged Term Loan Facility Rigs...................    76

      Section 6.16   Leverage Ratio......................................    77

      Section 6.17   Interest Coverage Ratio.............................    77

      Section 6.18   Maximum Debt to Capitalization Ratio................    78

      Section 6.19   Minimum Net Worth...................................    78

ARTICLE VII    EVENTS OF DEFAULT.........................................    78

      Section 7.1    Events of Default...................................    78

      Section 7.2    Optional Acceleration of Maturity...................    81

      Section 7.3    Automatic Acceleration of Maturity..................    81

      Section 7.4    Non-exclusivity of Remedies.........................    81

      Section 7.5    Right of Set-off....................................    81

      Section 7.6    Application of Proceeds.............................    82

ARTICLE VIII   GUARANTY..................................................    82

      Section 8.1    Guaranty............................................    82

      Section 8.2    Guaranty Absolute...................................    83
</TABLE>
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
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      Section 8.3    Waiver..............................................    84

      Section 8.4    Subrogation.........................................    84

ARTICLE IX     THE AGENTS................................................    85

      Section 9.1    Appointment; Nature of Relationship.................    85

      Section 9.2    Powers..............................................    85

      Section 9.3    General Immunity....................................    85

      Section 9.4    No Responsibility for Loans, Recitals, etc..........    85

      Section 9.5    Action on Instructions of Term Lenders..............    86

      Section 9.6    Employment of Agents and Counsel....................    86

      Section 9.7    Reliance on Documents; Counsel......................    86

      Section 9.8    Agent's Reimbursement and Indemnification...........    86

      Section 9.9    Notice of Default...................................    87

      Section 9.10   Rights as a Term Lender.............................    87

      Section 9.11   Lender Credit Decision..............................    87

      Section 9.12   Successor Administrative Agent......................    87

      Section 9.13   Collateral Matters..................................    88

ARTICLE X      BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS.........    89

      Section 10.1   Successors and Assigns..............................    89

      Section 10.2   Participations......................................    90

      Section 10.3   Assignments.........................................    90

      Section 10.4   Dissemination of Information........................    91

      Section 10.5   Tax Treatment.......................................    92

ARTICLE XI     MISCELLANEOUS.............................................    92

      Section 11.1   Amendments, Etc.....................................    92

      Section 11.2   Notices, Etc........................................    93

      Section 11.3   No Waiver; Remedies.................................    93

      Section 11.4   Costs and Expenses..................................    93

      Section 11.5   Binding Effect......................................    94

      Section 11.6   Indemnification.....................................    94

      Section 11.7   Execution in Counterparts...........................    94

      Section 11.8   Survival of Representations, etc....................    94

      Section 11.9   Severability........................................    95
</TABLE>
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
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      Section 11.10  Usury Not Intended..................................    95

      Section 11.11  Judgment Currency...................................    95

      Section 11.12  Governing Law.......................................    96

      Section 11.13  Consent to Jurisdiction.............................    96

      Section 11.14  Waiver of Jury......................................    97

      Section 11.15  Third Party Beneficiaries...........................    97
</TABLE>

EXHIBITS:

Exhibit A       -       Form of Assignment and Acceptance
Exhibit B       -       Form of Compliance Certificate
Exhibit C       -       Form of Notice of Borrowing
Exhibit D       -       Form of Notice of Conversion or Continuation
Exhibit E       -       Form of Security Agreement
Exhibit F       -       Form of Term Note
Exhibit G       -       Form of Rig Mortgage
Exhibit H       -       Form of the Borrower's Outside Counsel Opinion
Exhibit I       -       Form of the Borrower's General Counsel Opinion
Exhibit J       -       Form of the Borrower's Local Counsel Opinion
Exhibit K       -       Form of Joinder Agreement

SCHEDULES:

Schedule 1              -   Notice Information for Term Lenders
Schedule 4.16           -   Environmental Disclosures
Schedule 4.17           -   Initial Mortgaged Term Loan Facility Rigs
Schedule 4.19           -   Subsidiaries/Corporate Structure
Schedule 6.2            -   Existing Debt
<PAGE>
                               TERM LOAN AGREEMENT

      This Term Loan Agreement dated as of June 20, 2002 is among Pride
Offshore, Inc., a Delaware corporation (the "Borrower"), the Guarantors, the
Term Lenders, and Credit Lyonnais New York Branch, as Administrative Agent for
the Term Lenders.

      The Borrower, the Term Lenders, and the Administrative Agent agree as
follows:

                                    ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

      Section 1.1 Certain Defined Terms. As used in this Agreement, the terms
defined above shall have the meanings set forth therein and the following terms
shall have the following meanings (unless otherwise indicated, such meanings to
be equally applicable to both the singular and plural forms of the terms
defined):

      "Acceptable Security Interest" in any Property means a Lien (a) which
exists in favor of the Collateral Agent for the benefit of the Term Secured
Parties; (b) which is superior to all other Liens except Permitted Liens; (c)
which secures the Obligations; and (d) which is perfected and enforceable
against all Persons in preference to any rights of any Person therein (other
than rights in respect of Permitted Liens).

      "Acquisition" means any Going Concern Acquisition or any Asset
Acquisition.

      "Additional Appraisal Report" has the meaning set forth in Section
5.11(d).

      "Administrative Agent" means CLNY in its capacity as contractual
representative of the Term Lenders pursuant to Article IX, and any successor
administrative agent pursuant to Section 9.12.

      "Affiliate" of any Person means any other Person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person or any Subsidiary of such Person. The
term "control" (including the terms "controlled by" or "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 a Person, whether through
ownership of a Control Percentage, by contract or otherwise.

      "Agent" means the Administrative Agent or the Collateral Agent, and
"Agents" means all such Persons collectively.

      "Agreement" means this Term Loan Agreement dated as of June 20, 2002 among
the Borrower, the Guarantors, the Term Lenders, the Administrative Agent, the
Collateral Agent, and the Arranger, as it may be amended or modified and in
effect from time to time.
<PAGE>
      "Alternate Base Rate" means, for any day, a fluctuating rate of interest
per annum equal to the higher of (a) the Prime Rate in effect for such day and
(b) the sum of the Federal Funds Rate in effect for such day plus -1/2 of 1% per
annum.

      "Applicable Lending Office" means, with respect to any Term Lender, the
office, branch, subsidiary, affiliate or correspondent bank of such Term Lender
listed on Schedule 1 or such other office, branch, subsidiary, affiliate or
correspondent bank as such Term Lender may from time to time specify to the
Borrower and the Administrative Agent from time to time.

      "Applicable Margin" means, at any time with respect to each Type of Term
Loan, the percentage rate per annum as set forth below for the Level in effect
at such time:

<TABLE>
<CAPTION>
               LEVEL I   LEVEL II   LEVEL III   LEVEL IV   LEVEL V   LEVEL VI
               -------   --------   ---------   --------   -------   --------
<S>            <C>       <C>        <C>         <C>        <C>       <C>
 Eurodollar     2.00%     2.25%       2.50%      2.75%      3.25%     3.75%
   Loans

 Base Rate      0.50%     0.75%       1.00%      1.25%      1.75%     2.25%
   Loans
</TABLE>

      "Approved Fund" means, with respect to any Term Lender that is a fund that
invests in commercial loans, any other fund that invests in commercial loans and
is managed or advised by the same investment advisor as such Term Lender or by
an Affiliate of such investment advisor.

      "Approved Rigbroker" means Normarine Offshore Consultants, Inc., Johan G.
Olsen Shipbrokers A\S or any other first-class, international, independent, sale
and purchase offshore drilling rig broker reasonably acceptable to the
Administrative Agent.

      "Arranger" means CLNY.

      "Asset Acquisition" means, any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Parent Company or any of its Subsidiaries acquires any land or offshore drilling
rig or vessel, or fleet of rigs or vessels, or any other asset the acquisition
of which is not made to maintain or improve an existing asset.

      "Assignment and Acceptance" has the meaning set forth in Section 10.3(a).

      "Base Rate Loan" means a Term Loan which bears interest as provided in
Section 2.5(a).

      "Borrowing" means a borrowing hereunder, (a) made by the Term Lenders on
the Borrowing Date, or (b) Converted or Continued by the Term Lenders on the
same date of Conversion or Continuation, consisting, in either case, of the
aggregate amount of the several Term Loans of the same Type and, in the case of
Eurodollar Loans, for the same Interest Period.

      "Borrowing Date" means the date on which the Term Loans are made
hereunder.

      "Business Day" means, (a) with respect to any payment or rate selection of
Eurodollar Loans, a day (other than a Saturday or Sunday) on which banks
generally are open in New York for the conduct of substantially all of their
commercial lending activities and on which dealing in
<PAGE>
Dollars are carried on in the London interbank market and (b) for all other
purposes, a day (other than a Saturday or Sunday) on which banks generally are
open in New York for the conduct of substantially all of their commercial
lending activities.

      "Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.

      "Capitalized Lease" of a Person means any lease of any Property by such
Person as lessee which would, in accordance with GAAP, be required to be
classified and accounted for as a capital lease on the balance sheet of such
Person.

      "Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with GAAP.

      "Cash Collateral Account" means a special interest bearing cash collateral
account pledged by the Borrower to the Collateral Agent for the ratable benefit
of the Term Secured Parties containing cash deposited pursuant to Section 2.6(c)
to be maintained at the Collateral Agent's office in accordance with Section
2.13 and bear interest or be invested in the Collateral Agent's reasonable
discretion.

      "Cash Equivalents" means (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or government of a
Participating Member State or issued by any agency thereof and backed by the
full faith and credit of the United States of America or a Participating Member
State, in each case maturing within one year from the date of acquisition; (b)
certificates of deposit, time deposits, eurodollar time deposits or overnight
bank deposits having maturities of six months or less from the date of
acquisition issued by any Revolving Lender or by any commercial bank organized
under the laws of the United States of America or any state thereof or of any
Participating Member State or any province or other jurisdiction thereof having
combined capital and surplus of not less than $500,000,000 (or the equivalent in
any other currency); (c) commercial paper of an issuer rated at least A-2 by S&P
or P-2 by Moody's, or carrying an equivalent rating by a nationally recognized
rating agency, if both of the two named rating agencies cease publishing ratings
of commercial paper issuers generally, and maturing within six months from the
date of acquisition; (d) repurchase obligations of any Revolving Lender or of
any commercial bank satisfying the requirements of clause (b) or (c) of this
definition, having a term of not more than 30 days with respect to securities
issued or fully guaranteed or insured by the United States government or
government of a Participating Member State; (e) securities with maturities of
one year or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth, territory, province or other jurisdiction of the United
States or any other foreign country, by any political subdivision or taxing
authority of any such state, commonwealth, territory, province or other
jurisdiction, the securities of which state, commonwealth, territory, province,
other jurisdiction, political subdivision or taxing authority (as the case may
be) are rated at least A by S&P or A by Moody's; (f) securities with maturities
of six months or less from the date of acquisition backed by standby letters of
credit issued by any Revolving Lender or any commercial bank satisfying
<PAGE>
the requirements of clause (b) or (c) of this definition; and (g) shares of
money market mutual or similar funds which invest exclusively in assets
satisfying the requirements of clauses (a) through (f) of this definition.

      "Casualty Event" means, with respect to any Mortgaged Term Loan Facility
Rig owned by any Person, (a) any loss or damage to, or any condemnation or
taking of, such Mortgaged Term Loan Facility Rig other than a Total Loss of any
Mortgaged Term Loan Facility Rig, for which such Person receives, anticipates
recovering or has filed a claim for Casualty Proceeds or (b) any Lien imposed by
any Governmental Authority pursuant to Environmental Law and that has not been
released or bonded within ten Business Days following the applicable Credit
Party's receipt of notice of such imposition unless such Lien is being contested
in good faith and by appropriate proceedings.

      "Casualty Proceeds" means the proceeds of any insurance, condemnation
award or other compensation paid or payable to any Credit Party or the
Collateral Agent in respect of any Casualty Event, less the reasonable fees,
taxes and expenses paid to collect such proceeds.

      "CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, state and local analogs, and all rules and
regulations and requirements thereunder in each case as now or hereafter in
effect.

      "CERCLIS", or the "CERCLA Information System", means the inventory
maintained by the EPA of sites with potential Releases of Hazardous Substances
that have been or may need to be addressed by the CERCLA program.

      "Change of Control" means any of (a) any acquisition pursuant to which any
Person or group (as defined in Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) other than a Permitted
Holding Company has become the direct or indirect beneficial owner (as defined
in Rule 13d-3 under the Exchange Act) of more than 35% of the Voting Stock of
the Parent Company; (b) the Parent Company is merged with or into or
consolidated with another Person and, immediately after giving effect to the
merger or consolidation, less than a majority of the outstanding voting
securities entitled to vote generally in the election of directors or persons
who serve similar functions of the surviving or resulting Person are then
beneficially owned (within the meaning of Rule 13d-3 of the Exchange Act) in the
aggregate by (x) the stockholders of the Parent Company immediately prior to
such merger or consolidation, or (y) if the record date has been set to
determine the stockholders of the Parent Company entitled to vote on such merger
or consolidation, the stockholders of the Parent Company as of such record date
or (z) a Permitted Holding Company; (c) the Parent Company, either individually
or in conjunction with one or more of its Subsidiaries, sells, conveys,
transfers or leases, or its Subsidiaries sell, convey, transfer or lease, all or
substantially all of the assets of the Parent Company and its Subsidiaries,
taken as a whole (either in one transaction or a series of related
transactions), including Capital Stock of its Subsidiaries, to any Person except
as otherwise permitted by Section 6.3; (d) the liquidation or dissolution of the
Parent Company, (e) the first day on which a majority of the individuals who
constitute the Board of Directors of the Parent Company are not Continuing
Directors or (f) the Parent Company shall cease to own, directly or indirectly,
100% of the Capital Stock of the Borrower.
<PAGE>
      "CLNY" means Credit Lyonnais New York Branch.

      "Closing Date" means the date on which the conditions precedent set forth
in Section 3.1 shall have been satisfied, which date shall not be later than
June 30, 2002.

      "Code" means the United States Internal Revenue Code of 1986, as amended,
reformed or otherwise modified from time to time.

      "Collateral" means the Mortgaged Term Loan Facility Rigs and all other
collateral as defined in each of the Security Documents.

      "Collateral Agent" means the Administrative Agent acting as collateral
agent and/or mortgagee for the Term Secured Parties.

      "Collateral Disposition" means (a) the sale, transfer, contribution or
other disposition by (i) the Borrower to any Person other than a Guarantor or
(ii) any Guarantor to any Person other than the Borrower or any other Guarantor,
of any Mortgaged Term Loan Facility Rig and (b) any Total Loss of any Mortgaged
Term Loan Facility Rig.

      "Collateral Disposition Proceeds" means (a) with respect to any Collateral
Disposition involving a sale, transfer, contribution or other disposition of a
Mortgaged Term Loan Facility Rig, the gross proceeds thereof received by any
Credit Party less the reasonable fees, taxes and expenses paid by such Person
that are directly related to such sale and the amount of reserves, if any,
recorded in accordance with GAAP for indemnity or other obligations of the
Parent Company and its Subsidiaries directly related to such sale or the
Mortgaged Term Loan Facility Rig and (b) with respect to any Collateral
Disposition involving a Total Loss of a Mortgaged Term Loan Facility Rig, the
proceeds of any insurance proceeds, condemnation award or other compensation
paid or payable to any Credit Party or the Collateral Agent in respect of such
Total Loss less the reasonable fees, taxes and expenses paid to collect such
proceeds and the amount of reserves, if any, recorded in accordance with GAAP
for indemnity or other obligations of the Parent Company and its Subsidiaries
directly related to such sale or the Mortgaged Term Loan Facility Rig.

      "Compliance Certificate" means a Compliance Certificate signed by a
Responsible Officer of the Parent Company in substantially the form of the
attached Exhibit B.

      "Confidential Information Memorandum" means the Confidential Information
Memorandum dated May 2002 (together with all amendments and supplements thereto)
and furnished to the initial Term Lenders in connection with the syndication of
(a) the Term Loans made hereunder and (b) the Revolving Commitments made under
the Revolving Credit Agreement.

      "Consolidated EBITDA" means, for any period of determination, (a)
Consolidated Operating Income for such period of determination plus (b) to the
extent deducted in determining Consolidated Operating Income, depreciation,
amortization and other non-cash expense for such period of determination, and
cash costs directly related to the Acquisition by the Parent Company of Marine
Drilling Companies, Inc. and its Subsidiaries, each calculated on a consolidated
basis in accordance with GAAP; provided, however, that for each transaction
<PAGE>
effected on or prior to the time of calculation of Consolidated EBITDA that is
reasonably expected to have the effect of increasing or decreasing Consolidated
EBITDA by at least $10,000,000 during the twelve month period following the
transaction date, the Pro Forma Consolidated EBITDA of such transaction shall be
included in Consolidated EBITDA.

      "Consolidated Net Debt" means, at any time, the Debt of the Parent Company
and its Subsidiaries less Unrestricted Cash, each calculated on a consolidated
basis as of such time; provided, however, that, unless the Parent Company elects
otherwise, the MARAD Financing may be excluded from Consolidated Net Debt if (a)
the MARAD Financing is non-recourse to the Parent Company and its Subsidiaries
(other than Special Purpose Subsidiaries), (b) neither the Parent Company nor
any of its Subsidiaries (other than Special Purpose Subsidiaries) shall have any
liability whatsoever, whether direct or indirect, contingent or otherwise, for
the Debt that constitutes part of the MARAD Financing and (c) the provider of
the MARAD Financing shall have no recourse to any assets of the Parent Company
and its Subsidiaries (other than MARAD Collateral).

      "Consolidated Net Income" means, for any period, the net income of the
Parent Company and its Subsidiaries calculated on a consolidated basis for such
period after taxes, as determined in accordance with GAAP.

      "Consolidated Net Interest Expense" means, for any period, the cash
interest expense of the Parent Company and its Subsidiaries (and for so long as
the MARAD Financing is excluded from Consolidated Net Debt, including cash
interest expense from the MARAD Financing, if any, to the extent paid by the
Parent Company or one of its Subsidiaries other than the Special Purpose
Subsidiaries associated with the MARAD Financing) that is not funded by further
drawdown on, or other increase in principal amount of, the associated Debt less
cash interest income of the Parent Company and its Subsidiaries, each calculated
on a consolidated basis in accordance with GAAP for such period; provided,
however, that for each transaction effected on or prior to the time of
calculation of Consolidated Net Interest Expense that is reasonably expected to
have the effect of increasing or decreasing Consolidated EBITDA by at least
$10,000,000 per annum, Consolidated Net Interest Expense will be calculated on a
pro forma basis as if any Debt associated with such transaction had been
incurred on the first day of the period of determination at an interest rate
equivalent to the interest rate associated with such Debt on the current date of
determination and giving effect to the amortization schedule starting from the
current date of determination.

      "Consolidated Net Worth" means, at any time, the net worth or total
shareholders equity of the Parent Company and its Subsidiaries on a consolidated
basis determined in accordance with GAAP.

      "Consolidated Operating Income" means, for any period, the revenues of the
Parent Company and its Subsidiaries for such period after operating costs and
selling, general and administrative expenses but, for the avoidance of doubt,
before taxes and interest, each calculated on a consolidated basis in accordance
with GAAP; provided, however, that the effects of the MARAD Vessels will be
excluded from Consolidated Operating Income for so long as the MARAD Financing
is excluded from Consolidated Net Debt.
<PAGE>
      "Consolidated Tangible Net Assets" means, as of any date, the assets
(other than the Intangible Assets) which would be reflected on a consolidated
balance sheet of the Parent Company and its Subsidiaries prepared as of such
date in accordance with GAAP.

      "Consolidated Tangible Net Worth" means, at any time, the Consolidated Net
Worth less the aggregate book values of the Intangible Assets.

      "Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or the obligations of any such Person as general
partner of a partnership with respect to the liabilities of the partnership.

      "Continue", "Continuation", and "Continued" each refers to a continuation
of Term Loans for an additional Interest Period upon the expiration of the
Interest Period then in effect for such Term Loans.

      "Continuing Director" means an individual who (a) is a member of the full
Board of Directors of the Parent Company and (b) either (i) was a member of the
Board of Directors of the Parent Company on the Closing Date or (ii) whose
nomination for election or election to the Board of Directors of the Parent
Company was approved by vote of at least two-thirds of the directors then still
in office who were either directors on the Closing Date or whose election or
nomination for election was previously so approved.

      "Control Percentage" means, with respect to any Person, the percentage of
the outstanding Capital Stock (or other ownership interests and including any
options, warrants or similar rights to purchase such Capital Stock) of such
Person having ordinary voting power which gives the direct or indirect holder of
such Capital Stock or ownership interests the power to elect a majority of the
Board of Directors (or other applicable governing body) of such Person.

      "Controlled Group" means all members of a controlled group of corporations
or other business entities and all trades (whether or not incorporated) under
common control which, together with the Parent Company or any of its
Subsidiaries, are treated as a single employer under Section 414 of the Code.

      "Convert", "Conversion", and "Converted" each refers to a conversion of
Term Loans of one Type into Term Loans of another Type pursuant to Section
2.2(b).

      "Credit Documents" means this Agreement, any Term Notes issued pursuant to
Section 2.2(g), the Security Documents, any Joinder Agreement and each other
agreement, instrument or document executed by any Credit Party or any of their
respective officers at any time in connection with this Agreement.

      "Credit Party" means the Borrower and any Guarantor.
<PAGE>
      "Debt," for any Person, means without duplication:

      (a)   indebtedness of such Person for borrowed money (but, for the
avoidance of doubt, excluding accounts payable arising in the ordinary course of
such Person's business payable on terms customary in the trade which shall not
remain unpaid for a period of more than 90 days after such liabilities become
due and payable);

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

      (c)   obligations of such Person to pay the deferred purchase price of
property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade which shall
not remain unpaid for a period of more than 90 days after such liabilities
become due and payable);

      (d)   Capitalized Lease Obligations;

      (e)   all obligations of such Person in respect of financial letters of
credit, bank guarantees, acceptance facilities, bills of exchange or similar
instruments which are issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable;

      (f)   Off-Balance Sheet Liabilities;

      (g)   indebtedness or obligations of others, whether or not assumed,
secured by Liens or payable out of the proceeds or production from Property on
or in respect of any Property now or hereafter owned or acquired by such Person,
the amount of such Debt being deemed to be the lesser of the value of such
Property and the amount of the obligation so secured; and

      (h)   Contingent Obligations for the Debt of another Person referred to in
clauses (a) through (g) of this definition.

but, for the avoidance of doubt, shall not include bid, surety or appeal bonds,
performance bonds or other obligations of a like nature or performance letters
of credit or similar arrangements issued for the account of the Parent Company
or any of its Subsidiaries.

The amount of Debt of any Person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations as of such date, less, in each case, the
outstanding balance at such date of cash and Cash Equivalents deposited in
restricted accounts that require the provider of such Debt to consent to
withdrawal.

      "Debt Incurrence" means any issuance for cash or Cash Equivalents by the
Parent Company or any of its Subsidiaries of any Debt after the Closing Date not
permitted pursuant to Section 6.2.

      "Debt Incurrence Proceeds" means, with respect to any Debt Incurrence, all
cash and Cash Equivalents received by the Parent Company or any of its
Subsidiaries from such Debt
<PAGE>
Incurrence after payment of, or provision for, all brokerage commissions and
other reasonable out-of-pocket fees and expenses actually incurred.

      "Default" means (a) an Event of Default or (b) any event or condition
which with notice or lapse of time or both would, unless cured or waived, become
an Event of Default.

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

      "Eligible Assignee" means a Term Lender, a Revolving Lender, an Affiliate
or an Approved Fund of a Term Lender or a Revolving Lender, or a fund which is
in the business of purchasing or investing in loans or other securities, a
commercial bank or other financial institution that is approved by the
Administrative Agent, and, so long as no Default exists, is approved by the
Borrower, in either case, such approval not to be unreasonably withheld.

      "Environment" or "Environmental" shall have the meanings set forth in 43
U.S.C. Section 9601(8)(1988).

      "Environmental Claim" means any third party (including governmental
agencies and employees) action, lawsuit, claim, regulatory action or proceeding,
order, decree, consent agreement or notice of potential or actual responsibility
or violation which seeks to impose liability under any Environmental Law.

      "Environmental Law" means all Legal Requirements arising from, relating
to, or in connection with the Environment, including, without limitation,
CERCLA, the Outer Continental Shelf Lands Act, the Federal Water Pollution
Control Act of 1972 and the Oil Pollution Act of 1990 (as applicable), relating
to (a) pollution, contamination, injury, destruction, loss, protection, cleanup,
reclamation or restoration of the air, surface water, groundwater, land surface
or subsurface strata, or other natural resources; (b) solid, gaseous or liquid
waste generation, treatment, processing, recycling, reclamation, cleanup,
storage, disposal or transportation; (c) exposure to pollutants, contaminants,
hazardous, medical, infectious, or toxic substances, materials or wastes; or (d)
the manufacture, processing, handling, transportation, distribution in commerce,
use, storage or disposal of hazardous, medical, infectious, or toxic substances,
materials or wastes.

      "Environmental Permit" means any permit, license, order, approval or other
authorization under Environmental Law.

      "EPA" means the United States Environmental Protection Agency or any
successor thereto.

      "Equity Issuance" means any issuance of equity securities (including any
preferred equity securities) by the Parent Company or any of its Subsidiaries
other than equity securities issued (a) to the Parent Company or one of its
Subsidiaries, (b) pursuant to employee or director and officer stock option
plans in the ordinary course of business, (c) pursuant to the Pride
International, Inc. Direct Stock Purchase Plan or in connection with the Parent
Company's program for the issuance and sale from time to time of the Parent
Company's common stock pursuant to an agency agreement between the Parent
Company and a sales agent providing for sales by means of ordinary brokers'
transactions through the facilities of the New York Stock
<PAGE>
Exchange at prices prevailing at the time of sale less a selling commission to
the sales agent, and (d) pursuant to the exercise of conversion rights with
respect to the Parent Company's convertible securities outstanding on the
Closing Date.

      "Equity Issuance Proceeds" means, with respect to any Equity Issuance, all
cash and Cash Equivalents received by the Parent Company or any of its
Subsidiaries from such Equity Issuance after payment of, or provision for, all
brokerage commissions and other reasonable out-of-pocket fees and expenses
actually incurred.

      "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time-to-time.

      "Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D.

      "Eurodollar Loan" means a Term Loan which bears interest based on the
Eurodollar Rate.

      "Eurodollar Rate Reserve Percentage" of any Term Lender for the Interest
Period for any Eurodollar Loan means the reserve percentage applicable during
such Interest Period (or if more than one such percentage shall be so
applicable, the daily average of such percentages for those days in such
Interest Period during which any such percentage shall be so applicable) under
regulations issued from time-to-time by the Federal Reserve Board for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for such Term
Lender with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities having a term equal to such Interest Period.

      "Eurodollar Rate" means, with respect to a Eurodollar Loan for the
relevant Interest Period, the applicable British Bankers' Association Interest
Settlement Rate for deposits in Dollars appearing on Reuters Screen FRBD as of
11:00 a.m. (London, England time) two Business Days prior to the first day of
such Interest Period, and having a maturity equal to such Interest Period,
provided that (a) if Reuters Screen FRBD is not available to the Administrative
Agent for any reason, the applicable Eurodollar Rate for the relevant Interest
Period shall instead be the applicable British Bankers' Association Interest
Settlement Rate for deposits in Dollars as reported by any other generally
recognized financial information service as of 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period, and having a
maturity equal to such Interest Period, and (b) if no such British Bankers'
Association Interest Settlement Rate for deposits in Dollars is available to the
Administrative Agent, the applicable Eurodollar Rate for the relevant Interest
Period shall instead be the rate determined by the Administrative Agent to be
the rate at which CLNY or one of its Affiliate banks offers to place deposits in
Dollars with first class banks in the London interbank market at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period, in the approximate amount of CLNY's relevant Eurodollar Loan
and having a maturity equal to such Interest Period.

      "European Facility" means the Facility Agreement for a U.S.$125,000,000
Secured Revolving Credit Facility to Pride Foramer SAS and Forasub B.V. arranged
by Natexis Banques Populaires, as lead arranger, agent and security agent,
Credit Industriel et Commercial, as
<PAGE>
arranger, and BNP Paribas and Credit Lyonnais, as co-arrangers, as the same may
be amended, supplemented, restated or otherwise modified from time to time.

      "Events of Default" has the meaning set forth in Section 7.1.

      "Existing Bank Facility" means the Amended and Restated Credit Agreement
dated as of August 12, 1998 among Marine Drilling Companies, Inc., the lenders
named therein, ABN AMRO Bank N.V., as administrative agent for such lenders, and
Christiania Bank og Kreditkasse, New York Branch, as syndication agent, as
amended.

      "Federal Funds Effective Rate" means, for any day, a fluctuating interest
rate per annum equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published for such day (or, if such day is
not a Business Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations at approximately 10:00 a.m.
(New York time) on such day on such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it.

      "Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any of its successors.

      "Finance Documents" has the meaning set forth in the Revolving Credit
Agreement.

      "Finance Parties" has the meaning set forth in the Revolving Credit
Agreement.

      "Financial Contract" of a Person means (a) any exchange-traded or
over-the-counter futures, forward, swap or option contract or other financial
instrument with similar characteristics or (b) any Rate Hedging Agreement.

      "Financial Contract Obligations" of a Person means any and all obligations
of such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all
Financial Contracts, and (b) any and all cancellations, buy backs, reversals,
terminations or assignments of any Financial Contract.

      "Financial Statements" means (a) audited consolidated balance sheets of
the Parent Company and its Subsidiaries as at December 31, 1999, December 31,
2000 and December 31, 2001 and the related consolidated statements of income,
cash flow, and retained earnings of the Parent Company and its Subsidiaries for
each of the fiscal years then ended, copies of which have been furnished to the
Administrative Agent, and (b) the unaudited consolidated balance sheet of the
Parent Company and its Subsidiaries as at March 31, 2002, and the related
consolidated statements of income, cash flow, and retained earnings of the
Parent Company and its Subsidiaries for the fiscal quarter then ended, copies of
which have been furnished to the Administrative Agent.

      "Fund," "Trust Fund," or "Superfund" means the Hazardous Substance
Response Trust Fund, established pursuant to 42 U.S.C. Section 9631 (1988) and
the Post-closure Liability Trust Fund,
<PAGE>
established pursuant to 42 U.S.C. Section 9641 (1988), which statutory
provisions have been amended or repealed by the Superfunds Amendments and
Reauthorization Act of 1986, and the "Fund," "Trust Fund," or "Superfund" that
are now maintained pursuant to Section 9507 of the Code.

      "GAAP" means with respect to any financial statements of the Parent
Company or any of its Subsidiaries, or calculations related to such financial
statements of the Parent Company or any of its Subsidiaries, United States
generally accepted accounting principles as in effect from time-to-time applied
on a basis consistent with the requirements of Section 1.3.

      "Going Concern Acquisition" means, any transaction, or any series of
related transactions, consummated on or after the date of this Agreement, by
which the Parent Company or any of its Subsidiaries (i) acquires any going
business or all or substantially all of the assets of any firm, corporation or
limited liability company, or division thereof, whether through purchase of
assets, merger, or otherwise, or (ii) directly or indirectly acquires (in one
transaction or as the most recent transaction in a series of transactions) at
least a majority (in number of votes) of the securities of a corporation which
have ordinary voting power for the election of directors (other than securities
having such power only by reason of the happening of a contingency) or a
majority (by percentage or voting power) of the outstanding ownership interests
of a partnership or limited liability company (but, for the avoidance of doubt,
except in the case of (ii) above where such acquisition would reasonably be
considered an Asset Acquisition).

      "Governmental Authority" means, as to any Person in connection with any
subject, any foreign, supranational, national, state or provincial governmental
authority (or any political subdivision thereof), any governmental or regulatory
agency, department, commission, board, bureau, authority or instrumentality
lawfully entitled to exercise any executive, judicial, legislative, police,
regulatory or taxing authority or power or any government court, in each case,
having jurisdiction over such Person or such Person's Property in connection
with such subject.

      "Governmental Proceedings" means any action or proceedings by or before
any Governmental Authority, including, without limitation, the promulgation,
enactment or entry of any Legal Requirement.

      "Guarantors" means (a) the Parent Company, (b) Mexico Drilling Limited
LLC, Pride Central America, LLC, Pride Drilling, LLC, Pride North America LLC,
Pride Offshore International LLC and Pride South Pacific LLC; and (c) each
Material Subsidiary of the Borrower that becomes a guarantor of all or a portion
of the Obligations and which has entered into a Joinder Agreement substantially
in the form of the attached Exhibit K.

      "Hazardous Substance" means the substances identified as such pursuant to
CERCLA and those regulated under any other Environmental Law, including without
limitation pollutants, contaminants, petroleum, petroleum products,
radionuclides, radioactive materials, and medical and infectious waste.

      "Hazardous Waste" means the substances regulated as such pursuant to any
Environmental Law.
<PAGE>
      "Index Debt" means senior, unsecured, long-term indebtedness for borrowed
money of the Parent Company that is not guaranteed by any other Person or
subject to any other credit enhancement.

      "Initial Mortgaged Term Loan Facility Rigs" means each of the vessels
listed on Schedule 4.17.

      "Initial Rig Appraisal Report" has the meaning specified in Section
3.1(i).

      "Insurance Policies" includes (a) all insurances (including, without
limitation, all certificates of entry in protection and indemnity and war risks
associations or clubs) in respect of the Mortgaged Term Loan Facility Rigs,
whether heretofore, now or hereafter effected, and all renewals of or
replacements for the same, (b) all claims, returns of premium and other moneys
and claims for moneys due and to become due under or in respect of said
insurances, and (c) all other rights of each owner of a Mortgaged Term Loan
Facility Rig under or in respect of said insurances.

      "Intangible Assets" means (a) deferred assets, other than prepaid
insurance and prepaid taxes, (b) patents, copyrights, trademarks, tradenames,
franchises, goodwill, experimental expenses and other similar assets which would
be classified as intangible assets on a balance sheet prepared in accordance
with GAAP, and (c) unamortized debt discount and expense.

      "Intercompany Debt" means all Debt owing by any Credit Party to the Parent
Company or any of its Subsidiaries (including any other Credit Party).

      "Interest Coverage Ratio" means, for the Parent Company and its
Subsidiaries on a consolidated basis, as of the end of any fiscal quarter, for
the then most-recently ended four fiscal quarters, the ratio of (a) Consolidated
EBITDA to (b) Consolidated Net Interest Expense.

      "Interest Period" means, for each Eurodollar Loan comprising part of the
Borrowing, the period commencing on the date of such Eurodollar Loan or the date
of the Conversion of any existing Base Rate Loan into such Eurodollar Loan and
ending on the last day of the period selected by the Borrower pursuant to the
provisions below and Section 2.2 and, thereafter, each subsequent period
commencing on the last day of the immediately preceding Interest Period and
ending on the last day of the period selected by the Borrower pursuant to the
provisions below and Section 2.2. The duration of each such Interest Period
shall be one, two, three, or six months (or such other period that is acceptable
to the Term Lenders), in each case as the Borrower may select; provided,
however, that:

      (a)   the Borrower may not select any Interest Period for any Term Loan
which ends after any principal repayment date unless, after giving effect to
such selection, the aggregate unpaid principal amount of Term Loans that are
Base Rate Loans and Term Loans having Interest Periods which end on or before
such principal repayment date shall be at least equal to the amount of Term
Loans due and payable on or before such date;

      (b)   Interest Periods commencing on the same date for Term Loans by each
Term Lender comprising part of the same Borrowing shall be of the same duration;
<PAGE>
      (c)   whenever the last day of any Interest Period would otherwise occur
on a day other than a Business Day, the last day of such Interest Period shall
be extended to occur on the next succeeding Business Day, provided that if such
extension would cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day;

      (d)   any Interest Period 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 calendar month in which it would have ended if there were a
numerically corresponding day in such calendar month;

      (e)   the Borrower may not select any Interest Period for any Term Loan
which ends after the Term Loan Maturity Date; and

      (f)   at the Administrative Agent's sole discretion, the Borrower may not
select any Interest Period for any Eurodollar Loan longer than one month until
the satisfactory completion of the syndication of this Agreement by the
Arranger.

      "Investment" of any Person means any loan, advance (other than commission,
travel and similar advances to officers and employees, drawing accounts and
similar expenditures or prepayments or deposits made in the ordinary course of
business) or extension of credit that constitutes Debt of the Person to whom it
is extended or contribution of capital by such Person; stocks, bonds, mutual
funds, partnership interests, notes (including structured notes), debentures or
other securities owned by such Person; any deposit accounts and certificates of
deposit owned by such Person (but, for the avoidance of doubt, excluding capital
expenditures of such Person determined in accordance with GAAP).

      "ISM Code" has the meaning set forth in Section 4.27.

      "Legal Requirement" means, as to any Person, any law, statute, ordinance,
decree, award, requirement, order, writ, judgment, injunction, rule, regulation
(or official interpretation of any of the foregoing) of, and the terms of any
license or permit issued by, any Governmental Authority which is binding on such
Person.

      "Level I, Level II, Level III, Level IV, Level V and Level VI", and
individually, a "Level", shall mean the level determined by the senior secured
ratings by Moody's or S&P, respectively, applicable on such date to the Term
Loans:

<TABLE>
<CAPTION>
                Level                 Term Loan Facility Ratings
                -----                 --------------------------
<S>                                   <C>
               Level I                BBB+ or higher by S&P
                                      Baa1 or higher by Moody's

              Level II                BBB by S&P
                                      Baa2 by Moody's

              Level III               BBB- by S&P
                                      Baa3 by Moody's
</TABLE>
<PAGE>
<TABLE>
<S>                                   <C>
              Level IV                BB+ by S&P
                                      Ba1 by Moody's

               Level V                BB by S&P
                                      Ba2 by Moody's

              Level VI                BB- or lower by S&P
                                      Ba3 or lower by Moody's
</TABLE>

      For purposes of the foregoing, (a) if neither Moody's nor S&P shall have
in effect a rating for the Term Loans (other than by reason of the circumstances
referred to in the last sentence of this definition), then the level shall be
based upon the ratings by Moody's and S&P, respectively, applicable on such date
to the Index Debt which ratings the Parent Company will maintain until the Term
Loan Maturity Date; (b) if either Moody's or S&P (but not both) shall have in
effect a rating for the Term Loans, then the level shall be based upon that
rating; (c) if neither Moody's nor S&P shall have in effect a rating for the
Term Loans or the Index Debt (other than by reason of the circumstances referred
to in the last sentence of this definition), then the level shall be deemed to
be Level VI; (d) if the ratings established or deemed to have been established
by Moody's and S&P for the Term Loans or the Index Debt, as the case may be,
shall fall within different Levels, the Applicable Margin shall be based on the
higher of the two ratings unless one of the two ratings is two or more Levels
lower than the other, in which case the Applicable Margin shall be determined by
reference to the Level next above that of the lower of the two ratings; and (e)
if the ratings established or deemed to have been established by Moody's or S&P
for the Term Loans or the Index Debt, as the case may be, shall be changed
(other than as a result of a change in the rating system of Moody's or S&P),
such change shall be effective as of the date on which it is first announced or
published by the applicable rating agency or, in the absence of such
announcement or publication, on the effective date of such rating as determined
by the Administrative Agent. Each change in the Applicable Margin shall apply
during the period commencing on the effective date of such change and ending on
the date immediately preceding the effective date of the next such change. If
the rating system of Moody's or S&P shall change, or if both such rating
agencies shall cease to be in the business of rating corporate debt obligations,
the Borrower and the Term Lenders shall negotiate in good faith to amend this
definition to reflect such changed rating system or the unavailability of
ratings from such rating agencies and, pending the effectiveness of any such
amendment, the Applicable Margin shall be determined by reference to the rating
most recently in effect prior to such change or cessation.

      "Leverage Ratio" means, for the Parent Company and its Subsidiaries on a
consolidated basis, as of the end of any fiscal quarter, the ratio of (a)
Consolidated Net Debt to (b) Consolidated EBITDA for the then most-recently
ended four fiscal quarters.

      "Lien" means any mortgage, lien (statutory or other), pledge, assignment,
charge, deed of trust, security interest, hypothecation, preference, deposit
arrangement, encumbrance, priority or other security arrangement or preferential
arrangement of any kind or nature whatsoever to secure or provide for the
payment of any obligation of any Person, whether arising by contract, operation
of law or otherwise (including, without limitation, the interest of a vendor or
lessor under any conditional sale agreement, synthetic lease, Capitalized Lease
or other title retention agreement having substantially the same economic effect
as the foregoing); provided, however,
<PAGE>
for the avoidance of doubt, that negative pledge or similar agreements of a
Person to refrain from permitting Liens and the interest of a Person as owner or
lessor under charters or leases of Property (including, without limitation,
drilling rigs, drillships and other vessels and platforms) shall not constitute
"Liens" on or in respect of the Property of such Person.

      "Maintenance Capital Expenditures" means, without duplication for any
period, the aggregate of all expenditures for any purchase, other acquisition or
leasing (pursuant to a Capitalized Lease) of any asset or additions to equipment
(including replacements, capitalized repairs and improvements during such
period) which would be classified as a fixed or capital asset on a consolidated
balance sheet of the Parent Company and its Subsidiaries prepared in accordance
with GAAP, excluding (a) expenditures in respect of Acquisitions, (b)
expenditures of any proceeds of any insurance, condemnation award or other
compensation paid or payable to the Parent Company or any of its Subsidiaries,
in respect of any loss or damage to, or any condemnation or taking of, any land
or offshore drilling rig or vessel or any other asset, less the reasonable fees,
taxes, and expenses paid to collect such proceeds, to rebuild or repair such
land or offshore drilling rig or vessel or such other asset, (c) with respect to
any sale, transfer, contribution or other disposition of a land or offshore
drilling rig or vessel or any other asset, expenditures of the gross proceeds
thereof received by the Parent Company or any of its Subsidiaries less the
reasonable fees, taxes and expenses paid by such Person that are directly
related to such sale, transfer, contribution or other disposition, to replace
such land or offshore drilling rig or vessel or such other asset, and (d)
expenditures for which the Parent Company or its Subsidiaries will be reimbursed
directly or indirectly (including, without limitation, by compensation from a
customer, whether in the form of a lump sum payment, any increase in the day
rate for an offshore drilling rig or vessel or otherwise).

      "MARAD" means the Maritime Administration, United States of America.

      "MARAD Collateral" means the MARAD Vessels, additions and accessions
thereto, inventory relating thereto, improvements and upgrades thereof, all
reserve and construction funds associated with any MARAD Financing and money and
other instruments therein, MARAD Revenues, insurance and proceeds of any of the
foregoing (including, without limitation, proceeds from associated contracts and
insurances), and the Capital Stock of any Special Purpose Subsidiary that own,
whether directly or indirectly, only the MARAD Vessels.

      "MARAD Financing" means any debt obligations of the Parent Company or its
Subsidiaries for the purpose of financing or refinancing the MARAD Vessels
which, pursuant to Title XI of the Merchant Marine Act of 1936, as amended, are
secured by a full faith and credit guaranty of the U.S. government, represented
by the Secretary of Transportation, acting through MARAD.

      "MARAD Revenues" means the rights to payments and payments made under any
contracts between the Parent Company or any of its Subsidiaries and one or more
of their customers under which the Parent Company or any of its Subsidiaries
uses a MARAD Vessel to perform any of its obligations under such contract.

      "MARAD Vessels" means the Amethyst IV and the Amethyst V.
<PAGE>
      "Market Value" means, as of any date of determination, the fair market
value (or to the extent that the Rig Appraisal Reports, if two Rig Appraisal
Reports are required to be delivered by this Agreement, provide for different
fair market values, the arithmetical average of such fair market values) of each
Mortgaged Term Loan Facility Rig or other offshore drilling rig or vessel set
forth in the most recent Rig Appraisal Reports covering such Mortgaged Term Loan
Facility Rig or other offshore drilling rig or vessel delivered to the Term
Lenders. Each Market Value shall initially be calculated as of the Closing Date
by reference to the Initial Rig Appraisal Reports. To the extent that any Rig
Appraisal Report provides a range of fair market values for any Mortgaged Term
Loan Facility Rig, then the fair market value for such of Mortgaged Term Loan
Facility Rig shall be the arithmetical average of the highest and lowest fair
market values given for such Rig in such Rig Appraisal Report. Concurrently with
delivery of any subsequent Rig Appraisal Reports, the Administrative Agent shall
calculate the Market Values as of the date of such reports. The recalculated
Market Values shall become effective immediately upon receipt of such subsequent
Rig Appraisal Reports by the Administrative Agent. In addition, each Market
Value shall be adjusted from time to time to reflect any Casualty Event (if the
Casualty Proceeds with respect thereto could reasonably be expected to exceed
U.S.$5,000,000) or any Collateral Disposition occurring with respect to any
Mortgaged Term Loan Facility Rig to reflect the amount set forth in the
Additional Appraisal Report covering such Mortgaged Term Loan Facility Rig to be
delivered by the Borrower to the Term Lenders pursuant to Section 5.11(d). The
cost of such Additional Appraisal Report shall be paid by the Borrower.

      "Material Adverse Change" shall mean (a) a material adverse change in the
business, Property, condition (financial or otherwise) or results of operations
of the Parent Company and its Subsidiaries, taken as a whole, (b) the occurrence
and continuance of any event or circumstance which could reasonably be expected
to have a material adverse effect on the Credit Parties' ability to perform
their obligations under this Agreement, any Term Note or the other Credit
Documents, or (c) a material adverse effect on the validity or enforceability
against any Credit Party of any of the Credit Documents or the rights or
remedies of the Administrative Agent or the Term Lenders thereunder.

      "Material Subsidiary" means (a) any wholly-owned Subsidiary of the
Borrower that (a) has "net assets" that constitute more than 10% of the combined
GAAP value of the assets of the Borrower and its Subsidiaries, inclusive of the
subject Subsidiary, on a consolidated basis at such time, (b) any
non-wholly-owned Subsidiary of the Borrower if the percentage of such
Subsidiary's "net assets" equal to the Borrower's ownership interest in such
Subsidiary constitutes more than 10% of the combined GAAP value of the assets of
the Borrower and its Subsidiaries, inclusive of the subject Subsidiary, on a
consolidated basis at such time, (c) any Subsidiary of the Parent Company that
owns any Mortgaged Term Loan Facility Rig, or (d) any Person that guarantees the
Borrower's obligations under the Revolving Credit Agreement, and "Material
Subsidiaries" means all such Subsidiaries collectively. As used herein, "net
assets" means the GAAP value of the assets of such Subsidiary less the principal
amount of Debt (i) which is non-recourse to the Borrower and its Subsidiaries
(other than Special Purpose Subsidiaries), (ii) in respect of which neither the
Borrower nor any of its Subsidiaries (other than Special Purpose Subsidiaries)
shall have any liability whatsoever, whether direct or indirect, contingent or
otherwise, and (iii) the provider of which shall have no recourse to any assets
of the Parent Company and its Subsidiaries (other than the assets for which such
Debt was incurred, the proceeds (including, without limitation, proceeds from
associated contracts and insurances) of, and improvements,
<PAGE>
accessories and upgrades to, such assets and the Capital Stock of any Special
Purpose Subsidiary that owns, whether directly or indirectly, such assets).

      "Maximum Rate" means the maximum nonusurious interest rate under
applicable law (determined under such laws after giving effect to any items
which are required by such laws to be construed as interest in making such
determination, including without limitation if required by such laws, certain
fees and other costs).

      "Merger" means the transactions whereby the Delaware corporation formerly
known as Pride Marine, Inc. and its former Subsidiaries are merged with and into
the Borrower and its Subsidiaries.

      "Merger Documents" means each of the documents, agreements and instruments
which evidences the Merger.

      "Moody's" means Moody's Investors Service, Inc. or any successor that is a
national credit rating organization.

      "Mortgaged Revolving Credit Facility Rigs" has the meaning set forth in
the Revolving Credit Agreement.

      "Mortgaged Term Loan Facility Rigs" means the Initial Mortgaged Term Loan
Facility Rigs and any other offshore drilling rigs or vessels becoming subject
to a Rig Mortgage pursuant to this Agreement, other than any Mortgaged Term Loan
Facility Rig affected by a Casualty Event or Collateral Disposition that results
in a Total Loss.

      "Multiemployer Plan" means an employee benefit plan maintained pursuant to
a collective bargaining agreement or any other arrangement to which the Parent
Company or any member of the Controlled Group is a party to which more than one
employer is obligated to make contributions.

      "National Priority List" means the list compiled by the EPA of sites with
uncontrolled Hazardous Substance Releases deemed by EPA to be priorities for
further evaluation and cleanup based on the severity of hazards associated with
those Releases.

      "Net Cash Proceeds" means, with respect to any Asset Sale, all cash and
Cash Equivalents received by the Parent Company or any of its Subsidiaries from
such Asset Sale after (a) payment of, or provision for, all taxes, commissions
and other reasonable out-of-pocket fees and expenses actually incurred; (b)
payment of any outstanding obligations relating to such Property paid in
connection with, and necessary for, any such Asset Sale; and (c) the amount of
reserves recorded in accordance with GAAP for indemnity or similar obligations
of the Parent Company and its Subsidiaries directly related to such Asset Sale
or the assets sold.

      "Notice of Assignment" has the meaning set forth in Section 10.3(b).

      "Notice of Borrowing" means a notice of borrowing in the form of the
attached Exhibit C signed by a Responsible Officer of the Borrower.
<PAGE>
      "Notice of Conversion or Continuation" means a notice of conversion or
continuation in the form of the attached Exhibit D signed by a Responsible
Officer of the Borrower.

      "Obligations" means all unpaid principal of the Term Loans, unpaid
interest on the Term Loans, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations and amounts payable by the
Credit Parties to the Administrative Agent or the Term Lenders under the Credit
Documents.

      "Off-Balance Sheet Liability" of a Person means (a) any repurchase
obligation or liability of such Person with respect to accounts or notes
receivable sold by such Person, (b) Synthetic Lease Obligations, or (c) any
obligation arising with respect to any other transaction which is the functional
equivalent of or takes the place of borrowing but which does not constitute a
liability on the balance sheets of such Person (but, for the avoidance of doubt,
excluding any Operating Leases).

      "Operating Lease" of a Person means any lease of Property (other than a
Capitalized Lease or an Off-Balance Sheet Liability) by such Person as lessee
which has an original term (including any required renewals and any renewals
effective at the option of the lessor) of one year or more.

      "Parent Company" means (a) the U.S. Parent until the creation of a
Permitted Holding Company and (b) thereafter, the Permitted Holding Company that
is not a Subsidiary of another Permitted Holding Company.

      "Participants" has the meaning set forth in Section 10.2(a).

      "Payment Dates" means the last day of each March, June, September and
December.

      "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

      "Permitted Holding Company" means (a) from and after the time the common
stock of the U.S. Parent is not listed on a United States or non-United States
national or regional securities exchange or traded through the National
Association of Securities Dealers Automated Quotation System or similar system,
a Person organized and validly existing under the laws of the United States of
America, any state thereof or the District of Columbia, the Bahamas, Barbados,
Bermuda, the British Virgin Islands, the Cayman Islands, any of the Channel
Islands, France, Luxembourg, the United Kingdom, the Netherlands or the
Netherlands Antilles that, immediately after such time, had substantially the
same stockholders, directly or indirectly, as the U.S. Parent immediately prior
to such time, (b) from and after the sale, conveyance, assignment, transfer,
lease or other disposition of all or substantially all of the U.S. Parent's and
its Subsidiaries' assets, the U.S. Parent and (c) each wholly-owned Subsidiary
of another Permitted Holding Company that directly or indirectly owns the common
stock of the U.S. Parent.

      "Permitted Liens" has the meaning set forth in Section 6.1.
<PAGE>
      "Person" means an individual, partnership, limited liability partnership,
limited liability company, corporation (including a business trust), joint stock
company, enterprise, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency, department or
instrumentality thereof or any trustee, receiver, custodian or similar official.

      "Plan" means an employee benefit plan (other than a Multiemployer Plan)
which is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code as to which the Parent Company or any
member of the Controlled Group may have any liability.

      "Prime Rate" means a fluctuating rate of interest per annum as shall be in
effect from time-to-time equal to the prime rate of interest publicly announced
by the Administrative Agent from time to time as its prime rate, whether or not
the Borrower has notice thereof, when and as said prime rate changes.

      "Pro Forma Consolidated EBITDA" means, in respect of any transaction, the
increase or decrease in Consolidated EBITDA attributable to such transaction,
assuming the transaction had occurred on the first day of the determination
period, to the extent readily quantifiable by reference to (A) past performance,
existing contractual commitments or otherwise as may be appropriate in the case
of a Going Concern Acquisition and (B) existing contractual commitments in the
case of an Asset Acquisition, in either case as set forth in a certificate from
a Responsible Officer based on information that is reasonably acceptable to the
Administrative Agent.

      "Project Finance Debt" means (a) Debt with respect to the two
drilling/workover barge rigs owned by the Parent Company's Venezuelan Subsidiary
as in effect on the date hereof, (b) Debt with respect to the two drillships
owned by Andre Maritime Ltd. and Martin Maritime Ltd. as in effect on the date
hereof, (c) Debt with respect to the one jack-up rig owned by Pride Foramer SAS
as in effect on the date hereof, except for the $10,000,000 portion which is
recourse to the Parent Company, and (d) Debt (i) incurred to finance the
purchase price or construction cost of Property (including the cost of
upgrading, refurbishing or renovating drilling rigs, drillships and other
vessels and platforms) and related items (including interest added to
principal), (ii) which is non-recourse to the Parent Company and its
Subsidiaries, other than a Special Purpose Subsidiary, (iii) for which neither
the Parent Company nor any of its Subsidiaries (other than a Special Purpose
Subsidiary) shall have any liability whatsoever, whether direct or indirect,
contingent or otherwise, and (iv) the provider of which shall have no recourse
to any assets of the Parent Company and its Subsidiaries (other than the assets
for which such Project Finance Debt was incurred, the proceeds (including,
without limitation, proceeds from associated contracts and insurances) of, and
improvements, accessories and upgrades to, such assets and the Capital Stock of
any Special Purpose Subsidiary that owns, whether directly or indirectly, such
assets).

      "Property" of any Person means any interest of such Person in any property
or asset (whether real, personal or mixed, tangible or intangible).
<PAGE>
      "Pro Rata Share" means, at any time with respect to any Term Lender, the
ratio (expressed as a percentage) of such Term Lender's aggregate outstanding
Term Loans at such time to the aggregate outstanding Term Loans of all the Term
Lenders at such time.

      "Purchaser" has the meaning set forth in Section 10.3.

      "Rate Hedging Agreement" means an agreement, device or arrangement
providing for payments which are related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts or warrants.

      "Regulations T, U, X and D" means Regulations T, U, X, and D of the
Federal Reserve Board, as the same is from time-to-time in effect, and all
official rulings and interpretations thereunder or thereof.

      "Release" shall have the meaning set forth in CERCLA or under any other
Environmental Law.

      "Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section.

      "Required Revolving Lenders" has the meaning set forth in the Revolving
Credit Agreement.

      "Required Term Lenders" means, at any time, Term Lenders having more than
50% of the aggregate unpaid principal amount of the Term Loans.

      "Response" shall have the meaning set forth in CERCLA or under any other
Environmental Law.

      "Responsible Officer" means, the Chief Executive Officer, President, Chief
Financial Officer, any Executive or Senior Vice President, or Treasurer of the
Parent Company or the Borrower.

      "Restricted Cash" means, at any time, any cash and Cash Equivalents of the
Parent Company and its Subsidiaries which are reserved for the payment of
principal and interest under Project Finance Debt of the Parent Company and its
Subsidiaries.

      "Restricted Payment" means (a) the declaration or making by the Parent
Company or any of its Subsidiaries of any dividends or other distributions (in
cash, property, or otherwise) on, or any payment for the purchase, redemption or
other acquisition of, any shares of any Capital Stock of such Person, other than
dividends payable in such Person's Capital Stock, (b) the making by the Parent
Company or any of its Subsidiaries of any direct or indirect payment (scheduled
or otherwise) in respect of the principal of any Subordinated Debt, and (c) any
defeasance or covenant defeasance, purchase, redemption, retirement or other
acquisition by the Parent Company or any of its Subsidiaries in respect of
Subordinated Debt of such Person.
<PAGE>
      "Revolving Commitments" has the meaning set forth in the Revolving Credit
Agreement.

      "Revolving Credit Agreement" means the $250,000,000 Facility Agreement
dated as of June 20, 2002 among the Borrower, the Revolving Lenders and CLNY, as
administrative agent for the Revolving Lenders.

      "Revolving Lenders" means each lender party to the Revolving Credit
Agreement from time-to-time.

      "Rig Appraisal Report" has the meaning set forth in Section 5.11(a).

      "Rig Mortgages" means each of the First Preferred Fleet Mortgages (or
other ship mortgage, fleet mortgage, naval mortgage or other agreement, document
or instrument evidencing a grant of liens in a rig or vessel) executed by any
Credit Party which pledges a rig or vessel owned by such Person to the
Collateral Agent for the benefit of the Term Secured Parties as collateral for
all or a portion of the Obligations, in substantially the form of the attached
Exhibit H and as required to create an Acceptable Security Interest, in each
case as the same may be amended, supplemented, restated or otherwise modified
from time to time.

      "S&P" means Standard & Poor's Rating Agency Group, a division of Mc-Graw
Hill Companies, Inc., or any successor that is a national credit rating
organization.

      "SEC" means the Securities and Exchange Commission, and any successor
entity.

      "Security Agreements" means each of the Security Agreements in
substantially the form of the attached Exhibit E and executed by the Credit
Parties in favor of the Collateral Agent to secure all or a portion of the
Obligations, as same may be amended, supplemented, restated or otherwise
modified from time to time.

      "Security Documents" means the Rig Mortgages, the Security Agreements, and
each other document, instrument or agreement executed in connection therewith or
otherwise executed in order to secure all or a portion of the Obligations.

      "Security Maintenance Ratio" means, as at any date of determination, the
ratio of (a) the sum of (i) the aggregate Market Value of all Mortgaged Term
Loan Facility Rigs as of such date and (ii) two times the amount of any cash
deposited into the Cash Collateral Account pursuant to Section 2.6 to (b) the
outstanding principal amount of the Term Loans as of such date.

      "Senior Indenture" means the Indenture dated as of May 1, 1997 between the
Parent Company and JP Morgan Chase Bank, as trustee (the "Senior Trustee"), as
supplemented by (a) the First Supplemental Indenture dated as of May 1, 1997
between the Parent Company and the Senior Trustee relating to $325,000,000
principal amount of 9 3/8% Senior Notes due 2007, (b) the Second Supplemental
Indenture dated as of May 26, 1999 between the Parent Company and the Senior
Trustee relating to $200,000,000 principal amount of 10% Senior Notes due 2009,
(c) the Third Supplemental Indenture dated as of January 16, 2001 between the
Parent Company and the Senior Trustee relating to $431,454,000 principal amount
at maturity of Zero Coupon Convertible Senior Debentures Due 2021, (d) the
Fourth Supplemental Indenture dated as of September 10, 2001 between the Parent
Company and the Senior Trustee relating to the
<PAGE>
redomicile of the Parent Company and (e) the Fifth Supplemental Indenture dated
as of March 4, 2002 between the Parent Company and the Senior Trustee relating
to $300,000,000 principal amount of Convertible Senior Notes Due 2007 and as may
be further amended, restated, supplemented or otherwise modified from time to
time.

      "Special Purpose Subsidiary" means any Subsidiary of the Parent Company
whose principal purpose is to incur Debt or to become an owner of interests in a
Person created to conduct the business activities for which such Debt was
incurred, and substantially all the fixed assets of which Subsidiary or Person
are those fixed assets being financed (or to be financed) in whole or in part by
such Debt.

      "Subordinated Indenture" means the Indenture dated as of April 1, 1998
between the Parent Company and HSBC Bank USA, as trustee (the "Subordinated
Trustee"), as supplemented by the First Supplemental Indenture dated as of April
24, 1998 between the Parent Company and the Subordinated Trustee relating to
$588,145,000 principal amount at maturity of Zero Coupon Convertible
Subordinated Debentures Due 2018 and the Second Supplemental Indenture dated as
of September 10, 2001 between the Parent Company and the Subordinated Trustee
relating to the redomicile of the Parent Company and as may be further amended,
restated, supplemented or otherwise modified from time to time.

      "Subordinated Debt" means any Debt (including Debt under the Subordinated
Indentures) of the Parent Company or any of its Subsidiaries which is
subordinated to their respective obligations under the Credit Documents.

      "Subsidiary" of a Person means any corporation, association, partnership
or other business entity of which more than 50% of the outstanding shares of
Capital Stock (or other equivalent interests) having by the terms thereof
ordinary voting power under ordinary circumstances to elect a majority of the
board of directors or Persons performing similar functions (or, if there are no
such directors or Persons, having general voting power) of such entity
(irrespective of whether at the time Capital Stock (or other equivalent
interests) of any other class or classes of such entity shall or might have
voting power upon the occurrence of any contingency) is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or more
Subsidiaries of such Person or by one or more Subsidiaries of such Person.

      "Synthetic Lease Obligations" means an arrangement treated as an Operating
Lease for financial accounting purposes and a financing lease for tax purposes.

      "Tax Group" has the meaning set forth in Section 4.11.

      "Taxes" has the meaning set forth in Section 2.10(a).

      "Term Commitment" means, for each Term Lender, the amount in Dollars set
opposite such Term Lender's name on the signature pages of this Agreement as its
Term Commitment.

      "Term Lenders" means the lenders listed on the signature pages of this
Agreement and each Purchaser that shall become a party to this Agreement
pursuant to Article X.
<PAGE>
      "Term Loan" means, with respect to a Term Lender, such Term Lender's loan
made pursuant to Article II (or any conversion or continuation thereof).

      "Term Loan Maturity Date" means June 20, 2007.

      "Term Note" means a promissory note of the Borrower payable to the order
of any Term Lender, in substantially the form of the attached Exhibit F,
evidencing indebtedness of the Borrower to such Term Lender resulting from Term
Loans owing to such Term Lender.

      "Term Secured Parties" means the Administrative Agent, the Collateral
Agent and the Term Lenders.

      "Termination Event" means (a) the occurrence of a Reportable Event with
respect to a Plan, as described in Section 4043 of ERISA and the regulations
issued thereunder (other than a Reportable Event not subject to the provision
for 30-day notice to the PBGC under such regulations), (b) the withdrawal of any
Credit Party or any of its Affiliates from a Plan during a plan year in which it
was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the
giving of a notice of intent to terminate a Plan under Section 4041(c) of ERISA,
(d) the institution of proceedings to terminate a Plan by the PBGC, or (e) any
other event or condition which constitutes grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan.

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

      "Total Loss" shall mean (a) the actual, constructive, arranged, agreed, or
compromised total loss of any Mortgaged Term Loan Facility Rig; (b) the
requisition for title or other compulsory acquisition or forfeiture of any
Mortgaged Term Loan Facility Rig otherwise than by requisition for hire; or (c)
the capture, seizure, arrest, detention or confiscation of any Mortgaged Term
Loan Facility Rig by any Governmental Authority or by Persons acting or
purporting to act on behalf of any Governmental Authority unless such Mortgaged
Term Loan Facility Rig be released from such capture, seizure, arrest, detention
or confiscation within one (1) month after the occurrence thereof.

      "Total Revolving Commitments" has the meaning set forth in the Revolving
Credit Agreement.

      "Transferee" has the meaning set forth in Section 10.4.

      "Type" has the meaning set forth in Section 1.4.

      "Unfunded Liabilities" means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Plans exceeds the
fair market value of all such Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plans using PBGC
actuarial assumptions for single employer plan terminations.

      "Unrestricted Cash" means, at any time, any cash and Cash Equivalents of
the Parent Company and its Subsidiaries that is not Restricted Cash.
<PAGE>
      "U.S. Parent" means Pride International, Inc., a Delaware corporation.

      "Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock or other interests (including partnership interests)
in such Person entitling the holders thereof (whether at all times or at the
time that such class of Capital Stock) has voting power by reason of the
happening of any contingency) to vote in the election of members of the board of
directors or comparable body of such Person.

      "War Risks" includes the risk of mines, hostile force, confiscation,
nationalization, expropriation, seizure and all risks excluded from the standard
form of English marine policy by the free of capture and seizure clause.

      Section 1.2 Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding".

      Section 1.3 Accounting Terms.

      (a)   Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted using GAAP accounting policies and practices
and financial reference periods that are consistent with those used in the
preparation of the Financial Statements; provided, however, that all financial
statements and certificates and reports as to financial matters required to be
delivered to the Term Lenders hereunder shall be prepared, using GAAP accounting
policies and practices and financial reference periods that are in effect at the
time of preparation.

      (b)   All calculations for the purposes of determining compliance with
Sections 6.16 through 6.19 of this Agreement shall be adjusted to reflect the
basis upon which the Financial Statements were prepared.

      (c)   In addition, all calculations and defined accounting terms used
herein shall, unless expressly provided otherwise, when referring to any Person,
refer to such Person on a consolidated basis and mean such Person and its
consolidated subsidiaries.

      Section 1.4 Types of Loans. Loans are distinguished by "Type". The "Type"
of a Loan refers to the determination whether such Loan is a Eurodollar Loan or
a Base Rate Loan, each of which constitutes a Type.

      Section 1.5 Miscellaneous. Article, Section, Schedule and Exhibit
references are to Articles and Sections of and Schedules and Exhibits to this
Agreement, unless otherwise specified. All references to instruments, documents,
contracts, and agreements are references to such instruments, documents,
contracts, and agreements as the same may be amended, supplemented, and
otherwise modified from time to time, unless otherwise specified.
<PAGE>
                                   ARTICLE II

                                  THE TERM LOAN

      Section 2.1 Term Commitments. Each Term Lender severally agrees, on the
terms and conditions set forth in this Agreement, to make a single Term Loan to
the Borrower in an amount equal to the amount of its Term Commitment on the
Closing Date. Principal payments made after the Closing Date may not be
reborrowed. Unless the Term Loans have been made on or before June 30, 2002, the
Term Commitments shall terminate in full on such date.

      Section 2.2 Method of Borrowing.

      (a)   Notice. The Term Loans shall be made pursuant to a Notice of
Borrowing, given not later than (i) if the Borrowing is comprised of Eurodollar
Loans, 10:00 a.m. (New York time) on the third Business Day before the requested
Borrowing Date and (ii) if the Borrowing is comprised of Base Rate Loans, 10:00
a.m. (New York time) on the requested Borrowing Date, in each case to the
Administrative Agent's Applicable Lending Office. The Administrative Agent shall
give to each Term Lender prompt notice on the day of receipt of a timely Notice
of Borrowing. The Notice of Borrowing shall be in writing specifying (A) the
Borrowing Date (which shall be a Business Day), (B) the requested Type of Loans
comprising such Borrowing, (C) the aggregate amount of such Borrowing, and (D)
if such Borrowing is to be comprised of Eurodollar Loans, the requested Interest
Period. In the case of a requested Borrowing comprised of Eurodollar Loans, the
Administrative Agent shall promptly notify each Term Lender of the applicable
interest rate under Section 2.5(b). Each Term Lender shall make available its
Pro Rata Share of such Borrowing before 12:00 p.m. (New York time) on the
Borrowing Date in immediately available funds to the Administrative Agent at its
Applicable Lending Office or such other location as the Administrative Agent may
specify by notice to the Term Lenders. After the Administrative Agent's receipt
of such funds and upon fulfillment of the applicable conditions set forth in
Article III, the Administrative Agent will promptly make such funds available to
the Borrower not later than 2:00 p.m. (New York time) at such account as the
Borrower shall specify in writing to the Administrative Agent.

      (b)   Conversions and Continuations. In order to elect to Convert or
Continue the Term Loans under this Section, the Borrower shall deliver an
irrevocable Notice of Conversion or Continuation to the Administrative Agent at
its Applicable Lending Office no later than (i) 10:00 a.m. (New York time) at
least one Business Day in advance of such requested Conversion date in the case
of a Conversion of a Eurodollar Loan to a Base Rate Loan or (ii) 10:00 a.m. (New
York time) at least three Business Days in advance of such requested Conversion
date in the case of a Conversion into or Continuation of a Eurodollar Loan to
another Eurodollar Loan. Each such Notice of Conversion or Continuation shall be
in writing or by telex, telecopier or telephone, confirmed promptly in writing
specifying (A) the requested Conversion or Continuation date (which shall be a
Business Day), (B) the amount and Type of the Term Loan to be Converted or
Continued, (C) whether a Conversion or Continuation is requested, and if a
Conversion, into what Type of Term Loan, and (D) in the case of a Conversion to,
or a Continuation of, a Eurodollar Loan, the requested Interest Period. Promptly
after receipt of a Notice of Conversion or Continuation under this paragraph,
the Administrative Agent shall provide each Term Lender with a copy thereof and,
in the case of a Conversion to or a
<PAGE>
Continuation of a Eurodollar Loan, notify each Term Lender of the interest rate
under Sections 2.5(b). Notwithstanding anything in this Agreement to the
contrary, Conversions of Eurodollar Loans may only be made at the end of the
applicable Interest Period for such Term Loans; provided, however, that
Conversions of Base Rate Loans may be made at any time.

      (c)   Certain Limitations. Notwithstanding anything in paragraphs (a) and
(b) above:

            (i)   at no time shall there be more than one Interest Period
      applicable to outstanding Eurodollar Loans;

            (ii)  (A) if any Term Lender shall, at least one Business Day before
      the date of any requested Borrowing, notify the Administrative Agent that
      the introduction of or any change in or in the interpretation of any law
      or regulation makes it unlawful, or that any central bank or other
      Governmental Authority asserts that it is unlawful, for such Term Lender
      or any of its Applicable Lending Offices to perform its obligations under
      this Agreement to make Eurodollar Loans, or to fund or maintain Eurodollar
      Loans, the right of the Borrower to select Eurodollar Loans from such Term
      Lender for such Borrowing or for any subsequent Borrowing shall be
      suspended until such Term Lender shall notify the Administrative Agent
      that the circumstances causing such suspension no longer exist, and such
      Term Lender's Term Loan for such Borrowing shall be a Base Rate Loan and
      (B) such Term Lender agrees to use commercially reasonable efforts
      (consistent with its internal policies and legal and regulatory
      restrictions) to designate a different Applicable Lending Office if the
      making of such designation would avoid the effect of this paragraph and
      would not, in the reasonable judgment of such Term Lender, be otherwise
      disadvantageous to such Term Lender;

            (iii) if the Administrative Agent is unable to determine the
      Eurodollar Rate for any requested Borrowing and the Administrative Agent
      gives telephonic or telecopy notice thereof to the Borrower as soon as
      practicable, the right of the Borrower to select Eurodollar Loans or for
      any subsequent Borrowing and the obligation of the Term Lenders to make
      such Eurodollar Loans shall be suspended until the Administrative Agent
      shall notify the Borrower and the Term Lenders that the circumstances
      causing such suspension no longer exist, and each Term Loan comprising
      such Borrowing shall be a Base Rate Loan;

            (iv)  if the Required Term Lenders shall, by 11:00 a.m. (New York
      time) at least one Business Day before the date of any requested
      Borrowing, notify the Administrative Agent that the Eurodollar Rate will
      not adequately reflect the cost to such Term Lenders of making or funding
      their respective Eurodollar Loans and the Administrative Agent gives
      telephonic or telecopy notice thereof to the Borrower as soon as
      practicable, the right of the Borrower to select Eurodollar Loans for such
      Borrowing or for any subsequent Borrowing and the obligation of the Term
      Lenders to make Eurodollar Loans shall be suspended until the
      Administrative Agent shall notify the Borrower and the Term Lenders that
      the circumstances causing such suspension no longer exist, and each Term
      Loan comprising such Borrowing shall be a Base Rate Loan;
<PAGE>
            (v)   if the Borrower shall fail to select the duration or
      Continuation of any Interest Period for any Eurodollar Loans in accordance
      with the provisions contained in the definition of "Interest Period" in
      Section 1.1 and paragraphs (a) and (b) above or shall fail to deliver a
      Notice of Conversion or Continuation or to specify the Type of Eurodollar
      Loan in a Notice of Conversion or Continuation, the Administrative Agent
      will forthwith so notify the Borrower and the Term Lenders and such Term
      Loans will be made available to the Borrower on the date of such Borrowing
      and will have an Interest Period of one month; and

            (vi)  no Term Loan may be Converted or Continued as a Eurodollar
      Loan at any time when a Default has occurred and is continuing.

      (d)   Notices Irrevocable. The Notice of Borrowing and each Notice of
Conversion or Continuation delivered by the Borrower shall be irrevocable and
binding on the Borrower. In the case of the initial Borrowing or any Borrowing
which the related Notice of Conversion or Continuation specifies is to be
comprised of Eurodollar Loans, the Borrower shall indemnify each Term Lender
against any loss, out-of-pocket cost or expense actually incurred by such Term
Lender as a result of any failure to fulfill on or before the Borrowing Date or
the date specified in such Notice of Conversion or Continuation for such
Borrowing the applicable conditions set forth in Article III, including, without
limitation, any loss, cost or expense actually incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Term
Lender to fund the Term Loan to be made by such Term Lender as part of such
Borrowing when such Term Loan, as a result of such failure, is not made on such
date.

      (e)   Administrative Agent Reliance. Unless the Administrative Agent shall
have received notice from a Term Lender before the Borrowing Date that such Term
Lender will not make available to the Administrative Agent such Term Lender's
Pro Rata Share of the Borrowing, the Administrative Agent may assume that such
Term Lender has made its Pro Rata Share of such Borrowing available to the
Administrative Agent on the Borrowing Date in accordance with paragraph (a) of
this Section 2.2 and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on the Borrowing Date a corresponding
amount. If and to the extent that such Term Lender shall not have so made its
Pro Rata Share of such Borrowing available to the Administrative Agent, such
Term Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate per annum equal to the daily average Federal Funds
Effective Rate for the period until such Term Lender makes such amount
immediately available to the Administrative Agent. If such Term Lender shall
repay to the Administrative Agent such corresponding amount and interest as
provided above, such corresponding amount so repaid shall constitute such Term
Lender's Loan as part of such Borrowing for purposes of this Agreement even
though not made on the same day as the other Term Loans comprising such
Borrowing. If such Term Lender's Term Loan as part of such Borrowing is not made
available by such Term Lender within three Business Days of the Borrowing Date,
the Borrower shall repay such Term Lender's share of such Borrowing (together
with interest thereon at the interest rate applicable during such period to Term
Loans comprising such Borrowing) to the Administrative Agent not later than
three Business Days after receipt of written notice from the Administrative
Agent specifying such Term Lender's share of such Borrowing that was not made
available to the Administrative Agent.
<PAGE>
      (f)   Term Lender Obligations Several. The failure of any Term Lender to
make the Term Loan to be made by it as part of the Borrowing shall not relieve
any other Term Lender of its obligation, if any, to make its Term Loan on the
Borrowing Date. No Term Lender shall be responsible for the failure of any other
Term Lender to make the Term Loan to be made by such other Term Lender on the
Borrowing Date.

      (g)   Noteless Agreement; Evidence of Indebtedness.

            (i)   Each Term Lender shall maintain in accordance with its usual
      practice an account or accounts evidencing the indebtedness of the
      Borrower to such Term Lender resulting from the Term Loan made by such
      Term Lender from time to time, including the amounts of principal and
      interest payable and paid to such Term Lender from time to time hereunder.

            (ii)  The Administrative Agent shall also maintain accounts in which
      it will record (a) the amount of each Term Loan made hereunder, the Type
      thereof and the Interest Period with respect thereto, (b) the amount of
      any principal or interest due and payable or to become due and payable
      from the Borrower to each Term Lender hereunder and (c) the amount of any
      sum received by the Agent hereunder from the Borrower and each Term
      Lender's share thereof.

            (iii) The entries maintained in the accounts maintained pursuant to
      paragraphs (i) and (ii) above shall be prima facie evidence of the
      existence and amounts of the Obligations therein recorded; provided,
      however, that the failure of the Administrative Agent or any Term Lender
      to maintain such accounts or any error therein shall not in any manner
      affect the obligation of the Borrower to repay the Obligations in
      accordance with their terms.

            (iv)  Any Term Lender may request that the Term Loan owing to such
      Term Lender be evidenced by a Term Note. In such event, the Borrower shall
      prepare, execute and deliver to such Term Lender such Term Note payable to
      the order of such Term Lender. Thereafter, the Term Loans evidenced by
      such Term Note and interest thereon shall at all times (including after
      any assignment pursuant to Section 10.3) be represented by one or more
      Term Notes payable to the order of the payee named therein or any assignee
      pursuant to Section 10.3, except to the extent that any such Term Lender
      or assignee subsequently returns any such Term Note for cancellation and
      requests that such Loans once again be evidenced as described in
      paragraphs (i) and (ii) above.

      Section 2.3 Fees.

      (a)   [Intentionally Omitted]

      (b)   Agent's Fees. The Borrower agrees to pay to the Administrative Agent
the agent's fees as separately agreed upon by the Borrower and the
Administrative Agent in the letter agreement dated March 28, 2002 from CLNY to
the Borrower on the dates required by such letter.
<PAGE>
      Section 2.4 Repayment. The aggregate principal amount of the Term Loans
shall be payable in quarterly installments equal to 0.25% of the initial
aggregate principal amount of the Term Loans on each of the first nineteen
Payment Dates occurring after the Borrowing Date**. Any remaining outstanding
Term Loans and all other unpaid Obligations shall be paid in full by the
Borrower on the Term Loan Maturity Date.

      Section 2.5 Interest. The Borrower shall pay interest on the unpaid
principal amount of each Term Loan made by each Term Lender to it from the date
of such Term Loan until such principal amount shall be paid in full, at the
following rates per annum:

      (a)   Base Rate Loans. If such Term Loan is a Base Rate Loan, a rate per
annum equal at all times to the lesser of (i) the Alternate Base Rate in effect
from time-to-time plus the Applicable Margin and (ii) the Maximum Rate, payable
in arrears on the last Business Day of each calendar quarter and on the date
such Base Rate Loan shall be paid in full; provided that, any amount of
principal, interest or fees which is not paid when due (whether at stated
maturity, by acceleration, or otherwise) shall bear interest from the date on
which such amount is due until such amount is paid in full, payable on demand,
at a rate per annum equal at all times to the lesser of (i) the Alternate Base
Rate in effect from time-to-time plus the Applicable Margin plus 2% and (ii) the
Maximum Rate.

      (b)   Eurodollar Loans. If such Term Loan is a Eurodollar Loan, a rate per
annum equal at all times during the Interest Period for such Term Loan to the
lesser of (i) the Eurodollar Rate for such Interest Period plus the Applicable
Margin in effect on each day of such Interest Period for Eurodollar Loans and
(ii) the Maximum Rate, payable on the last day of such Interest Period, and, in
the case of Interest Periods of greater than three months, on the Business Day
which occurs during such Interest Period three months from the first day of such
Interest Period; provided that, any amount of principal, interest or fees which
is not paid when due (whether at stated maturity, by acceleration, or otherwise)
shall bear interest from the date on which such amount is due until such amount
is paid in full, payable on demand, at a rate per annum equal at all times to
the lesser of (i) the rate required to be paid on such Term Loan immediately
prior to the occurrence of such Default plus 2% and (ii) the Maximum Rate.

      (c)   Additional Interest on Eurodollar Loans. The Borrower shall pay to
each Term Lender, so long as any such Term Lender shall be required under
regulations of the Federal Reserve Board to maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities,
additional interest on the unpaid principal amount of each Eurodollar Loan of
such Term Lender, from the effective date of such Term Loan until such principal
amount is paid in full, at an interest rate per annum equal at all times to the
remainder obtained by subtracting (A) the Eurodollar Rate for the Interest
Period for such Term Loan from (B) the rate obtained by dividing such Eurodollar
Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage
of such Term Lender for such Interest Period, payable on each date on which
interest is payable on such Term Loan. Such additional interest payable to any
Term Lender shall be determined by such Term Lender and notified to the Borrower
through the Administrative Agent (such notice to include the calculation of such
additional interest, which calculation shall be conclusive in the absence of
manifest error, and be accompanied by any evidence indicating the need for such
additional interest as the Borrower may reasonably request).
<PAGE>
      (d)   Usury Recapture. In the event the rate of interest chargeable under
this Agreement or the Term Notes at any time (calculated after giving affect to
all items charged which constitute "interest" under applicable laws, including
fees and margin amounts, if applicable) is greater than the Maximum Rate, the
unpaid principal amount of the Term Loans shall bear interest at the Maximum
Rate until the total amount of interest paid or accrued on the Term Loans equals
the amount of interest which would have been paid or accrued on the Term Loans
if the stated rates of interest set forth in this Agreement had at all times
been in effect.

            In the event, upon payment in full of the Term Loans, the total
amount of interest paid or accrued under the terms of this Agreement and the
Term Loans is less than the total amount of interest which would have been paid
or accrued if the rates of interest set forth in this Agreement had, at all
times, been in effect, then the Borrower shall, to the extent permitted by
applicable law, pay the Administrative Agent for the account of the Term Lenders
an amount equal to the difference between (i) the lesser of (A) the amount of
interest which would have been charged on its Term Loans if the Maximum Rate
had, at all times, been in effect and (B) the amount of interest which would
have accrued on its Term Loans if the rates of interest set forth in this
Agreement had at all times been in effect and (ii) the amount of interest
actually paid under this Agreement on its Term Loans.

            In the event the Term Lenders ever receive, collect or apply as
interest any sum in excess of the Maximum Rate, such excess amount shall, to the
extent permitted by law, be applied to the reduction of the principal balance of
the Term Loans, and if no such principal is then outstanding, such excess or
part thereof remaining shall be paid to the Borrower.

      Section 2.6 Prepayments.

      (a)   Right to Prepay. The Borrower shall have no right to prepay any
principal amount of any Term Loan except as provided in this Section 2.6.

      (b)   Optional. The Borrower may elect to prepay, in whole or in part, any
of the Term Loans owing by it to the Term Lenders, after giving prior written
notice of such election by (i) 10:00 a.m. (New York time) five days before such
prepayment date in the case of Borrowings which are comprised of Eurodollar
Loans, and (ii) 10:00 a.m. (New York time) on the Business Day of such
prepayment, in case of Borrowings which are comprised of Base Rate Loans, in
each case to the Administrative Agent stating the proposed date and aggregate
principal amount of such prepayment. If any such notice is given, the
Administrative Agent shall give prompt notice thereof to each Term Lender and
the Borrower shall prepay Term Loans comprising part of the same Borrowing in
whole or ratably in part in an aggregate principal amount equal to the amount
specified in such notice, together with accrued interest to the date of such
prepayment on the principal amount prepaid and amounts, if any, required to be
paid pursuant to Section 2.7 as a result of such prepayment being made on such
date; provided, however, that each partial prepayment shall be in an aggregate
principal amount not less than $2,000,000.00 and in integral multiples of
$1,000,000.00 in excess thereof (or such lesser amount as may then be
outstanding).

      (c)   Mandatory.
<PAGE>
            (i)   Security Maintenance Ratio. If at any time the Borrower shall
      fail to maintain a Security Maintenance Ratio of at least 2.0 to 1.0, then
      as soon as possible but in any event no later than 30 days after such
      failure, to the extent such failure is continuing, either (A) the Borrower
      will, or will cause the Parent Company or one of its Subsidiaries
      (provided that such Subsidiary becomes a Credit Party pursuant to Section
      5.13) to, execute and deliver to the Collateral Agent additional Rig
      Mortgages granting an Acceptable Security Interest in such other rigs or
      vessels acceptable to the Collateral Agent (acting on the instruction of
      the Required Term Lenders) (together with any required amendments to any
      applicable Security Agreement and such evidence of corporate authority to
      enter into and such legal opinions in relation to such Security Documents
      as the Collateral Agent may reasonably request) that have a Market Value
      such that the Security Maintenance Ratio is at least 2.0 to 1.0, (B) at
      the end of such 30-day period, then the Borrower shall prepay the Term
      Loans by an amount necessary so that the Security Maintenance Ratio is at
      least 2.0 to 1.0, or (C) the Borrower shall deposit with the Collateral
      Agent into the Cash Collateral Account an amount of cash necessary so that
      the Security Maintenance Ratio is at least 2.0 to 1.0.

            (ii)  Collateral Disposition. Without prejudice to Section 2.6(c)(i)
      above,

                  (A)   Following any Collateral Disposition, all Collateral
            Disposition Proceeds payable to or received by the Credit Parties
            shall on the date of receipt by such Credit Party be deposited with
            the Collateral Agent as security for the Obligations and applied in
            accordance with this Agreement.

                  (B)   If no Event of Default has occurred and is continuing,
            then the Collateral Agent shall apply 100% of such Collateral
            Disposition Proceeds to prepay the Term Loans unless:

                        (1)   if the Security Maintenance Ratio is at least 2.0
                  to 1.0 (calculated with respect to the Market Values set forth
                  in the related Additional Appraisal Report and both with and
                  without giving effect to or credit for the Mortgaged Term Loan
                  Facility Rig affected by such Collateral Disposition or any
                  related Collateral Disposition Proceeds), on or before the
                  90th day following such Collateral Disposition, either (x) the
                  Parent Company or one of its Subsidiaries shall replace such
                  disposed Mortgaged Term Loan Facility Rig with an offshore
                  drilling rig of the same or superior type, class and value (as
                  verified by a written appraisal report prepared by an Approved
                  Rigbroker setting forth the Market Value of such replacement
                  rig) as the disposed Mortgaged Term Loan Facility Rig or with
                  another offshore drilling rig reasonably acceptable to the
                  Collateral Agent (acting on the instruction of the Required
                  Term Lenders) and for which the Collateral Agent has received
                  a written appraisal report prepared by an Approved Rigbroker
                  setting forth the Market Value of such replacement rig and
                  granted an Acceptable Security Interest pursuant to a Rig
                  Mortgage in relation thereto (together with any required
                  amendments to any applicable Security Agreement and such
                  evidence of corporate authority to enter into and such legal
                  opinions in relation to such
<PAGE>
                  Security Documents as the Collateral Agent may reasonably
                  request) or (y) the Borrower shall deposit with the Collateral
                  Agent into the Cash Collateral Account an amount of cash
                  (including, without limitation, cash constituting Collateral
                  Disposition Proceeds) equal to 50% of the Market Value of the
                  disposed Mortgaged Term Loan Facility Rig;

                        (2)   if the Security Maintenance Ratio is at least 2.0
                  to 1.0 (calculated with respect to the Market Values set forth
                  in the Additional Appraisal Report and with giving effect to
                  or credit for the Mortgaged Term Loan Facility Rig affected by
                  such Collateral Disposition or any related Collateral
                  Disposition Proceeds) but the Security Maintenance Ratio is
                  less than 2.0 to 1.0 (calculated with respect to the Market
                  Values set forth in the Additional Appraisal Report and
                  without giving effect to or credit for the Mortgaged Term Loan
                  Facility Rig affected by such Collateral Disposition or any
                  related Collateral Disposition Proceeds), on or before the
                  30th day following such Collateral Disposition, either (x) the
                  Parent Company or one of its Subsidiaries shall replace such
                  disposed Mortgaged Term Loan Facility Rig in the manner
                  described in Section 2.6(c)(ii)(B)(1)(x) and complied with the
                  ancillary matters referred to therein or (y) the Borrower
                  shall deposit with the Collateral Agent into the Cash
                  Collateral Account an amount of cash (including, without
                  limitation, cash constituting Collateral Disposition Proceeds)
                  equal to 50% of the Market Value of the disposed Mortgaged
                  Term Loan Facility Rig;

                        (3)   if the Security Maintenance Ratio is less than 2.0
                  to 1.0 (calculated with respect to the Market Values set forth
                  in the Additional Appraisal Report and both with and without
                  giving effect to or credit for the Mortgaged Term Loan
                  Facility Rig affected by such Collateral Disposition or any
                  related Collateral Disposition Proceeds) and the Term Loans
                  have been prepaid pursuant to Section 2.6(c)(i)(B) above, on
                  or before the 30th day following such Collateral Disposition,
                  either (x) the Parent Company or one of its Subsidiaries shall
                  replace such disposed Mortgaged Term Loan Facility Rig in the
                  manner described in Section 2.6(c)(ii)(B)(1)(x) and complied
                  with the ancillary matters referred to therein or (y) the
                  Borrower shall deposit with the Collateral Agent into the Cash
                  Collateral Account an amount of cash (including, without
                  limitation, cash constituting Collateral Disposition Proceeds)
                  equal to 50% of the Market Value of the disposed Mortgaged
                  Term Loan Facility Rig.

                  (C)   If (1) no Event of Default has occurred and is
            continuing and (2) a replacement for any Mortgaged Term Loan
            Facility Rig affected by a Collateral Disposition or other
            arrangement permitted by Section 2.6(c)(ii)(B) shall have been made
            within the time periods provided for therein following such
            Collateral Disposition in accordance with Section 2.6(c)(ii)(B),
            then the Collateral Agent shall refund such Collateral Disposition
            Proceeds (together with accrued interest thereon) to the Borrower or
            any other Credit Party as appropriate.
<PAGE>
                  (D)   If an Event of Default has occurred and is continuing,
            the Collateral Agent shall apply such Collateral Disposition
            Proceeds in accordance with Section 7.6.

            (iii) Casualty Event. Without prejudice to Section 2.6(c)(i) above,

                  (A)   Following any Casualty Event (if the Casualty Proceeds
            with respect thereto could reasonably be expected to exceed
            U.S.$5,000,000), all Casualty Proceeds payable to or received by the
            Credit Parties in respect of such Casualty Event shall on the date
            of receipt by such Credit Party be deposited with the Collateral
            Agent as security for the Obligations and applied in accordance with
            this Agreement.

                  (B)   If (1) no Event of Default has occurred and is
            continuing, (2) the applicable Credit Party reasonably believes that
            all necessary repairs to any Mortgaged Term Loan Facility Rig
            affected by a Casualty Event can be completed within 270 days
            following such Casualty Event, and (3) during such 270-day period
            following such Casualty Event, the applicable Credit Party works
            diligently to complete all such repairs, then the Collateral Agent
            shall from time to time apply such Casualty Proceeds in payment for
            all necessary repairs to the extent that the costs of such repairs
            shall have been paid by a Credit Party upon receipt of satisfactory
            evidence of such repairs, and following completion of such repairs
            within 270 days after the Casualty Event and if no Event of Default
            has occurred and is continuing, the Collateral Agent shall refund
            the remainder of such Casualty Proceeds (together with accrued
            interest thereon), if any, to the Borrower or other appropriate
            Credit Party.

                  (C)   If (1) no Event of Default has occurred and is
            continuing and (2) all necessary repairs to any Mortgaged Term Loan
            Facility Rig affected by a Casualty Event shall not have been made
            within 270 days following such Casualty Event, then the Collateral
            Agent shall apply 100% of the remaining Casualty Proceeds to prepay
            the Term Loans unless:

                        (x)   the Parent Company or one of its Subsidiaries
                  shall replace such affected Mortgaged Term Loan Facility Rig
                  with an offshore drilling rig of the same or superior type,
                  class and value (as verified by a written appraisal report
                  prepared by an Approved Rigbroker setting forth the Market
                  Value of such replacement rig) as the affected Mortgaged Term
                  Loan Facility Rig or with another offshore drilling rig
                  reasonably acceptable to the Collateral Agent (acting on the
                  instruction of the Required Term Lenders) and for which the
                  Collateral Agent has received a written appraisal report
                  prepared by an Approved Rigbroker setting forth the Market
                  Value of such replacement rig and granted an Acceptable
                  Security Interest pursuant to a Rig Mortgage in relation
                  thereto (together with any required amendments to any
                  applicable Security Agreement and such evidence of corporate
                  authority to enter into and such legal opinions
<PAGE>
                  in relation to such Security Documents as the Collateral Agent
                  may reasonably request); or

                        (y)   the Borrower shall deposit with the Collateral
                  Agent into the Cash Collateral Account an amount of cash
                  (including, without limitation, cash constituting Casualty
                  Proceeds) equal to 50% of the decrease in Market Value of the
                  affected Mortgaged Term Loan Facility Rig.

                  (D)   If an Event of Default has occurred and is continuing,
            the Collateral Agent shall apply such Casualty Proceeds in
            accordance with Section 7.6.

            (iv)  Debt Incurrence. The Borrower shall prepay the Term Loans by
      an amount equal to 100% of the Debt Incurrence Proceeds that the Parent
      Company or any of its Subsidiaries receives from each Debt Incurrence
      after the Closing Date within 30 days after the date of each such Debt
      Incurrence.

      (d)   Application of Prepayments. Each prepayment pursuant to this Section
2.6 shall be accompanied by accrued interest on the amount prepaid to the date
of such prepayment and amounts, if any, required to be paid pursuant to Section
2.7 as a result of such prepayment being made on such date. All prepayments
shall be applied to future scheduled principal payments in the inverse order of
maturity. Notwithstanding the foregoing, any Term Lender may elect, by notice to
the Administrative Agent by telephone (confirmed by telecopy) at least one
Business Day prior to the prepayment date, to decline all or any portion of any
prepayment of its Term Loans pursuant to Section 2.6 above, in which case the
aggregate amount of the prepayment that would have been applied to prepay such
Term Loans but was so declined shall be retained by the Borrower.

      (e)   Illegality. If any Term Lender shall notify the Administrative Agent
and the Borrower that the introduction of or any change in or in the
interpretation of any law or regulation makes it unlawful, or that any central
bank or other Governmental Authority asserts that it is unlawful for such Term
Lender or its Applicable Lending Office to perform its obligations under this
Agreement or to make or maintain Eurodollar Loans then outstanding hereunder,
the Borrower shall, no later than 10:00 a.m. (New York time) (A) if not
prohibited by law or regulation to maintain such Eurodollar Loans for the
duration of the Interest Period, on the last day of the Interest Period for each
outstanding Eurodollar Loan or (B) if prohibited by law or regulation to
maintain such Eurodollar Loans for the duration of the Interest Period, on the
second Business Day following its receipt of such notice, prepay all Eurodollar
Loans of all of the Term Lenders then outstanding, together with accrued
interest on the principal amount prepaid to the date of such prepayment and
amounts, if any, required to be paid pursuant to Section 2.7 as a result of such
prepayment being made on such date, (ii) each Term Lender shall simultaneously
make a Base Rate Loan or, if not otherwise prohibited, make an Eurodollar Loan
in an amount equal to the aggregate principal amount of the affected Eurodollar
Loans, and (iii) the right of the Borrower to select Eurodollar Loans shall be
suspended until such Term Lender shall notify Administrative Agent that the
circumstances causing such suspension no longer exist. Each Term Lender agrees
to use commercially reasonable efforts (consistent with its
<PAGE>
internal policies and subject to legal and regulatory restrictions) to designate
a different Applicable Lending Office if the making of such designation would
avoid the effect of this paragraph and would not, in the reasonable judgment of
such Term Lender, be otherwise disadvantageous to such Term Lender.

      (f)   Effect of Notice. All notices given pursuant to this Section 2.6
shall be irrevocable and binding upon the Borrower.

      Section 2.7 Funding Losses. If (a) any payment of principal of any
Eurodollar Loan is made other than on the last day of the Interest Period for
such Term Loan as a result of any payment pursuant to Section 2.6 or the
acceleration of the maturity of the Term Loans pursuant to Article VII or (b) if
the Borrower fails to make a principal or interest payment with respect to any
Eurodollar Loan on the date such payment is due and payable, the Borrower shall,
within 3 Business Days of any written demand sent by any Term Lender to the
Borrower through the Administrative Agent, pay to Administrative Agent for the
account of such Term Lender any amounts (without duplication of any other
amounts payable in respect of breakage costs) required to compensate such Term
Lender for any additional losses, out-of-pocket costs or expenses which it may
reasonably incur as a result of such payment or nonpayment, including, without
limitation, any loss, cost or expense actually incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by any Term
Lender to fund or maintain such Term Loan. Each Term Lender shall, as soon as
reasonably practicable after a demand by the Administrative Agent , provide a
certificate confirming the amount of its funding losses for any Interest Period
in which they accrue.

      Section 2.8 Increased Costs.

      (a)   Eurodollar Loans. If, due to either (i) the introduction of or any
change (other than any change by way of imposition or increase of reserve
requirements included in the Eurodollar Rate Reserve Percentage) in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to any Term Lender of agreeing to make or making, funding or maintaining
Eurodollar Loans, then the Borrower shall from time-to-time pay within five
Business Days of demand by such Term Lender (with a copy of such demand to the
Administrative Agent) to the Administrative Agent for the account of such Term
Lender additional amounts (without duplication of any other amounts payable in
respect of increased costs) sufficient to compensate such Term Lender for such
increased cost; provided, however, that, before making any such demand, each
Term Lender agrees to use commercially reasonable efforts (consistent with its
internal policy and subject to legal and regulatory restrictions) to designate a
different Applicable Lending Office if the making of such a designation would
avoid the need for, or reduce the amount of, such increased cost and would not,
in the reasonable judgment of such Term Lender, be otherwise economically
disadvantageous to such Term Lender. A certificate indicating the amount of such
increased cost, detailing the calculation of such increased cost and explaining
how and why such increased costs have been suffered by such Term Lender shall be
submitted by such Term Lender to the Borrower and the Administrative Agent and
shall be conclusive and binding for all purposes, absent manifest error.
<PAGE>
      (b)   Capital Adequacy. If any Term Lender determines in good faith that
compliance with any law or regulation or any guideline or request from any
central bank or other Governmental Authority (whether or not having the force of
law) implemented or effective after the Closing Date affects or would affect the
amount of capital required or expected to be maintained by such Term Lender or
any corporation controlling such Term Lender and that the amount of such capital
is increased by or based upon the existence of such Term Lender's commitment to
lend and other commitments of this type, then, upon demand by such Term Lender
(with a copy of any such demand to the Administrative Agent), the Borrower shall
within five Business Days of demand pay to the Administrative Agent for the
account of such Term Lender as the case may be, from time-to-time as specified
by such Term Lender, additional amounts (without duplication of any other
amounts payable in respect of increased costs) sufficient to compensate such
Term Lender, in light of such circumstances, with respect to such Term Lender,
to the extent that such Term Lender reasonably determines such increase in
capital to be allocable to the existence of such Term Lender's commitment to
lend under this Agreement. A certificate as to such amount, detailing the
calculation of such costs and explaining how and why such increased costs have
been suffered by such Term Lender shall be submitted to the Borrower by the Term
Lender, such certificate to be conclusive and binding for all purposes, absent
manifest error.

      Section 2.9 Payments and Computations.

      (a)   Payment Procedures. The Borrower shall make each payment under this
Agreement not later than 12:00 p.m. (local time) on the day when due to the
Administrative Agent at the Administrative Agent's address specified in Section
11.2 (or such other location as the Administrative Agent shall designate in
writing to the Borrower) in immediately available funds. Each Term Loan shall be
repaid and each payment of interest thereon shall be paid in Dollars. All
payments shall be made without setoff, deduction, or counterclaim. The
Administrative Agent will promptly thereafter, and in any event prior to the
close of business on the day any timely payment is made, cause to be distributed
like funds relating to the payment of principal, interest or fees ratably (other
than amounts payable solely to the Administrative Agent, or a specific Term
Lender pursuant to Section 2.3(b), 2.7, 2.8 or 2.10, but after taking into
account payments effected pursuant to Section 11.4) in accordance with each Term
Lender's Pro Rata Share to the Term Lenders for the account of their respective
Applicable Lending Offices, and like funds relating to the payment of any other
amount payable to any Term Lender to such Term Lender for the account of its
Applicable Lending Offices, in each case to be applied in accordance with the
terms of this Agreement.

      (b)   Computations. All computations of interest based on the Base Rate
shall be made by the Administrative Agent on the basis of a year of 365 or 366
days, as the case may be, and all computations of interest based on the
Eurodollar Rate and of fees shall be made by the Administrative Agent, on the
basis of a year of 360 days, in each case for the actual number of days
(including the first day, but excluding the last day) occurring in the period
for which such interest or fees are payable. Each determination by the
Administrative Agent of an interest rate shall be conclusive and binding for all
purposes, absent manifest error.

      (c)   Non-Business Day Payments. Whenever any payment shall be stated to
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business
<PAGE>
Day, and such extension of time shall in such case be included in the
computation of payment of interest or fees, as the case may be.

      (d)   Agent Reliance. Unless the Administrative Agent shall have received
written notice from the Borrower prior to the date on which any payment is due
to the Term Lenders that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Term Lender on
such date an amount equal to the amount then due to such Term Lender. If and to
the extent the Borrower shall not have so made such payment in full to
Administrative Agent, each Term Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Term Lender, together with
interest, for each day from the date such amount is distributed to such Term
Lender until the date such Term Lender repays such amount to the Administrative
Agent, at the Federal Funds Effective Rate for such day.

      Section 2.10 Taxes.

      (a)   No Deduction for Certain Taxes. Any and all payments by the Borrower
shall be made, in accordance with this Section 2.10, free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings and all liabilities with respect thereto,
excluding in the case of each Term Lender and the Administrative Agent, taxes
imposed on or measured by its income or receipts, and franchise taxes imposed on
it by either the jurisdiction under the laws of which such Term Lender or the
Administrative Agent (as the case may be) is organized or any political
subdivision of that jurisdiction or the jurisdiction of such Term Lender's
Applicable Lending Office or any political subdivision of that jurisdiction (all
such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable to any
Term Lender or the Administrative Agent, (i) the sum payable shall be increased
as may be necessary so that, after making all required deductions, such Term
Lender or the Administrative Agent (as the case may be) receives an amount equal
to the sum it would have received had no such deductions been made; provided,
however, that if the Borrower's obligation to deduct or withhold Taxes is caused
solely by such Term Lender's or Administrative Agent's failure to provide the
forms described in paragraph (e) of this Section 2.10 and such Term Lender or
Administrative Agent could have provided such forms, no such increase shall be
required; (ii) the Borrower shall make such deductions; and (iii) the Borrower
shall pay the full amount deducted to the relevant taxing authority or other
Governmental Authority in accordance with applicable law.

      (b)   Other Taxes. In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or the
other Credit Documents (hereinafter referred to as "Other Taxes").

      (c)   Indemnification. If the Borrower fails to pay any Taxes or Other
Taxes (that it is required to pay under the terms of this Agreement) to the
appropriate taxing authority or other Governmental Authority and the Term Lender
or the Administrative Agent (as the case may be)
<PAGE>
pays the amount due, the Borrower shall indemnify each Term Lender and the
Administrative Agent for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 2.10) paid by such Term Lender or the
Administrative Agent (as the case may be) and any liability (including interest
and expenses) arising therefrom or with respect thereto (whether or not such
Taxes or Other Taxes were correctly or legally asserted). Each payment required
to be made by the Borrower in respect of this indemnification shall be made to
the Administrative Agent for the benefit of any party claiming such
indemnification within five Business Days from the date the Borrower receives
written demand detailing the calculation of such amounts therefor from
Administrative Agent on behalf of itself as Administrative Agent or any such
Term Lender. If any Term Lender or the Administrative Agent receives a refund in
respect of any taxes paid by the Borrower under this paragraph (c), such Term
Lender or Administrative Agent, as the case may be, shall promptly pay to the
Borrower its share of such refund. A certificate indicating the amount of such
Taxes or Other Taxes and detailing the calculation of such Taxes or Other Taxes
shall be submitted by such Term Lender to the Borrower and the Administrative
Agent and shall be conclusive and binding for all purposes, absent manifest
error.

      (d)   Evidence of Tax Payments. The Borrower will pay prior to delinquency
all Taxes payable in respect of any payment. Within 30 days after the date of
any payment of Taxes, the Borrower will furnish to the Administrative Agent, at
its address referred to in Section 11.2, the original or a certified copy of a
receipt evidencing payment of such Taxes.

      (e)   Foreign Lender Withholding Exemption. Each Term Lender that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to the Borrower and the Administrative Agent on the
Closing Date or upon, the effectiveness of any Assignment and Acceptance (i) two
duly completed copies of United States Internal Revenue Service Form W-8BEN or
W-8ECI or successor applicable form, as the case may be, certifying in each case
that such Term Lender is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes, (ii)
if applicable, an Internal Revenue Service Form W-8 or W-9 or successor
applicable form, as the case may be, to establish an exemption from United
States backup withholding tax, and (iii) any other governmental forms which are
necessary or required under an applicable tax treaty or otherwise by law to
reduce or eliminate any withholding tax, which have been reasonably requested by
the Borrower. Each Term Lender which delivers to the Borrower and the
Administrative Agent a Form W-8BEN or W-8ECI and Form W-8 or W-9 pursuant to the
next preceding sentence further undertakes to deliver to the Borrower and the
Administrative Agent two further copies of Form W-8BEN or W-8ECI and Form W-8 or
W-9, or successor applicable forms, or other manner of certification, as the
case may be, on or before the date that any such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form previously delivered by it to the Borrower and the Administrative
Agent, and such extensions or renewals thereof as may reasonably be requested by
the Borrower and the Administrative Agent certifying in the case of a Form
W-8BEN or W-8ECI that such Term Lender is entitled to receive payments under
this Agreement without deduction or withholding of any United States federal
income taxes. If an event (including without limitation any change in treaty,
law or regulation) has occurred after the date of this Agreement, but prior to
the date on which any delivery required by the preceding sentence would
otherwise be required and the event renders all such forms inapplicable or which
would prevent any Term Lender from duly
<PAGE>
completing and delivering any such form with respect to it and such Term Lender
advises the Borrower and the Administrative Agent that it is not capable of
receiving payments without any deduction or withholding of United States federal
income tax, and in the case of a Form W-8 or W-9, establishing an exemption from
United States backup withholding tax, such Term Lender shall not be required to
deliver such forms. The Borrower shall withhold tax at the rate and in the
manner required by the laws of the United States with respect to payments made
to a Term Lender failing to timely provide the requisite Internal Revenue
Service forms.

      (f)   Repayment under Certain Circumstances. If the Borrower is required
by any law or regulation to make any deduction or withholding from any sum
payable by it under this Agreement and is prevented by law from fulfilling the
related gross-up obligation, upon written notice to the Borrower from the
Administrative Agent (which shall give such notice if, and only if, so requested
by any Term Lender) the relevant Term Loans shall be repaid within 30 days of
the date such notice is received by the Borrower together with accrued interest
and any amounts owing under Section 2.7.

      (g)   Change of Applicable Lending Office. Each Term Lender agrees to use
commercially reasonable efforts (consistent with its internal policies and
subject to legal and regulatory restrictions) to designate a different
Applicable Lending Office if the making of such designation would avoid the
effect of this paragraph and would not, in the reasonable judgment of such Term
Lender, be otherwise disadvantageous to such Term Lender.

      Section 2.11 Sharing of Payments, Etc. If any Term Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off or otherwise) on account of the Term Loans made by it in excess of its
Pro Rata Share of payments on account of the Term Loans obtained by all the Term
Lenders, such Term Lender shall notify the Administrative Agent and forthwith
purchase from the other Term Lenders such participations in the Term Loans made
by them as shall be necessary to cause such purchasing Term Lender to share the
excess payment ratably in accordance with the requirements of this Agreement
with each of them; provided, however, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Term Lender, such purchase
from each Term Lender shall be rescinded and such Term Lender shall repay to the
purchasing Term Lender the purchase price to the extent of such Term Lender's
ratable share (according to the proportion of (a) the amount of the
participation sold by such Term Lender to the purchasing Term Lender as a result
of such excess payment to (b) the total amount of such excess payment) of such
recovery, together with an amount equal to such Term Lender's ratable share
(according to the proportion of (i) the amount of such Term Lender's required
repayment to the purchasing Term Lender to (ii) the total amount of all such
required repayments to the purchasing Term Lender) of any interest or other
amount paid or payable by the purchasing Term Lender in respect of the total
amount so recovered. The Borrower agrees that any Term Lender so purchasing a
participation from another Term Lender pursuant to this Section 2.11 may, to the
fullest extent permitted by law, unless and until rescinded as provided above,
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Term Lender were the direct creditor
of the Borrower in the amount of such participation.

      Section 2.12 Applicable Lending Offices. Each Term Lender may book its
Term Loans at any Applicable Lending Office selected by such Term Lender and may
change its Applicable
<PAGE>
Lending Office from time to time. All terms of this Agreement shall apply to any
such Applicable Lending Office and the Term Loans shall be deemed held by each
Term Lender for the benefit of such Applicable Lending Office. Each Term Lender
may, by written notice to the Administrative Agent and the Borrower designate
replacement or additional Applicable Lending Offices through which Term Loans
will be made by it and for whose account repayments are to be made.

      Section 2.13 Cash Collateral Account.

      (a)   If the Borrower elects to deposit funds in the Cash Collateral
Account pursuant to Section 2.6, then the Borrower and the Collateral Agent
shall establish the Cash Collateral Account and the Borrower shall execute any
documents and agreements, including the Collateral Agent's standard form of
assignment of deposit accounts, that the Collateral Agent requests in connection
therewith to establish the Cash Collateral Account and grant the Collateral
Agent a first priority security interest in such account and the funds therein.

      (b)   So long as no Event of Default exists, the Collateral Agent shall
release to the Borrower at the Borrower's written request any funds held in the
Cash Collateral Account either (i) on the earlier of (A) the date on which the
Borrower would be in compliance with the Security Maintenance Ratio without
giving effect to such funds held in the Cash Collateral Account or (B) the
Parent Company or one of its Subsidiaries shall have replaced such disposed
Mortgaged Term Loan Facility Rig in the manner described in Section
2.6(c)(ii)(B)(1)(x) above and complied with the ancillary matters referred to
therein or (ii) on the earliest of (A) the date on which the Borrower would be
in compliance with the Security Maintenance Ratio without giving effect to such
funds held in the Cash Collateral Account, (B) the Credit Party who owned such
affected Mortgaged Term Loan Facility Rig shall have repaired such affected
Mortgaged Term Loan Facility Rig in the manner described in Section
2.6(c)(iii)(B) above, or (C) the Parent Company or one of its Subsidiaries shall
have replaced such affected Mortgaged Revolving Credit Facility Rig in the
manner described in Section 2.6(c)(iii)(C)(x) above and complied with the
ancillary matters referred to therein. During the existence of any Event of
Default, the Collateral Agent may apply any funds held in the Cash Collateral
Account to the Obligations in the order of priority set out in Section 7.6.

                                   ARTICLE III

                              CONDITIONS OF LENDING

      Section 3.1 Conditions Precedent to Term Loans. The obligation of each
Term Lender to make its Term Loans is subject to the conditions precedent that:

      (a)   Documentation. On or before the day on which the initial Borrowing
is made, the Administrative Agent and the Term Lenders shall have received the
following, each dated on or before such day, duly executed by all the parties
thereto, in form and substance satisfactory to the Administrative Agent and the
Term Lenders:

            (i)   this Agreement and all attached Exhibits and Schedules;
<PAGE>
            (ii)  any Term Note requested by a Term Lender pursuant to Section
      2.2(g) payable to the order of such requesting Term Lender in the amount
      of its Term Commitment;

            (iii) the Security Agreements executed by each Credit Party that
      owns or operates one or more vessels granting to the Collateral Agent for
      the benefit of the Term Secured Parties a Lien in earnings and the
      Insurance Policies with respect to the Mortgaged Term Loan Facility Rigs
      to secure the Obligations, in each case together with UCC-1 financing
      statements and any other documents, agreements or instruments necessary to
      create an Acceptable Security Interest in such collateral;

            (iv)  the Rig Mortgages executed by each Credit Party that owns one
      or more vessels granting a Lien to the Collateral Agent in the Initial
      Mortgaged Term Loan Facility Rigs to secure the Obligations, together with
      any other documents, agreements or instruments necessary to create an
      Acceptable Security Interest in such Initial Mortgaged Term Loan Facility
      Rigs and the revenues therefrom;

            (v)   certificates from the appropriate Governmental Authority
      certifying as to the good standing, existence and authority of each of the
      Credit Parties in all jurisdictions where required by the Administrative
      Agent;

            (vi)  certificates from a Responsible Officer of the Borrower
      stating that (A) all representations and warranties of such Person set
      forth in this Agreement and in the other Credit Documents to which it is a
      party are true and correct in all material respects; (B) no Default has
      occurred and is continuing; and (C) the conditions in this Section 3.1
      have been met;

            (vii) copies, certified as of the Closing Date by a Secretary or an
      Assistant Secretary of the appropriate Person of (A) the resolutions of
      the Board of Directors of each Credit Party approving the Credit Documents
      to which it is a party and the transactions contemplated thereby, (B) the
      organizational documents of each Credit Party, and (C) all other documents
      evidencing other necessary corporate action and governmental approvals, if
      any, with respect to this Agreement and the other Credit Documents;

            (viii) certificates of a Secretary or an Assistant Secretary of each
      of the Credit Parties certifying the names and true signatures of officers
      of the Credit Parties authorized to sign this Agreement, the Notice of
      Borrowing and the other Credit Documents to which such Credit Parties are
      a party;

            (ix)  a detailed report from the Parent Company's independent
      maritime insurance broker with respect to all Insurance Policies in effect
      with respect to the Initial Mortgaged Term Loan Facility Rigs, specifying
      for each such Insurance Policy the amount thereof, the risks insured
      against thereby, the name of the insurer and each insured party thereunder
      and the policy or other identification number thereof, together with a
      certificate from such broker certifying that all such Insurance Policies
      are (A) in full force and effect, (B) are placed with such insurance
      companies, underwriters or
<PAGE>
      associations, in such amounts, against such risks, and in such form, as
      are normally issued against by Persons of similar size and established
      reputation engaged in the same or similar businesses and similarly
      situated and as are necessary or advisable for the protection of the
      Collateral Agent as mortgagee and (C) conform with the requirements of
      this Agreement;

            (x)   a favorable opinion of Baker Botts L.L.P., counsel to the
      Borrower, substantially in the form of the attached Exhibit H;

            (xi)  a favorable opinion of the general counsel of the Parent
      Company substantially in the form of the attached Exhibit I;

            (xii) favorable opinions reasonably satisfactory to the
      Administrative Agent covering the items in the attached Exhibit J from
      local counsel located in Panama and Vanuatu;

            (xiii) a certificate from the chief financial officer of the Parent
      Company addressed to the Administrative Agent and each of the Term
      Lenders, which shall be in form and in substance reasonably satisfactory
      to the Administrative Agent, regarding the matters set forth in Section
      4.26;

            (xiv) a certificate from the chief financial officer of the Parent
      Company addressed to the Administrative Agent and each of the Term
      Lenders, which shall be in form and in substance reasonably satisfactory
      to the Administrative Agent and shall reaffirm that as of the Closing Date
      the projections prepared by the Borrower and included in the Confidential
      Information Memorandum are true and correct in all material respects based
      upon the assumptions stated therein and the best information reasonably
      available to such officer at the time such projections were made and shall
      describe any changes therein and state that such changes shall not,
      individually or in the aggregate, reasonably be expected to cause a
      Material Adverse Change to occur;

            (xv)  copies of each of the Merger Documents certified by a
      Secretary or an Assistant Secretary of the Borrower (A) as being true and
      correct copies of such documents as of the Closing Date, and (B) as being
      in full force and effect and no material term or condition thereof shall
      have been amended, modified or waived after the execution thereof without
      the prior written consent of the Administrative Agent;

            (xvi) copies of each promissory note evidencing Intercompany Debt;

            (xvii) a copy of the formal report or "management letter" submitted
      to the Parent Company by its independent accountants in connection with
      the annual audit made by it of the books of the Parent Company for the
      fiscal year ending 2001;

            (xviii) acknowledgment from CT Corporation System with respect to
      its irrevocable appointment by each Credit Party pursuant to Section
      11.13(b); and

            (xix) such other documents, governmental certificates and agreements
      as the Administrative Agent or any Term Lender may reasonably request.
<PAGE>
      (b)   Merger. The Merger shall have been consummated by the Borrower and
its Subsidiaries, and all other conditions to the Merger shall have been
satisfied in form and substance satisfactory to the Administrative Agent. All
legal, financial, accounting, governmental, tax and regulatory matters, and
fiduciary aspects of the Merger and the terms, conditions and structure of the
proposed financing must be reasonably acceptable to the Administrative Agent.

      (c)   Rating. The Administrative Agent shall have received a letter from
S&P or Moody's confirming its rating of Index Debt as BB+ or higher or Ba2 or
higher, as applicable.

      (d)   Due Diligence. The Administrative Agent and the Term Lenders shall
have completed satisfactory due diligence review of the assets, liabilities,
business, operations and condition (financial or otherwise) of the Parent
Company and its Subsidiaries, including, but not limited, to a review of their
Contingent Obligations, product liabilities, intellectual property, and all
legal, financial, accounting, governmental, tax and regulatory matters, and
fiduciary aspects of the proposed financing.

      (e)   Payment of Fees. On the Closing Date, the Borrower shall have paid
the fees required to be paid to the Agents, the Arranger, and the Term Lenders
and all costs and expenses which have been invoiced and are payable pursuant to
Section 10.4.

      (f)   Other Indebtedness. The Administrative Agent shall be reasonably
satisfied with the terms, conditions and amounts of any other Debt of the Parent
Company and its Subsidiaries. All Intercompany Debt required to be subordinated
pursuant to Section 6.2 shall have been subordinated to the Obligations on terms
and conditions satisfactory in form and substance to the Administrative Agent.

      (g)   Termination of Existing Bank Facility. The Administrative Agent and
the Term Lenders shall have received sufficient evidence indicating that
simultaneously with the making of the Term Loans, the obligations of the
Borrower and its Subsidiaries under the Existing Bank Facility will be repaid
with the proceeds of such Term Loans and all obligations of the Borrower and its
lenders under the Existing Bank Facility shall be terminated (including, without
limitation, any obligations of any Subsidiary of the Borrower in respect of
guaranties and security agreements executed in connection with such Existing
Bank Facility but excluding any obligations which expressly survive the
repayment of the amounts owing under the Existing Bank Facility) such that the
Liens existing in respect of the Existing Bank Facility shall be terminated and
replaced with the Liens for the benefit of the Term Secured Parties or the
Finance Parties (as applicable) and encumbering the same Property.

      (h)   Business Plan; Financial Statements. The Administrative Agent and
the Term Lenders shall have received true and correct copies of the Credit
Parties and their Affiliates' business and financial plan for the years 2002
through 2007, together with a written analysis of such business and financial
plan, in form and substance satisfactory to the Administrative Agent. The
Administrative Agent and the Term Lenders shall have received true and correct
copies of the Financial Statements and such other financial information as the
Administrative Agent may reasonably request. The actual results of operations
for such periods shall not, individually or in the aggregate, differ from the
results of operations projected for such period in the financial
<PAGE>
projections previously supplied to the Administrative Agent or included in the
Confidential Information Memorandum in any respect that would cause a Material
Adverse Change to occur.

      (i)   Initial Rig Appraisal Reports. The Administrative Agent shall have
received two satisfactory appraisals (on a fair market value basis) of the
Initial Mortgaged Term Loan Facility Rigs dated no more than 90 days prior to
the Closing Date. Such appraisals shall be in form and substance reasonably
satisfactory to the Administrative Agent and shall be prepared by Approved
Rigbrokers. Such appraisals shall affirm that the Security Maintenance Ratio is
greater than or equal to 2.0 to 1.0 on the Closing Date.

      (j)   Security Documents. The Collateral Agent shall have received all
appropriate evidence required by the Collateral Agent in its sole discretion
necessary to determine that arrangements have been made for the Collateral Agent
for the benefit of Term Secured Parties to have an Acceptable Security Interest
in the Collateral, including, without limitation, (i) the delivery to the
Collateral Agent of such financing statements under the Uniform Commercial Code
for filing in such jurisdictions as the Collateral Agent may require, (ii) the
delivery to the Collateral Agent of the Rig Mortgages for filing in such
jurisdictions as the Collateral Agent may require, (iii) lien, tax and judgment
searches conducted on the Credit Parties reflecting no Liens other than
Permitted Liens against any of the Collateral as to which perfection of a Lien
is accomplished by the filing of a financing statement and (iv) lien releases
with respect to any Collateral currently subject to a Lien other than Permitted
Liens.

      (k)   No Default. No Default shall have occurred and be continuing or
would result from such Term Loan or from the application of the proceeds
therefrom.

      (l)   Representations and Warranties. The representations and warranties
contained in Article IV hereof and in each other Credit Document shall be true
and correct before and after giving effect to the Term Loans and to the
application of the proceeds from such Term Loans from the date of the Term
Loans, as though made on and as of such date.

      (m)   No Material Adverse Change. No event or events which, individually
or in the aggregate, has had or is reasonably likely to cause a Material Adverse
Change shall have occurred.

      (n)   No Proceeding or Litigation; No Injunctive Relief. No action, suit,
investigation or other proceeding (including, without limitation, the enactment
or promulgation of a statute or rule) by or before any arbitrator or any
Governmental Authority shall be threatened or pending and no preliminary or
permanent injunction or order by a state or federal court shall have been
entered (i) in connection with this Agreement or any transaction contemplated
hereby or (ii) which, in any case, in the reasonable judgment of the
Administrative Agent, could reasonably be expected to cause a Material Adverse
Change.

      (o)   Consents, Licenses, Approvals, etc. The Administrative Agent shall
have received true copies (certified to be such by the Borrower or other
appropriate party) of all consents, licenses and approvals required in
accordance with applicable law in connection with the execution, delivery,
performance, validity and enforceability of the Merger, this Agreement and the
other Credit Documents. In addition, the Parent Company and Subsidiaries shall
have all
<PAGE>
such material consents, licenses and approvals required in connection with the
continued operation of the Parent Company and its Subsidiaries, and such
approvals shall be in full force and effect, and all applicable waiting periods
shall have expired without any action being taken or threatened by any competent
authority which would restrain, prevent or otherwise impose adverse conditions
on this Agreement and the actions contemplated hereby.

      (p)   Environmental Certificates. The Administrative Agent shall have
received copies of Certificates of Inspection, Certificates of Compliance,
Vessel Certificates of Financial Responsibility (Water Pollution) or
International Oil Pollution Prevention Certificate, each issued by the United
States Coast Guard (or the substantial equivalent in the case of foreign assets
if available) for each of the Initial Mortgaged Term Loan Facility Rigs and
shall be reasonably satisfied with the contents thereof.

      (q)   Revolving Credit Agreement. The conditions precedent to the
effectiveness of the Revolving Credit Agreement shall have been satisfied or
waived in form and substance satisfactory to the Administrative Agent prior to
or contemporaneously with the Closing Date.

      Section 3.2 Determinations Under Section 3.1. For purposes of determining
compliance with the conditions specified in Section 3.1, each Term Lender shall
be deemed to have consented to, approved or accepted or to be satisfied with
each document or other matter required thereunder to be consented to or approved
by or acceptable or satisfactory to the Term Lenders unless an officer of the
Administrative Agent responsible for the transactions contemplated by the Credit
Documents shall have received written notice from such Term Lender prior to the
Borrowings hereunder specifying its objection thereto and such Term Lender shall
not have made available to the Administrative Agent such Term Lender's ratable
portion of such Borrowings.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

      Each Credit Party jointly and severally represents and warrants as
follows:

      Section 4.1 Existence; Subsidiaries. Each of the Credit Parties is duly
formed, validly existing, and in good standing (to the extent the concept of
good standing is applicable in such jurisdiction) under the laws of the
jurisdiction of its formation and in good standing (to the extent the concept of
good standing is applicable in such jurisdiction) and qualified to do business
in each jurisdiction where its ownership or lease of Property or conduct of its
business requires such qualification and where a failure to be qualified could
reasonably be expected to cause a Material Adverse Change.

      Section 4.2 Power and Authority. Each of the Credit Parties has the
organizational power and authority to execute and deliver the Credit Documents
to which it is a party and to perform its obligations thereunder. The execution,
delivery, and performance by the Credit Parties of this Agreement and the other
Credit Documents to which each is a party and the consummation of the
transactions contemplated hereby (a) have been duly authorized by all necessary
organizational action, (b) do not contravene (i) such Credit Party's
organizational
<PAGE>
documents, (ii) any material Legal Requirement binding on or affecting such
Credit Party, or (iii) the provisions of any indenture or material instrument or
agreement to which such Credit Party is a party or is subject, or by which it,
or its Property, is bound, or conflict with or constitute a default thereunder,
except, in the case of clauses (ii) and (iii), for which a prior consent,
waiver, authorization or approval has been (or will timely be) obtained, and (c)
will not result in or require the creation or imposition of any Lien prohibited
by this Agreement. At the time of the making of the Term Loans, the Term Loans
and the use of the proceeds of the Term Loan will (a) be within the Borrower's
corporate powers, (b) have been duly authorized by all necessary corporate
action, (c) not contravene (i) the Borrower's certificate of incorporation or
bylaws or (ii) any material Legal Requirement binding on or affecting the
Borrower, except for which a prior consent, waiver, authorization or approval
has been (or will timely be) obtained, and (d) not result in or require the
creation or imposition of any Lien prohibited by this Agreement.

      Section 4.3 Authorization and Approvals. No authorization or approval or
other action by, and no notice to or filing with, any Governmental Authority is
required on the part of the Credit Parties for the due execution, delivery and
performance by the Credit Parties of this Agreement and the other Credit
Documents to which each is a party or the consummation of the transactions
contemplated thereby, except actions by, and notices to or filings with,
Governmental Authorities (including, without limitation, the SEC) that may be
required in the ordinary course of business from time to time or that may be
required to comply with the express requirements of the Credit Documents
(including, without limitation, to effect the Merger, to release existing Liens
on the Collateral or to comply with requirements to perfect, and/or maintain the
perfection of, Liens created for the benefit of the Term Secured Parties). At
the time of the making of the Term Loan, no authorization or approval or other
action by, and no notice to or filing with, any Governmental Authority will be
required on the part of the Credit Parties for the borrowing of the Term Loans
or the use of the proceeds of such Term Loans, except actions by, and notices to
or filings with, Governmental Authorities (including, without limitation, the
SEC) that may be required in the ordinary course of business from time to time
or that may be required to comply with the express requirements of the Credit
Documents (including, without limitation, to effect the Merger, to release
existing Liens on the Collateral or to comply with requirements to perfect,
and/or maintain the perfection of, Liens created for the benefit of the Term
Secured Parties).

      Section 4.4 Enforceable Obligations. This Agreement and the other Credit
Documents to which each of the Credit Parties is a party have been duly executed
and delivered by such Credit Party. Assuming that each has been duly authorized,
executed and delivered by the other parties thereto, each Credit Document to
which each Credit Party is a party is the legal, valid, and binding obligation
of such Credit Party and is enforceable against such Credit Party in accordance
with its terms, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, or
similar law affecting creditors' rights generally or general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law or under applicable legal codes).

      Section 4.5 Financial Statements.

      (a)   The Parent Company has delivered to the Administrative Agent the
Financial Statements, and the Financial Statements are accurate and complete in
all material respects and
<PAGE>
present fairly in all material respects the consolidated financial condition of
the Parent Company and its Subsidiaries as of their respective dates and for
their respective periods in accordance with GAAP. As of the date of the
Financial Statements, there were no material contingent obligations, liabilities
for taxes, unusual forward or long-term commitments, or unrealized or
anticipated losses of the Parent Company or any of its Subsidiaries, except as
disclosed therein and adequate reserves for such items have been made in
accordance with GAAP.

      (b)   Since December 31, 2001, no Material Adverse Change has occurred.

      Section 4.6 True and Complete Disclosure. All factual information (whether
delivered before or after the Closing Date) furnished by or on behalf of the
Credit Parties in writing to the Administrative Agent and the Term Lenders for
purposes of or in connection with this Agreement, any other Credit Document or
any transaction contemplated hereby or thereby is true and accurate in all
material respects as of the date as of which such information is dated or
certified (or, if not dated and certified, as of the date as of which such
information is provided) and not incomplete by omitting to state any material
fact necessary to make such information (taken as a whole) not misleading as of
such time (in light of circumstances and facts known at such time).

      Section 4.7 Litigation. There is no pending or, to the knowledge of any
Responsible Officer, threatened action or proceeding affecting the Parent
Company or any of its Subsidiaries before any court, Governmental Authority or
arbitrator, that could reasonably be expected to cause a Material Adverse Change
or which purports to affect the legality, validity, binding effect or
enforceability of this Agreement, any Term Note or any other Credit Document.
Additionally, there is no pending or, to the knowledge of any Responsible
Officer of the Parent Company, threatened action or proceeding instituted
against the Parent Company or any of its Subsidiaries which seeks to adjudicate
the Parent Company or any of its Subsidiaries as bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee or other
similar official for it or for any substantial part of its Property.

      Section 4.8 Use of Proceeds. The proceeds of the Term Loans will be used
by the Borrower and its Subsidiaries for the purposes described in Section 5.8.
The Parent Company and its Subsidiaries are not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U). No proceeds of any Term Loan will be used to
purchase or carry any margin stock in violation of Regulation T, U or X.

      Section 4.9 Investment Company Act. None of the Parent Company or any of
its Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.

      Section 4.10 Public Utility Holding Company Act. None of the Parent
Company or any of its Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company",
<PAGE>
or a "public utility", as such terms are used in the Public Utility Holding
Company Act of 1935, as amended.

      Section 4.11 Taxes. All material federal, state, local and foreign tax
returns, reports and statements required to be filed (after giving effect to any
extension granted in the time for filing) by the Parent Company or any member of
the Controlled Group (hereafter collectively called the "Tax Group") have been
filed with the appropriate Governmental Authorities in all jurisdictions in
which such returns, reports and statements are required to be filed (except
where any obligation to so file is being contested in good faith and by
appropriate proceedings and after adequate reserves for such items have been
made in accordance with GAAP), and all taxes (which are material in amount) and
other impositions due and payable have been timely paid prior to the date on
which any fine, penalty, interest, late charge or loss may be added thereto for
non-payment thereof except where contested in good faith and by appropriate
proceedings and after providing adequate reserves therefor. Except as disclosed
in writing to the Administrative Agent from time to time, none of the Parent
Company or any member of the Tax Group has given, or been requested to give, a
waiver of the statute of limitations relating to the payment of any federal,
state, local or foreign taxes or other impositions. None of the Property owned
by the Parent Company or any other member of the Tax Group is Property which the
Parent Company or any member of the Tax Group is required to treat as being
owned by any other Person pursuant to the provisions of Section 168(f)(8) of the
Code. Proper and accurate amounts have been withheld by the Parent Company and
all other members of the Tax Group from their employees for all periods to
comply in all material respects with the tax, social security and unemployment
withholding provisions of applicable federal, state, local and foreign law.
Timely payment of all material sales and use taxes required by applicable law
have been made by the Parent Company and all other members of the Tax Group.

      Section 4.12 Pension Plans. No Termination Event has occurred with respect
to any Plan, and each Plan has complied in all material respects with and been
administered in all material respects in accordance with applicable provisions
of ERISA and the Code. No "accumulated funding deficiency" (as defined in
Section 302 of ERISA) has occurred and there has been no excise tax imposed
under Section 4971 of the Code. To the extent either any such action or inaction
could reasonably be attributable to the Parent Company or to the knowledge of a
Responsible Officer of the Parent Company, no Reportable Event has occurred with
respect to any Multiemployer Plan, and each Multiemployer Plan has complied in
all material respects with and been administered in all material respects with
applicable provisions of ERISA and the Code. The present value of all benefits
vested under each Plan (based on the assumptions used to fund such Plan) did
not, as of the last annual valuation date applicable thereto, exceed the value
of the assets of such Plan allocable to such vested benefits in any amount that
could reasonably be expected to cause a Material Adverse Change. None of the
Parent Company or any member of the Controlled Group has had a complete or
partial withdrawal from any Multiemployer Plan for which there is any material
withdrawal liability. As of the most recent valuation date applicable thereto,
none of the Parent Company or any member of the Controlled Group has received
notice that any Multiemployer Plan is insolvent or in reorganization. Based upon
GAAP existing as of the Closing Date and current factual circumstances, the
Parent Company has no reason to believe that the annual cost during the term of
this Agreement to the Parent Company or any of its Subsidiaries for
post-retirement benefits to be provided to the current and former employees of
the Parent Company or any of its Subsidiaries under welfare
<PAGE>
benefit plans (as defined in Section 3(1) of ERISA) could, in the aggregate,
reasonably be expected to cause a Material Adverse Change.

      Section 4.13 Condition of Property; Casualties. (a) Except as otherwise
permitted by this Agreement, including, without limitation, Section 4.16 and the
requirements of Section 2.6, the material Property necessary for the conduct of
business of the Parent Company and its Subsidiaries are in good repair and
working condition, normal wear and tear excepted and (b) none of the Parent
Company or any of its Subsidiaries has knowingly or willfully permitted the
commission of waste or other injury or released Hazardous Substances on or about
owned or operated property in violation of applicable Environmental Laws.

      Section 4.14 Insurance. Each of the Parent Company and its Subsidiaries
carries the insurance required to be carried under Section 5.2 of this
Agreement. The amount of acceptance of first loss in lieu of paying premiums on
the Closing Date is not more than $10,000,000. As of the Closing Date, all of
the Mortgaged Term Loan Facility Rigs have insurance covering War Risks.

      Section 4.15 No Defaults. None of the Parent Company or any of its
Subsidiaries is in default under or has received any notice of default with
respect to any contract, agreement, lease or other instrument to which the
Parent Company or any of its Subsidiaries is a party and which is continuing
and, if not cured, could reasonably be expected to cause a Material Adverse
Change.

      Section 4.16 Environmental Condition. Except as disclosed on the attached
Schedule 4.16:

      (a)   The Parent Company and its Subsidiaries (i) have obtained all
material Environmental Permits necessary for the ownership and operation of
their respective material Properties and the conduct of their respective
businesses; (ii) have been and are in compliance with all material terms and
conditions of such Environmental Permits and with all other material
requirements of applicable Environmental Laws; (iii) have not received notice of
any material violation or alleged violation of any Environmental Law or
Environmental Permit; and (iv) are not subject to any material actual or
contingent Environmental Claim.

      (b)   None of the present or previously owned or operated Properties of
the Parent Company or of any of its present or former Subsidiaries, wherever
located, (i) has been placed on or proposed to be placed on the National
Priorities List, CERCLIS, or, to the knowledge of any Responsible Officer, their
state or local analogs, nor has the Parent Company or any of its Subsidiaries
been otherwise notified of the designation, listing or identification of any
Property of the Parent Company or any of its present or former Subsidiaries as a
potential site for material removal, remediation, cleanup, closure, restoration,
reclamation, or other material response activity under any Environmental Laws
(except as such activities may be required by permit conditions); (ii) is
subject to a material Lien, arising under or in connection with any
Environmental Laws, that attaches to any revenues or to any Property owned or
operated by the Parent Company or any of its present or former Subsidiaries,
wherever located; or (iii) has been the site of any Release of Hazardous
Substances or Hazardous Wastes from present or past operations which has caused
at the site or at any third-party site any condition that has resulted in
<PAGE>
or could reasonably be expected to result in the need for Response that could
cause a Material Adverse Change and none of the Parent Company or any of its
present or former Subsidiaries has generated or transported or has caused to be
generated or transported Hazardous Substances to any third party site which
could reasonably be expected to result in the need for Response that could cause
a Material Adverse Change.

      (c)   Without limiting the foregoing, the present and future liability, if
any, of the Parent Company or any of its Subsidiaries, which could reasonably be
expected to arise in connection with requirements under Environmental Laws could
not reasonably be expected to cause a Material Adverse Change.

      Section 4.17 Title to Property, Etc.

      (a)   Each of the Parent Company and its Subsidiaries has good and
marketable title in all its Property, except where the failure to have such good
and marketable title could not reasonably be expected to cause a Material
Adverse Change, and none of such Property is subject to any Lien, except
Permitted Liens.

      (b)   Schedule 4.17 sets forth the Initial Mortgaged Term Loan Facility
Rigs of the Credit Parties on the Closing Date and identifies the registered
owner, flag, official or patent number, as the case may be, the home port,
class, location and operating status on the Closing Date after giving effect to
the Merger.

      Section 4.18 Security Interests. On the Closing Date, all governmental
actions and all other filings, recordings, registrations, third party consents,
and other actions which are necessary to create and perfect the Liens provided
for in the Security Documents will have been made, obtained, and taken in all
relevant jurisdictions, or satisfactory arrangements will have been made for all
governmental actions and all other filings, recordings, registrations, third
party consents, and other actions which are necessary to create and perfect the
Liens provided for in the Security Documents to be made, obtained, or taken in
all relevant jurisdictions. Upon the filing of the Security Documents referred
to in this Section 4.18, each of the Security Documents creates, as security for
the Obligations purported to be secured thereby, a valid and enforceable
perfected security interest in and Lien on all of the Collateral subject
thereto, to the extent perfection of a security interest or Lien is governed by
Article 9 of the UCC (as defined in the applicable Security Documents) or the
Ship Mortgage Act (as defined in the Rig Mortgages), and subject to no other
Liens (other than Permitted Liens) in favor of the Collateral Agent for the
ratable benefit of the Term Secured Parties. Except with respect to filings or
recordings required in order to perfect the security interests in earnings, no
filings or recordings are required in order to perfect the security interests
created under any Security Document except for filings or recordings required in
connection with any such Security Document which shall have been made upon or
prior to (or are the subject of arrangements, satisfactory to the Collateral
Agent, for filing on or promptly after the date of) the execution and delivery
thereof.

      Section 4.19 Subsidiaries; Corporate Structure. The Subsidiaries of the
Borrower listed on Schedule 4.19 constitute all of the Subsidiaries of the
Borrower on the Closing Date after giving effect to the Merger. Schedule 4.19
correctly lists the names, ownership and jurisdictions
<PAGE>
of incorporation or formation of each of the Borrower's Subsidiaries as of the
Closing Date after giving effect to the Merger.

      Section 4.20 Labor Relations. None of the Parent Company nor its
Subsidiaries is engaged in any unfair labor practice that could reasonably be
expected to have a Material Adverse Change. There is (a) no unfair labor
practice complaint pending against the Parent Company or any of its Subsidiaries
or, to the knowledge of any Responsible Officer, threatened against any of them,
before the National Labor Relations Board (or any successor United States
federal agency that administers the National Labor Relations Act), and no
grievance or arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against the Parent Company or any of its
Subsidiaries or, to the knowledge of any Responsible Officer, threatened against
any of them, (b) no strike, labor dispute, slowdown or stoppage pending against
the Parent Company or any of its Subsidiaries or, to the knowledge of any
Responsible Officer, threatened against the Parent Company or any of its
Subsidiaries and (c) no union representation petition existing with respect to
the employees of the Parent Company or any of its Subsidiaries and no union
organizing activities are taking place, except with respect to any matter
specified in clause (a), (b) or (c) above, either individually or in the
aggregate, such as could not reasonably be expected to have a Material Adverse
Change.

      Section 4.21 Merger. The Borrower has delivered to the Administrative
Agent true, correct, and complete copies of the Merger Documents as in effect on
the Closing Date.

      Section 4.22 Senior Debt. The Obligations of the Parent Company under
Article VIII of this Agreement constitute "Senior Indebtedness" as defined in
the Subordinated Indenture.

      Section 4.23 Guarantors. All of the Borrower's Material Subsidiaries are
Guarantors under Article VIII hereof.

      Section 4.24 Citizenship. Each Credit Party which owns a Mortgaged Term
Loan Facility Rig is qualified to own and operate such Mortgaged Term Loan
Facility Rig under the laws of the jurisdiction in which any such Mortgaged Term
Loan Facility Rig is flagged, if such qualification is required.

      Section 4.25 Intellectual Property. The Parent Company and each of its
Subsidiaries has obtained all material patents, trademarks, service marks, trade
names, copyrights, licenses and other intellectual property rights, that are
necessary for the operation of their businesses taken as a whole as presently
conducted.

      Section 4.26 Solvency.

      (a)   Immediately after the consummation of the transactions to occur on
the Closing Date and after giving effect to the Borrowing contemplated under
this Agreement and the application of the proceeds thereof, (i) the fair value
of the assets of the Parent Company and its Subsidiaries on a consolidated
basis, at a fair valuation, will exceed the debts and liabilities, subordinated,
contingent or otherwise, of the Parent Company and its Subsidiaries on a
consolidated basis; (ii) the present fair saleable value of the Property of the
Parent Company and its Subsidiaries on a consolidated basis will be greater than
the amount that will be required to pay the probable liability of the Parent
Company and its Subsidiaries on a consolidated basis on
<PAGE>
their debts and other liabilities, subordinated, contingent or otherwise, as
such debts and other liabilities become absolute and matured; (iii) the Parent
Company and its Subsidiaries on a consolidated basis will be able to pay their
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (iv) the Parent Company and its
Subsidiaries on a consolidated basis will not have unreasonably small capital
with which to conduct the businesses in which they are engaged as such
businesses are now conducted and are proposed to be conducted after the date
hereof.

      (b)   The Parent Company does not intend to, or to permit any of its
Subsidiaries to, and does not believe that it or any of its Subsidiaries will,
on a consolidated basis, incur debts beyond its ability to pay such debts as
they mature, taking into account the timing of and amounts of cash to be
received by it or any such Subsidiary and the timing of the amounts of cash to
be payable on or in respect of its Debt or the Debt of such Subsidiary.

      Section 4.27 Compliance with Laws. The Parent Company and its Subsidiaries
have complied with all applicable statutes, rules, regulations, orders and
restrictions of any Governmental Authority having jurisdiction over the conduct
of their respective businesses or the ownership of their respective Property
except for any failure to comply with any of the foregoing which could not
reasonably be expected to cause a Material Adverse Change. The Parent Company
and its Subsidiaries are in compliance in all material respects with the
International Maritime Organization's International Management Code for the Safe
Operation of Ships and Pollution Prevention ("ISM Code"), to the extent
applicable, and have established and implemented a safety management system and
such other procedures as required by the ISM Code, to the extent applicable.

                                    ARTICLE V

                              AFFIRMATIVE COVENANTS

      So long as the Term Loans or any amount under any Credit Document shall
remain unpaid, the Borrower agrees, unless the Consolidated Required Lenders
otherwise consent in writing, to comply with the following covenants.

      Section 5.1 Compliance with Laws, Etc. The Parent Company shall, and shall
cause each of its Subsidiaries to, comply with all Legal Requirements except
where the failure to so comply could not reasonably be expected to cause a
Material Adverse Change. Without limiting the generality and coverage of the
foregoing, the Parent Company shall, and shall cause each of its Subsidiaries
to, comply with all applicable Environmental Laws, and all Legal Requirements
with respect to equal employment opportunity and employee safety in all
jurisdictions in which the Parent Company and its Subsidiaries do business
including, if applicable, the ISM Code, except where the failure to so comply
could not reasonably be expected to cause a Material Adverse Change.

      Section 5.2 Maintenance of Insurance.

      (a)   Generally.
<PAGE>
            (i)   Except as otherwise specifically provided below, the Parent
      Company shall, and shall cause each of its Subsidiaries to, at their own
      expense, maintain insurance with financially sound and reputable insurance
      companies or associations in such amounts (and with co-insurance and
      deductibles) as are usually insured against by Persons of similar size and
      established reputation engaged in the same or similar businesses and
      similarly situated, including insurance against fire, casualty, business
      interruption, injury to Persons or property and other normal hazards
      normally insured against.

            (ii)  The Parent Company shall, and shall cause each of its
      Subsidiaries to, renew all such insurance, including, without limitation,
      the Insurance Policies, as they expire and so as to ensure that there is
      no gap in coverage, keep the Collateral Agent advised of the progress of
      such renewals, and shall provide evidence of such renewal in writing to
      the Collateral Agent as and when each such renewal is effected.

            (iii) The Parent Company shall, and shall cause each of its
      Subsidiaries to, punctually pay all premiums, calls, contributions or
      other sums payable in respect of such insurance, including, without
      limitation, the Insurance Policies, and produce all relevant receipts when
      so required by the Collateral Agent and all Insurance Policies shall
      provide that there shall be no recourse against the Collateral Agent or
      any other Term Secured Party for unpaid premiums or calls.

            (iv)  The Parent Company shall, and shall cause each of its
      Subsidiaries to, upon the written request of the Collateral Agent, deliver
      to the Collateral Agent true and complete copies of all such insurance
      policies, including, without limitation, the Insurance Policies.

            (v)   Upon the written request of the Collateral Agent, provided no
      such request shall be made more frequently than once per year, the Parent
      Company shall deliver to the Collateral Agent copies of all cover notes,
      binders and certificates of entry and all endorsements and riders
      supplemental thereto in respect of Insurance Policies maintained pursuant
      to this Section 5.2.

            (vi)  None of the Credit Parties shall declare or agree with the
      underwriters that a Mortgaged Term Loan Facility Rig is a Total Loss
      without the prior written consent of the Collateral Agent.

      (b)   Hull and Machinery/Increased Value Insurance. With respect to hull
and machinery/increased value insurance each of the Credit Parties shall insure
or shall cause that the Parent Company or the relevant Subsidiary of the Parent
Company owning the same insures each Mortgaged Term Loan Facility Rig, or cause
each Mortgaged Term Loan Facility Rig to be insured, against loss, damage, fire
and such other perils as are customary in the industry, for an amount which is
at least the Market Value of such Mortgaged Term Loan Facility Rig and when such
amount is aggregated with the amount of such insurance coverage on the other
Mortgaged Term Loan Facility Rigs, such aggregate amount shall be at least 200%
of the aggregate Term Loans (less any deductible). In addition, the Credit
Parties shall, at their own expense, obtain, for and on behalf of the Collateral
Agent, a mortgagee's single interest policy providing coverage
<PAGE>
which, when aggregated with the amount of such insurance coverage on the other
Mortgaged Term Loan Facility Rigs, shall be at least 200% of the aggregate Term
Loans. Such insurance shall cover marine perils on hull and machinery, and shall
be maintained in the broadest forms available (on reasonable commercial terms as
the Credit Parties shall see fit and reasonably acceptable to the Collateral
Agent) in the American and British insurance markets or in such other major
international markets acceptable to the Collateral Agent.

      (c)   Comprehensive Third Party Liability. The Credit Parties shall
maintain insurance (or its equivalent) covering comprehensive third party
liability on the Mortgaged Term Loan Facility Rigs in an aggregate amount not
less than 100% of the Term Loans. The Credit Parties shall arrange for the
execution of such guarantees as may from time to time be required by any
protection and indemnity (or its equivalent).

      (d)   War Risks. The Credit Parties shall at all times maintain insurance
(or its equivalent) covering War Risks on all of the Mortgaged Term Loan
Facility Rigs; provided, however, that (i) if the premiums associated therewith
increase by more than 30% above the premiums in effect on the Closing Date, as
certified in writing by the Parent Company's independent maritime insurance
broker, then the Credit Parties shall only be obligated to maintain insurance
(or its equivalent) covering War Risks on Mortgaged Term Loan Facility Rigs, so
that the aggregate amount of War Risk coverage is not less than 150% of the Term
Loans, and including, in any event, the Pride North America and each of the
Mortgaged Term Loan Facility Rigs that have a Market Value equal to or greater
than $40,000,000 (as set forth in the most recent Rig Appraisal Reports covering
such Mortgaged Term Loan Facility Rig) located outside of the Gulf of Mexico
shall remain at all times covered against War Risks by insurance (or its
equivalent) by the Credit Parties; and (ii) if from time to time, insurance (or
its equivalent) covering War Risks becomes unavailable in certain geographical
areas, as certified in writing by the Parent Company's independent maritime
insurance broker, then the Credit Parties shall maintain insurance (or its
equivalent) covering War Risks on such other unaffected Mortgaged Term Loan
Facility Rigs so that the aggregate amount of War Risk coverage is not less than
150% of the Term Loans. Promptly after such insurance (or its equivalent)
covering War Risks becomes available again, then the Credit Parties shall
reinstate the coverage set forth in clause (i) above. The Credit Parties shall
arrange for the execution of such guarantees as may from time to time be
required by any war risks association.

      (e)   Mortgagee Right Insurance. If the Parent Company's Index Debt is
rated less than BB- by S&P or Ba3 by Moody's, the Credit Parties shall maintain
insurance (or its equivalent) covering the risks of repossession on the
Mortgaged Term Loan Facility Rigs operating under charters or in jurisdiction
implying potential repossession risks, as determined by the Collateral Agent or
acting under the instruction of the Required Term Lenders.

      (f)   United States Operations. At all times during which one or more
Mortgaged Term Loan Facility Rigs is operating within the jurisdiction of the
United States of America, the Credit Parties shall maintain with respect to such
Mortgaged Term Loan Facility Rigs:

            (i)   insurance or post bonds or maintain approved evidence of
      financial responsibility (including, without limitation, qualification as
      a "qualified self-insurer" by the United States Coast Guard) with respect
      to such Mortgaged Term Loan Facility Rigs
<PAGE>
      to cover the actual cost of removal of discharged oil for which such
      Credit Party or the Collateral Agent may be held strictly liable (or held
      liable due to negligence of such Credit Party or any other Person) under
      the Clean Water Act of 1977, as amended, the Oil Pollution Act 1990 (33
      U.S.C. Section 2701 et seq.), as amended, or the Outer Continental Shelf
      Lands Act, as amended, or under any other Legal Requirement, including,
      without limitation, any Environmental Law, of any Governmental Authority
      that, now or in the future, may apply to such Mortgaged Term Loan Facility
      Rigs or to the Credit Parties, such Mortgaged Term Loan Facility Rigs or
      their operations; and

            (ii)  such worker's compensation or longshoremen's and harbor
      workers' insurance as shall be required by applicable law, including
      endorsements for foreign and Outer Continental Shelf operations, borrowed
      servant, voluntary compensation and in rem claims.

      (g)   Self Insurance. The Parent Company and its Subsidiaries may maintain
acceptance of first loss in lieu of paying premiums compatible with the
standards set forth herein in an amount which is the lesser of (i)
U.S.$25,000,000 or (ii) 5% of the Market Value of the Mortgaged Term Loan
Facility Rigs (as set forth in the most recent Rig Appraisal Reports covering
such Mortgaged Revolving Credit Facility Rigs) in the aggregate on an annualized
basis after deductibles and self insurance retention.

      (h)   Collateral Agent as Additional Insured. Other than with respect to
worker's compensation policies, each Insurance Policy maintained in compliance
with this Section 5.2 shall be endorsed showing the Collateral Agent as an
additional insured, or a loss payee, as applicable. All Insurance Policies
required by the terms of this Section 5.2 shall provide that at least 30 days'
(except 48 hours for War Risk) prior written notice be given to the Collateral
Agent by the underwriters or association of any termination, cancellation,
reduction or other modification of such Insurance Policy or the failure of the
Credit Parties to pay any premium or call which could suspend coverage under the
Insurance Policy or the payment of a claim thereunder. If such Insurance
Policies are not maintained in full force and effect, then the Collateral Agent,
at its option, may procure such insurance at the Borrower's expense. With
respect to any potential claims under any Insurance Policy, the Collateral Agent
may, but shall not be required to, make proof of loss under, settle and adjust
any claims under, or direct the Borrower to take such actions at the reasonable
direction of the Collateral Agent, and the expenses incurred by the Collateral
Agent in the adjustment and collection of such proceeds shall be paid by the
Borrower, provided, that if no Event of Default exists, the Collateral Agent
shall give the applicable Credit Party written notice and opportunity to perform
prior to itself performing or causing to perform. The Collateral Agent shall not
be liable or responsible for failure to collect or exercise diligence in the
collection of any proceeds, unless directly caused by its gross negligence or
willful misconduct.

      (i)   Application of Payments under Insurance Policies.

            (i)   Except as otherwise provided in Section 5.2(h)(iii) below, all
      Insurance Policies shall provide that all insurance payments in respect of
      any Casualty Event shall be paid to the Collateral Agent or, upon the
      prior written consent of the Collateral Agent, the underwriter may pay
      such amounts directly to the applicable Credit Party or such
<PAGE>
      Person as may be designated by the Credit Parties for the repair, salvage
      or other charges relating to such Casualty Event.

            (ii)  All Casualty Proceeds or Collateral Disposition Proceeds
      received by such Credit Party or the Collateral Agent as a result of a
      Casualty Event or Collateral Disposition shall be applied in accordance
      with the requirements of Sections 2.6(c)(i) and 5.6.

            (iii) Notwithstanding anything to the contrary in the other Credit
      Documents, all insurance payments in respect of any liability of the
      Credit Parties to third Persons or damage to Property of third Persons by
      any Credit Party shall be paid by the underwriter of such Insurance Policy
      directly to the Person to whom such liability is owed or directly to the
      applicable Credit Party to reimburse it for any loss, damage or expense
      incurred by it in connection with the event or condition giving rise to
      such liability.

      (j)   Operation of Mortgaged Term Loan Facility Rigs.

            (i)   Each Mortgaged Term Loan Facility Rig shall not operate in or
      proceed into any area then excluded by trading warranties under its marine
      or War Risk Insurance Policies (including protection and indemnity or its
      equivalent) without satisfying the conditions of the relevant Insurance
      Policies, evidence of which shall be furnished to the Collateral Agent.

            (ii)  The Credit Parties shall not employ any Mortgaged Term Loan
      Facility Rig or suffer any Mortgaged Term Loan Facility Rig to be employed
      otherwise than in conformity with the terms of the Insurance Policies
      relative to the Mortgaged Term Loan Facility Rig (including any
      warranties, express or implied, therein) without first obtaining the
      consent to such employment of the insurers and complying with such
      requirements as to extra premium or otherwise as the insurers may
      prescribe.

            (iii) To the extent any of the following could reasonably be
      expected to cause a Material Adverse Change, each of the Credit Parties
      agrees that it will not commit any act, nor voluntarily suffer nor permit
      any act to be done, whereby any Insurance Policy required hereunder shall
      or may be suspended, impaired or defeated and will not suffer nor permit
      any Mortgaged Term Loan Facility Rig to engage in any voyage, nor to
      engage in any employment not permitted under the Insurance Policies then
      in effect, without first covering any Mortgaged Term Loan Facility Rig
      with insurance satisfactory in all respects, including the amount thereof,
      to the Collateral Agent for the voyage or the employment.

      Section 5.3 Preservation of Existence, Etc. Except as permitted by Section
6.3, each of the Credit Parties shall preserve and maintain its corporate
existence, rights, franchises and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified as a foreign corporation in each
jurisdiction in which qualification is necessary in view of its business and
operations or the ownership of its Properties to the extent the failure to
qualify could reasonably be expected to cause a Material Adverse Change.
<PAGE>
      Section 5.4 Payment of Taxes, Etc. The Parent Company shall, and shall
cause each of its Subsidiaries to, pay and discharge before the same shall
become delinquent, (a) all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or Property that are material in
amount, prior to the date on which penalties attach thereto and (b) all lawful
claims that are material in amount which, if unpaid, might by law become a Lien
upon its Property; provided, however, that neither the Parent Company nor any of
its Subsidiaries shall be required to pay or discharge any such tax, assessment,
charge, levy, or claim which is being contested in good faith and by appropriate
proceedings, and with respect to which reserves in conformity with GAAP have
been provided.

      Section 5.5 Reporting Requirements. The Borrower will furnish, or will
cause the applicable Credit Party to furnish, to the Administrative Agent (with
sufficient copies for the Administrative Agent to distribute to the Term
Lenders):

      (a)   Defaults. As soon as possible after the occurrence of a Default
known to any Responsible Officer which is continuing on the date of such
statement, a statement of a Responsible Officer setting forth the details of
such Default and the actions which the Credit Parties have taken and propose to
take with respect thereto;

      (b)   Quarterly Financials. (i) As soon as available and in any event not
later than 45 days after the end of each of the first three fiscal quarters of
each fiscal year of the Parent Company, the unaudited consolidated balance sheet
of the Parent Company, as of the end of such quarter, and the consolidated
statements of income and cash flows of the Parent Company, each for the fiscal
quarter then ended and for the period commencing at the end of the previous year
and ending with the end of such fiscal quarter, all in reasonable detail and
duly certified with respect to such statements (subject to year-end audit
adjustments) by an authorized financial officer of the Parent Company as having
been prepared in accordance with GAAP, except for the absence of footnotes
(provided that the requirements of this Section 5.5(b) with respect to
consolidated financial statements of the Parent Company shall be deemed
satisfied by delivery of the Parent Company's Form 10-Q for such fiscal quarter)
and (ii) as soon as available and in any event not later than 45 days after the
end of each of the first three fiscal quarters of each fiscal year of the
Borrower, the unaudited consolidated balance sheet of the Borrower, as of the
end of such quarter, and the consolidated statements of income of the Borrower,
each for the fiscal quarter then ended and for the period commencing at the end
of the previous year and ending with the end of such fiscal quarter, all in
reasonable detail and duly certified with respect to such statements (subject to
year-end audit adjustments) by an authorized financial officer of the Parent
Company as having been prepared in accordance with GAAP, except for the absence
of footnotes;

      (c)   Audited Annual Financials. (i) As soon as available and in any event
not later than 90 days after the end of each fiscal year of the Borrower, copies
of the annual audit report for such year for the Borrower, including therein the
consolidated balance sheet of the Borrower as of the end of such fiscal year,
consolidated statements of income, changes in owners' equity and cash flows for
such fiscal year, and (ii) as soon as available and in any event not later than
90 days after the end of each fiscal year of the Parent Company, copies of the
annual audit report for such year for the Parent Company, including therein the
consolidated balance sheet of the Parent Company as of the end of such fiscal
year, consolidated statements of income, changes in
<PAGE>
owners' equity and cash flows for such fiscal year, in each case certified by
independent certified public accountants of nationally recognized standing
reasonably acceptable to the Administrative Agent and the Required Term Lenders
(provided that the requirements of this Section 5.5(c) with respect to
consolidated financial statements of the Parent Company shall be deemed
satisfied by delivery of the Parent Company's Form 10-K for such fiscal year);

      (d)   Compliance Certificates. (i) Within 45 days after the end of each of
the first three fiscal quarters of each fiscal year of the Parent Company and
(ii) within 90 days after the end of each fiscal year of the Parent Company, a
Compliance Certificate for the fiscal quarter or fiscal year then ended
indicating compliance with Section 5.14 and Sections 6.16 through 6.19;

      (e)   Management Letters. Promptly upon receipt thereof and following such
time as the appropriate officers of the Parent Company shall have had reasonable
time to respond thereto, a copy of each formal report or "management letter"
submitted to the Parent Company by its independent accountants in connection
with any annual, interim or special audit made by it of the books of the Parent
Company;

      (f)   Budgets. On or before 45 days after the commencement of each fiscal
year of the Parent Company, (i) a consolidated budget of the Parent Company and
its Subsidiaries which includes consolidated income statements, balance sheets
and cash flow statements of the Parent Company and its Subsidiaries for each of
the four fiscal quarters of such fiscal year and (ii) a breakdown of projected
revenues, operating expenses, utilizations and capital expenditures for each
offshore drilling rig owned or leased by the Parent Company and its
Subsidiaries;

      (g)   Rig Report. On or before 45 days after the end of each of fiscal
quarter of each fiscal year of the Parent Company, a report detailing (i) the
then current location of each of the Mortgaged Term Loan Facility Rigs and each
other offshore drilling rigs and other vessels owned or leased by the Borrower
and its Subsidiaries, and the then current term of and parties to any contract
of any such vessels and (ii) for the previous fiscal quarter, the average day
rates and utilization for each such rig or vessel.

      (h)   Other Creditors. Promptly after the giving or receipt thereof,
copies of any material notices given or received by any Credit Party pursuant to
the terms of any indenture, loan agreement, credit agreement, or similar
agreement;

      (i)   Securities Law Filings and other Public Information. Promptly and in
any event within 10 days after the sending or filing thereof, copies of all
proxy material, reports and other information which the Parent Company or any of
its Subsidiaries sends to the holders of its respective public securities
generally, files with the SEC, or otherwise makes available to the public or the
financial community generally;

      (j)   Termination Events. As soon as possible and in any event within 10
days after a Responsible Officer knows or has reason to know that any
Termination Event with respect to any Plan has occurred, a statement of a senior
financial officer of the Parent Company or such Subsidiary describing such
Termination Event and the action, if any, which the Parent Company or such
Subsidiary proposes to take with respect thereto;
<PAGE>
      (k)   Termination of Plans. Promptly and in any event within 10 days after
receipt thereof by the Parent Company or any member of the Controlled Group from
the PBGC, copies of each notice received by the Parent Company or any such
member of the Controlled Group of the PBGC's intention to terminate any Plan or
to have a trustee appointed to administer any Plan;

      (l)   Other ERISA Notices. Promptly and in any event within 10 days after
receipt thereof by the Parent Company or any member of the Controlled Group from
a Multiemployer Plan sponsor, a copy of each notice received by the Parent
Company or any member of the Controlled Group concerning the imposition of
withdrawal liability pursuant to Section 4202 of ERISA in an amount that could
reasonably be expected to cause a Material Adverse Change;

      (m)   Disputes, etc. Promptly and in any event within 10 days after a
Responsible Officer becomes aware thereof, written notice of any claims,
proceedings, or disputes, or to the knowledge of a Responsible Officer
threatened, or affecting the Parent Company or any of its Subsidiaries which, if
adversely determined, could reasonably be expected to cause a Material Adverse
Change;

      (n)   Material Changes. Prompt written notice of any condition or event of
which the Parent Company or any of its Subsidiaries has knowledge, which
condition or event has resulted or may reasonably be expected to result in a
Material Adverse Change;

      (o)   Environmental Notices. Promptly upon the receipt thereof by the
Parent Company or any of its Subsidiaries, a copy of any form of notice, summons
or citation received from the EPA, or any other Governmental Authority or any
other third party, concerning (i) material violations or alleged violations of
Environmental Laws, which seeks to impose liability therefor, (ii) any material
action or omission on the part of the Parent Company or any of its Subsidiaries
in connection with Hazardous Waste or Hazardous Substances, (iii) any notice of
potential responsibility under CERCLA or any analogous law, or (iv) concerning
the filing of a Lien other than a Permitted Lien upon, against or in connection
with the Parent Company or any of its Subsidiaries, or any of their leased or
owned material Property, wherever located;

      (p)   Collateral. Promptly upon obtaining knowledge thereof by any
Responsible Officer, notice of:

            (i)   any Casualty Event if the Casualty Proceeds with respect
      thereto could reasonably be expected to exceed U.S.$5,000,000 (or the
      equivalent in any other currency) with respect to any Mortgaged Term Loan
      Facility Rig;

            (ii)  any Collateral Disposition;

            (iii) any occurrence in respect of any Mortgaged Term Loan Facility
      Rig that is or is likely, by the passing of time or otherwise, to become a
      Total Loss;

            (iv)  any material requirement made by any insurer or classification
      society or by any competent authority which is not complied with within a
      reasonable time; and

            (v)   any arrest of any Mortgaged Term Loan Facility Rig or the
      exercise or purported exercise of any Lien on any Mortgaged Term Loan
      Facility Rig.
<PAGE>
      (q)   Insurance Broker Reports. As soon as available and in any event not
later than 90 days after the end of each fiscal year of the Parent Company, a
report prepared by the Parent Company's independent maritime insurance broker
which report (i) lists all Insurance Policies then in effect with respect to the
Mortgaged Term Loan Facility Rigs, (ii) specifies for each such Policy (A) the
amount thereof, (B) the risks insured against thereby, (C) the name of the
insurer and each insured party thereunder and (D) the policy or other
identification number thereof and (iii) certifies that all such Insurance
Policies are (A) in full force and effect, (B) placed with such insurance
companies, underwriters or associations, in such amounts, against such risks,
and in such form, as are normally issued against by Persons of similar size and
established reputation engaged in the same or similar businesses and similarly
situated and as are necessary or advisable for the protection of the Collateral
Agent as mortgagee, and (C) conforming to the requirements of this Agreement;

      (r)   Safety Management Manual. Upon request by the Administrative Agent,
a copy of the safety management manual used to describe and implement the Parent
Company's safety management system developed, implemented and maintained in
compliance with the ISM Code, if applicable;

      (s)   Indentures. Prompt written notice of any material amendments,
modifications, or terminations of the Senior Indenture, the Subordinated
Indenture or any other indenture, note or other agreement evidencing or
governing any Subordinated Debt; and

      (t)   Other Information. Such other information respecting the business or
Properties, or the condition or operations, financial or otherwise, of the
Parent Company and its Subsidiaries as the Administrative Agent or any Term
Lender may from time-to-time reasonably request.

      Section 5.6 Maintenance of Property. The Parent Company shall, and shall
cause each of its Subsidiaries to, (a) maintain their material Property
necessary for the conduct of its business in good repair and working condition,
except for normal wear and tear and as otherwise permitted by this Agreement,
and (b) not knowingly or willfully permit the commission of waste or other
injury, or the release of Hazardous Substances on or about the owned or operated
property in violation of applicable Environmental Laws. Notwithstanding the
foregoing, if a Mortgaged Term Loan Facility Rig is affected by a Casualty Event
or a Collateral Disposition, the Borrower shall, or shall cause the Guarantor
who owns such affected Mortgaged Term Loan Facility Rig, to either make all
necessary repairs and replacements to such affected Mortgaged Term Loan Facility
Rig or apply the Casualty Proceeds or Collateral Disposition Proceeds therefrom
as provided in Section 2.6(c)(ii) or (iii), as the case may be.

      Section 5.7 Inspection. From time-to-time during regular business hours
upon reasonable prior notice (and subject to the requirements of applicable
insurance policies), the Parent Company shall, and shall cause each of its
Subsidiaries to, (a) permit the Administrative Agent (at the request of any Term
Lender) to examine and copy their books and records, (b) permit the
Administrative Agent and the Term Lenders to visit and inspect their Properties,
and (c) permit the Administrative Agent and Term Lenders to discuss the business
operations and Properties of the Parent Company and its Subsidiaries with their
officers and directors.
<PAGE>
      Section 5.8 Use of Proceeds. The Borrower shall use the proceeds of the
Term Loans to refinance existing Debt of the Credit Parties and to pay related
fees and expenses. The Borrower will not engage in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U). No proceeds of any Term Loan will be used to purchase
or carry any margin stock in violation of Regulation T, U, or X.

      Section 5.9 Nature of Business. The Parent Company shall, and shall cause
each of its Subsidiaries to, not engage in any business if, as a result, the
general nature of the business of the Parent Company and its Subsidiaries, taken
on a consolidated basis, would then be substantially changed from the general
nature of the business engaged in by the Parent Company and its Subsidiaries on
the Closing Date.

      Section 5.10 Books and Records. The Parent Company will keep, and will
cause each of its Subsidiaries to keep, adequate records and books of account in
which complete entries will be made in accordance with GAAP (subject to year-end
adjustments), reflecting all financial transactions of such Person. The Parent
Company shall maintain or cause to be maintained a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP, and each of
the financial statements described herein shall be prepared from such system and
records.

      Section 5.11 Rig Appraisal Reports.

      (a)   Within 45 days after each anniversary date of the Closing Date, the
Borrower shall deliver to the Administrative Agent and the Term Lenders two
written appraisal reports prepared by two independent Approved Rigbrokers
setting forth the Market Value of each of the Mortgaged Term Loan Facility Rigs
as of the date appraised (each a "Rig Appraisal Report"). The cost of each such
Rig Appraisal Report shall be paid by the Borrower.

      (b)   If the Market Value of either (i) the Mortgaged Revolving Credit
Facility Rigs is less than 205% of the Total Revolving Commitments or (ii) the
Mortgaged Term Loan Facility Rigs is less than 205% of the outstanding principal
amount of the Term Loans, then the Borrower shall deliver to the Administrative
Agent and the Term Lenders an additional set of Rig Appraisal Reports no less
than 175 days and no more than 225 days after each anniversary date of the
Closing Date until such time as (A) the Market Value of the Mortgaged Revolving
Credit Facility Rigs is equal to or greater than 205% of the Total Revolving
Commitments and (B) the Market Value of the Mortgaged Term Loan Facility Rigs is
equal to or greater than 205% of the outstanding principal amount of the Term
Loans. The cost of each such additional Rig Appraisal Report shall be paid by
the Borrower.

      (c)   At any time the Administrative Agent, at the request of the Required
Term Lenders, may request that the Borrower deliver an additional Rig Appraisal
Report to the Term Lenders. Upon receipt of such request by the Borrower, the
Borrower shall deliver such Rig Appraisal Report to the Administrative Agent and
the Term Lenders within 30 days after receipt of such request. Unless a Default
is in existence at the time of such request, the Term Lenders shall pay the
costs of any subsequent Rig Appraisal Reports requested by the Administrative
Agent under this Section 5.11(c) during such calendar year.
<PAGE>
      (d)   Within 30 days of the occurrence of any Casualty Event (if the
Casualty Proceeds with respect thereto could reasonably be expected to exceed
U.S.$5,000,000) or any Collateral Disposition occurring with respect to any
Mortgaged Term Loan Facility Rig, the Borrower shall deliver to the
Administrative Agent and the Term Lenders an additional Rig Appraisal Report
setting forth the Market Values of the Mortgaged Term Loan Facility Rigs
immediately prior to such Casualty Event or Collateral Disposition and the
Market Values giving effect to such Casualty Event or Collateral Disposition (an
"Additional Appraisal Report"). The cost of each such Rig Appraisal Report shall
be paid by the Borrower.

      (e)   Each Rig Appraisal Report delivered under this Section 5.11 shall be
in form, scope and substance reasonably satisfactory to the Administrative
Agent.

      Section 5.12 Operation of Mortgaged Term Loan Facility Rigs. Each
Subsidiary of the Parent Company that owns or operates a Mortgaged Term Loan
Facility Rig shall:

      (a)   (i) Comply with and satisfy all Legal Requirements of the
jurisdiction of such Mortgaged Term Loan Facility Rig's home port, now or
hereafter from time to time in effect, in order that such Mortgaged Term Loan
Facility Rig shall continue to be documented pursuant to the laws of the
jurisdiction of its home port with such endorsements as shall qualify such
Mortgaged Term Loan Facility Rigs for participation in the trades and services
to which it may be dedicated from time to time or (ii) not do or allow to be
done anything whereby such documentation is or could reasonably be expected be
forfeited;

      (b)   keep such Mortgaged Term Loan Facility Rig in a good and sufficient
state of repair consistent with first-class ship-ownership and management
practice employed by owners of vessels of similar size and type and so as to (i)
maintain the present class of such Mortgaged Term Loan Facility Rig at its
current classification by any first-class, recognized rating agency, including,
without limitation, the American Bureau of Shipping, free of recommendations
affecting class and qualifications and change of class, save those notified to
the Collateral Agent in writing prior to the date of this Agreement and (ii)
comply with all Legal Requirements from time to time applicable to such
Mortgaged Term Loan Facility Rig and such Credit Party's operations except where
such non-compliance will not reasonably be expected to cause a material adverse
change on the Mortgaged Term Loan Facility Rigs, the applicable Credit Party or
the Lien created by the Rig Mortgage;

      (c)   with respect to such Mortgaged Term Loan Facility Rig, (i) make or
cause to be made all repairs to or replacement of any damaged, worn or lost
parts or equipment such that the value of such Mortgaged Term Loan Facility Rig
will not be materially impaired and (ii) except as otherwise contemplated by
this Agreement, not remove any material part of, or item of equipment owned by
the Credit Parties installed on, such Mortgaged Term Loan Facility Rig except in
the ordinary course of the operation and maintenance of such Mortgaged Term Loan
Facility Rig or unless (A) the part or item so removed is forthwith replaced by
a suitable part or item which is in the same condition as or better condition
than the part or item removed, is free from any Lien (other than Permitted
Liens) in favor of any Person other than the Collateral Agent and becomes, upon
installation on such Mortgaged Term Loan Facility Rig the property of the Credit
Parties and subject to the security constituted by the Rig Mortgage or the
Security Agreement or (B) the removal will not materially diminish the value of
such Mortgaged Term
<PAGE>
Loan Facility Rig (provided, however, that this Section 5.12(c) shall be deemed
satisfied in the event of a Casualty Event if the Credit Parties comply with
Section 2.6);

      (d)   submit such Mortgaged Term Loan Facility Rig to such periodical or
other surveys as may be required for classification purposes and, upon the
request of the Collateral Agent supply to the Collateral Agent copies of all
survey reports and classification certificates issued in respect thereof;

      (e)   promptly pay and discharge all debts, damages and liabilities
whatsoever which have given or may give rise to maritime or possessory Liens
(other than Permitted Liens) on or claims enforceable against such Mortgaged
Term Loan Facility Rig and all tolls, dues, taxes, assessments, governmental
charges, fines and penalties that are material in amount and lawfully charged on
or in respect of each Mortgaged Term Loan Facility Rig other than any of the
foregoing being contested in good faith and diligently by appropriate
proceedings, and, in the event of arrest of any Mortgaged Term Loan Facility Rig
pursuant to legal process, or in the event of her detention in exercise or
purported exercise of any such Lien or claim as aforesaid, procure, if possible,
the release of such Mortgaged Term Loan Facility Rig from such arrest or
detention forthwith upon receiving notice thereof by providing bail or otherwise
as the circumstances may require; and

      (f)   if the Person operating such Mortgaged Term Loan Facility Rig is not
the Borrower or a Guarantor, promptly remit all earnings received by such Person
from any Mortgaged Term Loan Facility Rig back to the appropriate Credit Party.
For the avoidance of doubt, "earnings" does not include operating costs and
reasonable management fees as are customary in the industry and which are set
forth and supported by a budget for such Mortgaged Term Loan Facility Rigs which
will be delivered to the Administrative Agent on or before such time as the
subject Rig begins operations for such Person.

      Section 5.13 New Subsidiaries; Permitted Holding Company.

      (a)   Within 10 days after (i) the date of the creation of any new
Material Subsidiary of the Borrower, (ii) the date that any Subsidiary of the
Borrower that was not a Material Subsidiary becomes a Material Subsidiary, (iii)
the purchase by the Borrower or any of its Subsidiaries of the Capital Stock of
any Person, which purchase results in such Person becoming a Material Subsidiary
of the Borrower permitted by this Agreement, or (iv) the transfer of a Mortgaged
Term Loan Facility Rig to any wholly-owned Subsidiary of the Parent Company that
is not a Guarantor, the Borrower shall, in each case, cause such Person to
execute and deliver to the Collateral Agent (with sufficient originals for each
applicable Term Lender) a Joinder Agreement in substantially the form of the
attached Exhibit K, together with evidence of corporate authority to enter into
and such legal opinions in relation to such Joinder Agreement as the Collateral
Agent may reasonably request.

      (b)   Within 10 days after the date of the creation of any Permitted
Holding Company, the Borrower shall cause such Permitted Holding Company to
execute and deliver to the Collateral Agent (with sufficient originals for each
applicable Term Lender) a Joinder Agreement in substantially the form of the
attached Exhibit K, together with evidence of
<PAGE>
corporate authority to enter into and such legal opinions in relation to such
Joinder Agreement as the Collateral Agent may reasonably request.

      Section 5.14 Security Maintenance Ratio. The Borrower shall at all times
maintain a Security Maintenance Ratio of at least 2.0 to 1.0; provided, however,
that this Section 5.14 shall be deemed satisfied during any period in which this
Section 5.14, but for a Collateral Disposition or Casualty Event, would have
been satisfied if, during such period, the Credit Parties are in compliance with
Section 2.6(c)(ii) or (iii), as the case may be. Notwithstanding the foregoing,
if the Borrower is in compliance with this Section 5.14, the Collateral Agent
shall, at the request of the Borrower, release any Lien granted to or held by
the Collateral Agent on or relating to the Mortgaged Term Loan Facility Rigs
(other than Liens on or relating to the Initial Mortgaged Term Loan Facility
Rigs) if the Borrower would be in compliance with this Section 5.14 after giving
effect to such release of Lien and no other Default exists or would be caused
thereby.

      Section 5.15 Further Assurances in General. The Parent Company shall, and
shall cause each of the Credit Parties to, protect and perfect the Liens
contemplated by the Security Documents. The Parent Company at its expense shall,
and shall cause each of the Credit Parties to, promptly execute and deliver all
such other and further documents, agreements and instruments in compliance with
or accomplishment of the covenants and agreements of the Parent Company or any
of its Subsidiaries in the Credit Documents, including, without limitation, the
accomplishment of any condition precedent that may have been temporarily waived
by the Term Lenders prior to the Closing Date.

                                   ARTICLE VI

                               NEGATIVE COVENANTS

      So long as the Term Loans or any amount under any Credit Document shall
remain unpaid, the Borrower agrees, unless the Consolidated Required Lenders
otherwise consent in writing, to comply with the following covenants.

      Section 6.1 Liens, Etc. The Parent Company shall not, nor shall it permit
any of its Subsidiaries to, create, assume, incur or suffer to exist, any Lien
on or in respect of any of its Property whether now owned or hereafter acquired,
or assign any right to receive income therefrom, except that the Parent Company
and its Subsidiaries may create, incur, assume and suffer to exist the following
which are permitted liens ("Permitted Liens"):

      (a)   Liens for taxes, assessments or governmental charges or levies on
its Property if the same shall not at the time be delinquent or thereafter can
be paid without penalty, or are being contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books;

      (b)   Liens imposed by law, or arising by operation of law, including,
without limitation, carriers', warehousemen's, mechanics' liens, maritime Liens
and other similar liens arising in the ordinary course of business which secure
payment of obligations not more than 60 days past due or which are being
contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside on the books of the applicable Person;
<PAGE>
      (c)   Liens incurred and pledges and deposits made in the ordinary course
of business in connection with worker's compensation, unemployment insurance,
old age pensions, or other social security or retirement benefits, or similar
legislation, other than any Lien imposed by ERISA;

      (d)   Liens to secure the performance of bids, trade contracts and leases
(other than Debt), statutory obligations, surety bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business
not to exceed in the aggregate 25% of Unrestricted Cash determined at the time
such deposits, statutory obligations, bonds or other obligations are incurred;

      (e)   zoning restrictions, easements, licenses, covenants, reservations,
restrictions on the use of Property, defects, irregularities and deficiencies in
title to Property and such other encumbrances or charges against real property
as are of a nature generally existing with respect to Property of a similar
character and which, in the aggregate, are not substantial in amount, and which
do not in any material way affect the marketability of the same or interfere
with the use thereof in the business of the Parent Company or its Subsidiaries;

      (f)   Liens existing on the Closing Date that either (i) secure Debt and
other obligations that do not exceed $25,000,000 in the aggregate or (ii) are
disclosed in writing to the Administrative Agent on or before the Closing Date;

      (g)   Liens created by Capital Leases provided that the Liens created by
any such Capital Lease attach only to the Property leased pursuant thereto and
proceeds (including, without limitation, proceeds from associated contracts and
insurances) of, and improvements, accessories and upgrades to, the Property
leased pursuant thereto;

      (h)   Liens to secure Debt, including, without limitation, Project Finance
Debt, incurred for the purpose of financing all or a part of the purchase price
or construction cost of Property (including the cost of upgrading, refurbishing
or renovating drilling rigs, drillships and other vessels and platforms) if (A)
the principal amount of the Debt secured by such Liens does not exceed the cost
of the Property so acquired, constructed, upgraded, refurbished or renovated
plus transaction costs related thereto, (B) such Liens do not encumber any other
Property (other than the proceeds (including, without limitation, proceeds from
associated contracts and insurances) of, and improvements, accessories and
upgrades to, the Property so acquired, constructed, upgraded, refurbished or
renovated and the Capital Stock of Special Purpose Subsidiaries that own,
whether directly or indirectly, only the Property so acquired, constructed,
upgraded, refurbished or renovated) and (C) such Liens attach no later than 12
months after the later of (x) commencement of commercial operation of the
Property so acquired, constructed, upgraded, refurbished or renovated, (y)
completion of the construction, acquisition, upgrade, improvement or renovation
of such Property and (z) acquisition of such Property;

      (i)   Liens created for the benefit of the Term Secured Parties or the
Finance Parties;

      (j)   Liens on Property of a Person existing at the time such Person is
merged or consolidated with or into, or otherwise acquired by, the Parent
Company or one of its Subsidiaries; provided that, (i) such Liens are in
existence at the time the respective Persons
<PAGE>
become Subsidiaries of the Parent Company and were not created or incurred in
anticipation thereof and (ii) the Debt secured by such Liens (A) is permitted
under Section 6.2, (B) secured only by such Property and the proceeds thereof
(including, without limitation, proceeds from associated contracts and
insurances) of, and improvements, accessories and upgrades to, such Property and
not by any other assets of the Parent Company and its Subsidiaries, and (C) is
not increased in amount;

      (k)   Liens on Property existing at the time of the acquisition thereof;
provided that, (i) such Liens are in existence at the time such Property is
acquired and were not created or incurred in anticipation thereof and (ii) the
Debt secured by such Liens (A) is permitted under Section 6.2, (B) does not
exceed the fair market value of such Property, (C) is secured only by such
Property and the proceeds thereof (including, without limitation, proceeds from
associated contracts and insurances) of, and improvements, accessories and
upgrades to, such Property and not by any other assets of the Parent Company and
its Subsidiaries, and (D) is not increased in amount;

      (l)   judgment, attachment, sequestration, distress and similar Liens
(including bonds related to judgment or litigation) not giving rise to an Event
of Default so long as any appropriate legal proceedings which may have been
initiated for the review of such judgment, attachment, sequestration, distress
or similar action shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired;

      (m)   rights of set-off of banks and other Persons in the ordinary course
of banking and trading arrangements;

      (n)   Liens securing reimbursement obligations under financial letters of
credit;

      (o)   Liens securing any MARAD Financing, provided that each such Lien
encumbers only the property financed in connection with the creation of any such
Debt and any other MARAD Collateral;

      (p)   Liens on Property of any Affiliate of the Parent Company or any of
its Subsidiaries or any other joint venture in favor of the Parent Company or
any of its Subsidiaries;

      (q)   Liens securing Debt permitted by subsections (d), (e) and (n) of
Section 6.2;

      (r)   Liens on Property of any Credit Party in favor of the Parent
Company, the Borrower or any Guarantor that is a wholly-owned Subsidiary of the
Parent Company;

      (s)   Liens incurred in the ordinary course of business to secure
liabilities to insurance carriers under insurance or other self-insurance
arrangements in an amount not to exceed $25,000,000; and

      (t)   Liens to secure any extension, renewal, refinancing, refunding or
replacement (or successive extensions, renewals, refinancings, refundings or
replacements), in whole or in part, of any Debt or other obligation secured by
any Permitted Lien referred to in clauses (a) through (s) above, provided that
the principal amount of the Debt or other obligation secured thereby is no
greater than the greater of (i) the outstanding principal amount of such Debt or
other obligation immediately before such extension, renewal, refinancing,
refunding or replacement
<PAGE>
and (ii) the maximum commitment of such Debt or other obligation immediately
before such extension, renewal, refinancing, refunding or replacement and that
any such Liens are limited to the Property originally encumbered thereby (and
any proceeds (including, without limitation, proceeds from associated contracts
and insurance) of and improvements, accessories and upgrades to, such Property).

Notwithstanding the foregoing, the Parent Company shall not, nor shall it permit
any of its Subsidiaries to, create, assume, incur or suffer to exist, any Lien
on or in respect of (i) any assets relating to or arising from the Mortgaged
Term Loan Facility Rigs whether now owned or hereafter acquired, including,
without limitation, any accounts receivable, inventory, equipment, and general
intangibles (each as defined in Article 9 of the UCC) other than Liens in favor
of the Collateral Agent for the benefit of the Term Secured Parties, (ii) the
Pride Oklahoma or (iii) the Capital Stock of the Borrower or any of its
Subsidiaries, except in each case, Permitted Liens under clauses (a) through
(d), (l) and, to the extent relating to any of the foregoing, clause (t) above.

      Section 6.2 Debts, Guaranties and Other Obligations. The Parent Company
shall not, nor shall it permit any of its Subsidiaries to, create, assume,
suffer to exist or in any manner become or be liable, in respect of any Debt
except:

      (a)   Debt under the Credit Documents;

      (b)   Debt under the Revolving Credit Agreement and related documents;

      (c)   Debt existing on the date hereof that either (i) does not exceed
$25,000,000 in the aggregate or (ii) is described in Schedule 6.2;

      (d)   Intercompany Debt, provided that if such Debt is owing to any Credit
Party that is not a wholly-owned Subsidiary of the Parent Company or any other
Person other than a Credit Party, (i) then such Debt shall be subordinated to
the Obligations and the Obligations (as defined in the Revolving Credit
Agreement) on terms reasonably acceptable to the Administrative Agent and (ii)
and if such Intercompany Debt is secured, then the Obligations will be secured
by such Liens equally and ratably with such secured Intercompany Debt so long as
such Intercompany Debt shall be so secured;

      (e)   Debt owing by any Subsidiary of the Parent Company (other than a
Credit Party) to the Parent Company or any of other Subsidiary of the Parent
Company;

      (f)   Debt in connection with any guarantees in favor of any protection
and indemnity or War Risk associations to the extent such guarantees are
required in connection with any insurance policies;

      (g)   unsecured Debt of the Borrower and its Subsidiaries in the aggregate
amount not to exceed $15,000,000 (or the equivalent in any other currency) in
addition to all other Debt permitted by this Section 6.2;

      (h)   unsecured Debt of the Parent Company and its Subsidiaries (other
than the Borrower and its Subsidiaries), in addition to all other Debt permitted
by this Section 6.2 other
<PAGE>
than Debt permitted under Section 6.2(h), provided, that (i) if the maturity of
such Debt is after the Term Loan Maturity Date, then the amortization of such
Debt may not exceed the greater of 10% of the principal amount of such Debt or
$25,000,000 in any fiscal year prior to the Term Loan Maturity Date or (ii) to
the extent that such Debt is not permitted under subclause (i) above, then such
Debt is in an aggregate amount not to exceed the greater of $200,000,000 (or the
equivalent in any other currency) and 5% of Consolidated Tangible Net Assets;

      (i)   Project Finance Debt;

      (j)   unsecured Debt under the Subordinated Indenture and any other
Subordinated Debt, provided, that either (i) such Subordinated Debt is on
subordination terms and conditions reasonably satisfactory to the Administrative
Agent and the Required Term Lenders or as contemplated by Section 6.7 or (ii)
the amortization of such Subordinated Debt may not exceed the greater of 10% of
the principal amount of such Subordinated Debt or $25,000,000 in any fiscal year
prior to the Term Loan Maturity Date;

      (k)   Debt of a Subsidiary of the Parent Company that existed at the time
such Person became a Subsidiary of the Parent Company; provided that, (i) such
Debt is in existence at the time the respective Persons become Subsidiaries of
the Parent Company and were not created or increased in anticipation thereof,
(ii) no Event of Default exists or no Default would be caused thereby and (iii)
after giving effect to the transaction by which such Person became a Subsidiary
of the Parent Company on a pro forma basis, the Parent Company would have been
in compliance with Sections 6.16 through 6.19 as of the end of the most recent
fiscal quarter;

      (l)   Debt of the Parent Company or any of its Subsidiaries that
represents the assumption by the Parent Company or that Subsidiary of Debt of
another Person (including, without limitation, another Subsidiary of the Parent
Company) in connection with a merger of the Parent Company or that Subsidiary
with such other Person; provided that, (i) such Debt is in existence at the time
the respective Persons are merged with the Parent Company or that Subsidiary and
were not created or increased in anticipation thereof, (ii) no Event of Default
exists or no Default would be caused thereby and (iii) after giving effect to
such transaction on a pro forma basis, the Parent Company would have been in
compliance with Sections 6.16 through 6.19 as of the end of the most recent
fiscal quarter;

      (m)   Debt of the Parent Company or any of its Subsidiaries incurred for
the purpose of financing all or a part of the purchase price or construction
cost of Property (including the cost of upgrading, refurbishing or renovating
drilling rigs, drillships and other vessels and platforms) if (i) the principal
amount of such Debt does not exceed the cost of the Property so acquired,
constructed, upgraded, refurbished or renovated plus transaction costs related
thereto, and (ii) such Debt is incurred no later than 12 months after the latest
of (A) commencement of commercial operation of the Property so acquired,
constructed, upgraded, refurbished or renovated, (B) completion of the
construction, acquisition, upgrade, improvement or renovation of such Property
and (C) acquisition of such Property; provided, however, that, if payment of the
principal, interest, fees or other costs payable with respect to such Debt is
required before the Term Loan Maturity Date, then, to the extent that the
payment of such principal, interest, fees or other costs are not offset, in the
aggregate, by payments under a contract dependent on such Property, the
remaining aggregate principal balance (the "Uncovered Portion") shall not be
<PAGE>
permitted under this Section 6.2(m) (but may be permitted under another clause
of this Section 6.2); and provided further, for the avoidance of doubt, that if
any part of the Uncovered Portion is, subsequent to incurrence, offset by
payments to be made prior to the Term Loan Maturity Date under a contract that
is dependent on such Property, such part shall no longer be part of the
Uncovered Portion and shall be permitted under this Section 6.2(m);

      (n)   Debt of the Parent Company and its Subsidiaries (other than the
Borrower and its Subsidiaries), in addition to all other Debt permitted by this
Section 6.2, provided, that (i) if the maturity of such Debt is after the Term
Loan Maturity Date, then the amortization of such Debt may not exceed the
greater of 10% of the principal amount of such Debt or $25,000,000 in any fiscal
year prior to the Term Loan Maturity Date or (ii) to the extent that such Debt
is not permitted under subclause (i) above, then such Debt is in an aggregate
amount not to exceed the greater of $350,000,000 (or the equivalent in any other
currency) and 10% of Consolidated Tangible Net Assets as of the most recent
fiscal quarter of the Parent Company;

      (o)   unsecured Debt of the Parent Company and its Subsidiaries in
addition to all other Debt permitted by this Section 6.2, the proceeds of which
are used to refinance Subordinated Debt existing on the Closing Date;

      (p)   the MARAD Financing; and

      (q)   any extension, renewal, refinancing, refunding or replacement (or
successive extensions, renewals, refinancings, refundings or replacements), in
whole or in part, of any Debt referred to in clauses (a) through (p) of this
Section 6.2, provided that (i) the principal amount of such Debt is not thereby
increased (other than by the reasonable fees, expenses and any premium incurred
in connection with the extension, renewal, refinancing, refunding or replacement
(except that in connection with any refinancing, refunding or replacement of the
European Facility, the principal amount thereof may be increased to, but may not
exceed, $125,000,000)) and (ii) with respect to Subordinated Debt, except as
otherwise permitted by Section 6.2(p), such Subordinated Debt shall not be
extended, renewed, refinanced, refunded or replaced except on subordination
terms at least as favorable to the Term Lenders and no more restrictive on the
Parent Company than the Subordinated Debt being extended, renewed, refinanced,
refunded or replaced.

      Section 6.3 Merger or Consolidation; Asset Sales.

      (a)   The Borrower shall not, nor shall it permit any Subsidiary to,
merge, dissolve, liquidate or consolidate with or into any other Person or to
transfer all or substantially all of its Property to any other Person, except
that (i) a Subsidiary of the Borrower may merge with or into the Borrower or a
wholly-owned Subsidiary of the Borrower (provided that if either of such
Subsidiaries is a Guarantor, the surviving entity shall be a Guarantor), and
(ii) a Subsidiary of the Borrower may transfer all or substantially all of its
assets (upon voluntary liquidation or otherwise) to the Borrower or to another
wholly-owned Subsidiary of the Borrower (provided that if the transferor in such
a transaction is a Guarantor, then the transferee must either be the Borrower or
a Guarantor), provided in each case that (A) no Event of Default exists or no
Default would be caused thereby, and (B) if any Collateral is transferred
pursuant to this Section 6.3, the Borrower shall provide the Collateral Agent
with ten Business Days' written notice prior
<PAGE>
to such transfer, and the Borrower or such Guarantor, as the case may be, owning
the Collateral after such transfer shall ratify and confirm the Lien on such
Collateral and shall take all action reasonably requested by the Collateral
Agent in respect of the continued priority and perfection of the Lien over such
Collateral.

      (b)   The Parent Company shall not, in any transaction or series of
transactions, consolidate with or merge into any other Person (other than a
merger of a Subsidiary into the Parent Company in which the Parent Company is
the continuing corporation), or sell, convey, assign, transfer, lease or
otherwise dispose of all or substantially all of the assets of the Parent
Company and its Subsidiaries, taken as a whole, to any Person unless (i) either
(A) the Parent Company shall be the continuing Person or (B) the Person (if
other than the Parent Company) formed by such consolidation or into which the
Parent Company is merged, or the Person which acquires, by sale, assignment,
conveyance, transfer, lease or other disposition, all or substantially all of
the assets of the Parent Company and the Subsidiaries, taken as a whole, shall
(1) be a Permitted Holding Company and (2) comply with the provisions of Section
5.13, (ii) no Event of Default exists or no Default would be caused thereby, and
(iii) after giving effect to such transaction on a pro forma basis, the Parent
Company would have been in compliance with the financial covenants set forth in
Sections 6.16 through 6.19 as of the end of the most recent fiscal quarter.

      (c)   The Parent Company shall not, nor shall it permit any of its
Subsidiaries to, sell, transfer, assign or otherwise dispose of its Property to
any other Person, except:

            (i)   Sales of inventory in the ordinary course of business;

            (ii)  Dispositions of obsolete or worn out property, whether now
      owned or hereafter acquired, in the ordinary course of business;

            (iii) Dispositions of equipment to the extent that (A) such property
      is exchanged for credit against the purchase price of similar replacement
      property, (B) the proceeds of such disposition are reasonably promptly
      applied to the purchase price of such replacement property or (C) with
      respect to equipment relating to Mortgaged Term Loan Facility Rigs, such
      dispositions are in compliance with Section 5.12(c);

            (iv)  to the extent not otherwise permitted by this Section 6.3, so
      long as no Event of Default exists and after giving effect to such
      transaction on a pro forma basis, no Default would be caused thereby,
      sales, transfers, assignments or other dispositions of Property to a
      Person other than the Parent Company or any of its Subsidiaries (an "Asset
      Sale") that, together with all other Asset Sales (other than sales,
      transfers, assignments or other dispositions permitted by subsections (i),
      (ii) and (iii) above) as permitted by this Section during the twelve-month
      period ending with the month in which any such Asset Sale occurs, does not
      exceed $100,000,000 (or the equivalent in any other currency) for the
      Parent Company and its Subsidiaries of which no more than $10,000,000 (or
      the equivalent in any other currency) may be attributable to the Borrower
      and its Subsidiaries; provided, however, that the requirements set forth
      in this Section 6.3(c)(iv) shall not apply if the Net Cash Proceeds from
      each Asset Sale are used to acquire one or more replacement assets or to
      repurchase or repay existing Debt (with a permanent
<PAGE>
      reduction of availability in the case of revolving credit borrowings)
      within 180 days after the consummation of such Asset Sale;

            (v)   sales, transfers, assignments or other dispositions of any
      Property, other than Mortgaged Revolving Credit Facility Rigs or Mortgaged
      Term Loan Facility Rigs, to the Parent Company or any of its Subsidiaries;

            (vi)  sales, transfers, assignments or other dispositions of any
      Mortgaged Term Loan Facility Rig or Mortgaged Revolving Credit Facility
      Rig to the Borrower or any other Guarantor; provided, that (A) with
      respect to sales, transfers, assignments or other dispositions of any
      Mortgaged Term Loan Facility Rig, the Borrower or such Guarantor shall
      ratify, grant and confirm the Liens on such Mortgaged Term Loan Facility
      Rig (and other related Collateral) pursuant to such Security Documents and
      deliver such legal opinions in relation thereto as may be reasonably
      requested by the Collateral Agent and (B) such sale, transfer, assignment
      or other disposition of any Mortgaged Revolving Credit Facility Rig is
      made in accordance with the Revolving Agreement; and

            (vii) sales, transfers, assignments or other dispositions of any
      Mortgaged Revolving Credit Facility Rig or Mortgaged Term Loan Facility
      Rig to the Parent Company or any of its wholly-owned Subsidiaries;
      provided, that (A) with respect to sales, transfers, assignments or other
      dispositions of any Mortgaged Term Loan Facility Rig, (1) such Subsidiary
      shall (x) comply with the terms of Section 5.13, (y) execute and deliver a
      Security Agreement and (z) ratify, grant and confirm the Liens on such
      Mortgaged Term Loan Facility Rig (and other related Collateral) pursuant
      to such Security Documents and deliver such legal opinions in relation
      thereto as may be reasonably requested by the Collateral Agent and (2) at
      all times, at least 50% of the Market Value of the Mortgaged Term Loan
      Facility Rigs must be owned by either the Borrower or a Guarantor that is
      a wholly-owned Subsidiary of the Borrower and (B) such sale, transfer,
      assignment or other disposition of any Mortgaged Revolving Credit Facility
      Rig is made in accordance with the Revolving Credit Agreement; and

            (viii) any Collateral Disposition; provided that (A) both before and
      immediately after giving effect to such proposed Collateral Disposition,
      the Borrower is in compliance with the Security Maintenance Ratio and (B)
      the Borrower complies with the prepayment provisions of Section
      2.6(c)(ii).

      Section 6.4 Investments. The Parent Company shall not, nor shall it permit
any of its Subsidiaries to, make or suffer to exist any Investments, or
commitments therefor, except:

      (a)   Cash Equivalents;

      (b)   Existing Investments in Subsidiaries and other Investments in
existence on the date hereof and disclosed in writing to the Administrative
Agent on or before the Closing Date;

      (c)   Debt to the extent permitted by Sections 6.2(d) and (e);

      (d)   Investments, the consideration for which is Capital Stock of the
Parent Company or any of its Subsidiaries or cash funded by the issuance of
Capital Stock of the Parent Company
<PAGE>
or any of its Subsidiaries; provided that (i) no Event of Default exists or no
Default would be caused thereby and (ii) after giving effect to such Investment
on a pro forma basis, the Parent Company would have been in compliance with all
of the covenants contained in this Agreement, including, without limitation,
Sections 6.16 through 6.19 as of the end of the most recent fiscal quarter;

      (e)   Investments made by the Parent Company or by any of its Subsidiaries
in a Subsidiary of the Parent Company (or in any Person that will become a
Subsidiary as a result of such Investment); and

      (f)   Investments not otherwise permitted by this Section 6.4 in an
aggregate amount not to exceed 10% of the Consolidated Tangible Net Worth as of
the date of the most recent financial statement delivered pursuant to Section
5.5(b) or (c).

      Section 6.5 Transactions With Affiliates. The Parent Company shall not,
nor shall it permit any of its Subsidiaries to, directly or indirectly, enter
into or permit to exist any transaction or series of transactions (including,
but not limited to, the purchase, sale, lease or exchange of Property, the
making of any investment, the giving of any guaranty or the rendering of any
service) with any of their Affiliates other than the Parent Company or a
wholly-owned Subsidiary of the Parent Company unless such transaction or series
of transactions is on terms no less favorable to the Parent Company or such
Subsidiary than those that could be obtained in a comparable arm's length
transaction with a Person that is not such an affiliate; provided that this
Section 6.5 shall not apply to reasonable compensation (including amounts paid
pursuant to Plans) and indemnification paid or made available to an officer,
director or employee of the Parent Company or any of its Subsidiaries for
services rendered in that person's capacity as an officer, director or employee
or the making of any Restricted Payment or Investment otherwise permitted by
this Agreement.

      Section 6.6 Compliance with ERISA. The Parent Company shall not, nor shall
it permit any of its Subsidiaries to, (a) terminate, or permit any Subsidiary to
terminate, any Plan so as to result in any material (in the opinion of the
Consolidated Required Lenders) liability of the Parent Company or such
Subsidiary or (b) permit to exist any occurrence of any Reportable Event (as
defined in Title IV of ERISA), or any other event or condition, which presents a
material (in the reasonable opinion of the Consolidated Required Lenders) risk
of such a termination by the PBGC of any Plan.

      Section 6.7 Restricted Payments. The Parent Company shall not, nor shall
it permit any of its Subsidiaries to, make any Restricted Payment except that:

      (a)   any Subsidiary of the Parent Company may declare and pay dividends
or make distributions to the Parent Company or to a wholly-owned Subsidiary of
the Parent Company (and, in the case of a Restricted Payment by a
non-wholly-owned Subsidiary, to the Parent Company and any Subsidiary and to
each other owner of capital stock or other equity interests of such Subsidiary
in an amount not greater than their applicable ownership interests or based on
any relevant joint venture, shareholders' or similar agreement);
<PAGE>
         (b)      so long as no Event of Default exists and after giving effect
to such transaction on a pro forma basis, no Default would be caused thereby,
the Parent Company or any Subsidiary may repurchase up to $100,000,000 of its
Capital Stock or Subordinated Debt (in the aggregate in the period prior to the
Term Loan Maturity Date) if, immediately after giving effect to such repurchase,
the aggregate amount of Unrestricted Cash and any unused availability under the
Revolving Commitments and the European Facility shall exceed U.S.$150,000,000;

         (c)      so long as no Event of Default exists and after giving effect
to such transaction on a pro forma basis, no Default would be caused thereby,
the Parent Company or any Subsidiary may repurchase or redeem Subordinated Debt
in exchange for or out of the net cash proceeds from the substantially
concurrent issuance or sale of new Subordinated Debt so long as the new
Subordinated Debt is subordinated in right of payment to the Term Loans to the
same extent as the Subordinated Debt being repurchased or redeemed;

         (d)      so long as no Event of Default exists and after giving effect
to such transaction, no Default would be caused thereby, the Parent Company or
any Subsidiary may repurchase or redeem Subordinated Debt in exchange for or out
of the net cash proceeds from the substantially concurrent issuance or sale of
Capital Stock; and

         (e)      the Parent Company may make any scheduled payment on
Subordinated Debt and may make any payment (scheduled or otherwise) in respect
of, and may repurchase, Subordinated Debt issued pursuant to the Subordinated
Indenture.

         Section 6.8       Maintenance of Ownership of Subsidiaries. Except as
permitted by Section 6.3, the Parent Company shall not sell or otherwise dispose
of any shares of Capital Stock of the Borrower, the Borrower will not sell or
otherwise dispose of any shares of Capital Stock of any of its Material
Subsidiaries, and neither the Borrower nor any of its Material Subsidiaries
shall issue, sell or otherwise dispose of (other than to the Borrower or the
Parent Company) any shares of its Capital Stock. Upon the sale or disposition of
any Guarantor pursuant to the terms of this Agreement to any Person other than
the Borrower or any other Guarantor, provided that such Guarantor does not own a
Mortgaged Term Loan Facility Rig or receive any earnings from any Mortgaged Term
Loan Facility Rig, the Collateral Agent shall, at the Borrower's expense,
execute and deliver to such Guarantor such documents as such Guarantor shall
reasonably require and take any other actions reasonably required to evidence or
effect the release of such Guarantor from this Agreement and the other Credit
Documents.

         Section 6.9       Agreements Restricting Liens and Distributions. The
Parent Company shall not, nor shall it permit any of its Subsidiaries to, create
or otherwise cause or suffer to exist any prohibition, encumbrance or
restriction which prohibits or otherwise restricts (a) the ability of any
Subsidiary to (i) pay dividends or make other distributions or pay any Debt owed
to the Parent Company or any Subsidiary of the Parent Company, (ii) make loans
or advances to the Parent Company or any Subsidiary of the Parent Company, or
(iii) transfer any of its Properties to the Parent Company or any Subsidiary of
the Parent Company or (b) the ability of the Parent Company or any Subsidiary of
the Parent Company to create, incur, assume or suffer to exist any Lien upon its
Property to secure the Obligations or to become a guarantor of the Obligations,
other than prohibitions or restrictions existing under or by reason of: (i) this
Agreement and the other Credit Documents; (ii) the Revolving Credit Agreement
and the other Finance Documents;
<PAGE>
(iii) the Senior Indenture; (iv) applicable Legal Requirements; (v) customary
non-assignment provisions entered into in the ordinary course of business and
consistent with past practices; (vi) any restriction or encumbrance with respect
to a Subsidiary of the Borrower imposed pursuant to an agreement which has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary, so long as such sale or disposition
is permitted under this Agreement; (vii) Liens, prohibitions or restrictions
permitted by Section 6.1 and any documents or instruments governing the terms of
any Debt or other obligations secured by any such Liens, provided that such
prohibitions or restrictions apply only to the Property subject to such Liens;
(viii) European Facility; (ix) Project Finance Debt and (x) MARAD Financing.

         Section 6.10      Other Debt.

         (a)      The Parent Company will not, and will not permit any
Subsidiary to, make any amendment or modification to the subordination
provisions of the Subordinated Indenture or any other indenture, note or other
agreement evidencing or governing any Subordinated Debt if such subordination
provisions are required to be approved by the Administrative Agent pursuant to
Section 6.2(j)(i) unless such approval has been obtained.

         (b)      If any Intercompany Debt is required to be subordinated
pursuant to Section 6.2 and is not evidenced by a promissory note, then the
Parent Company shall procure that each Credit Party will enter into a written
subordination agreement on terms reasonably acceptable to the Administrative
Agent.

         Section 6.11      Financial Contract Obligations. The Parent Company
shall not, and shall not permit any of its Subsidiaries to, enter into any
Financial Contract Obligations unless (a) such obligations are (or were) entered
into by such Person in the ordinary course of business for the purpose of
directly mitigating risks associated with liabilities, commitments, investments,
assets, or property held or reasonably anticipated by such Person, or changes in
the value of securities issued by such Person, and not for purposes of
speculation or taking a "market view;" and (b) such Financial Contract
Obligation does not contain any provision exonerating the non-defaulting party
from its obligation to make payments on outstanding transactions to the
defaulting party.

         Section 6.12      Charter and Leases. The Parent Company shall not, nor
shall it permit any of its Subsidiaries to, incur, assume or suffer to exist,
any obligation for payments under Operating Leases (including, without
limitation, rental payments and payments of taxes thereunder) with respect to
any Property, except that the following shall be permitted: (a) obligations with
respect to Operating Leases of offshore drilling rigs or other equipment having
terms of twelve months or less (including options); (b) obligations disclosed in
writing to the Administrative Agent, and amendments, renewals or extensions
thereof on terms that are not materially less favorable, but in no event for a
period longer, than those obligations disclosed in writing to the Administrative
Agent on or before the Closing Date; (c) Operating Leases having in the
aggregate rental payment obligations for any 12 month period prior to the Term
Loan Maturity Date of less than $50,000,000 (or the equivalent in any other
currency) for the Parent Company and its Subsidiaries of which no more than
$2,000,000 (or the equivalent in any other currency) may be attributable to the
Borrower and its Subsidiaries, in each case exclusive of any Synthetic Lease
Obligations; (d) obligations with respect to operating charters or leases
between
<PAGE>
Subsidiaries of the Parent Company; or (e) obligations as have been approved in
writing by the Administrative Agent with the consent of the Required Term
Lenders.

         Section 6.13      Maintenance Capital Expenditures. The Parent Company
shall not, nor shall it permit any of its Subsidiaries to, expend, or be
committed to expend, in excess of 5% of Consolidated Tangible Net Assets for
Maintenance Capital Expenditures during any one fiscal year on a non-cumulative
basis in the aggregate for the Parent Company and its Subsidiaries.

         Section 6.14      Limitation on Changes in Fiscal Periods. The Parent
Company shall not, nor shall it permit any of its Subsidiaries to, permit the
fiscal year of the Parent Company or any of its Subsidiaries to end on a day
other than December 31 or change the Parent Company's method of determining
fiscal quarters.

         Section 6.15      Mortgaged Term Loan Facility Rigs. The Parent Company
shall not, nor shall it permit any of its Subsidiaries to,

         (a)      without the previous consent in writing of the Collateral
Agent, make any modification to any Mortgaged Term Loan Facility Rig which would
materially or adversely alter the structure, type or performance characteristics
of such Mortgaged Term Loan Facility Rig or which would materially reduce the
value of such Mortgaged Term Loan Facility Rig;

         (b)      employ any Mortgaged Term Loan Facility Rig or allow her
employment in any trade or business which is unlawful under the laws of any
relevant jurisdiction in which it is located or subject or in carrying illicit
or prohibited goods or in any manner whatsoever which can reasonably be expected
to render her liable to destruction, seizure or confiscation; and in the event
of hostilities in any part of the world (whether war be declared or not) not
employ any Mortgaged Term Loan Facility Rig or suffer her employment in carrying
any contraband goods or to enter or trade to any zone which is declared a war
zone by any Government Authority or by the War Risks insurers of such Mortgaged
Term Loan Facility Rig unless there shall have been effected by the Credit
Parties (at their expense) such special, additional or modified insurance cover
as the Collateral Agent may reasonably require;

         (c)      if an Event of Default has occurred and is continuing, not
without the previous consent of the Collateral Agent (such consent not to be
unreasonably withheld or delayed), undertake or commence upgrades or
improvements on any Mortgaged Term Loan Facility Rig in an amount exceeding or
likely to exceed $5,000,000 (or the equivalent in any other currency) in the
aggregate unless the Person to provide such upgrades or improvements shall first
have given to the Collateral Agent a written waiver or subordination of its
Liens or its equivalent, such waiver or subordination to be in form and
substance reasonably satisfactory to the Collateral Agent;

         (d)      charter any Mortgaged Term Loan Facility Rig to, or permit the
Mortgaged Term Loan Facility Rig to serve under any contract with, a Person
included within the definition of (i) "national" of a "designated foreign
country," or "specially designated national" of a "designated foreign country,"
in the Foreign Assets Control Regulations or the Cuban Assets Control
Regulations of the United States Treasury Department, 31 C.F.R. Parts 500 and
515, in each case as amended, (ii) "Government of Libya", "entity of the
Government of Libya" or "Libyan entity"
<PAGE>
in the Libyan Sanctions Regulations of the United States Treasury Department, 31
C.F.R. Part 550, as amended, or (iii) "Government of Iraq", "entity of the
Government of Iraq" or "Iraqi Government entity" in the Iraqi Sanctions
Regulations, 56 Fed. Reg. 2112 (1991) to be codified at 31 C.F.R. Part 575, as
amended, all within the meaning of said Regulations or of any regulations,
interpretations or rulings issued thereunder, or engage in any transaction that
violates any provision of said Regulations or that violates any provision of the
Iranian Transactions Regulations, 31 C.F.R. Part 560, as amended, the Foreign
Funds Control Regulations, 31 C.F.R. Part 520, as amended, the Transaction
Control Regulations, 31 C.F.R. Part 505, as amended, the Haitian Transaction
Regulations, 31 C.F.R. Part 580, as amended, the Foreign Assets Control
Regulations, 31 C.F.R. Part 500, as amended, or Executive Orders 12810 and 12831
if such transaction or violation would (A) expose the Collateral Agent or any
Term Secured Party to any penalty, sanction or investigation or (B) jeopardize
the Lien created by the Rig Mortgages or (C) might reasonably be expected to
have a material adverse effect on the Credit Parties or the operation of the
Mortgaged Term Loan Facility Rigs, or call at a Cuban port to load or discharge
cargo or to effect repairs on the Mortgaged Term Loan Facility Rigs;

         (e)      cause or permit any Mortgaged Term Loan Facility Rig to be
operated in any manner contrary to law (except where the failure to operate in
compliance with any law would not have a material adverse effect on the Credit
Parties, such Mortgaged Term Loan Facility Rig or the Lien created by the
applicable Rig Mortgage);

         (f)      abandon any Mortgaged Term Loan Facility Rig in a port outside
the United States of America;

         (g)      engage in any unlawful trade or violate any law or carry any
cargo that shall expose any Mortgaged Term Loan Facility Rig to forfeiture or
capture;

         (h)      operate any Mortgaged Term Loan Facility Rig in any
jurisdiction or in any manner which could cause the Lien created by the
applicable Rig Mortgage to be rendered unenforceable or the Collateral Agent's
foreclosure or enforcement rights to be materially impaired or hindered; or

         (i)      without giving prior written notice thereof to the Collateral
Agent, change the registered owner, name, flag, official or patent number, as
the case may be, the home port or class of any Mortgaged Term Loan Facility Rig.

         Section 6.16      Leverage Ratio. The Parent Company shall not permit
its Leverage Ratio at the end of any fiscal quarter to be greater than the
following ratios for the following fiscal quarters:
<PAGE>
<TABLE>
<CAPTION>
                  Fiscal Quarters Ending                                          Maximum Ratio
                  ----------------------                                          -------------
<S>                                                                               <C>
           June 30, 2002, September 30, 2002 and                                   4.75 to 1.00
                     December 31, 2002

              March 31, 2003, June 30, 2003,                                       4.00 to 1.00
         September 30, 2003 and December 31, 2003

              March 31, 2004, June 30, 2004,                                       3.50 to 1.00
         September 30, 2004 and December 31, 2004

               March 31, 2005 and thereafter                                       3.00 to 1.00
</TABLE>

         Section 6.17      Interest Coverage Ratio. The Parent Company shall not
permit the Interest Coverage Ratio as of the end of any fiscal quarter to be
less than the following ratios for the following fiscal quarters:

<TABLE>
<CAPTION>
                  Fiscal Quarters Ending                                          Minimum Ratio
                  ----------------------                                          -------------
<S>                                                                               <C>
           June 30, 2002, September 30, 2002 and                                   3.00 to 1.00
                     December 31, 2002

              March 31, 2003, June 30, 2003,                                       3.25 to 1.00
         September 30, 2003 and December 31, 2003

              March 31, 2004, June 30, 2004,                                       4.00 to 1.00
         September 30, 2004 and December 31, 2004

               March 31, 2005 and thereafter                                       4.50 to 1.00
</TABLE>

         Section 6.18      Maximum Debt to Capitalization Ratio. The Parent
Company shall not permit the ratio of (a) Consolidated Net Debt to (b) Total
Capitalization as of the end of any fiscal quarter to be greater than the
following ratios for the following fiscal quarters:

<TABLE>
<CAPTION>
                  Fiscal Quarters Ending                                          Maximum Ratio
                  ----------------------                                          -------------
<S>                                                                               <C>
           June 30, 2002, September 30, 2002 and                                       55%
                     December 31, 2002

              March 31, 2003, June 30, 2003,                                           50%
         September 30, 2003 and December 31, 2003

              March 31, 2004, June 30, 2004,                                           45%
         September 30, 2004 and December 31, 2004

               March 31, 2005 and thereafter                                           35%
</TABLE>

         Section 6.19      Minimum Net Worth. The Parent Company shall not
permit its Consolidated Net Worth as of the last day of any fiscal quarter to be
less than the sum of (i) 80%
<PAGE>
of Consolidated Net Worth at the end of the fiscal quarter immediately preceding
the Closing Date plus (ii) 50% of Consolidated Net Income (if positive) earned
in each fiscal quarter beginning with the first fiscal quarter after the Closing
Date and (iii) 100% of the Equity Issuance Proceeds from any Equity Issuance on
or after the Closing Date.

                                   ARTICLE II

                                EVENTS OF DEFAULT

         Section 7.1       Events of Default. The occurrence of any of the
following events shall constitute an "Event of Default" under any Credit
Document:

         (a)      Payment. The Borrower shall fail to pay any principal of any
Term Loan (including, without limitation, any mandatory prepayment required by
Section 2.6) when the same becomes due and payable, or any interest on the Term
Loans or any fee or other amount payable hereunder or under any other Credit
Document within five Business Days after the same becomes due and payable;

         (b)      Representation and Warranties. Any representation or statement
made or deemed to be made by the Borrower or any other Credit Party (or any of
their respective officers) in this Agreement, in any other Credit Document, or
in any certificate delivered in connection with this Agreement or any other
Credit Document shall prove to have been incorrect in any material respect when
made or deemed to be made;

         (c)      Covenant Breaches. The Borrower or any other Credit Party
shall (i) fail to perform or observe any covenant contained in Section 5.2 and
Article VI of this Agreement or (ii) fail to perform or observe any other term
or covenant set forth in this Agreement or in any other Credit Document which is
not covered by clause (i) above or any other provision of this Section 7.1 if
such failure shall remain unremedied for 30 days after the earlier of (A)
written notice of such default shall have been given to the Borrower by the
Administrative Agent or any Term Lender or (B) any actual knowledge of such
default by a Responsible Officer;

         (d)      Cross-Default. (i) Any Credit Party shall fail to pay any
principal of or premium or interest on its Debt which is outstanding in a
principal amount of at least $30,000,000.00 (or the equivalent in any other
currency) when aggregated with all such Debt of the Person so in default (but
excluding Debt evidenced by the Term Loans) when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), (ii) any other event shall occur or condition shall exist
under any agreement or instrument relating to Debt which is outstanding in a
principal amount of at least $30,000,000.00 (or the equivalent in any other
currency) when aggregated with all such Debt of the Person so in default (but
excluding Debt evidenced by the Term Loans), and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Debt; or (iii) any such Debt shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof;
<PAGE>
         (e)      Insolvency. Any Credit Party shall generally not pay its debts
as such debts become due, or shall admit in writing its inability to pay its
debts generally, commences negotiations with one or more of its creditors with a
view to rescheduling any of its indebtedness which it would not otherwise be
able to pay as it falls due or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against any Credit
Party seeking to adjudicate it as a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee or other similar
official for it or for any substantial part of its property and, in the case of
any such proceeding instituted against any Credit Party, either such proceeding
shall remain undismissed for a period of 60 days or any of the actions sought in
such proceeding shall occur; or any Credit Party shall take any corporate action
to authorize any of the actions set forth above in this paragraph (e) or any
analogous procedure or step is taken in any jurisdiction.

         (f)      Judgments. Any judgment, decree or order for the payment of
money shall be rendered against any Credit Party in an amount in excess of
$20,000,000.00 (or the equivalent in any other currency) (to the extent not paid
or fully covered by insurance less any deductible) if rendered solely against
any Credit Party, or for which any Credit Party's allocated portion of which
exceeds $20,000,000.00 (or the equivalent in any other currency) (to the extent
not paid or fully covered by insurance less any deductible) and either (i) such
judgment, decree or order remains unsatisfied and in effect for a period of 60
consecutive days or more without being vacated, discharged, satisfied or stayed
or bonded pending appeal or (ii) enforcement proceedings shall have been
commenced by any creditor upon such judgment, decree or order;

         (g)      Termination Events. Any Termination Event with respect to a
Plan shall have occurred, and, 30 days after notice thereof shall have been
given to the Borrower by the Administrative Agent, (i) such Termination Event
shall not have been corrected and (ii) the then present value of such Plan's
vested benefits exceeds the then current value of assets accumulated in such
Plan by an amount that would reasonably be expected to cause or to have a
Material Adverse Change (or in the case of a Termination Event involving the
withdrawal of a "substantial employer" (as defined in Section 4001(a)(2) of
ERISA), the withdrawing employer's proportionate share of such excess shall
exceed such amount);

         (h)      Plan Withdrawals. The Parent Company or any member of the
Controlled Group as employer under a Multiemployer Plan shall have made a
complete or partial withdrawal from such Multiemployer Plan and the plan sponsor
of such Multiemployer Plan shall have notified such withdrawing employer that
such employer has incurred a withdrawal liability in an annual amount that could
reasonably be expected to cause or to have a Material Adverse Change;

         (i)      Credit Documents. Any material provision of the Credit
Documents, including, without limitation, the provisions in Article VIII shall
for any reason cease to be valid and binding on the Credit Parties or any of the
Credit Parties shall so state in writing;

         (j)      Security Documents. (i) The Administrative Agent and the Term
Lenders shall fail to have an Acceptable Security Interest in the Collateral or
(ii) any material provision of any
<PAGE>
Security Document shall for any reason cease to be valid and binding on the
Borrower or other Credit Parties executing such Security Document, or any such
Person shall so state in writing;

         (k)      Change in Control. A Change of Control shall occur;

         (l)      Qualified Operator. Any owner of a Mortgaged Term Loan
Facility Rig shall cease to be qualified to own and operate such Mortgaged Term
Loan Facility Rig under the laws of the United States or the jurisdiction in
which such Mortgaged Term Loan Facility Rig is flagged; or

         (m)      Creditors' process. Any expropriation, attachment,
sequestration, distress or execution affects any asset or assets of the Parent
Company or any of its Subsidiaries having an aggregate value (to the extent not
paid or fully covered by insurance less any deductible) of the greater of
$200,000,000 (or the equivalent in one or more currencies) or 5% of Consolidated
Tangible Net Assets as of the end of the most recent fiscal quarter of the
Parent Company and such expropriation, attachment, sequestration, distress or
execution remains in effect for a period of 30 consecutive Business Days or more
without being vacated, discharged, satisfied or stayed or bonded.

         Section 7.2       Optional Acceleration of Maturity. If any Event of
Default (other than an Event of Default pursuant to paragraph (e) of Section
7.1) shall have occurred and be continuing, then, and in any such event:

         (a)      the Administrative Agent (i) shall at the request of, or may
with the consent of, the Consolidated Required Lenders, by notice to the
Borrower, declare the obligation of each Term Lender to make Term Loans to be
terminated, whereupon the same shall forthwith terminate, and (ii) shall at the
request of, or may with the consent of, the Consolidated Required Lenders, by
notice to the Borrower, declare the Term Loans, all interest thereon, and all
other amounts payable under this Agreement to be forthwith due and payable,
whereupon the Term Loans, all such interest, and all such amounts shall become
and be forthwith due and payable in full, without presentment, demand, protest
or further notice of any kind (including, without limitation, any notice of
intent to accelerate or notice of acceleration), all of which are hereby
expressly waived by the Borrower; and

         (b)      the Administrative Agent and the Term Secured Parties may
exercise all rights and remedies available under the Security Documents and
applicable law.

         Section 7.3       Automatic Acceleration of Maturity. If any Event of
Default pursuant to paragraph (e) of Section 7.1 shall occur:

         (a)      the obligation of each Term Lender to make Term Loans shall
immediately and automatically be terminated and the Term Loans, and all other
amounts payable under this Agreement shall immediately and automatically become
and be due and payable in full, without presentment, demand, protest or any
notice of any kind (including, without limitation, any notice of intent to
accelerate or notice of acceleration), all of which are hereby expressly waived
by the Borrower; and
<PAGE>
         (b)      the Administrative Agent and the Term Lenders may exercise all
rights and remedies available under the Security Documents and applicable law.

         Section 7.4       Non-exclusivity of Remedies. No remedy conferred upon
the Administrative Agent is intended to be exclusive of any other remedy, and
each remedy shall be cumulative of all other remedies existing by contract, at
law, in equity, by statute or otherwise.

         Section 7.5       Right of Set-off. Upon (a) the occurrence and during
the continuance of any Event of Default and (b) the making of the request or the
granting of the consent, if any, specified by Section 7.2 to authorize the
Administrative Agent upon the consent of the Consolidated Required Lenders to
declare the Term Loans and any other amount payable hereunder due and payable
pursuant to the provisions of Section 7.2 or the automatic acceleration of the
Term Loans and all amounts payable under this Agreement pursuant to Section 7.3,
each Term Lender is hereby authorized at any time and from time-to-time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Term Lender to or for the credit or
the account of any Credit Party against any and all of the obligations of any
Credit Party now or hereafter existing under this Agreement and the other Credit
Documents, irrespective of whether or not such Term Lender shall have made any
demand under this Agreement or such other Credit Documents, and although such
obligations may be unmatured. Each Term Lender agrees to promptly notify the
applicable Credit Party after any such set-off and application made by it,
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Term Lender under this Section
are in addition to any other rights and remedies (including, without limitation,
other rights of set-off) which such Term Lender may have.

         Section 7.6       Application of Proceeds. All proceeds received after
or held at the time of maturity of the Obligations, whether by acceleration or
otherwise shall be applied in the following order:

         (a)      First, to payment of the reasonable expenses, liabilities,
losses, costs, duties, fees, charges or other moneys whatsoever (together with
interest payable thereon) as may have been paid or incurred in, about or
incidental to any sale or other realization of Collateral, including reasonable
compensation to the Collateral Agent and its agents and counsel, and to the
ratable payment of any other unreimbursed reasonable expenses and indemnities
for which the Collateral Agent, the Administrative Agent or any Term Secured
Party is to be reimbursed pursuant to this Agreement or any other Credit
Document, in each case that are then due and payable;

         (b)      Second, to the ratable payment of accrued but unpaid agent's
fees then due and payable to the Administrative Agent under this Agreement;

         (c)      Third, to the ratable payment of accrued but unpaid interest
on the Term Loans then due and payable under this Agreement;

         (d)      Fourth, to the ratable payment of accrued but unpaid
commitment fees then due and payable to the Term Lenders in respect of the Term
Loans under this Agreement;
<PAGE>
         (e)      Fifth, to the ratable payment of all outstanding Obligations
then due and payable; and

         (f)      Sixth, any excess after payment in full of all Obligations
shall be paid to the Borrower or any Credit Party as appropriate or to such
other Person who may be lawfully entitled to receive such excess.

                                  ARTICLE III

                                  THE GUARANTY

         Section 8.1       Guaranty. Each Guarantor, joint and severally, hereby
unconditionally and irrevocably guarantees the punctual payment of the
Obligations (but, in the case of each Guarantor other than the Parent Company,
excluding the Obligations of the Parent Company) when due, whether at stated
maturity, by acceleration or otherwise, and agrees to pay any and all expenses
(including reasonable counsel fees and expenses) incurred by the Administrative
Agent and the Term Lenders in enforcing any rights under this Section 8.1.
Without limiting the generality of the foregoing, each Guarantor's liability
shall extend to all amounts which constitute part of the Obligations and are
owed by the Borrower even if they are declared unenforceable or not allowable
due to the existence of a bankruptcy, reorganization or similar proceeding
involving the Borrower. Each Guarantor will pay to the Administrative Agent for
the benefit of the Term Lenders all amounts due and payable under this Section
8.1 in Dollars in immediately available funds one Business Day after demand from
the Administrative Agent.

         Section 8.2       Limitation of Liability. Notwithstanding the
foregoing, any Person that becomes a Guarantor after the Closing Date (an
"Additional Guarantor") (other than an Additional Guarantor that is either a
Permitted Holding Company or a Subsidiary of the Borrower) shall be liable under
this Agreement with respect to the Obligations only for an amount equal to (a)
the aggregate Market Value of the Mortgaged Term Loan Facility Rigs owned by
such Additional Guarantor determined as of the date of the most recent Rig
Appraisal Reports divided by (b) the Total Commitments multiplied by (c) the
Obligations.

         Section 8.3       Guaranty Absolute. Each Guarantor guarantees that the
Obligations (but, in the case of each Guarantor other than the Parent Company,
excluding the Obligations of the Parent Company) will be paid strictly in
accordance with the terms of this Agreement, regardless of any Legal Requirement
now or hereafter in effect in any jurisdiction affecting any of such terms or
the rights of any Term Lender with respect thereto. The guaranty provided for in
Section 8.1 is a guaranty of payment, not of collection and each Guarantor's
obligations hereunder are primary, not secondary. The obligations of each
Guarantor under Section 8.1 are independent of the Obligations, joint and
several with any other Guarantor in each and every particular (except that the
obligations of each Guarantor other than the Parent Company under Section 8.1 do
not extend to the Obligations of the Parent Company), and a separate action or
actions may be brought and prosecuted against any Guarantor to enforce such
obligations, irrespective of whether any action is brought against the Borrower
or any other Person or whether the Borrower or any other Person is joined in any
such action or actions. The liability of the Guarantors under Section 8.1 shall
be absolute and unconditional irrespective of:
<PAGE>
         (a)      any lack of validity or enforceability of any other provision
of this Agreement or any other Credit Document;

         (b)      any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations or any other liabilities, or
any other amendment or waiver of or any consent to departure from this Agreement
or any other Credit Document, including, without limitation, any increase in the
Obligations or any other liabilities resulting from the extension of additional
credit to the Borrower or otherwise (provided that the guarantee under this
Article VIII will apply to such Credit Documents or other document or security
as amended or replaced);

         (c)      any taking, exchange, release or non-perfection of any
collateral (if any), or any taking, release, amendment or waiver of or consent
to departure from any other guaranty for all or any of the Obligations or any
other liabilities;

         (d)      any manner of application of collateral (if any), or proceeds
thereof or of collections on account of any other guaranty to all or any of the
Obligations or any other liabilities, or any manner of sale or other disposition
of any collateral for all or any of the Obligations or any other liabilities or
any other assets of the Borrower;

         (e)      any change, restructuring or termination of the corporate
structure or existence of the Borrower; or

         (f)      any other circumstances which might otherwise constitute a
defense available to, or a discharge of, the Borrower or a guarantor (other than
the defense of prior payment).

Notwithstanding the foregoing, each of the Guarantors shall be liable under this
Article VIII only for amounts aggregating up to the largest amount that would
not render its obligations hereunder subject to avoidance under Section 548 of
the United States Bankruptcy Code or any comparable provisions of any state law.

         Section 8.4       Waiver. Each Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations and the guaranty provided for in Section 8.1 and any requirement
that the Administrative Agent or any Term Lender protect, secure, perfect or
insure any security interest or other Lien or any property subject thereto or
exhaust any right to take any action against any Guarantor or any other Person
or any collateral.

         Section 8.5       Subrogation.

         (a)      Until such time as the Obligations are paid in full, each
Guarantor irrevocably waives any and all rights to which it may be entitled, by
operation of law or otherwise, by making any payment hereunder or otherwise to
be subrogated to the rights of the Administrative Agent and the Term Lenders
against the Borrower or any other Person with respect to such payment or
otherwise to be reimbursed, indemnified or exonerated by the Borrower or any
other Person in respect thereof. If any amount shall be paid to any Guarantor on
account of such subrogation in violation of the preceding sentence, such amount
shall be held in trust for the benefit of the Administrative Agent and the Term
Lenders and shall forthwith be paid to the
<PAGE>
Administrative Agent to be credited against and applied upon the Obligations,
whether matured or unmatured, in such order as may be determined by the Term
Lenders.

         (b)      Each Guarantor agrees that, to the extent that the Borrower
makes payment to the Administrative Agent or any Term Lender, or the
Administrative Agent or any Term Lender receives any proceeds of collateral, and
such payments or proceeds or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, or otherwise required to
be repaid, then to the extent of such repayment the Obligations shall be
reinstated and continued in full force and effect as of the date such initial
payment or collection of proceeds occurred. Each Guarantor shall defend and
indemnify the Administrative Agent and the Term Lenders from and against any
claim or loss under this subsection 8.4 (including reasonable attorneys' fees
and expenses) in the defense of any such action or suit, but excluding any such
losses, liabilities, claims, damages, or expenses incurred by reason of the
gross negligence, bad faith or willful misconduct of the Administrative Agent or
any Term Lender.

         Section 8.6       No Guarantee of Indenture Issuer Obligations. No
provision of this Agreement or any other Credit Document shall require any
Guarantor that is a Subsidiary of the Person that is the issuer of the existing
Debt under the Senior Indenture and the Subordinated Indenture (on the Closing
Date, such Person being the U.S. Parent) or any successor or assign of such
Person with respect to such Debt to guarantee or otherwise be liable, directly
or indirectly, for any obligation of such Person under any Credit Document.

                                   ARTICLE IV

                                   THE AGENTS

         Section 9.1       Appointment; Nature of Relationship. CLNY is hereby
appointed by the Term Lenders as the Administrative Agent hereunder and under
each other Credit Document (other than the Security Documents), and to act as
the Collateral Agent under each of the Security Documents, and each of the Term
Lenders irrevocably authorizes the Agents to act as the contractual
representatives of such Term Lender with the rights and duties expressly set
forth herein and in the other Credit Documents. The Agents agree to act as such
contractual representative upon the express conditions contained in this Article
IX. Notwithstanding the use of the defined term "Agent," it is expressly
understood and agreed that neither of the Agents shall have any fiduciary
responsibilities to any Term Lender by reason of this Agreement or any other
Credit Document and that the Agents are merely acting as the representatives of
the Term Lenders with only those duties as are expressly set forth in this
Agreement and the other Credit Documents. In its capacity as the Term Lenders'
contractual representative, the Agents (a) do not hereby assume any fiduciary
duties to any of the Term Lenders, (b) are "representatives" of the Term Lenders
within the meaning of Section 9-105 of the Uniform Commercial Code as adopted in
the State of New York and (c) are acting as independent contractors, the rights
and duties of which are limited to those expressly set forth in this Agreement
and the other Credit Documents. Each of the Term Lenders hereby agrees to assert
no claim against either of the Agents on any agency theory or any other theory
of liability for breach of fiduciary duty, all of which claims each Term Lender
hereby waives.
<PAGE>
         Section 9.2       Powers. The Agents shall have and may exercise such
powers under the Credit Documents as are specifically delegated to such Agent by
the terms of each thereof, together with such powers as are reasonably
incidental thereto. Neither of the Agents shall have any implied duties to the
Term Lenders, or any obligation to the Term Lenders to take any action
thereunder except any action specifically provided by the Credit Documents to be
taken by such Agent.

         Section 9.3       General Immunity. None of the Agents, the Arranger or
any of their respective directors, officers, agents or employees shall be liable
to any Credit Party or any Term Lender for any action taken or omitted to be
taken by it or them hereunder or under any other Credit Document or in
connection herewith or therewith except for its or their own gross negligence or
willful misconduct.

         Section 9.4       No Responsibility for Loans, Recitals, etc. None of
the Agents, the Arranger or any of their respective directors, officers, agents
or employees shall be responsible for or have any duty to ascertain, inquire
into, or verify (i) any statement, warranty or representation made in connection
with any Credit Document or any borrowing hereunder; (ii) the performance or
observance of any of the covenants or agreements of any obligor under any Credit
Document, including, without limitation, any agreement by an obligor to furnish
information directly to each Term Lender; (iii) the satisfaction of any
condition specified in Article III, except receipt of items required to be
delivered to any Agent; (iv) the validity, enforceability, effectiveness,
sufficiency or genuineness of any Credit Document or any other instrument or
writing furnished in connection therewith; or (v) the value, sufficiency,
creation, perfection or priority of any interest in any collateral security.
Neither of the Agents shall have any duty to disclose to the Term Lender
information that is not required to be furnished by the Parent Company or any of
its Subsidiaries to such Agent at such time, but is voluntarily furnished by the
Parent Company or any of its Subsidiaries to such Agent (either in its capacity
as Agent or in its individual capacity).

         Section 9.5       Action on Instructions of Term Lenders. Each Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder and under any other Credit Document in accordance with written
instructions signed by the Required Term Lenders, and such instructions and any
action taken or failure to act pursuant thereto shall be binding on all of the
Term Lenders and on all holders of Term Loans. The Term Lenders hereby
acknowledge that the Agents shall be under no duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement
or any other Credit Document unless it shall be requested in writing to do so by
the Required Term Lenders. Each Agent shall be fully justified in failing or
refusing to take any action hereunder and under any other Credit Document unless
it shall first be indemnified to its satisfaction by the Term Lenders pro rata
against any and all liability, cost and expense that it may incur by reason of
taking or continuing to take any such action.

         Section 9.6       Employment of Agents and Counsel. Each Agent may
execute any of its duties as Agent hereunder and under any other Credit Document
by or through employees, agents, and attorneys-in-fact and shall not be
answerable to the Term Lenders, except as to money or securities received by it
or its authorized agents, for the default or misconduct of such Agent or
attorneys-in-fact selected by it with reasonable care. Each Agent shall be
entitled to
<PAGE>
advice of their respective counsels concerning all matters pertaining to the
agency hereby created and its duties hereunder and under any other Credit
Document.

         Section 9.7       Reliance on Documents; Counsel. Each Agent shall be
entitled to rely upon any Term Note, notice, consent, certificate, affidavit,
letter, telegram, statement, paper or document believed by it to be genuine and
correct and to have been signed or sent by the proper person or persons, and, in
respect to legal matters, upon the opinion of counsel selected by such Agent,
which counsel may be employees of such Agent.

         Section 9.8       Agent's Reimbursement and Indemnification. The Term
Lenders agree to reimburse and indemnify the Agents ratably in proportion to
their respective Pro Rata Shares (a) for any amounts not reimbursed by any
Credit Party for which such Agent is entitled to reimbursement under the Credit
Documents, (ii) for any other expenses incurred by the Agents on behalf of the
Term Lenders, in connection with the preparation, execution, delivery,
administration and enforcement of the Credit Documents and (iii) for any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against any Agent in any way relating to or
arising out of the Credit Documents or any other document delivered in
connection therewith or the transactions contemplated thereby, or the
enforcement of any of the terms thereof or of any such other documents, provided
that no Term Lender shall be liable for any of the foregoing to the extent they
arise from the gross negligence or willful misconduct of such Agent. The
obligations of the Term Lenders under this Section 9.8 shall survive payment of
the obligations and termination of this Agreement.

         Section 9.9       Notice of Default. Neither of the Agents shall be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless such Agent have received written notice from a Term
Lender or a Credit Party referring to this Agreement describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that an Agent receives such a notice, such Agent shall give prompt notice
thereof to the Term Lenders.

         Section 9.10      Rights as a Term Lender. In the event that an Agent
is a Term Lender, such Agent shall have the same rights and powers hereunder and
under any other Credit Document as any Term Lender and may exercise the same as
though it were not an Agent and the term "Term Lender" or "Term Lenders" shall,
at any time when such Agent is a Term Lender, unless the context otherwise
indicates, include such Agent in its individual capacity. Any Agent may accept
deposits from, lend money to, and generally engage in any kind of trust, debt,
equity or other transaction, in addition to those contemplated by this Agreement
or any other Credit Document, with the Parent Company or any of its Subsidiaries
in which the Parent Company or such Subsidiary is not restricted hereby from
engaging with any other Person. Each Agent, in its individual capacities, is not
obligated to remain a Term Lender.

         Section 9.11      Lender Credit Decision. Each Term Lender acknowledges
that it has, independently and without reliance upon any Agent or any other Term
Lender and based on the financial statements prepared by the Parent Company and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Credit
Documents. Each Term Lender also acknowledges that it will,
<PAGE>
independently and without reliance upon any Agent or any Term 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 Credit Documents.

         Section 9.12      Successor Agents. Either Agent may resign at any time
by giving prior written notice thereof to the Term Lenders and the Borrower,
such resignation to be effective upon the appointment of a successor Agent or,
if no successor Agent has been appointed, 45 days after the retiring Agent gives
notice of its intention to resign. Upon any such resignation, the Required Term
Lenders shall have the right to appoint, on behalf of the Borrower and the Term
Lenders, a successor Agent. If no successor Agent shall have been so appointed
by the Required Term Lenders within thirty days after the resigning Agent's
giving notice of its intention to resign, then the resigning Agent may appoint,
on behalf of the Borrower and the Term Lenders, a successor Agent. If the Agent
has resigned and no successor Agent has been appointed, the Term Lenders may
perform all the duties of the Agent hereunder and the Borrower shall make all
payments in respect of the Obligations to the applicable Term Lender and for all
other purposes shall deal directly with the Term Lenders. No successor Agent
shall be deemed to be appointed hereunder until such successor Agent has
accepted the appointment. Any such successor Agent shall be a commercial bank
organized under the laws of the United States or any state thereof having
combined capital and retained earnings of at least $100,000,000 (or the
equivalent in any other currency). Upon the acceptance of any appointment as
Agent 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 resigning. Upon the effectiveness of the resignation of an Agent, the
resigning Agent shall be discharged from its duties and obligations hereunder
and under the Credit Documents. After the effectiveness of the resignation of an
Agent, the provisions of this Article IX shall continue in effect for the
benefit of Agent in respect of any actions taken or omitted to be taken by it
while it was acting as an Agent hereunder and under the other Credit Documents.

         Section 9.13      Collateral Matters.

         (a)      The Collateral Agent is authorized on behalf of the Term
Secured Parties, without the necessity of any notice to or further consent from
the Term Secured Parties, from time to time, to take any actions with respect to
any Collateral or Security Documents which may be necessary to perfect and
maintain Acceptable Security Interests in and Liens upon the Collateral granted
pursuant to the Security Documents. The Collateral Agent is further authorized
on behalf of the Term Secured Parties, without the necessity of any notice to or
further consent from the Term Secured Parties, from time to time, to take any
action in exigent circumstances as may be reasonably necessary to preserve any
rights or privileges of the Term Secured Parties under the Credit Documents or
applicable Legal Requirements.

         (b)      Each of the Term Secured Parties irrevocably authorize the
Collateral Agent to release any Lien granted to or held by the Collateral Agent
upon any Collateral (i) upon termination of the Term Commitments and payment in
full of all outstanding Term Loan and all other Obligations payable under this
Agreement and under any other Credit Document; (ii) constituting property sold
or to be sold or disposed of as part of or in connection with any disposition
permitted under this Agreement or the other Credit Documents; (iii) constituting
<PAGE>
property in which any Credit Party owned no interest at the time the Lien was
granted or at any time thereafter; (iv) constituting property leased to any
Credit Party under a lease which has expired or has been terminated in a
transaction permitted under this Agreement or is about to expire and which has
not been, and is not intended by such Credit Party to be, renewed or extended;
(v) if approved, authorized or ratified in writing by the Required Term Lenders
or all the Term Lenders, as the case may be, as required by Section 11.1 or (vi)
as otherwise permitted by this Agreement. Upon the request of the Collateral
Agent at any time, the Term Lenders will confirm in writing the Collateral
Agent's authority to release particular types or items of Collateral pursuant to
this Section 9.13.

         (c)      In the event that any claim or Lien is asserted against any
Mortgaged Term Loan Facility Rig for loss, damage or expense which is covered by
an Insurance Policy, and it is necessary for any Credit Party to obtain a bond
or supply other security to prevent the arrest of such Mortgaged Term Loan
Facility Rig or to release the Mortgaged Term Loan Facility Rig from arrest on
account of such claim or Lien, the Collateral Agent may, in the sole discretion
of the Collateral Agent, and upon notice to the applicable Credit Party, assign
to any Person executing a surety or guaranty bond or other agreement to save or
release any such Mortgaged Term Loan Facility Rig from such arrest, all right,
title and interest of the Collateral Agent and the other Secured Parties in and
to the applicable Insurance Policies covering said loss, damage or expense, as
collateral security to indemnify against liability under said bond or other
agreement.

         (d)      Each Credit Party hereby irrevocably appoints the Collateral
Agent as such Credit Party's attorney-in-fact, with full authority to, after the
occurrence of a Default, act for such Credit Party and in the name of such
Credit Party to, in the Collateral Agent's discretion upon the occurrence and
during the continuance of Default, file one or more financing or continuation
statements, and amendments thereto, relative to all or any part of the
Collateral without the signature of such Credit Party where permitted by law, to
receive, endorse, and collect any drafts or other instruments, documents, and
chattel paper which are part of the Collateral, and to ask, demand, collect, sue
for, recover, compromise, receive, and give acquittance and receipts for moneys
due and to become due under or in respect of any of the Collateral and to file
any claims or take any action or institute any proceedings which the Collateral
Agent may reasonably deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of the Collateral Agent with
respect to any of the Collateral. The power of attorney granted hereby is
coupled with an interest and is irrevocable.

         (e)      If any Credit Party fails to perform any covenant contained in
this Agreement or the other Security Documents, the Collateral Agent may itself
perform, or cause performance of, such covenant, and such Credit Party shall pay
for the expenses of the Collateral Agent incurred in connection therewith in
accordance with Section 11.4.

         (f)      The powers conferred on the Collateral Agent under this
Agreement and the other Security Documents are solely to protect its interest in
the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the reasonable care of any Collateral in its possession and
the accounting for monies or other property actually received by it hereunder,
the Collateral Agent shall have no duty as to any Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral. The
<PAGE>
Collateral Agent shall be deemed to have exercised reasonable care as to the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which the Collateral Agent
accords its own property, provided that the Collateral Agent shall have no
responsibility for taking any necessary steps to preserve rights against any
parties with respect to any Collateral.

                                   ARTICLE X

                BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

         Section 10.1      Successors and Assigns. The terms and provisions of
the Credit Documents shall be binding upon and inure to the benefit of the
Borrower and the Term Lenders and their respective successors and assigns,
except that (a) the Borrower shall not have the right to assign its rights or
obligations under the Credit Documents and (b) any assignment by any Term Lender
must be made in compliance with Section 10.3. Notwithstanding clause (b) of this
Section, any Term Lender may at any time, without the consent of the Borrower or
the Administrative Agent, pledge or assign all or any portion of its rights
under this Agreement to secure obligations of such Term Lender including without
limitation any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided, however, that no such pledge or assignment shall release the
transferor Term Lender from its obligations hereunder. The Administrative Agent
may treat the payee of any Term Note as the owner thereof for all purposes
hereof unless and until such payee complies with Section 10.3 in the case of an
assignment thereof or, in the case of any other transfer, a written notice of
the transfer is filed with the Administrative Agent. Any assignee or transferee
of the Term Loans agrees by acceptance thereof to be bound by all the terms and
provisions of the Credit Documents. Any request, authority, or consent of any
Person, who at the time of making such request or giving such authority or
consent is the holder of any Term Loan, shall be conclusive and binding on any
subsequent holder, transferee, or assignee of such Term Loan.

         Section 10.2      Participations.

         (a)      Permitted Participants; Effect. Any Term Lender may, in the
ordinary course of its business and in accordance with applicable law, at any
time sell to one or more banks or other entities ("Participants") participating
interests in any Term Loans owing to such Term Lender, any Term Note held by
such Term Lender, any Term Commitment of such Term Lender, if any, or any other
interest of such Term Lender under the Credit Documents. In the event of any
such sale by a Term Lender of participating interests to a Participant, such
Term Lender's obligations under the Credit Documents shall remain unchanged,
such Term Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, such Term Lender shall remain the holder of
any such Term Note for all purposes under the Credit Documents, all amounts
payable by the Credit Parties under this Agreement shall be determined as if
such Term Lender had not sold such participating interests, and the Credit
Parties and the Administrative Agent shall continue to deal solely and directly
with such Term Lender in connection with such Term Lender's rights and
obligations under the Credit Documents.

         (b)      Voting Rights. Each Term Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment, modification, or
waiver of any provision of the
<PAGE>
Credit Documents other than any amendment, modification, or waiver which effects
any of the amendments, modifications or waivers referenced in Section 11.1
(other than with respect to the proviso at the end of Section 11.1).

         (c)      Benefit of Setoff. The Borrower agree that each Participant
shall be deemed to have the right of setoff provided in Section 7.5 in respect
of its participating interest in amounts owing under the Credit Documents to the
same extent as if the amount of its participating interest were owing directly
to it as a Term Lender under the Credit Documents; provided, that each Term
Lender shall retain the right of setoff provided in Section 7.5 with respect to
the amount of participating interests sold to each Participant; and provided
further that such right of setoff shall not be exercisable until five Business
Days after the date upon which the Borrower receives written notice of the fact
that such Participant is a Participant (it being understood that neither the
Administrative Agent, the Term Lender granting such participation nor the
Participant shall be obligated to give such notice). The Term Lenders agree to
share with each Participant, and each Participant, by exercising the right of
setoff provided in Section 7.5, agrees to share with each Term Lender, any
amount received pursuant to the exercise of its right of setoff, such amounts to
be shared as if each Participant were a Term Lender.

         Section 10.3      Assignments.

         (a)      Permitted Assignments. Any Term Lender may, in the ordinary
course of its business and in accordance with applicable law, at any time assign
to one or more Eligible Assignees ("Purchasers") all or any part of its rights
and obligations under the Credit Documents; provided, however, that in the case
of an assignment to an Eligible Assignee which is not a Term Lender or an
Affiliate or an Approved Fund of a Term Lender, such assignment shall be in a
minimum amount of (i) $1,000,000.00 or (ii) all of such Term Lender's Term
Commitments, if any, and Term Loans. Such assignment shall be made pursuant to
an Assignment and Acceptance substantially in the form of Exhibit A or in such
other form as may be agreed to by the parties thereto ("Assignment and
Acceptance"). The consent of the Administrative Agent and, so long as no Default
is continuing, the Borrower shall be required prior to an assignment becoming
effective, unless the assignment or transfer is (A) by CLNY connection with the
syndication of the Term Commitments and the Term Loans made hereunder, or (B) to
another Term Lender, Revolving Lender or an Affiliate or Approved Fund of such
Lender. Such consent shall not be unreasonably withheld or delayed.

         (b)      Effect; Effective Date. Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least three Business
Days after the execution thereof, (i) the Purchaser thereunder shall be a party
hereto for all purposes and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, have the
rights and obligations of a Term Lender hereunder and (ii) such Term Lender
thereunder shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement (and, in the case of
an Assignment and Acceptance covering all or the remaining portion of such Term
Lender's rights and obligations under this Agreement, such Term Lender shall
cease to be a party hereto). Upon the consummation of any assignment to a
Purchaser pursuant to this Section 12.3.2, the transferor Term Lender, the
Administrative Agent and the Borrower shall, if the
<PAGE>
transferor Term Lender or the Purchaser desires that its Term Loans be evidenced
by Term Notes, make appropriate arrangements so that new Term Notes or, as
appropriate, replacement Term Notes are issued to such transferor Term Lender
and new Term Notes or, as appropriate, replacement Term Notes, are issued to
such Purchaser, in each case in principal amounts reflecting their respective
Term Loans, as adjusted pursuant to such assignment.

         Section 10.4      Dissemination of Information. Each of the Agents and
the Term Lenders agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its and its
Affiliates' or Approved Funds' 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); (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) to the
extent required, 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 for the benefit of the Credit
Parties containing provisions substantially the same as those of this Section
10.4 or any other confidentiality obligation referred to herein, to (i) any
Participant or Purchaser or any other Person acquiring an interest in the Credit
Documents (each a "Transferee") and any prospective Transferee or (ii) any
direct or indirect contractual counterparty or prospective counterparty (or such
contractual counterparty's or prospective counterparty's professional advisor)
to any credit derivative transaction relating to obligations of the Parent
Company and its Subsidiaries; (g) with the prior written consent of the Parent
Company or the Borrower; (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 or Term Lender on a nonconfidential basis from a source
other than the Parent Company or any of its Subsidiaries; or (i) to the National
Association of Insurance Commissioners or any other similar organization. In
addition, any Agent or any Term Lender may disclose the existence of this
Agreement and information about this Agreement to market data collectors,
similar service providers to the lending industry, and service providers to the
Agents and the Term Lenders in connection with the administration and management
of this Agreement, the other Credit Documents, and the Term Loans. For the
purposes of this Section, "Information" means all information received from, or
on behalf of, the Parent Company or any of its Subsidiaries relating to the
Parent Company, any of its Subsidiaries or their business, other than any such
information that is available to any Agent or any Term Lender on a
nonconfidential basis prior to disclosure by the Parent Company or any of its
Subsidiaries; provided that, in the case of information received from the Parent
Company or any of its Subsidiaries after the date hereof, such information is
clearly identified in writing 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.

         Section 10.5      Tax Treatment. If any interest in any Credit Document
is transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Term Lender shall cause such Transferee, concurrently with the effectiveness of
such transfer, to comply with the provisions of Section 2.10.
<PAGE>
                                   ARTICLE X

                                  MISCELLANEOUS

         Section 11.1      Amendments, Etc. No amendment or waiver of any
provision of this Agreement or any other Credit Document, nor consent to any
departure by any Credit Party therefrom, shall in any event be effective unless
the same shall be in writing and signed by the Required Term Lenders and the
Borrower, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless in writing and
signed by each Term Lender directly affected thereby and the Borrower, do any of
the following: (a) increase the Term Commitments of the Term Lenders, (b) reduce
the principal of, or interest on, the Term Loans or any fees or other amounts
payable hereunder or under any other Credit Document, (c) postpone any date
fixed for any scheduled payment or prepayment of principal of, or interest on,
the Term Loans for any fees or other amounts payable hereunder, (d) change the
number of Term Lenders which shall be required to take any action hereunder or
under any other Credit Document, (e) amend Section 2.11 or this Section 11.1,
(f) except as expressly permitted by this Agreement, release any Guarantor from
its obligations under its Guaranty, or (g) release all or any substantial
portion of the Collateral; provided, further, that (i) no amendment, waiver or
consent shall, unless in writing and signed by the Administrative Agent in
addition to the Term Lenders required above to take such action, affect the
rights or duties of the Administrative Agent under this Agreement or any other
Credit Document and (ii) no waiver of any of the conditions specified in Article
III shall be effective against any Term Lender not executing such waiver;
provided, further that the Borrower may not amend, alter, vary, supplement,
terminate, revise, waive or otherwise modify any of the terms or provisions of,
or add any new or additional terms or provisions to, this Agreement or any other
Credit Document without the prior written consent of the Required Revolving
Lenders; provided, however, that the Borrower may, without the prior written
consent of the Required Revolving Lenders, (i) amend, alter, vary, supplement,
revise or waive any of the terms or provisions of, or add any new or additional
terms or provisions to (A) any of the Security Documents or (B) Section 2.6 of
this Agreement, (ii) release all or any portion of the Collateral or any
Guarantor or (iii) make any amendment, supplement, consent or waiver which is
administrative, immaterial or nonsubstantive in nature, not adverse to the
Revolving Lenders and has been consented to by the Administrative Agent.
Notwithstanding the foregoing, the consent of the Required Required Lenders is
not required for the Term Lenders to accelerate, or to permit the acceleration
of, the maturity of the Term Loans or to exercise any rights and remedies
available under the Security Documents, the guaranties provided by the
Guarantors or applicable law.

         Section 11.2      Notices, Etc. All notices and other communications
shall be in writing (including telecopy or telex) and mailed, telecopied,
telexed, hand delivered or delivered by a nationally recognized overnight
courier, if to any Credit Party, at its address as set forth on Schedule 1; if
to any Term Lender, at its specified Applicable Lending Office specified
opposite its name on Schedule 1; if to the Administrative Agent, at its address
for notices set forth in Schedule 1; and if a Notice of Borrowing or a Notice of
Conversion or Continuation to the Administrative Agent at the specified
Applicable Lending Office of Administrative Agent and, if different, the
specified Applicable Lending Office for Administrative Agent specified opposite
its name on Schedule 1 or, as to each party, at such other address or
teletransmission number as
<PAGE>
shall be designated by such party in a written notice to the other parties. All
such notices and communications shall, when mailed, telecopied, telexed or hand
delivered or delivered by overnight courier be effective: upon receipt, if
mailed, when telecopy transmission is completed, when confirmed by telex
answer-back or when delivered, respectively, except that notices and
communications to the Administrative Agent pursuant to Article II or IX shall
not be effective until received by the Administrative Agent.

         Section 11.3      No Waiver; Remedies. No failure on the part of any
Term Lender or the Administrative Agent to exercise, and no delay in exercising,
any right hereunder or under any Term Note shall operate as a waiver thereof;
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right. The remedies
provided in this Agreement are cumulative and not exclusive of any remedies
provided by law.

         Section 11.4      Costs and Expenses. The Borrower agree to pay within
five Business Days of on demand (a) all out-of-pocket costs and expenses of the
Agents and reasonable fees and out-of-pocket expenses of in-house counsel and
outside counsel for the Agents, in connection with the preparation, execution,
delivery, administration, modification and amendment of this Agreement and the
other Credit Documents, (b) all out-of-pocket costs and expenses of the Agents
and reasonable fees and out-of-pocket expenses of in-house counsel and outside
counsel for the Agents in connection with advising the Agents with respect to
its rights and responsibilities under this Agreement, and (c) all out-of-pocket
costs and expenses of the Agents and each Term Lender and reasonable fees and
out-of-pocket expenses of in-house counsel and outside counsel for the Agents
and each Term Lender in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement and the other
Credit Documents.

         Section 11.5      Binding Effect. This Agreement shall become effective
when it shall have been executed by the Credit Parties, the Agents, and when the
Administrative Agent shall have, as to each Term Lender, either received a
counterpart hereof executed by such Term Lender or been notified by such Term
Lender that such Term Lender has executed it.

         Section 11.6      Indemnification. The Borrower shall indemnify the
Agent, the Arranger, the Term Lenders and each affiliate thereof and their
respective directors, officers, employees and agents from, and discharge,
release, and hold each of them harmless against, any and all losses,liabilities,
claims or damages to which any of them may become subject, insofar as such
losses, liabilities, claims or damages arise out of or result from (i) any
actual or proposed use by the Borrower or any Affiliate of the Borrower of the
proceeds of any Term Loan, (ii) any breach by any Credit Party of any provision
of this Agreement or any other Credit Document, (iii) any investigation,
litigation or other proceeding (including any threatened investigation or
proceeding) relating to the foregoing, or (iv) any Environmental Claim or
requirement of Environmental Laws concerning or relating to the present or
previously-owned or operated Properties, or the operations or business, of the
Parent Company or any of its Subsidiaries, and the Borrower shall reimburse the
Agents, the Arranger, and each Term Lender, and each Affiliate thereof and their
respective directors, officers, employees and agents, upon demand for any
reasonable out-of-pocket expenses (including legal fees) incurred in connection
with any such investigation, litigation or other proceeding; and expressly
including any such losses,
<PAGE>
liabilities, claims, damages, or expense incurred by reason of the Person being
indemnified's own negligence, but excluding any such losses, liabilities,
claims, damages or expenses incurred by reason of the gross negligence, bad
faith or willful misconduct of the person to be indemnified, or in the case of
clause (iv) above, caused by the affirmative act of such Agent, the Arranger or
such Term Lender.

         Section 11.7      Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.

         Section 11.8      Survival of Representations, etc. All representations
and warranties contained in this Agreement or made in writing by or on behalf of
the Credit Parties in connection herewith shall survive the execution and
delivery of this Agreement and the Credit Documents, the making of the Term
Loans and any investigation made by or on behalf of the Term Lenders, none of
which investigations shall diminish any Term Lender's right to rely on such
representations and warranties. All obligations of the Borrower provided for in
Sections 2.7, 2.8, 2.10(c), 11.4 and 11.6 shall survive any termination of this
Agreement and repayment in full of the Obligations.

         Section 11.9      Severability. In case one or more provisions of this
Agreement or the other Credit Documents shall be invalid, illegal or
unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions contained herein or therein shall
not be affected or impaired thereby.

         Section 11.10     Usury Not Intended. It is the intent of the Credit
Parties and each Term Lender in the execution and performance of this Agreement
and the other Credit Documents to contract in strict compliance with applicable
usury laws, including conflicts of law concepts, governing the Term Loans of
each Term Lender including such applicable laws of the State of New York and the
United States of America from time-to-time in effect. In furtherance thereof,
the Term Lenders and the Borrower stipulate and agree that none of the terms and
provisions contained in this Agreement or the other Credit Documents shall ever
be construed to create a contract to pay, as consideration for the use,
forbearance or detention of money, interest at a rate in excess of the Maximum
Rate and that for purposes hereof "interest" shall include the aggregate of all
charges which constitute interest under such laws that are contracted for,
charged or received under this Agreement; and in the event that, notwithstanding
the foregoing, under any circumstances the aggregate amounts taken, reserved,
charged, received or paid on the Term Loans, include amounts which by applicable
law are deemed interest which would exceed the Maximum Rate, then such excess
shall be deemed to be a mistake and each Term Lender receiving same shall credit
the same on the principal of its Term Loans (or if such Term Loans shall have
been paid in full, refund said excess to the Borrower). In the event that the
maturity of the Term Loans are accelerated by reason of any election of the
holder thereof resulting from any Event of Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest may never include more than the Maximum
Rate and excess interest, if any, provided for in this Agreement or otherwise
shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited on the applicable Term
Loans (or, if the applicable Term Loans shall have been
<PAGE>
paid in full, refunded to the Borrower of such interest). In determining whether
or not the interest paid or payable under any specific contingencies exceeds the
Maximum Rate, the Borrower and the Term Lenders shall to the maximum extent
permitted under applicable law amortize, prorate, allocate and spread in equal
parts during the period of the full stated term of the Term Loans all amounts
considered to be interest under applicable law at any time contracted for,
charged, received or reserved in connection with the Obligations. The provisions
of this Section shall control over all other provisions of this Agreement or the
other Credit Documents which may be in apparent conflict herewith.

         Section 11.11     Judgment Currency. If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due from any Credit Party
hereunder in the currency expressed to be payable herein (the "specified
currency") into another currency, the parties hereto agree, to the fullest
extent that they may effectively do so, that the rate of exchange used shall be
that at which in accordance with normal banking procedures the Administrative
Agent could purchase the specified currency with such other currency at the
Administrative Agent's main New York office on the Business Day preceding that
on which final, non-appealable judgment is given. The obligations of the Credit
Parties in respect of any sum due to any Term Lender or any Agent hereunder
shall, notwithstanding any judgment in a currency other than the specified
currency, be discharged only to the extent that on the Business Day following
receipt by such Term Lender or such Agent (as the case may be) of any sum
adjudged to be so due in such other currency such Term Lender or such Agent (as
the case may be) may in accordance with normal, reasonable banking procedures
purchase the specified currency with such other currency. If the amount of the
specified currency so purchased is less than the sum originally due to such Term
Lender or such Agent, as the case may be, in the specified currency, each Credit
Party agrees, to the fullest extent that it may effectively do so, as a separate
obligation and notwithstanding any such judgment, to indemnify such Term Lender
or such Agent, as the case may be, against such loss, and if the amount of the
specified currency so purchased exceeds (a) the sum originally due to any Term
Lender or such Agent, as the case may be, in the specified currency and (b) any
amounts shared with other Term Lenders as a result of allocations of such excess
as a disproportionate payment to such Term Lender under Section 2.11, such Term
Lender or such Agent, as the case may be, agrees to remit such excess to the
applicable Credit Party.

         Section 11.12     Governing Law. This Agreement and each of the other
Credit Documents shall be governed by and construed in accordance with the laws
of the State of New York and the applicable laws of the United States of
America.

         Section 11.13     Consent to Jurisdiction.

         (a)      Each Credit Party hereby irrevocably submits to the
non-exclusive jurisdiction of any United States Federal or New York state court
sitting in New York in any action or proceeding arising out of or relating to
any Credit Documents and each Credit Party hereby irrevocably agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such court and irrevocably waives any objection it may now or hereafter have
as to the venue of any such suit, action or proceeding brought in such court or
that such court is an inconvenient forum. Any judicial proceeding by any Credit
Party against any Agent, any Term Lender or any Affiliate or Approved Fund of
any Agent or any Term Lender involving,
<PAGE>
directly or indirectly, any matter in any way arising out of, related to, or
connected with any Credit Document shall be brought only in a court in New York,
New York.

         (b)      Each Credit Party has irrevocably appointed CT Corporation
System (the "Process Agent"), with an office on the date hereof at 111 Eighth
Ave., New York, New York, 10011, as its agent to receive on its behalf and on
behalf of its property service of copies of any summons or complaint or any
other process which may be served in any action. Such service may be made by
mailing or delivering a copy of such process to such Credit Party in care of the
Process Agent at the Process Agent's above address, and each Credit Party hereby
irrevocably authorizes and directs the Process Agent to accept such service on
its behalf. As an alternative method of service, each Credit Party also
irrevocably consents to the service of any and all process in any such action or
proceeding by the mailing of copies of such process to it at the address
specified for it on the signature pages of this Agreement.

         (c)      Nothing in this Section 11.13 shall affect the right of any
Agent or any other Term Lender to serve legal process in any other manner
permitted by law or affect the right of any Agent or any Term Lender to bring
any action or proceeding against any Credit Party (as a Borrower or as a
Guarantor) in the courts of any other jurisdiction.

         Section 11.14     Waiver of Jury. Each Credit Party, Term Lender and
Agent hereby irrevocably waives any and all right to trial by jury in respect of
any legal proceeding, directly or indirectly, (whether sounding in tort,
contract or otherwise) arising out of or relating to this Agreement, any other
Credit Document, any of the transactions contemplated hereby, or the
relationship established hereunder.

         Section 11.15     Third Party Beneficiaries. For the purposes of
Section 11.1, the Revolving Lenders are intended third party beneficiaries of
this Agreement.
<PAGE>
         EXECUTED as of the 20th day of June, 2002.

                                         BORROWER:

                                         PRIDE OFFSHORE, INC.

                                         By: /s/  EARL W. McNIEL
                                            ------------------------------------
                                                  Earl W. McNiel
                                                  Treasurer

                                         GUARANTORS:

                                         PRIDE INTERNATIONAL, INC.

                                         By: /s/  EARL W. McNIEL
                                            ------------------------------------
                                                  Earl W. McNiel
                                                  Chief Financial Officer

                                         MEXICO DRILLING LIMITED LLC

                                         By: /s/  EARL W. McNIEL
                                            ------------------------------------
                                                  Earl W. McNiel
                                                  Treasurer

                                         PRIDE CENTRAL AMERICA, LLC

                                         By: /s/  EARL W. McNIEL
                                            ------------------------------------
                                                  Earl W. McNiel
                                                  Treasurer

                                         PRIDE DRILLING, LLC

                                         By: /s/  EARL W. McNIEL
                                            ------------------------------------
                                                  Earl W. McNiel
                                                  Treasurer
<PAGE>
                                         PRIDE NORTH AMERICA LLC

                                         By: /s/  EARL W. McNIEL
                                            ------------------------------------
                                                  Earl W. McNiel
                                                  Treasurer

                                         PRIDE OFFSHORE INTERNATIONAL LLC

                                         By: /s/  EARL W. McNIEL
                                            ------------------------------------
                                                  Earl W. McNiel
                                                  Treasurer

                                         PRIDE SOUTH PACIFIC LLC

                                         By: /s/  EARL W. McNIEL
                                            ------------------------------------
                                                  Earl W. McNiel
                                                  Treasurer
<PAGE>
                                        ADMINISTRATIVE AGENT:

                                        CREDIT LYONNAIS NEW YORK BRANCH,
                                        as Administrative Agent

                                        By: /s/ BERNARD WEYMULLER
                                           -------------------------------------
                                        Name:   Bernard Weymuller
                                             -----------------------------------
                                        Title:  Senior Vice President
                                              ----------------------------------

                                        TERM LENDERS:

TERM COMMITMENT                         CREDIT LYONNAIS NEW YORK BRANCH
$200,000,000

                                        By: /s/ BERNARD WEYMULLER
                                           -------------------------------------
                                        Name:   Bernard Weymuller
                                             -----------------------------------
                                        Title:  Senior Vice President
                                              ----------------------------------

<PAGE>
                                    EXHIBIT A

                            ASSIGNMENT AND ACCEPTANCE

                          Dated ________________, 200_

         Reference is made to the Term Loan Agreement dated as of June 20, 2002
(as the same may be amended or modified from time to time, the "Term Loan
Agreement") among Pride Offshore, Inc., a Delaware corporation (the "Borrower"),
the Term Lenders and Credit Lyonnais New York Branch, as Administrative Agent
for the Term Lenders. Capitalized terms not otherwise defined in this Assignment
and Acceptance shall have the meanings assigned to them in the Term Loan
Agreement.

         Pursuant to the terms of the Term Loan Agreement, _______________
wishes to assign and delegate ___% (1) of its rights and obligations under the
Term Loan Agreement. Therefore, _______________ ("Assignor"), _______________
("Assignee"), and the Administrative Agent agree as follows:

         1. As of the Effective Date (as defined below), the Assignor hereby
sells and assigns and delegates to the Assignee, and the Assignee hereby
purchases and assumes from the Assignor, without recourse to the Assignor and
without representation or warranty except for the representations and warranties
specifically set forth in clauses (i), (ii), and (iii) of Section 2, a ___%
interest in and to all of the Assignor's rights and obligations under the Term
Loan Agreement, including, without limitation, the Term Loans owing to the
Assignor and the Term Note, if any, held by the Assignor.

         2. The Assignor (i) represents and warrants that, prior to executing
this Assignment and Acceptance, the aggregate outstanding principal amount of
Term Loans owed to it by the Borrower is $ ; (ii) represents and warrants that
it is the legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any adverse claim; (iii)
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties, or representations made in or in connection with
the Term Loan Agreement or any other Credit Document or the execution, legality,
validity, enforceability, genuineness, sufficiency, or value of the Term Loan
Agreement or any other Credit Document or any other instrument or document
furnished pursuant thereto; (iv) makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Borrower or any
Guarantor, or the performance or observance by the Borrower or any Guarantor of
any of their obligations under the Term Loan Agreement or any other Credit
Document or any other instrument or document furnished pursuant thereto; [and]
(v) represents and warrants that it is an Eligible Assignee[; and (vi) attaches
the Term Note referred to in paragraph 1 above and requests that the
Administrative Agent exchange such Term Note for a new Term Note dated the
Effective Date in the principal amount of $__________ payable to the order of
the Assignee [and a new Term Note dated the Effective Date in the principal
amount of $__________ payable to the order of Assignor]].

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

(1)    Specify percentage in no more than 5 decimal points.
<PAGE>
         3. The Assignee (i) confirms that it has received a copy of the Term
Loan Agreement, together with copies of the financial statements referred to in
Section 4.5 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon the Administrative Agent, the 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 the Term Loan Agreement or any other Credit Document; (iii) appoints and
authorizes the Administrative Agent and the Collateral Agent to take such action
as agent on its behalf and to exercise such powers under the Term Loan Agreement
and any other Credit Document as are delegated to the Administrative Agent or
the Collateral Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (iv) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Term Loan
Agreement or any other Credit Document are required to be performed by it as a
Term Lender; (v) specifies as its Applicable Lending Office (and address for
notices), the office(s) set forth beneath its name on the signature pages
hereof; and (vi) attaches the forms prescribed by the appropriate Governmental
Authority certifying as to the Assignee's status for purposes of determining
exemption from withholding taxes with respect to all payments to be made to the
Assignee under the Term Loan Agreement [and its Term Note] or such other
documents as are necessary to indicate that all such payments are subject to
such rates at a rate reduced by an applicable tax treaty (2).

         4. The effective date for this Assignment and Acceptance shall be
__________ __, 200_ (the "Effective Date") and following the execution of this
Assignment and Acceptance, the Administrative Agent will record it.

         5. Upon such recording, and as of the Effective Date, (i) the Assignee
shall be a party to the Term Loan Agreement as a "Term Lender" thereunder for
all purposes, and, to the extent provided in this Assignment and Acceptance,
have the rights and obligations of a Term Lender thereunder and (ii) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights (other than rights against the Borrower pursuant to
Sections 2.7, 2.8, 2.10(c) and 11.4 of the Term Loan Agreement, which shall
survive this assignment) and be released from its obligations under the Term
Loan Agreement (except for its obligations and agreements under Section 9.8,
10.4 and 11.14, which shall survive this assignment).

         6. Upon such recording, from and after the Effective Date, the
Administrative Agent shall make all payments under the Term Loan Agreement and
the Term Notes in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest, and commitment fees) to the
Assignee. The Assignor and Assignee shall make all appropriate adjustments in
payments under the Term Loan Agreement [and the Term Notes] for periods prior to
the Effective Date directly between themselves.

         7. This Assignment and Acceptance shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York.

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

(2)    If the Assignee is organized under the laws of a jurisdiction outside the
       United States or France.

                                      -2-
<PAGE>
         The parties hereto have caused this Assignment and Acceptance to be
duly executed as of the date first above written.

                                           [ASSIGNOR]

                                           By:
                                              ---------------------------------
                                           Name:
                                                -------------------------------
                                           Title:
                                                 ------------------------------

                                           Address:
                                                   ----------------------------

                                           Attention:
                                                     --------------------------
                                           Telecopy:
                                                    ---------------------------
                                           Telephone:
                                                     --------------------------

                                           [ASSIGNEE]

                                           By:
                                              ---------------------------------
                                           Name:
                                                -------------------------------
                                           Title:
                                                 ------------------------------

                                      -3-
<PAGE>
                                           Applicable Lending Office:

                                           Address:
                                                   ----------------------------

                                           Attention:
                                                     --------------------------
                                           Telecopy:
                                                    ---------------------------
                                           Telephone:
                                                     --------------------------

                                           CREDIT LYONNAIS NEW YORK BRANCH,
                                           as Administrative Agent

                                           By:
                                              ---------------------------------
                                           Name:
                                                -------------------------------
                                           Title:
                                                 ------------------------------

                                      -4-
<PAGE>
                                    EXHIBIT B

                             COMPLIANCE CERTIFICATE

         This certificate dated as of __________ ___, 200__ for the fiscal
quarter ending __________ ___, 200__ is prepared pursuant to Section 5.5(d) of
the Credit Agreement dated as of June 20, 2002 (as it may be amended in
accordance with its terms, the "Credit Agreement") among Pride Offshore, Inc., a
Delaware corporation (the "Borrower"), the Term Lenders party thereto, and
Credit Lyonnais New York Branch, as Administrative Agent for the Term Lenders.
Unless otherwise defined in this certificate, capitalized terms used herein that
are defined in the Credit Agreement shall have the meanings set forth in the
Credit Agreement.

         The Borrower hereby certifies (a) that no Default has occurred or is
continuing, (b) that all of the representations and warranties made by the
Credit Parties in Article IV of the Credit Agreement and in each other Credit
Document are true and correct on and as of the date hereof, and (c) that as of
the last day of the fiscal quarter ending immediately preceding the date of this
Certificate the following amounts and calculations were true and correct:

<TABLE>
<S>                                                              <C>
SECTION 5.14.  SECURITY MAINTENANCE RATIO.

               (a)  Market Value of the Mortgaged Term Loan
                    Facility Rigs
                                                                 --------------

               (b)  outstanding principal amount of the Term
                    Loans
                                                                 --------------

                    Security Maintenance Ratio

                    (a) divided by (b)
                                                                 --------------

               Compliance                                           2.0 to 1.0
</TABLE>

<TABLE>
<S>                                                              <C>
SECTION 6.16.  LEVERAGE RATIO.

               (a)  Consolidated Net Debt
                                                                 --------------
                    (i)  Debt of the Parent Company and
                         its Subsidiaries
                                                                 --------------
                    (ii) Unrestricted Cash
                                                                 --------------
                    (iii) Consolidated Net Debt
                                                                 --------------
                          (i) minus (ii)
                                                                 --------------
               (b)  Consolidated EBITDA
                                                                 --------------
</TABLE>
<PAGE>
<TABLE>
<S>                                                              <C>

                    (i)  Consolidated Operating Income
                                                                 --------------

                    (ii) depreciation, amortization and
                         other non-cash expenses
                                                                 --------------

                    (iii)cash costs directly related
                         to the Acquisition by the
                         Parent Company of Marine
                         Drilling Companies, Inc. and
                         its Subsidiaries
                                                                 --------------

                    (iv) Pro Forma Consolidated EBITDA*
                                                                 --------------
                    (v)  Consolidated EBITDA
                                                                 --------------
                        (i)  plus (ii) plus (iii) plus (iv)
                                                                 --------------
               Leverage Ratio

                    (a) divided by (b)
                                                                 --------------

                  Compliance

                  For the fiscal quarters ending June 30, 2002,
                  September 30, 2002 and December 31, 2002         4.75 to 1.00

                  For the fiscal quarters ending March 31, 2003,
                  June 30, 2003, September 30, 2003, and
                  December 31, 2003                                4.00 to 1.00

                  For the fiscal quarters ending March 31, 2004,
                  June 30, 2004, September 30, 2004, and
                  December 31, 2004                                3.50 to 1.00

                  March 31, 2005 and thereafter                    3.00 to 1.00

SECTION 6.17.  INTEREST COVERAGE RATIO.

               (a)  Consolidated EBITDA
                                                                 --------------
                    (i)  Consolidated Operating Income
                                                                 --------------
                    (ii) depreciation, amortization and
                         other non-cash expenses
                                                                 --------------
                    (iii) cash costs directly related
                          to the
</TABLE>

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

*    Attach certificate setting forth calculation of Pro Forma Consolidated
     EBITDA.
<PAGE>
<TABLE>
<S>                                                             <C>
                  Acquisition by the Parent Company of
                  Marine Drilling Companies, Inc. and its
                  Subsidiaries
                                                                 --------------

                    (iv) Pro Forma Consolidated EBITDA*
                                                                 --------------
                    (v)  Consolidated EBITDA
                                                                 --------------

                        (i) plus (ii) plus (iii) plus (iv)
                                                                 --------------

               (b)  Consolidated Net Interest Expense

                    (i)  cash interest expense of the
                         Parent Company and its
                         Subsidiaries
                                                                 --------------

                    (ii) cash interest income of the Parent
                         Company and its Subsidiaries
                                                                 --------------

                    (iii) pro forma adjustment, if any*
                                                                 --------------

                    (iv) Consolidated Net Interest Expense
                                                                 --------------

                         (i) minus (ii) plus (iii)
                                                                 --------------
                  Interest Coverage Ratio

                  (a) divided by (b)
                                                                 --------------
                  Compliance

                  For the fiscal quarters ending June 30, 2002,
                  September 30, 2002 and December 31, 2002         3.00 to 1.00

                  For the fiscal quarters ending March 31, 2003,
                  June 30, 2003, September 30, 2003, and
                  December 31, 2003                                3.25 to 1.00

                  For the fiscal quarters ending March 31, 2004,
                  June 30, 2004, September 30, 2004, and
                  December 31, 2004                                4.00 to 1.00

                  March 31, 2005 and thereafter                    4.50 to 1.00
</TABLE>

SECTION 6.18.     MAXIMUM DEBT TO CAPITALIZATION RATIO.

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

*    Attach certificate setting forth calculation of Pro Forma Consolidated
     EBITDA.
<PAGE>
<TABLE>
<S>                                                              <C>

               (a) Consolidated Net Debt
                                                                 --------------
                    (i)  Debt of the Parent Company and
                         its Subsidiaries
                                                                 --------------

                    (ii) Unrestricted Cash
                                                                 --------------

                    (iii) Consolidated Net Debt
                                                                 --------------

                          (i) minus (ii)
                                                                 --------------

               (b)  Total Capitalization
                                                                 --------------

                    (i)  Consolidated Net Debt
                                                                 --------------

                    (ii) Consolidated Net Worth
                                                                 --------------

                    (iii) Total Capitalization
                                                                 --------------

                          (i) plus (ii)
                                                                 --------------

              Maximum Debt to Capitalization Ratio

               (a) divided by (b)
                                                                 --------------
              Compliance

                  For the fiscal quarters ending June 30, 2002,
                  September 30, 2002 and December 31, 2002              55%

                  For the fiscal quarters ending March 31, 2003,
                  June 30, 2003, September 30, 2003, and
                  December 31, 2003                                     50%

                  For the fiscal quarters ending March 31, 2004,
                  June 30, 2004, September 30, 2004, and
                  December 31, 2004                                     45%

                  March 31, 2005 and thereafter                         35%

SECTION 6.19.     MINIMUM NET WORTH.

                  Consolidated Net Worth
                                                                 --------------
                  Compliance

                    (i)  80% of Consolidated Net Worth
                         at the end of the fiscal
                         quarter immediately
</TABLE>
<PAGE>
                         preceding the Closing Date
                                                                 --------------

                    (ii) 50% of Consolidated Net Income
                         (if positive)
                                                                 --------------

                    (iii) Equity Issuance Proceeds

                                                                 --------------
                    Minimum Net Worth

                         (i) plus (ii) plus (iii)
                                                                 --------------

         Executed this       day of           , 200    .
                      ------       -----------     ----

                                      PRIDE INTERNATIONAL, INC.

                                      By:
                                         ------------------------------------
                                      Name:
                                           ----------------------------------
                                      Title:
                                            ---------------------------------
<PAGE>
                                    EXHIBIT C

                                     FORM OF
                               NOTICE OF BORROWING

                                     [Date]

Credit Lyonnais New York Branch, as Administrative Agent
1301 Avenue of the Americas
New York, New York  10019-6022
Attention:        ____________________

Ladies and Gentlemen:

The undersigned, Pride Offshore, Inc., a Delaware corporation (the "Borrower"),
refers to the Term Loan Agreement dated as of June 20, 2002 (as the same may be
amended or modified from time to time, the "Term Loan Agreement," the defined
terms of which are used in this Notice of Borrowing unless otherwise defined in
this Notice of Borrowing) among the Borrower, the Term Lenders, and the
Administrative Agent, and hereby gives you irrevocable notice pursuant to
Section 2.2(a) of the Term Loan Agreement that the undersigned hereby requests
the Borrowing, and in connection with that request sets forth below the
information relating to such Borrowing (the "Proposed Borrowing") as required by
Section 2.2(a) of the Credit Agreement:

          (a) The Business Day of the Proposed Borrowing is ________________.

          (b) The Proposed Borrowing will consist of [Eurodollar Loans] [Base
     Rate Loans].

          (c) The aggregate amount of the Proposed Borrowing is $200,000,000.00.

          (d) [The Interest Period for each Eurodollar Loan is made as part of
     the Proposed Borrowing is [_____ month[s] commencing on ____________ and
     ending on ____________]].

The undersigned hereby certifies that the following statements are true on the
date hereof, and will be true on the date of the Proposed Borrowing:

          (a) the representations and warranties contained in Article IV of the
     Term Loan Agreement and in each other Credit Document are correct in all
     material respects on and as of the date of the Proposed Borrowing before
     and after giving effect to such Proposed Borrowing and to the application
     of the proceeds therefrom, as though made on and as of such date; and
<PAGE>
          (b) no Default has occurred and is continuing or would result from
     such Proposed Borrowing or from the application of the proceeds therefrom.

                                               Very truly yours,

                                               PRIDE OFFSHORE, INC.

                                               By:______________________________

                                               Name:____________________________

                                               Title: __________________________

                                      -2-
<PAGE>
                                 EXHIBIT D

                                     FORM OF
                      NOTICE OF CONVERSION OR CONTINUATION

                                     [Date]

Credit Lyonnais New York Branch, as Administrative Agent
1301 Avenue of the Americas
New York, New York  10019-6022
Attention:        _____________________

Ladies and Gentlemen:

The undersigned, Pride Offshore, Inc., a Delaware corporation (the "Borrower"),
refers to the Term Loan Agreement dated as of June 20, 2002 (as the same may be
amended or modified from time to time, the "Term Loan Agreement," the defined
terms of which are used in this Notice of Conversion or Continuation unless
otherwise defined in this Notice of Conversion or Continuation) among the
Borrower, the Term Lenders, and the Administrative Agent, and hereby gives you
irrevocable notice pursuant to Section 2.2(b) of the Term Loan Agreement that
the undersigned hereby requests a Continuation or Conversion ("Proposed
Borrowing") of an outstanding Borrowing, and in connection with that request
sets forth below the information relating to the Proposed Borrowing as required
by Section 2.2(b) of the Credit Agreement:

          (a) The Business Day of the Proposed Borrowing is _______________.

          (b) The aggregate amount of the Borrowing to be Converted or Continued
     is $ _______.

          (c) The Proposed Borrowing consists of [a Conversion to [Eurodollar
     Loans][a Continuation].

          (d) [The Interest Period for each Proposed Borrowing is [____ month[s]
     commencing on ____________ and ending on _____________].]

                                              Very truly yours,

                                              PRIDE OFFSHORE, INC.

                                               By:______________________________

                                               Name:____________________________

                                               Title: __________________________
<PAGE>
                                    EXHIBIT E

                           FORM OF SECURITY AGREEMENT

         This Security Agreement dated as of June 20, 2002 ("Security
Agreement") is between _______________________________, a __________________
(the "Debtor"), and Credit Lyonnais New York Branch, as collateral agent
("Collateral Agent") for the Term Secured Parties (as defined below).

                                  INTRODUCTION

         A. Pride Offshore, Inc., a Delaware corporation (the "Borrower"), has
entered into a Term Loan Agreement dated as of June 20, 2002 (as amended,
modified, supplemented or restated from time to time, the "Term Loan Agreement,"
the defined terms of which are used in this Security Agreement unless otherwise
defined herein) together with the lenders party thereto (the "Term Lenders"),
and Credit Lyonnais New York Branch, as administrative agent ("Administrative
Agent") for the Term Lenders, providing for the making of Term Loans by the Term
Lenders.

         [B. The Debtor has guaranteed the Borrower's obligations owing to the
Term Secured Parties under the Credit Documents pursuant to Article VIII of the
Term Loan Agreement (the "Guaranty").](1)

         C. Under the Term Loan Agreement, it is required that the Debtor shall
secure its obligations under the [Credit Documents][Guaranty] by entering into
this Security Agreement.

         Therefore, the Debtor hereby agrees with the Collateral Agent for its
benefit and the benefit of the other Term Secured Parties as follows:

Section 1. Definitions.

         Any terms used in this Security Agreement that are defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New York
("UCC") shall have the meanings assigned to those terms by the UCC as of the
date of this Security Agreement, unless otherwise defined in this Security
Agreement.

Section 2. Security Interest.

         2.1 Grant of Security Interest. The Debtor hereby grants to the
Collateral Agent for its benefit and the ratable benefit of the Term Secured
Parties a security interest in the Collateral (as defined in Section 2.2 below)
to secure the performance and payment of the Obligations of the Debtor now and
hereafter existing under the Term Loan Agreement and any other Credit Documents,
whether for principal, interest, fees, expenses, indemnification or otherwise,
(all such obligations being the "Secured Obligations").

(1) To be inserted in Security Agreements executed by Material Subsidiaries
    of the Borrower.
<PAGE>
         2.2 Collateral. "Collateral" shall mean all of Debtor's right, title,
and interest in the following, whether now owned or hereafter created or
acquired or arising:

                  (a) Earnings. (i) (A) All rent, charterhire, day rates and
fees and other moneys and rights and claims to moneys payable to the Debtor
arising from the Mortgaged Term Loan Facility Rigs listed on Schedule 2.2
attached hereto (the "Debtor Rigs"); (B) all rights of the Debtor to payment
under, and any moneys whatsoever payable to the Debtor under, any bareboat or
time charter, drilling contract, or other contract for the use or employment of
the Debtor Rigs, and all other rights and benefits whatsoever accruing to the
Debtor thereunder, including (but without prejudice to the generality of the
foregoing) all claims for damages for any breach by any charterer or other party
thereto of such bareboat or time charter, drilling contract, or other contract
for the use or employment of the Debtor Rigs; and (C) all freights, passage
moneys, hire moneys, compensation payable to the Debtor in the event of the
requisition of any Debtor Rig for hire, remuneration for salvage and towage
services, demurrage and detention moneys, and any other earnings whatsoever due
or to become due to the Debtor and all insurance proceeds payable to the Debtor
with respect to any third party liability for any loss of or damage to all or
any part of any Debtor Rig and (ii) all moneys or other compensation payable by
reason of requisition of title or for hire or other compulsory acquisition of
any Debtor Rig or its capture, seizure, arrest, detention or confiscation by any
Governmental Authority or Persons acting on behalf of any Governmental Authority
("Earnings");

                  (b) Insurance Policies. (i) All insurances (including, without
limitation, all certificates of entry in protection and indemnity and war risks
associations or clubs) in respect of the Debtor Rigs and all renewals of and
replacements for the same, (ii) all claims, returns of premium and other moneys
due and to become due under or in respect of said insurances and (iii) all other
rights of the Debtor under or in respect of said insurances; and

                  (c) Proceeds. Any proceeds of any of the foregoing Collateral.

         2.3 Debtor Remains Liable. Anything herein to the contrary
notwithstanding: (a) the Debtor shall remain liable under any contracts and
agreements included in the Collateral to the extent set forth therein to perform
its obligations thereunder to the same extent as if this Agreement had not been
executed; (b) as between the Debtor and the Collateral Agent, the exercise by
the Collateral Agent of any rights hereunder shall not release the Debtor from
any obligations under any contracts and agreement included in the Collateral;
and (c) Collateral Agent shall not have any obligation under any contracts and
agreements included in the Collateral by reason of this Agreement, nor shall
Collateral Agent be obligated to perform or fulfill any of the obligations of
the Debtor thereunder, including any obligation to make any inquiry as to the
nature or sufficiency of any payment the Debtor may be entitled to receive
thereunder, to present or file any claim, or to take any action to collect or
enforce any claim for payment thereunder.

         Section 3. Representations and Warranties. The Debtor hereby represents
and warrants the following to the Collateral Agent and the Term Secured Parties:

                                      -2-
<PAGE>
         3.1 Debtor's Name. The true and correct name of the Debtor, is the name
of the Debtor as listed on the signature pages to this Security Agreement or as
most recently notified to the Collateral Agent pursuant to Section 4.5 hereof.

         3.2 Lien Priority and Perfection. The security interest in the
Collateral created pursuant to this Security Agreement creates a valid and
binding security interest in the Collateral, securing the performance and
payment of the Secured Obligations, and such security interests will be
perfected first priority security interests upon the filing of appropriate
financing statements naming the Debtor as debtor and Collateral Agent as
collateral agent in the jurisdictions set forth on the attached Schedule 3.2, or
as otherwise notified to the Collateral Agent, to the extent such interest may
be perfected under the UCC.

Section 4. Debtors' Covenants.

         4.1 Further Assurances. The Debtor agrees that at any time, at the
Debtor's expense, the Debtor shall promptly execute and deliver all further
instruments and documents and take all further action that may be necessary and
that the Collateral Agent may reasonably request in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable the
Collateral Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral, provided, however, that, to the extent this Agreement
states that the Collateral Agent may direct the Debtor to take an action during
the occurrence and continuance of an Event of Default (including, without
limitation, under Section 5 hereof), the Collateral Agent shall not be entitled
to request the Debtor to take such action unless an Event of Default shall have
occurred and be continuing. Without limiting the generality of the foregoing,
each Debtor will at the Collateral Agent's request, (a) deliver and pledge to
the Collateral Agent duly indorsed or accompanied by duly executed instruments
of transfer or assignment, all in form and substance reasonably satisfactory to
the Collateral Agent any instrument, document or chattel paper representing any
Earnings or right to receive Earnings or arising as a result of the disposition
of any Collateral, and (b) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices as may
be reasonably necessary, and as the Collateral Agent may reasonably request, in
order to perfect and preserve the security interests granted or purported to be
granted hereby. The Debtor shall furnish to the Collateral Agent from time to
time any statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the
Collateral Agent may reasonably request.

         4.2 Insurance. Upon the request of the Collateral Agent, after the
occurrence and during the continuance of an Event of Default, the Debtor shall
execute and deliver to the Collateral Agent any additional assignments and other
documents as may be necessary or desirable to enable the Collateral Agent to
directly collect any insurance proceeds.

         4.3 Transfer of Collateral; Release of Security Interest. The Debtor
shall not sell, assign (by operation of law or otherwise), or otherwise dispose
of any of the Collateral, except as permitted by the Term Loan Agreement
(including, without limitation but for the avoidance of doubt, by merger
permitted under the Term Loan Agreement). The Collateral Agent shall promptly,
at the Debtor's expense, execute and deliver all further instruments and
documents, and take all further action, that the Debtor may reasonably request
in order to release (for itself

                                      -3-
<PAGE>
and on behalf of the other Term Secured Lenders) its security interest in (a)
any Collateral which is disposed of in accordance with the terms of the Term
Loan Agreement or (b) any Collateral the release of which is contemplated by the
Term Loan Agreement or this Security Agreement (including, without limitation,
in the case of termination of this Security Agreement according to Section 7.4
hereof).

         4.4 Change of Name, State of Incorporation. The Debtor will notify the
Collateral Agent in writing 15 days prior to any change in the Debtor's name or
jurisdiction of formation.

Section 5. Remedies. If any Event of Default shall have occurred and remain
uncured:

         5.1 UCC Remedies. To the extent permitted by law, the Collateral Agent
may exercise in respect of the Collateral, in addition to other rights and
remedies provided for in this Security Agreement or otherwise available to it,
all the rights and remedies of a collateral agent under the UCC (whether or not
the UCC applies to the affected Collateral).

         5.2 Assembly of Collateral. The Collateral Agent may require the Debtor
to, at the Debtor's expense, promptly assemble all or part of the Collateral and
make it available to the Collateral Agent at a place to be designated by the
Collateral Agent which is reasonably convenient to all parties. The Collateral
Agent may occupy any premises owned or leased by the Debtor where the Collateral
or any part thereof is assembled for a reasonable period in order to effectuate
its rights and remedies hereunder or under law, without obligation to the Debtor
in respect of such occupation. The Collateral Agent shall have no obligation to
take any action to assemble or otherwise take control of the Collateral, whether
for the purposes of sale or otherwise.

         5.3 Sale of Collateral. Upon at least ten Business Days prior written
notice to the Debtor of the time and place of any proposed sale or other
disposition, the Collateral Agent may sell all or part of the Collateral at a
public or private sale, at any of the Collateral Agent's offices or elsewhere,
for cash, on credit, or for future delivery, and upon such other terms as the
Collateral Agent deems commercially reasonable. The Collateral Agent shall not
be obligated to make any sale of Collateral regardless of notice of sale having
been given. The Collateral Agent may adjourn any public or private sale from
time-to-time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned in such announcement.

         5.4 Earnings. The Collateral Agent may, or may direct any Debtor to,
take any action the Collateral Agent deems necessary or advisable to enforce
collection of the Earnings including, without limitation, notifying the
corresponding account debtors or obligors of the assignment of such Earnings to
the Collateral Agent and directing such account debtors or obligors to make
payment of all amounts due or to become due directly to the Collateral Agent.
Upon such notification and direction, and at the expense of the Debtor, the
Collateral Agent may enforce collection of any such Earnings, and adjust, settle
or compromise the amount or payment thereof, in the same manner and to the same
extent as the Debtor might have done. After receipt by the Debtor of notice that
the Collateral Agent has so notified and directed an account debtor or obligor,
all amounts and proceeds (including instruments) received by the Debtor in
respect of the corresponding Earnings shall be received in trust for the benefit
of the Collateral Agent

                                      -4-
<PAGE>
hereunder, shall be segregated from other funds of the Debtor, and shall
promptly be paid over to the Collateral Agent in the same form as so received
(with any necessary endorsement) to be held as Collateral. The Debtor shall not
adjust, settle, or compromise the amount or payment of any receivable, or
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.

         5.5 Application of Collateral. The proceeds of any sale or other
realization upon all or any part of the Collateral shall be applied by the
Collateral Agent in order set forth in Section 7.6 of the Term Loan Agreement.

Section 6. Collateral Agent as Attorney-in-Fact for Debtor.

         6.1 Attorney-In-Fact. The Debtor hereby irrevocably appoints the
Collateral Agent as the Debtor's attorney-in-fact, with full authority to, if an
Event of Default shall have occurred and be continuing (a) act for the Debtor
and in the name of the Debtor to, in the Collateral Agent's discretion if an
Event of Default shall have occurred and be continuing, file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of the Debtor where permitted
by law, (b) receive, endorse, and collect any drafts or other instruments,
documents, and chattel paper which are part of the Collateral, and (c) ask,
demand, collect, sue for, recover, compromise, receive, and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Collateral and (d) file any claims or take any action or institute any
proceedings which the Collateral Agent may reasonably deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of the Collateral Agent with respect to any of the Collateral.

         The power of attorney granted hereby is coupled with an interest and is
irrevocable.

         6.2 Collateral Agent Performance. If the Debtor fails to perform any
covenant contained herein, the Collateral Agent may itself perform, or cause
performance of, such covenant, and the Debtor shall pay for the expenses of the
Collateral Agent incurred in connection therewith in accordance with Section
7.1, provided that if no Event of Default exists, the Collateral Agent shall
give the Debtor written notice and opportunity to perform prior to itself
performing or causing to perform.

         6.3 Collateral Agent's Duties. The powers conferred on the Collateral
Agent under this Security Agreement are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any such powers.
Except for the reasonable care of any Collateral in its possession and the
accounting for monies or other property actually received by it hereunder, the
Collateral Agent shall have no duty as to any Collateral or as to the taking of
any necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral. The Collateral Agent shall be deemed to have
exercised reasonable care as to the custody and preservation of the Collateral
in its possession if the Collateral is accorded treatment substantially equal to
that which the Collateral Agent accords its own property, provided that the
Collateral Agent shall have no responsibility for taking any necessary steps to
preserve rights against any parties with respect to any Collateral.

                                      -5-
<PAGE>
Section 7. Miscellaneous.

         7.1 Expenses. The Debtor shall upon demand pay to the Collateral Agent
for its benefit and the benefit of the other Term Secured Parties the amount
without duplication of any reasonable expenses, including the reasonable fees
and disbursements of its counsel and of any experts and agents, which the
Collateral Agent and the other Term Secured Parties may incur in connection with
(a) the custody, preservation, use, or operation of, or the sale, collection, or
other realization of, any of the Collateral, (b) the exercise or enforcement of
any of the rights of the Collateral Agent or any Term Secured Party hereunder,
and (c) the failure by the Debtor to perform or observe any of the provisions
hereof.

         7.2 Amendments; Etc. No amendment or waiver of any provision of this
Security Agreement nor consent to any departure by the Debtor from the terms of
this Security Agreement shall be effective unless the same shall be in writing
and authenticated by the Debtor, the Collateral Agent, and either, as required
by the Term Loan Agreement, the Required Term Lenders or all the Lenders, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.

         7.3 Addresses for Notices. All notices and other communications
provided for hereunder shall be made as provided in the Term Loan Agreement. All
such notices and other communications shall be effective as provided in the Term
Loan Agreement.

         7.4 Continuing Security Interest; Transfer of Interest. Unless earlier
terminated according to Section 4.3 hereof, this Security Agreement shall create
a continuing security interest in the Collateral and shall (a) remain in full
force and effect until indefeasible payment in full and termination of the
Secured Obligations, (b) be binding upon the Debtor, the Collateral Agent, the
Term Secured Parties and their respective successors, and assigns, and (c)
inure, together with the rights and remedies of the Collateral Agent hereunder,
to the benefit of, and be binding upon, the Collateral Agent, the Term Secured
Parties, and their respective successors, transferees, and assigns. Without
limiting the generality of the foregoing clause, when any Term Secured Party
assigns or otherwise transfers any interest held by it under the Term Loan
Agreement or other Credit Document to any other Person pursuant to the terms of
the Term Loan Agreement or other Credit Document, that other Person shall
thereupon become vested with all the benefits held by such Term Secured Party
under this Security Agreement. Upon the indefeasible payment in full and
termination of the Secured Obligations, the security interest granted hereby
shall terminate and all rights to the Collateral shall revert to the Debtor to
the extent such Collateral shall not have been sold or otherwise applied
pursuant to the terms hereof.

         7.5 Choice of Law. This Security Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
except to the extent that the validity or perfection of the security interests
hereunder, or remedies hereunder, in respect of any particular Collateral are
governed by the laws of a jurisdiction other than the State of New York.

                                      -6-
<PAGE>
         The parties hereto have caused this Security Agreement to be duly
executed as of the date first above written.

                                               DEBTOR:

                                               [DEBTOR]

                                               By:______________________________

                                               Name:____________________________

                                               Title: __________________________

                                      -7-
<PAGE>
                                               COLLATERAL AGENT:

                                               CREDIT LYONNAIS NEW YORK BRANCH,
                                               as Collateral Agent

                                               By:______________________________

                                               Name:____________________________

                                               Title: __________________________

                                      -8-
<PAGE>
                                  SCHEDULE 2.2

                                   Debtor Rigs
<PAGE>
                                  SCHEDULE 3.2

                        List of UCC Filing Jurisdictions
<PAGE>
                                    EXHIBIT F

                                     FORM OF
                                    TERM NOTE

$________________                                             ________ __, 2002

         For value received, the undersigned, Pride Offshore, Inc., a Delaware
corporation ("Borrower"), hereby promises to pay to the order of
_________________________ ("Term Lender") the principal amount of
_______________ and __/100 Dollars ($________________) or, if less, the
aggregate outstanding principal amount of the Term Loan (as defined in the Term
Loan Agreement referred to below) made by the Term Lender to the Borrower,
together with interest on the unpaid principal amount of such Term Loan from the
date of such Term Loan until such principal amount is paid in full, at such
interest rates, and at such times, as are specified in the Term Loan Agreement.

         This Term Note is one of the Term Loan referred to in, and is entitled
to the benefits of, and is subject to the terms of, the Term Loan Agreement
dated as of June 20, 2002 (as the same may be amended or modified from time to
time, the "Term Loan Agreement"), among the Borrower, the Term Lenders and
Credit Lyonnais New York Branch, as Administrative Agent for the Term Lenders.
Capitalized terms used in this Term Note that are defined in the Term Loan
Agreement and not otherwise defined in this Term Note have the meanings assigned
to such terms in the Term Loan Agreement. The Term Loan Agreement, among other
things, (a) provides for the making of a Term Loan by the Term Lender to the
Borrower in an aggregate amount not to exceed at any time outstanding the Dollar
amount first above mentioned, the indebtedness of the Borrower resulting from
such Term Loan being evidenced by this Term Note and (b) contains provisions for
acceleration of the maturity of this Term Note upon the happening of certain
events stated in the Term Loan Agreement and for prepayments of principal prior
to the maturity of this Term Note upon the terms and conditions specified in the
Term Loan Agreement.

         Both principal and interest are payable in lawful money of the United
States of America to the Administrative Agent at 1301 Avenue of the Americas,
New York, New York 10019 (or at such other location or address as may be
specified by the Administrative Agent in writing to the Borrower) in same day
funds. The Term Lender shall record its Term Loan and payments of principal made
under this Term Note, but no failure of the Term Lender to make such recordings
shall affect the Borrower's repayment obligations under this Term Note.

         Except as specifically provided in the Term Loan Agreement, the
Borrower hereby waives presentment, demand, protest, notice of intent to
accelerate, notice of acceleration, and any other notice of any kind. No failure
to exercise, and no delay in exercising, any rights hereunder on the part of the
holder of this Term Note shall operate as a waiver of such rights.

         The Obligations evidenced by this Term Note are guaranteed by the
Guarantors pursuant to the terms of the Term Loan Agreement and secured pursuant
to the terms of the Security Documents.
<PAGE>
         This Note shall be governed by and construed in accordance with the
laws of the State of New York.

                                               PRIDE OFFSHORE, INC.

                                               By:______________________________

                                               Name:____________________________

                                               Title: __________________________

                                      -2-
<PAGE>
                                    EXHIBIT G

                                     FORM OF
                                  RIG MORTGAGE

                                                                   UNITED STATES

                         FIRST PREFERRED FLEET MORTGAGE

                                     [OWNER]

                                       and

                        CREDIT LYONNAIS NEW YORK BRANCH,
                               as Collateral Agent

                          For the Term Secured Parties
                                  Named Herein

                               Dated June 20, 2002
<PAGE>
                                      INDEX
<TABLE>
<CAPTION>
Subject Matter                                                                                              Page
--------------                                                                                              ----
<S>                                                                                                       <C>
ARTICLE I     DEFINITIONS AND INTERPRETATION............................................................     3

ARTICLE II    THE MORTGAGE..............................................................................     4

ARTICLE III   PAYMENT COVENANTS.........................................................................     5

ARTICLE IV    PRESERVATION OF SECURITY..................................................................     6

ARTICLE V     COVENANTS; REPRESENTATIONS AND WARRANTIES.................................................     8

ARTICLE VI    PROTECTION OF SECURITY....................................................................     9

ARTICLE VII   ENFORCEABILITY AND MORTGAGEE'S POWERS.....................................................     9

ARTICLE VIII  FURTHER ASSURANCES........................................................................    12

ARTICLE IX    POWER OF ATTORNEY.........................................................................    12

ARTICLE X     EXPENSES AND INDEMNITIES..................................................................    13

ARTICLE XI    COMMUNICATIONS............................................................................    14

ARTICLE XII   ASSIGNMENTS...............................................................................    15

ARTICLE XIII  WAIVER; AMENDMENT.........................................................................    15

ARTICLE XIV   MISCELLANEOUS.............................................................................    15

ARTICLE XV    JURISDICTION..............................................................................    16
</TABLE>

                                      -i-
<PAGE>
                      FIRST PREFERRED FLEET MORTGAGE

         This FIRST PREFERRED FLEET MORTGAGE (this "Mortgage") dated as of June
20, 2002 is by [OWNER, a _____________________] having its principal offices at
5847 San Felipe, Suite 3300, Houston, Texas 77057 (the "Owner"), in favor of
CREDIT LYONNAIS NEW YORK BRANCH, a French banking association having offices at
1301 Avenue of the Americas, New York, New York 10019, as Collateral Agent and
mortgagee (in such capacity, the "Mortgagee") for the benefit of the Term
Secured Parties (as defined in the Term Loan Agreement referred to below).

                                    RECITALS

         A.       The Owner is the sole owner of the whole (100%) of the vessels
described on Exhibit A attached hereto and made a part hereof.

         B.       Pursuant to the terms of the Term Loan Agreement dated as of
June 20, 2002 (as the same may be amended or supplemented from time to time, the
"Term Loan Agreement") and made by and among [the Owner][Pride Offshore, Inc., a
Delaware corporation (the "Borrower")], Credit Lyonnais New York Branch, as
Administrative Agent and the lenders identified in Exhibit B attached hereto and
who hereafter may become a party thereto ("Term Lenders"), the Term Lenders
agree to make available to the [Owner][Borrower] a term loan facility in the
maximum principal amount at any one time outstanding of Two Hundred Million
United States Dollars (US$200,000,000) (the loans made pursuant thereto, the
"Term Loans"). The Term Loans, and interest, fees and commissions thereon, are
to be paid as provided in the Term Loan Agreement. The Term Loans are evidenced
by the Term Loan Agreement and the other Credit Documents (as defined in the
Term Loan Agreement).

         [C.      The Owner has guaranteed the Borrower's obligations owing to
the Term Lenders under the Credit Documents pursuant to Article VIII of the Term
Loan Agreement (the "Guaranty").]

         D.       It is required under the terms of the Term Loan Agreement that
the Owner shall grant and execute this Mortgage as security for its obligations
under the [Guaranty and the Borrower's obligations under the] Term Loan
Agreement.

         E.       Therefore, the Owner, in order to secure its obligations under
the [Guaranty and the Borrower's obligations under the] Term Loan Agreement and
the Credit Documents, and the performance and observance of and compliance with
all of the covenants, terms and conditions contained in this Mortgage, has duly
authorized the execution and delivery of this Mortgage under and pursuant to 46
U.S.C. Section 31301 et seq., as amended (the "Ship Mortgage Act"), which is
entered into by the Owner in consideration of the Term Lenders agreeing, at the
request of the Owner [and the Borrower], to make the Term Loans available to the
[Owner][Borrower] and as a condition thereto and for other good and valuable
consideration provided by the Term Lenders (the sufficiency of which the Owner
hereby acknowledges).

         NOW, THEREFORE, the Owner and the Mortgagee agree as follows:
<PAGE>
                                   ARTICLE I
                         DEFINITIONS AND INTERPRETATION

Section 1.1       In this Mortgage unless the context otherwise requires, the
following expressions shall have the following meanings:

         ["Borrower" has the meaning set forth in the Recitals hereof.]

         "Credit Documents" has the meaning set forth in the Term Loan
Agreement.

         "Credit Party" has the meaning set forth in the Term Loan Agreement.

         "Effective Date" means the date of this Mortgage.

         "Excepted Liens" has the meaning set forth in Section 5.1(b) hereof.

         ["Guaranty" has the meaning set forth in the Recitals hereof.]

         "Hazardous Materials" shall mean, collectively, "Hazardous Substance"
and "Hazardous Waste" as those terms are defined in the Term Loan Agreement.

         "Lien" has the meaning set forth in the Term Loan Agreement.

         "Mortgage" has the meaning set forth in the first paragraph hereof.

         "Mortgagee" has the meaning set forth in the first paragraph hereof.

         "Owner" has the meaning set forth in the first paragraph hereof.

         "Rigs" means the whole of each of the offshore drilling rigs described
on Exhibit A hereto, and includes any share or interest therein, and their
engines, generators, drilling machinery and equipment, anchors, chains, pumps
and pumping equipment, furniture and fittings, boats, tackle, outfit, spare
gear, fuel, consumable or other stores, belongings and appurtenances whether on
board or ashore and whether now owned or hereafter acquired and all additions,
improvements and replacements hereafter made in or to said rigs or any part
thereof and all of their freight, hires and earnings.

         "Secured Indebtedness" means all obligations and liabilities of the
Owner and the other Credit Parties except for the U.S. Parent (whether for
principal, interest, fees, expenses or any other charges whatsoever), now
existing or hereafter incurred under, arising out of or in connection with any
Credit Document to which it is a party [including, without limitation, in the
case of the Owner, the Guaranty,] and the due performance and compliance by the
Owner and the other Credit Parties except for the U.S. Parent with the terms of
each such Credit Document.

         "Ship Mortgage Act" has the meaning set forth in the Recitals hereof.

         "Term Loan Agreement" has the meaning set forth in the Recitals hereof.

                                      -2-
<PAGE>
         "Term Loan Facility Period" means the period commencing on the
Effective Date and ending on the date upon which all amounts owing under the
Term Loan Agreement and all other amounts due to the Term Secured Parties
pursuant to the Term Loan Agreement and the other Credit Documents have been
repaid in full and the Term Loan Agreement has terminated.

         "Term Loans" has the meaning set forth in the Recitals hereof.

         "Term Secured Parties" has the meaning set forth in the Term Loan
Agreement.

         "United States Dollars" and "US$" means the lawful currency of the
United States of America.

         Section  1.2 Except where otherwise expressly provided or unless the
context otherwise requires, words and expressions defined in the Term Loan
Agreement shall bear the same meanings when used but not otherwise defined in
this Mortgage.

         Section  1.3 In this Mortgage:

                  (a) section headings are inserted for convenience only and
shall not affect the construction of this Mortgage and, unless otherwise
specified, all references to Sections are to sections of this Mortgage;

                  (b) unless the context otherwise requires, words denoting the
singular number shall include the plural and vice versa;

                  (c) references to Persons include bodies corporate and
unincorporated;

                  (d) references to assets include property, rights and assets
of every description;

                  (e) references to any document are to be construed as
references to such document as amended or supplemented from time to time; and

                  (f) references to any enactment include re-enactments,
amendments and extensions thereof.

                                   ARTICLE II
                                  THE MORTGAGE

         Section  2.1 Granting Clause. In order to secure the payment of the
Secured Indebtedness and to secure the performance and observance of and
compliance with the covenants, terms and conditions contained in this Mortgage
and the other Credit Documents to which it is a party, the Owner has GRANTED,
CONVEYED and MORTGAGED and does by these presents GRANT, CONVEY and MORTGAGE
unto the Mortgagee for the benefit of the Term Secured Parties and their
respective successors and assigns, the whole (100%) of each Rig; TO HAVE AND TO
HOLD the same unto the Mortgagee for the benefit of the Term Secured Parties and
their respective successors and assigns forever, upon the terms herein set
forth.

                                      -3-
<PAGE>
         Section  2.2 Termination. If the Owner[, the Borrower] or [its][their]
respective successors and assigns shall pay or cause to be paid to the Mortgagee
and the other Term Secured Parties and their respective successors or assigns
the Secured Indebtedness in full as and when the same shall become due and
payable in accordance with the terms of the Term Loan Agreement, [the Guaranty,]
this Mortgage and the other Credit Documents; then these presents and the rights
hereunder shall cease, determine and be void and, in such event, the Mortgagee
agrees by accepting this Mortgage to furnish, execute and record, at the expense
of the Owner, all such documents as the Owner may reasonably require to
discharge this Mortgage, otherwise to be and remain in full force and effect.

         Section  2.3 Partial Release; No Waiver. If any Rig is sold,
transferred, conveyed or otherwise disposed of in accordance with the Term Loan
Agreement, such Rig shall be released in writing by the Mortgagee from the lien
of this Mortgage, and such release shall not affect the Mortgagee's lien on the
remaining Rigs. Notwithstanding anything to the contrary herein, it is not
intended that any provision of this Mortgage shall waive the preferred status of
this Mortgage and that if any provision or part thereof herein shall be
construed as waiving the preferred status of this Mortgage then such provision
shall to such extent be void and of no effect.

         Section  2.4 Owner Liable. The Owner shall remain liable to perform all
the obligations assumed by it in relation to each Rig; and until such time as
the Mortgagee or any Term Secured Party shall become the owner thereof following
foreclosure, neither the Mortgagee nor any other Term Secured Party shall be
under any obligation of any kind whatsoever in respect thereof or be under any
liability whatsoever in event of any failure by the Owner to perform its
obligations in respect thereof.

         Section  2.5 Recordation under the Ship Mortgage Act. For the purpose
of this Mortgage and its filing and recordation as required by the Ship Mortgage
Act, (i) the total amount of the Secured Indebtedness is $200,000,000.00 of
principal, plus interest, expenses and fees thereon plus the performance of
mortgage covenants; (ii) the interest of the Owner (mortgagor) in the Rigs is
100% and the interest mortgaged to the Mortgagee is 100%; (iii) the respective
addresses of the Owner (mortgagor) and Mortgagee are as set forth on the first
page of this Mortgage; and (iv) subject to the partial release provisions in
Section 2.3 above, the discharge amount of the Mortgage is the same as the total
amount, and upon receipt thereof, the Mortgagee shall release the Rigs from the
lien of this Mortgage. The Mortgagee expressly does not waive the preferred
status of this Mortgage.

                                  ARTICLE III
                                PAYMENT COVENANTS

         Section  3.1 Payment Obligations. The Owner hereby covenants with the
Mortgagee and the other Term Secured Parties:

                  (a) to pay and indemnify the Mortgagee and the other Term
Secured Parties for all such reasonable expenses, claims, liabilities, losses,
costs, duties, fees, charges, or other moneys as are stated in this Mortgage to
be payable by the Owner to or recoverable from the Owner by the Mortgagee and
the other Term Secured Parties (or in respect of which the Owner

                                      -4-
<PAGE>
agrees in this Mortgage to indemnify the Mortgagee and the other Term Secured
Parties) at the times and in the manner specified in this Mortgage;

                  (b) to pay interest on any such reasonable expenses, claims,
liabilities, losses, costs, duties, fees, charges or other moneys referred to in
Section 3.1(a) from the date on which demand by the Mortgagee or any other Term
Secured Party is first made to the Owner to reimburse such expenses, claims,
liabilities, losses, costs, duties, fees, charges or other moneys (both before
and after any relevant judgment), at a rate per annum equal at all times to the
lesser of (i) the Alternate Base Rate (as defined in the Term Loan Agreement)
plus 2% and (ii) the Maximum Rate (as defined in the Term Loan Agreement); and

                  (c) to pay and perform its obligations which may be or become
due or owing to the Mortgagee or any other Term Secured Party, as the case may
be, under this Mortgage and the other Credit Documents to which the Owner is or
is to be a party at the times and in the manner specified herein or therein.

                                   ARTICLE IV
                            PRESERVATION OF SECURITY

         Section  4.1 Owner's Covenants Concerning the Security. It is declared
and agreed that:

                  (a) the security created by this Mortgage shall be held by the
Mortgagee as a continuing security for the payment of the Secured Indebtedness
and that the security so created shall not be satisfied by any intermediate
payment or satisfaction of any part of the Secured Indebtedness;

                  (b) the security so created shall be in addition to and shall
not in any way be prejudiced or affected by any of the other Credit Documents;

                  (c) the Mortgagee shall not have to wait for any Term Secured
Party to enforce any of the other Credit Documents, to the extent it may do so
pursuant to the terms thereof, before enforcing the security created by this
Mortgage;

                  (d) no failure or delay on the part of the Mortgagee in
exercising any right, power or privilege hereunder and no course of dealing
between the Owner and the Mortgagee or any other Term Secured Party shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder. The
rights and remedies herein expressly provided are cumulative and not exclusive
of any rights or remedies which the Mortgagee or any other Term Secured Party
would otherwise have. No notice to or demand on the Owner in any case shall
entitle the Owner to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Mortgagee or the Term
Secured Parties to any other or further action in any circumstances without
notice or demand; and

                  (e) any waiver by the Mortgagee of any terms of this Mortgage
or any consent given by the Mortgagee under this Mortgage shall only be
effective if given in writing and then only for the purpose and upon the terms
for which it is given.

                                      -5-
<PAGE>
         Section  4.2 Settlements; No Waiver. Any settlement or discharge under
this Mortgage between the Mortgagee and the Owner shall be conditional upon no
security or payment to the Mortgagee or the Term Secured Parties or any of them
by the Owner, any Credit Party, or any other Person being avoided or set-aside
or ordered to be refunded or reduced by virtue of any provision or enactment
relating to bankruptcy, insolvency, administration or liquidation for the time
being in force and, if such condition is not satisfied, the Mortgagee shall be
entitled to recover from the Owner on demand the value of such security or the
amount of any such payment as if such settlement or discharge had not occurred.

         Section  4.3 Mortgagee's Rights Not Affected. The rights of the
Mortgagee under this Mortgage and the security hereby constituted shall not be
affected by any act, omission, matter or thing which, but for this provision,
might operate to impair, affect or discharge such rights and security, in whole
or in part, including without limitation, and whether or not known to or
discoverable by the Owner, any Credit Party, the Mortgagee, any Term Secured
Party or any other Person:

                  (a) any waiver granted to or composition with the Owner, any
Credit Party, or any other Person; or

                  (b) the taking, variation, compromise, renewal or release of
or refusal or neglect to perfect or enforce any rights, remedies or securities
against any of the Owner, any Credit Party, or any other Person; or

                  (c) any legal limitation, disability, incapacity or other
circumstances relating to the Owner, any Credit Party, or any other Person; or

                  (d) any amendment or supplement to the Term Loan Agreement,
any of the other Credit Documents or any other document or security (except that
the Secured Indebtedness shall be defined by reference to the Term Loan
Agreement, other Credit Document or other document or security as amended or
supplemented); or

                  (e) the dissolution, liquidation, amalgamation, reconstruction
or reorganization of any of the Owner, any Credit Party, or any other Person; or

                  (f) the unenforceability, invalidity or frustration of any
obligations of any of the Owner, any Credit Party, or any other Person under the
Term Loan Agreement, any of the other Credit Documents, or any other document or
security.

         Section  4.4 Moneys Received by Mortgagee. Until the Secured
Indebtedness has been unconditionally and irrevocably paid in full to the
satisfaction of the Mortgagee, any moneys received, recovered or realized under
Article VII relating in whole or in part to the Secured Indebtedness shall be
held in a cash collateral account as security for the Secured Indebtedness and
applied to the Secured Indebtedness in accordance with Section 7.6 of the Term
Loan Agreement.

                                      -6-
<PAGE>
                                   ARTICLE V
                    COVENANTS; REPRESENTATIONS AND WARRANTIES

         Section  5.1 Owner's Covenants Concerning the Rigs and Other Matters.
The Owner covenants with the Mortgagee and the other Term Secured Parties that
throughout the Term Loan Facility Period the Owner will:

                  (a) comply with and satisfy all the requirements and
formalities established by the Ship Mortgage Act and any other pertinent
legislation of the United States to perfect this Mortgage as a legal, valid and
enforceable first (subject only to Permitted Liens) and preferred Lien upon the
Rigs and promptly to furnish to the Mortgagee from time to time such proofs as
the Mortgagee may request for its satisfaction with respect to the compliance by
the Owner with the provisions of this subsection (a);

                  (b) place, and use due diligence to retain, a properly
certified copy of this Mortgage on board each Rig with her papers and cause such
certified copy of this Mortgage to be exhibited to any and all Persons (and to
any representative of the Mortgagee on demand) having business with such Rig
which might give rise to any Lien thereon other than the Lien of this Mortgage,
Permitted Liens, Liens for wages of the crew (including the master of the Rig),
Liens for general average or salvage, Liens for wages of stevedores when
employed directly by a person listed in Section 31341 of the Ship Mortgage Act
and other maritime Liens incurred in the ordinary course of business provided
such other maritime liens are inferior to the Liens created by this Mortgage
(all such Liens herein collectively called "Excepted Liens"); and to place and
keep prominently displayed in the chart room and in the master's cabin of each
Rig a framed printed notice in plain type in English of such size that the
paragraph of reading matter shall cover a space not less than 6 inches wide and
9 inches high reading as follows:

                               NOTICE OF MORTGAGE

                  This Rig is covered by a First Preferred Fleet Mortgage to
                  Credit Lyonnais New York Branch, as Collateral Agent and
                  Mortgagee for the benefit of the Term Secured Parties referred
                  to in the said Mortgage under authority of the United States
                  Ship Mortgage Act, as amended and recodified as 46 U.S.C.
                  Section 31301 et seq. Under the terms of the said Mortgage
                  neither the Owner nor any charterer nor the master of this Rig
                  nor any other Person has any right, power or authority to
                  create, incur or permit to be imposed upon this Rig any lien
                  whatsoever other than for crew's wages and salvage and other
                  Excepted Liens (as that term is defined in said Mortgage);

                  (c) at its sole cost and expense and at no cost to the
Mortgagee, cause this Mortgage to be duly filed with the U.S. Coast Guard
National Rig Documentation Center in accordance with the provisions of 46
U.S.C.Section 31321, on the date hereof and subsequently duly recorded, and will
otherwise comply with and satisfy all the applicable provisions of the U.S.
Code, Title 46, Ch. 301 and Ch. 313, as amended, in order to establish, record
and maintain this Mortgage as a first preferred mortgage thereunder upon the
Rigs; and

                                      -7-
<PAGE>
                  (d) do all such other acts and execute all such instruments,
deeds, conveyances, mortgages and assurances as the Mortgagee shall reasonably
require in order to subject the Rigs to the lien of this Mortgage as aforesaid.

         Section  5.2 Representations and Warranties. The Owner hereby
represents and warrants to the Mortgagee and covenants with the Mortgagee that:

                  (a) The Owner is a "citizen" of the United States of America
as defined in 46 U.S.C. Section 802, as amended, duly qualified to engage in the
United States coastwise trade and foreign commerce of the United States, and
shall remain such a citizen during the life of this Mortgage.

                  (b) The Owner lawfully owns and is lawfully possessed of the
whole (100%) of each of the Rigs free from any Lien whatsoever other than the
lien of this Mortgage and Excepted Liens, and the Owner will warrant and defend
the title to, and possession of, each of the Rigs and every part thereof for the
benefit of the Mortgagee, against the claims and demands of all persons
whomsoever.

                  (c) Except for Excepted Liens, prior to and as of the date of
this Mortgage, the Owner is not aware of any maritime Liens, prior mortgages or
other obligations or liability on the Rig. The Mortgagee acknowledges that is
has received written notice complying with the disclosure requirements of
Section 31323 of the Ship Mortgage Act.

                                   ARTICLE VI
                             PROTECTION OF SECURITY

         Section  6.1 Mortgagee's Rights. The Mortgagee shall without prejudice
to its other rights and powers under this Mortgage and the other Credit
Documents be entitled (but not bound) at any time and as often as may be
reasonably necessary to take any such action as it may in the reasonable
exercise of its discretion think fit for the purpose of protecting or
maintaining the security created by this Mortgage and the other Credit Documents
(including, without limitation, any actions entitled under the Term Loan
Agreement) and all reasonable expenses, liabilities, or losses (including,
without limitation, reasonable legal fees) so incurred by the Mortgagee and the
other Term Secured Parties in or about the protection or maintenance of the said
security together with interest payable thereon according to Section 3.1(b)
shall be repayable to it by the Owner on demand; provided that if no Event of
Default exists, the Mortgagee shall give the Owner written notice and
opportunity to take such action on the Mortgagee's behalf prior to taking any
such action; provided further, however, to the extent this Mortgage states that
the Mortgagee may take any action during the occurrence and continuance of an
Event of Default (including, without limitation, under Article VII hereof), the
Mortgagee shall not be entitled to take such action unless an Event of Default
shall have occurred and be continuing.

                                  ARTICLE VII
                      ENFORCEABILITY AND MORTGAGEE'S POWERS

         Section  7.1 Events of Default. During the continuance of any of the
Events of Default specified in the Term Loan Agreement but without the necessity
for any court order or declaration in any jurisdiction to the effect that an
Event of Default has occurred, the security

                                      -8-
<PAGE>
constituted by this Mortgage shall become immediately enforceable and the
Mortgagee shall be entitled, as and when it may see fit, to put into force and
exercise all or any of the powers possessed by it as mortgagee of the Rigs or
otherwise and in particular:

                  (a) to exercise all the rights and remedies in foreclosure and
otherwise given to mortgagees by applicable law including the provisions of the
Ship Mortgage Act or any other applicable law including the laws of any other
applicable jurisdiction;

                  (b) to take possession of the Rigs or any of them whether
actually or constructively and/or otherwise to take control of such Rigs
wherever located and cause the Owner or any other Person in possession of the
Rigs forthwith upon demand to surrender the same to the Mortgagee without legal
process and without liability of the Mortgagee for any losses or damages
incurred thereby and without having to render accounts to the Owner in
connection therewith;

                  (c) to require that all policies, contracts, certificates of
entry and other records relating to the Insurance Policies (including details of
and correspondence concerning outstanding claims) be forthwith delivered to or
to the order of the Mortgagee;

                  (d) to collect, recover, compromise and give a good discharge
for any and all moneys or claims for moneys then outstanding or thereafter
arising under the Insurance Policies or any Requisition Compensation and to
permit any brokers through whom collection or recovery is effected to charge the
usual brokerage therefor;

                  (e) to take over or institute (if necessary using the name of
the Owner) all such proceedings in connection with any Rig, the Insurance
Policies, or any Requisition Compensation as the Mortgagee thinks reasonably
necessary and to discharge, compound, release or compromise claims against the
Owner in respect of any Rig which have given or may give rise to any charge or
Lien on such Rig or which are or may be enforceable by proceedings against such
Rig;

                  (f) following acceleration of the Term Loans, to sell any Rig
or any share therein, upon advance notice of ten (10) consecutive days published
in any newspaper authorized to publish legal notices of that kind in the hailing
port and the places of sale of the Rigs and by sending notice of such sale at
least fourteen (14) days prior to the date fixed for such sale to the Owner, and
each other Person entitled to notice under applicable Legal Requirements, free
from any claim of or by the Owner of any nature whatsoever, and with or (subject
to the rights of third parties under applicable law) without the benefit of any
charter party or other contract for her employment, by public auction or private
contract at such place and upon such commercially reasonable terms (including,
without limitation, on terms such that payment of some or all of the purchase
price be deferred) as the Mortgagee in its absolute discretion may determine
with power to postpone any such sale, without being answerable for any loss
occasioned by such sale or resulting from postponement thereof, except in the
case of gross negligence or willful misconduct, and/or itself to purchase such
Rig at any such public auction and to set off the purchase price against all or
any part of the Secured Indebtedness in the manner specified in Section 7.6 of
the Term Loan Agreement; provided, however that in the event any such Rig shall

                                      -9-
<PAGE>
be offered for sale by private sale, no newspaper publication of notice shall be
required, nor notice of adjournment of sale;

                  (g) subject to the rights of any charter, to manage, insure,
maintain and repair any Rig and to charter, employ, sail or lay up any Rig in
such manner, upon such terms and for such period as the Mortgagee deems
reasonably expedient; and for the purposes aforesaid the Mortgagee shall be
entitled to do all acts and things reasonably incidental or conducive thereto
and in particular to enter into such arrangements respecting such Rig, and the
insurance, management, maintenance, repair, classification, chartering and
employment of such Rig, in all respects as if the Mortgagee were the owner of
such Rig and without being responsible for any loss thereby incurred;

                  (h) to recover from the Owner on demand any liabilities,
losses and reasonable expenses as may be incurred by the Mortgagee in or about
the exercise of the power vested in the Mortgagee under Section 7.1(g);

                  (i) generally and in addition, but not in lieu of any of the
above rights, to recover from the Owner on demand any liabilities, losses and
reasonable expenses incurred by the Mortgagee in or about or incidental to the
exercise by it of any of the powers aforesaid; and

                  (j) generally, take any other action or exercise any other
right permitted by applicable law.

         Section  7.2 Sufficiency of Payments Received. The Mortgagee shall not
be obliged to make any enquiry as to the nature or sufficiency of any payment
received by it under this Mortgage or to make any claim, take any action or
enforce any rights and benefits assigned to the Mortgagee by this Mortgage or to
which the Mortgagee may at any time be entitled hereunder.

         Section  7.3 Mortgagee, Term Secured Parties Not Liable. Neither the
Mortgagee, the Term Secured Parties, nor any of their agents, managers,
officers, employees, delegates and advisers shall be liable for any expense,
claim, liability, loss, cost, damage or expense incurred or arising in
connection with the exercise or purported exercise of any rights, powers and
discretions under this Mortgage in the absence of its, his, or her gross
negligence or wilful misconduct.

         Section  7.4 No Mortgagee-in-Possession. To the fullest extent
permitted by law, the Mortgagee shall not by reason of the taking possession of
any Rig be liable to account as mortgagee-in-possession or for anything except
actual receipts or be liable for any loss upon realization or for any default or
omission for which a mortgagee-in-possession might be liable.

         Section  7.5 Purchaser's Rights on Sale. Upon any sale of any Rig or
any share therein by the Mortgagee, the purchaser shall not be bound to see or
inquire whether the Mortgagee's power of sale has arisen in the manner provided
in this Mortgage and the sale shall be deemed to be within the power of the
Mortgagee and the receipt of the Mortgagee for the purchase money shall
effectively discharge the purchaser who shall not be concerned with the manner
of application of the proceeds of sale or be in any way answerable therefor.

                                      -10-
<PAGE>
         Section  7.6 Divestiture of Owner's Rights. A sale of any Rig made in
pursuance of this Mortgage, whether under the power of sale hereby granted or
any judicial proceedings, shall operate to divest all right, title and interest
of any nature whatsoever of the Owner therein and thereto, and shall bar the
Owner, its successors and assigns, and all Persons claiming by, through or under
them. No purchaser shall be bound to inquire whether notice has been given or
whether any default has occurred, or as to the propriety of the sale, or as to
application of the proceeds thereof.

                                  ARTICLE VIII
                               FURTHER ASSURANCES

         Section  8.1 Perfection and Preservation of the Collateral. The Owner
shall execute and do all such assurances, acts and things as the Mortgagee may
reasonably require for:

                  (a) perfecting or protecting the security created (or intended
to be created) by this Mortgage; or

                  (b) preserving or protecting any of the rights of the
Mortgagee and the other Term Secured Parties under this Mortgage; or

                  (c) ensuring that the security constituted by this Mortgage
and the covenants and obligations of the Owner under this Mortgage shall inure
to the benefit of any transferee, successor or assignee of the Mortgagee as is
referred to in Section 12.1; or

                  (d) enforcing the security constituted by this Mortgage on or
at any time after the same shall have become enforceable; or

                  (e) the exercise of any power, authority or discretion vested
in the Mortgagee under this Mortgage,

in any such case, forthwith upon demand by the Mortgagee and at the expense of
the Owner; provided, however, that, to the extent this Mortgage states that the
Mortgagee may direct the Owner to take an action during the occurrence and
continuance of an Event of Default (including, without limitation, under Section
7 hereof), the Mortgagee shall not be entitled to request the Owner to take such
action unless an Event of Default shall have occurred and be continuing.

                                   ARTICLE IX
                                POWER OF ATTORNEY

         Section  9.1 Owner's Attorney. The Owner, by way of security and in
order to more fully secure the performance of the Owner's obligations under this
Mortgage, hereby irrevocably appoints the Mortgagee as its attorney for the
duration of the Term Loan Facility Period for the purposes of:

                  (a) doing in its name all acts and executing, signing and (if
required) registering in its name all documents which the Owner itself could do,
execute, sign or register in relation to any Rig (including without limitation,
transferring title to such Rig to a third party);

                                      -11-
<PAGE>
                  (b) executing, signing, perfecting, doing and (if required)
registering every such further assurance document, act, or thing as is referred
to in Section 8.1; and

                  (c) demanding, collecting, receiving, compromising, and suing
for all freights, hires, earnings, issues, revenues and income of any Rig;
provided, however, that such powers shall not be exercisable by or on behalf of
the Mortgagee unless an Event of Default shall have occurred and be continuing
(and, in the case exercised with respect to an action contemplated by Section
7.1(f), unless the Term Loans shall have been accelerated).

         Section 9.2 Third Parties. The exercise of such power as is referred to
in Section 9.1(a) by or on behalf of the Mortgagee shall not put any Person
dealing with the Mortgagee upon any enquiry as to whether this Mortgage has
become enforceable nor shall such Person be in any way affected by notice that
this Mortgage has not become enforceable and, in relation to Sections 9.1(a),
9.1(b) and 9.1(c), the exercise by the Mortgagee of such power shall be
conclusive evidence as against third parties of its right to exercise the same.

                                   ARTICLE X
                            EXPENSES AND INDEMNITIES

         Section  10.1 Mortgage Preparation. The Owner agrees to pay all
reasonable out-of-pocket costs and expenses of the Mortgagee in connection with
the negotiation, preparation, execution and delivery of this Mortgage and any
amendment, waiver, release or consent relating thereto (including, without
limitation, the reasonable fees and disbursements of counsel and any valuation
fees) and, after the occurrence and during the continuance of an Event of
Default, each of the Mortgagee and the Term Secured Parties in connection with
the enforcement of this Mortgage (including, without limitation, the actual
reasonable fees and disbursements of counsel for the Mortgagee and the Term
Secured Parties).

         Section  10.2 Owner's Indemnity. WITHOUT LIMITING THE FOREGOING SECTION
10.1, THE OWNER HEREBY FURTHER INDEMNIFIES THE MORTGAGEE, EACH OTHER TERM
SECURED PARTY, AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES AND AGENTS FROM AND HOLDS HARMLESS AND AGREES TO DEFEND EACH OF
THEM AGAINST ANY AND ALL LOSSES, LIABILITIES, OBLIGATIONS, CLAIMS, DAMAGES, OR
REASONABLE EXPENSES INCURRED BY ANY OF THEM, AS A RESULT OF, OR ARISING OUT OF,
OR IN ANY WAY RELATED TO, OR BY REASON OF, (A) ANY INVESTIGATION, LITIGATION OR
OTHER PROCEEDING (WHETHER OR NOT THE MORTGAGEE IS A PARTY THERETO) RELATED TO
THE ENTERING INTO AND/OR PERFORMANCE OF THIS MORTGAGE HEREUNDER OR THE
CONSUMMATION OF ANY TRANSACTIONS CONTEMPLATED HEREBY, WHETHER INITIATED BY THE
OWNER OR ANY OTHER PERSON, INCLUDING WITHOUT LIMITATION, THE ACTUAL REASONABLE
FEES AND DISBURSEMENTS OF COUNSEL INCURRED IN CONNECTION WITH ANY SUCH
INVESTIGATION, LITIGATION OR OTHER PROCEEDING OR (B) ANY PERSONAL INJURY TO OR
DEATH OF OR ANY LOSS OR DAMAGE TO PROPERTY OF ANY PERSON OR (C) THE ACTUAL OR
ALLEGED PRESENCE OF HAZARDOUS MATERIALS IN THE AIR, SURFACE WATER, GROUNDWATER,
SURFACE OR SUBSURFACE OF ANY RIG, FACILITY OR LOCATION AT ANY TIME OWNED OR
OPERATED BY THE OWNER OR ANY OF ITS AFFILIATES, THE GENERATION, STORAGE,
TRANSPORTATION OR DISPOSAL OF HAZARDOUS MATERIALS AT ANY RIG, FACILITY OR
LOCATION AT ANY TIME OWNED OR OPERATED BY THE OWNER OR ANY OF ITS AFFILIATES,
THE NON-COMPLIANCE OF

                                      -12-
<PAGE>
ANY RIG, FACILITY OR LOCATION AT ANY TIME OWNED OR OPERATED BY THE OWNER OR ANY
OF ITS AFFILIATES WITH FEDERAL, STATE AND LOCAL LAWS, REGULATIONS, AND
ORDINANCES (INCLUDING APPLICABLE PERMITS THEREUNDER) APPLICABLE TO ANY SUCH RIG,
FACILITY OR LOCATION, OR ANY VIOLATION OR ALLEGED VIOLATION OF ANY ENVIRONMENTAL
LAWS ASSERTED AGAINST THE OWNER, ANY OF ITS AFFILIATES, OR ANY RIG, FACILITY OR
LOCATION AT ANY TIME OWNED OR OPERATED BY THE OWNER OR ANY OF ITS AFFILIATES,
INCLUDING, IN EACH CASE, WITHOUT LIMITATION, THE ACTUAL REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL AND OTHER CONSULTANTS INCURRED IN CONNECTION WITH ANY
SUCH INVESTIGATION, LITIGATION OR OTHER PROCEEDING. TO THE EXTENT THAT THE
UNDERTAKING TO INDEMNIFY, PAY OR HOLD HARMLESS AND DEFEND THE MORTGAGEE SET
FORTH IN THIS SECTION 10.2 MAY BE UNENFORCEABLE BECAUSE IT IS VIOLATIVE OF ANY
LAW OR PUBLIC POLICY, THE OWNER SHALL MAKE THE MAXIMUM CONTRIBUTION TO THE
PAYMENT AND SATISFACTION OF EACH OF THE INDEMNIFIED LIABILITIES WHICH IS
PERMISSIBLE UNDER APPLICABLE LAW. SUCH OBLIGATION TO INDEMNIFY, HOLD HARMLESS
AND DEFEND THE MORTGAGEE AND OTHER PERSONS SET OUT ABOVE SHALL APPLY
IRRESPECTIVE OF THE NEGLIGENCE OR STRICT LIABILITY OF THE MORTGAGEE OR ANY OTHER
INDEMNIFIED PERSON, UNLESS SUCH LOSS OR INJURY ARISES DIRECTLY OUT OF THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF MORTGAGEE OR SUCH OTHER INDEMNIFIED PERSON.

         Section  10.3 Payment Currency. If, under any applicable law or
regulation, and whether pursuant to a judgment being made or registered against
the Owner or the liquidation of the Owner or for any other reason, any payment
under or in connection with this Mortgage is made in a currency (the "Payment
Currency") other than the currency in which such payment is due under or in
connection with this Mortgage (the "Contractual Currency"), then to the extent
that the amount of such payment actually received by the Mortgagee, when
converted into the Contractual Currency at the rate of exchange, (a) falls short
of the amount due under or in connection with this Mortgage, the Owner, as a
separate and independent obligation, shall indemnify and hold harmless the
Mortgagee against the amount of such shortfall or (b) exceeds the amount due
under or in connection with this Mortgage, the Mortgagee shall reimburse the
Owner the excess. For the purposes of this Section 10.3, "rate of exchange"
means the rate at which the Mortgagee is able on the date of such payment (or,
if it is not practicable for the Mortgagee to purchase the contractual currency
with the Payment Currency on the date of such payment, at the rate of exchange
as soon afterwards as is practicable for the Mortgagee to do so) to purchase the
Contractual Currency with the Payment Currency and shall take into account any
premium and other costs of exchange with respect thereto.

                                  ARTICLE XI.
                                 COMMUNICATIONS

         Section  11.1 Notices. All notices required to be given to the
Mortgagee shall be made to the following address:

                           Credit Lyonnais New York Branch
                           1301 Avenue of the Americas
                           New York, New York  10019
                           Attention: Gloria Beloti-Fields

                                      -13-
<PAGE>
                           17th Floor - Syndications
                           Telecopier:  212-459-3172
                           Telephone:  212-261-7186

All other notices shall be made to the addresses given in Section 11.2 of the
Term Loan Agreement.

                                   ARTICLE XII
                                   ASSIGNMENTS

         Section 12.1 Assignees. This Mortgage shall be binding upon and shall
inure to the benefit of the Owner, the Mortgagee and the Term Secured Parties
and their respective transferees, successors and permitted assigns, and
references in this Mortgage to any of them shall be construed accordingly.

         Section 12.2 No Assignment by Owner. Except as permitted by the Term
Loan Agreement, the Owner may not assign or transfer any of the Rigs or its
rights and/or obligations under this Mortgage.

                                  ARTICLE XIII
                                WAIVER; AMENDMENT

         Section 13.1 No Waiver. None of the terms and conditions of this
Mortgage may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by the Owner and the Mortgagee (with the consent
of either the Required Term Lenders or, to the extent required by Section 11.1
of the Term Loan Agreement, all of the Term Lenders).

                                   ARTICLE XIV
                                  MISCELLANEOUS

         Section 14.1 Governing Law. This Mortgage shall be governed by the
federal maritime laws of the United States of America and to the extent
necessary by the laws of the State of New York.

         Section 14.2 No Invalidity, Etc. If at any time any one or more of the
provisions in this Mortgage is or becomes invalid, illegal or unenforceable in
any respect under any law or regulation, the validity, legality and
enforceability of the remaining provisions of this Mortgage shall not be in any
way affected or impaired thereby.

         Section 14.3 Delegation of Powers. The Mortgagee, at any time and from
time to time, may delegate by power of attorney or in any other manner to any
Person or Persons all or any of the powers, authorities and discretions which
are for the time being exercisable by the Mortgagee under this Mortgage in
relation to the Rigs. Any such delegation may be made upon such terms and
subject to such regulations as the Mortgagee may think fit. The Mortgagee shall
not be in any way liable or responsible to the Owner for any loss or damage
arising from any act, default, omission or misconduct on the part of any such
delegate (other than gross negligence or willful misconduct); provided such
delegation has been made in good faith.

                                      -14-
<PAGE>
         Section 14.4 Counterparts. This instrument may be executed in any
number of counterparts, and each of such counterparts shall for all purposes be
deemed to be an original.

         Section 14.5 Mortgagee. For purposes of the Ship Mortgage Act, the
"mortgagee" under this Mortgage is Credit Lyonnais New York Branch, in its
capacity as Collateral Agent.

                                   ARTICLE XV
                                  JURISDICTION

         Section 15.1 New York. Any legal action or proceeding with respect to
this Mortgage may be brought in the courts of the United States or State of New
York sitting in New York City in the Borough of Manhattan and the Owner hereby
accepts for itself and its property, generally and unconditionally, the
non-exclusive jurisdiction of such court. The Owner further irrevocably consents
to the service of process out of such court in any such action or proceeding in
the manner provided for in the Term Loan Agreement. Nothing herein shall affect
the right of the Mortgagee to serve process in any other manner permitted by law
or to commence legal proceedings or otherwise proceed against the Owner in any
other jurisdiction.

         Section 15.2 Power to Seize Rig or Take Action. Without prejudice to
the generality of Section 15.1, the Mortgagee shall have the right to arrest and
take action against any Rig or the Owner at whatever place such Rig or the Owner
shall be found and for the purpose of any action which the Mortgagee may bring
before the courts of such jurisdiction or other judicial authority and for the
purpose of any action which the Mortgagee may bring against such Rig, any writ,
notice, judgment or other legal process or documents may (without prejudice to
any other method of service under applicable law) be served upon the master of
such Rig (or upon anyone acting as the master) and such service shall be deemed
good service on the Owner for all purposes.

         IN WITNESS whereof the Owner has caused this Mortgage to be executed
the day and year first before written.

                                             [OWNER]

                                               By:______________________________

                                               Name:____________________________

                                               Title: __________________________

                                      -15-
<PAGE>
                           ACKNOWLEDGMENT OF MORTGAGE

STATE OF TEXAS              )
                            )
COUNTY OF HARRIS            )

         On this 20th day of June, 2002 before me personally appeared
______________________________ to me known who being by me duly sworn did depose
and say that he is the ______________________________, of [Owner], the company
described in and which executed the foregoing instrument; and that he signed his
name thereto pursuant to authority granted to him by the _________________ of
said company; and that said instrument is the act and deed of the company.

         And the said ___________________________ did further produce to me
sufficient proof that he is the ___________________________ of said company and
that he was duly authorized by the said company to execute the foregoing
mortgage, and I the notary hereby certify that the signature of the said
______________________ on the foregoing mortgage is authentic.

                                                ______________________________
                                                         Notary Public

                                      -16-
<PAGE>
                                    EXHIBIT A
<TABLE>
<CAPTION>
                                                                            Official
Rig Name                   Owner                           Flag             Number
--------                   -----                           ----             ------
<S>                        <C>                            <C>              <C>

</TABLE>
<PAGE>
                                    EXHIBIT B

                              List of Term Lenders

Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
<PAGE>
                                    EXHIBIT K

                            FORM OF JOINDER AGREEMENT

         [Material Subsidiary][Permitted Holding Company], a __________________
corporation (the "Company"), hereby agrees with Credit Lyonnais New York Branch,
as Administrative Agent (the "Administrative Agent") under the Term Loan
Agreement dated as of June 20, 2002 among Pride Offshore, Inc., a Delaware
corporation [which is the direct or indirect shareholder of the Company][which
is a wholly-owned subsidiary of the Company], the Guarantors party thereto, the
Term Lenders parties thereto, and Credit Lyonnais New York Branch, as
Administrative Agent and Collateral Agent (as such agreement is amended from
time to time in accordance with its terms, the "Term Loan Agreement";
capitalized terms used herein and not otherwise defined having the meanings set
forth therein), as follows:

         The Company hereby agrees and confirms that, as of the date hereof, it
(a) intends to be a party to the Term Loan Agreement and undertakes to perform
all the obligations expressed therein, respectively, of a Guarantor, (b) agrees
to become a Guarantor pursuant to the terms of Article VIII of the Term Loan
Agreement [and accede to the Agreement as the Parent Company]* and to be bound
by the terms of the Agreement as a Guarantor [and Parent Company] pursuant to
Section 5.13 of the Agreement, and (c) confirms that the representations and
warranties set forth in the Agreement with respect to the Company are true and
correct in all material respects as of the date of this Joinder Agreement.

         [Subsidiary's][Permitted Holding Company's] administrative details are
as follows:

         Address:
         Fax No:
         Attention:

         [Subsidiary][Permitted Holding Company] irrevocably appoints CT
Corporation System (the "Process Agent"), with an office on the date hereof at
111 Eighth Ave., New York, New York, 10011, as its agent to receive on its
behalf and on behalf of its property service of copies of any summons or
complaint or any other process which may be served in any action. Such service
may be made by mailing or delivering a copy of such process to
[Subsidiary][Permitted Holding Company] in care of the Process Agent at the
Process Agent's above address, and [Subsidiary][Permitted Holding Company]
hereby irrevocably authorizes and directs the Process Agent to accept such
service on its behalf. As an alternative method of service, each
[Subsidiary][Permitted Holding Company] also irrevocably consents to the service
of any and all process in any such action or proceeding by the mailing of copies
of such process to it at the address specified for it above.

         This Joinder Agreement shall be governed by and construed in accordance
with the laws of the State of New York.

______________

*    Include if Person delivering Joinder Agreement is a Permitted Holding
     Company.
<PAGE>
         IN WITNESS WHEREOF this Joinder Agreement was executed and delivered as
of the _____ day of ___________________, 200__.

                                                     [SUBSIDIARY]
                                                     [PERMITTED HOLDING COMPANY]

                                               By:______________________________

                                               Name:____________________________

                                               Title: __________________________

                                      -2-
<PAGE>
                                  SCHEDULE 4.17
                    INITIAL MORTGAGED TERM LOAN FACILITY RIGS

<TABLE>
<CAPTION>

RIG                     REGISTERED OWNER        FLAG        OFFICIAL OR     HOME PORT      CLASS       LOCATION     OPERATING STATUS
---                     ----------------        ----       --------------   ---------      -----       --------     ----------------
                                                           PATENT NUMBER
                                                           -------------
<S>                  <C>                      <C>        <C>               <C>            <C>        <C>            <C>
Marine 305                Pride Offshore       Vanuatu          1027         Port Vila      yes         SE Asia         operating
                        International LLC
Pride Arizona          Pride Offshore, Inc.       US           638626         Houston       yes           GOM            stacked
Pride Florida          Pride Offshore, Inc.       US           641802         Houston       yes           GOM           operating
Pride Georgia          Pride Offshore, Inc.       US           638954         Houston       yes           GOM            stacked
Pride Illinois         Pride Offshore, Inc.       US           523782         Houston       yes           GOM            stacked
Pride Kentucky         Pride Offshore, Inc.       US           560547         Houston       yes           GOM            stacked
Pride Michigan         Pride Offshore, Inc.       US           567686         Houston       yes           GOM            stacked
Pride Missouri         Pride Offshore, Inc.       US           652045         Houston       yes           GOM           operating
Pride Nebraska         Pride Offshore, Inc.       US           631372         Houston       yes           GOM           operating
Pride North America  Pride North America LLC   Vanuatu          1055         Port Vila      yes        W. Africa        operating
Pride Wisconson        Pride Offshore, Inc.     Panama       8142-PEXT-7    Panama City     yes           GOM           shipyard
</TABLE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00040-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00040-of-00352.parquet"}]]