Exhibit 10.4

EXECUTION VERSION

TRANSITION SERVICES AGREEMENT

BETWEEN

MCDERMOTT INTERNATIONAL, INC.

(as service provider)

and

THE BABCOCK & WILCOX COMPANY

(as service receiver)

 

Dated July 2, 2010

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TABLE OF CONTENTS

 

         Page No.

ARTICLE I

  DEFINITIONS    1

      Section 1.1

      Definitions    1

ARTICLE II

  SERVICES    2

      Section 2.1

      Services    2

      Section 2.2

      Service Coordinators    3

      Section 2.3

      Additional Services    3

      Section 2.4

      Third Party Services    3

      Section 2.5

      Standard of Performance; Limitation of Liability    4

      Section 2.6

      Service Boundaries and Scope    5

      Section 2.7

      Cooperation    6

      Section 2.8

      Transitional Nature of Services; Changes    6

      Section 2.9

      Access    6

ARTICLE III

  SERVICE CHARGES    6

      Section 3.1

      Compensation    6

ARTICLE IV

  PAYMENT    6

      Section 4.1

      Payment    6

      Section 4.2

      Payment Disputes    7

      Section 4.3

      Review of Charges; Error Correction    7

      Section 4.4

      Taxes    7

      Section 4.5

      Records    8

ARTICLE V

  TERM    8

      Section 5.1

      Term    8

ARTICLE VI

  DISCONTINUATION OF SERVICES    8

      Section 6.1

      Discontinuation of Services    8

      Section 6.2

      Procedures Upon Discontinuation or Termination of Services    8

ARTICLE VII

  DEFAULT    9

      Section 7.1

      Termination for Default    9

ARTICLE VIII

  INDEMNIFICATION AND WAIVER    9

      Section 8.1

      Waiver of Consequential Damages    9

      Section 8.2

      Services Received    9

      Section 8.3

      Express Negligence    10

ARTICLE IX

  CONFIDENTIALITY    11

      Section 9.1

      Confidentiality    11

      Section 9.2

      System Security    11

ARTICLE X

  FORCE MAJEURE    12

       Section 10.1

      Performance Excused    12

       Section 10.2

      Notice    12

       Section 10.3

      Cooperation    12

 

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ARTICLE XI

  MISCELLANEOUS    12

       Section 11.1

      Entire Agreement    12

       Section 11.2

      Binding Effect; No Third-Party Beneficiaries; Assignment    12

       Section 11.3

      Amendment; Waivers    13

       Section 11.4

      Notices    13

       Section 11.5

      Counterparts    13

       Section 11.6

      Severability    13

       Section 11.7

      Governing Law    13

       Section 11.8

      Performance    14

       Section 11.9

      Relationship of Parties    14

       Section 11.10

      Regulations    14

       Section 11.11

      Construction    14

       Section 11.12

      Effect if Separation does not Occur    14

Schedules

Schedule A - Tax Services

Schedule B - Accounting and Financial Reporting Services

Schedule C - Executive Consulting Services

Schedule D - Legal Services

Schedule E - Human Resources Services

Schedule F - Risk Management Services

Schedule G - Treasury Services

Schedule H - Investor Relations Services

Schedule I - Litigation Services

Schedule J - Services for Sales Office in Singapore

Schedule K - Services for MPLS and Facility Access in Houston

Schedule L - Office Space

Schedule M - Offsite and Third Party Records Storage and Destruction

Schedule N - Office in McDermott’s New Orleans Facility

Schedule 2.4 - Certain Subcontractors

Schedule 4.1 - Payment Instructions

 

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TRANSITION SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT (together with the Schedules hereto, this
“Agreement”) is entered into as of July 2, 2010, by and between McDermott
International, Inc., a Panamanian corporation (“McDermott”), and The Babcock &
Wilcox Company, a Delaware corporation (“B&W”).

WHEREAS, the Board of Directors of McDermott has determined that it would be
appropriate and desirable for McDermott to distribute (the “Distribution”) on a
pro rata basis to the holders of outstanding shares of common stock, par value
$1.00 per share, of McDermott all of the outstanding shares of common stock, par
value $0.01 per share, of B&W owned by McDermott;

WHEREAS, in order to effectuate the foregoing, McDermott and B&W have entered
into a Master Separation Agreement, dated as of the date hereof (the “Master
Separation Agreement”), which provides, among other things, upon the terms and
subject to the conditions thereof, for the separation of the respective
businesses of McDermott and B&W and the Distribution, and the execution and
delivery of certain other agreements, including this Agreement, in order to
facilitate and provide for the foregoing; and

WHEREAS, in order to provide for an orderly transition under the Master
Separation Agreement, it will be advisable for McDermott, through members of the
MII Group, to provide to B&W certain services described herein for a
transitional period.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:

“Additional Services” has the meaning set forth in Section 2.3.

“Agreement” has the meaning set forth in the preamble.

“Availed Party” has the meaning set forth in Section 9.2(a).

“B&W” has the meaning set forth in the preamble.

“Distribution” has the meaning set forth in the recitals.

“Force Majeure Event” has the meaning set forth in Section 10.1.

 

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“Master Separation Agreement” has the meaning set forth in the recitals.

“McDermott” has the meaning set forth in the preamble.

“Schedules” means the Schedules attached hereto.

“Security Regulations” has the meaning set forth in Section 9.2(a).

“Service Coordinator” has the meaning set forth in Section 2.2.

“Services” has the meaning set forth in Section 2.1(a).

“Systems” has the meaning set forth in Section 9.2(a).

“Tax” has the meaning set forth in Section 4.4.

Capitalized terms used but not otherwise defined in this Agreement shall have
the respective meanings assigned to such terms in the Master Separation
Agreement.

ARTICLE II

SERVICES

Section 2.1 Services.

(a) Upon the terms and subject to the conditions of this Agreement, McDermott,
acting directly and/or through its Affiliates and their respective employees,
agents, contractors or independent third parties designated by any of them,
agrees to use commercially reasonable efforts to provide or to cause to be
provided services to the B&W Group as set forth in Schedules A through N
(including any Additional Services provided in accordance with Section 2.3
hereof, all such services are collectively referred to herein as the
“Services”).

(b) At all times during the performance of the Services, all Persons performing
such Services (including agents, temporary employees, independent third parties
and consultants) shall be construed as being independent from the B&W Group, and
such Persons shall not be considered or deemed to be employees of any member of
the B&W Group nor entitled to any employee benefits of B&W as a result of this
Agreement. The responsibility of such Persons is to perform the Services in
accordance with this Agreement and, as necessary, to advise the applicable
member of the B&W Group in connection therewith, and such Persons shall not be
responsible for decision-making on behalf of any member of the B&W Group. Such
Persons shall not be required to report to management of any member of the B&W
Group nor be deemed to be under the management or direction of any member of the
B&W Group. B&W acknowledges and agrees that, except as may be expressly set
forth herein as a Service (including any Additional Services provided in
accordance with Section 2.3 hereof) or otherwise expressly set forth in the
Master Separation Agreement or an Ancillary Agreement, no member of the MII
Group shall be obligated to provide, or cause to be provided, any service or
goods to any member of the B&W Group.

 

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(c) Notwithstanding anything to the contrary in this Agreement, McDermott and
members of the MII Group shall not be required to perform Services hereunder or
take any actions relating thereto that conflict with or violate any applicable
law, contract, license, authorization, certification or permit or McDermott’s
Code of Business Conduct or other governance policies, as they may be amended
from time to time.

Section 2.2 Service Coordinators. Each party will nominate in writing a
representative to act as the primary contact with respect to the provision of
the Services and the resolution of disputes under this Agreement (each such
person, a “Service Coordinator”). The initial Service Coordinators shall be
Mr. Gary Brauchle (for McDermott) and Mr. Keith Robinson (for B&W) (or their
designated delegates) for each of McDermott and B&W, respectively. The Service
Coordinators shall meet as expeditiously as possible to resolve any dispute
hereunder; and any dispute that is not resolved by the Service Coordinators
within 45 days shall be resolved in accordance with the dispute resolution
procedures set forth in Article V of the Master Separation Agreement. Each party
hereto may treat an act of a Service Coordinator of the other party hereto which
is consistent with the provisions of this Agreement as being authorized by such
other party without inquiring behind such act or ascertaining whether such
Service Coordinator had authority to so act; provided, however, that no such
Service Coordinator shall have authority to amend this Agreement. McDermott and
B&W shall advise each other promptly (in any case no more than three Business
Days) in writing of any change in their respective Service Coordinators, setting
forth the name of the replacement, and stating that the replacement Service
Coordinator is authorized to act for such party in accordance with this
Section 2.2.

Section 2.3 Additional Services. B&W may request additional Services (the
“Additional Services”) from McDermott by providing written notice. Upon the
mutual written agreement as to the nature, cost, duration and scope of such
Additional Services, McDermott and B&W shall supplement in writing the Schedules
hereto to include such Additional Services. Subject to the other limitations in
this Agreement, including the provisions in Section 2.6, but notwithstanding the
foregoing provisions of this Section 2.3, in addition to providing the Services
specified in the Schedules, McDermott, acting directly and/or through its
Affiliates and their respective employees, agents, contractors or independent
third parties designated by any of them, shall use commercially reasonable
efforts to provide or to cause to be provided additional, de minimis
administrative support services to the B&W Group as may be requested by any
member of the B&W Group from time to time, at no cost beyond the amounts set
forth in the Schedules (as the amounts set forth in the Schedules contemplate
such additional, de minimis administrative support services); provided, however,
that, for any such additional services to be considered de minimis for purposes
of this sentence, such additional services shall not require the attention of
(i) any one employee of any member of the McDermott Group for more than 2 hours
in any single calendar month or (ii) any group of employees of any one or more
members of the McDermott Group for more than 30 hours in any single calendar
month. Except where the context otherwise indicates or requires, any such
additional services referred to in the immediately preceding sentence shall be
deemed to be “Services” under this Agreement.

Section 2.4 Third Party Services. McDermott shall have the right to hire
third-party subcontractors to provide all or part of any Service hereunder;
provided, that McDermott shall consult in good faith with B&W regarding the
proposed hiring of any third-party subcontractor that has not previously been
involved in the activities relating to such Service prior to the date

 

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hereof; provided, further, that, in the event such subcontracting is
inconsistent with the practice applied by McDermott generally from time to time
within its own organization, McDermott shall give notice to B&W of its intent to
subcontract any portion of the Services and B&W shall have 20 days (or such
lesser period set forth in the notice as may be practicable in the event of
exigent circumstances) to determine, in its sole discretion, whether to permit
such subcontracting or whether to cancel such Service in accordance with Article
VI hereof. If B&W opts to cancel a Service pursuant to the immediately preceding
sentence, it shall not be liable to McDermott pursuant to Section 6.1 for any
costs or expenses McDermott or any member of the MII Group remains obligated to
pay to the third-party subcontractor identified in the notice provided by
McDermott as described above. McDermott shall not be required to give notice of
its intent to subcontract Services to any party listed on Exhibit 2.4 hereto,
nor shall B&W have any right to cancel any Service subcontracted to any such
listed party pursuant to this Section 2.4 (provided, that this sentence shall
not prevent B&W from cancelling any Service pursuant to Section 6.1).

Section 2.5 Standard of Performance; Limitation of Liability.

(a) The Services to be provided hereunder shall be performed with the same
general degree of care, at the same general level and at the same general degree
of accuracy and responsiveness, as when performed within the McDermott
organization (including, for this purpose, B&W and its subsidiaries) prior to
the date of this Agreement. It is understood and agreed that McDermott and the
members of the MII Group are not professional providers of the types of services
included in the Services and that McDermott personnel performing Services have
other responsibilities and will not be dedicated full-time to performing
Services hereunder.

(b) In the event McDermott or any member of the MII Group fails to provide, or
cause to be provided, the Services in accordance with the standard of service
set forth in Section 2.5(a) or Section 2.5(c), the sole and exclusive remedy of
B&W shall be, at B&W’s sole discretion, within 90 days from the date that
McDermott or such member of the MII Group first fails to provide such Service,
to not pay for such Service; provided that in the event McDermott defaults in
the manner described in clause (ii) of Section 7.1, B&W shall have the further
rights set forth in Article VII.

(c) EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 2.5, NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND, EXPRESSED OR IMPLIED (INCLUDING THE WARRANTIES OF
NON-INFRINGEMENT, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
CONFORMITY TO ANY REPRESENTATION OR DESCRIPTION), ARE MADE BY MCDERMOTT OR ANY
MEMBER OF THE MII GROUP WITH RESPECT TO THE SERVICES UNDER THIS AGREEMENT AND,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ALL SUCH REPRESENTATIONS OR
WARRANTIES ARE HEREBY WAIVED AND DISCLAIMED. B&W (ON ITS OWN BEHALF AND ON
BEHALF OF EACH OTHER MEMBER OF THE B&W GROUP) HEREBY EXPRESSLY WAIVES ANY RIGHT
B&W OR ANY MEMBER OF THE B&W GROUP MAY OTHERWISE HAVE FOR ANY LOSSES, TO ENFORCE
SPECIFIC PERFORMANCE OR TO PURSUE ANY OTHER REMEDY AVAILABLE IN CONTRACT, AT LAW
OR IN EQUITY IN THE EVENT OF ANY NON-PERFORMANCE, INADEQUATE PERFORMANCE, FAULTY
PERFORMANCE OR OTHER FAILURE OR BREACH BY MCDERMOTT OR ANY MEMBER OF THE MII

 

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GROUP UNDER OR RELATING TO THIS AGREEMENT, NOTWITHSTANDING THE NEGLIGENCE OR
GROSS NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE) OF
MCDERMOTT OR ANY MEMBER OF THE MII GROUP OR ANY THIRD PARTY SERVICE PROVIDER AND
WHETHER DAMAGES ARE ASSERTED IN CONTRACT OR TORT, UNDER FEDERAL, STATE OR NON
U.S. LAWS OR OTHER STATUTE OR OTHERWISE; PROVIDED, HOWEVER, THAT THE FOREGOING
WAIVER SHALL NOT EXTEND TO COVER, AND MCDERMOTT SHALL BE RESPONSIBLE FOR, SUCH
LOSSES CAUSED BY THE WILLFUL MISCONDUCT OF MCDERMOTT OR ANY MEMBER OF THE MII
GROUP. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL THE MII GROUP BE LIABLE TO THE B&W GROUP WITH RESPECT TO CLAIMS ARISING
OUT OF THIS AGREEMENT FOR AMOUNTS IN THE AGGREGATE EXCEEDING THE AGGREGATE
SERVICE CHARGES PAID HEREUNDER BY THE B&W GROUP.

Section 2.6 Service Boundaries and Scope. Except as provided in a Schedule for a
specific Service: (a) McDermott shall be required to provide, or cause to be
provided, the Services only at the locations such Services are being provided by
any member of the MII Group for any member of the B&W Group immediately prior to
the Distribution Date; provided, however, that, to the extent any such Service
is to be provided by an employee of McDermott who works in the corporate
headquarters of McDermott, such Service shall, to the extent feasible, only be
provided by such employee from the corporate headquarters of McDermott; and
(b) the Services shall be available only for purposes of conducting the business
of the B&W Group substantially in the manner it was conducted immediately prior
to the Distribution Date. Except as provided in a Schedule for a specific
Service, in providing, or causing to be provided, the Services, McDermott shall
not be obligated to: (i) maintain the employment of any specific employee or
hire additional employees or third-party service providers; (ii) purchase, lease
or license any additional equipment (including computer equipment, furniture,
furnishings, fixtures, machinery, vehicles, tools and other tangible personal
property), software or other assets, rights or properties; (iii) make
modifications to its existing systems or software; (iv) provide any member of
the B&W Group with access to any systems or software other than those to which
it has authorized access immediately prior to the Distribution Date; or (v) pay
any costs related to the transfer or conversion of data of any member of the B&W
Group. B&W acknowledges (on its own behalf and on behalf of the other members of
the B&W Group) that the employees of McDermott or any other members of the MII
Group who may be assisting in the provision of Services hereunder are at-will
employees and, as such, may terminate or be terminated from employment with
McDermott or any of the other members of the MII Group providing Services
hereunder at any time for any reason. In no event shall McDermott or any of its
Affiliates or any of their respective employees or agents be required to perform
any Services or take any other actions hereunder that conflict with any
applicable Law. For the avoidance of doubt and except as may hereafter be
designated as Additional Services in accordance with Section 2.3, the Services
do not include any services required for or as the result of any business
acquisitions, divestitures, start-ups or terminations by the B&W Group. To the
extent B&W desires McDermott to provide any services in connection with any such
acquisitions, divestitures, start-ups or terminations, B&W shall follow the
procedures for requesting Additional Services pursuant to Section 2.3.

 

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Section 2.7 Cooperation. McDermott and B&W shall cooperate with one another and
provide such further assistance as the other party may reasonably request in
connection with the provision of Services hereunder.

Section 2.8 Transitional Nature of Services; Changes. Subject to Sections 2.3
and 2.5, the parties acknowledge the transitional nature of the Services and
that McDermott may make changes from time to time in the manner of performing
the Services.

Section 2.9 Access. During the term of this Agreement and for so long as any
Services are being provided to B&W by McDermott, B&W will provide McDermott and
its authorized representatives reasonable access, during regular business hours
upon reasonable notice, to B&W and its employees, representatives, facilities
and books and records as McDermott and its representatives may reasonably
require in order to perform such Services.

ARTICLE III

SERVICE CHARGES

Section 3.1 Compensation. Subject to the specific terms of this Agreement, the
compensation to be received by McDermott for each Service provided hereunder
will be the fees set forth on the Schedule relating to the particular Service,
subject to any escalation provided for on such Schedule. In consideration for
the provision of a Service, each member of the B&W Group receiving such Service
shall pay to McDermott or, at the election of McDermott, the member of the MII
Group providing such Service, the applicable fee for such Service as set forth
on the attached Schedules.

ARTICLE IV

PAYMENT

Section 4.1 Payment. Except as otherwise provided in a Schedule for a specific
Service, charges for Services shall be invoiced monthly by McDermott or, at its
option, the member of the MII Group providing the Service. Except as otherwise
provided in a Schedule for a specific Service, B&W shall make the corresponding
payment no later than 60 days after receipt of the invoice. Unless otherwise
provided in this Agreement, B&W shall remit funds in payment of invoices
provided hereunder either by wire transfer or ACH (Automated Clearing House) in
accordance with the payment instructions set forth in Schedule 4.1. Each invoice
shall be directed to the B&W Service Coordinator or such other person designated
in writing from time to time by such Service Coordinator. The invoice shall set
forth in reasonable detail the Services rendered and the invoice amount for the
Services rendered for the period covered by such invoice. Interest will accrue
on any unpaid amounts at ten percent (10%) per annum (compounded monthly) or, if
less, the maximum non-usurious rate of interest permitted by applicable law,
until such amounts, together with all accrued and unpaid interest thereon, are
paid in full. All timely payments under this Agreement shall be made without
early payment discount. Any preexisting obligation to make payment for Services
provided hereunder shall survive the termination of this Agreement. If McDermott
incurs any reasonable out-of-pocket expenses (including any incremental license
fees incurred by McDermott in connection with performance of the Services and
any travel expenses incurred at the request or with the consent of B&W) or
remits funds to a third-party on behalf of B&W, in either case in connection
with

 

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the rendering of Services, then McDermott shall include such amount on its
monthly invoice to B&W, with reasonable supporting documentation, and B&W shall
reimburse that amount to McDermott pursuant to this Section 4.1 as part of its
next monthly payment.

Section 4.2 Payment Disputes. B&W may object to any amounts for any Service at
any time before, at the time of, or after payment is made, provided such
objection is made in writing to McDermott within 120 days following the date of
the disputed invoice. B&W shall timely pay the disputed items in full while
resolution of the dispute is pending; provided, however, that McDermott shall
pay interest at a rate of five percent (5%) per annum (compounded monthly) on
any amounts it is required to return to B&W upon resolution of the dispute.
Payment of any amount shall not constitute approval thereof. The Service
Coordinators shall meet as expeditiously as possible to resolve any dispute. Any
dispute that is not resolved by the Service Coordinators within 45 days shall be
resolved in accordance with the dispute resolution and arbitration procedures
set forth in Article V of the Master Separation Agreement. Neither party (or any
member of its respective Group) shall have a right of set-off against the other
party (or any member of its respective Group) for billed amounts hereunder. Upon
written request, McDermott will provide to B&W reasonable detail and support
documentation to permit B&W to verify the accuracy of an invoice.

Section 4.3 Review of Charges; Error Correction. McDermott shall maintain
accurate books and records (including invoices of third parties) related to the
Services sufficient to calculate, and allow B&W to verify, the amounts owed
under this Agreement. From time to time until 120 days following the termination
of this Agreement, B&W shall have the right to review, and McDermott shall
provide access to, such books and records to verify the accuracy of such
amounts, provided that such reviews shall not occur more frequently than once
per calendar quarter. Each such review shall be conducted during normal business
hours and in a manner that does not unreasonably interfere with the operations
of McDermott. If, as a result of any such review, B&W determines that it
overpaid any amount to McDermott, then B&W may raise an objection pursuant to
the provisions of Section 4.2. B&W shall bear the cost and expense of any such
review. McDermott shall make adjustments to charges as required to reflect the
discovery of errors or omissions in charges.

Section 4.4 Taxes. All transfer taxes, excises, fees or other charges (including
value added, sales, use or receipts taxes, but not including a tax on or
measured by the income, net or gross revenues, business activity or capital of a
member of the MII Group), or any increase therein, now or hereafter imposed
directly or indirectly by law upon any fees paid hereunder for Services, which a
member of the MII Group is required to pay or incur in connection with the
provision of Services hereunder (“Tax”), shall be passed on to B&W as an
explicit surcharge and shall be paid by B&W in addition to any Service fee
payment, whether included in the applicable Service fee payment, or added
retroactively. If B&W submits to McDermott a timely and valid resale or other
exemption certificate acceptable to McDermott and sufficient to support the
exemption from Tax, then such Tax will not be added to the Service fee payable
pursuant to Article III; provided, however, that if a member of the MII Group is
ever required to pay such Tax, B&W will promptly reimburse McDermott for such
Tax, including any interest, penalties and attorney’s fees related thereto. The
parties will cooperate to minimize the imposition of any Taxes.

 

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Section 4.5 Records. McDermott shall maintain true and correct records of all
receipts, invoices, reports and such other documents relating to the Services
hereunder in accordance with its standard accounting practices and procedures,
consistently applied. McDermott shall retain such accounting records and make
them available to B&W’s authorized representatives and auditors for a period of
not less than one year from the close of each fiscal year of McDermott;
provided, however, that McDermott may, at its option, transfer such accounting
records to B&W upon termination of this Agreement.

ARTICLE V

TERM

Section 5.1 Term. Subject to Articles VI and VII, the MII Group shall provide
the specific Services to the B&W Group pursuant to this Agreement for the time
period set forth on the Schedule relating to the specific Service. In accordance
with the Master Separation Agreement and Article VI of this Agreement, except as
otherwise provided in a Schedule for a specific Service, B&W shall undertake to
provide to itself and members of the B&W Group, and to terminate as soon as
reasonably practicable, the Services provided to the B&W Group hereunder. Except
as otherwise provided in a Schedule for a specific Service or group of related
Services, all Services provided for hereunder shall terminate on March 31, 2011.
Except as otherwise expressly agreed or unless sooner terminated, this Agreement
shall commence upon the Distribution Date and shall continue in full force and
effect between the parties for so long as any Service set forth in any Schedule
hereto is being provided to B&W or members of the B&W Group and this Agreement
shall terminate upon the cessation of all Services provided hereunder; provided
that Articles I, IV, VIII, IX and XI and Section 2.5(c) will survive the
termination of this Agreement and any such termination shall not affect any
obligation for the payment of Services rendered prior to termination.

ARTICLE VI

DISCONTINUATION OF SERVICES

Section 6.1 Discontinuation of Services. Unless otherwise provided in the
relevant Schedule for a particular Service, at any time after the Distribution
Date, B&W may, without cause and in accordance with the terms and conditions
hereunder and the Master Separation Agreement, request the discontinuation of
one or more specific Services by giving McDermott at least 30 days’ prior
written notice; provided, however, that any such discontinuation will not affect
the amounts payable to McDermott hereunder unless (and then only to the extent
that) the charges for the discontinued Services have been separately identified
in the applicable Schedule. B&W shall be liable to McDermott for all costs and
expenses McDermott or any member of the MII Group remains obligated to pay in
connection with any discontinued Service or Services, except in the case of a
Service terminated by B&W pursuant to clause (ii) of the first sentence of
Section 7.1 hereof. The parties shall cooperate as reasonably required to
effectuate an orderly and systematic transfer to the B&W Group of all of the
duties and obligations previously performed by McDermott or a member of the MII
Group under this Agreement.

Section 6.2 Procedures Upon Discontinuation or Termination of Services. Upon the
discontinuation or termination of a Service hereunder, this Agreement shall be
of no further force and effect with respect to such Service, except as otherwise
provided in a Schedule for a specific

 

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Service and except as to obligations accrued prior to the date of
discontinuation or termination; provided, however, that Articles I, IV, VIII, IX
and XI and Section 2.5(c) of this Agreement shall survive such discontinuation
or termination. Each party and the applicable member(s) of its respective Group
shall, within 60 days after discontinuation or termination of a Service, deliver
to the other party and the applicable member(s) of its respective Group
originals of all books, records, contracts, receipts for deposits and all other
papers or documents in its possession which pertain exclusively to the business
of the other party and relate to such Service; provided that a party may retain
copies of material provided to the other party pursuant to this Section 6.2 as
it deems necessary or appropriate in connection with its financial reporting
obligations or internal control practices and policies.

ARTICLE VII

DEFAULT

Section 7.1 Termination for Default. In the event (i) of a failure of B&W to pay
for Services in accordance with the terms of this Agreement, or (ii) any party
shall default, in any material respect, in the due performance or observance by
it of any of the other terms, covenants or agreements contained in this
Agreement, then (1) if the non-defaulting party is McDermott, McDermott shall
have the right, at its sole discretion, to immediately terminate the Service
with respect to which the default occurred, and (2) if the non-defaulting party
is B&W, B&W shall have the right, at its sole discretion, to immediately
terminate the Service with respect to which the default occurred, in either case
if the defaulting party has failed to cure the default within 30 days of receipt
of the written notice of such default. B&W’s right to terminate this Agreement
pursuant to this Article VII and the rights set forth in Section 2.5 shall
constitute B&W’s sole and exclusive rights and remedies for a breach by
McDermott hereunder (including any breach caused by an Affiliate of McDermott or
other third party providing a Service hereunder).

ARTICLE VIII

INDEMNIFICATION AND WAIVER

Section 8.1 Waiver of Consequential Damages. NEITHER PARTY SHALL BE LIABLE TO
THE OTHER PARTY UNDER THIS AGREEMENT FOR ANY EXEMPLARY, PUNITIVE, SPECIAL,
INDIRECT, CONSEQUENTIAL, REMOTE OR SPECULATIVE DAMAGES (INCLUDING IN RESPECT OF
LOST PROFITS OR REVENUES), HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY
(INCLUDING NEGLIGENCE OR GROSS NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS
AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH
PARTY’S INDEMNIFICATION OBLIGATIONS FOR LIABILITIES TO THIRD PARTIES AS SET
FORTH IN THIS AGREEMENT, THE MASTER SEPARATION AGREEMENT OR ANY ANCILLARY
AGREEMENT.

Section 8.2 Services Received. B&W hereby acknowledges and agrees that:

(a) the Services to be provided hereunder are subject to and limited by the
provisions of Section 2.5, Article VII and the other provisions hereof,
including the limitation of remedies available to B&W that restricts available
remedies resulting from a Service not provided in accordance with the terms
hereof to non-payment and, in certain limited circumstances, the right to
terminate this Agreement;

 

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(b) the Services are being provided solely to facilitate the transition of B&W
to a separate company as a result of the Distribution, and McDermott and its
Affiliates do not provide any such Services to non-Affiliates;

(c) it is not the intent of McDermott and the other members of the MII Group to
render, nor of B&W and the other members of the B&W Group to receive from
McDermott and the other members of the MII Group, professional advice or
opinions, whether with regard to tax, legal, treasury, finance, employment or
other business and financial matters, or technical advice, whether with regard
to information technology or other matters; B&W shall not rely on, or construe,
any Service rendered by or on behalf of McDermott as such professional advice or
opinions or technical advice; and B&W shall seek all third-party professional
advice and opinions or technical advice as it may desire or need, and in any
event B&W shall be responsible for and assume all risks associated with the
Services, except to the limited extent set forth in Section 2.5 and Article VII;

(d) with respect to any software or documentation within the Services, B&W shall
use such software and documentation internally and for their intended purpose
only, shall not distribute, publish, transfer, sublicense or in any manner make
such software or documentation available to other organizations or persons, and
shall not act as a service bureau or consultant in connection with such
software; and

(e) a material inducement to McDermott’s agreement to provide the Services is
the limitation of liability and the release provided by B&W in this Agreement.

ACCORDINGLY, EXCEPT WITH REGARD TO THE LIMITED REMEDIES EXPRESSLY SET FORTH
HEREIN, B&W SHALL ASSUME ALL LIABILITY FOR AND SHALL FURTHER RELEASE, DEFEND,
INDEMNIFY AND HOLD MCDERMOTT, ANY MEMBER OF THE MII GROUP AND THEIR RESPECTIVE
EMPLOYEES, OFFICERS, DIRECTORS AND AGENTS (ALL AS INDEMNIFIED PARTIES) FREE AND
HARMLESS FROM AND AGAINST ALL LOSSES RESULTING FROM, ARISING OUT OF OR RELATED
TO THE SERVICES, HOWSOEVER ARISING AND WHETHER OR NOT CAUSED BY THE NEGLIGENCE
OR GROSS NEGLIGENCE OF MCDERMOTT, ANY MEMBER OF THE MII GROUP OR ANY THIRD PARTY
SERVICE PROVIDER, OTHER THAN THOSE LOSSES CAUSED BY THE WILLFUL MISCONDUCT OF
MCDERMOTT OR ANY MEMBER OF THE MII GROUP.

Section 8.3 Express Negligence. THE INDEMNITY, RELEASES AND LIMITATIONS OF
LIABILITY IN THIS AGREEMENT (INCLUDING ARTICLES II AND VIII) ARE INTENDED TO BE
ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE EXPRESS TERMS AND SCOPE
THEREOF NOTWITHSTANDING ANY EXPRESS NEGLIGENCE RULE OR ANY SIMILAR DIRECTIVE
THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES BECAUSE OF THE NEGLIGENCE OR
GROSS NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE) OR
OTHER FAULT OR STRICT LIABILITY OF ANY OF THE INDEMNIFIED PARTIES.

 

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ARTICLE IX

CONFIDENTIALITY

Section 9.1 Confidentiality. B&W and McDermott each acknowledge and agree that
the terms of Section 6.9 of the Master Separation Agreement shall apply to
information, documents, plans and other data made available or disclosed by one
party to the other in connection with this Agreement. B&W and McDermott each
acknowledge and agree that any third party Information (to the extent such
Information does not constitute McDermott Books and Records) provided by any
member of the B&W Group to any member of the MII Group after the Distribution
Date in connection with the provision of the Services by any member of the MII
Group, or generated, maintained or held in connection with the provision of the
Services by any member of the MII Group after the Distribution Date, in each
case that primarily relates to the B&W Business, the B&W Assets, or the B&W
Liabilities, shall not be considered Privileged Information of McDermott or
Confidential Information of McDermott.

Section 9.2 System Security.

(a) If any party hereto is given access to the other party’s computer systems or
software (collectively, the “Systems”) in connection with the Services, the
party given access (the “Availed Party”) shall comply with all of the other
party’s system security policies, procedures and requirements that have been
provided to the Availed Party in advance and in writing (collectively, “Security
Regulations”), and shall not tamper with, compromise or circumvent any security
or audit measures employed by such other party. The Availed Party shall access
and use only those Systems of the other party for which it has been granted the
right to access and use.

(b) Each party hereto shall use commercially reasonable efforts to ensure that
only those of its personnel who are specifically authorized to have access to
the Systems of the other party gain such access, and use commercially reasonable
efforts to prevent unauthorized access, use, destruction, alteration or loss of
information contained therein, including notifying its personnel of the
restrictions set forth in this Agreement and of the Security Regulations.

(c) If, at any time, the Availed Party determines that any of its personnel has
sought to circumvent, or has circumvented, the Security Regulations, that any
unauthorized Availed Party personnel has accessed the Systems, or that any of
its personnel has engaged in activities that may lead to the unauthorized
access, use, destruction, alteration or loss of data, information or software of
the other party hereto, the Availed Party shall promptly terminate any such
person’s access to the Systems and immediately notify the other party hereto. In
addition, such other party hereto shall have the right to deny personnel of the
Availed Party access to its Systems upon notice to the Availed Party in the
event that the other party hereto reasonably believes that such personnel have
engaged in any of the activities set forth above in this Section 9.2(c) or
otherwise pose a security concern. The Availed Party shall use commercially
reasonable efforts to cooperate with the other party hereto in investigating any
apparent unauthorized access to such other party’s Systems.

 

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ARTICLE X

FORCE MAJEURE

Section 10.1 Performance Excused. Continued performance of a Service may be
suspended immediately to the extent caused by any event or condition beyond the
reasonable control of the party suspending such performance (and not involving
any willful misconduct of such party), including acts of God, pandemics, floods,
fire, earthquakes, labor or trade disturbances, strikes, war, acts of terrorism,
civil commotion, electrical shortages or blackouts, breakdown or injury to
computing facilities, compliance in good faith with any Law (whether or not it
later proves to be invalid), unavailability of materials or bad weather (a
“Force Majeure Event”). B&W shall not be obligated to pay any amount for
Services that it does not receive as a result of a Force Majeure Event (and the
parties hereto shall negotiate reasonably to determine the amount applicable to
such Services not received). In addition to the reduction of any amounts owed by
B&W hereunder, during the occurrence of a Force Majeure Event, to the extent the
provision of any Service has been disrupted or reduced, during such disruption
or reduction, (a) B&W may replace any such affected Service by providing any
such Service for itself or engaging one or more third parties to provide such
Service at the expense of B&W and (b) McDermott shall cooperate with, provide
such information to and take such other actions as may be reasonably required to
assist such third parties to provide such substitute Service.

Section 10.2 Notice. The party claiming suspension due to a Force Majeure Event
will give prompt notice to the other of the occurrence of the Force Majeure
Event giving rise to the suspension and of its nature and anticipated duration.

Section 10.3 Cooperation. Upon the occurrence of a Force Majeure Event, the
parties shall cooperate with each other to find alternative means and methods
for the provision of the suspended Service.

ARTICLE XI

MISCELLANEOUS

Section 11.1 Entire Agreement. This Agreement, together with the documents
referenced herein (including the Master Separation Agreement), constitutes the
entire agreement and understanding between the parties hereto with respect to
the subject matter hereof and supersedes all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the subject
matter hereof. To the extent any provision of this Agreement conflicts with the
provisions of the Master Separation Agreement, the provisions of this Agreement
shall be deemed to control with respect to the subject matter hereof.

Section 11.2 Binding Effect; No Third-Party Beneficiaries; Assignment. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns; and nothing in this
Agreement, express or implied, is intended to confer upon any other person or
entity any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement. This Agreement may not be assigned by either party
hereto, except with the prior written consent of the other party hereto.

 

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Section 11.3 Amendment; Waivers. No change or amendment may be made to this
Agreement except by an instrument in writing signed on behalf of both of the
parties hereto. Either party hereto may, at any time, (i) extend the time for
the performance of any of the obligations or other acts of the other, (ii) waive
any inaccuracies in the representations and warranties of the other contained
herein or in any document delivered pursuant hereto, and (iii) waive compliance
by the other with any of the agreements, covenants or conditions contained
herein. Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the party to be bound thereby. No failure or
delay on the part of either party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty, covenant or agreement contained
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right.

Section 11.4 Notices. Unless otherwise expressly provided herein, all notices,
claims, certificates, requests, demands and other communications hereunder shall
be in writing and shall be deemed to be duly given (i) when personally delivered
or (ii) if mailed by registered or certified mail, postage prepaid, return
receipt requested, on the date the return receipt is executed or the letter is
refused by the addressee or its agent or (iii) if sent by overnight courier
which delivers only upon the signed receipt of the addressee, on the date the
receipt acknowledgment is executed or refused by the addressee or its agent or
(iv) if sent by facsimile or electronic mail, on the date confirmation of
transmission is received (provided that a copy of any notice delivered pursuant
to this clause (iv) shall also be sent pursuant to clause (i), (ii) or (iii)),
addressed to the attention of the addressee’s General Counsel at the address of
its principal executive office or to such other address or facsimile number for
a party hereto as it shall have specified by like notice.

Section 11.5 Counterparts. This Agreement, including the Schedules hereto and
the other documents referred to herein, may be executed in multiple
counterparts, each of which when executed shall be deemed to be an original but
all of which together shall constitute one and the same agreement.

Section 11.6 Severability. If any term or other provision of this Agreement or
the Schedules attached hereto is determined by a nonappealable decision by a
court, administrative agency or arbitrator to be invalid, illegal or incapable
of being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to either party hereto.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the court, administrative agency or arbitrator
shall interpret this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the fullest extent possible.
If any sentence in this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.

Section 11.7 Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the substantive laws of the State of Texas,
without regard to any conflicts of law provisions thereof that would result in
the application of the laws of any other jurisdiction.

 

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Section 11.8 Performance. Each party hereto shall cause to be performed, and
hereby guarantees the performance of, all actions, agreements and obligations
set forth herein to be performed by any Subsidiary or Affiliate of such party.

Section 11.9 Relationship of Parties. This Agreement does not create a fiduciary
relationship, partnership, joint venture or relationship of trust or agency
between the parties. The parties hereto agree that McDermott (and any other
member of the MII Group which performs Services hereunder) is an independent
contractor in the performance of Services for the B&W Group under this
Agreement.

Section 11.10 Regulations. All employees of McDermott and the members of the MII
Group shall, when on the property of B&W, conform to the rules and regulations
of B&W concerning safety, health and security which are made known to such
employees in advance in writing.

Section 11.11 Construction. This Agreement shall be construed as if jointly
drafted by the parties hereto and no rule of construction or strict
interpretation shall be applied against either party. In this Agreement, unless
the context clearly indicates otherwise, words used in the singular include the
plural and words used in the plural include the singular; and if a word or
phrase is defined in this Agreement, its other grammatical forms, as used in
this Agreement, shall have a corresponding meaning. Whenever the context
requires, the gender of all words used in this Agreement includes the masculine,
feminine and the neuter. Unless the context otherwise requires, the words
“include,” “includes” and “including” shall be deemed to be followed by the
words “without limitation,” and the word “or” shall have the inclusive meaning
represented by the phrase “and/or.” The words “shall” and “will” are used
interchangeably in this Agreement and have the same meaning. Relative to the
determination of any period of time hereunder, “from” means “from and
including,” “to” means “to but excluding” and “through” means “through and
including.” All references herein to a specific time of day in this Agreement
shall be based upon Central Standard Time or Central Daylight Savings Time, as
applicable, on the date in question. Whenever this Agreement refers to a number
of days, such number shall refer to calendar days unless Business Days are
specified. Any reference herein to any Article, Section or Schedule means such
Article or Section of, or such Schedule to, this Agreement, as the case may be,
and references in any Section or definition to any clause means such clause of
such Section or definition. As used in this Agreement, the words “this
Agreement,” “herein,” “hereunder,” “hereof,” “hereto” and words of similar
import shall be deemed references to this Agreement as a whole and not to any
particular Section or other provision of this Agreement. The titles to Articles
and headings of Sections contained in this Agreement, in any Schedule and in the
table of contents to this Agreement have been inserted for convenience of
reference only and shall not be deemed to be a part of or to affect the meaning
or interpretation of this Agreement.

Section 11.12 Effect if Separation does not Occur. If the Distribution does not
occur, then all actions and events that are, under this Agreement, to be taken
or occur effective as of or following the Distribution Date, or otherwise in
connection with the Distribution, shall not be taken or occur except to the
extent specifically agreed by the parties and neither party shall have any
liability or further obligation to the other party under this Agreement.

[Signature page follows.]

 

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

 

MCDERMOTT INTERNATIONAL, INC. By:  

 

  Name:   Title: THE BABCOCK & WILCOX COMPANY By:  

 

  Name:   Title:

 

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