Document:

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                                                                    EXHIBIT 10.1

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                                  $400,000,000

                         DIAMOND OFFSHORE DRILLING, INC.

                      1 1/2% CONVERTIBLE SENIOR DEBENTURES
                                    DUE 2031

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                               PURCHASE AGREEMENT

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                               PURCHASE AGREEMENT

                                                                   April 6, 2001

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
            Incorporated
North Tower
World Financial Center
New York, New York  10281-1209

Dear Sirs:

      1. Introductory. Diamond Offshore Drilling, Inc., a Delaware corporation
(the "COMPANY"), confirms its agreement with Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated (the "PURCHASER"), with respect to the issue
and sale by the Company and the purchase by the Purchaser of $400,000,000
aggregate principal amount of the Company's 1 1/2% Convertible Senior Debentures
due 2031 (the "INITIAL SECURITIES") and the grant by the Company to the
Purchaser of the option described in Section 3(b) to purchase all or any part of
an additional $60,000,000 aggregate principal amount of the Company's 1 1/2%
Convertible Senior Debentures due 2031 to cover over-allotments, if any (the
"OPTION SECURITIES"). The Initial Securities, together with the Option
Securities, are collectively referred to herein as the "OFFERED SECURITIES". The
Offered Securities are to be issued under an Indenture dated as of February 4,
1997, as supplemented by a Third Supplemental Indenture to be dated as of the
Closing Date (as defined below) (as so amended and supplemented, the
"INDENTURE"), between the Company and The Chase Manhattan Bank, as trustee (the
"TRUSTEE"). The Offered Securities will be represented by one or more permanent
global Offered Securities in definitive form (the "GLOBAL SECURITIES") deposited
with the Trustee as custodian for The Depository Trust Company ("DTC") and
registered in the name of Cede & Co., as nominee for DTC. Interests in any
Global Securities will be held only in book-entry form through DTC, except in
the limited circumstances described in the Offering Document (as defined below).

      The holders of Offered Securities will be entitled to the benefits of a
Registration Rights Agreement, substantially in the form attached hereto as
Exhibit A with such changes as shall be agreed to by the parties hereto (the
"REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company will file a
registration statement with the Securities and Exchange Commission (the
"COMMISSION") registering resales of the Offered Securities and the shares of
common stock, par value $.01 per share, of the Company (the "COMMON STOCK")
issuable upon conversion thereof, as referred to in the Registration Rights
Agreement, under the Securities Act of 1933, as amended (the "SECURITIES ACT").

      The Company understands that the Purchaser proposes to make an offering of
the Offered Securities on the terms and in the manner set forth herein and
agrees that the Purchaser

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may resell, subject to the conditions set forth herein, all or a portion of the
Offered Securities to purchasers ("SUBSEQUENT PURCHASERS") at any time after the
date of this Agreement. The Offered Securities are to be offered and sold
through the Purchaser without being registered under the Securities Act, in
reliance upon exemptions therefrom. Pursuant to the terms of the Offered
Securities and the Indenture, investors that acquire Offered Securities may only
resell or otherwise transfer such Offered Securities if such Offered Securities
are hereafter registered under the Securities Act or if an exemption from the
registration requirements of the Securities Act is available (including the
exemption afforded by Rule 144A ("RULE 144A") of the rules and regulations
promulgated under the Securities Act (the "RULE AND REGULATIONS") by the
Commission).

      2. Representations and Warranties of the Company. The Company represents
and warrants to the Purchaser as of the date hereof and as of the Closing Date,
and as of the Date of Delivery (if any) referred to in Section 3(b) hereof, and
agrees with the Purchaser, as follows:

          (a) The Company has prepared and delivered to the Purchaser copies of
a preliminary offering memorandum dated April 5, 2001 (the "PRELIMINARY OFFERING
MEMORANDUM"), and has prepared and will deliver to the Purchaser on the date
hereof or the next succeeding day copies of a final offering memorandum dated
April 6, 2001 (the "FINAL OFFERING MEMORANDUM"), each for use by the Purchaser
in connection with the solicitation of purchases of, or offering of, the Offered
Securities. "OFFERING DOCUMENT" means, with respect to any date or time referred
to in this Agreement, the most recent offering memorandum (whether the
Preliminary Offering Memorandum or the Final Offering Memorandum, or any
amendment or supplement to either such document), including exhibits thereto and
any documents incorporated therein by reference, which has been prepared and
delivered by the Company to the Purchaser in connection with its solicitation of
purchases of, or offering of, the Offered Securities. The Offering Document does
not, and on the Closing Date (as defined herein) (and, if any Option Securities
are purchased, on the Date of Delivery (as defined herein)) will not, include
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The preceding sentence
does not apply to statements in or omissions from the Offering Document based
upon written information furnished to the Company by the Purchaser specifically
for use in the Offering Document as specified in Section 7(a).

      The Offering Document as delivered from time to time shall incorporate by
reference the most recent Annual Report of the Company on Form 10-K filed with
the Commission and each subsequent report filed with the Commission since the
end of the fiscal year to which such Annual Report relates (collectively, the
"EXCHANGE ACT REPORTS"). Except as disclosed in the Offering Document, the
Exchange Act Reports, when read together with the other information in the
Offering Document, do not, and on the Closing Date (as defined herein) (and, if
any Option Securities are purchased, on the Date of Delivery (as defined
herein)) will not, include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading. The Exchange
Act Reports, when they were or hereafter are filed with the Commission, complied
and will at the time of such filing comply in all material respects to the
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder.

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      All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the Offering
Document (or other references of like import) shall be deemed to mean and
include all such financial statements and schedules and other information which
are incorporated by reference in the Offering Document; and all references in
this Agreement to amendments or supplements to the Offering Document shall be
deemed to mean and include the filing of any document under the Exchange Act
which is incorporated or deemed to be incorporated by reference in the Offering
Document.

          (b) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Offering Document and to enter into and perform its
obligations under this Agreement, the Indenture and the Registration Rights
Agreement; and the Company is duly qualified to transact business as a foreign
corporation in good standing in all other jurisdictions in which its ownership
or lease of property or the conduct of its business requires such qualification,
except where the failure of the Company to be so qualified would not have a
material adverse effect on the business, results of operations or financial
condition of the Company and its subsidiaries, taken as a whole (a "MATERIAL
ADVERSE EFFECT").

          (c) Each subsidiary of the Company has been duly incorporated and is
an existing corporation in good standing under the laws of the jurisdiction of
its incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Offering Document; and
each subsidiary of the Company is duly qualified to transact business as a
foreign corporation in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business requires such
qualification, except where the failure of such subsidiary to be so qualified
would not have a Material Adverse Effect; all of the issued and outstanding
capital stock of each subsidiary of the Company has been duly authorized and
validly issued and is fully paid and nonassessable, except where the failure of
such capital stock to have been so authorized and issued would not have a
Material Adverse Effect; and, except as disclosed in the Offering Document, all
of the capital stock (other than directors' qualifying shares) of each
Subsidiary (as defined in Section 6(d)(ii)) is owned by the Company, directly or
through subsidiaries, free from liens, encumbrances and defects, except where
the failure of the Company to own such capital stock would not have a Material
Adverse Effect.

          (d) The Indenture has been duly authorized; the Offered Securities
have been duly authorized; and when the Offered Securities are delivered and
paid for pursuant to this Agreement on the Closing Date, the Indenture will have
been duly executed and delivered, such Offered Securities will have been duly
executed, authenticated, issued and delivered and the Indenture and such Offered
Securities will conform to the descriptions thereof contained in the Offering
Document and will constitute valid and legally binding obligations of the
Company, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.

          (e) When the Offered Securities are delivered and paid for pursuant to
this Agreement on the Closing Date, such Offered Securities will be convertible
at the rate of

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20.3978 shares (the "UNDERLYING SHARES") of Common Stock per $1,000 principal
amount of such Offered Securities in accordance with the terms of the Indenture;
the Underlying Shares initially issuable upon conversion of such Offered
Securities have been duly authorized and reserved for issuance upon such
conversion and, when issued upon such conversion, will be validly issued, fully
paid and nonassessable. The shares of Common Stock issuable at the Company's
option upon the purchase of Offered Securities at the option of the holder
thereof will have been, prior to the issuance thereof, duly authorized and, if
and when issued in accordance with the terms of the Offered Securities and the
Indenture, will be validly issued, fully paid and nonassessable.

          (f) The authorized, issued and outstanding capital stock and debt of
the Company is as set forth in the Offering Document in the column entitled
"Historical" under the caption "Capitalization" (except for subsequent
repurchases pursuant to the Company's stock repurchase program or subsequent
issuances, if any, pursuant to this Agreement, pursuant to reservations,
agreements, employee benefit plans referred to in the Offering Document or
pursuant to the exercise or redemption of convertible securities or options
referred to in the Offering Document); the outstanding shares of Common Stock
have been duly authorized and validly issued, are fully paid and nonassessable
and conform to the description thereof contained in the Offering Document; and
the stockholders of the Company have no preemptive rights with respect to the
Offered Securities or the Underlying Shares.

          (g) Except as disclosed in the Offering Document, there are no
contracts, agreements or understandings between the Company and any person that
would give rise to a valid claim against the Company or the Purchaser for a
brokerage commission, finder's fee or other like payment.

          (h) Except for the Registration Rights Agreement dated October 16,
1995, between the Company and Loews Corporation ("LOEWS"), as amended (the
"LOEWS REGISTRATION RIGHTS AGREEMENT"), the Registration Rights Agreement dated
June 6, 2000, between the Company and Credit Suisse First Boston Corporation
(the "ZERO DEBENTURES REGISTRATION RIGHTS AGREEMENT") and the Registration
Rights Agreement, there are no contracts, agreements or understandings between
the Company and any person granting such person the right to require the Company
to file a registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered pursuant to the
Shelf Registration Statement (as defined in the Registration Rights Agreement)
or in any securities being registered pursuant to any other registration
statement filed by the Company under the Securities Act.

          (i) The outstanding shares of Common Stock are listed on The New York
Stock Exchange (the "STOCK EXCHANGE").

          (j) No consent, approval, authorization or order of, or filing with,
any governmental agency or body or any court is required for the performance by
the Company of its obligations hereunder or the consummation of the transactions
contemplated by this Agreement and the Registration Rights Agreement, except for
the filing of the Shelf Registration Statement (as defined in the Registration
Rights Agreement) and the order of the Commission declaring the

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Shelf Registration Statement (as defined in the Registration Rights Agreement)
effective and such as may be required under state securities laws.

          (k) The execution, delivery and performance of the Indenture, this
Agreement and the Registration Rights Agreement, the issuance and sale of the
Offered Securities and compliance with the terms and provisions thereof and the
issuance of the Underlying Shares will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound, or to which any of the
property or assets of the Company or any of its subsidiaries is subject (except
for such conflicts, breaches, violations or defaults that, individually or in
the aggregate, would not have a Material Adverse Effect or impair the Company's
ability to perform its obligations hereunder or have any material adverse effect
upon the consummation of the transactions contemplated hereby), nor will such
action result in any violation of the provisions of the charter or bylaws of the
Company or any of its subsidiaries or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or the property of the Company or any of
its subsidiaries.

          (l) This Agreement has been duly authorized, executed and delivered by
the Company; the Registration Rights Agreement has been duly authorized and, as
of the Closing Date, will have been duly executed and delivered by the Company.

          (m) Except for Permitted Liens, as such term is defined below, the
Company and its subsidiaries have good and marketable title to all offshore
drilling rigs described as being owned by them in the Offering Document, and
good and marketable title to all real property and all other properties and
assets owned by them, in each case free from liens, encumbrances and defects
that would materially affect the value thereof, taken as a whole, or materially
interfere with the use made or to be made thereof by them; and except as
disclosed in the Offering Document, the Company and its subsidiaries hold any
leased real or personal property under valid and enforceable leases with no
exceptions to such validity or enforceability that would materially interfere
with the use made or to be made thereof by them. "PERMITTED LIENS" means (i)
liens for taxes not yet due or liens for taxes that are being contested in good
faith and by appropriate proceedings diligently prosecuted and for which
appropriate reserves have been established by the Company as required by
generally accepted accounting principles in the United States; (ii) carriers',
warehousemen's, mechanics', materialmen's, repairmen's, maritime, statutory or
other like liens arising in the ordinary course of business that are not overdue
for more than 30 days or that are being contested in good faith and by
appropriate proceedings diligently prosecuted; (iii) pledges or deposits in
connection with workmen's compensation, unemployment insurance and other social
security legislation; and (iv) deposits to secure the performance of bids,
contracts in the ordinary course of business (other than for borrowed money),
leases, statutory obligations, surety and appeal bonds and performance bonds,
and other obligations of a like nature that are incurred in the ordinary course
of business.

          (n) The Company and its subsidiaries possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by them in all material respects
and have not received any notice of proceedings

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relating to the revocation or modification of any such certificate, authority or
permit that, if determined adversely to the Company or any of its subsidiaries,
would individually or in the aggregate have a Material Adverse Effect.

          (o) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that might
have a Material Adverse Effect.

          (p) The Company and its subsidiaries own, possess or can acquire on
reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and other
intellectual property (collectively, "INTELLECTUAL PROPERTY RIGHTS") necessary
to conduct the business now operated by them, or presently employed by them, and
have not received any notice of infringement of or conflict with asserted rights
of others with respect to any intellectual property rights that, if determined
adversely to the Company or any of its subsidiaries, would individually or in
the aggregate have a Material Adverse Effect.

          (q) Neither the Company nor any of its subsidiaries is in violation of
any statute, any rule, regulation, decision or order of any governmental agency
or body or any court, domestic or foreign, relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic
substances (collectively, "ENVIRONMENTAL LAWS"), owns or operates any real
property contaminated with any substance that is subject to any environmental
laws, is liable for any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to any environmental
laws, which violation, contamination, liability or claim would individually or
in the aggregate have a Material Adverse Effect; and the Company is not aware of
any pending investigation which might lead to such a claim.

          (r) There are no pending actions, suits or proceedings against or
affecting the Company, any of its subsidiaries or any of their respective
properties except as disclosed in the Offering Document, or as individually or
in the aggregate do not now have and, to the best of the knowledge of the
Company, are not reasonably expected in the future to have a Material Adverse
Effect or would materially and adversely affect the ability of the Company to
perform its obligations under the Indenture, the Offered Securities, this
Agreement or the Registration Rights Agreement, or which are otherwise material
in the context of the sale of the Offered Securities; and no such actions, suits
or proceedings are, to the Company's knowledge, threatened or contemplated.

          (s) The financial statements included or incorporated by reference in
the Offering Document present fairly in all material respects the financial
position of the Company and its consolidated subsidiaries as of the dates shown
and their results of operations and cash flows for the periods shown, and such
financial statements have been prepared in conformity with the generally
accepted accounting principles in the United States applied on a consistent
basis.

          (t) Except as disclosed in the Offering Document, since the date of
the latest audited financial statements included or incorporated by reference in
the Offering Document, there has been no material adverse change, nor any
development or event involving a prospective material adverse change, in the
condition (financial or other), business, properties or results of

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operations of the Company and its subsidiaries taken as a whole, and there has
been no dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.

          (u) The Company is not and, after giving effect to the offering and
sale of the Offered Securities and the application of the proceeds thereof as
described in the Offering Document, will not be (i) an "investment company" or a
company "controlled" by an "investment company" within the meaning of in the
Investment Company Act of 1940, as amended (the "INVESTMENT COMPANY ACT") or
(ii) a "holding company" or a "subsidiary company" or an "affiliate" of a
holding company within the meaning of the Public Utility Holding Company Act of
1935, as amended (the "HOLDING COMPANY ACT").

          (v) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Offered Securities are listed on any
national securities exchange registered under Section 6 of the Exchange Act or
quoted in a U.S. automated inter-dealer quotation system.

          (w) Assuming the accuracy of the Purchaser's representations and
performance by the Purchaser of its covenants and warranties contained in
Section 4 herein, the offer, sale and delivery of the Offered Securities by the
Company to the Purchaser and the resale of the Offered Securities by the
Purchaser to each Subsequent Purchaser in the manner contemplated by this
Agreement will be exempt from the registration requirements of the Securities
Act, and it is not necessary to qualify an indenture in respect of the Offered
Securities under the Trust Indenture Act of 1939, as amended (the "TRUST
INDENTURE ACT").

          (x) Neither the Company, nor any of its affiliates (as such term is
defined in Rule 501(b) under the Securities Act (each, an "AFFILIATE")), nor any
person acting on its or their behalf (i) has solicited any offer to buy, sold or
offered to sell, or will solicit any offer to buy, sell or offer to sell, any
security which is or would be integrated with the sale of the Offered Securities
in a manner that would require the Offered Securities to be registered under the
Securities Act or (ii) has offered or will offer or sell the Offered Securities
by means of any form of general solicitation or general advertising within the
meaning of Rule 502(c) under the Securities Act. The Company has not entered and
will not enter into any contractual arrangement with respect to the distribution
of the Offered Securities except for this Agreement.

      3. Purchase, Sale and Delivery of Offered Securities. (a) On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Purchaser, and the Purchaser agrees to purchase from the Company, at a purchase
price of $977.50 per $1,000 principal amount thereof, $400,000,000 aggregate
principal amount of the Initial Securities.

      (b) In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants an option to the Purchaser to purchase any or
all of the Option Securities (in multiples of $1,000 principal amount) at the
same price per $1,000 principal amount thereof set forth in Section 3(a) for the
Initial Securities plus accrued interest, if any, from the Closing Date to the
Date of Delivery. The option hereby granted will expire 30 days after the date
hereof and may be

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exercised in whole or in part (but only once) only for the purpose of covering
over-allotments that may be made in connection with the offering and
distribution of the Initial Securities upon notice by the Purchaser to the
Company setting forth the principal amount of Option Securities as to which the
Purchaser is exercising the option and the time and date of payment and delivery
for such Option Securities. Any such time and date of delivery (a "DATE OF
DELIVERY") shall be determined by the Purchaser, but shall not be later than
seven full business days after the exercise of said option, nor in any event
prior to the Closing Date.

      (c) Payment of the purchase price for, and delivery of the Global
Securities representing, the Initial Securities shall be made at the offices of
Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022, or at such
other place as shall be agreed upon by the Purchaser and the Company, at 9:00
A.M. (New York City time) on April 11, 2001, or such other time not later than
ten business days after such date as shall be agreed upon by the Purchaser and
the Company (such time and date of payment and delivery being herein called the
"CLOSING DATE").

      In addition, in the event that any or all of the Option Securities are
purchased by the Purchaser, payment of the purchase price for, and delivery of
the Global Securities representing, such Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by the
Purchaser and the Company, on the Date of Delivery as specified in the notice
from the Purchaser to the Company.

      Payment of the purchase price for the Initial Securities and, if
applicable, the Option Securities shall be made by the Purchaser to the Company
by wire transfer of immediately available funds to a bank account designated by
the Company, against delivery by the Company to the Purchaser of the Offered
Securities to be purchased by it.

      4. Representations by Purchaser; Resale by Purchaser.

          (a) The Purchaser represents and warrants to the Company that it is an
"accredited investor" within the meaning of Regulation D under the Securities
Act.

          (b) The Purchaser acknowledges that the Offered Securities have not
been registered under the Securities Act and may not be offered or sold within
the United States except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act. The Purchaser
represents and agrees that it has not offered and sold the Offered Securities
and will not offer and sell the Offered Securities, except to persons whom the
Purchaser reasonably believes to be qualified institutional buyers within the
meaning of Rule 144A under the Securities Act.

          (c) The Purchaser agrees that it and each of its Affiliates has not
entered and will not enter into any contractual arrangement with respect to the
distribution of the Offered Securities except with the prior written consent of
the Company.

          (d) The Purchaser agrees that it and each of its Affiliates will not
offer or sell the Offered Securities by means of any form of general
solicitation or general advertising, within the meaning of Rule 502(c) under the
Securities Act, including, but not limited to (i) any advertisement, article,
notice or other communication published in any newspaper, magazine or

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similar media or broadcast over television or radio or (ii) any seminar or
meeting whose attendees have been invited by any general solicitation or general
advertising.

          (e) The Purchaser agrees to inform, and cause each of its Affiliates
to inform, persons acquiring Offered Securities from the Purchaser or such
Affiliate, as the case may be, that the Offered Securities (A) have not been and
will not be registered under the Securities Act, (B) are being sold by them
without registration under the Securities Act in reliance on Rule 144A or in
accordance with another exemption from registration under the Securities Act, as
the case may be, and (C) may not be offered, sold or otherwise transferred
except (1) to the Company, (2) outside the United States in accordance with
Regulation S under the Securities Act or (3) inside the United States (x) in
accordance with Rule 144A to a person whom the seller reasonably believes is a
qualified institutional buyer that is purchasing for its own account or for the
account of a qualified institutional buyer in a transaction meeting the
requirements of Rule 144A and to whom notice is given that the offer, sale or
transfer is being made in reliance on Rule 144A or (y) pursuant to another
available exemption from registration under the Securities Act.

          (f) The Purchaser acknowledges and agrees that the transfer
restrictions and the other provisions set forth in the Offering Document under
the heading "Transfer Restrictions", including the legends required thereby,
shall apply to the Offered Securities except as otherwise agreed by the Company
and the Purchaser.

      5. Certain Agreements of the Company. The Company agrees with the
Purchaser that:

          (a) The Company will advise the Purchaser promptly of any proposal to
amend or supplement the Offering Document after the Closing Date and will not
effect such amendment or supplementation without the Purchaser's consent, which
will not be reasonably withheld. If, at any time prior to the completion of the
resale of the Offered Securities by the Purchaser any event occurs as a result
of which the Offering Document as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary at any such time to
amend or supplement the Offering Document to comply with any applicable law, the
Company promptly will notify the Purchaser of such event and promptly will
prepare, at its own expense, an amendment or supplement which will correct such
statement or omission or effect such compliance. Neither the Purchaser's consent
to, nor delivery to offerees or investors of, any such amendment or supplement
shall constitute a waiver of any of the conditions set forth in Section 6.

          (b) The Company will furnish to the Purchaser copies of the Offering
Document and all amendments and supplements to such documents, in each case as
soon as available and in such quantities as the Purchaser requests. At any time
when the Company is not subject to Section 13 or 15(d) of the Exchange Act, the
Company will promptly furnish or cause to be furnished to the Purchaser and,
upon request of holders and prospective purchasers of the Offered Securities, to
such holders and purchasers, copies of the information required to be delivered
to holders and prospective purchasers of the Offered Securities pursuant to Rule
144A(d)(4) under the Securities Act (or any successor provision thereto) in
order to permit compliance with Rule 144A in connection with resales by such
holders of the Offered Securities

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in reliance upon Rule 144A. The Company will pay the expenses of printing and
distributing to the Purchaser all such documents.

          (c) The Company will arrange for the qualification of the Offered
Securities for sale and the determination of their eligibility for investment
under the laws of such states in the United States as the Purchaser designates
and will continue such qualifications in effect so long as required for the
resale of the Offered Securities by the Purchaser; provided that the Company
will not be required to qualify as a foreign corporation or to file a general
consent to service of process in any such state.

          (d) During the period of five years hereafter, the Company will
furnish to the Purchaser as soon as practicable after the end of each fiscal
year, a copy of its annual report to stockholders for such year; and the Company
will furnish to the Purchaser as soon as available, a copy of each report and
any definitive proxy statement of the Company filed with the Commission under
the Exchange Act or mailed to stockholders. It is understood and agreed that the
Company may satisfy its obligations under this Section 5(d) by publishing such
reports and proxy statements at the Company's Web site on the World Wide Web or
through such other public medium as the Company may use at that time.

          (e) During the period of two years after the Closing Date, the Company
will, upon request, furnish to the Purchaser and any holder of Offered
Securities a copy of the restrictions on transfer applicable to the Offered
Securities.

          (f) During the period of two years after the Closing Date, the Company
will not, and will not permit any of its affiliates (as defined in Rule 144
under the Securities Act) to, resell any of the Offered Securities that have
been reacquired by any of them.

          (g) The Company will pay all expenses incidental to the performance of
its obligations under this Agreement, the Offered Securities and the Indenture,
including, but not limited to, (i) any filing fees or other expenses (including
fees and disbursements of counsel not to exceed $5,000) in connection with the
qualification pursuant to Section 5(c) of the Offered Securities or Underlying
Shares for sale and any determination for eligibility for investment under the
laws of such jurisdictions as the Purchaser may designate and the printing of
memoranda relating thereto, (ii) any fees charged by investment rating agencies
for the rating of the Offered Securities, (iii) the fees and expenses of the
Trustee and its professional advisers, (iv) all expenses in connection with the
execution, issue, authentication, packaging and initial delivery of the Offered
Securities and, as applicable, the Underlying Shares, the preparation and
printing of this Agreement, the Registration Rights Agreement, the Offered
Securities, the Indenture, the Offering Document and amendments and supplements
thereto, and any other document relating to the issuance, offer, sale and
delivery of the Offered Securities and as applicable the Underlying Shares, (v)
the cost of qualifying the Offered Securities for trading in The Portal Market
("PORTAL") of The Nasdaq Stock Market, Inc. and any expenses incidental thereto,
(vi) the cost of any advertising approved by the Company in connection with the
issue of the Offered Securities, (vii) any travel expenses of the Company's
officers and employees and any other expenses of the Company in connection with
attending or hosting meetings with prospective purchasers of Offered Securities
and for expenses incurred in distributing the Offering Document (including any
amendments and supplements thereto). Except as provided in

                                       11
<PAGE>   12

the preceding sentence, the Purchaser will pay the expenses incident to the
performance of its obligations under this Agreement and will reimburse the
Company (if and to the extent incurred by the Company) for any travel expenses
of the Purchaser's representatives and any other expenses of the Purchaser in
connection with attending or hosting meetings with prospective purchasers of the
Offered Securities.

          (h) The Company agrees that it will not and will cause its Affiliates
not to, directly or indirectly, solicit any offer to buy or make any offer or
sale of securities of the Company of any class if, as a result of the doctrine
of "integration" referred to in Rule 502 under the Securities Act, such offer or
sale would render invalid (for the purpose of (i) the sale of the Offered
Securities by the Company to the Purchaser, (ii) the resale of the Offered
Securities by the Purchaser to Subsequent Purchasers or (iii) the resale of the
Offered Securities by such Subsequent Purchasers to others) the exemption from
the registration requirements of the Securities Act provided by Section 4(2)
thereof or by Rule 144A thereunder or otherwise.

          (i) For a period of 90 days after the date hereof, except for the sale
of the Offered Securities to the Purchaser, the Company will not offer, sell,
pledge, or otherwise dispose of (other than any contract to sell), directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock without the prior written consent
of the Purchaser, or publicly disclose the intention to make any such offer,
sale, pledge or disposition, except grants of employee or director stock
options, stock appreciation rights or restricted stock grants pursuant to the
terms of a plan in effect on the date hereof, issuances of Common Stock pursuant
to the exercise of such options or the exercise of any other employee stock
options currently outstanding or upon the conversion of the Offered Securities
or the Company's Zero Coupon Convertible Debentures due 2020.

          (j) The Company will promptly apply for the listing on the Stock
Exchange of the Underlying Shares and will use its reasonable best efforts to
obtain such listing within 15 days of the Closing Date.

      6. Conditions of the Obligation of the Purchaser. The obligation of the
Purchaser to purchase and pay for the Offered Securities will be subject to the
accuracy of the representations and warranties on the part of the Company
herein, to the accuracy of the statements of officers of the Company made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder and to the following additional conditions precedent:

          (a) The Purchaser shall have received a letter, dated the date of this
Agreement, of Deloitte & Touche LLP confirming that they are independent public
accountants within the meaning of the Securities Act and the applicable
published Rules and Regulations thereunder and to the effect that:

            (i) In their opinion the financial statements examined by them and
     included or incorporated by reference in the Offering Document comply as to
     form in all material respects with the applicable accounting requirements
     of the Securities Act and the related published Rules and Regulations;

                                       12
<PAGE>   13

            (ii) they have performed the procedures specified by the American
     Institute of Certified Public Accountants for a review of interim financial
     information as described in Statement of Auditing Standards No. 71, Interim
     Financial Information, on the unaudited financial statements included or
     incorporated by reference in the Offering Document;

            (iii) on the basis of the review referred to in clause (ii) above, a
     reading of the latest available interim financial statements of the
     Company, inquiries of officials of the Company who have responsibility for
     financial and accounting matters and other specified procedures, nothing
     came to their attention that caused them to believe that:

                  (A) the unaudited financial statements included or
            incorporated by reference in the Offering Document do not comply as
            to form in all material respects with the applicable accounting
            requirements of the Securities Act and the related published Rules
            and Regulations or any material modifications should be made to such
            unaudited financial statements for them to be in conformity with
            generally accepted accounting principles;

                  (B) at the date of the latest available balance sheet read by
            such accountants, or at a subsequent specified date not more than
            three business days prior to the date of this Agreement, there was
            any change in the capital stock or any increase in short-term
            indebtedness or long-term debt of the Company and its consolidated
            subsidiaries or, at the date of the latest available balance sheet
            read by such accountants, there was any decrease in consolidated net
            current assets or net assets, as compared with amounts shown on the
            latest balance sheet included or incorporated by reference in the
            Offering Document; or

                  (C) for the period from the closing date of the latest income
            statement included in or incorporated by reference in the Offering
            Document to the closing date of the latest available income
            statement read by such accountants there were any decreases, as
            compared with the corresponding period of the previous year, and
            with the period of corresponding length ended the date of the latest
            income statement included in or incorporated by references in the
            Offering Document, in the contract drilling revenue, net operating
            income or in the total or per share amounts of consolidated income
            before extraordinary items or net income or in the ratio of earnings
            to fixed charges;

            except in all cases set forth in clauses (B) and (C) above for
            changes, increases or decreases which the Offering Document
            discloses have occurred or may occur or which are described in such
            letter; and

            (iv) they have compared specified dollar amounts (or percentages
     derived from such dollar amounts) and other financial information contained
     in the Offering Document (in each case to the extent that such dollar
     amounts, percentages and other financial information are derived from the
     general accounting records of the Company and its subsidiaries subject to
     the internal controls of the Company's accounting system or are derived
     directly from such records by analysis or computation)

                                       13
<PAGE>   14

     with the results obtained from inquiries, a reading of such general
     accounting records and other procedures specified in such letter and have
     found such dollar amounts, percentages and other financial information to
     be in agreement with such results, except as otherwise specified in such
     letter.

      (b) The Purchaser shall have received from Deloitte & Touche LLP a letter,
dated as of the Closing Date, to the effect that the reaffirm the statements
made in the letter furnished pursuant to subsection (a) of this Section, except
that the specified date referred to shall be a date not more than three business
days prior to the Closing Date.

      (c) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development or event involving a
prospective change, in the condition (financial or other), business, properties
or results of operations of the Company or its subsidiaries which, in the
judgment of the Purchaser is material and adverse and makes it impractical or
inadvisable to proceed with completion of the offering or the sale of and
payment for the Offered Securities; (ii) any downgrading in the rating of any
debt securities of the Company by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Securities Act),
or any public announcement that any such organization has under surveillance or
review its rating of any debt securities of the Company (other than an
announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating); (iii) any material
suspension or material limitation of trading in securities generally on the New
York Stock Exchange or any setting of minimum prices for trading on such
exchange; (iv) or any suspension of trading of any securities of the Company on
any exchange in the over-the-counter market; (v) any banking moratorium declared
by U.S. Federal or New York authorities; or (vi) any outbreak or escalation of
major hostilities in which the United States is involved, any declaration of war
by Congress or any other substantial national or international calamity or
emergency if, in the judgment of the Purchaser, the effect of any such outbreak,
escalation, declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the offering or sale of and payment
for the Offered Securities.

      (d) The Purchaser shall have received an opinion, dated the Closing Date,
of William C. Long, Esq., the General Counsel of the Company, to the effect
that:

            (i) The Company is duly qualified to transact business and is in
     good standing as a foreign corporation in each jurisdiction where the
     character of its activities requires such qualification, except where the
     failure of the Company to be so qualified would not have a material adverse
     effect on the business, results of operations or financial condition of the
     Company and its subsidiaries taken as a whole.

            (ii) All of the issued and outstanding shares of capital stock or
     membership interests, as applicable, of (i) each subsidiary of the Company
     listed on Exhibit A attached hereto (each, a "SUBSIDIARY" and collectively,
     the "SUBSIDIARIES") and, (ii) to such counsel's knowledge, Diamond Offshore
     Limited and Diamond Offshore Drilling (UK) Limited, are owned, directly or
     indirectly, of record and beneficially by the Company, free and clear of
     all liens, claims, limitations on voting rights, options, security
     interests and other encumbrances and have been duly authorized and validly
     issued and

                                       14
<PAGE>   15

     are fully paid and nonassessable, except to the extent that any such liens,
     claims, limitations, options, security interests and other encumbrances,
     individually or in the aggregate, would not have a material adverse effect
     on the business, results of operations or financial condition of the
     Company and its subsidiaries, taken as a whole.

            (iii) Each Subsidiary is a corporation or limited liability company,
     as applicable, duly organized, validly existing and in good standing under
     the laws of its jurisdiction of organization. Each Subsidiary is duly
     qualified to transact business and is in good standing as a foreign
     corporation or limited liability company, as applicable, in the states
     listed by such Subsidiary's name on the attached Exhibit A (such states
     being the only states in which each such Subsidiary is required to be
     qualified, except where the failure to be so qualified would not have a
     material adverse effect on the business, results of operations or financial
     condition of the Company and its subsidiaries, taken as a whole).

            (iv) Except as described under the caption "Risk Factors -- The sale
     of shares available for future sale could hurt our common stock price." and
     under the caption "Description of the Debentures -- Registration Rights" in
     the Offering Document and except for the Zero Debentures Registration
     Rights Agreement, there are no contracts, agreements or understandings
     known to such counsel between the Company and any person granting such
     person the right to require the Company to file a registration statement
     under the Securities Act with respect to any securities of the Company
     owned or to be owned by such person or to require the Company to include
     such securities in the securities registered pursuant to the Shelf
     Registration Statement (as defined in the Registration Rights Agreement) or
     in any securities being registered pursuant to any other registration
     statement filed by the Company under the Securities Act.

            (v) The execution, delivery and performance by the Company of the
     Indenture and the Agreement and the issuance and sale of the Offered
     Securities to the Purchaser thereunder and the compliance by the Company
     with all the provisions of the Indenture and this Agreement and the
     consummation of the transactions contemplated thereby and hereby will not
     conflict with, constitute a breach of or default under or violate (i) any
     of the terms, conditions or provisions of the certificate of incorporation
     or by-laws of any of the Subsidiaries, (ii) any of the terms, conditions or
     provisions of any document, agreement or other instrument to which the
     Company or any of the Subsidiaries is a party or by which the Company or
     any of the Subsidiaries is bound or to which any of the properties of the
     Company or any of the Subsidiaries is subject, or (iii) any judgment, writ,
     injunction, decree, order or ruling of any court or governmental authority
     binding on any of the Subsidiaries, except (other than with respect to
     clause (i)) any such conflict, breach, default or violation which would
     not, individually or in the aggregate, have a material adverse effect on
     the business, results of operations or financial condition of the Company
     and its subsidiaries, taken as a whole.

            (vi) To such counsel's knowledge, there are no legal or governmental
     proceedings that are required to be described in the Offering Document that
     are not described therein.

                                       15
<PAGE>   16

            (vii) Except as disclosed in the Offering Document, there is no
     litigation, proceeding or governmental investigation pending or, to such
     counsel's knowledge, overtly threatened against the Company or any of its
     subsidiaries or to which any of the property of the Company or any of its
     subsidiaries is subject which, in such counsel's opinion, if adversely
     determined would, individually or in the aggregate, have a material adverse
     effect on the business, assets, results of operations or financial
     condition of the Company and its subsidiaries, taken as a whole.

            (viii) No consent or approval of any federal governmental agency
     with respect to any federal maritime law matter is required in connection
     with performance by the Company of its obligations under this Agreement or
     the issuance and sale of the Offered Securities or the Underlying Shares.
     Neither the issuance, offer, sale or delivery by the Company of the Offered
     Securities pursuant to this Agreement nor the execution, delivery and
     performance thereof by the Company or consummation of the transactions
     contemplated thereby, including the issuance and delivery of the Underlying
     Shares, will violate any existing federal maritime laws, including, without
     limitation, the Shipping Act, 1916, as amended, and the rules and
     regulations of the Maritime Administration and the United States Coast
     Guard.

     The opinions expressed in such opinion may be limited to the laws of the
State of Texas, the corporate laws of the State of Delaware and the federal laws
of the United States.

          (e) The Purchaser shall have received an opinion, dated the Closing
Date, of Weil, Gotshal & Manges LLP, counsel for the Company, to the effect
that:

            (i) The Company is a corporation validly existing and in good
     standing under the laws of the State of Delaware and has all requisite
     corporate power and authority to own, lease and operate its properties and
     to carry on its business as described in the Offering Document.

            (ii) The Offered Securities are convertible into Common Stock in
     accordance with the Indenture. The shares of Common Stock issuable upon
     conversion of the Offered Securities have been duly authorized and reserved
     for issuance upon such conversion, and such Common Stock, when issued upon
     such conversion in accordance with the provisions of the Indenture, will be
     validly issued, fully paid and nonassessable. All of the outstanding shares
     of the Common Stock have been duly authorized and validly issued, are fully
     paid and nonassessable, are free of any preemptive rights pursuant to law
     or the Company's Certificate of Incorporation and conform as to legal
     matters in all material respects to the description thereof contained in
     the Offering Document.

            (iii) The Company has the requisite corporate power and authority to
     authorize, issue and sell the Offered Securities as contemplated by this
     Agreement. The Offered Securities to be issued pursuant to this Agreement
     have been duly authorized. The Offered Securities have been duly executed,
     authenticated, issued and delivered and conform in all material respects to
     the description thereof contained in the Offering Document.

                                       16
<PAGE>   17

            (iv) The Company has all requisite corporate power and authority to
     execute and deliver the Indenture, the Registration Rights Agreement and
     this Agreement and to issue, sell and deliver the Offered Securities to the
     Purchaser pursuant to the Indenture and this Agreement. The execution,
     delivery and performance of the Indenture and this Agreement and the
     issuance, sale and delivery of the Offered Securities by the Company to the
     Purchaser thereunder have been duly authorized by all necessary corporate
     action on the part of the Company. This Agreement and the Indenture have
     been duly executed and delivered by the Company. The Indenture (assuming
     the due authorization, execution and delivery thereof by the Trustee), the
     Offered Securities and the Registration Rights Agreement (other than
     Section 6 as to which no opinion need be expressed) constitute legal, valid
     and binding obligations of the Company, enforceable against it in
     accordance with their terms, subject to applicable bankruptcy, insolvency,
     fraudulent conveyance, reorganization, moratorium and similar laws
     affecting creditors' rights and remedies generally, and subject, as to
     enforceability, to general principles of equity, including principles of
     commercial reasonableness, good faith and fair dealing (regardless of
     whether enforcement is sought in a proceeding at law or in equity).

            (v) The execution and delivery by the Company of the Indenture, this
     Agreement and the Registration Rights Agreement and the performance by the
     Company of its obligations thereunder and the issuance and sale of the
     Offered Securities to the Purchaser pursuant to the Indenture and this
     Agreement and the compliance by the Company with the provisions of the
     Indenture, this Agreement and the Registration Rights Agreement and the
     consummation by the Company of the transactions contemplated thereby will
     not conflict with, constitute a default under or violate (i) any of the
     terms, conditions or provisions of the Certificate of Incorporation or
     Amended Bylaws, of the Company, (ii) any New York, Texas, Delaware
     corporate or federal law or regulation (other than federal and state
     securities or blue sky laws or the Shipping Act, 1916, as amended, as to
     which no opinion need be expressed), or (iii) any judgment, writ,
     injunction, decree, order or ruling of any federal or state court or
     governmental authority binding on the Company or any of its properties of
     which we are aware, except in each case other than with respect to clause
     (i), any such conflict, default or violation as would not impair the
     Company's ability to perform its obligations under the Indenture, the
     Offered Securities, this Agreement or the Registration Rights Agreement or
     have any material adverse effect upon the consummation of the transactions
     contemplated by the Indenture, the Offered Securities, this Agreement or
     the Registration Rights Agreement.

            (vi) No consent, approval, waiver, license, order or authorization
     or other action by or filing with any New York, Texas, Delaware corporate
     or federal governmental agency, body or court is required in connection
     with the execution, delivery or performance by the Company of this
     Agreement, the Indenture or the Registration Rights Agreement or the
     consummation by the Company of the transactions contemplated hereby and
     thereby, except for filings and other actions required pursuant to federal
     and state securities or blue sky laws or the order of the Commission
     declaring the Shelf Registration Statement effective, as to which no
     opinion need be expressed, or the Shipping Act, 1916, as amended, as to
     which no opinion need be expressed, and those already obtained and made
     under the Delaware General Corporation Law ("DGCL").

                                       17
<PAGE>   18

            (vii) The Company is not (A) an "investment company" or an entity
     "controlled" by an "investment company" under the Investment Company Act or
     (B) a "holding company" or a "subsidiary company" or an "affiliate" of a
     holding company within the meaning of the Public Utility Holding Company
     Act. In rendering the opinion in this paragraph (vii) Weil, Gotshal &
     Manges LLP shall have assumed with the Purchaser's permission that Loews
     (x) is not and is not controlled by an "investment company" under the
     Investment Company Act and (y) is not a "holding company" or a "subsidiary
     company" or an "affiliate" of a holding company under the Holding Company
     Act.

            (viii) The statements in the Offering Document under the caption
     "Description of the Debentures", insofar as they constitute descriptions of
     the Indenture or the Offered Securities or refer to statements of law or
     legal conclusions under the DGCL, constitute fair summaries thereof in all
     material respects. The statements in the Offering Document under the
     caption "Description of Capital Stock", insofar as they constitute
     descriptions of the Common Stock or refer to statements of law or legal
     conclusions under the DGCL, constitute fair summaries thereof in all
     material respects. The discussion under the caption "Certain United States
     Federal Income Tax Considerations" in the Offering Document accurately
     describes in all material respects the U.S. federal income tax aspects of
     the acquisition, ownership and disposition of the Offered Securities and
     the Underlying Shares, and provides a fair summary in all material respects
     of the provisions of the Internal Revenue Code of 1986, as amended,
     summarized therein. The opinions of such counsel under the caption "Certain
     United States Federal Income Tax Considerations" in the Offering Document
     are confirmed.

            (ix) The Registration Rights Agreement has been duly authorized,
     executed and delivered by the Company;

            (x) It is not necessary in connection with (i) the offer, sale and
     delivery of the Offered Securities by the Company to the Purchaser pursuant
     to this Agreement or (ii) the resales of the Offered Securities by the
     Purchaser to Subsequent Purchasers in the manner contemplated hereby to
     register the Offered Securities under the Securities Act or to qualify an
     indenture in respect thereof under the Trust Indenture Act; and

            (xi) Such counsel has participated in conferences with directors,
     officers and other representatives of the Company, representatives of the
     independent public accountants for the Company, representatives of the
     Purchaser and representatives of counsel for the Purchaser, at which
     conferences the contents of the Offering Document and related matters were
     discussed, and, although such counsel has not independently verified and is
     not passing upon and assumes no responsibility for the accuracy,
     completeness or fairness of the statements contained in the Offering
     Document (except to the extent specified in such counsel's opinion), no
     facts have come to such counsel's attention which lead such counsel to
     believe that the Offering Document or any amendment or supplement thereto
     prior to the Closing Date, at the time the Offering Document was issued, at
     the time any such amended or supplemented Offering Document was issued or
     at the Closing Date, contained or contains an untrue statement of

                                       18
<PAGE>   19

     a material fact or omitted or omits to state a material fact necessary to
     make the statements contained therein, in light of the circumstances under
     which they were made, not misleading (it being understood that such counsel
     need express no view with respect to the financial statements and related
     notes and the other financial, statistical and accounting data included or
     which should be included in the Offering Document).

     Such opinion may be limited to the laws of the States of New York and
Texas, the corporate laws of the State of Delaware and the federal laws of the
United States.

            (f) The Purchaser shall have received from Shearman & Sterling,
counsel for the Purchaser, such opinion or opinions, dated the Closing Date,
with respect to the incorporation of the Company, the validity of the Offered
Securities, the Offering Document, the exemption from registration for the offer
and sale of the Offered Securities by the Company to the Purchaser and the
resales by the Purchaser as contemplated hereby and other related matters as the
Purchaser may require, and the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon such
matters.

            (g) The Purchaser shall have received a certificate, dated the
Closing Date, of the President or any Vice President and a principal financial
or accounting officer of the Company in which such officers, to the best of
their knowledge after reasonable investigation, shall state that the
representations and warranties of the Company in this Agreement are true and
correct, that the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to
such Closing Date, and that, subsequent to the respective date of the most
recent financial statements included in the Offering Document, there has been no
material adverse change, nor any development or event involving a prospective
material adverse change, in the condition (financial or other), business,
properties or results of operations of the Company and its subsidiaries taken as
a whole, except as set forth in or contemplated by the Offering Document or as
described in such certificate.

            (h) The Purchaser shall have received from Loews an executed copy of
an agreement that Loews, for a period of 90 days after the date hereof, will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any shares of Common Stock of the Company or any securities
convertible into or exercisable or exchangeable for such Common Stock without
the prior written consent of the Purchaser, or publicly disclose the intention
to make any such offer, sale, pledge or disposition, except for the exchange of
shares of Common Stock for any of Loews' outstanding 3 1/8% Exchangeable
Subordinated Notes due 2007.

            (i) The Registration Rights Agreement shall have been duly executed
and delivered by the Company and (assuming due execution, delivery and
performance by the Purchaser) be in full force and effect. The Purchaser shall
have received an executed copy of an agreement between Loews and the Company
under which Loews waives any provisions in the Loews Registration Rights
Agreement that are inconsistent with and would impair the Company's ability to
comply with its covenants and agreements in the Registration Rights Agreement.

            (j) In the event that the Purchaser exercises its option provided in
Section 3(b) to purchase all or any portion of the Option Securities, the
representations and warranties of the

                                       19
<PAGE>   20

Company contained herein and the statements of officers of the Company made
pursuant to the provisions hereof shall be true and correct as of the Date of
Delivery and, at the Date of Delivery, the Purchaser shall have received:

            (i) Letter from Deloitte & Touche LLP dated the Date of Delivery,
     substantially in the same form and substance as the letter furnished to the
     Purchaser pursuant to Section 6(b), except that the "specified date" in the
     letter furnished pursuant to this paragraph shall be a date not more than
     three business days prior to the Date of Delivery.

            (ii) The opinions of William C. Long, Esq., the General Counsel of
     the Company, and Weil, Gotshal & Manges LLP, counsel for the Company, each
     dated the Date of Delivery, relating to the Option Securities to be
     purchased on the Date of Delivery and otherwise to substantially the same
     effect as the opinions provided in Sections 6(d) and 6(e).

            (iii) The opinion of Shearman & Sterling, counsel for the Purchaser,
     dated the Date of Delivery, relating to the Option Securities to be
     purchased on the Date of Delivery and otherwise to the same effect as the
     opinion provided in Section 6(f).

            (iv) A certificate, dated the Date of Delivery, of the President or
     any Vice President and a principal financial or accounting officer of the
     Company confirming that the certificate delivered at the Closing Date
     pursuant to Section 6(g) remains true and correct as of the Date of
     Delivery.

         (k) On the Closing Date and at the Date of Delivery, counsel for the
Purchaser shall have been furnished with such documents as they may reasonably
require for the purpose of enabling them to pass upon the issuance and sale of
the Offered Securities as herein contemplated, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of any
of the conditions, herein contained; and all proceedings taken by the Company in
connection with the issuance and sale of the Offered Securities as herein
contemplated shall be reasonably satisfactory in form and substance to the
Purchaser and counsel for the Purchaser.

     7. Indemnification and Contribution. (a) The Company agrees to indemnify
and hold harmless the Purchaser and each person, if any, who controls the
Purchaser within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act as follows:

            (i) against any and all loss, liability, claim or damage, as
     incurred, arising out of any untrue statement or alleged untrue statement
     of a material fact contained in the Offering Document, or the omission or
     alleged omission therefrom of a material fact necessary in order to make
     the statements therein, in the light of the circumstances under which they
     were made, not misleading;

            (ii) against any and all loss, liability, claim or damage, as
     incurred, to the extent of the aggregate amount paid in settlement of any
     litigation, or any investigation or proceeding by any governmental agency
     or body, commenced or threatened, or of any claim whatsoever based upon any
     such untrue statement or omission, or any such alleged

                                       20
<PAGE>   21

     untrue statement or omission; provided that any such settlement is effected
     with the written consent of the Company; and

            (iii) against any and all expense whatsoever, as incurred (including
     the fees and disbursements of counsel chosen by the Purchaser), reasonably
     incurred in investigating, preparing or defending against any litigation,
     or any investigation or proceeding by any governmental agency or body,
     commenced or threatened, or any claim whatsoever based upon any such untrue
     statement or omission, or any such alleged untrue statement or omission;

provided, however, that the Company shall not be liable in any such case for or
in respect of any loss, liability, claim, damage or expense to the extent
arising out of or based upon any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with written
information furnished to the Company by the Purchaser expressly for use in the
Offering Document, it being understood and agreed that the only such information
consists of the information described in subsection (b) below.

      (b) The Purchaser agrees to indemnify and hold harmless the Company and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in subsections (a)(i), (ii) and (iii) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Offering Document in reliance upon and in conformity with
written information furnished to the Company by the Purchaser expressly for use
in the Offering Document, it being understood and agreed that the following is
the only such information furnished by the Purchaser to the Company for use in
the Offering Document: the first, second and third sentences of the first
paragraph and the second paragraph under the caption "Plan of Distribution -
Debentures Are Not Being Registered," the second sentence of the paragraph under
the caption "Plan of Distribution - New Issue of Debentures" and the first and
second paragraphs under the caption "Plan of Distribution - Price Stabilization
and Short Positions."

      (c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
hereunder to the extent it is not materially prejudiced as a result thereof and
in any event shall not relieve it from any liability which it may have otherwise
than on account of this indemnity agreement. In case any such action is brought
against any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall, without the prior written consent of the indemnified party, settle,
compromise or consent to the entry of any

                                       21
<PAGE>   22

judgment with respect to any pending or threatened action in respect of which
any indemnified party is or could have been a party and indemnity could have
been sought hereunder by such indemnified party unless such settlement,
compromise or consent (i) includes an unconditional release of such indemnified
party from all liability on any claims that are the subject matter of such
action and (ii) does not include any statement as to, or an admission of, fault,
culpability or a failure to act by or on behalf of an indemnified person.

      (d) If the indemnification provided for in Section 7(a) or (b) is for any
reason unavailable or insufficient to hold harmless an indemnified party in
respect of any losses, liabilities, claims, damages or expenses referred to
therein, then each indemnifying party shall contribute to the aggregate amount
of such losses, liabilities, claims, damages and expenses incurred by such
indemnified party, as incurred, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Purchaser on the other hand from the offering of the Offered Securities pursuant
to this Agreement or (ii) if the allocation provided by clause (i) is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and of the Purchaser on the other hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Purchaser on the other hand in connection with the offering of
the Offered Securities pursuant to this Agreement shall be deemed to be in the
same respective proportions as the total net proceeds from the offering of the
Offered Securities pursuant to this Agreement (before deducting expenses)
received by the Company and the total discounts and commissions received by the
Purchaser, bear to the aggregate initial offering price of the Offered
Securities. The relative fault of the Company on the one hand and the Purchaser
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Purchaser and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

      The Company and the Purchaser agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 7(d). The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 7(d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.

      Notwithstanding the provisions of this Section 7(d), the Purchaser shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Offered Securities purchased by it were resold exceeds
the amount of any damages which the Purchaser has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission.

                                       22
<PAGE>   23

      No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.

      For purposes of this Section 7(d), each person, if any, who controls the
Purchaser within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act shall have the same rights to contribution as the Purchaser,
and each person, if any, who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Company.

      8. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the Purchaser set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation, or statement as to the results thereof, made by or on behalf of
the Purchaser, the Company or any of their respective representatives, officers
or directors or any controlling person, and will survive delivery of and payment
for the Offered Securities. If for any reason the purchase of the Offered
Securities by the Purchaser is not consummated, the Company shall remain
responsible for the expenses to be paid or reimbursed by it pursuant to Section
5 and the respective obligations of the Company and the Purchaser pursuant to
Section 7 shall remain in effect and if any Offered Securities have been
purchased hereunder the representations and warranties in Sections 2 and 4 and
all obligations under Section 5 shall remain in effect. If the purchase of the
Offered Securities by the Purchaser is not consummated for any reason other than
solely because of the occurrence of any event specified in clause (iii), (iv),
(v) or (vi) of Section 6(b), the Company will reimburse the Purchaser for all
out-of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by it in connection with the offering of the Offered Securities.

      9. Notices. All communications hereunder will be in writing and, if sent
to the Purchaser will be mailed, delivered or telegraphed and confirmed to the
Purchaser at 4 World Financial Center New York, N.Y 10080, Attention: Raymond
Wong, or, if sent to the Company, will be mailed, delivered or telegraphed and
confirmed to it at 15415 Katy Freeway, Houston, Texas 77094, Attention:
Corporate Secretary.

      10. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the controlling
persons referred to in Section 7, and no other person will have any right or
obligation hereunder, except that holders of Offered Securities shall be
entitled to enforce the agreements for their benefit contained in the second and
third sentences of Section 5(b) hereof against the Company as if such holders
were parties hereto.

      11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.

      12. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.

                                       23
<PAGE>   24

          The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.

                            [SIGNATURE PAGE FOLLOWS]

                                       24
<PAGE>   25

      If the foregoing is in accordance with the Purchaser's understanding of
our agreement, kindly sign and return to the Company one of the counterparts
hereof, whereupon it will become a binding agreement between the Company and the
Purchaser in accordance with its terms.

                                       Very truly yours,

                                       DIAMOND OFFSHORE DRILLING, INC.

                                       By: /s/ William C. Long
                                          --------------------------------------
                                          Name: William C. Long
                                          Title: Vice President, General Counsel
                                                 & Secretary

The foregoing Purchase Agreement is
hereby confirmed and accepted as of the
date first above written.

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
            INCORPORATED

By: /s/ Joseph C. Gatto, Jr.
   --------------------------------------
           Authorized Signatory<PAGE>   1
                                                                    EXHIBIT 10.2

                          REGISTRATION RIGHTS AGREEMENT

                  THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered into as of April 11, 2001 by and between Diamond Offshore Drilling,
Inc., a Delaware corporation (the "Company"), and Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated (the "Purchaser") pursuant to the
Purchase Agreement, dated as of April 6, 2001 (the "Purchase Agreement"),
between the Company and the Purchaser. In order to induce the Purchaser to enter
into the Purchase Agreement, the Company has agreed to provide the registration
rights set forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Purchase Agreement.

                  The Company agrees with the Purchaser, (i) for the benefit of
the Purchaser and (ii) for the benefit of the beneficial owners (including the
Purchaser) from time to time of the Securities (as defined herein) and the
beneficial owners from time to time of the Underlying Common Stock (as defined
herein) issued upon conversion of the Securities (each of the foregoing a
"Holder" and together the "Holders"), as follows:

                  Section 1. Definitions. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:

                  "Affiliate" means, with respect to any specified person, an
"affiliate," as defined in Rule 144, of such person.

                  "Applicable Conversion Price" means, as of any date of
determination, the principal amount of Securities as of such date of
determination divided by the Conversion Rate in effect as of such date of
determination or, if no Securities are then outstanding, the Conversion Rate
that would be in effect were Securities then outstanding.

                  "Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday that is not a day on which banking institutions in The City of New
York are authorized or obligated by law or executive order to close.

                  "Common Stock" means any shares of Common Stock, par value
$.01 per share, of the Company and any other shares of common stock as may
constitute "Common Stock" for purposes of the Indenture, including the
Underlying Common Stock.

                  "Conversion Rate" has the meaning assigned to that term in the
Indenture.

                  "Damages Accrual Period" has the meaning specified in Section
2(e) hereof.

<PAGE>   2

                  "Damages Payment Date" means each October 15 and April 15 in
the case of Securities and the Underlying Common Stock.

                  "Deferral Notice" has the meaning specified in Section 3(i)
hereof.

                  "Deferral Period" has the meaning specified in Section 3(i)
hereof.

                  "Effectiveness Deadline Date" has the meaning specified in
Section 2(a) hereof.

                  "Effectiveness Period" means the period of two years from the
date the Shelf Registration Statement is declared effective or such shorter
period terminating upon the earliest to occur of the following: (A) when all the
Securities covered by the Shelf Registration Statement have been sold pursuant
to the Shelf Registration Statement or transferred pursuant to Rule 144, (B)
when all shares of Common Stock issued upon conversion of any such Securities
that had not been sold pursuant to the Shelf Registration Statement or
transferred pursuant to Rule 144 have been sold pursuant to the Shelf
Registration Statement or transferred pursuant to Rule 144 and (C) when all
outstanding Registrable Securities held by persons which are not affiliates of
the Company may be resold without registration under the Securities Act pursuant
to Rule 144(k) under the Securities Act or any successor provision thereto.

                  "Event" has the meaning specified in Section 2(e) hereof.

                  "Event Termination Date" has the meaning specified in Section
2(e) hereof.

                  "Event Date" has the meaning specified in Section 2(e) hereof.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.

                  "Filing Deadline Date" has the meaning specified in Section
2(a) hereof.

                  "Holder" has the meaning specified in the second paragraph of
this Agreement.

                  "Indenture" means the Indenture dated as of the date hereof
between the Company and the Trustee, pursuant to which the Securities are being
issued.

                  "Initial Shelf Registration Statement" has the meaning
specified in Section 2(a) hereof.

                  "Issue Date" means April 11, 2001.

                  "Liquidated Damages Amount" has the meaning specified in
Section 2(e) hereof.

                  "Losses" has the meaning specified in Section 6 hereof.

                  "Material Event" has the meaning specified in Section 3(i)
hereof.

                  "Notice and Questionnaire" means a duly executed, written
notice delivered to the Company containing the information called for by the
Selling Securityholder Notice and

                                       2
<PAGE>   3

Questionnaire attached as Annex A to the Offering Memorandum of the Company
dated April 6, 2001 relating to the Securities.

                  "Notice Holder" means, on any date, any Holder that has
delivered a Notice and Questionnaire to the Company on or prior to such date.

                  "Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any amendment or prospectus
supplement, including post-effective amendments, and all materials incorporated
by reference or explicitly deemed to be incorporated by reference in such
Prospectus.

                  "Purchase Agreement" has the meaning specified in the first
paragraph of this Agreement.

                  "Purchaser" means Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated.

                  "Record Holder" means, with respect to any Damages Payment
Date relating to any Securities or Underlying Common Stock as to which any
Liquidated Damages Amount has accrued, the registered holder of such Securities
or Underlying Common Stock, as the case may be, 14 days prior to the next
succeeding Damages Payment Date or, if all Events giving rise to the Liquidated
Damages Amount payable on such Damages Payment Date have been cured and no such
Event is continuing on such date, as of the date on which the last such Event
was cured.

                  "Registrable Securities" means the Securities and the
Underlying Common Stock, until such securities have been converted or exchanged,
and, at all times subsequent to any such conversion or exchange, any securities
into or for which such securities have been converted or exchanged, and any
security issued with respect thereto upon any stock dividend, split or similar
event until, in the case of any such security, the earliest of (i) its effective
registration under the Securities Act and resale in accordance with the
Registration Statement covering it, (ii) expiration of the holding period that
would be applicable thereto under Rule 144(k) were it not held by an Affiliate
of the Company or (iii) its sale to the public pursuant to Rule 144.

                  "Registration Expenses" has the meaning specified in Section 5
hereof.

                  "Registration Statement" means any registration statement of
the Company that covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits, and all materials incorporated by reference or explicitly deemed
to be incorporated by reference in such registration statement.

                  "Restricted Securities" has the meaning assigned to that term
in Rule 144.

                  "Rule 144" means Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.

                                       3
<PAGE>   4

                  "Rule 144A" means Rule 144A under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.

                  "SEC" means the U.S. Securities and Exchange Commission and
any successor agency.

                  "Securities" means the 1 1/2% Convertible Senior Debentures
due 2031 of the Company to be purchased pursuant to the Purchase Agreement.

                  "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated by the SEC thereunder.

                  "Shelf Registration Statement" has the meaning specified in
Section 2(a) hereof.

                  "Subsequent Shelf Registration Statement" has the meaning
specified in Section 2(b) hereof.

                  "TIA" means the Trust Indenture Act of 1939, as amended.

                  "Trustee" means The Chase Manhattan Bank (or any successor
entity), the Trustee under the Indenture.

                  "Underlying Common Stock" means the Common Stock into which
the Securities are convertible or issued upon any such conversion.

                  Section 2. Shelf Registration. (a) The Company shall prepare
and file or cause to be prepared and filed with the SEC, as soon as practicable
but in any event by the date (the "Filing Deadline Date") ninety (90) days after
the Issue Date, a Registration Statement for an offering to be made on a delayed
or continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf
Registration Statement") registering the resale from time to time by Holders
thereof of all of the Registrable Securities (the "Initial Shelf Registration
Statement"). The Initial Shelf Registration Statement shall be on Form S-3 or
another appropriate form permitting registration of such Registrable Securities
for resale by such Holders in accordance with the methods of distribution
elected by the Holders and set forth in the Initial Shelf Registration
Statement, provided that notwithstanding anything herein to the contrary, in no
event will such method(s) of distribution take the form of an underwritten
offering of the Registrable Securities without the prior written agreement of
the Company. The Company shall use reasonable best efforts to cause the Initial
Shelf Registration Statement to be declared effective under the Securities Act
as promptly as is practicable but in any event by the date (the "Effectiveness
Deadline Date") that is one hundred eighty (180) days after the Issue Date, and
to keep the Initial Shelf Registration Statement (or any Subsequent Shelf
Registration Statement) continuously effective under the Securities Act until
the expiration of the Effectiveness Period; provided, however, that no Holder
shall be entitled to have the Registrable Securities held by it covered by such
Shelf Registration Statement unless such Holder shall have provided a Notice and
Questionnaire in accordance with Section 2(d) and is in compliance with Section
4. None of the Company's securityholders (other than the Holders of Registrable
Securities) shall have the right to include any of the Company's securities in
the Shelf Registration Statement.

                                       4
<PAGE>   5

                  (b) If the Initial Shelf Registration Statement or any
Subsequent Shelf Registration Statement ceases to be effective for any reason at
any time during the Effectiveness Period (other than because all Registrable
Securities registered thereunder shall have been resold pursuant thereto or
shall have otherwise ceased to be Registrable Securities), the Company shall use
reasonable best efforts to obtain the prompt withdrawal of any order suspending
the effectiveness thereof, and in any event shall within sixty (60) days of such
cessation of effectiveness amend the Shelf Registration Statement in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Shelf Registration Statement
covering all of the securities that as of the date of such filing are
Registrable Securities (a "Subsequent Shelf Registration Statement"). If a
Subsequent Shelf Registration Statement is filed, the Company shall use
reasonable best efforts to cause the Subsequent Shelf Registration Statement to
become effective as promptly as is practicable after such filing or, if filed
during a Deferral Period, after the expiration of such Deferral Period, and to
keep such Registration Statement (or Subsequent Shelf Registration Statement)
continuously effective until the end of the Effectiveness Period.

                  (c) The Company shall supplement and amend the Shelf
Registration Statement if required by the rules, regulations or instructions
applicable to the registration form used by the Company for such Shelf
Registration Statement, if required by the Securities Act or, to the extent to
which the Company does not reasonably object, as reasonably requested by the
Purchaser or by the Trustee on behalf of the registered Holders.

                  (d) Each Holder of Registrable Securities agrees that if such
Holder wishes to sell Registrable Securities pursuant to a Shelf Registration
Statement and related Prospectus, it will do so only in accordance with this
Section 2(d) and Section 3(i). Each Holder of Registrable Securities wishing to
sell Registrable Securities pursuant to a Shelf Registration Statement and
related Prospectus agrees to deliver a Notice and Questionnaire to the Company
at least ten (10) Business Days prior to any intended distribution of
Registrable Securities under the Shelf Registration Statement. From and after
the date the Initial Shelf Registration Statement is declared effective, the
Company shall (i) as promptly as is practicable after the date a Notice and
Questionnaire is delivered, but in any event within ten (10) Business Days after
such date, if required by applicable law, file with the SEC a post-effective
amendment to the Shelf Registration Statement or prepare and, if required by
applicable law, file a supplement to the related Prospectus or a supplement or
amendment to any document incorporated therein by reference or file any other
required document so that the Holder delivering such Notice and Questionnaire is
named as a selling securityholder in the Shelf Registration Statement and the
related Prospectus in such a manner as to permit such Holder to deliver such
Prospectus to purchasers of the Registrable Securities in accordance with
applicable law and, if the Company shall file a post-effective amendment to the
Shelf Registration Statement, use reasonable best efforts to cause such
post-effective amendment to be declared effective under the Securities Act as
promptly as is practicable, but in any event by the date (the "Amendment
Effectiveness Deadline Date") that is sixty (60) days after the date such
post-effective amendment is required by this clause to be filed; (ii) provide
such Holder copies of any documents filed pursuant to Section 2(d)(i) as
promptly as practicable after the filing of such documents; and (iii) notify
such Holder as promptly as practicable after the effectiveness under the
Securities Act of any post-effective amendment filed pursuant to Section
2(d)(i); provided that if such Notice and Questionnaire is delivered during a
Deferral Period, the Company shall so inform the Holder

                                       5
<PAGE>   6

delivering such Notice and Questionnaire and shall take the actions set forth in
clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in
accordance with Section 3(i) as though such Holder's Notice and Questionnaire
had been delivered on the expiration date of such Deferral Period, provided
further, that if under applicable law the Company has more than one option as to
the type or manner of making any such filing, it will make the required filing
or filings in the manner or of a type that is reasonably expected to result in
the earliest availability of the Prospectus for effecting resales of Registrable
Securities. Notwithstanding anything contained herein to the contrary, the
Company shall be under no obligation to name any Holder that is not a Notice
Holder as a selling securityholder in any Registration Statement or related
Prospectus; provided, however, that any Holder that becomes a Notice Holder
pursuant to the provisions of Section 2(d) of this Agreement (whether or not
such Holder was a Notice Holder at the time the Registration Statement was
declared effective) shall be named as a selling securityholder in the
Registration Statement or related Prospectus in accordance with the requirements
and conditions of this Section 2(d).

                  (e) The parties hereto agree that the Holders of Registrable
Securities will suffer damages, and that it would not be feasible to ascertain
the extent of such damages with precision, if (i) the Initial Shelf Registration
Statement has not been filed on or prior to the Filing Deadline Date, (ii) the
Initial Shelf Registration Statement has not been declared effective under the
Securities Act on or prior to the Effectiveness Deadline Date, (iii) the Company
has failed to perform its obligations set forth in Section 2(d) hereof within
the time period required therein or (iv) the aggregate duration of Deferral
Periods in any period exceeds the number of days permitted in respect of such
period pursuant to Section 3(i) hereof (each of the events of a type described
in any of the foregoing clauses (i) through (iv) are individually referred to
herein as an "Event," and the Filing Deadline Date in the case of clause (i),
the Effectiveness Deadline Date in the case of clause (ii), the date by which
the Company is required to perform its obligations set forth in Section 2(d) in
the case of clause (iii) (including the filing of any post-effective amendment
prior to the Amendment Effectiveness Deadline Date), and the date on which the
aggregate duration of Deferral Periods in any period exceeds the number of days
permitted by Section 3(i) hereof in the case of clause (iv), being referred to
herein as an "Event Date"). Events shall be deemed to continue until the "Event
Termination Date," which shall be the following dates with respect to the
respective types of Events: the date the Initial Shelf Registration Statement is
filed in the case of an Event of the type described in clause (i), the date the
Initial Shelf Registration Statement is declared effective under the Securities
Act in the case of an Event of the type described in clause (ii), the date the
Company performs its obligations set forth in Section 2(d) in the case of an
Event of the type described in clause (iii) (including, without limitation, the
date the relevant post-effective amendment to the Shelf Registration Statement
is declared effective under the Securities Act), and termination of the Deferral
Period that caused the limit on the aggregate duration of Deferral Periods in a
period set forth in Section 3(i) to be exceeded in the case of the commencement
of an Event of the type described in clause (iv).

                  Accordingly, commencing on (and including) any Event Date and
ending on (but excluding) the next date on which there are no Events that have
occurred and are continuing (a "Damages Accrual Period"), the Company agrees to
pay, as liquidated damages and not as a penalty, an amount (the "Liquidated
Damages Amount"), payable on the Damages Payment Dates to Record Holders of then
outstanding Securities that are Registrable Securities and of then

                                       6
<PAGE>   7
outstanding shares of Underlying Common Stock issued upon conversion of
Securities that are Registrable Securities, as the case may be, accruing, for
each portion of such Damages Accrual Period beginning on and including a Damages
Payment Date (or, in respect of the first time that the Liquidated Damages
Amount is to be paid to Holders on a Damages Payment Date as a result of the
occurrence of any particular Event, from the Event Date) and ending on but
excluding the first to occur of (A) the date of the end of the Damages Accrual
Period or (B) the next Damages Payment Date, at a rate per annum equal to
one-quarter of one percent (0.25%) for the first ninety (90) day period from the
Event Date, and thereafter at a rate per annum equal to one-half of one percent
(0.50%) of the aggregate principal amount of such Securities and the aggregate
Applicable Conversion Price of such shares of Underlying Common Stock, as the
case may be, in each case determined as of the Business Day immediately
preceding the next Damages Payment Date; provided that in the case of a Damages
Accrual Period that is in effect solely as a result of an Event of the type
described in clause (iii) of the immediately preceding paragraph, such
Liquidated Damages Amount shall be paid only to the Holders that have delivered
Notice and Questionnaires that caused the Company to incur the obligations set
forth in Section 2(d) the non-performance of which is the basis of such Event;
provided further, that any Liquidated Damages Amount accrued with respect to any
Securities or portion thereof called for redemption on a redemption date or
converted into Underlying Common Stock on a conversion date prior to the Damages
Payment Date, shall, in any such event, be paid instead to the Holder who
submitted such Securities or portion thereof for redemption or conversion on the
applicable redemption date or conversion date, as the case may be, on such date
(or promptly following the conversion date, in the case of conversion).
Notwithstanding the foregoing, no Liquidated Damages Amounts shall accrue as to
any Registrable Security from and after the earlier of (x) the date such
security is no longer a Registrable Security and (y) expiration of the
Effectiveness Period. The rate of accrual of the Liquidated Damages Amount with
respect to any period shall not exceed the rate provided for in this paragraph
notwithstanding the occurrence of multiple concurrent Events. Following the cure
of all Events requiring the payment by the Company of Liquidated Damages Amounts
to the Holders of Registrable Securities pursuant to this Section, the accrual
of Liquidated Damages Amounts will cease (without in any way limiting the effect
of any subsequent Event requiring the payment of Liquidated Damages Amount by
the Company).

                  The Trustee shall be entitled, on behalf of Holders of
Securities or Underlying Common Stock, to seek any available remedy for the
enforcement of this Agreement, including for the payment of any Liquidated
Damages Amount in accordance herewith. Notwithstanding the foregoing, the
parties agree that the sole monetary damages payable for a violation of the
terms of this Agreement with respect to which liquidated damages are expressly
provided shall be such liquidated damages. Nothing shall preclude a Notice
Holder from pursuing or obtaining specific performance or other equitable relief
with respect to this Agreement.

                  All of the Company's obligations set forth in this Section
2(e) that are outstanding with respect to any Registrable Security at the time
such security ceases to be a Registrable Security shall survive until such time
as all such obligations with respect to such security have been satisfied in
full (notwithstanding termination of this Agreement pursuant to Section 8(k)).

                  The parties hereto agree that the liquidated damages provided
for in this Section 2(e) constitute a reasonable estimate of the damages that
may be incurred by Holders of Registrable Securities by reason of the failure of
the Shelf Registration Statement to be filed or

                                       7
<PAGE>   8

declared effective or available for effecting resales of Registrable Securities
in accordance with the provisions hereof.

                  Section 3. Registration Procedures. In connection with the
registration obligations of the Company under Section 2 hereof, the Company
shall:

                  (a) Before filing any Registration Statement or Prospectus or
any amendments or supplements (other than supplements that do nothing more
substantive than name one or more Notice Holders as selling securityholders or
provide other information required by Item 507 of Regulation S-K with respect to
such Notice Holders) thereto with the SEC, furnish to the Purchaser copies of
all such documents proposed to be filed and use reasonable best efforts to
reflect in each such document when so filed with the SEC such comments as the
Purchaser reasonably shall propose within three (3) Business Days of the
delivery of such copies to the Purchaser.

                  (b) Prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the applicable
period specified in Section 2(a), except as provided in Section 3(i); cause the
related Prospectus to be supplemented by any required Prospectus supplement, and
as so supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) under the Securities Act; and use reasonable best efforts to
comply with the provisions of the Securities Act applicable to it with respect
to the disposition of all securities covered by such Registration Statement
during the Effectiveness Period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement as
so amended or such Prospectus as so supplemented.

                  (c) As promptly as practicable give notice to the Notice
Holders and the Purchaser (i) when any Prospectus, Prospectus supplement,
Registration Statement or post-effective amendment to a Registration Statement
has been filed with the SEC and, with respect to a Registration Statement or any
post-effective amendment, when the same has been declared effective (provided,
however, that the Company shall not be required by this clause (i) to notify (A)
the Purchaser of the filing of a Prospectus supplement that does nothing more
substantive than name one or more Notice Holders as selling securityholders or
provide other information required by Item 507 of Regulation S-K with respect to
such Notice Holders or (B) any Notice Holder of the filing of a Prospectus
supplement that does nothing more substantive than name one or more other Notice
Holders as selling securityholders or provide other information required by Item
507 of Regulation S-K with respect to such Notice Holders), (ii) of any request,
following the effectiveness of the Initial Shelf Registration Statement under
the Securities Act, by the SEC or any other federal or state governmental
authority for amendments or supplements to any Registration Statement or related
Prospectus or for additional information, (iii) of the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of any Registration Statement or the initiation or threatening
of any proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, (v) of the occurrence of (but not the nature of or details concerning)
a Material Event (provided, however, that no notice by the Company shall be
required pursuant to this clause (v)

                                       8
<PAGE>   9

in the event that the Company either promptly files a Prospectus supplement to
update the Prospectus or a Form 8-K or other appropriate Exchange Act report
that is incorporated by reference into the Registration Statement, which, in
either case, contains the requisite information with respect to such Material
Event that results in such Registration Statement no longer containing any
untrue statement of material fact or omitting to state a material fact necessary
to make the statements contained therein not misleading) and (vi) of the
determination by the Company that a post-effective amendment to a Registration
Statement will be filed with the SEC, which notice may, at the discretion of the
Company (or as required pursuant to Section 3(i)), state that it constitutes a
Deferral Notice, in which event the provisions of Section 3(i) shall apply.

                  (d) Use reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement or the
lifting of any suspension of the qualification (or exemption from qualification)
of any of the Registrable Securities for sale in any jurisdiction in which they
have been qualified for sale, in either case at the earliest possible moment.

                  (e) If reasonably requested by the Purchaser or any Notice
Holder, promptly as reasonably practicable, but in any event within ten (10)
Business Days of such request, incorporate in a Prospectus supplement or
post-effective amendment to a Registration Statement such information as the
Purchaser or such Notice Holder shall, on the basis of a written opinion of
nationally-recognized counsel experienced in such matters, determine to be
required to be included therein by applicable law and make any required filings
of such Prospectus supplement or such post-effective amendment; provided that
the Company shall not be required to take any actions under this Section 3(e)
that are not, in the reasonable opinion of counsel for the Company, in
compliance with applicable law.

                  (f) As promptly as reasonably practicable furnish to each
Notice Holder and the Purchaser, upon their request and without charge, at least
one (1) conformed copy of the Registration Statement and any amendment thereto,
including financial statements but excluding schedules, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits
(unless requested in writing to the Company by such Notice Holder or the
Purchaser, as the case may be).

                  (g) During the Effectiveness Period, deliver to each Notice
Holder in connection with any sale of Registrable Securities pursuant to a
Registration Statement, without charge, as many copies of the Prospectus or
Prospectuses relating to such Registrable Securities (including each preliminary
prospectus) and any amendment or supplement thereto as such Notice Holder may
reasonably request; and the Company hereby consents (except during such periods
that a Deferral Notice is outstanding and has not been revoked) to the use of
such Prospectus or each amendment or supplement thereto by each Notice Holder in
connection with any offering and sale of the Registrable Securities covered by
such Prospectus or any amendment or supplement thereto in the manner set forth
therein.

                  (h) Prior to any public offering of the Registrable Securities
pursuant to the Shelf Registration Statement, use reasonable best efforts to
register or qualify or cooperate with the Notice Holders in connection with the
registration or qualification (or exemption from such

                                       9
<PAGE>   10

registration or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the United
States as any Notice Holder reasonably requests in writing (which request may be
included in the Notice and Questionnaire); prior to any public offering of the
Registrable Securities pursuant to the Shelf Registration Statement, use
reasonable best efforts to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period in connection
with such Notice Holder's offer and sale of Registrable Securities pursuant to
such registration or qualification (or exemption therefrom) and do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of such Registrable Securities in the manner set forth in the
relevant Registration Statement and the related Prospectus; provided that the
Company will not be required to (i) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not otherwise be
required to qualify but for this Agreement or (ii) take any action that would
subject it to general service of process or to taxation in any such jurisdiction
where it is not then so subject.

                  (i) Upon (A) the issuance by the SEC of a stop order
suspending the effectiveness of the Shelf Registration Statement or the
initiation of proceedings with respect to the Shelf Registration Statement under
Section 8(d) or 8(e) of the Securities Act, (B) the occurrence of any event or
the existence of any fact (a "Material Event") as a result of which any
Registration Statement shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, or any Prospectus shall contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or (C) the
occurrence or existence of any pending corporate development that, in the
discretion of the Company, makes it appropriate to suspend the availability of
the Shelf Registration Statement and the related Prospectus, (i) in the case of
clause (B) above, subject to the next sentence, as promptly as practicable,
prepare and file a post-effective amendment to such Registration Statement or a
supplement to the related Prospectus or any document incorporated therein by
reference or file any other required document that would be incorporated by
reference into such Registration Statement and Prospectus so that such
Registration Statement does not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and such Prospectus does not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, as
thereafter delivered to the purchasers of the Registrable Securities being sold
thereunder, and, in the case of a post-effective amendment to a Registration
Statement, subject to the next sentence, use reasonable best efforts to cause it
to be declared effective as promptly as is reasonably practicable, and (ii) give
notice to the Notice Holders that the availability of the Shelf Registration
Statement is suspended (a "Deferral Notice") and, upon receipt of any Deferral
Notice, each Notice Holder agrees to immediately suspend the use of any
Prospectus and not to sell any Registrable Securities pursuant to the
Registration Statement until such Notice Holder's receipt of copies of the
supplemented or amended Prospectus provided for in clause (i) above, or until it
is advised in writing by the Company that the Prospectus may be used, and has
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in such Prospectus. The Company will use
reasonable best efforts to ensure that the use of the Prospectus may be resumed
(x) in the case of clause (A)

                                       10
<PAGE>   11

above, as promptly as is reasonably practicable, (y) in the case of clause (B)
above, as soon as, in the sole judgment of the Company, public disclosure of
such Material Event would not be prejudicial to or contrary to the interests of
the Company or, if necessary to avoid unreasonable burden or expense, as soon as
reasonably practicable thereafter and (z) in the case of clause (C) above, as
soon as, in the sole discretion of the Company, such suspension is no longer
appropriate. The period during which the availability of the Registration
Statement and any Prospectus is suspended (the "Deferral Period") shall, without
the Company incurring any obligation to pay liquidated damages pursuant to
Section 2(e), not exceed thirty (30) days in any three (3) month period and
ninety (90) days in any twelve (12) month period.

                  (j) If reasonably requested in writing in connection with a
disposition of Registrable Securities pursuant to a Registration Statement, make
reasonably available for inspection during normal business hours by a
representative for the Notice Holders of such Registrable Securities and any
broker-dealers, attorneys and accountants retained by such Notice Holders, all
relevant financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and cause the appropriate
executive officers, directors and designated employees of the Company and its
subsidiaries to make reasonably available for inspection during normal business
hours all relevant information reasonably requested by such representative for
the Notice Holders or any such broker-dealers, attorneys or accountants in
connection with such disposition, in each case as is reasonably necessary to
enable such Notice Holders or any such broker-dealers, attorneys or accountants
to conduct a reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that such persons shall first agree in
writing with the Company that any information that is reasonably and in good
faith designated by the Company in writing as confidential at the time of
delivery of such information shall be kept confidential by such persons and
shall be used solely for the purposes of exercising rights under this Agreement,
unless (i) disclosure of such information is required by court or administrative
order, (ii) disclosure of such information is required by law (including any
disclosure requirements pursuant to federal securities laws in connection with
the filing of any Registration Statement or the use of any Prospectus referred
to in this Agreement), (iii) such information becomes generally available to the
public other than as a result of a disclosure or failure to safeguard by any
such person or (iv) such information becomes available to any such person from a
source other than the Company and such source is not bound by a confidentiality
agreement; provided further, that (x) no Holder that is a competitor of the
Company shall have any right whatsoever to conduct any inspection of the
Company's records and information and (y) in connection with any such inspection
under this Section 3(j), any such inspectors shall use their reasonable best
efforts to minimize any disruption to the operation by the Company of its
business; and provided further, that the foregoing inspection and information
gathering shall, to the greatest extent possible, be coordinated on behalf of
all the Notice Holders and the other parties entitled thereto by the counsel
referred to in Section 5.

                  (k) Comply with all applicable rules and regulations of the
SEC and make generally available to its securityholders earning statements
(which need not be audited) satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule promulgated under
the Securities Act) no later than forty-five (45) days after the end of any
twelve (12) month period (or ninety (90) days after the end of any twelve (12)
month period if such period is a fiscal year) commencing on the first day of the
first fiscal quarter of the

                                       11
<PAGE>   12

Company commencing after the effective date of a Registration Statement, which
statements shall cover said twelve (12) month periods.

                  (l) Cooperate with each Notice Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
sold pursuant to a Registration Statement (to the extent such Registrable
Securities are certificated), and cause such Registrable Securities to be in
such denominations as are permitted by the Indenture and registered in such
names as such Notice Holder may request in writing at least three (3) Business
Days prior to any sale of such Registrable Securities.

                  (m) Provide a CUSIP number for all Registrable Securities
covered by each Registration Statement not later than the effective date of such
Registration Statement and provide the Trustee for the Securities and the
transfer agent for the Securities with printed certificates for the Registrable
Securities that are in a form eligible for deposit with The Depository Trust
Company.

                  (n) Use reasonable best efforts to provide such information as
is required for any filings required to be made with the National Association of
Securities Dealers, Inc.

                  (o) Upon (i) the filing of the Initial Shelf Registration
Statement and (ii) the effectiveness of the Initial Shelf Registration
Statement, announce the same, in each case by release to Reuters Economic
Services and Bloomberg Business News.

                  (p) Enter into such customary agreements and take all such
other reasonable necessary actions in connection therewith (including those
reasonably requested by the Holders of a majority of the Registrable Securities
being sold) in order to expedite or facilitate disposition of such Registrable
Securities.

                  (q) Cause the Indenture to be qualified under the TIA not
later than the effective date of any Registration Statement; and in connection
therewith, cooperate with the Trustee to effect such changes to the Indenture as
may be required for the Indenture to be so qualified in accordance with the
terms of the TIA and execute, and use reasonable best efforts to cause the
Trustee to execute, all documents as may be required to effect such changes, and
all other forms and documents required to be filed with the SEC to enable the
Indenture to be so qualified in a timely manner.

                  Section 4. Holder's Obligations. Each Holder agrees, by
acquisition of the Registrable Securities, to be bound by and to comply in all
respects with its obligations as a Holder under this Agreement and that no
Holder of Registrable Securities shall be entitled to any notice or other rights
hereunder or to sell any of such Registrable Securities pursuant to a
Registration Statement or to receive a Prospectus relating thereto, unless such
Holder has furnished the Company with a Notice and Questionnaire as required
pursuant to Section 2(d) hereof (including all information required to be
included in such Notice and Questionnaire) and the information set forth in the
next sentence. Each Notice Holder agrees promptly to furnish to the Company all
information required to be disclosed in order to make the information previously
furnished to the Company by such Notice Holder not misleading and any other
information regarding such Notice Holder and the distribution of such
Registrable Securities as

                                       12
<PAGE>   13

may be required to be disclosed in the Registration Statement under applicable
law or pursuant to SEC comments or as the Company may reasonably request.

                  Section 5. Registration Expenses. The Company shall bear all
fees and expenses (but not including any underwriting discounts or commissions
or transfer taxes, if any, attributable to the sale of the Securities, which
discounts, commissions and taxes shall be paid by Holders of such Securities)
incurred in connection with the performance by the Company of its obligations
under Sections 2 and 3 of this Agreement whether or not any of the Registration
Statements are declared effective. Such fees and expenses shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (x) with respect to filings required to be made with the
National Association of Securities Dealers, Inc. and (y) of compliance with
federal and state securities or Blue Sky laws (including, without limitation,
reasonable fees and disbursements of the counsel specified in the next sentence
in connection with Blue Sky qualifications of the Registrable Securities under
the laws of such jurisdictions as the Notice Holders of a majority of the
Registrable Securities being sold pursuant to a Registration Statement may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities in a form eligible for deposit
with The Depository Trust Company), (iii) duplication expenses relating to
copies of any Registration Statement or Prospectus delivered to any Holders
hereunder, (iv) fees and disbursements of counsel for the Company in connection
with the Shelf Registration Statement, and (v) reasonable fees and disbursements
of the Trustee and its counsel and of the registrar and transfer agent for the
Common Stock. In addition, the Company shall bear or reimburse the Notice
Holders for the reasonable fees and disbursements of one firm of legal counsel
for the Holders, which shall initially be Shearman & Sterling, but which may,
upon the written consent of the Purchaser (which shall not be unreasonably
withheld), be another nationally recognized law firm experienced in securities
law matters designated by the Company. In addition, the Company shall pay the
internal expenses of the Company (including, without limitation, all salaries
and expenses of officers and employees performing legal or accounting duties),
the expense of any annual audit, the fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities exchange on
which similar securities of the Company are then listed and the fees and
expenses of any person, including special experts, retained by the Company.

                  Section 6. Indemnification; Contribution. (a) The Company
agrees to indemnify and hold harmless the Purchaser and each Holder of
Registrable Securities and each person, if any, who controls the Purchaser or
any Holder of Registrable Securities within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act, as follows:

                  (i) against any and all loss, liability, claim or damage, as
         incurred, arising out of or based upon any untrue statement or alleged
         untrue statement of a material fact contained in the Registration
         Statement (or any amendment thereto), or the omission or alleged
         omission therefrom of a material fact necessary in order to make the
         statements therein, in light of the circumstances under which they were
         made, not misleading or arising out of any untrue statement or alleged
         untrue statement of a material fact included in any preliminary
         prospectus or the Prospectus (or any amendment or supplement thereto),
         or the omission or alleged omission therefrom of a material fact
         necessary in order to make the statements therein, in the light of the
         circumstances under which they were made, not misleading;

                                       13
<PAGE>   14

                  (ii) against any and all loss, liability, claim or damage, as
         incurred, to the extent of the aggregate amount paid in settlement of
         any litigation, or any investigation or proceeding by any governmental
         agency or body, commenced or threatened, or of any claim whatsoever
         based upon any such untrue statement or omission, or any such alleged
         untrue statement or omission, provided that any such settlement is
         effected with the prior written consent of the Company; and

                  (iii) against any and all expense whatsoever, as incurred
         (including the fees and disbursements of counsel), reasonably incurred
         in investigating, preparing or defending against any litigation, or any
         investigation or proceeding by any governmental agency or body,
         commenced or threatened, or any claim whatsoever based upon any such
         untrue statement or omission, or any such alleged untrue statement or
         omission;

provided, however, that the Company shall not be liable in any such case for or
in respect of any loss, liability, claim, damage or expense to the extent
arising out of or based upon any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of Purchaser or such Holder
of Registrable Securities and each person, if any, who controls the Purchaser or
any such Holder of Registrable Securities expressly for use in the Registration
Statement (or any amendment thereto), or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto); provided further, that the
Company shall not be liable in any such case for or in respect of any loss,
liability, claim, damage or expense (1) arising from an offer or sale of
Registrable Securities occurring during a Deferral Period, if Notice Holder
received a Deferral Notice, or (2) if the Holder fails to deliver at or prior to
written confirmation of sale, the most recent Prospectus, as amended or
supplemented, and such Prospectus, as amended or supplemented, would have
corrected such untrue statement or omission or alleged untrue statement or
omission of a material fact.

                  (b) In connection with any Registration Statement in which a
Holder, including, without limitation, the Purchaser, of Registrable Securities
is participating, by furnishing information relating to such Holder of
Registrable Securities to the Company in writing expressly for use in such
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto, such Holder agrees, severally and not
jointly, to indemnify and hold harmless the Purchaser and each person, if any,
who controls the Purchaser within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act and the Company, its directors,
each of its officers who signed such Registration Statement, and each person, if
any, who controls the Company within the meaning of either such Section, against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsections (a)(i), (ii) and (iii) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder of
Registrable Securities and each person, if any, who controls any such Holder of
Registrable Securities expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).

                                       14
<PAGE>   15

                  The Purchaser agrees to indemnify and hold harmless the
Company, its directors, each of its officers who signed the Registration
Statement, the Holders of Registrable Securities, and each person, if any, who
controls the Company or any Holder of Registrable Securities within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsections (a)(i), (ii) and (iii) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Purchaser expressly
for use in the Registration Statement (or any amendment thereto) or such
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).

                  (c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. In case any such
action is brought against any indemnified party and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the prior written consent of the indemnified party, settle,
compromise or consent to the entry of any judgment with respect to any pending
or threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement, compromise or consent (i) includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action and (ii) does not include any
statement as to, or an admission of, fault, culpability or a failure to act by
or on behalf of an indemnified person.

                  (d) If the indemnification provided for in this Section 6 is
for any reason unavailable to or insufficient to hold harmless an indemnified
party in respect of any losses, liabilities, claims, damages or expenses
referred to therein, then each indemnifying party shall contribute to the
aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party or parties
on the one hand and of the indemnified party on the other hand in connection
with the statements or omissions which resulted in such losses, liabilities,
claims, damages or expenses, as well as any other relevant equitable
considerations.

                  The relative fault of the Company on the one hand and the
Holders of the Registrable Securities or the Purchaser on the other hand shall
be determined by reference to,

                                       15
<PAGE>   16

among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company on the one hand or by the Holder of the
Registrable Securities or the Purchaser or such other indemnified party, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.

                  The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6(d) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 6(d). The
aggregate amount of losses, liabilities, claims, damages, and expenses incurred
by an indemnified party and referred to above in this Section 6(d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.

                  Notwithstanding the provisions of this Section 6, neither the
Holder of any Registrable Securities nor the Purchaser shall be required to
indemnify or contribute any amount in excess of the amount by which the total
price at which the Registrable Securities sold by such Holder of Registrable
Securities or purchased by the Purchaser, as the case may be, and distributed to
the public were offered to the public exceeds the amount of any damages that
such Holder of Registrable Securities or the Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.

                  No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

                  For purposes of this Section 6(d), each person, if any, who
controls the Purchaser or any Holder of Registrable Securities within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
shall have the same rights to contribution as the Purchaser or such Holder, and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Company.

                  Section 7. Information Requirements. (a) The Company covenants
that, if at any time before the end of the Effectiveness Period the Company is
not subject to the reporting requirements of the Exchange Act, it will cooperate
with any Holder of Registrable Securities and take such further reasonable
action as any Holder of Registrable Securities may reasonably request in writing
(including, without limitation, making such reasonable representations as any
such Holder may reasonably request), all to the extent required from time to
time to enable such Holder to sell Registrable Securities without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144 and Rule 144A under the Securities Act and customarily taken in
connection with sales pursuant to such exemptions. Upon the written request of
any Holder of Registrable Securities, the Company shall deliver to such Holder a

                                       16
<PAGE>   17

written statement as to whether it has complied with such filing requirements,
unless such a statement has been included in the Company's most recent report
required to be filed and filed pursuant to Section 13 or Section 15(d) of
Exchange Act. Notwithstanding the foregoing, nothing in this Section 7 shall be
deemed to require the Company to register any of its securities (other than the
Common Stock) under any section of the Exchange Act.

                  Section 8. Miscellaneous.

                  (a) No Conflicting Agreements. The Company is not, as of the
date hereof, a party to, nor shall it, on or after the date of this Agreement,
enter into, any agreement with respect to its securities that conflicts with the
rights granted to the Holders of Registrable Securities in this Agreement, other
than any conflicting rights in any such agreement that have been waived by the
beneficiary thereof. The Company represents and warrants that the rights granted
to the Holders of Registrable Securities hereunder do not in any way conflict
with the rights granted to the holders of the Company's securities under any
other agreements, other than any conflicts in any such agreement that have been
waived by the beneficiary thereof.

                  (b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of a majority of the then outstanding Underlying Common Stock constituting
Registrable Securities (with Holders of Securities deemed to be the Holders, for
purposes of this Section, of the number of outstanding shares of Underlying
Common Stock into which such Securities are or would be convertible or
exchangeable as of the date on which such consent is requested). Notwithstanding
the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders of Registrable Securities may be given by Holders of at
least a majority of the Registrable Securities being sold by such Holders
pursuant to such Registration Statement; provided that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence. Each Holder of Registrable
Securities outstanding at the time of any such amendment, modification,
supplement, waiver or consent or thereafter shall be bound by any such
amendment, modification, supplement, waiver or consent effected pursuant to this
Section 8(b), whether or not any notice, writing or marking indicating such
amendment, modification, supplement, waiver or consent appears on the
Registrable Securities or is delivered to such Holder. Each Holder may waive
compliance with respect to any obligation of the Company under this Agreement as
it may apply or be enforced by such particular Holder.

                  (c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery, by telecopier,
by courier guaranteeing overnight delivery or by first-class mail, return
receipt requested, and shall be deemed given (i) when made, if made by hand
delivery, (ii) upon confirmation, if made by telecopier, (iii) one (1) Business
Day after being deposited with such courier, if made by overnight courier or
(iv) on the date indicated on the notice of receipt, if made by first-class
mail, to the parties as follows:

                                       17
<PAGE>   18

                  (x) if to a Holder of Registrable Securities, at the most
         current address given by such Holder to the Company in a Notice and
         Questionnaire or any amendment thereto,

                  (y) if to the Company, to:

                  Diamond Offshore Drilling, Inc.
                  15415 Katy Freeway
                  Houston, TX 77094
                  Attention:  Corporate Secretary
                  Telephone:  (281) 492-5300
                  Facsimile:  (281) 647-2223

                  with a copy to:

                  Weil, Gotshal & Manges LLP
                  700 Louisiana, Suite 1600
                  Houston, TX 77002
                  Attention:  Shelton M. Vaughan
                  Telephone:  (713) 546-5000
                  Facsimile:  (713) 224-9511

                  and

                  (z) if to the Purchaser, to:

                  Merrill Lynch & Co., Merrill Lynch, Pierce,
                  Fenner & Smith Incorporated
                  World Financial Center
                  North Tower
                  250 Vesey Street
                  New York, New York  10281
                  Attention: Syndicate Department
                  Facsimile: (212) 738-1069

                  with a copy to:

                  Shearman & Sterling
                  599 Lexington Avenue
                  New York, New York 10022
                  Attention:  Michael J. Schiavone
                  Telephone:  (212) 848-4000
                  Facsimile:  (212) 848-7179

or to such other address as such person may have furnished to the other persons
identified in this Section 8(c) in writing in accordance herewith.

                  (d) Approval of Holders. Whenever the consent or approval of
Holders of a specified percentage of Registrable Securities is required
hereunder, the Registrable Securities

                                       18
<PAGE>   19

held by the Company or its affiliates (as such term is defined in Rule 405 under
the Securities Act) (other than the Purchaser or subsequent Holders of
Registrable Securities if such subsequent Holders are deemed to be such
affiliates solely by reason of their holdings of such Registrable Securities)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.

                  (e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Purchase Agreement or the Indenture.
If any transferee of any Holder shall acquire Securities or Registrable
Securities, in any manner, whether by operation of law or otherwise, such
Securities or Registrable Securities shall be held subject to all of the terms
of this Agreement, and by taking and holding such Securities or Registrable
Securities, such person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement and such
person shall be entitled to receive the benefits hereof. The Purchaser (in its
capacity as Purchaser) shall have no liability or obligation to the Company with
respect to any failure by any other Holder to comply with, or any breach by any
other Holder of, any of the obligations of such other Holder under this
Agreement.

                  (f) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be original and all of which taken
together shall constitute one and the same agreement.

                  (g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                  (h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES THEREOF.

                  (i) Severability. If any term, provision, covenant or
restriction of this Agreement is held to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated thereby, and the parties hereto
shall use their best efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction, it being intended that all of the rights and
privileges of the parties shall be enforceable to the fullest extent permitted
by law.

                  (j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and is intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and the
registration rights granted by the Company with respect to the Registrable
Securities. Except as provided in the Purchase Agreement, there are no
restrictions, promises,

                                       19
<PAGE>   20

warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the Registrable Securities. This Agreement supersedes all prior agreements and
undertakings among the parties with respect to such registration rights.

                  (k) Termination. This Agreement and the obligations of the
parties hereunder shall terminate upon the expiration of the Effectiveness
Period, except for any liabilities or obligations under Sections 4, 5 or 6
hereof and the obligations to make payments of and provide for liquidated
damages under Section 2(e) hereof to the extent such damages accrue prior to the
end of the Effectiveness Period, each of which shall remain in effect in
accordance with its terms.

                [Remainder of this page intentionally left blank]

                                       20
<PAGE>   21

                  IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.

DIAMOND OFFSHORE DRILLING, INC.

By: /s/ William C. Long
   -------------------------------
   Name:  William C. Long
   Title: Vice President, General Counsel & Secretary

Confirmed and accepted as of the date
first above written:

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
            INCORPORATED

By: /s/ Richard K. Gordon
   -------------------------------
   Name:  Richard K. Gordon
   Title: Vice Chairman

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