DIAMOND OFFSHORE DRILLING INC, POS AM, 1996-05-23

DIAMOND OFFSHORE DRILLING INC
POS AM, 1996-05-23
DRILLING OIL & GAS WELLS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 23, 1996

REGISTRATION NO. 333-2680
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

POST-EFFECTIVE

AMENDMENT NO. 1

TO
FORMS S-4/S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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

DIAMOND OFFSHORE DRILLING, INC.
(Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 1381 76-0321760
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)

DIAMOND OFFSHORE DRILLING, INC. RICHARD L. LIONBERGER, ESQ.
15415 KATY FREEWAY, SUITE 400 VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
HOUSTON, TEXAS 77094 15415 KATY FREEWAY, SUITE 400
(713) 492-5300 HOUSTON, TEXAS 77094
(Address, Including Zip Code, and Telephone Number, (713) 492-5300
Including Area Code, of Registrant's (Name, Address, Including Zip Code and
Principal Executive Offices) Telephone Number, Including Area
Code, of Agent For Service)
</TABLE>

Copies to:

<TABLE>
<S> <C>
JAMES L. RICE III, ESQ. MORRIS J. KRAMER, ESQ.
WEIL, GOTSHAL & MANGES LLP ROBERT M. CHILSTROM, ESQ.
700 LOUISIANA, SUITE 1600 SKADDEN, ARPS, SLATE, MEAGHER & FLOM
HOUSTON, TEXAS 77002 919 THIRD AVENUE
(713) 546-5000 NEW YORK, NEW YORK 10022
(212) 735-3000
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the amalgamation (the "Acquisition") of AO Acquisition Limited
with Arethusa (Off-Shore) Limited pursuant to the Plan of Acquisition described
in the enclosed Prospectus/Joint Proxy Statement have been satisfied or waived.
If any of the securities being registered on these Forms are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE> 2

EXPLANATORY NOTE

This Post-Effective Amendment No. 1 to Registration Statement No. 333-2680
is being filed for the sole purpose of adding the following exhibits to the
Registration Statement: Form of U.S. Purchase Agreement; Form of International
Purchase Agreement; and List of Subsidiaries of Diamond Offshore.

II-1
<PAGE> 3

FORM S-4 ITEM 21/FORM S-1 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of U.S. Purchase Agreement
1.2 Form of International Purchase Agreement
2.1 Plan of Acquisition*
2.2 Amendment No. 1 to Plan of Acquisition*
2.3 Amalgamation Agreement*
3.1 Restated Certificate of Incorporation of Diamond Offshore (incorporated
by reference herein to Exhibit 3.1 of Diamond Offshore's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995)
3.2 Amended By-laws of Diamond Offshore*
3.2.1 Amendment of the Company's By-laws on November 8, 1995*
3.2.2 Amendment of the Company's By-laws on April 3, 1996*
5.1 Opinion of Weil, Gotshal & Manges LLP regarding validity of the
securities being registered*
8.1 Opinion of Weil, Gotshal & Manges LLP regarding certain tax matters*
10.1 Fee Agreement*
10.2 Amendment No. 1 to Fee Agreement*
10.3 Loews Stockholder's Agreement*
10.4 Amendment No. 1 to Loews Stockholder's Agreement*
10.5 Shareholders Agreement*
10.6 Amendment No. 1 to Shareholders Agreement*
10.7 Termination and Settlement Agreement dated October 10, 1995 between
Loews and Diamond Offshore (incorporated by reference herein to Exhibit
10.1 of Diamond Offshore's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995)
10.8 Registration Rights Agreement dated October 16, 1995 between Loews and
Diamond Offshore (incorporated by reference herein to Exhibit 10.2 of
Diamond Offshore's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995)
10.9 Services Agreement dated October 16, 1995 between Loews and Diamond
Offshore (incorporated by reference herein to Exhibit 10.3 of Diamond
Offshore's Annual Report on Form 10-K for the fiscal year ended December
31, 1995)
10.10 Agreement ("Rose Employment Agreement"), dated November 1, 1992, between
Diamond Offshore and Robert E. Rose (incorporated by reference herein to
Exhibit 10.7 of Diamond Offshore's Registration Statement No. 33-95484
on Form S-1)
10.11 Amendment, dated December 27, 1995, to the Rose Employment Agreement
(incorporated by reference herein to Exhibit 10.5 of Diamond Offshore's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995)
10.12 Credit Agreement among Diamond Offshore, Diamond Offshore Limited,
various lending institutions, Bankers Trust Company and Christiania Bank
og Kreditkasse, New York Branch, as Co-Arrangers and Bankers Trust
Company, as Administrative Agent dated as of February 8, 1996 and
amended and restated as of March 27, 1996*
</TABLE>

II-2
<PAGE> 4

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------------------------------------------------------------------------------------------
<S> <C>
10.13 Diamond Offshore Management Bonus Program (incorporated by reference
herein to Exhibit 10.9 of Diamond Offshore's Registration Statement No.
33-95484 on Form S-1)
10.14 Form of Diamond Offshore Executive Deferred Compensation Plan
(incorporated by reference herein to Exhibit 10.10 of Diamond Offshore's
Registration Statement No. 33-95484 on Form S-1)
10.15+ Term Drilling Contract dated March 29, 1996 between Diamond Offshore and
Chevron U.S.A. Production Company with respect to the Ocean Quest
10.16 Letter of Intent entered into September 6, 1995 between Diamond Offshore
and Texaco Exploration and Production Inc. with respect to the Ocean
Star (formerly named Ocean Countess) (incorporated by reference herein
to Exhibit 10.12 of Diamond Offshore's Registration Statement No.
33-95484 on Form S-1)
10.17 Diamond Offshore Drilling, Inc. Nonqualified Stock Option Plan for
Certain Former Directors of Arethusa*
10.18 Diamond Offshore Drilling, Inc. Stock Option Plan for Certain Former
Employees of Arethusa*
21.1 List of Subsidiaries of Diamond Offshore
23.1 Consent of Deloitte & Touche LLP*
23.2 Consent of Arthur Andersen & Co.*
23.3 Consent of Klynveld Peat Marwick Goerdeler*
23.4 Consent of Weil, Gotshal & Manges LLP. Reference is made to Exhibit 5.1
23.5 Consent of Weil, Gotshal & Manges LLP. Reference is made to Exhibit 8.1
23.6 Consent of CS First Boston Corporation*
23.7 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated*
24.1 Powers of Attorney*
99.1 Fairness Opinion of CS First Boston Corporation*
99.2 Fairness Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated*
99.3 Excerpts from The Companies Act of 1981 of Bermuda, as amended*
99.4 Form of Diamond Offshore proxy card*
99.5 Form of Arethusa proxy card*
</TABLE>

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

* Previously filed.

+ Previously filed confidentially.

(b) Financial Statement Schedules

Not applicable.

II-3
<PAGE> 5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Post-Effective Amendment No. 1 to Registration
Statement on Forms S-4/S-1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Houston, State of Texas, on May 23,
1996.

DIAMOND OFFSHORE DRILLING, INC.

By: /s/ RICHARD L. LIONBERGER
---------------------------------
Name: Richard L. Lionberger
Title: Vice President, General
Counsel and Secretary

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 1 to Registration Statement has been signed by
the following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- -----------------
<S> <C> <C>
/s/ ROBERT E. ROSE* President, Chief Executive May 23, 1996
- --------------------------------------------- Officer and Director
Robert E. Rose (principal executive
officer)

/s/ LAWRENCE R. DICKERSON* Senior Vice President and May 23, 1996
- --------------------------------------------- Chief Financial Officer
Lawrence R. Dickerson (principal financial
officer)

/s/ GARY T. KRENEK* Controller (principal May 23, 1996
- --------------------------------------------- accounting officer)
Gary T. Krenek

/s/ JAMES S. TISCH* Chairman of the Board May 23, 1996
- ---------------------------------------------
James S. Tisch

/s/ HERBERT C. HOFMANN* Director May 23, 1996
- ---------------------------------------------
Herbert C. Hofmann

*By: /s/ RICHARD L. LIONBERGER
- ---------------------------------------------
Richard L. Lionberger
Attorney-in-Fact
</TABLE>

II-4
<PAGE> 6

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------------------------------------------------------------------------
<S> <C>
1.1 Form of U.S. Purchase Agreement
1.2 Form of International Purchase Agreement
2.1 Plan of Acquisition*
2.2 Amendment No. 1 to Plan of Acquisition*
2.3 Amalgamation Agreement*
3.1 Restated Certificate of Incorporation of Diamond Offshore
(incorporated by reference herein to Exhibit 3.1 of Diamond Offshore's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995)
3.2 Amended By-laws of Diamond Offshore*
3.2.1 Amendment of the Company's By-laws on November 8, 1995*
3.2.2 Amendment of the Company's By-laws on April 3, 1996*
5.1 Opinion of Weil, Gotshal & Manges LLP regarding validity of the
securities being registered*
8.1 Opinion of Weil, Gotshal & Manges LLP regarding certain tax matters*
10.1 Fee Agreement*
10.2 Amendment No. 1 to Fee Agreement*
10.3 Loews Stockholder's Agreement*
10.4 Amendment No. 1 to Loews Stockholder's Agreement*
10.5 Shareholders Agreement*
10.6 Amendment No. 1 to Shareholders Agreement*
10.7 Termination and Settlement Agreement dated October 10, 1995 between
Loews and Diamond Offshore (incorporated by reference herein to
Exhibit 10.1 of Diamond Offshore's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995)
10.8 Registration Rights Agreement dated October 16, 1995 between Loews and
Diamond Offshore (incorporated by reference herein to Exhibit 10.2 of
Diamond Offshore's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995)
10.9 Services Agreement dated October 16, 1995 between Loews and Diamond
Offshore (incorporated by reference herein to Exhibit 10.3 of Diamond
Offshore's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995)
10.10 Agreement ("Rose Employment Agreement"), dated November 1, 1992,
between Diamond Offshore and Robert E. Rose (incorporated by reference
herein to Exhibit 10.7 of Diamond Offshore's Registration Statement
No. 33-95484 on Form S-1)
10.11 Amendment, dated December 27, 1995, to the Rose Employment Agreement
(incorporated by reference herein to Exhibit 10.5 of Diamond
Offshore's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995)
10.12 Credit Agreement among Diamond Offshore, Diamond Offshore Limited,
various lending institutions, Bankers Trust Company and Christiania
Bank og Kreditkasse, New York Branch, as Co-Arrangers and Bankers
Trust Company, as Administrative Agent dated as of February 8, 1996
and amended and restated as of March 27, 1996*
</TABLE>

<PAGE> 7

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------------------------------------------------------------------------
<S> <C>
10.13 Diamond Offshore Management Bonus Program (incorporated by reference
herein to Exhibit 10.9 of Diamond Offshore's Registration Statement
No. 33-95484 on Form S-1)
10.14 Form of Diamond Offshore Executive Deferred Compensation Plan
(incorporated by reference herein to Exhibit 10.10 of Diamond
Offshore's Registration Statement No. 33-95484 on Form S-1)
10.15+ Term Drilling Contract dated March 29, 1996 between Diamond Offshore
and Chevron U.S.A. Production Company with respect to the Ocean Quest
10.16 Letter of Intent entered into September 6, 1995 between Diamond
Offshore and Texaco Exploration and Production Inc. with respect to
the Ocean Star (formerly named Ocean Countess) (incorporated by
reference herein to Exhibit 10.12 of Diamond Offshore's Registration
Statement No. 33-95484 on Form S-1)
10.17 Diamond Offshore Drilling, Inc. Nonqualified Stock Option Plan for
Certain Former Directors of Arethusa*
10.18 Diamond Offshore Drilling, Inc. Stock Option Plan for Certain Former
Employees of Arethusa*
21.1 List of Subsidiaries of Diamond Offshore
23.1 Consent of Deloitte & Touche LLP*
23.2 Consent of Arthur Andersen & Co.*
23.3 Consent of Klynveld Peat Marwick Goerdeler*
23.4 Consent of Weil, Gotshal & Manges LLP. Reference is made to Exhibit
5.1
23.5 Consent of Weil, Gotshal & Manges LLP. Reference is made to Exhibit
8.1
23.6 Consent of CS First Boston Corporation*
23.7 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated*
24.1 Powers of Attorney*
99.1 Fairness Opinion of CS First Boston Corporation*
99.2 Fairness Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated*
99.3 Excerpts from The Companies Act of 1981 of Bermuda, as amended*
99.4 Form of Diamond Offshore proxy card*
99.5 Form of Arethusa proxy card*
</TABLE>

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

* Previously filed.

+ Previously filed confidentially.

<PAGE> 1
EXHIBIT 1.1

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DIAMOND OFFSHORE DRILLING, INC.
(a Delaware corporation)

6,018,140 Shares of Common Stock

U.S. PURCHASE AGREEMENT

Dated: May __, 1996

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<PAGE> 2
DIAMOND OFFSHORE DRILLING, INC.

(a Delaware corporation)

6,018,140 Shares of Common Stock

(Par Value $.01 Per Share)

U.S. PURCHASE AGREEMENT

May __, 1996

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
CS FIRST BOSTON CORPORATION
SALOMON BROTHERS INC
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
North Tower
World Financial Center
New York, New York 10281-1209

Ladies and Gentlemen:

Diamond Offshore Drilling, Inc., a Delaware corporation (the
"Company"), Alphee S.A., a Luxembourg corporation ("Alphee"), and Forvaltnings
AB Ratos, a Swedish corporation ("Ratos" and, together with Alphee, the
"Selling Stockholders"), confirm their respective agreements with Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), CS First Boston
Corporation and Salomon Brothers Inc. (collectively, the "U.S. Underwriters,"
which term shall also include any underwriter substituted as hereinafter
provided in Section 10 hereof), with respect to the sale by the Selling
Stockholders and the purchase by the U.S. Underwriters, acting severally and
not jointly, of the respective numbers of shares of Common Stock, par value
$.01 per share, of the Company ("Common Stock") set forth in said Schedule A
and Schedule B hereto, and with respect to the grant by the Selling
Stockholders to the U.S. Underwriters, acting severally and not jointly, of the
option described in
<PAGE> 3
Section 2(b) hereof to purchase such number of shares of Common Stock set forth
in Schedule B hereto to cover over-allotments, if any. The aforesaid 6,018,140
shares of Common Stock (the "Initial U.S. Securities") to be purchased by the
U.S. Underwriters and all or any part of the shares of Common Stock subject to
the option described in Section 2(b) hereof (the "U.S. Option Securities") are
hereinafter called, collectively, the "U.S. Securities."

It is understood that the Company and the Selling Stockholders
are concurrently entering into an agreement, dated the date hereof (the
"International Purchase Agreement"), providing for the sale by the Selling
Stockholders of an aggregate of 1,505,000 shares of Common Stock (the "Initial
International Securities") through arrangements with certain underwriters
outside the United States (the "International Managers" which, together with
the U.S. Underwriters, shall be referred to as the "Underwriters"). The
Selling Stockholders have also granted to the International Managers an option
to purchase all or any part of 150,501 shares of Common Stock (the
"International Option Securities" which, together with the Initial
International Securities, shall be referred to as the "International
Securities") to cover over-allotments, if any. The U.S. Securities and the
International Securities are hereinafter collectively referred to as the
"Offered Securities."

The Company and the Selling Stockholders understand that the
U.S. Underwriters will simultaneously enter into an agreement with the
International Managers dated the date hereof (the "Intersyndicate Agreement")
providing for the coordination of certain transactions among the U.S.
Underwriters and the International Managers, under the direction of Merrill
Lynch.

The purchase price per share for the International Securities
to be paid by the several International Managers shall be identical to the
purchase price per share for the U.S. Securities to be paid by the several U.S.
Underwriters hereunder.

The Company and the Selling Stockholders understand that the
U.S. Underwriters propose to make a public offering of the U.S. Securities as
soon as the U.S.

2
<PAGE> 4
Underwriters deem advisable after this Agreement has been executed and
delivered.

The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Forms S-4/S-1 (No.
333-2680) covering, among other things, the registration of the Offered
Securities under the Securities Act of 1933, as amended (the "1933 Act"),
including the related preliminary prospectus or prospectuses. Promptly after
execution and delivery of this Agreement, the Company will either (i) prepare
and file a prospectus in accordance with the provisions of Rule 430A ("Rule
430A") of the rules and regulations of the Commission under the 1933 Act (the
"1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of the
1933 Act Regulations or (ii) if the Company has elected to rely upon Rule 434
("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b).
Two forms of prospectus are to be used in connection with the offering and sale
of the Offered Securities: one relating to the U.S. Securities (the "Form of
U.S. Prospectus") and one relating to the International Securities (the "Form
of International Prospectus"). Each of the Form of U.S. Prospectus and the
Form of International Prospectus consists of (a) a "Basic Prospectus," which is
the prospectus included in the above-described registration statement and (b) a
"Prospectus Supplement," which specifically relates to the Offered Securities,
in the form first filed with, or transmitted for filing to, the Commission
pursuant to Rule 424. The Form of International Prospectus is identical to the
Form of U.S. Prospectus, except for the front cover and back cover pages and
the information under the caption "Underwriting." The term "Prospectus," as
used herein, shall refer to the Basic Prospectus as so supplemented by the
relevant Prospectus Supplement. The information included in such prospectuses
or in such Term Sheet, as the case may be, that was omitted from such
registration statement at the time it became effective but that is deemed to be
part of such registration statement at the time it became effective (a)
pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
"Rule 434 Information." Each Form of U.S. Prospectus and Form of International
Prospectus used before such registration statement became effective, and any
prospectus that

3
<PAGE> 5
omitted, as applicable, the Rule 430A Information or the Rule 434 Information,
that was used after such effectiveness and prior to the execution and delivery
of this Agreement, is herein called a "preliminary prospectus." Such
registration statement, including the exhibits and any schedules, at the time
it became effective and including the Rule 430A Information and the Rule 434
Information, as applicable, is herein called the "Registration Statement." Any
registration statement filed pursuant to Rule 462(b) of the 1933 Act
Regulations is herein referred to as the "Rule 462(b) Registration Statement,"
and after such filing the term "Registration Statement" shall include the Rule
462(b) Registration Statement. The final prospectuses in the forms first
furnished to the U.S. Underwriters or the International Managers, as the case
may be, for use in connection with the offering of the U.S. Securities or the
International Securities, as the case may be, are herein called the "U.S.
Prospectus and the International Prospectus." If Rule 434 is relied on, the
terms "U.S. Prospectus" and "International Prospectus" shall refer to the
preliminary U.S. Prospectus and the preliminary International Prospectus dated
April 30, 1996 together with the Term Sheet and all references in this
Agreement to the date of the U.S. Prospectus and the International Prospectus
shall mean the date of the Term Sheet. For purposes of this Agreement, all
references to the Registration Statement, any preliminary prospectus, the U.S.
Prospectus, the International Prospectus or any Term Sheet or any amendment or
supplement to any of the foregoing shall be deemed to include the copy filed
with the Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval system ("EDGAR"). The U.S. Prospectus and the International
Prospectus are collectively referred to herein as the "Prospectuses."

SECTION 1. Representations and Warranties.

(a) Representations and Warranties by the Company. The
Company represents and warrants to each U.S. Underwriter as of the date hereof,
as of the Closing Time referred to in Section 2(c) hereof, and as of each Date
of Delivery (if any) referred to in Section 2(b) hereof, and agrees with each
U.S. Underwriter, as follows:

4
<PAGE> 6
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information has
been complied with.

At the respective times the Registration Statement,
any Rule 462(b) Registration Statement and any post-effective amendments
thereto became effective and at the Closing Time (and, if any U.S.
Option Securities are purchased, at the Date of Delivery), the
Registration Statement, the Rule 462(b) Registration Statement and any
amendments and supplements thereto complied and will comply in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations and did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
Neither of the Prospectuses nor any amendments or supplements thereto,
at the time the Prospectuses or any such amendment or supplement was
issued and at the Closing Time (and, if any U.S. Option Securities are
purchased, at the Date of Delivery), included or will include an untrue
statement of a material fact or omitted or will omit to state a material
fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. If
Rule 434 is used, the Company will comply with the requirements of Rule
434 and the Prospectuses shall not be "materially different," as such
term is used in Rule 434, from the Prospectuses included in the
Registration Statement at the time it became effective. The
representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or the
Prospectuses made in reliance upon and in conformity with information
furnished to the Company (x) prior to April 29, 1996 by or on behalf

5
<PAGE> 7
of Arethusa (as defined herein) or (y) in writing by (a) any Underwriter
through Merrill Lynch, or (b) any Selling Stockholder, expressly for use
in the Registration Statement or either Prospectus.

Each preliminary prospectus and the prospectuses
filed as part of the Registration Statement as originally filed or as
part of any amendment thereto, or filed pursuant to Rule 424 under the
1933 Act, complied when so filed in all material respects with the 1933
Act Regulations and, if applicable, each preliminary prospectus and the
Prospectuses delivered to the Underwriters for use in connection with
this offering was identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.

(ii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required by
the 1933 Act and the 1933 Act Regulations.

(iii) Financial Statements. The financial statements
included in the Registration Statement and the Prospectuses, together
with the related schedules and notes, present fairly the financial
position of the Company and Arethusa (Off-Shore) Limited, a Bermuda
corporation ("Arethusa"), and their respective consolidated subsidiaries
at the dates indicated and the statement of operations, stockholders'
equity and cash flows of the Company, Arethusa and their respective
consolidated subsidiaries for the periods specified; said financial
statements have been prepared in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved. The supporting schedules, if any, included in the
Registration Statement present fairly in accordance with GAAP the
information required to be stated therein. The selected financial data
and the summary financial information included in the Prospectuses
present fairly the information shown therein and have been compiled on a
basis consistent with that of the audited financial statements included
in the Registration Statement. The pro forma

6
<PAGE> 8
financial statements and the related notes thereto included in the
Registration Statement and the Prospectuses present fairly the
information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the bases described
therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give
effect to the transactions and circumstances referred to therein.

(iv) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectuses, and except as otherwise stated therein,
(A) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its Subsidiaries (as defined herein)
considered as one enterprise whether or not arising in the ordinary
course of business (a "Material Adverse Effect"), (B) there have been no
transactions entered into by the Company or any of its Subsidiaries,
other than those in the ordinary course of business, which are material
with respect to the Company and its Subsidiaries considered as one
enterprise and (C) except as described in the Prospectuses, there has
been no dividend or distribution of any kind declared, paid or made by
the Company on any class of its capital stock in fiscal 1994, 1995 or
1996.

(v) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the state of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectuses and to enter into and perform
its obligations under this Agreement and the International Purchase
Agreement; and the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership
or leasing of property or the conduct of business, except where the
failure so to qualify

7
<PAGE> 9
or to be in good standing would not result in a Material Adverse Effect.

(vi) Good Standing of Subsidiaries. Each subsidiary of the
Company (each a "Subsidiary" and, collectively, the "Subsidiaries") has
been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectuses and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct
of business, except where the failure with respect to any of the
foregoing would not result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all of the issued and
outstanding capital stock of each such Subsidiary has been duly
authorized and validly issued and is fully paid and non-assessable,
except where the failure of such capital stock to have been so
authorized and issued would not have a Material Adverse Effect; such
shares of capital stock are owned by the Company, directly or through
subsidiaries, and except for liens and security interests securing the
Diamond Offshore Bank Credit Facility (as defined in the Prospectuses)
which are described in the Prospectuses, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity, except
where the failure of the Company so to own such capital stock would not
have a Material Adverse Effect; none of the outstanding shares of
capital stock of any Subsidiary was issued in violation of the
preemptive or similar rights of any securityholder of such Subsidiary,
except any such violations which would not, individually or in the
aggregate, have a Material Adverse Effect. The only subsidiaries of the
Company are (a) the Subsidiaries listed on Exhibit 21 to the
Registration Statement, (b) former subsidiaries of Arethusa and (c)
certain other Subsidiaries which, considered in the aggregate as a
single Subsidiary, do not constitute a "significant subsidiary" as
defined in Rule 1-02 of Regulation S-X.

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<PAGE> 10
(vii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectuses in the
column entitled "Historical" under the caption "Capitalization" (except
for subsequent issuances, if any, pursuant to reservations, agreements
or employee benefit plans referred to in the Prospectuses or pursuant to
the exercise of convertible securities or options referred to in the
Prospectuses). The shares of issued and outstanding capital stock have
been duly authorized and validly issued and are fully paid and
non-assessable; none of the outstanding shares of capital stock of the
Company was issued in violation of the preemptive or other similar
rights of any securityholder of the Company arising by operation of law,
under the Company's Restated Certificate of Incorporation or by-laws,
under any agreement to which the Company or any of its Subsidiaries is a
party or otherwise.

(viii) Authorization of Agreement. This Agreement and the
International Purchase Agreement have been duly authorized, executed and
delivered by the Company.

(ix) Description of Securities. The Common Stock conforms to
all statements relating thereto contained in the Prospectuses and such
description conforms to the rights set forth in the instruments defining
the same; no holder of the Offered Securities will be subject to
personal liability by reason of being such a holder; and the sale of the
Offered Securities is not subject to preemptive or other similar rights
of any securityholder of the Company.

(x) Absence of Defaults and Conflicts. Neither the Company
nor any of its Subsidiaries is in violation of its charter or by-laws or
in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its Subsidiaries
is a party or by which it or any of them may be bound, or to which any
of the property or assets of the Company or Subsidiary is subject
(collectively, "Agreements and Instruments") except

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<PAGE> 11
for such defaults that would not result in a Material Adverse Effect;
and the execution, delivery and performance of this Agreement and the
International Purchase Agreement and the consummation of the
transactions contemplated herein, therein and in the Registration
Statement and compliance by the Company with its obligations hereunder
have been duly authorized by all necessary corporate action and do not
and will not, whether with or without the giving of notice or passage of
time or both, conflict with or constitute a breach of, or default or
Repayment Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any Subsidiary pursuant to, the Agreements and
Instruments (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not impair the Company's or any of
the Subsidiaries' ability to perform the obligations hereunder or which
would not result in a Material Adverse Effect), nor will such action
result in any violation of the provisions of the Restated Certificate of
Incorporation or by-laws of the Company or any Subsidiary or any
applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any Subsidiary or
any of their assets, properties or operations. As used herein, a
"Repayment Event" means any event or condition which gives the holder of
any note, debenture or other evidence of indebtedness (or any person
acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any Subsidiary.

(xi) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any Subsidiary exists or, to the knowledge
of the Company, is imminent, which, in either case, may reasonably be
expected to result in a Material Adverse Effect.

(xii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to

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<PAGE> 12
the knowledge of the Company, threatened, against or affecting the
Company or any Subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
individually or in the aggregate might reasonably be expected to result
in a Material Adverse Effect, or which might reasonably be expected to
materially and adversely affect the properties or assets thereof or the
consummation of this Agreement, the International Purchase Agreement or
the performance by the Company of its obligations hereunder or
thereunder; the aggregate of all pending legal or governmental
proceedings to which the Company or any Subsidiary is a party or of
which any of their respective property or assets is the subject which
are not described in the Registration Statement, including ordinary
routine litigation incidental to the business, are not reasonably
expected to result in a Material Adverse Effect.

(xiii) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement or the Prospectuses or to be filed as exhibits thereto which
have not been so described as required.

(xiv) Possession of Intellectual Property. The Company and
its Subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and neither the Company
nor any of its Subsidiaries has received any notice or is otherwise
aware of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
Subsidiaries therein, and which infringement or conflict (if the subject
of any unfavorable decision, ruling or finding) or invalidity

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<PAGE> 13
or inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.

(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
the Company's obligations hereunder or under the International Purchase
Agreement, in connection with the offering of the Offered Securities or
the consummation of the transactions contemplated by this Agreement and
the International Purchase Agreement, except such as have been already
obtained or as may be required under the 1933 Act or the 1933 Act
Regulations, the Delaware General Corporation Law or state securities
laws.

(xvi) Maritime Laws. No consent or approval of any federal
governmental agency with respect to any federal maritime law matter is
required in connection with the performance by the Company of its
obligations under this Agreement or the International Purchase Agreement
or the issuance and sale of the Offered Securities; and neither the
issue, offer, sale or delivery by the Company of the Offered Securities
pursuant to this Agreement or the International Purchase Agreement or
the execution, delivery, and performance by the Company and the
consummation of the transactions contemplated thereby 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 (MarAd) and the United States Coast Guard.

12
<PAGE> 14
aggregate, have a Material Adverse Effect; all of the Governmental
Licenses are valid and in full force and effect, except when the
invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.

(xviii) Title to Property. The Company and its Subsidiaries
have good and marketable title to all real property owned by the Company
and its Subsidiaries and good title to all other properties owned by
them, in each case, free and clear of all mortgages, pledges, liens,
security interests, claims, restrictions or encumbrances of any kind
except such as (a) are described in the Prospectuses, (b) do not, singly
or in the aggregate, materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property
by the Company or any of its Subsidiaries or (c) are "Permitted Liens";
and all of the leases and subleases material to the business of the
Company and its Subsidiaries, considered as one enterprise, and under
which the Company or any of its Subsidiaries holds properties described
in the Prospectus, are in full force and effect, and neither the Company
nor any Subsidiary has any notice of any material claim of any sort that
has been asserted by anyone adverse to the rights of the Company or any
Subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such Subsidiary to
the continued possession of the leased or subleased premises under any
such lease or sublease. "Permitted Liens" means (i) liens for taxes not
yet due or liens that have not been filed for taxes that are being
contested in good faith and by appropriate proceedings diligently
prosecuted, (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

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<PAGE> 15
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, (iv) pledges and deposits to secure letters of credit, 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, (v)
mortgages, liens and security interests securing the Diamond Offshore
Bank Credit Facility (as defined in the Prospectuses) and (vi) mortgages
and liens securing former Arethusa credit facilities (the indebtedness
under which has been paid in full) which remain unreleased of record.

(xix) Compliance with Cuba Act. The Company has complied
with, and is and, prior to the completion of the distribution of the
Offered Securities, will be in compliance with, the provisions of that
certain Florida act relating to disclosure of doing business with Cuba,
codified as Section 517.075 of the Florida statutes, and the rules and
regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.

(xx) Investment Company Act and Public Utility Holding
Company Act. The Company is not, and upon the sale of the Offered
Securities as herein contemplated will not be, (A) an "investment
company" or an entity "controlled" by an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended (the
"1940 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 of 1935, as amended, and the rules and
regulations promulgated by the Commission thereunder (the "Holding
Company Act").

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<PAGE> 16
of any federal, state, local or foreign statute, law, rule, regulation,
ordinance, code, policy or rule of common law or any judicial or
administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution
or protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials (collectively, "Environmental Laws"), (B) the Company and its
Subsidiaries have all permits, authoriza- tions and approvals required
under any applicable Environmental Laws and are each in compliance with
their requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against
the Company or any of its Subsidiaries and (D) there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by
any private party or governmental body or agency, against or affecting
the Company or any of its Subsidiaries relating to any Hazardous
Materials or the violation of any Environmental Laws.

(xxii) The Acquisition. The Acquisition (as defined in the
Prospectuses) has been consummated in the manner described in the
Prospectuses.

(xxiii) Registration Rights. Except as described in the
Registration Statement, there are no persons with registration or other
similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the
1933 Act.

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<PAGE> 17
(b) Representations and Warranties by the Selling
Stockholders. Each Selling Stockholder severally represents and warrants to
each U.S. Underwriter (and in the case of paragraph (v), to the Company) as of
the date hereof, as of the Closing Time, and, if one or more Selling
Stockholder is selling U.S. Option Securities on a Date of Delivery, as of each
such Date of Delivery, and agrees with each U.S. Underwriter, as follows:

(i) Accurate Disclosure. Such Selling Stockholder has no
reason to believe that the representations and warranties of the Company
contained in Section 1(a) hereof are not true and correct in any
material respect. Such Selling Stockholder has reviewed and is familiar
with the Registration Statement and, (A) to the best knowledge of such
Selling Stockholder, to the extent that any statements or omissions made
in the Prospectuses or any amendment or supplement thereto are made in
reliance upon and in conformity with written information with respect to
such Selling Stockholder furnished to the Company by such Selling
Stockholder expressly for use therein or (B) to such Stockholder's
knowledge, without any independent investigation, to the extent that any
statements or omissions made in the Prospectuses or any amendment or
supplement thereto relate to any information with respect to Arethusa
furnished to the Company prior to April 29, 1996 by or on behalf of
Arethusa, the Registration Statement and the Prospectuses do not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; such Selling
Stockholder is not prompted to sell the U.S. Securities to be sold by
such Selling Stockholder hereunder by any information concerning the
Company or any Subsidiary of the Company which is not set forth in the
Prospectuses.

(ii) Authorization of Agreements. Such Selling Stockholder
has the full right, power and authority to enter into this Agreement,
the International Purchase Agreement and with respect to Alphee, a power
of attorney (the "Alphee Power of Attorney") appointing James F. Munsell
and John Berton as Attorneys-in-Fact (the "Alphee Power of

16
<PAGE> 18
Attorney"), and with respect to Ratos, a power of attorney (the "Ratos
Power of Attorney"), appointing Gary Wolfe and Olle Isberg as
Attorneys-in-Fact (such individuals, together with Messrs. Munsell and
Berton, are each referred to herein as an "Attorney-in-Fact"; and each
of the Alphee Power of Attorney and the Ratos Power of Attorney is
referred to herein as a "Power of Attorney"), and to sell, transfer and
deliver the U.S. Securities to be sold by such Selling Stockholder
hereunder. The execution and delivery by each Selling Stockholder of
this Agreement, the International Purchase Agreement and its respective
Power of Attorney, and the sale and delivery of the Securities to be
sold by such Selling Stockholder and the consummation of the
transactions contemplated herein and compliance by such Selling
Stockholder with its obligations hereunder have been duly authorized by
such Selling Stockholder and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute a breach of or default under, or result in the creation or
imposition of any tax, lien, charge or encumbrance upon the Offered
Securities to be sold by such Selling Stockholder or any property or
assets of such Selling Stockholder pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, license, lease
or other agreement or instrument to which such Selling Stockholder is a
party or by which such Selling Stockholder may be bound, or to which any
of the property or assets of such Selling Stockholder is subject
(including any contract or other instrument creating any right-of-first
refusal or any similar right with respect to the Offered Securities),
nor will such action result in any violation of the provisions of the
charter or by-laws or other organizational instrument of such Selling
Stockholder, or any applicable treaty, law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
such Selling Stockholder or any of its properties.

(iii) Good and Marketable Title. Such Selling Stockholder
has and will have at the Closing Time and, if any U.S. Option Securities
are purchased, on the Date of Delivery, good and marketable title to

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<PAGE> 19
the U.S. Securities to be sold by such Selling Stockholder hereunder,
free and clear of any security interest, mortgage, pledge, lien, charge,
claim, equity or encumbrance of any kind, other than pursuant to this
Agreement; and upon delivery of such U.S. Securities and payment of the
purchase price therefor as herein contemplated, assuming each U.S.
Underwriter acquires its interest in such U.S. Securities in good faith
and has no notice of any adverse claim, each of the U.S. Underwriters
will receive good and marketable title to the U.S. Securities purchased
by it from such Selling Stockholder, free and clear of any security
interest, mortgage, pledge, lien, charge, claim, equity or encumbrance
of any kind.

(iv) Due Execution of Agreements. Such Selling Stockholder
has duly executed and delivered, in the form heretofore furnished to the
U.S. Underwriters, with respect to Alphee, the Alphee Power of Attorney,
and with respect to Ratos, the Ratos Power of Attorney; and each
Attorney-in-Fact is authorized by its respective Selling Stockholder to
execute and deliver this Agreement and the certificate referred to in
Section 5(h) or that may be required pursuant to Sections 5(m) and 5(n)
on behalf of such Selling Stockholder, to sell, assign and transfer to
the U.S. Underwriters the U.S. Securities to be sold by such Selling
Stockholder hereunder, to determine the purchase price to be paid by the
U.S. Underwriters to such Selling Stockholder, as provided in Section
2(a) hereof, to authorize the delivery of the U.S. Securities to be sold
by such Selling Stockholder hereunder, to accept payment therefor, and
otherwise to act on behalf of such Selling Stockholder in connection
with this Agreement.

(v) Absence of Manipulation. Such Selling Stockholder has
not taken and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be
expected to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of
the Securities.

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<PAGE> 20
(vi) Absence of Further Requirements. No filing with, or
consent, approval, authorization, order, registration, qualification or
decree of, any court or governmental authority or agency, domestic or
foreign, is required for the performance by such Selling Stockholder of
its obligations hereunder or in the Alphee Power of Attorney or the
Ratos Power of Attorney (as the case may be), or in connection with the
sale and delivery of the U.S. Securities hereunder or the consummation
of the transactions contemplated by this Agreement, except such as may
have previously been made or obtained or as may be required under the
1933 Act or the 1933 Act Regulations or state securities laws.

(vii) Restriction on Sale of Securities. During a period of
90 days from the date of the Prospectuses, such Selling Stockholder will
not, without the prior written consent of Merrill Lynch, (i) sell, offer
to sell, grant any option for sale of, contract or otherwise transfer,
directly or indirectly, any share of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock. The
foregoing sentence shall not apply to the Common Stock to be sold
hereunder or under the International Purchase Agreement. In addition,
during the 90 days after the date of this Agreement, such Selling
Stockholders will not release the Company from the Company's obligation
under the Shareholders Agreement (as defined in the Prospectuses) not to
effect, and to cause Loews to agree not to effect, any public sale or
distribution of any securities the same as or similar to the Common
Stock, or any securities convertible into or exchangeable for securities
the same as or similar to the Common Stock (except pursuant to
registrations on Form S-4 or any successor form, or Form S-8 or any
successor form relating solely to securities offered pursuant to any
benefit plan).

(viii) Transfer of U.S. Securities. Certificates for all of
the U.S. Securities to be sold by such Selling Stockholder pursuant to
this Agreement, in suitable form for transfer by delivery or accompanied
by duly executed instruments of transfer or assignment in blank with
signatures guaranteed, will have been delivered prior to the Closing
Date to the

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<PAGE> 21
Company's transfer agent, Chemical Mellon Shareholder Services, L.L.C.
(or in the case of U.S. Securities that are not in certificated form,
such other customary method of transfer from such Selling Stockholder to
such transfer agent), with irrevocable conditional instructions to
deliver such U.S. Securities to the U.S. Underwriters pursuant to this
Agreement.

(ix) No Association with NASD. Neither such Selling
Stockholder nor any of its affiliates directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
common control with, or has any other association with (within the
meaning of Article I, Section 1(m) of the Bylaws of the National
Association of Securities Dealers, Inc.), any member firm of the
National Association of Securities Dealers, Inc.

(c) Officer's Certificates. Any certificate signed by any
officer of the Company or any subsidiary delivered to the U.S. Underwriters or
to counsel for the U.S. Underwriters shall be deemed a representation and
warranty by the Company to each U.S. Underwriter as to the matters covered
thereby; and any certificate signed by or on behalf of any Selling Stockholder
as such and delivered to the U.S. Underwriters or to counsel for the U.S.
Underwriters pursuant to the terms of this Agreement shall be deemed a
representation and warranty by such Selling Stockholder to the U.S.
Underwriters as to the matters covered thereby.

SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.

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<PAGE> 22
Underwriter, plus any additional number of Initial U.S. Securities which such
U.S. Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof bears to the total number of Initial U.S. Securities,
subject, in each case, to such adjustments among the U.S. Underwriters as the
U.S. Underwriters in their sole discretion shall make to eliminate any sales or
purchases of fractional securities.

(b) Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Selling Stockholders, acting severally and not
jointly, hereby grant an option to the U.S. Underwriters, severally and not
jointly, to purchase, at the price per share set forth in Schedule C, up to the
additional number of shares of Common Stock set forth in Schedule B less an
amount per share equal to any dividends or distributions declared by the
Company and payable on the Initial U.S. Securities but not payable on the U.S.
Option Securities. The option hereby granted will expire 30 days after the
date hereof and may be exercised in whole or in part from time to time only for
the purpose of covering over-allotments which may be made in connection with
the offering and distribution of the Initial U.S. Securities upon notice by the
U.S. Underwriters to the Company and the Selling Stockholders setting forth the
number of U.S. Option Securities as to which the several U.S. Underwriters are
then exercising the option and the time and date of payment and delivery for
such U.S. Option Securities. Any such time and date of delivery (a "Date of
Delivery") shall be determined by the U.S. Underwriters, but shall not be later
than seven full business days after the exercise of said option, nor in any
event prior to the Closing Time, as hereinafter defined. If the option is
exercised as to all or any portion of the U.S. Option Securities, each of the
U.S. Underwriters, acting severally and not jointly, will purchase that
proportion of the total number of U.S. Option Securities then being purchased
which the number of Initial U.S. Securities set forth in Schedule A opposite
the name of such U.S. Underwriter bears to the total number of Initial U.S.
Securities, subject in each case to such adjustments as the U.S. Underwriters
in their discretion shall make to eliminate any sales or purchases of
fractional shares.

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<PAGE> 23
(c) Payment. Payment of the purchase price for, and
delivery of certificates for, the Initial U.S. Securities shall be made at the
office of Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, New
York 10022, or at such other place as shall be agreed upon by the U.S.
Underwriters, the Company and the Selling Stockholders, at 10:00 A.M. (Eastern
Time) on the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern
Time) on any given day) business day after the date hereof (unless postponed in
accordance with the provisions of Section 10), or such other time not later
than ten business days after such date as shall be agreed upon by the U.S.
Underwriters, the Company and the Selling Stockholders (such time and date of
payment and delivery being herein called "Closing Time").

In addition, in the event that any or all of the U.S. Option
Securities are purchased by the U.S. Underwriters, payment of the purchase
price for, and delivery of certificates for, such U.S. Option Securities shall
be made at the above-mentioned offices, or at such other place as shall be
agreed upon by the U.S. Underwriters, the Company and the Selling Stockholders,
on each Date of Delivery as specified in the notice from the U.S. Underwriters
to the Company and the Selling Stockholders. Payment for the Initial U.S.
Securities and the U.S. Option Securities shall be made to each Selling
Stockholder by wire transfer of immediately available funds to one or more bank
accounts designated by such Selling Stockholder, against delivery to the U.S.
Underwriters for the respective accounts of the U.S. Underwriters of
certificates for the U.S. Securities to be purchased by them. It is understood
that each U.S. Underwriter has authorized the U.S. Underwriters, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial U.S. Securities and the U.S. Option Securities, if any,
which it has agreed to purchase. Merrill Lynch, individually and not as
representative of the U.S. Underwriters, may (but shall not be obligated to)
make payment of the purchase price for the Initial U.S. Securities or the U.S.
Option Securities, if any, to be purchased by any U.S. Underwriter whose
payment has not been received by the Closing Time or the relevant Date of
Delivery, as the case may be, but such payment shall not relieve such U.S.
Underwriter from its obligations hereunder.

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<PAGE> 24
(d) Denominations; Registration. Certificates for the
Initial U.S. Securities and the U.S. Option Securities, if any, shall be in
such denominations and registered in such names as the U.S. Underwriters may
request in writing at least one full business day before the Closing Time or
the relevant Date of Delivery, as the case may be. The certificates for the
Initial U.S. Securities and the U.S. Option Securities, if any, will be made
available for examination and packaging by the U.S. Underwriters in the City of
New York not later than 10:00 A.M. (Eastern Time) on the business day prior to
the Closing Time or the relevant Date of Delivery, as the case may be.

SECTION 3. Covenants of the Company. The Company covenants
with each U.S. Underwriter as follows:

(a) Compliance with Securities Regulations and Commission
Requests. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A and will notify the U.S. Underwriters
immediately, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement shall become
effective, or any supplement to the Prospectuses or any amended
Prospectuses shall have been filed, (ii) of the receipt of any comments
from the Commission, (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement
to the Prospectuses or for additional information and (iv) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing
or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Offered Securities for offering
or sale in any jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes. The Company will promptly effect
the filings necessary pursuant to Rule 424(b) and will take such steps
as it deems necessary to ascertain promptly whether the forms of
prospectus transmitted for filing under Rule 424(b) were received for
filing by the Commission and, in the event that they were not, it will
promptly file such prospectuses. The Company will make every reasonable
effort to prevent the issuance of any stop

23
<PAGE> 25
order and, if any stop order is issued, to obtain the lifting thereof at
the earliest possible moment.

(b) Filing of Amendments. The Company will give the U.S.
Underwriters notice of its intention to file or prepare any amendment to
the Registration Statement (including any filing under Rule 462(b)), any
Term Sheet or any amendment, supplement or revision to either the
prospectuses included in the Registration Statement at the time it
became effective or to the Prospectuses and will furnish the U.S.
Underwriters with copies of any such documents a reasonable amount of
time prior to such proposed filing or use, as the case may be, and will
not file or use any such document to which the U.S. Underwriters or
counsel for the U.S. Underwriters reasonably shall object.

(c) Delivery of Registration Statements. The Company has
furnished or will deliver to the U.S. Underwriters and counsel for the
U.S. Underwriters, without charge, signed copies of the Registration
Statement as originally filed and of each amendment thereto (including
exhibits filed therewith or incorporated by reference therein and signed
copies of all consents and certificates of experts, and will also
deliver to the U.S. Underwriters, without charge, a conformed copy of
the Registration Statement as originally filed and of each amendment
thereto (without exhibits) for each of the U.S. Underwriters. If
applicable, the copies of the Registration Statement and each amendment
thereto furnished to the U.S. Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.

(d) Delivery of Prospectuses. The Company has delivered
to each U.S. Underwriter, without charge, as many copies of each
preliminary U.S. prospectus as such U.S. Underwriter reasonably
requested, and the Company hereby consents to the use of such copies for
purposes permitted by the 1933 Act. The Company will furnish to each
U.S. Underwriter, without charge, during the period when the U.S.
Prospectus is required to be delivered under the 1933 Act or the
Securities Exchange Act of 1934 (the "1934

24
<PAGE> 26
Act"), such number of copies of the U.S. Prospectus (as amended or
supplemented) as such U.S. Underwriter may reasonably request. If
applicable, the U.S. Prospectus and any amendments or supplements
thereto furnished to the U.S. Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.

(e) Continued Compliance with Securities Laws. The
Company will comply with the 1933 Act and the 1933 Act Regulations so as
to permit the completion of the distribution of the Offered Securities
as contemplated in this Agreement, the International Purchase Agreement
and in the Prospectuses. If at any time when a prospectus is required
by the 1933 Act to be delivered in connection with sales of the Offered
Securities, any event shall occur or condition shall exist as a result
of which it is necessary to amend the Registration Statement or amend or
supplement the Prospectuses in order that the Prospectuses will not
include any untrue statements of a material fact or omit to state a
material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary at any such time
to amend the Registration Statement or amend or supplement the
Prospectuses in order to comply with the requirements of the 1933 Act or
the 1933 Act Regulations, the Company will promptly prepare and file
with the Commission, subject to Section 3(b), such amendment or
supplement as may be necessary to correct such statement or omission or
to make the Registration Statement or the Prospectuses comply with such
requirements, and the Company will furnish to the U.S. Underwriters such
number of copies of such amendment or supplement as the U.S.
Underwriters may reasonably request.

(f) Blue Sky Qualifications. The Company will use its
best efforts, in cooperation with the U.S. Underwriters, to qualify the
Offered Securities for offering and sale under the applicable securities
laws of such states and other jurisdictions (domestic or foreign) as the
U.S. Underwriters may designate and to maintain such qualifications in
effect

25
<PAGE> 27
for a period of not less than one year from the later of the effective
date of the Registration Statement and any Rule 462(b) Registration
Statement; provided, however, that the Company shall not be obligated to
file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in
which it is not so qualified or to subject itself to taxation in respect
of doing business in any jurisdiction in which it is not otherwise so
subject. In each jurisdiction in which the Offered Securities have been
so qualified, the Company will file such statements and reports as may
be required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from the
effective date of the Registration Statement and any Rule 462(b)
Registration Statement.

(g) Rule 158. The Company will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally
available to its security holders as soon as practicable an earnings
statement for the purposes of, and to provide the benefits contemplated
by, the last paragraph of Section 11(a) of the 1933 Act.

(h) Reporting Requirements. The Company, during the
period in which the Prospectuses are required to be delivered under the
1933 Act or the 1934 Act, will file all documents required to be filed
with the Commission pursuant to the 1934 Act within the time periods
required by the 1934 Act and the rules and regulations of the Commission
thereunder.

(i) Release of Certain Mortgages and Liens. The Company
will use its best commercially reasonable efforts to obtain the release
of record of the mortgages and liens referred to in clause (vi) of
Section 1(a)(xviii) hereof within 60 days of the date hereof; upon
obtaining such release or releases, the Company shall promptly furnish
evidence of such release or releases to the U.S. Underwriters and their
counsel.

26
<PAGE> 28
SECTION 4. Payment of Expenses. (a) Expenses. Except as
otherwise agreed to in writing by the U.S. Underwriters and the Selling
Stockholders, the Company will pay all expenses incident to the performance of
its obligations under this Agreement, including (i) the preparation, printing
and filing of the Registration Statement (including financial statements and
exhibits) as originally filed and of each amendment thereto, (ii) the
preparation, photocopying and delivery to the Underwriters of this Agreement,
any Agreement among U.S. Underwriters, the International Purchase Agreement,
the Agreement among International Managers, the Intersyndicate Agreement
between the U.S. Underwriters and the International Managers and such other
documents as may be required in connection with the offering, purchase, sale
and delivery of the Offered Securities, (iii) the preparation, issuance and
delivery of the certificates for the Offered Securities to the Underwriters,
including any stock or other transfer taxes or duties payable upon the sale of
the Offered Securities to the Underwriters, (iv) the fees and disbursements of
the Company's counsel, accountants and other advisors, (v) the qualification of
the Offered Securities under securities laws in accordance with the provisions
of Section 3(f) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus, any Term Sheets and of the Prospectuses and any
amendments or supplements thereto, (vii) the preparation, photocopying and
delivery to the Underwriters of copies of the Blue Sky Survey and any
supplement thereto, (viii) the fees and expenses of any transfer agent or
registrar for the Offered Securities and (ix) the filing fees incident to, and
the reasonable fees and disbursements of counsel to the Underwriters in
connection with, the review by the National Association of Securities Dealers,
Inc. (the "NASD") of the terms of the sale of the Offered Securities, if any.

(b) Expenses of the Selling Stockholders. Each Selling
Stockholder will pay all of its expenses incident to the performance of its
respective obligations under, and the consummation of the transactions
contemplated by this Agreement, including: (i) any stamp duties, capital duties
and stock transfer taxes, if any,

27
<PAGE> 29
payable upon the sale of the U.S. Securities to the U.S. Underwriters by such
Selling Stockholder, and their transfer between the Underwriters pursuant to an
agreement between such Underwriters, (ii) the fees and disbursements of its
respective counsel and accountants. and (iii) all expenses required to be paid
by the Selling Stockholders (A) as between the Selling Stockholders and the
Company, as set forth in the last sentence of Section 4(h) of the Shareholders
Agreement, and (B) as between the Selling Stockholders and the Underwriters, as
set forth in that certain Expense Agreement dated as of the date hereof among
the Selling Stockholders and the Underwriters.

(c) Termination of Agreement. If this Agreement is
terminated by the U.S. Underwriters in accordance with the provisions of
Section 5 (other than Section 5(e), (h), (m)(ii) or (m)(vi)), Section 9(a)(i)
or Section 11 hereof, the Company shall reimburse the U.S. Underwriters for
all of their out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the U.S. Underwriters. If this Agreement is
terminated by the U.S. Underwriters in accordance with the provisions of
Section 5(e), (h), (m)(ii) or (m)(vi) or Section 11, the Selling Stockholders
shall reimburse the U.S. Underwriters and the Company for all of their
reasonable respective out-of-pocket expenses, including the reasonable fees and
disbursements of their respective counsel.

SECTION 5. Conditions of the U.S. Underwriters' Obligations.
The obligations of the several U.S. Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Company and the Selling
Stockholders contained in Section 1 hereof or in certificates of any officer of
the Company, any Subsidiary or any of the Selling Stockholders delivered
pursuant to the provisions hereof, to the performance by the Company and the
Selling Stockholders of their respective covenants and other obligations
hereunder, and to the following further conditions:

(a) Effectiveness of Registration Statement. The
Registration Statement, including any Rule 462(b) Registration
Statement, has become effective on the date hereof and at Closing Time
no stop order suspending the effectiveness of the Registration

28
<PAGE> 30
Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on
the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of counsel to the
Underwriters. Prospectuses containing the Rule 430A Information shall
have been filed with the Commission in accordance with Rule 424(b) (or a
post-effective amendment providing such information shall have been
filed and declared effective in accordance with the requirements of Rule
430A) or, if the Company has elected to rely upon Rule 434, a Term Sheet
shall have been filed with the Commission in accordance with Rule
424(b).

(b) Opinion of Counsel for the Company. At Closing Time,
the U.S. Underwriters shall have received the favorable opinion, dated
as of Closing Time, of Weil, Gotshal & Manges LLP, counsel for the
Company, in form and substance reasonably satisfactory to counsel for
the U.S. Underwriters, together with signed or reproduced copies of such
letter for each of the other U.S. Underwriters substantially to the
effect set forth in Exhibit A hereto and to such further effect as
counsel to the U.S. Underwriters may reasonably request.

(c) Opinion of General Counsel of the Company. At
Closing Time, the U.S. Underwriters shall have received the favorable
opinion, dated as of Closing Time, of Richard L. Lionberger, Vice
President and General Counsel of the Company, in form and substance
reasonably satisfactory to counsel for the U.S. Underwriters, together
with signed or reproduced copies of such letter for each of the other
U.S. Underwriters substantially to the effect set forth in Exhibit B
hereto and to such further effect as counsel to the U.S. Underwriters
may reasonably request.

(d) Opinion of Maritime Counsel for the Company. At
Closing Time, the U.S. Underwriters shall have received the favorable
opinion, dated as of Closing Time, of Verner, Liipfert, Bernhard,
McPherson and Hand, Chartered, special maritime counsel for the Company,
in form and substance reasonably satisfactory to counsel for the U.S.
Under-

29
<PAGE> 31
writers, together with signed or reproduced copies of such letter for
each of the other U.S. Underwriters substantially to the effect set
forth in Exhibit C hereto and to such further effect as counsel to the
U.S. Underwriters may reasonably request.

(e) Opinions of Counsel for the Selling Stockholders. At
Closing Time, the U.S. Underwriters shall have received the favorable
opinion, dated as of Closing Time, of (i) Loesch & Wolter, Luxembourg
counsel for Alphee, (ii) Mannheimer Swartling, Swedish counsel for
Ratos, (iii) Cleary, Gottlieb, Steen & Hamilton, U.S. counsel for
Alphee, and (iv) Seward & Kissel, U.S. counsel for Ratos, in form and
substance reasonably satisfactory to counsel for the U.S. Underwriters,
together with signed or reproduced copies of such letter for each of the
other U.S. Underwriters substantially to the effect set forth in
Exhibits D-1, D-2, D-3 and D-4, respectively, hereto and to such further
effect as counsel to the U.S. Underwriters may reasonably request.

(f) Opinion of Counsel for the U.S. Underwriters. At Closing
Time the U.S. Underwriters shall have received the favorable opinion,
dated as of Closing Time, of Skadden, Arps, Slate, Meagher & Flom,
counsel for the U.S. Underwriters, together with signed or reproduced
copies of such letter for each of the other U.S. Underwriters, in form
and substance reasonably satisfactory to the U.S. Underwriters.

(g) Officers' Certificate. At Closing Time there shall
not have been, since the date hereof or since the respective dates as of
which information is given in the Prospectuses, any material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, and the U.S. Underwriters shall have
received a certificate of the President or a Vice President of the
Company and of the chief financial or chief accounting officer of the
Company, dated as of Closing Time, to the effect that (i) there has been
no such material adverse change, (ii) the representations and warranties
in

30
<PAGE> 32
Section 1(a) hereof are true and correct with the same force and effect
as though expressly made at and as of Closing Time, (iii) the Company
has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied under this Agreement and under the
International Purchase Agreement at or prior to Closing Time and (iv) no
stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been instituted
or are pending or are contemplated by the Commission.

(h) Certificate of the Selling Stockholders. At Closing
Time, the U.S. Underwriters shall have received a certificate of each
Selling Stockholder, or of an Attorney-in-Fact on behalf of such Selling
Stockholder, dated as of Closing Time, to the effect that (i) the
representations and warranties of each Selling Stockholder contained in
Section l(b) hereof are true and correct in all respects with the same
force and effect as though expressly made at and as of Closing Time and
(ii) such Selling Stockholder has complied in all material respects with
all agreements and satisfied all conditions on its part to be performed
or satisfied under this Agreement at or prior to Closing Time.

(i) Accountants' Comfort Letter. At the time of the
execution of this Agreement, the U.S. Underwriters shall have received
from Deloitte & Touche LLP and Arthur Andersen & Co. letters dated such
date, in form and substance satisfactory to the U.S. Underwriters,
together with signed or reproduced copies of such letter for each of the
other U.S. Underwriters containing statements and information of the
type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain
financial information contained in the Registration Statement and the
Prospectuses.

(j) Bring-down Comfort Letter. At Closing Time the U.S.
Underwriters shall have received from each of the accountants identified
in the preceding paragraph a letter, dated as of Closing Time, to the
effect that they reaffirm the statements made in the letters furnished
pursuant to the preceding para-

31
<PAGE> 33
graph of this Section, except that the specified date referred to shall
be a date not more than three business days prior to Closing Time.

(k) No Objection. The NASD shall not have raised any
objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements.

(l) Agreement with Loews. The Underwriters shall have
entered into an agreement with Loews Corporation, a Delaware corporation
("Loews"), in the form previously submitted to the U.S. Underwriters,
with such changes and revisions as shall be agreed to by the parties
thereto, and the opinion provided for therein shall have been delivered
to the Underwriters.

(m) Conditions to Purchase of the U.S. Option Securities.
In the event that the U.S. Underwriters exercise their option provided
in Section 2(b) hereof to purchase all or any portion of the U.S. Option
Securities, the representations and warranties of the Company and the
Selling Stockholders contained herein and the statements in any
certificates furnished by the Company and the Selling Stockholders
hereunder shall be true and correct as of each Date of Delivery and, at
the relevant Date of Delivery, the U.S. Underwriters shall have
received:

(i) Officers' Certificate. A certificate, dated
such Date of Delivery, of the President or a Vice President of
the Company and of the chief financial or chief accounting
officer of the Company confirming that the certificate
delivered at the Closing Time pursuant to Section 5(g) hereof
remains true and correct as of such Date of Delivery.

(ii) Selling Stockholders' Certificates. A
certificate, dated such Date of Delivery, of each Selling
Stockholder, or of an Attorney-in-Fact on behalf of such
Selling Stockholder, confirming that the certificate delivered
at Closing Time pursuant to Section 5(h) remains true and
correct as of such Date of Delivery.

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<PAGE> 34
(iii) Opinion of Counsel for Company. The favorable
opinion of Weil, Gotshal & Manges LLP, counsel for the
Company, substantially in form and substance reasonably
satisfactory to counsel for the U.S. Underwriters, dated such
Date of Delivery, relating to the U.S. Option Securities to be
purchased on such Date of Delivery and otherwise to the same
effect as the opinion required by Section 5(b) hereof.

(iv) Opinion of Counsel for Company. The favorable
opinion of Richard L. Lionberger, Vice President and General
Counsel of the Company, in form and substance reasonably
satisfactory to counsel for the U.S. Underwriters, dated such
Date of Delivery, relating to the U.S. Option Securities to be
purchased on such Date of Delivery and otherwise to the same
effect as the opinion required by Section 5(c) hereof.

(v) Opinion of Maritime Counsel for the Company.
The favorable opinion of Verner, Liipfert, Bernhard, McPherson
and Hand, Chartered, special maritime counsel for the Company,
in form and substance reasonably satisfactory to counsel for
the U.S. Underwriters, dated such Date of Delivery, relating
to the U.S. Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion
required by Section 5(d) hereof.

(vi) Opinion of Counsels for Selling Stockholders.
The favorable opinion of (A) Loesch & Wolter, Luxembourg
counsel for Alphee, (B) Mannheimer Swartling, Swedish counsel
for Ratos, and (C) Cleary, Gottlieb, Steen & Hamilton, U.S.
counsel for Alphee, and Seward & Kissel, U.S. counsel for
Ratos, in form and substance reasonably satisfactory to
counsel for the U.S. Underwriters, dated such Date of
Delivery, relating to the U.S. Option Securities to be
purchased on such Date of Delivery and otherwise to the same
effect as the opinions required by Section 5(e).

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<PAGE> 35
(vii) Opinion of Counsel for the U.S. Underwriters.
The favorable opinion of Skadden, Arps, Slate, Meagher & Flom,
counsel for the U.S. Underwriters, dated such Date of
Delivery, relating to the U.S. Option Securities to be
purchased on such Date of Delivery and otherwise to the same
effect as the opinion required by Section 5(f) hereof.

(viii) Bring-down Comfort Letter. Letters from
Deloitte & Touche LLP and Arthur Andersen & Co., in form and
substance satisfactory to the U.S. Underwriters and dated such
Date of Delivery, substantially in the same form and substance
as the letter furnished to the U.S. Underwriters pursuant to
Section 5(i) hereof, except that the "specified date" in the
letter furnished pursuant to this paragraph shall be a date
not more than five days prior to such Date of Delivery.

(n) Additional Documents. At Closing Time and at each
Date of Delivery counsel for the U.S. Underwriters shall have been
furnished with such certificates and such other customary closing
documents as they may require for the purpose of enabling them to pass
upon the sale of the U.S. 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 and the Selling Stockholders, in
connection with the sale of the U.S. Securities as herein contemplated
shall be satisfactory in form and substance to the U.S. Underwriters and
counsel for the U.S. Underwriters.

(o) Termination of Agreement. If any condition specified
in this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the
purchase of U.S. Option Securities, on a Date of Delivery which is after
the Closing Time, the obligations of the several U.S. Underwriters to
purchase the relevant U.S. Option Securities, may be terminated by the
U.S. Underwriters by notice to the Company and the Selling Stockholders
at any time at

34
<PAGE> 36
or prior to Closing Time or such Date of Delivery, as the case may be,
and such termination shall be without liability of any party to any
other party except as provided in Section 4 and except that Sections 1,
6 and 7 shall survive any such termination and remain in full force and
effect.

SECTION 6. Indemnification.

(a) Indemnification of U.S. Underwriters. The Company
agrees to indemnify and hold harmless each U.S. Underwriter and each person, if
any, who controls any U.S. Underwriter within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act as follows:

(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or
any 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;

(ii) against any and all loss, liability, claim, damage and
expense whatsoever, 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 (subject to
Section 6(c) below) any such settlement is effected with the written
consent of the Company and the Selling Stockholders; and

35
<PAGE> 37
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), 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, to the extent that any such
expense is not paid under paragraphs (i) or (ii) of this Section 6(a))
above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of 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 (x)
prior to April 29, 1996 by or on behalf of Arethusa or (y) in writing by (i)
any U.S. Underwriter through Merrill Lynch, or (ii) any Selling Stockholder,
expressly for use in the Registration Statement (or any amendment thereto),
including the 430A Information and the Rule 434 Information, if applicable, or
any preliminary prospectus or the Prospectuses (or any amendment or supplement
thereto) and provided further, that this indemnification agreement shall not
apply to any loss, liability, claim, damage or expense if a copy of the U.S.
Prospectus (as then amended or supplemented if the Company shall have prepared
any amendments or supplements thereto) was not sent or given by or on behalf of
any U.S. Underwriter to such person, if such is required by law, at or prior to
the written confirmation of the sale of Offered Securities to such person and
if the U.S. Prospectus, as so amended or supplemented, would have cured the
defect giving rise to such loss, liability, claim, damage or expense.

(b) Indemnification of U.S. Underwriters, the Company,
Directors and Officers by the Selling Stockholders. Each Selling Stockholder,
severally and not jointly (in the proportion that the number of U.S. Securities
being sold by such Selling Stockholder bears to the total number of U.S.
Securities), with respect to (i) below, and jointly and severally, with respect
to (ii) below, agrees to indemnify and hold harmless each U.S. Underwriter, the
Company, the Company's directors, each of the Company's officers who signed the
Registration Statement,

36
<PAGE> 38
and each person, if any, who controls a U.S. Underwriter or the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act,
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section 6, 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),
including the Rule 430A Information and the Rule 434 Information, if
applicable, or any preliminary prospectus or any Prospectus (or any amendment
or supplement thereto) (i) in reliance upon and in conformity with written
information furnished to the Company by a Selling Stockholder with respect to
such Selling Stockholder expressly for use in the Registration Statement (or
any amendment thereto) or such preliminary prospectus or any Prospectus (or any
amendment or supplement thereto) or (ii) any information with respect to
Arethusa furnished to the Company prior to April 29, 1996 by or on behalf of
Arethusa.

(c) Indemnification of Company, Selling Stockholders,
Directors and Officers by the U.S. Underwriters. Each U.S. Underwriter
severally agrees to indemnify and hold harmless the Company, its directors,
each of its officers who signed the Registration Statement, and each person, if
any, who controls the Company within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act, and each Selling Stockholder against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in subsection (a) of this Section 6, 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), including the Rule
430A Information and the Rule 434 Information, if applicable, or any
preliminary prospectus or any Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by such U.S. Underwriter through Merrill Lynch expressly for use
in the Registration Statement (or any amendment thereto) or such preliminary
prospectus or any Prospectus (or any amendment or supplement thereto).

(d) Actions against Parties; Notification. Each
indemnified party shall give notice as promptly as reasonably practicable to
each indemnifying party of any

37
<PAGE> 39
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 reasonably
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 6 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. An indemnified party may
participate at its own expense in the defense of any such action. In no event
shall the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. No indemnifying party shall, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 6 or Section 7 hereof (whether
or not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of
any indemnified party.

38
<PAGE> 40
(e) Settlement without Consent if Failure to Reimburse.
If at any time an indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.

SECTION 7. Contribution. If the indemnification provided for
in Section 6 hereof 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, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, the Selling Stockholders and the U.S. Underwriters from the offering
of the U.S. 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, the Selling
Stockholders and the U.S. Underwriters 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 Selling Stockholders and
the U.S. Underwriters in connection with the offering of the U.S. 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 U.S. Securities
pursuant to this Agreement (before deducting expenses) received by the Selling
Stockholders and the total underwriting discount received by the U.S.
Underwriters, in each case as set forth on the cover of

39
<PAGE> 41
the U.S. Prospectus, or, if Rule 434 is used, the corresponding location on the
Term Sheet bear to the aggregate initial public offering price of the U.S.
Securities as set forth on such cover.

The relative fault of the Company, the Selling Stockholders
and the U.S. Underwriters 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, the Selling Stockholders or the U.S. Underwriters and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.

The Company, the Selling Stockholders and the U.S.
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 7 were determined by pro rata allocation (even if the
U.S. Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this Section 7. The aggregate amount of
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section 7 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, no U.S.
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the U.S. Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such U.S. Underwriter has otherwise been required to pay by
reason of any 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 1933

40
<PAGE> 42
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.

For purposes of this Section 7, (i) each person, if any, who
controls a U.S. Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
U.S. Underwriter, (ii) each director of the Company, each officer of the
Company who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as the
Company and (iii) each director of each Selling Stockholder and each person, if
any, who controls such Selling Stockholder within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as such Selling Stockholder. The U.S. Underwriters' respective
obligations to contribute pursuant to this Section 7 are several in proportion
to the number of Initial U.S. Securities set forth opposite their respective
names in Schedule A hereto and not joint.

SECTION 8. Representations, Warranties and Agreements to
Survive Delivery. All representations, warranties and agreements contained in
this Agreement or in certificates of officers of the Company or the Selling
Stockholders submitted pursuant hereto, shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any
U.S. Underwriter or controlling person, or by or on behalf of the Company or
the Selling Stockholders, and shall survive delivery of the U.S. Securities to
the U.S. Underwriters.

SECTION 9. Termination of Agreement.

(a) Termination; General. The U.S. Underwriters may
terminate this Agreement, by notice to the Company and the Selling
Stockholders, at any time at or prior to Closing Time (i) if there has been,
since the time of execution of this Agreement or since the respective dates as
of which information is given in the Prospectuses, any material adverse change
in the condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Company and its Subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, (ii) if
there

41
<PAGE> 43
has occurred any material adverse change in the financial markets in the United
States for the international financial markets, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political,
financial or economic conditions, in each case the effect of which is such as
to make it, in the judgment of the U.S. Underwriters, impracticable to market
the U.S. Securities or to enforce contracts for the sale of the U.S.
Securities, (iii) if trading in any securities of the Company has been
suspended or limited by the Commission or the New York Stock Exchange, or if
trading generally on the American Stock Exchange or the New York Stock Exchange
or in the Nasdaq National Market has been suspended or limited, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices have
been required, by any of said exchanges or by such system or by order of the
Commission, the National Association of Securities Dealers, Inc. or any other
governmental authority or (iv) if a banking moratorium has been declared by
either Federal or New York authorities.

(b) Liabilities. If this Agreement is terminated
pursuant to this Section 9, such termination shall be without liability of any
party to any other party except as provided in Section 4 hereof, and provided
further that Sections 1, 6 and 7 shall survive such termination and remain in
full force and effect.

SECTION 10. Default by One or More of the U.S. Underwriters.
If one or more of the U.S. Underwriters shall fail at Closing Time or a Date of
Delivery to purchase the U.S. Securities which it or they are obligated to
purchase under this Agreement (the "Defaulted Securities"), the U.S.
Underwriters shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting U.S. Underwriters, or any
other underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the U.S. Underwriters shall not have completed such
arrangements within such 24-hour period, then:

(a) if the number of Defaulted Securities does not exceed
10% of the number of U.S. Securities to be purchased on such date, each
of the non-default-

42
<PAGE> 44
ing U.S. Underwriters shall be obligated, severally and not jointly, to
purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting U.S. Underwriters, or

(b) if the number of Defaulted Securities exceeds 10% of
the number of U.S. Securities to be purchased on such date, this
Agreement or, with respect to any Date of Delivery which occurs after
the Closing Time, the obligation of the U.S. Underwriters to purchase
and of the Selling Stockholders to sell the U.S. Option Securities to be
purchased and sold on such Date of Delivery shall terminate without
liability on the part of any non-defaulting U.S. Underwriter.

No action taken pursuant to this Section 10 shall relieve any
defaulting U.S. Underwriter from liability in respect of its default.

In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the
obligation of the U.S. Underwriters to purchase and the Selling Stockholders to
sell the relevant U.S. Option Securities, as the case may be, either the U.S.
Underwriters or the Selling Stockholders shall have the right to postpone
Closing Time or the relevant Date of Delivery, as the case may be, for a period
not exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectuses or in any other documents or
arrangements. As used herein, the term "U.S. Underwriter" includes any person
substituted for an U.S. Underwriter under this Section 10.

SECTION 11. Default by One or More of the Selling
Stockholders. (a) If any Selling Stockholder shall fail at Closing Time to
sell and deliver the number of U.S. Securities which such Selling Stockholder
is obligated to sell hereunder, then the U.S. Underwriters may, at option of
the U.S. Underwriters, by notice from the U.S. Underwriters to the Company and
the nondefaulting Selling Stockholder, either (i) terminate this Agreement
without any liability on the fault of any non-

43
<PAGE> 45
defaulting party except that the provisions of Sections 1, 4, 6 and 7 shall
remain in full force and effect or (ii) elect to purchase the U.S. Securities
which the nondefaulting Selling Stockholder has agreed to sell hereunder. No
action taken pursuant to this Section 11 shall relieve any Selling Stockholder
so defaulting from liability, if any, in respect of such default.

In the event of a default by any Selling Stockholder as
referred to in this Section 11, each of the U.S. Underwriters and the
non-defaulting Selling Stockholder shall have the right to postpone Closing
Time for a period not exceeding seven days in order to effect any required
change in the Registration Statement or Prospectuses or in any other documents
or arrangements.

SECTION 12. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to
the U.S. Underwriters shall be directed to the U.S. Underwriters at North
Tower, World Financial Center, New York, New York 10281-1201, attention of
Vincent Maddi; notices to the Company shall be directed to it at 15415 Katy
Freeway, Suite 400, Houston, Texas 77094, attention of Richard L. Lionberger,
Vice President, General Counsel and Secretary; notices to Alphee shall be
directed to it at 11, Avenue de la Gare, P.O. Box 2255, L-1022 Luxembourg,
attention of Jean Paul Kill; notices to Ratos shall be directed to it at
Drottninggatan 2, P.O. Box 1661, S-111 96, Stockholm, Sweden, attention of Olle
Isberg.

SECTION 13. Parties. This Agreement shall inure to the
benefit of and be binding upon the U.S. Underwriters, the Company, the Selling
Stockholders and their respective successors. Nothing expressed or mentioned
in this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the U.S. Underwriters, the Company, the Selling
Stockholders and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and
legal representatives, any legal or equitable right, remedy or claim under or
in respect of this Agreement or any provision herein contained. This Agreement
and all conditions and provisions hereof are intended to be for the sole and

44
<PAGE> 46
exclusive benefit of the U.S. Underwriters, the Company, the Selling
Stockholders and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of U.S.
Securities from any U.S. Underwriter shall be deemed to be a successor by
reason merely of such purchase.

SECTION 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

SECTION 15. SUBMISSION TO JURISDICTION; APPOINTMENT OF AGENT.
Each of the parties hereto irrevocably agrees that any legal suit, action or
proceeding arising out of or based upon this Agreement or the transactions
contemplated hereby shall be instituted in any United States Federal or state
court in the City, County and State of New York, and irrevocably waives, to the
fullest extent permitted by applicable law, any objection which it may now or
hereafter have to the laying of venue of any such proceeding and irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court, as to which such
jurisdiction is non-exclusive) of such courts in any such suit, action or
proceeding. Alphee has appointed CT Corporation System, New York, New York, as
its authorized agent, and Ratos has appointed Seward & Kissel, New York, New
York, as its authorized agent (each, an "Authorized Agent"), upon whom process
may be served in any such action arising out of or based on this Agreement or
the transactions contemplated hereby which may be instituted in any New York
court by any U.S. Underwriter or the Company or by any person who controls any
U.S. Underwriter or the Company, which appointment shall be irrevocable so long
as the Offered Securities remain outstanding or until the appointment,
similarly irrevocable, of a successor authorized agent reasonably acceptable to
the Underwriters and the Company and such successor's acceptance of such
appointment. Each Selling Stockholder represents and warrants that its
Authorized Agent has agreed to act as said agent for service of process, and
each Selling Stockholders agree to take any and all action, including the
filing of any and all documents and instruments, that may be necessary to
continue its respective appointment in full force and

45
<PAGE> 47
effect as aforesaid. Service of process upon an Authorized Agent and written
notice of such service to the other parties hereto shall be deemed, in every
respect, effective service of process upon its related Selling Stockholder.

SECTION 16. Shareholders Agreement. Except as set forth
herein, the provisions of this Agreement shall not affect any rights or
obligations of the Company or either of the Selling Stockholders under the
Shareholders Agreement.

SECTION 17. Effect of Headings. The Article and Section
headings herein are for convenience only and shall not affect the construction
hereof.

46
<PAGE> 48
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to each of the Company and the Selling
Stockholders a counterpart hereof, whereupon this instrument, along with all
counterparts, will become a binding agreement between the U.S. Underwriters,
the Company and the Selling Stockholders in accordance with its terms.

DIAMOND OFFSHORE DRILLING, INC.

By
-------------------------
Name:
Title:

ALPHEE S.A.

By
-------------------------
Name:
Title:

FORVALTNINGS AB RATOS

By
-------------------------
Name:
Title:

By
-------------------------
Name:
Title:
<PAGE> 49
CONFIRMED AND ACCEPTED,
as of the date first above written:

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
CS FIRST BOSTON CORPORATION
SALOMON BROTHERS INC

By: MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated

By
-----------------------------
Name:
Title:
<PAGE> 50
SCHEDULE A

<TABLE>
<CAPTION>
Number of
Initial U.S.
Name of U.S. Underwriter Securities
- ------------------------ ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . . . . .
CS First Boston Corporation . . . . . . . . . . . . . . . . . .
Salomon Brothers Inc . . . . . . . . . . . . . . . . . . . . .

---------

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,018,140
=========
</TABLE>

Sch A - 1
<PAGE> 51
SCHEDULE B

<TABLE>
<CAPTION>
Maximum Number
Number of Initial of U.S. Option
Name of Selling U.S. Securities Securities
Stockholder to Be Sold to Be Sold
- ---------------- ----------------- -----------------
<S> <C> <C>
Alphee S.A. . . . . . . . . . . . . 3,387,607 338,760
Forvaltnings AB
Ratos . . . . . . . . . . . . . . 2,630,533 263,054

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

Total . . . . . . . . . . . 6,018,140 601,814
============= ==========
</TABLE>

Sch B - 1
<PAGE> 52
SCHEDULE C

DIAMOND OFFSHORE DRILLING, INC.
6,018,140 Shares of Common Stock
(Par Value $.01 Per Share)

1. The public offering price per share for the U.S.
Securities, determined as provided in said Section 2, shall be $_____.

2. The purchase price per share for the U.S. Securities to be
paid by the several U.S. Underwriters shall be $_____, being an amount equal to
the public offering price set forth above less $____ per share; provided that
the purchase price per share for any U.S. Option Securities purchased upon the
exercise of the over-allotment option described in Section 2(b) shall be
reduced by an amount per share equal to any dividends or distributions declared
by the Company and payable on the Initial U.S. Securities but not payable on
the U.S. Option Securities.

Sch C - 1
<PAGE> 53
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(B)

[SUBJECT TO REVIEW BY OPINION COMMITTEE]

[LETTERHEAD OF WEIL, GOTSHAL & MANGES LLP]

May 24, 1996

Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
CS First Boston Corporation
Salomon Brothers Inc
c/o Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated
North Tower
World Financial Center
New York, N.Y. 10281-1209

Merrill Lynch International
CS First Boston Limited
Salomon Brothers International Limited
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England

Gentlemen:

We have acted as counsel to Diamond Offshore Drilling, Inc., a
Delaware corporation (the "Company"), in connection with the execution and
delivery of, and the consummation of the transactions contemplated by, the U.S.
Purchase Agreement (the "U.S. Purchase Agreement"), dated May 20, 1996, among
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, CS
First Boston Corporation and Salomon Brothers Inc (the "U.S. Underwriters"),
Alphee S.A., a Luxembourg corporation ("Alphee"), Forvaltnings AB Ratos, a
Swedish corporation ("Ratos"; together with Alphee, the "Selling Stockholders")
and the Company, and the International Purchase Agreement (the "International
Purchase Agreement"), dated May 20, 1996, among Merrill Lynch International, CS
First Boston Limited, Salomon Brothers International Limited (the
"International Managers"), the Selling Stockholders and the Company with
respect to the offering of 7,523,140 shares (the "Shares") of common stock, par
value $.01 per share, of

Ex A - 1
<PAGE> 54
the Company ("Diamond Offshore Common Stock") by the Selling Stockholders, and
the related grant by the Selling Stockholders to (a) the U.S. Underwriters of
an option to purchase up to 601,814 additional shares of Diamond Offshore
Common Stock solely to cover over-allotments, if any, and (b) the International
Managers of an option to purchase up to 150,501 additional shares of Diamond
Offshore Common Stock solely to cover over-allotments, if any. This opinion is
delivered to you pursuant to Section 5(b) of the U.S. Purchase Agreement and
Section 5(b) of the International Purchase Agreement. Capitalized terms
defined in the U.S. Purchase Agreement and used but not otherwise defined
herein are used herein as so defined.

In so acting, we have examined originals or copies, certified
or otherwise identified to our satisfaction, of (i) the U.S. Purchase
Agreement, (ii) the International Purchase Agreement, (iii) the Registration
Statement on Forms S-4/S-1 (Registration No. 333-2680) of the Company filed
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), on March 21, 1996, (iv)
Amendment No. 1 to the Registration Statement filed with the Commission on
April 5, 1996, (v) Amendment No. 2 to the Registration Statement filed with the
Commission on April 12, 1996, (vi) Post-Effective Amendment No. 1 to the
Registration Statement filed with the Commission on May [23], 1996 (the
Registration Statement, as so amended, is hereinafter referred to as the
"Registration Statement"), (vii) the prospectus of the Company dated April 12,
1996 (the "Base Prospectus"), (viii) the two preliminary prospectus supplements
to the Base Prospectus dated April 30, 1996 in the respective forms filed with
the Commission pursuant to Rule 424(b) under the Act, (ix) the two final
prospectus supplements to the Base Prospectus dated May 20, 1996 in the
respective forms filed with the Commission pursuant to Rule 424(b) under the
Act (the Base Prospectus, as so supplemented by the relevant prospectus
supplements, is hereinafter referred to as the "Prospectuses") and (x) such
other corporate records, agreements, documents and other instruments, and such
certificates or comparable documents of public officials and of officers and
representatives of the Company, and we have made such inquiries of such
officers and representatives, as we have deemed relevant and necessary as a
basis for the opinions hereinafter set forth.

Ex A - 2
<PAGE> 55
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. As to all questions of
fact material to this opinion that have not been independently established, we
have relied upon certificates or comparable documents of officers and
representatives of the Company (copies of which have been furnished to you),
and upon the representations and warranties of the Company contained in the
U.S. Purchase Agreement and the International Purchase Agreement. As used
herein, "to our knowledge" means the conscious awareness of facts or other
information by any lawyer in our firm actively involved in negotiating the U.S.
Purchase Agreement, the International Purchase Agreement and the transactions
contemplated thereby.

Based on the foregoing, and subject to the qualifications
stated herein, we are of the opinion that:

1. The Company is a corporation duly organized, 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 Prospectuses.

2. The authorized capital stock of the Company consists
of 200,000,000 shares of common stock, par value $.01 per share, and 25,000,000
shares of preferred stock, par value $.01 per share. As of the open of
business on May [24], 1996, there were ______________ shares of common stock
and no shares of preferred stock issued and outstanding. All of such
outstanding shares of the Company's capital stock have been duly authorized and
validly issued, are fully paid and nonassessable, have not been issued in
violation of any preemptive rights and conform as to legal matters in all
material respects to the description thereof contained in the Prospectuses.
Under the Delaware General Corporation Law, no holder of the Company's common
stock is or will be personally liable for the payment of the Company's debts
except as they may be liable by reason of their own conduct or acts.

3. The Company has all requisite corporate power and
authority to execute and deliver the U.S. Purchase Agreement and the
International Purchase Agreement and to

Ex A - 3
<PAGE> 56
perform its obligations thereunder. The execution, delivery and performance of
the U.S. Purchase Agreement and the International Purchase Agreement by the
Company have been duly authorized by all necessary corporate action on the part
of the Company. The U.S. Purchase Agreement and the International Purchase
Agreement have been duly executed and delivered by the Company.

4. The execution, delivery and performance by the
Company of the U.S. Purchase Agreement and the International Purchase Agreement
and the compliance by the Company with all the provisions of the U.S. Purchase
Agreement and the International Purchase Agreement and the consummation by the
Company of the transactions contemplated thereby will not, whether with or
without the giving of notice or lapse of time or both, conflict with,
constitute a default under or result in a breach or violation of, or result in
the creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company under (i) any of the terms, conditions or provisions
of the restated certificate of incorporation or amended by-laws of the Company,
(ii) any of the terms, conditions or provisions of any document, agreement or
other instrument filed as an exhibit to the Registration Statement, (iii) any
New York, Texas, Delaware corporate or federal law or regulation (other than
federal and state securities or blue sky laws, as to which we express no
opinion in this sentence, and the Shipping Act, 1916, as amended, as to which
we express no opinion), or (iv) any final and non-appealable judgment, writ,
injunction, decree, order or ruling of any federal or state court or
governmental authority binding on the Company of which we are aware, except, in
each case other than with respect to clause (i), any such conflict, default,
breach or violation as would not impair the Company's ability to perform its
obligations under the U.S. Purchase Agreement or the International Purchase
Agreement or have any material adverse effect upon the consummation of the
transactions contemplated by the U.S. Purchase Agreement or the International
Purchase Agreement.

5. 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 and performance by the Company of the
U.S. Purchase Agreement or the International Purchase Agreement or the
consummation by the Company of the transactions contemplated thereby (including
the

Ex A - 4
<PAGE> 57
Acquisition), except for filings and other actions required pursuant to federal
and state securities or blue sky laws, as to which we express no opinion, or
the Shipping Act, 1916, as amended, as to which we express no opinion, and
those already obtained and made under the Delaware General Corporation Law and
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

6. Based solely upon telephonic confirmation from the
Commission, the Registration Statement has become effective under the Act and,
to our knowledge, no stop order suspending the effectiveness of the
Registration Statement or suspending or preventing the use of the Prospectuses
has been issued and no proceedings for that purpose have been instituted or are
pending or threatened under the Act. Any required filing of the Prospectuses
pursuant to Rule 424(b) under the Act has been made in the manner and within
the time period required by such Rule 424(b).

7. The Company is not (A) an "investment company" or an
entity "controlled" by an "investment company" under the Investment Company Act
of 1940, as amended, and the rules and regulations promulgated by the
Commission thereunder (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 of 1935, as amended, and the
rules and regulations promulgated by the Commission thereunder (the "Holding
Company Act"). In rendering the opinion in this paragraph 7, we have assumed
that Loews Corporation, a Delaware corporation ("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.

8. The statements in the Prospectuses under the caption
"Management -- Employment Agreements and Severance and Change in Control
Arrangements" and under the caption "Management -- Certain Relationships and
Related Transactions -- Transactions Between Diamond Offshore and Loews",
insofar as they constitute descriptions of the Employment Agreement, the
Services Agreement, the Tax Sharing Agreement or the Registration Rights
Agreement (each as defined in the Prospectuses), constitute fair summaries
thereof in all material respects. The statements in the Prospectuses under the
caption "Management -- Certain Relationships and Related Transactions --
Transactions

Ex A - 5
<PAGE> 58
Between Diamond Offshore and the Selling Stockholders" and under the caption
"Management -- Certain Relationships and Related Transactions -- Registration
Rights of Selling Stockholders", insofar as they constitute descriptions of the
Shareholders Agreement or the Plan of Acquisition (each as defined in the
Prospectuses), constitute fair summaries thereof in all material respects. The
statements in the Prospectuses under the caption "Dividend Policy" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity", insofar as they constitute descriptions of the
Diamond Offshore Bank Credit Facility (as defined in the Prospectuses),
constitute fair summaries thereof in all material respects. The statements in
the Prospectuses under the caption "Business -- The Acquisition -- The
Amalgamation", under the caption "Business -- The Acquisition -- Memorandum of
Association; Bye-laws; Directors; Officers", under the caption "Business -- The
Acquisition -- Continuing Arethusa Severance, Consulting and Salary
Continuation Plans", under the caption "Business -- The Acquisition -- Arethusa
Stock Option Plans" and under the caption "Business -- The Acquisition --
Indemnification", insofar as they constitute descriptions of the Plan of
Acquisition and the Amalgamation Agreement (each as defined in the
Prospectuses), constitute fair summaries thereof in all material respects. The
statements in the Prospectuses under the caption "Management -- Stock Option
Plans", insofar as they constitute descriptions of the Arethusa Stock Option
Plans (as defined in the Prospectuses), as assumed by Diamond Offshore at the
Effective Time pursuant to the Amalgamation Agreement, constitute fair
summaries thereof in all material respects. The statements in the Prospectuses
under the caption "Management -- Executive Compensation" and under the caption
"Management -- Annual Cash Bonus Incentives", insofar as they constitute
descriptions of the Retirement Plan (as defined in the Prospectuses) and of the
Diamond Offshore Management Bonus Program and the proposed Executive Deferred
Compensation Plan filed as exhibits to the Registration Statement, constitute
fair summaries thereof in all material respects. The statements in the
Prospectuses under the caption "Risk Factors -- Shares Available for Future
Sale", insofar as they refer to statements of laws or legal conclusions under
the Act or the rules and regulations thereunder, constitute fair summaries
thereof in all material respects. The statements in the Prospectuses under the
caption "Description of Capital Stock", insofar as they constitute descriptions
of the capital stock of the Company, or refer to statements of laws or legal
conclusions under

Ex A - 6
<PAGE> 59
the Delaware General Corporation Law, constitute fair summaries thereof in all
material respects. Insofar as certain provisions of the Delaware General
Corporation Law have been described under Form S-4 Item 20/Form S-1 Item 14 of
Part II of the Registration Statement, such descriptions constitute fair
summaries thereof in all material respects. The statements in the Prospectuses
under the caption "Management -- Certain Relationships and Related Transactions
- -- Controlling Stockholder", insofar as they constitute descriptions of Rule
144 promulgated under the Act, constitute fair summaries thereof in all
material respects. The statements in the Prospectuses under the caption
"Business -- Governmental Regulation", insofar as they constitute descriptions
of the CWA, CERCLA or RCRA (each as defined in the Prospectuses) or the Clean
Air Act or amendments thereto or the rules and regulations thereunder,
constitute fair summaries thereof in all material respects.

9. To our knowledge, there is no contract or other
document that is required to be described in the Registration Statement or the
Prospectuses or is required to be filed as an exhibit to the Registration
Statement that is not described therein or filed as an exhibit thereto.

10. The Registration Statement, as of the effective date
thereof, and the Prospectuses, as of the date thereof and as of the date
hereof, complied and comply as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder (except for
the financial statements and the notes thereto, the financial statement
schedules and the other financial, statistical and accounting data included in
or which should be included in the Registration Statement or the Prospectuses,
as to which we express no opinion).

11. The form of certificate used to evidence the Diamond
Offshore Common Stock complies in all material respects with all applicable
requirements of the Delaware General Corporation Law, with any applicable
requirements of the restated certificate of incorporation and amended by-laws
of the Company and the requirements of the New York Stock Exchange, Inc.

We have participated in conferences with directors, officers
and other representatives of the Company, various representatives of the
Selling Stockholders, representatives of the independent public accountants for

Ex A - 7
<PAGE> 60
the Company, representatives of the U.S. Underwriters and representatives of
counsel for the U.S. Underwriters, at which conferences the contents of the
Registration Statement and the Prospectuses and related matters were discussed,
and, although we have not independently verified and are not passing upon and
assume no responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and Prospectuses (except to
the extent specified in the foregoing opinion), no facts have come to our
attention which lead us to believe that the Registration Statement, on the
effective date thereof, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading or that the Prospectuses,
on the date thereof or on the date hereof, contained or contain an untrue
statement of a material fact or omitted or omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading (it being understood that we express no view with respect to the
financial statements and related notes and the other financial [,statistical]
and accounting data included in the Registration Statement or Prospectuses).

The opinions expressed herein are 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, and we express no opinion as to the
effect on the matters covered by this letter of the laws of any other
jurisdiction.

The opinions expressed herein are rendered solely for your
benefit in connection with the transactions described herein. Those opinions
may not be used or relied upon by any other person, nor may this letter or any
copies thereof be furnished to a third party, filed with a governmental agency,
quoted, cited or otherwise referred to without our prior written consent.

Very truly yours,

Ex A - 8
<PAGE> 61
Exhibit B
FORM OF OPINION OF COUNSEL OF RICHARD L. LIONBERGER,
VICE PRESIDENT AND GENERAL COUNSEL TO THE COMPANY,
TO BE DELIVERED PURSUANT TO SECTION 5(C)

[Subject to Review by Richard L. Lionberger]

[Richard L. Lionberger letterhead]

May 24, 1996

Merrill Lynch International
CS First Boston Limited
Salomon Brothers International Limited
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England

Gentlemen:

I have acted as counsel to Diamond Offshore Drilling, Inc., a
Delaware corporation (the "Company"), in connection with the execution and
delivery of, and the consummation of the transactions contemplated by, the U.S.
Purchase Agreement (the "U.S. Purchase Agreement"), dated May 20, 1996, among
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, CS
First Boston Corporation and Salomon Brothers Inc (the "U.S. Underwriters"),
Alphee S.A., a Luxembourg corporation ("Alphee"), Forvaltnings AB Ratos, a
Swedish corporation ("Ratos"; together with Alphee, the "Selling Stockholders")
and the Company, and the International Purchase Agreement (the "International
Purchase Agreement"), dated May 20, 1996, among Merrill Lynch International, CS
First Boston Limited, Salomon Brothers International Limited (the
"International Managers"), the Selling Stockholders and the Company with
respect to the offering of up to 7,523,140 shares (the "Shares") of common
stock, par value $.01 per

Ex B - 1
<PAGE> 62
share, of the Company ("Diamond Offshore Common Stock") by the Selling
Stockholders, and the related grant by the Selling Stockholders to (a) the U.S.
Underwriters of an option to purchase up to 601,814 additional shares of
Diamond Offshore Common Stock solely to cover over-allotments, if any, and (b)
the International Managers of an option to purchase up to 150,501 additional
shares of Diamond Offshore Common Stock solely to cover over-allotments, if
any. This opinion is delivered to you pursuant to Section 5(c) of the U.S.
Purchase Agreement and Section 5(c) of the International Purchase Agreement.
Capitalized terms defined in the U.S. Purchase Agreement and used but not
otherwise defined herein are used herein as so defined.

In so acting, I have examined originals or copies, certified
or otherwise identified to my satisfaction, of (i) the U.S. Purchase Agreement,
(ii) the International Purchase Agreement, (iii) the Registration Statement on
Forms S-4/S-1 (Registration No. 333-2680) of the Company filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"), on March 21, 1996, (iv) Amendment No. 1 to the
Registration Statement filed with the Commission on April 5, 1996, (v)
Amendment No. 2 to the Registration Statement filed with the Commission on
April 12, 1996, (vi) Post-Effective Amendment No. 1 to the Registration
Statement filed with the Commission on May [23], 1996 (the Registration
Statement, as so amended, is hereinafter referred to as the "Registration
Statement"), (vii) the prospectus of the Company dated April 12, 1996 (the
"Base Prospectus"), (viii) the two preliminary prospectus supplements to the
Base Prospectus dated April 30, 1996 in the respective forms filed with the
Commission pursuant to Rule 424(b) under the Act, (ix) the two final prospectus
supplements to the Base Prospectus dated May 20, 1996 in the respective forms
filed with the Commission pursuant to Rule 424(b) under the Act (the Base
Prospectus, as so supplemented by the relevant prospectus supplements, is
hereinafter referred to as the "Prospectuses") and (x) such other corporate
records, agreements, documents and other instruments, and such certificates or
comparable documents of public officials and of officers and representatives of
the Company and I have made such inquiries of such officers and
representatives, as I have deemed relevant and necessary as a basis for the
opinions hereinafter set forth.

Ex B - 2
<PAGE> 63
In such examination, I have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to me as originals, the conformity to original documents of
all documents submitted to me as certified or photostatic copies and the
authenticity of the originals of such latter documents. As to all questions of
fact material to this opinion that have not been independently established, I
have relied upon certificates or comparable documents of officers and
representatives of the Company and upon the representations and warranties of
the Company contained in the U.S. Purchase Agreement and the International
Purchase Agreement. As used herein, "to my knowledge" means the conscious
awareness of facts or other information by me.

Based on the foregoing, and subject to the qualifications
stated herein, I am of the opinion that:

1. 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 operations or financial condition of the Company and
its subsidiaries considered as a whole.

2. All of the outstanding shares of capital stock of
each subsidiary of the Company listed on Exhibit A attached hereto (each, a
"Subsidiary" and collectively, the "Subsidiaries") have been duly authorized
and validly issued, are fully paid and nonassessable, and are owned, directly
or indirectly, of record and beneficially by the Company, free and clear, to my
knowledge, except for liens and security interests securing the Diamond
Offshore Bank Credit Facility (as such term is defined in the Prospectuses)
which are described in the Prospectuses, of all liens, claims, limitations on
voting rights, options, security interests and other encumbrances, 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 operations or financial
condition of the Company and its subsidiaries, taken as a whole. None of the
outstanding shares of capital stock of any Subsidiary was issued in violation
of the preemptive or similar rights of any securityholder of such Subsidiary
except any such violation(s) which would not, individually or in the aggregate,
have a material adverse effect on the business

Ex B - 3
<PAGE> 64
operations or financial condition of the Company and its subsidiaries, taken
as a whole.

3. Each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and has all requisite corporate power and authority to own,
lease and operate its properties and to conduct its business as described in
the Registration Statement. [Arethusa Off-Shore Company is validly existing
and in good standing under the laws of the State of Delaware.] Each Subsidiary
[and Arethusa Off-Shore 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 such Subsidiary [and/or Arethusa Off-Shore Company] to be so
qualified would not have a material adverse effect on the business, operations
or financial condition of the Company and its subsidiaries considered as a
whole.

4. Except as described under the caption "Management --
Certain Relationships and Related Transactions -- Transactions Between Diamond
Offshore and Loews" and under the caption "Management -- Certain Relationships
and Related Transactions -- Registration Rights of Selling Stockholders" in the
Prospectuses, there are no contracts, agreements or understandings known to me
between the Company and any person granting such person the right to require
the Company to file a registration statement under the 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
Registration Statement or in any securities being registered pursuant to any
other registration statement filed by the Company under the Act.

5. The execution, delivery and performance by the
Company of the U.S. Purchase Agreement and the International Purchase Agreement
and the consummation of the transactions contemplated thereby will not, whether
with or without the giving of notice or lapse of time, or both, conflict with,
constitute a default under or violate or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of any of the
Subsidiaries, under (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

Ex B - 4
<PAGE> 65
or provisions of any document, agreement or other instrument to which any of
the Subsidiaries is a party or by which any of the Subsidiaries is bound of
which I am aware, (iii) any Texas, Delaware corporate or federal law or
regulation (other than federal and state securities or blue sky laws, as to
which I express no opinion in this sentence, and the Shipping Act, 1916, as
amended, as to which I express no opinion) or (iv) any judgment, writ,
injunction, decree, order or ruling of any court or governmental authority
binding on any of the Subsidiaries of which I am aware, except any such
default, breach or violation which would not, individually or in the aggregate,
have a material adverse effect on the business operations or financial
condition of the Company and its subsidiaries, taken as a whole.

6. Insofar as certain provisions of certain federal
statutes have been described under the captions "Risk Factors -- Environmental
Matters" and "Business -- Governmental Regulation" in the Prospectuses, such
provisions conform in all material respects to the respective descriptions
thereof set forth under such captions.

7. To my knowledge, there are no legal or governmental
proceedings that are required to be described in the Registration Statement or
the Prospectuses that are not described therein.

8. To my knowledge, there is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending or threatened,
against or affecting the Company or any Subsidiary, which is required to be
disclosed in the Registration Statement (other than as disclosed therein), or
which individually or in the aggregate might reasonably be expected to result
in a material adverse effect on the business, assets or financial condition of
the Company and its subsidiaries, taken as a whole, or which might reasonably
be expected to materially and adversely affect the properties or assets thereof
or the consummation of the U.S. Purchase Agreement, the International Purchase
Agreement or the performance by the Company of its obligations thereunder; the
aggregate of all pending legal or governmental proceedings to which the Company
or any Subsidiary is a party or of which any of their respective property or
assets is the subject which are not described in the Registration Statement,
including ordinary routine

Ex B - 5
<PAGE> 66
litigation incidental to the business, are not reasonably expected to result in
a material adverse effect.

9. The statements in the Prospectuses under the caption
"Business -- Governmental Regulation", insofar as they constitute descriptions
of the Outer Continental Shelf Lands Act, constitute fair summaries thereof in
all material respects.

The opinions expressed herein are 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, and I express no opinion as to the effect on the
matters covered by this letter of the laws of any other jurisdiction.

Very truly yours,

Ex B - 6
<PAGE> 67
Exhibit C

FORM OF OPINION OF MARITIME COUNSEL FOR THE COMPANY
TO BE DELIVERED PURSUANT TO SECTION 5(D)

(i) No consent or approval of any federal governmental agency
with respect to any federal maritime law matter is required in connection with
the performance by the Company of its obligations under the U.S. Purchase
Agreement and the International Purchase Agreement or the issuance and sale of
the Offered Securities.

(ii) Neither the issue, offer, sale or delivery by the
Company of the Offered Securities pursuant to the U.S. Purchase Agreement and
the International Purchase Agreement or the execution, delivery and performance
by the Company and the consummation of the transactions contemplated thereby
will violate any existing federal maritime laws, including, without limitation,
the Shipping Act and the rules and regulations of the Maritime Administration
(MarAd) and the Coast Guard.

(iii) Insofar as certain provisions of the Shipping Act have
been described under the caption "Business -- Limitation on Ownership by
Non-U.S. Citizens" in the Prospectuses, such provisions conform in all material
respects to the respective descriptions thereof set forth under such caption.

(iv) Insofar as certain provisions of OPA '90 (as defined in
the Prospectuses) have been described under the caption "Business --
Governmental Regulation" in the Prospectuses, such provisions conform in all
material respects to the respective descriptions thereof set forth under such
caption.

Ex C - 1
<PAGE> 68
Exhibit D-1

FORM OF OPINION OF LUXEMBOURG COUNSEL FOR ALPHEE
TO BE DELIVERED PURSUANT TO SECTION 5(E)

(i) No filing with, or consent, approval, authorization,
order, registration qualification or decree of, any Luxembourg court or
governmental authority or agency is necessary or required to be obtained by
Alphee for the performance by Alphee of its obligations under the U.S. Purchase
Agreement, the International Purchase Agreement or the Power of Attorney and
Custody Agreement, or in connection with the offer, sale or delivery of the
Securities.

(ii) The Power of Attorney and Custody Agreement has been
duly executed and delivered by Alphee and constitutes the valid and binding
agreement of Alphee in accordance with its terms.

(iii) The U.S. Purchase Agreement and the International
Purchase Agreements have been duly authorized, executed and delivered by or on
behalf of Alphee.

(iv) The sale of the Offered Securities by Alphee is not
subject to preemptive or similar rights of any securityholder of the Company.

(v) Each Attorney-in-Fact has been duly authorized by Alphee
to deliver the Offered Securities on its behalf in accordance with the terms of
the U.S. Purchase Agreement and the International Purchase Agreement.

(vi) The execution, delivery and performance of the U.S.
Purchase Agreement, the International Purchase Agreement and the Power of
Attorney and Custody Agreement and the sale and delivery of the Offered
Securities and the consummation of the transactions contemplated in the U.S.
Purchase Agreement, the International Purchase Agreement and the Registration
Statement and the compliance by Alphee with its obligations under the U.S.
Purchase Agreement and the International Purchase Agreements have been duly
authorized by all necessary action on the part of Alphee and do not and will
not, whether with or without the giving of notice or passage

Ex D - 1 - 1
<PAGE> 69
of time or both, conflict with or constitute a breach of, or default (or
Repayment Event) under or result in the creation or imposition of any tax,
lien, charge or encumbrance upon the Offered Securities or any property or
assets of Alphee pursuant to any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, license, lease or other instrument or agreement
to which Alphee is a party or by which it may be bound, or to which any of the
properties or assets of Alphee may be subject, nor will such action result in
any violation of the provisions of the [charter or by-laws] of Alphee or any
law, administrative regulation, judgment or order of any Luxembourg government
agency or body or any administrative or court decree having jurisdiction over
Alphee or any of its properties.

(vii) Alphee has the full right, power and authority (A) to
enter into the U.S. Purchase Agreement, the International Purchase Agreement
and the Power of Attorney and Custody Agreement and (B) to sell, transfer and
deliver the Offered Securities to be sold by such Selling Stockholder under the
U.S. Purchase Agreement and the International Purchase Agreement.

(viii) As provided in the U.S. Purchase Agreement and the
International Purchase Agreement, Alphee has duly and irrevocably appointed CT
Corporation System as its agent to receive service of process in any action
against it in any federal or state court sitting in the county of New York
arising out of or in connection with the offering of the Offered Securities.

(ix) Under the laws of Luxembourg, the submission by Alphee
to the jurisdiction of any federal or state court sitting in the county of New
York and the designation of the law of the State of New York to apply to Alphee
is binding upon Alphee and, if properly bought to the attention of the court or
administrative body in accordance with the laws of Luxembourg, would be
enforceable in any judicial or administrative proceeding in Luxembourg.

Ex D - 1 - 2
<PAGE> 70
Exhibit D-2

FORM OF OPINION OF SWEDISH COUNSEL FOR RATOS
TO BE DELIVERED PURSUANT TO SECTION 5(E)

(i) No filing with, or consent, approval, authorization,
order, registration qualification or decree of, any Swedish court or
governmental authority or agency is necessary or required to be obtained by
Ratos for the Performance by Ratos of its obligations under the U.S. Purchase
Agreement, the International Purchase Agreement or the Power of Attorney and
Custody Agreement, or in connection with the offer, sale or delivery of the
Securities.

(ii) The Power of Attorney and Custody Agreement has been
duly executed and delivered by Ratos and constitutes the valid and binding
agreement of Ratos in accordance with its terms.

(iii) The U.S. Purchase Agreement and the International
Purchase Agreements have been duly authorized, executed and delivered by or on
behalf of Ratos.

(iv) The sale of the Offered Securities by Ratos is not
subject to preemptive or similar rights of any securityholder of the Company.

(v) Each Attorney-in-Fact has been duly authorized by Ratos
to deliver the Offered Securities on behalf of Ratos in accordance with the
terms of the U.S. Purchase Agreement and the International Purchase Agreement.

(vi) The execution, delivery and performance of the U.S.
Purchase Agreement, the International Purchase Agreement and the Power of
Attorney and Custody Agreement and the sale and delivery of the Offered
Securities and the consummation of the transactions contemplated in the U.S.
Purchase Agreement, the International Purchase Agreement and the Registration
Statement and the compliance by Ratos with its obligations under the U.S.
Purchase Agreement and the International Purchase Agreements have been duly
authorized by all necessary action on the part of Ratos and do not and will
not, whether with or without the giving of notice or passage

Ex D - 2 - 1
<PAGE> 71
of time or both, conflict with or constitute a breach of, or default (or
Repayment Event) under or result in the creation or imposition of any tax,
lien, charge or encumbrance upon the Offered Securities or any property or
assets of Ratos pursuant to any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, license, lease or other instrument or agreement
to which Ratos is a party or by which it may be bound, or to which any of the
properties or assets of Ratos may be subject, nor will such action result in
any violation of the provisions of the charter or by-laws of Ratos, or any law,
administrative regulation, judgment or order of any government agency or body
or any Swedish administrative or court decree having jurisdiction over Ratos or
any of its properties.

(vii) Ratos has the full right, power and authority (A) to
enter into the U.S. Purchase Agreement, the International Purchase Agreement
and the Power of Attorney and Custody Agreement and (B) to sell, transfer and
deliver the Offered Securities to be sold by Ratos under the U.S. Purchase
Agreement and the International Purchase Agreement.

(viii) As provided in the U.S. Purchase Agreement and the
International Purchase Agreement, Ratos has duly and irrevocably appointed
Seward & Kissel as its agent to receive service of process in any action
against it in any federal or state court sitting in the county of New York
arising out of or in connection with the offering of the Offered Securities.

(ix) Under the laws of Sweden, the submission by Ratos to the
jurisdiction of any federal or state court sitting in the county of New York
and the designation of the law of the State of New York to apply to the U.S.
Purchase Agreement and the International Purchase Agreement is binding upon
Ratos and, if properly brought to the attention of the court or administrative
body in accordance with the laws of Sweden, would be enforceable in any
judicial or administrative proceeding in Sweden.

Ex D - 2 - 2
<PAGE> 72
Exhibit D-3

FORM OF OPINION OF U.S. COUNSEL TO ALPHEE
TO BE DELIVERED PURSUANT TO SECTION 5(E)

(i) No filing with, or consent, approval, authorization,
order, registration qualification or decree of, any federal or state court or
governmental authority or agency (other than the issuance of the order of the
Commission declaring the Registration Statement effective and such
authorizations, approvals or consents as may be necessary under state
securities laws, as to which we need express no opinion) is necessary or
required to be obtained by Alphee for the Performance by Alphee of its
obligations under the U.S. Purchase Agreement, the International Purchase
Agreement or the Power of Attorney, or in connection with the offer, sale or
delivery of the Securities.

(ii) The Alphee Power of Attorney has been duly executed and
delivered by Alphee and constitutes the valid and binding agreement of each
Selling Stockholder in accordance with its terms.

(iii) The U.S. Purchase Agreement and the International
Purchase Agreements have been duly authorized, executed and delivered by or on
behalf of Alphee.

(iv) The sale of the Offered Securities by Alphee is not
subject to preemptive or similar rights of any securityholder of the Company.

(v) Each Attorney-in-Fact has been duly authorized by Alphee
to deliver the Offered Securities on behalf of Alphee in accordance with the
terms of the U.S. Purchase Agreement and the International Purchase Agreement.

(vi) The execution, delivery and performance of the U.S.
Purchase Agreement, the International Purchase Agreement and the Power of
Attorney and the sale and delivery of the Offered Securities and the
consummation of the transactions contemplated in the U.S. Purchase Agreement,
the International Purchase Agreement and the Registration Statement and the
compliance by Alphee with its obligations under the U.S. Purchase

Ex D - 3 - 1
<PAGE> 73
Agreement and the International Purchase Agreements will not, whether with or
without the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default (or Repayment Event) under or result in the
creation or imposition of any tax, lien, charge or encumbrance upon the Offered
Securities or any property or assets of Alphee pursuant to any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, license,
lease or other instrument or agreement to which Alphee is a party or by which
it may be bound, or to which any of the properties or assets of Alphee may be
subject, or any law, administrative regulation, judgment or order of any
federal or state government agency or body or any administrative or court
decree having jurisdiction over Alphee or any of its properties.

(vii) Alphee is, and immediately prior to Closing Time will
be the sole registered owner of the Offered Securities to be sold by Alphee;
upon consummation of the sale of the Offered Securities pursuant to the U.S.
Purchase Agreement and the International Purchase Agreement, each of the
Underwriters will be the registered owner of the Offered Securities purchased
by it from Alphee and, assuming the Underwriters purchased the Securities for
value in good faith and without notice of any adverse claim, the Underwriters
will have acquired all rights of Alphee in the Offered Securities free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity, and the owner of the Offered Securities, if other than Alphee, is
precluded from asserting against the Underwriters the ineffectiveness of any
unauthorized endorsement; and Alphee has the full right, power and authority
(A) to enter into the U.S. Purchase Agreement, the International Purchase
Agreement and the Power of Attorney and (B) to sell, transfer and deliver the
Offered Securities to be sold by such Selling Stockholder under the U.S.
Purchase Agreement and the International Purchase Agreement.

(viii) Under the laws of the State of New York relating to
submission to jurisdiction, the Selling Stockholders have validly and
irrevocably submitted to the jurisdiction of any state or federal court located
in the Borough of Manhattan, The City of New York, New York (each a "New York
court"), has validly and irrevo-

Ex D - 3 - 2
<PAGE> 74
cably waived any objection to the venue of a proceeding in any such court, and
has validly and irrevocably appointed CT Corporation System, as its authorized
agent for the purpose described in Section 15 hereof; service of process
effected in the manner set forth in Section 15 hereof will be effective to
confer valid personal jurisdiction over Alphee, provided however, that such
counsel need not express any opinion as to whether any United Stated Federal
court will accept venue of an action which it may affirmatively determine not
to accept as inconvenient or otherwise inappropriate.

Ex D - 3 - 3
<PAGE> 75
Exhibit D-4

FORM OF OPINION OF U.S. COUNSEL TO RATOS
TO BE DELIVERED PURSUANT TO SECTION 5(E)

(i) No filing with, or consent, approval, authorization,
order, registration qualification or decree of, any federal or state court or
governmental authority or agency (other than the issuance of the order of the
Commission declaring the Registration Statement effective and such
authorizations, approvals or consents as may be necessary under state
securities laws, as to which we need express no opinion) is necessary or
required to be obtained by Ratos for the Performance by Ratos of its
obligations under the U.S. Purchase Agreement, the International Purchase
Agreement or the Power of Attorney, or in connection with the offer, sale or
delivery of the Securities.

(ii) The Ratos Power of Attorney has been duly executed and
delivered by Ratos and constitutes the valid and binding agreement of each
Selling Stockholder in accordance with its terms.

(iii) The U.S. Purchase Agreement and the International
Purchase Agreements have been duly authorized, executed and delivered by or on
behalf of Ratos.

(iv) The sale of the Offered Securities by Ratos is not
subject to preemptive or similar rights of any securityholder of the Company.

Ex D - 4 - 1
<PAGE> 76
Agreement and the International Purchase Agreements will not, whether with or
without the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default (or Repayment Event) under or result in the
creation or imposition of any tax, lien, charge or encumbrance upon the Offered
Securities or any property or assets of Ratos pursuant to any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, license,
lease or other instrument or agreement to which Ratos is a party or by which it
may be bound, or to which any of the properties or assets of Ratos may be
subject, or any law, administrative regulation, judgment or order of any
federal or state government agency or body or any administrative or court
decree having jurisdiction over Ratos or any of its properties.

(vii) Ratos is, and immediately prior to Closing Time will be
the sole registered owner of the Offered Securities to be sold by Ratos; upon
consummation of the sale of the Offered Securities pursuant to the U.S.
Purchase Agreement and the International Purchase Agreement, each of the
Underwriters will be the registered owner of the Offered Securities purchased
by it from Ratos and, assuming the Underwriters purchased the Securities for
value in good faith and without notice of any adverse claim, the Underwriters
will have acquired all rights of Ratos in the Offered Securities free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim or equity,
and the owner of the Offered Securities, if other than Ratos, is precluded from
asserting against the Underwriters the ineffectiveness of any unauthorized
endorsement; and Ratos has the full right, power and authority (A) to enter
into the U.S. Purchase Agreement, the International Purchase Agreement and the
Power of Attorney and (B) to sell, transfer and deliver the Offered Securities
to be sold by such Selling Stockholder under the U.S. Purchase Agreement and
the International Purchase Agreement.

Ex D - 4 - 2
<PAGE> 77
cably waived any objection to the venue of a proceeding in any such court, and
has validly and irrevocably appointed Seward & Kissel, as its authorized agent
for the purpose described in Section 15 hereof; service of process effected in
the manner set forth in Section 15 hereof will be effective to confer valid
personal jurisdiction over Ratos, provided however, that such counsel need not
express any opinion as to whether any United Stated Federal court will accept
venue of an action which it may affirmatively determine not to accept as
inconvenient or otherwise inappropriate.

Ex D - 4 - 3

<PAGE> 1

EXHIBIT 1.2

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

DIAMOND OFFSHORE DRILLING, INC.
(a Delaware corporation)

1,505,000 Shares of Common Stock

INTERNATIONAL PURCHASE AGREEMENT

Dated: May 20, 1996

(a Delaware corporation)

1,505,000 Shares of Common Stock

(Par Value $.01 Per Share)

INTERNATIONAL PURCHASE AGREEMENT

May 20, 1996

MERRILL LYNCH INTERNATIONAL
CS FIRST BOSTON LIMITED
SALOMON BROTHERS INTERNATIONAL LIMITED
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England

Ladies and Gentlemen:

Diamond Offshore Drilling, Inc., a Delaware corporation (the
"Company"), Alphee S.A., a Luxembourg corporation ("Alphee"), and Forvaltnings
AB Ratos, a Swedish corporation ("Ratos" and, together with Alphee, the
"Selling Stockholders"), confirm their respective agreements with Merrill Lynch
International ("Merrill Lynch"), CS First Boston Limited and Salomon Brothers
International Limited (collectively, the "International Managers," which term
shall also include any underwriter substituted as hereinafter provided in
Section 10 hereof), with respect to the sale by the Selling Stockholders and
the purchase by the International Managers, acting severally and not jointly,
of the respective numbers of shares of Common Stock, par value $.01 per share,
of the Company ("Common Stock") set forth in said Schedule A and Schedule B
hereto, and with respect to the grant by the Selling Stockholders to the
International Managers, acting severally and not jointly, of the option
described in Section 2(b) hereof to purchase such number of shares of Common
Stock set forth in Schedule B hereto to cover
<PAGE> 3
over-allotments, if any. The aforesaid 1,505,000 shares of Common Stock (the
"Initial International Securities") to be purchased by the International
Managers and all or any part of the shares of Common Stock subject to the
option described in Section 2(b) hereof (the "International Option Securities")
are hereinafter called, collectively, the "International Securities."

It is understood that the Company, Loews and the Selling
Stockholders are concurrently entering into an agreement, dated the date hereof
(the "International Purchase Agreement"), providing for the sale by the Selling
Stockholders of an aggregate of 6,018,140 shares of Common Stock (the "Initial
International Securities") through arrangements with certain underwriters
outside the United States (the "U.S. Underwriters" which, together with the
International Managers, shall be referred to as the "Underwriters"). The
Selling Stockholders have also granted to the U.S. Underwriters an option to
purchase all or any part of 601,814 shares of Common Stock (the "U.S. Option
Securities" which, together with the Initial U.S. Securities, shall be referred
to as the "U.S. Securities") to cover over-allotments, if any. The
International Securities and the U.S. Securities are hereinafter collectively
referred to as the "Offered Securities."

The Company and the Selling Stockholders understand that the
International Managers will simultaneously enter into an agreement with the
U.S. Underwriters dated the date hereof (the "Intersyndicate Agreement")
providing for the coordination of certain transactions among the International
Managers and the International Managers, under the direction of Merrill Lynch,
Pierce, Fenner & Smith Incorporated.

The Company and the Selling Stockholders understand that the
International Managers propose to make a public offering of the International
Securities as soon as the International Managers deem advisable after this
Agreement has been executed and delivered.

2
<PAGE> 4
The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Forms S-4/S-1 (No.
333-2680) covering, among other things, the registration of the Offered
Securities under the Securities Act of 1933, as amended (the "1933 Act"),
including the related preliminary prospectus or prospectuses. Promptly after
execution and delivery of this Agreement, the Company will either (i) prepare
and file a prospectus in accordance with the provisions of Rule 430A ("Rule
430A") of the rules and regulations of the Commission under the 1933 Act (the
"1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of the
1933 Act Regulations or (ii) if the Company has elected to rely upon Rule 434
("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b).
Two forms of prospectus are to be used in connection with the offering and sale
of the Offered Securities: one relating to the International Securities (the
"Form of International Prospectus") and one relating to the U.S. Securities
(the "Form of U.S. Prospectus"). Each of the Form of International Prospectus
and the Form of U.S. Prospectus consists of (a) a "Basic Prospectus," which is
the prospectus included in the above-described registration statement and (b) a
"Prospectus Supplement," which specifically relates to the Offered Securities,
in the form first filed with, or transmitted for filing to, the Commission
pursuant to Rule 424. The Form of International Prospectus is identical to the
Form of U.S. Prospectus, except for the front cover and back cover pages and
the information under the caption "Underwriting." The term "Prospectus," as
used herein, shall refer to the Basic Prospectus as so supplemented by the
relevant Prospectus Supplement. The information included in such prospectuses
or in such Term Sheet, as the case may be, that was omitted from such
registration statement at the time it became effective but that is deemed to be
part of such registration statement at the time it became effective (a)
pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
"Rule 434 Information." Each Form of International Prospectus and Form of U.S.
Prospectus used before such registration statement became effective, and any
prospectus that omitted, as applicable, the Rule 430A Information or the Rule
434 Information, that was used after such effectiveness and prior to the
execution and delivery of this

3
<PAGE> 5
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits and any schedules, at the time it became
effective and including the Rule 430A Information and the Rule 434 Information,
as applicable, is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The final prospectuses in the forms first furnished to the
International Managers or the U.S. Underwriters, as the case may be, for use in
connection with the offering of the International Securities or the U.S.
Securities, as the case may be, are herein called the "International Prospectus
and the U.S. Prospectus." If Rule 434 is relied on, the terms "International
Prospectus" and "U.S. Prospectus" shall refer to the preliminary International
Prospectus and the preliminary U.S. Prospectus dated April 30, 1996 together
with the Term Sheet and all references in this Agreement to the date of the
International Prospectus and the U.S. Prospectus shall mean the date of the
Term Sheet. For purposes of this Agreement, all references to the Registration
Statement, any preliminary prospectus, the International Prospectus, the U.S.
Prospectus or any Term Sheet or any amendment or supplement to any of the
foregoing shall be deemed to include the copy filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval system
("EDGAR"). The International Prospectus and the U.S. Prospectus are
collectively referred to herein as the "Prospectuses."

SECTION 1. Representations and Warranties.

(a) Representations and Warranties by the Company. The
Company represents and warrants to each International Manager as of the date
hereof, as of the Closing Time referred to in Section 2(c) hereof, and as of
each Date of Delivery (if any) referred to in Section 2(b) hereof, and agrees
with each International Manager, as follows:

(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the

4
<PAGE> 6
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information has
been complied with.

At the respective times the Registration Statement,
any Rule 462(b) Registration Statement and any post-effective amendments
thereto became effective and at the Closing Time (and, if any
International Option Securities are purchased, at the Date of Delivery),
the Registration Statement, the Rule 462(b) Registration Statement and
any amendments and supplements thereto complied and will comply in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations and did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
Neither of the Prospectuses nor any amendments or supplements thereto,
at the time the Prospectuses or any such amendment or supplement was
issued and at the Closing Time (and, if any International Option
Securities are purchased, at the Date of Delivery), included or will
include an untrue statement of a material fact or omitted or will omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. If Rule 434 is used, the Company will comply with the
requirements of Rule 434 and the Prospectuses shall not be "materially
different," as such term is used in Rule 434, from the Prospectuses
included in the Registration Statement at the time it became effective.
The representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or the
Prospectuses made in reliance upon and in conformity with information
furnished to the Company (x) prior to April 29, 1996 by or on behalf of
Arethusa (as defined herein) or (y) in writing by (a) any Underwriter
through Merrill Lynch, or (b) any Selling

5
<PAGE> 7
Stockholder, expressly for use in the Registration Statement or either
Prospectus.

6
<PAGE> 8
spectuses present fairly the information shown therein, have been
prepared in accordance with the Commission's rules and guidelines with
respect to pro forma financial statements and have been properly
compiled on the bases described therein, and the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances
referred to therein.

(v) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the state of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectuses and to enter into and perform
its obligations under this Agreement and the U.S. Purchase Agreement;
and the Company is duly qualified as a foreign corporation to transact
business and is in good standing in each other jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure
so to qualify or to be in good standing would not result in a Material
Adverse Effect.

7
<PAGE> 9
(vi) Good Standing of Subsidiaries. Each subsidiary of the
Company (each a "Subsidiary" and, collectively, the "Subsidiaries") has
been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectuses and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct
of business, except where the failure with respect to any of the
foregoing would not result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all of the issued and
outstanding capital stock of each such Subsidiary has been duly
authorized and validly issued and is fully paid and non-assessable,
except where the failure of such capital stock to have been so
authorized and issued would not have a Material Adverse Effect; such
shares of capital stock are owned by the Company, directly or through
subsidiaries, and except for liens and security interests securing the
Diamond Offshore Bank Credit Facility (as defined in the Prospectus)
which are described in the Prospectuses, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity, except
where the failure of the Company so to own such capital stock would not
have a Material Adverse Effect; none of the outstanding shares of
capital stock of any Subsidiary was issued in violation of the
preemptive or similar rights of any securityholder of such Subsidiary,
except any such violations which would not, individually or in the
aggregate, have a Material Adverse Effect. The only subsidiaries of the
Company are (a) the Subsidiaries listed on Exhibit 21 to the
Registration Statement, (b) former subsidiaries of Arethusa and (c)
certain other Subsidiaries which, considered in the aggregate as a
single Subsidiary, do not constitute a "significant subsidiary" as
defined in Rule 1-02 of Regulation S-X.

(vii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectuses in the
column entitled

8
<PAGE> 10
"Historical" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectuses or pursuant to the
exercise of convertible securities or options referred to in the
Prospectuses). The shares of issued and outstanding capital stock have
been duly authorized and validly issued and are fully paid and
non-assessable; none of the outstanding shares of capital stock of the
Company was issued in violation of the preemptive or other similar
rights of any securityholder of the Company arising by operation of law,
under the Company's Restated Certificate of Incorporation or by-laws,
under any agreement to which the Company or any of its Subsidiaries is a
party or otherwise.

(viii) Authorization of Agreement. This Agreement and the
U.S. Purchase Agreement have been duly authorized, executed and
delivered by the Company.

9
<PAGE> 11
Agreement and the consummation of the transactions contemplated herein,
therein and in the Registration Statement and compliance by the Company
with its obligations hereunder have been duly authorized by all
necessary corporate action and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
Subsidiary pursuant to, the Agreements and Instruments (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that
would not impair the Company's or any of the Subsidiaries' ability to
perform the obligations hereunder or which would not result in a
Material Adverse Effect), nor will such action result in any violation
of the provisions of the Restated Certificate of Incorporation or
by-laws of the Company or any Subsidiary or any applicable law, statute,
rule, regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any Subsidiary or any of their assets,
properties or operations. As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or any Subsidiary.

(xii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any Subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which

10
<PAGE> 12
individually or in the aggregate might reasonably be expected to result
in a Material Adverse Effect, or which might reasonably be expected to
materially and adversely affect the properties or assets thereof or the
consummation of this Agreement, the U.S. Purchase Agreement or the
performance by the Company of its obligations hereunder or thereunder;
the aggregate of all pending legal or governmental proceedings to which
the Company or any Subsidiary is a party or of which any of their
respective property or assets is the subject which are not described in
the Registration Statement, including ordinary routine litigation
incidental to the business, are not reasonably be expected to result in
a Material Adverse Effect.

(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent,

11
<PAGE> 13
license, order, registration, qualification or decree of, any court or
governmental authority or agency is necessary or required for the
performance by the Company of the Company's obligations hereunder or
under the U.S. Purchase Agreement, in connection with the offering of
the Offered Securities or the consummation of the transactions
contemplated by this Agreement and the U.S. Purchase Agreement, except
such as have been already obtained or as may be required under the 1933
Act or the 1933 Act Regulations, the Delaware General Corporation Law or
state securities laws.

(xvi) Maritime Laws. No consent or approval of any federal
governmental agency with respect to any federal maritime law matter is
required in connection with the performance by the Company of its
obligations under this Agreement or the U.S. Purchase Agreement or the
issuance and sale of the Offered Securities; and neither the issue,
offer, sale or delivery by the Company of the Offered Securities
pursuant to this Agreement or the U.S. Purchase Agreement or the
execution, delivery, and performance by the Company and the consummation
of the transactions contemplated thereby 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 (MarAd) and the United States Coast Guard.

(xvii) Possession of Licenses and Permits. The Company and
its Subsidiaries possess such permits, licenses, approvals, consents and
other authorizations (collectively, "Governmental Licenses") issued by
the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them in all
material respects; the Company and its Subsidiaries are in compliance
with the terms and conditions of all such Governmental Licenses, except
where the failure so to comply would not, singly or in the aggregate,
have a Material Adverse Effect; all of the Governmental Licenses are
valid and in full force and effect, except when the invalidity of such
Governmental Licenses or the failure of such Governmental Licenses to be
in full force and effect would not have a Material Adverse Effect; and
neither the

12
<PAGE> 14
Company nor any of its Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in a
Material Adverse Effect.

13
<PAGE> 15
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, (v) mortgages, liens and security interests securing
the Diamond Offshore Bank Credit Facility (as defined in the
Prospectuses) and (vi) mortgages and liens securing former Arethusa
credit facilities (the indebtedness under which has been paid in full)
which remain unreleased of record.

(xxi) Environmental Laws. Except as described in the
Registration Statement and except such violations as would not, singly
or in the aggregate, result in a Material Adverse Effect, (A) neither
the Company nor any of its Subsidiaries is in violation of any federal,
state, local or foreign statute, law, rule, regulation, ordinance, code,
policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of
human health,

14
<PAGE> 16
the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants, contaminants,
wastes, toxic substances, hazardous substances, petroleum or petroleum
products (collectively, "Hazardous Materials") or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials (collectively, "Environmental Laws"),
(B) the Company and its Subsidiaries have all permits, authorizations
and approvals required under any applicable Environmental Laws and are
each in compliance with their requirements, (C) there are no pending or
threatened administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental
Law against the Company or any of its Subsidiaries and (D) there are no
events or circumstances that might reasonably be expected to form the
basis of an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency, against
or affecting the Company or any of its Subsidiaries relating to any
Hazardous Materials or the violation of any Environmental Laws.

(xxii) The Acquisition. The Acquisition (as defined in the
Prospectuses) has been consummated in the manner described in the
Prospectuses.

(b) Representations and Warranties by the Selling
Stockholders. Each Selling Stockholder severally represents and warrants to
each International Manager (and in the case of paragraph (v), to the Company)
as of the date hereof, as of the Closing Time, and, if one or more Selling
Stockholder is selling International Option Securities on a Date of Delivery,
as of each such Date of

15
<PAGE> 17
Delivery, and agrees with each International Manager, as follows:

(i) Accurate Disclosure. Such Selling Stockholder has no
reason to believe that the representations and warranties of the Company
contained in Section 1(a) hereof are not true and correct in any
material respect. Such Selling Stockholder has reviewed and is familiar
with the Registration Statement and (A) to the best knowledge of such
Selling Stockholder, to the extent that any statements or omissions made
in the Prospectuses or any amendment or supplement thereto are made in
reliance upon and in conformity with written information with respect to
such Selling Stockholder furnished to the Company by such Selling
Stockholder expressly for use therein or (B) to such Selling
Stockholder's knowledge, to the extent that any statements or omissions
made in the Prospectuses or any amendment or supplement thereto relate
to any information with respect to Arethusa furnished to the Company
prior to April 29, 1996, by or on behalf of Arethusa, the Registration
Statement and the Prospectuses do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; such Selling Stockholder is not
prompted to sell the International Securities to be sold by such Selling
Stockholder hereunder by any information concerning the Company or any
Subsidiary of the Company which is not set forth in the Prospectuses.

(ii) Authorization of Agreements. Such Selling Stockholder
has the full right, power and authority to enter into this Agreement,
the U.S. Purchase Agreement and with respect to Alphee, a power of
attorney appointing James F. Munsell and John Berton as
Attorneys-in-Fact (the "Alphee Power of Attorney"), and with respect to
Ratos, a power of attorney (the "Ratos Power of Attorney") appointing
Gary Wolfe and Olle Isberg as Attorneys-in-Fact (such individuals,
together with Messrs. Munsell and Berton, are each referred to herein as
an "Attorney-in-Fact"; and each of the Alphee Power of Attorney and the
Ratos Power of Attorney is referred to herein as a "Power of Attorney"),
and to sell, transfer

16
<PAGE> 18
and deliver the International Securities to be sold by such Selling
Stockholder hereunder. The execution and delivery by each Selling
Stockholder of this Agreement, the U.S. Purchase Agreement and its
respective Power of Attorney, and the sale and delivery of the
Securities to be sold by such Selling Stockholder and the consummation
of the transactions contemplated herein and compliance by such Selling
Stockholder with its obligations hereunder have been duly authorized by
such Selling Stockholder and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute a breach of or default under, or result in the creation or
imposition of any tax, lien, charge or encumbrance upon the Offered
Securities to be sold by such Selling Stockholder or any property or
assets of such Selling Stockholder pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, license, lease
or other agreement or instrument to which such Selling Stockholder is a
party or by which such Selling Stockholder may be bound, or to which any
of the property or assets of such Selling Stockholder is subject
(including any contract or other instrument creating any right-of-firdst
revusal or any similar right with respect to the Offered Securities),
nor will such action result in any violation of the provisions of the
charter or by-laws or other organizational instrument of such Selling
Stockholder, or any applicable treaty, law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
such Selling Stockholder or any of its properties.

(iii) Good and Marketable Title. Such Selling Stockholder
has and will have at the Closing Time and, if any International Option
Securities are purchased, on the Date of Delivery, have good and
marketable title to the International Securities to be sold by such
Selling Stockholder hereunder, free and clear of any security interest,
mortgage, pledge, lien, charge, claim, equity or encumbrance of any
kind, other than pursuant to this Agreement; and upon delivery of such
International Securities and payment of the purchase price therefor as
herein contemplated, assuming each International Manager

17
<PAGE> 19
acquires its interest in such International Securities in good faith and
has no notice of any adverse claim, each of the International Managers
will receive good and marketable title to the International Securities
purchased by it from such Selling Stockholder, free and clear of any
security interest, mortgage, pledge, lien, charge, claim, equity or
encumbrance of any kind.

(iv) Due Execution of Agreements. Such Selling Stockholder
has duly executed and delivered, in the form heretofore furnished to the
International Managers, with respect to Alphee, the Alphee Power of
Attorney, and with respect to Ratos, the Ratos Power of Attorney; and
each Attorney-in-Fact is authorized by its respective Selling
Stockholder to execute and deliver this Agreement and the certificate
referred to in Section 5(h) or that may be required pursuant to Sections
5(m) and 5(n) on behalf of such Selling Stockholder, to sell, assign and
transfer to the International Managers the International Securities to
be sold by such Selling Stockholder hereunder, to determine the purchase
price to be paid by the International Managers to such Selling
Stockholder, as provided in Section 2(a) hereof, to authorize the
delivery of the International Securities to be sold by such Selling
Stockholder hereunder, to accept payment therefor, and otherwise to act
on behalf of such Selling Stockholder in connection with this Agreement.

(vi) Absence of Further Requirements. No filing with, or
consent, approval, authorization, order, registration, qualification or
decree of, any court or governmental authority or agency, domestic or
foreign, is required for the performance by such Selling Stockholder of
its obligations hereunder or in the Alphee Power of Attorney or the
Ratos Power

18
<PAGE> 20
of Attorney (as the case may be), or in connection with the sale and
delivery of the International Securities hereunder or the consummation
of the transactions contemplated by this Agreement, except such as may
have previously been made or obtained or as may be required under the
1933 Act or the 1933 Act Regulations or state securities laws.

(vii) Restriction on Sale of Securities. During a period of
90 days from the date of the Prospectuses, such Selling Stockholder will
not, without the prior written consent of Merrill Lynch, (i) to sell,
offer to sell, grant any option for sale of, contract or otherwise
transfer, directly or indirectly, any share of Common Stock or any
securities convertible into or exercisable or exchangeable for Common
Stock. The foregoing sentence shall not apply to the Common Stock to be
sold hereunder or under the U.S. Purchase Agreement. In addition,
during the 90 days after the date of this Agreement, such Selling
Stockholders will not release the Company from the Company's obligation
under the Shareholders Agreement (as defined in the Prospectuses) not to
effect, and to cause Loews to agree not to effect, any public sale or
distribution of any securities the same as or similar to the Common
Stock, or any securities convertible into or exchangeable for securities
the same as or similar to the Common Stock (except pursuant to
registrations on Form S-4 or any successor form, or Form S-8 or any
successor form relating solely to securities offered pursuant to any
benefit plan).

(viii) Transfer of International Securities. Certificates
for all of the International Securities to be sold by such Selling
Stockholder pursuant to this Agreement, in suitable form for transfer by
delivery or accompanied by duly executed instruments of transfer or
assignment in blank with signatures guaranteed, will have been delivered
prior to the Closing Date to the Company's transfer agent, Chemical
Mellon Shareholder Services, L.L.C. (or in the case of International
Securities that are not in certificated form, such other customary
method of transfer from such Selling Stockholder to such transfer
agent), with irrevocable conditional instructions to deliver such
International Securities

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<PAGE> 21
to the International Managers pursuant to this Agreement.

(c) Officer's Certificates. Any certificate signed by any
officer of the Company or any subsidiary delivered to the International
Managers or to counsel for the International Managers shall be deemed a
representation and warranty by the Company to each International Manager as to
the matters covered thereby; any certificate signed by or on behalf of any
Selling Stockholder as such and delivered to the International Managers or to
counsel for the International Managers pursuant to the terms of this Agreement
shall be deemed a representation and warranty by such Selling Stockholder to
the International Managers as to the matters covered thereby.

SECTION 2. Sale and Delivery to International Managers;
Closing.

(a) Initial Securities. On the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, each Selling Stockholder, severally and not jointly, agrees to sell
to each International Manager, severally and not jointly, and each
International Manager, severally and not jointly, agrees to purchase from each
Selling Stockholder, at the price per share set forth in Schedule C, that
proportion of the number of Initial International Securities set forth in
Schedule B opposite the name of such Selling Stockholder, which the number of
Initial International Securities set forth in Schedule A opposite the name of
such International Manager, plus any additional number of Initial International
Securities which such International Manager may become obligated to purchase
pursuant to the provisions of Section 10 hereof bears to the total number of
Initial International Securities, subject, in each case, to such adjustments
among

20
<PAGE> 22
the International Managers as the International Managers in their sole
discretion shall make to eliminate any sales or purchases of fractional
securities.

(b) Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Selling Stockholders, acting severally and not
jointly, hereby grant an option to the International Managers, severally and
not jointly, to purchase, at the price per share set forth in Schedule C, up to
the additional number of shares of Common Stock as is set forth in Schedule B
less an amount per share equal to any dividends or distributions declared by
the Company and payable on the Initial International Securities but not payable
on the International Option Securities. The option hereby granted will expire
30 days after the date hereof and may be exercised in whole or in part from
time to time only for the purpose of covering over-allot-ments which may be
made in connection with the offering and distribution of the Initial
International Securities upon notice by the International Managers to the
Company and the Selling Stockholders setting forth the number of International
Option Securities as to which the several International Managers are then
exercising the option and the time and date of payment and delivery for such
International Option Securities. Any such time and date of delivery (a "Date
of Delivery") shall be determined by the International Managers , but shall not
be later than seven full business days after the exercise of said option, nor
in any event prior to the Closing Time, as hereinafter defined. If the option
is exercised as to all or any portion of the International Option Securities,
each of the International Managers, acting severally and not jointly, will
purchase that proportion of the total number of International Option Securities
then being purchased which the number of Initial International Securities set
forth in Schedule A opposite the name of such International Manager bears to
the total number of Initial International Securities, subject in each case to
such adjustments as the International Managers in their discretion shall make
to eliminate any sales or purchases of fractional shares.

(c) Payment. Payment of the purchase price for, and
delivery of certificates for, the Initial International Securities shall be
made at the office of

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<PAGE> 23
Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, New York
10022, or at such other place as shall be agreed upon by the International
Managers, the Company and the Selling Stockholders, at 10:00 A.M. (Eastern
Time) on the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern
Time) on any given day) business day after the date hereof (unless postponed in
accordance with the provisions of Section 10), or such other time not later
than ten business days after such date as shall be agreed upon by the
International Managers, the Company and the Selling Stockholders (such time and
date of payment and delivery being herein called "Closing Time").

In addition, in the event that any or all of the International
Option Securities are purchased by the International Managers, payment of the
purchase price for, and delivery of certificates for, such International Option
Securities shall be made at the above-mentioned offices, or at such other place
as shall be agreed upon by the International Managers, the Company and the
Selling Stockholders, on each Date of Delivery as specified in the notice from
the International Managers to the Company and the Selling Stockholders.
Payment for the Initial International Securities and the International Option
Securities shall be made to each Selling Stockholder by wire transfer of
immediately available funds to one or more bank accounts designated by such
Selling Stockholder, against delivery to the International Managers for the
respective accounts of the International Managers of certificates for the
International Securities to be purchased by them. It is understood that each
International Manager has authorized the International Managers, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial International Securities and the International Option
Securities, if any, which it has agreed to purchase. Merrill Lynch, Pierce,
Fenner & Smith Incorporated, individually and not as representative of the
International Managers, may (but shall not be obligated to) make payment of the
purchase price for the Initial International Securities or the International
Option Securities, if any, to be purchased by any International Manager whose
payment has not been received by the Closing Time or the relevant Date of
Delivery, as the case may be, but such payment shall not relieve such
International Manager from its obligations hereunder.

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<PAGE> 24
(d) Denominations; Registration. Certificates for the
Initial International Securities and the International Option Securities, if
any, shall be in such denominations and registered in such names as the
International Managers may request in writing at least one full business day
before the Closing Time or the relevant Date of Delivery, as the case may be.
The certificates for the Initial International Securities and the International
Option Securities, if any, will be made available for examination and packaging
by the International Managers in the City of New York not later than 10:00 A.M.
(Eastern Time) on the business day prior to the Closing Time or the relevant
Date of Delivery, as the case may be.

SECTION 3. Covenants of the Company. The Company covenants
with each International Manager as follows:

(a) Compliance with Securities Regulations and Commission
Requests. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A and will notify the International Managers
immediately, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement shall become
effective, or any supplement to the Prospectuses or any amended
Prospectuses shall have been filed, (ii) of the receipt of any comments
from the Commission, (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement
to the Prospectuses or for additional information and (iv) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing
or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Offered Securities for offering
or sale in any jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes. The Company will promptly effect
the filings necessary pursuant to Rule 424(b) and will take such steps
as it deems necessary to ascertain promptly whether the forms of
prospectus transmitted for filing under Rule 424(b) were received for
filing by the Commission and, in the event that they were not, it will
promptly file such prospectuses. The Company will make every

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<PAGE> 25
reasonable effort to prevent the issuance of any stop order and, if any
stop order is issued, to obtain the lifting thereof at the earliest
possible moment.

(b) Filing of Amendments. The Company will give the
International Managers notice of its intention to file or prepare any
amendment to the Registration Statement (including any filing under Rule
462(b)), any Term Sheet or any amendment, supplement or revision to
either the prospectuses included in the Registration Statement at the
time it became effective or to the Prospectuses and will furnish the
International Managers with copies of any such documents a reasonable
amount of time prior to such proposed filing or use, as the case may be,
and will not file or use any such document to which the International
Managers or counsel for the International Managers reasonably shall
object.

(c) Delivery of Registration Statements. The Company has
furnished or will deliver to the International Managers and counsel for
the International Managers, without charge, signed copies of the
Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein
and signed copies of all consents and certificates of experts, and will
also deliver to the International Managers, without charge, a conformed
copy of the Registration Statement as originally filed and of each
amendment thereto (without exhibits) for each of the International
Managers. If applicable, the copies of the Registration Statement and
each amendment thereto furnished to the International Managers will be
identical to the electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S- T.

(d) Delivery of Prospectuses. The Company has delivered
to each International Manager, without charge, as many copies of each
preliminary International prospectus as such International Manager
reasonably requested, and the Company hereby consents to the use of such
copies for purposes permitted by the 1933 Act. The Company will furnish
to each International Manager, without charge, during

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<PAGE> 26
the period when the International Prospectus is required to be delivered
under the 1933 Act or the Securities Exchange Act of 1934 (the "1934
Act"), such number of copies of the International Prospectus (as amended
or supplemented) as such International Manager may reasonably request.
If applicable, the International Prospectus and any amendments or
supplements thereto furnished to the International Managers will be
identical to the electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.

(e) Continued Compliance with Securities Laws. The
Company will comply with the 1933 Act and the 1933 Act Regulations so as
to permit the completion of the distribution of the Offered Securities
as contemplated in this Agreement, the U.S. Purchase Agreement and in
the Prospectuses. If at any time when a prospectus is required by the
1933 Act to be delivered in connection with sales of the Offered
Securities, any event shall occur or condition shall exist as a result
of which it is necessary to amend the Registration Statement or amend or
supplement the Prospectuses in order that the Prospectuses will not
include any untrue statements of a material fact or omit to state a
material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary at any such time
to amend the Registration Statement or amend or supplement the
Prospectuses in order to comply with the requirements of the 1933 Act or
the 1933 Act Regulations, the Company will promptly prepare and file
with the Commission, subject to Section 3(b), such amendment or
supplement as may be necessary to correct such statement or omission or
to make the Registration Statement or the Prospectuses comply with such
requirements, and the Company will furnish to the International Managers
such number of copies of such amendment or supplement as the
International Managers may reasonably request.

(f) Blue Sky Qualifications. The Company will use its
best efforts, in cooperation with the International Managers, to qualify
the Offered Securities

25
<PAGE> 27
for offering and sale under the applicable securities laws of such
states and other jurisdictions (domestic or foreign) as the
International Managers may designate and to maintain such
qualifications in effect for a period of not less than one year from the
later of the effective date of the Registration Statement and any Rule
462(b) Registration Statement; provided, however, that the Company shall
not be obligated to file any general consent to service of process or to
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject. In each jurisdiction in which the Offered
Securities have been so qualified, the Company will file such statements
and reports as may be required by the laws of such jurisdiction to
continue such qualification in effect for a period of not less than one
year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.

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<PAGE> 28
such release or releases to the International Managers and their
counsel.

SECTION 4. Payment of Expenses. (a) Expenses. Except as
otherwise agreed to in writing by the International Managers and the Selling
Stockholders, the Company will pay all expenses incident to the performance of
its obligations under this Agreement, including (i) the preparation, printing
and filing of the Registration Statement (including financial statements and
exhibits) as originally filed and of each amendment thereto, (ii) the
preparation, photocopying and delivery to the Underwriters of this Agreement,
any Agreement among International Managers, the U.S. Purchase Agreement, the
Agreement among U.S Underwriters, the Intersyndicate Agreement between the
Interna-tional Managers and the U.S. Underwriters and such other documents as
may be required in connection with the offering, purchase, sale and delivery of
the Offered Securities, (iii) the preparation, issuance and delivery of the
certificates for the Offered Securities to the Underwriters, including any
stock or other transfer taxes or duties payable upon the sale of the Offered
Securities to the Underwriters, (iv) the fees and disbursements of the
Company's counsel, accountants and other advisors, (v) the qualification of the
Offered Securities under securities laws in accordance with the provisions of
Section 3(f) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus, any Term Sheets and of the Prospectuses and any
amendments or supplements thereto, (vii) the preparation, photocopying and
delivery to the Underwriters of copies of the Blue Sky Survey and any
supplement thereto, (viii) the fees and expenses of any transfer agent or
registrar for the Offered Securities and (ix) the filing fees incident to, and
the reasonable fees and disbursements of counsel to the Underwriters in
connection with, the review by the National Association of Securities Dealers,
Inc. (the "NASD") of the terms of the sale of the Offered Securities, if any.

(b) Expenses of the Selling Stockholders. Each Selling
Stockholder will pay all of its expenses incident to the performance of its
respective obligations

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<PAGE> 29
under, and the consummation of the transactions contemplated by this Agreement,
including: (i) any stamp duties, capital duties and stock transfer taxes, if
any, payable upon the sale of the International Securities to the International
Managers by such Selling Stockholder, and their transfer between the
Underwriters pursuant to an agreement between such Underwriters, (ii) the fees
and disbursements of its respective counsel and accountants and (iii) all
expenses required to be paid by the Selling Stockholders (A) as between the
Selling Stockholders and the Company, as set forth in the last sentence of
Section 4(h) of the Shareholders Agreement, and (B) as between the Selling
Stockholders and the Underwriters, as set forth in that certain Expense
Agreement dated as of the date hereof among the Selling Stockholders and the
Underwriters.

(c) Termination of Agreement. If this Agreement is
terminated by the International Managers in accordance with the provisions of
Section 5 (other than Section 5(e), (h), (m)(ii) or (m)(vi)), Section 9(a)(i)
or Section 11 hereof, the Company shall reimburse the International Managers
for all of their out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the International Managers. If this Agreement is
terminated by the International Managers in accordance with the provisions of
Section 5(e), (h), (m)(ii) or (m)(vi) or Section 11, the Selling Stockholders
shall reimburse the International Managers and the Company for all of their
reasonable respective out-of-pocket expenses, including the reasonable fees and
disbursements of their respective counsel.

SECTION 5. Conditions of the International Managers'
Obligations. The obligations of the several International Managers hereunder
are subject to the accuracy of the representations and warranties of the
Company and the Selling Stockholders contained in Section 1 hereof or in
certificates of any officer of the Company, any Subsidiary or any of the
Selling Stockholders delivered pursuant to the provisions hereof, to the
performance by the Company and the Selling Stockholders of their respective
covenants and other obligations hereunder, and to the following further
conditions:

(a) Effectiveness of Registration Statement. The
Registration Statement, including any Rule

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<PAGE> 30
462(b) Registration Statement, has become effective on the date hereof
and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall
have been complied with to the reasonable satisfaction of counsel to the
Underwriters. Prospectuses containing the Rule 430A Information shall
have been filed with the Commission in accordance with Rule 424(b) (or a
post-effective amendment providing such information shall have been
filed and declared effective in accordance with the requirements of Rule
430A) or, if the Company has elected to rely upon Rule 434, a Term Sheet
shall have been filed with the Commission in accordance with Rule
424(b).

(b) Opinion of Counsel for the Company. At Closing Time,
the International Managers shall have received the favorable opinion,
dated as of Closing Time, of Weil, Gotshal & Manges LLP, counsel for the
Company, in form and substance reasonably satisfactory to counsel for
the International Managers, together with signed or reproduced copies of
such letter for each of the other International Managers substantially
to the effect set forth in Exhibit A hereto and to such further effect
as counsel to the International Managers may reasonably request.

(c) Opinion of General Counsel of the Company. At
Closing Time, the International Managers shall have received the
favorable opinion, dated as of Closing Time, of Richard L. Lionberger,
Vice President and General Counsel of the Company, in form and substance
reasonably satisfactory to counsel for the International Managers
together with signed or reproduced copies of such letter for each of the
International Managers to the effect set forth in Exhibit B hereto and
to such further effect as counsel to the International Managers may
reasonably request.

(d) Opinion of Maritime Counsel for the Company. At
Closing Time, the International Managers shall have received the
favorable opinion, dated as of Closing Time, of Verner, Liipfert,
Bernhard,

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<PAGE> 31
McPherson and Hand, Chartered, special maritime counsel for the Company,
in form and substance reasonably satisfactory to counsel for the
International Managers, together with signed or reproduced copies of
such letter for each of the other International Managers substantially
to the effect set forth in Exhibit C hereto and to such further effect
as counsel to the International Managers may reasonably request.

(e) Opinions of Counsel for the Selling Stockholders. At
Closing Time, the International Managers shall have received the
favorable opinion, dated as of Closing Time, of (i) Loesch & Wolter,
Luxembourg counsel for Alphee, (ii) Mannheimer Swartling, Swedish
counsel for Ratos, (iii) Cleary, Gottlieb, Steen & Hamilton, U.S.
counsel for Alphee, and (iv) Seward & Kissel, U.S. counsel for Ratos, in
form and substance reasonably satisfactory to counsel for the
International Managers, together with signed or reproduced copies of
such letter for each of the other International Managers substantially
to the effect set forth in Exhibits D-1, D-2, D-3 and D-4, respectively,
hereto and to such further effect as counsel to the International
Managers may reasonably request.

(f) Opinion of Counsel for the International Managers.
At Closing Time the International Managers shall have received the
favorable opinion, dated as of Closing Time, of Skadden, Arps, Slate,
Meagher & Flom, counsel for the International Managers, together with
signed or reproduced copies of such letter for each of the other
International Managers, in form and substance reasonably satisfactory to
the International Managers.

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<PAGE> 32
President or a Vice President of the Company and of the chief financial
or chief accounting officer of the Company, dated as of Closing Time, to
the effect that (i) there has been no such material adverse change, (ii)
the representations and warranties in Section 1(a) hereof are true and
correct with the same force and effect as though expressly made at and
as of Closing Time, (iii) the Company has complied with all agreements
and satisfied all conditions on its part to be performed or satisfied
under this Agreement and under the U.S. Purchase Agreement at or prior
to Closing Time and (iv) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or are contemplated by the
Commission.

(h) Certificate of the Selling Stockholders. At Closing
Time, the International Managers shall have received a certificate of
each Selling Stockholder, or of an Attorney-in-Fact on behalf of such
Selling Stockholder, dated as of Closing Time, to the effect that (i)
the representations and warranties of each Selling Stockholder contained
in Section l(b) hereof are true and correct in all respects with the
same force and effect as though expressly made at and as of Closing Time
and (ii) such Selling Stockholder has complied in all material respects
with all agreements and satisfied all conditions on its part to be
performed or satisfied under this Agreement at or prior to Closing Time.

(i) Accountants' Comfort Letter. At the time of the
execution of this Agreement, the International Managers shall have
received from Deloitte & Touche LLP and Arthur Andersen & Co. letters
dated such date, in form and substance satisfactory to the International
Managers, together with signed or reproduced copies of such letter for
each of the other International Managers containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement
and the Prospectuses.

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<PAGE> 33
(j) Bring-down Comfort Letter. At Closing Time the
International Managers shall have received from each of the accountants
identified in the preceding paragraph a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the
letters furnished pursuant to the preceding paragraph of this Section,
except that the specified date referred to shall be a date not more than
three business days prior to Closing Time.

(k) No Objection. The NASD shall not have raised any
objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements.

(m) Conditions to Purchase of the International Option
Securities. In the event that the International Managers exercise their
option provided in Section 2(b) hereof to purchase all or any portion of
the International Option Securities, the representations and warranties
of the Company and the Selling Stockholders contained herein and the
statements in any certificates furnished by the Company and the Selling
Stockholders hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the International
Managers shall have received:

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<PAGE> 34
(ii) Selling Stockholders Certificates. A
certificate, dated such Date of Delivery, of each Selling
Stockholder, or of an Attorney-in-Fact on behalf of such
Selling Stockholder, confirming that the certificate delivered
at Closing Time pursuant to Section 5(h) remains true and
correct as of such Date of Delivery.

(iii) Opinion of Counsel for Company. The favorable
opinion of Weil, Gotshal & Manges LLP, counsel for the
Company, substantially in form and substance reasonably
satisfactory to counsel for the International Managers, dated
such Date of Delivery, relating to the International Option
Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by
Section 5(b) hereof.

(iv) Opinion of Counsel for Company. The
favorable opinion of Richard L. Lionberger, Vice President and
General Counsel of the Company, in form and substance
reasonably satisfactory to counsel for the International
Managers, dated such Date of Delivery, relating to the
International Option Securities to be purchased on such Date
of Delivery and otherwise to the same effect as the opinion
required by Section 5(c) hereof.

(v) Opinion of Maritime Counsel for the Company.
The favorable opinion of Verner, Liipfert, Bernhard, McPherson
and Hand, Chartered, special maritime counsel for the Company,
in form and substance reasonably satisfactory to counsel for
the International Managers, dated such Date of Delivery,
relating to the International Option Securities to be
purchased on such Date of Delivery and otherwise to the same
effect as the opinion required by Section 5(d) hereof.

(vi) Opinion of Counsel for Selling Stockholders.
The favorable opinion of (A) Loesch & Wolter, Luxembourg
counsel for Alphee, (B) Mannheimer Swartling, Swedish counsel
for Ratos, and (C) Cleary, Gottlieb, Steen & Hamil-

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<PAGE> 35
ton, U.S. counsel for Alphee, and Seward & Kissel, U.S.
counsel for Ratos, in form and substance reasonably
satisfactory to counsel for the International Managers, dated
such Date of Delivery, relating to the International Option
Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinions required by
Section 5(e).

(vii) Opinion of Counsel for the International
Managers. The favorable opinion of Skadden, Arps, Slate,
Meagher & Flom, counsel for the International Managers, dated
such Date of Delivery, relating to the International Option
Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by
Section 5(f) hereof.

(viii) Bring-down Comfort Letter. Letters from
Deloitte & Touche LLP and Arthur Andersen & Co., in form and
substance satisfactory to the International Managers and dated
such Date of Delivery, substantially in the same form and
substance as the letter furnished to the International
Managers pursuant to Section 5(i) hereof, except that the
"specified date" in the letter furnished pursuant to this
paragraph shall be a date not more than five days prior to
such Date of Delivery.

(n) Additional Documents. At Closing Time and at each
Date of Delivery counsel for the International Managers shall have been
furnished with such certificates and such other customary closing
documents as they may require for the purpose of enabling them to pass
upon the sale of the International 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 and the Selling
Stockholders, in connection with the sale of the International
Securities as herein contemplated shall be satisfactory in form and
substance to the International Managers and counsel for the
International Managers.

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<PAGE> 36
(o) Termination of Agreement. If any condition specified
in this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the
purchase of International Option Securities, on a Date of Delivery which
is after the Closing Time, the obligations of the several International
Managers to purchase the relevant International Option Securities, may
be terminated by the International Managers by notice to the Company and
the Selling Stockholders at any time at or prior to Closing Time or such
Date of Delivery, as the case may be, and such termination shall be
without liability of any party to any other party except as provided in
Section 4 and except that Sections 1, 6 and 7 shall survive any such
termination and remain in full force and effect.

SECTION 6. Indemnification.

(a) Indemnification of International Managers. The
Company agrees to indemnify and hold harmless each International Manager and
each person, if any, who controls any International Manager within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:

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<PAGE> 37
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, 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 (subject to
Section 6(c) below) any such settlement is effected with the written
consent of the Company and the Selling Stockholders; and

(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), 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, to the extent that any such
expense is not paid under paragraphs (i) or (ii) of this Section 6(a)
above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of 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 (x)
prior to April 29, 1996 by or on behalf of Arethusa or (y) in writing by (i)
any International Manager through Merrill Lynch, or (ii) any Selling
Stockholder, expressly for use in the Registration Statement (or any amendment
thereto), including the 430A Information and the Rule 434 Information, if
applicable, or any preliminary prospectus or the Prospectuses (or any amendment
or supplement thereto) and provided further, that this indemnification
agreement shall not apply to any loss, liability, claim, damage or expense if a
copy of the International Prospectus (as then amended or supplemented if the
Company shall have prepared any amendments or supplements thereto) was not sent
or given by or on behalf of any International Manager to such person, if such
is required by law, at or prior to the written confirmation of the sale of
Offered Securities to such person and if the International Prospectus, as so
amended or supplemented, would have cured the defect

36
<PAGE> 38
giving rise to such loss, liability, claim, damage or expense.

(b) Indemnification of International Managers, the
Company, Directors and Officers by the Selling Stockholders. Each Selling
Stockholder, severally and not jointly (in the proportion that the number of
International Securities being sold by such Selling Stockholder bears to the
total number of International Securities), with respect to (i) below, and
jointly and severally, with respect to (ii) below, agrees to indemnify and hold
harmless each International Manager, the Company, the Company's directors, each
of the Company's officers who signed the Registration Statement, and each
person, if any, who controls a International Manager or the Company within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section 6, 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),
including the Rule 430A Information and the Rule 434 Information, if
applicable, or any preliminary prospectus or any Prospectus (or any amendment
or supplement thereto) (i) in reliance upon and in conformity with written
information furnished to the Company by a Selling Stockholder with respect to
such Selling Stockholder expressly for use in the Registration Statement (or
any amendment thereto) or such preliminary prospectus or any Prospectus (or any
amendment or supplement thereto) or (ii) any information with respect to
Arethusa furnished to the Company prior to April 29, 1996 by or on behalf of
Arethusa.

(c) Indemnification of Company, Selling Stockholders,
Directors and Officers by the International Managers. Each International
Manager severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act, and each Selling Stockholder
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section 6, as incurred, but only
with respect to untrue statements or omissions, or alleged

37
<PAGE> 39
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or any Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such International Manager
through Merrill Lynch expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or any Prospectus (or any
amendment or supplement thereto).

(d) Actions against Parties; Notification. 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 reasonably 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 6 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. An indemnified party may participate at its own
expense in the defense of any such action. In no event shall the indemnifying
parties be liable for fees and expenses of more than one counsel (in addition
to any local counsel) separate from their own counsel for all indemnified
parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent
of the indemnified parties, settle or

38
<PAGE> 40
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential
parties thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.

(e) Settlement without Consent if Failure to Reimburse.
If at any time an indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.

SECTION 7. Contribution. If the indemnification provided for
in Section 6 hereof 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, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, the Selling Stockholders and the International Managers from the
offering of the International 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

39
<PAGE> 41
relative fault of the Company, the Selling Stockholders and the International
Managers, 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 Selling Stockholders and
the International Managers in connection with the offering of the International
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
International Securities pursuant to this Agreement (before deducting expenses)
received by the Selling Stockholders and the total underwriting discount
received by the International Managers, in each case as set forth on the cover
of the International Prospectus, or, if Rule 434 is used, the corresponding
location on the Term Sheet bear to the aggregate initial public offering price
of the International Securities as set forth on such cover.

The relative fault of the Company, the Selling Stockholders
and the International Managers 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, the Selling Stockholders or by the International
Managers and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.

The Company, the Selling Stockholders and the International
Managers agree that it would not be just and equitable if contribution pursuant
to this Section 7 were determined by pro rata allocation (even if the
International Managers were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this Section 7. The aggregate amount of
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section 7 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

40
<PAGE> 42
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, no
International Manager shall be required to contribute any amount in excess of
the amount by which the total price at which the International Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such International Manager has
otherwise been required to pay by reason of any 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 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.

For purposes of this Section 7, (i) each person, if any, who
controls a International Manager within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act shall have the same rights to contribution as
such International Manager, (ii) each director of the Company, each officer of
the Company who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as the
Company and (iii) each director of each Selling Stockholder and each person, if
any, who controls such Selling Stockholder within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as such Selling Stockholder. The International Managers'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial International Securities set forth opposite
their respective names in Schedule A hereto and not joint.

SECTION 8. Representations, Warranties and Agreements to
Survive Delivery. All representations, warranties and agreements contained in
this Agreement or in certificates of officers of the Company or the Selling
Stockholders submitted pursuant hereto, shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any
International Manager or controlling person, or by or on behalf of the

41
<PAGE> 43
Company or the Selling Stockholders, and shall survive delivery of the
International Securities to the International Managers.

SECTION 9. Termination of Agreement.

(a) Termination; General. The International Managers may
terminate this Agreement, by notice to the Company and the Selling
Stockholders, at any time at or prior to Closing Time (i) if there has been,
since the time of execution of this Agreement or since the respective dates as
of which information is given in the Prospectuses, any material adverse change
in the condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Company and its Subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, (ii) if
there has occurred any material adverse change in the financial markets in the
United States for the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which
is such as to make it, in the judgment of the International Managers,
impracticable to market the International Securities or to enforce contracts
for the sale of the International Securities, (iii) if trading in any
securities of the Company has been suspended or limited by the Commission or
the New York Stock Exchange, or if trading generally on the American Stock
Exchange or the New York Stock Exchange or in the Nasdaq National Market has
been suspended or limited, or minimum or maximum prices for trading have been
fixed, or maximum ranges for prices have been required, by any of said
exchanges or by such system or by order of the Commission, the National
Associa-tion of Securities Dealers, Inc. or any other governmental authority or
(iv) if a banking moratorium has been declared by either Federal or New York
authorities.

42
<PAGE> 44
SECTION 10. Default by One or More of the International
Managers. If one or more of the International Managers shall fail at Closing
Time or a Date of Delivery to purchase the International Securities which it or
they are obligated to purchase under this Agreement (the "Defaulted
Securities"), the International Managers shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
International Managers, or any other underwriters, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be agreed
upon and upon the terms herein set forth; if, however, the International
Managers shall not have completed such arrangements within such 24-hour
period, then:

(a) if the number of Defaulted Securities does not exceed
10% of the number of International Securities to be purchased on such
date, each of the non-defaulting International Managers shall be
obligated, severally and not jointly, to purchase the full amount
thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all
non-defaulting International Managers, or

(b) if the number of Defaulted Securities exceeds 10% of
the number of International Securities to be purchased on such date,
this Agreement or, with respect to any Date of Delivery which occurs
after the Closing Time, the obligation of the International Managers to
purchase and of the Selling Stockholders to sell the International
Option Securities to be purchased and sold on such Date of Delivery
shall terminate without liability on the part of any non-defaulting
International Manager.

No action taken pursuant to this Section 10 shall relieve any
defaulting International Manager from liability in respect of its default.

43
<PAGE> 45
Managers or the Selling Stockholders shall have the right to postpone Closing
Time or the relevant Date of Delivery, as the case may be, for a period not
exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectuses or in any other documents or
arrangements. As used herein, the term "International Manager" includes any
person substituted for an International Manager under this Section 10.

SECTION 11. Default by One or More of the Selling
Stockholders. (a) If any Selling Stockholder shall fail at Closing Time to
sell and deliver the number of International Securities which such Selling
Stockholder is obligated to sell hereunder, then the International Managers
may, at option of the International Managers, by notice from the International
Managers to the Company and the nondefaulting Selling Stockholder, either (i)
terminate this Agreement without any liability on the fault of any
non-defaulting party except that the provisions of Sections 1, 4, 6 and 7 shall
remain in full force and effect or (ii) elect to purchase the International
Securities which the nondefaulting Selling Stockholder has agreed to sell
hereunder. No action taken pursuant to this Section 11 shall relieve any
Selling Stockholder so defaulting from liability, if any, in respect of such
default.

In the event of a default by any Selling Stockholder as
referred to in this Section 11, each of the International Managers and the
non-defaulting Selling Stockholder shall have the right to postpone Closing
Time for a period not exceeding seven days in order to effect any required
change in the Registration Statement or Prospectuses or in any other documents
or arrangements.

SECTION 12. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to
the International Managers shall be directed to the International Managers at
Ropemaker Place, 25 Ropemaker Street, London EC2Y 9LY, England, attention of
Vincent Maddi; notices to the Company shall be directed to it at 15415 Katy
Freeway, Suite 400, Houston, Texas 77094, attention of Richard L. Lionberger,
Vice President, General Counsel and Secretary; notices to Alphee shall be
directed to it at 11, Avenue de la Gare, P.O. Box 2255,

44
<PAGE> 46
L-1022 Luxembourg, attention of Jean Paul Kill; notices to Ratos shall be
directed to it at Drottninggatan 2, P.O. Box 1661, S-111 96, Stockholm, Sweden,
attention of Olle Isberg.

SECTION 13. Parties. This Agreement shall each inure to the
benefit of and be binding upon the International Managers, the Company,
Loews,the Selling Stockholders and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other than the International Managers,
the Company, the Selling Stockholders and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the International
Managers, the Company, the Selling Stockholders and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm
or corporation. No purchaser of International Securities from any
International Manager shall be deemed to be a successor by reason merely of
such purchase.

SECTION 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

45
<PAGE> 47
York, as its authorized agent, and Ratos has appointed Seward & Kissel, New
York, New York, as its authorized agent (each, an "Authorized Agent"), upon
whom process may be served in any such action arising out of or based on this
Agreement or the transactions contemplated hereby which may be instituted in
any New York court by any International Manager or the Company or by any person
who controls any International Manager or the Company, which appointment shall
be irrevocable so long as the Offered Securities remain outstanding or until
the appointment, similarly irrevocable, of a successor authorized agent
reasonably acceptable to the Underwriters and the Company and such successor's
acceptance of such appointment. Each Selling Stockholder represents and
warrants that its Authorized Agent has agreed to act as said agent for service
of process, and each of the Selling Stockholders agree to take any and all
action, including the filing of any and all documents and instruments, that may
be necessary to continue its respective appointment in full force and effect as
aforesaid. Service of process upon an Authorized Agent and written notice of
such service to the other parties hereto shall be deemed, in every respect,
effective service of process upon its related Selling Stockholder.

SECTION 17. Effect of Headings. The Article and Section
headings herein are for convenience only and shall not affect the construction
hereof.

46
<PAGE> 48
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to each of the Company and the Selling
Stockholders a counterpart hereof, whereupon this instrument, along with all
counterparts, will become a binding agreement between the International
Managers, the Company and the Selling Stockholders in accordance with its
terms.

DIAMOND OFFSHORE DRILLING, INC.

By
-------------------------
Name:
Title:

ALPHEE S.A.

By
-------------------------
Name:
Title:

FORVALTNINGS AB RATOS

By
-------------------------
Name:
Title:

By
-------------------------
Name:
Title:
<PAGE> 49
CONFIRMED AND ACCEPTED,
as of the date first above written:

MERRILL LYNCH INTERNATIONAL
CS FIRST BOSTON LIMITED
SALOMON BROTHERS INTERNATIONAL LIMITED

By: MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as Attorney-in-Fact

By
-----------------------------
Name:
Title:
<PAGE> 50
SCHEDULE A

<TABLE>
<CAPTION>
Number of
Initial
International
Name of International Manager Securities
- ----------------------------- ------------
<S> <C>
Merrill Lynch International . . . . . . . . . . . . . . . . . . . . 505,000
CS First Boston Limited . . . . . . . . . . . . . . . . . . . . . . 500,000
Salomon Brothers International Limited . . . . . . . . . . . . . . 500,000

---------

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,505,000
=========
</TABLE>

Sch A - 1
<PAGE> 51
SCHEDULE B

<TABLE>
<CAPTION>
Maximum Number
of International
Number of Initial Option
Name of Selling International Securities Securities
Stockholder to Be Sold to Be Sold
- ---------------- ----------------- -----------------
<S> <C> <C>
Alphee S.A. . . . . . . . . . . . . 847,164 84,717
Forvaltnings AB
Ratos . . . . . . . . . . . . . . 657,836 65,784

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

Total . . . . . . . . . . . 1,505,000 150,501
========= ===========
</TABLE>

Sch B - 1
<PAGE> 52
SCHEDULE C

DIAMOND OFFSHORE DRILLING, INC.
1,505,000 Shares of Common Stock
(Par Value $.01 Per Share)

1. The initial public offering price per share for the
International Securities, determined as provided in said Section 2, shall be
$49.25.

2. The purchase price per share for the International
Securities to be paid by the several International Manager shall be $47.77,
being an amount equal to the initial public offering price set forth above less
$1.48 per share; provided that the purchase price per share for any
International Option Securities purchased upon the exercise of the
over-allotment option described in Section 2(b) shall be reduced by an amount
per share equal to any dividends or distributions declared by the Company and
payable on the Initial International Securities but not payable on the
International Option Securities.

Sch C - 1
<PAGE> 53
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(B)

[SUBJECT TO REVIEW BY OPINION COMMITTEE]

[LETTERHEAD OF WEIL, GOTSHAL & MANGES LLP]

May 24, 1996

Merrill Lynch International
CS First Boston Limited
Salomon Brothers International Limited
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England

Gentlemen:

Based on the foregoing, and subject to the qualifications
stated herein, we are of the opinion that:

3. The Company has all requisite corporate power and
authority to execute and deliver the U.S. Purchase Agreement and the
International Purchase Agreement and to

Very truly yours,

Ex A - 8
<PAGE> 61
Exhibit B
FORM OF OPINION OF COUNSEL OF RICHARD L. LIONBERGER,
VICE PRESIDENT AND GENERAL COUNSEL TO THE COMPANY,
TO BE DELIVERED PURSUANT TO SECTION 5(C)

[Subject to Review by Richard L. Lionberger]

[Richard L. Lionberger letterhead]

May 24, 1996

Merrill Lynch International
CS First Boston Limited
Salomon Brothers International Limited
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England

Gentlemen:

Based on the foregoing, and subject to the qualifications
stated herein, I am of the opinion that:

Ex B - 3
<PAGE> 64
operations or financial condition of the Company and its subsidiaries, taken
as a whole.

7. To my knowledge, there are no legal or governmental
proceedings that are required to be described in the Registration Statement or
the Prospectuses that are not described therein.

Ex B - 5
<PAGE> 66
litigation incidental to the business, are not reasonably expected to result in
a material adverse effect.

Very truly yours,

Ex B - 6
<PAGE> 67
Exhibit C

FORM OF OPINION OF MARITIME COUNSEL FOR THE COMPANY
TO BE DELIVERED PURSUANT TO SECTION 5(D)

Ex C - 1
<PAGE> 68
Exhibit D-1

FORM OF OPINION OF LUXEMBOURG COUNSEL FOR ALPHEE
TO BE DELIVERED PURSUANT TO SECTION 5(E)

(ii) The Power of Attorney and Custody Agreement has been
duly executed and delivered by Alphee and constitutes the valid and binding
agreement of Alphee in accordance with its terms.

(iii) The U.S. Purchase Agreement and the International
Purchase Agreements have been duly authorized, executed and delivered by or on
behalf of Alphee.

(iv) The sale of the Offered Securities by Alphee is not
subject to preemptive or similar rights of any securityholder of the Company.

Ex D - 1 - 2
<PAGE> 70
Exhibit D-2

FORM OF OPINION OF SWEDISH COUNSEL FOR RATOS
TO BE DELIVERED PURSUANT TO SECTION 5(E)

(ii) The Power of Attorney and Custody Agreement has been
duly executed and delivered by Ratos and constitutes the valid and binding
agreement of Ratos in accordance with its terms.

(iii) The U.S. Purchase Agreement and the International
Purchase Agreements have been duly authorized, executed and delivered by or on
behalf of Ratos.

(iv) The sale of the Offered Securities by Ratos is not
subject to preemptive or similar rights of any securityholder of the Company.

(vi) The execution, delivery and performance of the U.S.
Purchase Agreement, the International Purchase Agreement and the Power of
Attorney and Custody Agreement and the sale and delivery of the Offered
Securities and the consummation of the transactions contemplated in the U.S.
Purchase Agreement, the International Purchase Agreement and the Registration
Statement and the compliance by Ratos with its obligations under the U.S.
Purchase Agreement and the International Purchase Agreements have been duly
authorized by all necessary action on the part of Ratos and do not and will
not, whether with or without the giving of notice or passage

Ex D - 2 - 2
<PAGE> 72
Exhibit D-3

FORM OF OPINION OF U.S. COUNSEL TO ALPHEE
TO BE DELIVERED PURSUANT TO SECTION 5(E)

(ii) The Alphee Power of Attorney has been duly executed and
delivered by Alphee and constitutes the valid and binding agreement of each
Selling Stockholder in accordance with its terms.

(iii) The U.S. Purchase Agreement and the International
Purchase Agreements have been duly authorized, executed and delivered by or on
behalf of Alphee.

(iv) The sale of the Offered Securities by Alphee is not
subject to preemptive or similar rights of any securityholder of the Company.

Ex D - 3 - 3
<PAGE> 75
Exhibit D-4

FORM OF OPINION OF U.S. COUNSEL TO RATOS
TO BE DELIVERED PURSUANT TO SECTION 5(E)

(i) No filing with, or consent, approval, authorization,
order, registration qualification or decree of, any federal or state court or
governmental authority or agency (other than the issuance of the order of the
Commission declaring the Registration Statement effective and such
authorizations, approvals or consents as may be necessary under state
securities laws, as to which we need express no opinion) is necessary or
required to be obtained by Ratos for the Performance by Ratos of its
obligations under the U.S. Purchase Agreement, the International Purchase
Agreement or the Power of Attorney, or in connection with the offer, sale or
delivery of the Securities.

(ii) The Ratos Power of Attorney has been duly executed and
delivered by Ratos and constitutes the valid and binding agreement of each
Selling Stockholder in accordance with its terms.

(iii) The U.S. Purchase Agreement and the International
Purchase Agreements have been duly authorized, executed and delivered by or on
behalf of Ratos.

(iv) The sale of the Offered Securities by Ratos is not
subject to preemptive or similar rights of any securityholder of the Company.

Ex D - 4 - 3

<PAGE> 1
Exhibit 21.1

SUBSIDIARIES OF DIAMOND OFFSHORE DRILLING, INC.

<TABLE>
<S> <C>
Diamond Offshore Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Diamond Offshore Perforadora, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . Delaware
St Vincent Drilling Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scotland
Diamond Offshore Turnkey Services, Inc. . . . . . . . . . . . . . . . . . . . . . . Delaware
Diamond Offshore General Company . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Diamond M Onshore, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Diamond Offshore Guardian Company . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Diamond Offshore Southern Company . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Anape Ltda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chile
Diamond Offshore (Indonesia) Inc. . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Diamond Offshore Finance Company . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Diamond Offshore Drilling Sdn. Bhd. . . . . . . . . . . . . . . . . . . . . . . . . Malaysia
Diamond Offshore Drilling (Nigeria) Limited . . . . . . . . . . . . . . . . . . . . Nigeria
Diamond Offshore Management Company . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Diamond M Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Texas
Diamond Offshore Development Company . . . . . . . . . . . . . . . . . . . . . . . Delaware
Diamond Offshore (USA) Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Dearborn Marine of Panama, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . Panama
Dearborn-Storm Drilling, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . Panama
Storm Nigeria Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nigeria
Brasdril-Sociedade de Perfuracoes Ltda. . . . . . . . . . . . . . . . . . . . . . . Brazil
Diamond Offshore Contract Services, S.A. . . . . . . . . . . . . . . . . . . . . . Panama
Diamond Offshore Alaska, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Diamond Offshore Atlantic, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Diamond Offshore (Mexico) Company . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Diamond Offshore Drilling (Overseas) Inc. . . . . . . . . . . . . . . . . . . . . . Delaware
Odeco Drilling of Canada, Limited . . . . . . . . . . . . . . . . . . . . . . . . . Canada
Diamond Offshore Drilling Services, Inc. . . . . . . . . . . . . . . . . . . . . . Delaware
Diamond Offshore International Corporation . . . . . . . . . . . . . . . . . . . . Delaware
Ensenada Internacional, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . Panama
Diamond Offshore Enterprises, Inc. . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Cumberland Maritime Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Odeco Mediterranean Services, S.A. . . . . . . . . . . . . . . . . . . . . . . . . Spain
Diamond Offshore Netherlands B.V. . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands Antilles
Diamond Offshore (South East Asia) Pte. Ltd. . . . . . . . . . . . . . . . . . . . Singapore
Odeco (U.K.) Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Storm Drilling, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . District of Columbia
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
Storm Drilling, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Panama
Diamond Offshore Drilling Company N.V. . . . . . . . . . . . . . . . . . . . . . . Netherlands
M-S Drilling, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Panama
Diamond Offshore (Bermuda) Limited . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Diamond Offshore Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . England
Lancer Services Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Diamond Offshore Drilling (UK) Limited . . . . . . . . . . . . . . . . . . . . . . England
Diamond Offshore Drilling (Bermuda) Limited . . . . . . . . . . . . . . . . . . . . Bermuda
Diamond M Servicios, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Venezuela
Diamond Offshore Exploration (Bermuda) Limited . . . . . . . . . . . . . . . . . . Bermuda
Arethusa Off-Shore Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Concord Drilling Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Lexington Drilling Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Saratoga Drilling Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Yorktown Drilling Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Scotian Drilling Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Heritage Drilling Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Sovereign Drilling Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Arctic Drilling Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Miss Kitty Drilling Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Bonito Drilling Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Neptune Drilling Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Whittington Drilling Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Yatzy Drilling Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Topham Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Mosel Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Winner Drilling Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Arethusa Services Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Treetop Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Scotian Chartering Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Arethusa Finance (USA) Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Arethusa Guaranty Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Arethusa/Zapata Off-Shore Brazil Ltda. . . . . . . . . . . . . . . . . . . . . . . Brazil
Z North Sea, Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Arethusa Onshore Services BV . . . . . . . . . . . . . . . . . . . . . . . . . . . Holland
AFCONS Zapata Off-Shore Services . . . . . . . . . . . . . . . . . . . . . . . . . India
PT AQZA DHARMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indonesia
Arethusa Singapore Pte. Limited . . . . . . . . . . . . . . . . . . . . . . . . . . Singapore
</TABLE>