Document:

Promissory Note

 Exhibit 10.2 
  
 As provided in Section 6 of this Promissory Note (this “Note”), this Note and the indebtedness evidenced hereby are
subject to the setoff and payment obligation reduction provisions set forth in Sections 7.1 and 7.2 of the within-referenced Settlement Agreement. The holder of this Note, by its acceptance hereof, agrees to be bound by the provisions of Sections
7.1 and 7.2 of such Settlement Agreement. 
  
 Except as provided in
Section 9 of this Note, neither this Note nor any interest herein may be assigned without the prior written consent of the maker hereof, which consent may be withheld in the sole discretion of the maker hereof. 
  
 This Note has not been registered under the Securities Act of 1933 and may be sold or
otherwise transferred only if the holder hereof complies with that law and other applicable securities laws. 
  
 PROMISSORY NOTE 
  

			
	$250,000,000.00	  	February 22, 2006
	 	  	New Orleans, Louisiana

  
 FOR VALUE RECEIVED,
The Babcock & Wilcox Company, a Delaware corporation (herein referred to as the “Maker”), hereby promises and agrees to pay to the order of The Babcock & Wilcox Company Asbestos PI Trust (the “Holder”) the
principal amount of TWO HUNDRED FIFTY MILLION DOLLARS ($250,000,000), together with interest on the unpaid principal sum from (and including) December 1, 2006 until (but excluding) the Maturity Date (as hereinafter defined), at the rate of
seven percent (7.0%) per annum as hereinafter provided, in each case subject to the terms and conditions hereof, including the provisions of Section 1(b). Interest hereunder shall be calculated on the basis of a 360-day year consisting of
twelve 30-day months. References in this Promissory Note (this “Note”) to the “Settlement Agreement” mean that certain Settlement Agreement made as of February 21, 2006 by and among the Maker, the Holder, McDermott
International, Inc., a Panamanian corporation of which the Maker is an indirect, wholly owned subsidiary (“MII”), McDermott Incorporated, a Delaware corporation and a direct, wholly owned subsidiary of MII (“MI”),
Babcock & Wilcox Investment Company, a Delaware corporation and a direct, wholly owned subsidiary of MI (“BWICO”), Diamond Power International, Inc., a Delaware corporation and a direct, wholly owned subsidiary of the Maker,
Americon, Inc., a Delaware corporation and a direct, wholly owned subsidiary of the Maker (“Americon”), Babcock & Wilcox Construction Co., Inc., a Delaware corporation and a direct, wholly owned subsidiary of Americon, the
Asbestos Claimants Committee referred to therein, the Legal Representative for Future Asbestos-Related Claimants referred to therein, and the Apollo/Parks Township Trust referred to therein. 
  

	 	1.	Payment Obligations. 

  

	 	(a)	 Principal and Interest. Subject to Section 1(b), the principal amount of this Note shall be payable in five equal annual installments of $50,000,000
each, commencing on December 1, 2007 and continuing on each anniversary thereof through and including December 1, 2011 (the “Maturity Date”), at which time the remaining unpaid principal amount of 

	 	 
this Note shall be paid in full. Each such payment date, including the Maturity Date, is referred to herein as a “Scheduled Principal Payment
Date.” Subject to Section 1(b), interest on the unpaid principal amount of this Note shall begin to accrue on December 1, 2006 and shall be payable on each June 1 and December 1 thereafter through the Maturity Date (each, an
“Interest Payment Date”), in each case to the extent interest has accrued from (and including) the date of the then most recent prior payment of interest to (but excluding) such Interest Payment Date. Payments of principal and interest
shall be made in lawful money of the United States of America, by (i) check or (ii) wire transfer of immediately available funds to such bank account of the Holder as the Holder may designate from time to time by at least thirty
(30) days’ prior written notice to the Maker. Any payment (excluding any prepayment) on or in respect of this Note shall be applied first to accrued but unpaid interest and then to the principal balance hereof. The unpaid principal may, at
the option of the Maker, be prepaid, in whole or in part, at any time without premium or penalty, through the payment of an amount equal to 100% of the principal amount being prepaid, together with all accrued and unpaid interest on this Note to
(but excluding) the date of the prepayment. At such time as this Note is paid or prepaid in full, it shall be surrendered to the Maker and cancelled and shall not be reissued. Anything in this Note to the contrary notwithstanding, any payment that
is due on a date other than a Business Day (as hereinafter defined) shall be made on the next succeeding Business Day (and such extension of time shall not be included in the computation of interest). As used in this Note, the term “Business
Day” means any day other than a Saturday, a Sunday, or a day on which commercial banks in New York City are required or authorized by law to be closed. 

  

	 	(b)	Payment Obligations Condition Precedent. Except for the $25,000,000 payment described in this Section 1(b), payment obligations under this Note shall only arise if the
U.S. federal legislation designated (as of the date of this Note) as Senate Bill 852 (also referred to as the “Fairness in Asbestos Injury Resolution Act” or the “FAIR Act”), or any other U.S. federal legislation designed, in
whole or in part, to resolve asbestos-related personal injury claims through the implementation of a national trust (any such legislation, including the FAIR Act, being referred to herein as “Asbestos Resolution Legislation”), has not been
enacted and become law on or before November 30, 2006 (the “Payment Obligations Condition Precedent”); provided, however, that: 

  

	 	(i)	 if Asbestos Resolution Legislation is enacted and becomes law on or before November 30, 2006 and is not subject to a legal proceeding as of January 31,
2007 which challenges the constitutionality of such Asbestos Resolution Legislation (any such proceeding being a “Challenge Proceeding”), the Payment Obligations Condition Precedent shall be deemed not to have been 

  

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satisfied, the only payment to be made under this Note shall be $25,000,000 (which payment shall be made by the Maker on the first Scheduled Principal
Payment Date), the covenants set forth in Section 2 shall terminate, the Guaranties (as hereinafter defined) shall terminate, and this Note shall be deemed paid in full and cancelled automatically pursuant to its terms, no interest shall be
deemed to have accrued hereunder, the Pledge Agreement shall terminate, and the Collateral (as defined in Section 1(c)) shall be released and returned to BWICO free and clear of any security interest (at no cost or expense to the Maker or
either Guarantor (as hereinafter defined)) as promptly as practicable; and 

  

	 	(ii)	if Asbestos Resolution Legislation is enacted and becomes law on or before November 30, 2006, but is subject to a Challenge Proceeding as of January 31, 2007, the Payment
Obligations Condition Precedent shall be deemed not to have been satisfied and any payments under this Note (other than a payment of principal in the amount of $25,000,000 to be made on December 1, 2007) shall be suspended (any period of
suspension as provided in this Section 1(b)(ii) being a “Suspension Period”) until either: 

  

	 	(A)	 there has been a final, non-appealable judicial decision with respect to such Challenge Proceeding to the effect that the Asbestos Resolution Legislation is
unconstitutional as generally applied to debtors in Chapter 11 proceedings whose plans of reorganization have not yet been confirmed and become substantially consummated (i.e., debtors that are then similarly situated to the Maker as of
September 1, 2005 (in a Chapter 11 proceeding with a plan of reorganization that has not yet been confirmed)), so that such debtors will not be subject to the Asbestos Resolution Legislation, in which event: (1) the Payment
Obligations Condition Precedent shall be deemed to have been satisfied on the first day following the later of (a) the date of such judicial decision and (b) the expiration of the last of any applicable periods of appeal from such judicial
decision; (2) within thirty (30) days of the receipt of written notice delivered by the Holder to the Maker and the United States Bankruptcy Court for the Eastern District of Louisiana (the “Bankruptcy Court”) of such judicial
decision or such expiration of the applicable periods of appeal (as applicable), interest on this Note held in the escrow account referred to below shall be paid to the Holder; and (3) principal payments and interest shall be payable on this
Note as described in Section 1(a) (with a one-time payment of any such principal payments that would have become due during the Suspension Period but for the application of 

  

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the foregoing provisions (after deducting the payment, if previously made, of the $25,000,000 amount referred to above), which payment shall be made within
thirty (30) days of receipt of the written notice by the Maker and the Bankruptcy Court referred to in the immediately preceding clause (2)); or 

  

	 	(B)	there has been a final nonappealable judicial decision with respect to such Challenge Proceeding which resolves the Challenge Proceeding in a manner other than as contemplated by
the immediately preceding clause (A), in which event: (1) the Payment Obligations Condition Precedent shall be irrevocably deemed not to have been satisfied; and (2) as of the later of the date that decision becomes final and nonappealable
or the date the $25,000,000 amount referred to above in this Section 1(b)(ii) has been paid by the Maker, (a) this Note shall be deemed to have been paid in full and shall be cancelled; (b) the funds in the escrow account referred to
below shall be turned over to the Maker; (c) the covenants set forth in Section 2 shall terminate; (d) the Guaranties shall terminate; (e) the Pledge Agreement shall terminate; and (f) the Collateral shall be released and
returned to BWICO free and clear of any security interest (at no cost or expense to the Maker or either Guarantor) as promptly as practicable. 

  
 During any Suspension Period, interest shall be paid on this Note as required by Section 1(a) into an escrow account established by the Maker for
such purpose with a national bank or trust company which regularly acts as an escrow agent in commercial transactions, which escrow account shall remain until such time as there has been a final, non-appealable judicial decision (to either effect
contemplated by this Section 1(b)) with respect to the Challenge Proceeding that gave rise to the Suspension Period, as evidenced by a written notice with respect thereto delivered by either (i) the Holder to the Maker and the Bankruptcy
Court or (ii) the Maker to the Holder and the Bankruptcy Court. 
  

	 	(c)	As further provided in Section 5, MII and BWICO (each a “Guarantor”) are guaranteeing the payment obligations of the Maker under this Note. Pursuant to the provisions
of the Pledge and Security Agreement dated as of the date of this Note to which BWICO and the Holder are parties (the “Pledge Agreement”), the guarantee obligations of the Guarantors are being secured by a security interest in all of the
capital stock of the Maker outstanding as of the date of this Note (the “Collateral”). Each of the Maker and the Guarantors sometimes is referred to herein as an “Obligor.” 

  

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	2.	Certain Covenants. The Obligors hereby covenant and agree as follows, after the date of the Note and until such time as this Note has been paid in full or deemed to have been
paid in full pursuant to the provisions of Section 1(b): 

  

	 	(a)	Maintenance of existence. Except as permitted by Section 2(h), each Obligor shall maintain its corporate existence and remain in good standing in its jurisdiction of
incorporation. 

  

	 	(b)	Continuation of business. Each Obligor shall continue its principal lines of business carried on as of the date of this Note, except where the board of directors of such
Obligor determines in good faith that the discontinuation of a line of business would not reasonably be expected to have a material adverse effect on the business, financial condition, or results of operations of such Obligor and its subsidiaries,
taken as a whole. 

  

	 	(c)	Maintenance of insurance. Each Obligor shall maintain or cause to be maintained insurance with respect to its property and business against such liabilities and risks, in
such types and amounts and with such deductibles or self-insurance risk retentions, in each case as the board of directors of such Obligor determines in good faith to be customary in its respective industries. 

  

	 	(d)	Maintenance of books and records. Each Obligor shall maintain its accounting books and records in accordance with accounting principles generally accepted in the United
States (“GAAP”) in all material respects, to the extent applicable. 

  

	 	(e)	Compliance with laws. Each Obligor shall comply with all laws and governmental regulations applicable to it, except to the extent that the failure to so comply would not have
a material adverse effect on the business, financial condition, or results of operations of such Obligor and its subsidiaries, taken as a whole. 

  

	 	(f)	Delivery of financial statements. MII shall deliver to the Holder (i) annual audited consolidated financial statements of MII and its consolidated subsidiaries,
(ii) if otherwise available, annual audited financial statements of the Maker and BWICO (provided that this clause will not require preparation of such audited financial statements if they are not otherwise available) and (iii) unaudited
consolidating financial statements of BWICO and MII, in each case no later than ninety (90) days after the end of each such Obligor’s fiscal year-end or as soon as otherwise available. 

  

	 	(g)	Notification of default. Each Obligor shall notify the Holder, within ten (10) Business Days after receipt by such Obligor, of any notice of default received by it under
any agreement or instrument governing or creating any material Indebtedness (as hereinafter defined) of such Obligor or any of its consolidated subsidiaries. As used in this Note, “Indebtedness” means, with respect to any Obligor, without
duplication: 

  

	 	(i)	indebtedness of such Obligor for borrowed money; 

  

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	 	(ii)	obligations of such Obligor evidenced by debentures, promissory notes, or other similar instruments; 

  

	 	(iii)	obligations of such Obligor in respect of letters of credit, bankers’ acceptances, or other similar instruments, excluding obligations in respect of trade letters of credit,
bankers’ acceptances, or other similar instruments issued in respect of trade payables or similar obligations to the extent not drawn upon or presented, or, if drawn upon or presented, the resulting obligation of such Obligor is paid with 30
Business Days; 

  

	 	(iv)	obligations of such Obligor to pay the deferred and unpaid purchase price of property or services which are recorded as liabilities in accordance with GAAP, excluding trade
payables, advances on contracts, deferred compensation and similar liabilities arising in the ordinary course of business of such Obligor (obligations of the kind referred to in this clause (iv) are hereinafter referred to as “Purchase
Money Indebtedness”); and 

  

	 	(v)	rent obligations of such Obligor as lessee under any lease arrangement classified as a capital lease on the balance sheet of such Obligor in accordance with GAAP.

  

	 	(h)	Restrictions on divestitures, mergers and consolidations. BWICO shall not sell the outstanding common stock of the Maker to any entity that is not an Obligor or a
consolidated subsidiary of an Obligor (excluding J. Ray McDermott, S.A. or any of its subsidiaries). None of the Obligors shall enter into any merger or consolidation transaction pursuant to which any of them is acquired by an entity that is not an
Obligor without the prior written consent of the Holder, which consent shall not be unreasonably withheld or delayed. Neither the Maker nor MII shall sell all of its assets or its assets substantially as an entirety (whether in a single transaction
or a series of related transactions), without the prior written consent of the Holder (which consent shall not be unreasonably withheld or delayed). Notwithstanding the foregoing, this covenant shall not restrict any transaction pursuant to which
the remaining principal balance of this Note (and all accrued and unpaid interest on this Note) is paid in full concurrently with the closing of such transaction. 

  

	 	(i)	 Subordination of additional Indebtedness. Any Indebtedness incurred by the Maker after the date of this Note will be expressly subordinated (pursuant to
customary subordination provisions as determined by the 

  

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Maker in good faith upon advice from a nationally recognized investment banking firm) to the indebtedness under this Note, except for any such incurrence by
the Maker under or in connection with any (i) facilities for working capital, letters of credit (including facilities relating to Indebtedness incurred to provide collateral for letters of credit and similar instruments, or so-called
“synthetic letter of credit facilities”) or bonding requirements entered into, issued, or obtained in the ordinary course of business or as part of the Exit Financing (as defined in the Plan of Reorganization referred to in the Settlement
Agreement), and any replacements, refinancings, renewals, or extensions of any of the foregoing, (ii) letters of credit, bankers’ acceptances, bonds (including industrial revenue bonds), capital leases, or similar instruments entered into,
issued, or obtained in the ordinary course of business, (iii) Purchase Money Indebtedness arrangements entered into in the ordinary course of business, (iv) replacements, refinancings, renewals, or extensions of any Indebtedness
outstanding as of the date of this Note (provided that, in the case of any Indebtedness incurred in accordance with this clause (iv), the principal amount of the Indebtedness incurred does not materially exceed the principal amount of the
Indebtedness being replaced, refinanced, renewed, or extended, plus any associated premiums, fees and expenses), or (v) guaranties, surety arrangements, interest rate protection arrangements and similar arrangements of or with respect to any
Indebtedness described in any of the immediately preceding clauses (i) through (iii) (the debt arrangements referred to in the immediately preceding clauses (i) through (v) are collectively referred to herein as the
“Specified Debt Arrangements”). 

  

	 	(j)	Prohibitions on incurrence of new liens. The Maker shall not grant any liens on its assets to secure any Indebtedness, other than Indebtedness pursuant to any of the
Specified Debt Arrangements. 

  

	 	(k)	Restrictions on certain guaranties. The Maker shall not provide a guaranty of the obligations of any entity that is not a consolidated subsidiary of the Maker (or a joint
venture or other similar business arrangement formed or invested in by the Maker or any of its subsidiaries) without the prior written consent of the Holder (which consent will not be unreasonably withheld or delayed). 

  

	 	(l)	 Restrictions on transactions with affiliates. The Maker shall not engage in any transactions with affiliated entities (other than its consolidated
subsidiaries) other than on an arm’s-length basis in the ordinary course of business, except as permitted by Section 2(m) or pursuant to existing agreements, including the Support Services Agreement dated as of January 1, 2000 to
which the Maker is a party, any amendments thereto that do not materially change the rights or obligations of the parties thereto in any manner that would be adverse to the Holder in any material respect, the Tax Allocation Agreement dated as of
January 1, 2000 to which the 

  

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Maker is a party, any amendments thereto that do not materially change the rights or obligations of the parties thereto in any manner that would be adverse
to the Holder in any material respect, the Amended and Restated Indemnification Agreements dated as of February 21, 2000 to which the Maker is a party, any amendments thereto that do not materially change the rights or obligations of the
parties thereto in any manner that would be adverse to the Holder in any material respect, and any replacement or similar inter-company agreements approved by the board of directors of the Maker in good faith, and except for the spin-off of the
Maker’s pension arrangements in a manner consistent with MII’s prior public disclosure thereof (as reflected in MII’s reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended,
prior to the date of this Note). 

  

	 	(m)	Restricted payments. The Maker shall not pay any dividends or make any similar distributions to BWICO; provided, however, that this covenant shall not restrict the Maker from
making any dividends, similar distributions, or payments in order to fund the $350,000,000 cash payment being made concurrently with the issuance of this Note (as contemplated by the Settlement Agreement), any dividends, similar distributions, or
payments in order to fund the amount that may become payable pursuant to the Contingent Payment Right (as defined in the Settlement Agreement), any payments under this Note, or any payments to reimburse the Guarantors for any amounts paid by either
of them pursuant to the Guaranties; provided, further, that: (i) after any payment due and owing in respect of the Contingent Payment Right has been paid in full, in the event the Maker accumulates cash in excess of $75,000,000 (other than
pursuant to borrowings under any of the Specified Debt Arrangements), this covenant shall not restrict the Maker from paying dividends from time to time to the extent of such excess, so long as the Maker is not in default under this Note at the time
any such dividend is declared or paid; and (ii) in the event of any Suspension Period as contemplated by Section 1(b)(ii), the Maker may from time to time pay dividends or make similar distributions to BWICO so long as an amount equal to
any such dividend is placed in the escrow account contemplated by Section 1(b)(ii) to satisfy any contingent payments with respect to the Contingent Payment Right or payment obligations under this Note, until such time as such Suspension Period
ends. 

  

	 	(n)	Prohibition on certain loans. The Maker shall not make loans to any entity that is not a consolidated subsidiary of the Maker or a joint venture or other similar business
arrangement formed or invested in by the Maker or any of its consolidated subsidiaries without the prior written consent of the Holder (which consent shall not be unreasonably withheld or delayed), other than loans to customers, vendors, and
subcontractors in the ordinary course of business. 

  

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	 	(o)	Covenant in event of foreclosure of security interest. In the event the Holder forecloses on its security interest in the Collateral pursuant to the provisions of the Pledge
Agreement, the Obligors will cooperate in the transition of the Maker to a stand-alone operating entity. 

  

	3.	Events of Default and Remedies. 

  

	 	(a)	Events of Default. So long as this Note has not been paid in full, each of the following events will constitute an “Event of Default”: 

  

	 	(i)	any default in the payment of the principal or accrued interest payable under this Note, as and when the same shall become due and payable, and continuance of such default for a
period of ten (10) days after the Maker’s receipt of a Default Notice (as hereinafter defined) from the Holder with respect to such default; 

  

	 	(ii)	any breach of any of the covenants contained in Section 2, and continuance of such breach for a period of thirty (30) days after the Maker’s receipt of a Default
Notice from the Holder with respect to such breach; 

  

	 	(iii)	commencement of an involuntary case or other proceeding against any Obligor seeking (A) liquidation, reorganization, or other relief with respect to it or its debts under any
applicable bankruptcy, insolvency, or other similar law now or hereafter in effect, (B) the appointment of a receiver, liquidator, custodian, or trustee of any Obligor or for all or substantially all the property and other assets of any
Obligor, or (C) the winding up or liquidation of the affairs of any Obligor, if, in the case of any of (A), (B), or (C) above, such case or proceeding shall remain unstayed and undismissed for a period of sixty (60) days;

  

	 	(iv)	(A) commencement of a voluntary case by any Obligor under any applicable bankruptcy, insolvency, or other similar law now or hereafter in effect, (B) consent by any
Obligor to the entry of an order for relief in an involuntary case against such Obligor under any such law, (C) consent by any Obligor to the appointment or taking possession by a receiver, liquidator, custodian, or trustee of such Obligor or
for all or substantially all its assets, or (D) a general assignment by any Obligor for the benefit of its creditors; or 

  

	 	(v)	the failure by MI to make, or to cause one or more of its subsidiaries to make, the required payment with respect to the Contingent Payment Right, on a timely basis in accordance
with the provisions of the Settlement Agreement following the satisfaction of the Payment Obligations Condition Precedent and the vesting of the Contingent Payment Right pursuant to the terms of the Settlement Agreement. 

  

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	 	(b)	Remedies. If an Event of Default specified in Section 3(a)(i), (ii), or (v) shall occur, then the Holder may, by written notice to the Maker (a “Default
Notice”), so long as the Event of Default is continuing, declare all unpaid principal and accrued interest under this Note immediately due and payable without further presentment, demand, protest, or further notice, all of which are hereby
expressly waived by the Maker. If any Event of Default specified in Section 3(a)(iii) or (iv) shall occur, then, without any notice to the Maker or any other act by the Holder, the entire principal amount of this Note (together with all
accrued interest thereon) shall become immediately due and payable without presentment, demand, protest, or other notice of any kind, all of which are hereby expressly waived by the Maker. 

  

	 	(c)	Expenses. If an Event of Default shall occur, the Maker shall pay, and save the Holder harmless against liability for the payment of, all reasonable expenses, including
reasonable attorneys’ fees, incurred by the Holder in enforcing its rights hereunder. 

  

	4.	Waivers; Amendments. Except as set forth in Sections 3(a)(i), 3(a)(ii), and 3(b), to the extent permitted by applicable law, each Obligor hereby expressly waives demand
for payment, presentment, notice of dishonor, notice of intent to demand, notice of acceleration, notice of intent to accelerate, protest, notice of protest and diligence in collecting and the bringing of suit against the Maker with respect to this
Note. The Obligors agree that the Holder may extend the time for repayment or accept partial payment an unlimited number of times without discharging or releasing any of the Obligors from their respective obligations under this Note (including the
Guaranties). No delay or omission on the part of the Holder in exercising any power or right in connection herewith shall operate as a waiver of such right or any other right under this Note (including the Guaranties), nor shall any single or
partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. No amendment, modification, or
waiver of any provision of this Note (including the Guaranties), nor any consent to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the person against whom enforcement thereof is to be
sought, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 

  

	5.	 Guaranties. (a) Subject to the terms and conditions of this Note, the Guarantors hereby, jointly and severally, unconditionally guarantee to the Holder
the prompt and complete payment in cash when due, subject to any applicable grace periods and notice requirements set forth in this Note, of all the Maker’s payment obligations to the Holder under this Note (the “Obligations”). An
Event of 

  

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Default under this Note shall constitute an event of default under the guaranties of the Guarantors provided in this Section 5 (the
“Guaranties”), and shall entitle the Holder to accelerate the obligations of the Guarantors hereunder in the same manner and to the same extent as the Obligations. The Guaranties constitute guarantees of payment when due and not of
collection. 

  

	 	(b)	Anything herein to the contrary notwithstanding, the maximum liability of each Guarantor hereunder shall in no event exceed the amount which can be guaranteed by such Guarantor
under applicable federal and state laws relating to fraudulent transfers or conveyances or to the insolvency of debtors (after giving effect to any right of contribution from the other Guarantor). 

  

	 	(c)	The Guarantors shall not exercise any rights which they may acquire by way of subrogation to the rights of the Holder hereunder until all the Obligations shall have been paid in
full. Subject to the foregoing, upon payment of all the Obligations, the Guarantors shall be subrogated to the rights of the Holder against the Maker, and the Holder agrees to take such steps as the Guarantors may reasonably request to implement
such subrogation. 

  

	 	(d)	 To the maximum extent permitted by applicable law, the Guarantors understand and agree that the Guaranties shall be construed as continuing, complete, absolute, and
unconditional guarantees of payment without regard to, and each Guarantor hereby waives any defense of a surety or guarantor or any other obligor on any obligations arising in connection with or in respect of, and hereby agrees that its obligations
hereunder shall not be discharged or otherwise affected as a result of, any of the following: (i) any defense, setoff, or counterclaim (other than the defense of payment or performance and the setoff rights referred to in Section 6) which
may at any time be available to or be asserted by the Maker against the Holder; (ii) the insolvency, bankruptcy arrangement, reorganization, adjustment, composition, liquidation, disability, dissolution, or lack of power of the Maker or the
other Guarantor, or any sale, lease, or transfer of any or all of the assets of the Maker or the other Guarantor, or any change in the shareholders of the Maker or the other Guarantor; (iii) any change in the corporate existence, structure, or
ownership of any other Obligor; (iv) the absence of any attempt to collect the Obligations or any part of them from any other Obligor; or (v) any other circumstance or act which constitutes, or might be construed to constitute, an
equitable or legal discharge of the Maker for the Obligations, or of such Guarantor under its Guaranty, in bankruptcy or in any other instance (other than the defense of payment or performance or any such discharge that may arise out of or be based
on Asbestos Resolution Legislation, as provided in Sections 7.1and 7.2 of the Settlement Agreement). When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against either Guarantor, the Holder may, but shall be
under no obligation to, join or 

  

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make a similar demand on or otherwise pursue or exhaust such rights and remedies as it may have against the Maker or the other Guarantor, and any failure by
the Holder to make any such demand, to pursue such other rights or remedies, or to collect any payments from the Maker or the other Guarantor, or any release of the Maker or the other Guarantor, shall not relieve such Guarantor of any obligation or
liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied, or available as a matter of law, of the Maker against such Guarantor. 

  

	 	(e)	The Guaranties shall terminate upon the payment in full of the Obligations (as the same may be limited pursuant to the provisions of Section 1(b)) or at such later time as may
be applicable pursuant to the provisions of Section 1(b)(ii)(B)(2)(c). 

  

	6.	Right of Setoff. The Obligations shall be subject to the setoff and reduction in payment obligations provisions set forth in Sections 7.1 and 7.2 of the Settlement
Agreement. By its acceptance of this Note, the Holder agrees to be bound by the provisions of Section 7.1 and 7.2 of the Settlement Agreement. 

  

	7.	No Recourse Against Individuals. No director, officer, employee, or representative of any of the Obligors (in each case, in such person’s capacity as such), and no
stockholder of MII (in its capacity as such), shall have any personal liability in respect of any obligations of the Obligors under this Note or the Guaranties, or for any claim based on, with respect to, or by reason of such obligations or their
creation, by reason of his/her or its status as such. By accepting this Note, the Holder hereby waives and releases all such liability. Such waiver and release is part of the consideration for the issue of the Note and the Guaranties by the
Obligors. 

  

	8.	Certain Representations. The Maker hereby represents that: (a) it is duly incorporated, validly existing, and in good standing under the laws of the State of Delaware
and has full corporate power and authority to execute and deliver this Note; (b) its execution and delivery of this Note has been duly authorized by all necessary corporate action on its part; and (c) this Note constitutes a legal, valid,
and binding obligation of the Maker, enforceable against the Maker in accordance with the terms hereof, except as such enforceability may be limited by: (i) bankruptcy, insolvency, reorganization, fraudulent transfer or conveyance, and other
laws of general applicability relating to or affecting creditors’ rights; and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 

  

	9.	 Assignment. Prior to satisfaction of the Payment Obligations Condition Precedent, the Holder may not transfer or assign this Note, its rights to payment
hereunder, or any other rights hereunder without the prior written consent of the Maker, which consent the Maker may withhold in its sole discretion; provided, however, that the Maker’s consent shall not be required in connection with any such
transfer or assignment to a national trust established pursuant to any 

  

 12 

	 	 
Asbestos Resolution Legislation, provided such transfer or assignment is made in accordance with the requirements of such legislation and in accordance with
the last sentence of this Section 9. If the Payment Obligations Condition Precedent is satisfied, at any time after the satisfaction thereof the Holder may transfer or assign this Note and its rights hereunder (subject to the provisions of
Section 6), provided that such transfer is effected in a transaction that is exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), and (ii) such transfer may only be in whole, and not in
part. In no event shall the Maker or the Guarantors be required to register this Note, the related Guaranties, or the Collateral under the Securities Act. The Holder, by its acceptance of this Note, hereby represents, and it is specifically
understood and agreed, that the Holder is not acquiring this Note or the related Guaranties with a view to any sale or distribution thereof within the meaning of the Securities Act. The Holder understands that this Note and the related Guaranties
have not been registered under the Securities Act and may be transferred only in compliance with the provisions of the Securities Act. In connection with any transfer or assignment of this Note in accordance with the foregoing provisions after the
satisfaction of the Payment Obligations Condition Precedent, the Maker shall issue to the Holder a replacement note (which shall provide replacement guaranties of the Guarantors) upon the written request of the Holder, accompanied by this Note
together with appropriate instruments of transfer, which replacement note shall reflect such modifications as shall be necessary or appropriate to reflect that the Payment Obligations Condition Precedent has been met and that successor holders are
thereafter permitted, and, upon the issuance of such replacement note, this Note shall be cancelled. Any transfer or assignment of this Note must be effected pursuant to written documentation pursuant to which the transferee or assignee agrees to be
bound by all the provisions of this Note and the Pledge Agreement. 

  

	10.	Entire Agreement. This Note, the Settlement Agreement and the Pledge Agreement constitute the entire agreement and understanding among the Holder and the Obligors with
respect to the subject matter of this Note and supersede all prior agreements and understandings, oral or written, among such parties with respect to the subject matter of this Note. 

  

	11.	Notices. All notices and communications provided for hereunder shall be in writing and sent (a) by facsimile if the sender on the same day sends a confirming copy of
such notice by a recognized overnight-delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight-delivery service (with charges prepaid). Any
such notice shall be sent: 

  

	 	(i)	if to the Holder, at such address as the Holder shall have specified to the Maker in writing; or 

  

	 	(ii)	 if to any Obligor, addressed to it at 777 North Eldridge Parkway, Houston, Texas 77079, to the attention of Ms. Liane K. Hinrichs, or at such other
address as any of the Obligors may hereafter 

  

 13 

	 	 
specify to the Holder in writing; with a copy to McDermott International, Inc., 777 North Eldridge Parkway, Houston, Texas 77079, to the attention of
Mr. John T. Nesser, III, or such other address as MII shall have specified to the Holder in writing. 

  

	12.	Captions; Interpretation. The captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Note. Except where the context otherwise requires, the defined terms used in this Note shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine, and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word
“will” shall be construed to have the same meaning and effect as the word “shall” and both “will” and “shall” are used in the mandatory and imperative sense. The word “may” means is authorized or
permitted to, while “may not” means is not authorized or permitted to. Unless the context otherwise requires: (i) any definition of or reference to any agreement or other document herein shall be construed as referring to such
agreement or other document as from time to time amended, restated, supplemented, or otherwise modified (subject to any restrictions on such amendments, restatements, supplements, or modifications set forth herein or therein); (ii) any
reference herein to the subsidiaries of any entity shall be construed to include such entity’s direct and indirect subsidiaries; (iii) the words “herein,” “hereof,” and “hereunder,” and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof; and (iv) all references herein to sections shall be construed to refer to sections of this Note. 

  

	13.	Severability. If any provision contained in this Note shall for any reason be held to be invalid, illegal, or unenforceable in any respect, that provision will, to the extent
possible, be modified in such manner as to be valid, legal, and enforceable but so as to most nearly retain the intent of the parties hereto as expressed herein, and if such a modification is not possible, that provision will be severed from this
Note, and in either case the validity, legality, and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby. 

  

	14.	Governing Law. The construction, validity, and enforceability of this Note shall be governed by the substantive laws of the State of Louisiana, without giving
effect to any principles of conflicts of laws thereof that would result in the application of the laws of any other jurisdiction. 

  
 *        *        * 
  

 14 

			
	 MAKER:
  
 THE BABCOCK & WILCOX COMPANY

		
	By:	 	  

	Name:	 	Harold L. Simmons, Jr.
	Title:	 	Vice President, Chief Restructuring Executive and Controller
	
	 GUARANTORS:
  
 BABCOCK & WILCOX INVESTMENT COMPANY

		
	By:	 	  

	Name:	 	John T. Nesser, III
	Title:	 	Executive Vice President, General Counsel and Secretary
	
	MCDERMOTT INTERNATIONAL, INC.
		
	By:	 	  

	Name:	 	John T. Nesser, III
	Title:	 	Executive Vice President and General Counsel

  

 15Pledge and Security Agreement

 Exhibit 10.3 

  
 PLEDGE AND SECURITY AGREEMENT 
  
 dated as of 
  
 February 22, 2006 
  
 by and among 
  
 BABCOCK & WILCOX INVESTMENT COMPANY 
  
 and 
  
 THE BABCOCK &WILCOX COMPANY 
 ASBESTOS PI TRUST 
  
 and

  
 U.S. BANK NATIONAL ASSOCIATION, 
  
 as Collateral Agent 
  

 This PLEDGE AND SECURITY AGREEMENT dated as of February 22, 2006 (this “Agreement”) is by
and between (a) Babcock & Wilcox Investment Company, a Delaware corporation (the “Company”), (b) The Babcock & Wilcox Company Asbestos PI Trust (together with the permitted successors and assigns thereof, the
“Secured Party”), and (c) U.S. Bank National Association, a national banking association organized under the laws of the United States (“U.S. Bank”). 
  
 For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company has agreed to
pledge and grant a security interest in the Collateral (as defined below) as security for the Guarantee Obligations (as defined below). 
  
 Accordingly, the parties hereto agree as follows: 
  
 Section 1. Definitions. 
  
 (a) As used in this Agreement, the terms defined in the preamble hereto shall have the meanings ascribed therein and the following terms have the meanings
ascribed below: 
  
 “Acceleration Event” exists
if all or any portion of the Guarantee Obligations have been accelerated pursuant to Section 5(a) of the Note and such acceleration shall not have been rescinded. 
  
 “B&W” means The Babcock & Wilcox Company, a Delaware corporation and a direct, wholly owned
subsidiary of the Company. 
  
 “Bankruptcy Court”
means the United States Bankruptcy Court for the Eastern District of Louisiana. 
  
 “Collateral” has the meaning assigned to such term in Section 3. 
  
 “Collateral Agent” means the collateral agent appointed pursuant to this Agreement, which shall initially be U.S. Bank. 
  
 “Confirmation Order” means the Order Confirming the Joint
Plan of Reorganization as of September 28, 2005, as Amended Through January 17, 2006, Proposed by the Debtors, the Asbestos Claimants’ Committee, the Future Asbestos-Related Claimants’ Representative, and McDermott Incorporated
and Issuing Injunctions entered on January 17, 2006 by the District Court. 
  
 “District Court” means the United States District Court for the Eastern District of Louisiana. 
  
 “Guarantee Obligations” means the guarantee obligations of the Guarantors set forth in Section 5 of the Note. 
  
 “Guarantors” means the Company and McDermott International,
Inc., a Panamanian corporation of which the Company is an indirect, wholly owned subsidiary. 
  
 “Note” means that certain Promissory Note executed and delivered by B&W, dated as of February 22, 2006, in the original principal amount of $250,000,000, as amended or modified from time to
time, together with any note executed and delivered in exchange or substitution therefor or transfer thereof. 
  

 1 

 “Plan” means the Joint Plan of Reorganization as of September 28, 2005, as Amended
Through January 17, 2006, and the exhibits and schedules to the foregoing, as confirmed by the District Court. 
  
 “Plan Documents” means the Plan, the exhibits to the Plan, the Plan Supplement, the disclosure statement to the Plan and all exhibits
attached to the disclosure statement. 
  
 “Plan
Supplement” means the Plan Supplement to the Plan, as amended through the date hereof. 
  
 “Pledged Stock” means the capital stock of B&W described on Annex 2, together with all certificates evidencing the same.

  
 “Proceeds” has the meaning assigned to such
term in the UCC. 
  
 “UCC” means the Uniform
Commercial Code as in effect from time to time in the State of Louisiana. 
  
 (b) In addition, for all purposes hereof, capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Note and, if not defined in the Note, in the UCC.

  
 (c) Except where the context otherwise requires, the foregoing
definitions shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine, and neuter forms. The words “include,”
“includes,” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall,” and both
“will” and “shall” are used in the mandatory and imperative sense. The word “may” means is authorized or permitted to, while “may not” means is not authorized or permitted to. Unless the context otherwise
requires: (i) any definition of or reference to any agreement, instrument, or other document herein shall be construed as referring to such agreement, instrument, or other document as from time to time amended, restated, supplemented, or
otherwise modified (subject to any restrictions on such amendments, restatements, supplements, or modifications set forth herein or therein); (ii) any reference herein to any person shall be construed to include such person’s permitted
successors and assigns; (iii) the words “herein,” “hereof,” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof;
and (iv) all references herein to sections and annexes shall be construed to refer to sections of, and annexes to, this Agreement. 
  
 Section 2. Appointment of Collateral Agent. 
  

2.01 Appointment. The Secured Party hereby appoints U.S. Bank as the Collateral Agent under this Agreement, to take such actions to be taken by
the Collateral Agent under this Agreement and to exercise such powers of the Collateral Agent contemplated by this Agreement, in each case subject to the terms and conditions hereof. The Company hereby consents to the appointment made pursuant to
the foregoing provisions of this Section 2.01. 
  

 2 

 2.02 Fees and Expenses of Collateral Agent. The Company agrees to pay the Collateral Agent upon
demand the amount of the Collateral Agent’s annual fee (as set forth on Annex 3 attached hereto) and any and all reasonable out-of-pocket expenses, including the reasonable fees and expenses of its counsel and agents, which the
Collateral Agent may invoice to the Company in connection with (a) the custody or preservation of, or the sale of, collection from or other realization upon, the Collateral, (b) the exercise or enforcement (whether through negotiations,
legal proceedings, or otherwise) of any of the rights of the Collateral Agent or the Secured Party hereunder, or (c) the failure by the Company to perform or observe any of the provisions hereof. The agreements in this Section 2.02 shall
survive the termination of this Agreement. No provision of this Agreement shall require the Collateral Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. 
  
 2.03 Tax Matters. Each of the Company and the Secured Party shall
provide the Collateral Agent with its taxpayer identification number documented by an appropriate Form W-8 or Form W-9 upon execution of this Agreement. 
  
 Section 3. Grant of Security Interest in the Collateral. As collateral security for the prompt payment of the Guarantee Obligations
when due in accordance with their terms, the Company hereby grants to the Collateral Agent, for the benefit of the Secured Party, a security interest in all of the Company’s right, title, and interest in and to the Pledged Stock, whether now
existing or hereafter coming into existence (such property described in this Section 3 being collectively referred to herein as the “Collateral”). In connection with the grant of such security interest, the Company agrees to take such
action as the Collateral Agent may reasonably request in order to permit the Collateral Agent to establish and maintain such security interest as a perfected, first priority security interest until such time as this Agreement terminates pursuant to
the provisions of Section 7.10. 
  
 Section 4.
Representations and Warranties. 
  
 4.01
Representations and Warranties of the Company. The Company represents and warrants to the Secured Party and the Collateral Agent as follows: 
  
 (a) Collateral. The Company is the sole beneficial owner of the Collateral, and no lien exists upon the Collateral other than the liens created
hereby. 
  
 (b) Creation, Perfection, and Priority. The
security interest created hereby constitutes a valid and perfected first priority security interest in the Collateral. 
  
 (c) Company Information; Locations. Annex 1 sets forth, as of date hereof, the exact name, the location, including county or parish, of the
chief executive office, the jurisdiction of organization, and the federal income tax identification number of the Company. 
  
 (d) Changes in Circumstances. The Company has not, within the period of 180 days prior to the date hereof, changed its name or the jurisdiction or
form of its organization. 
  
 (e) Pledged Stock. The
Pledged Stock identified in Annex 2 has been duly authorized and validly issued and is fully paid and nonassessable. The Pledged Stock is 

  

 3 

 
certificated, as indicated in Annex 2. The Pledged Stock identified on Annex 2 constitutes all of the issued and outstanding equity interests
in B&W as of the date hereof, and Annex 2 correctly identifies the class of the shares constituting the Pledged Stock. 
  
 (f) Organization. The Company is duly incorporated, validly existing, and in good standing under the laws of the State of Delaware and has full
corporate power and authority to execute and deliver this Agreement. 
  
 (g) Approvals; Noncontravention. The execution and delivery of this Agreement by the Company have been duly authorized by all necessary corporate action on the part of the Company and will not result in a contravention by the Company
of any provision of applicable law or of the Company’s organizational documents or any material contractual restriction binding on the Company or its assets. 
  
 (h) Execution and Delivery; Enforceability. This Agreement has been duly executed and delivered by the Company, and
this Agreement constitutes a legal, valid, and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by: (i) bankruptcy, insolvency, reorganization,
fraudulent transfer or conveyance, and other laws of general applicability relating to or affecting creditors’ rights; and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity
or at law). 
  
 (i) Compliance with Plan. This Agreement
and the Note comply in all material respects with the terms of the Plan Documents and the Confirmation Order applicable to the provisions of this Agreement and the Note. 
  
 4.02 Representations and Warranties of the Secured Party. The Secured Party represents and warrants to the Company
and the Collateral Agent as follows: 
  
 (a) Organization.
The Secured Party is a trust duly organized, validly existing, and in good standing under the laws of the State of Delaware and has all requisite power and authority to execute and deliver this Agreement. 
  
 (b) Approvals; Noncontravention. The execution and delivery of this
Agreement by the Secured Party have been duly authorized by all necessary action on the part of the Secured Party and will not result in a contravention by the Secured Party of any provision of applicable law or of the Secured Party’s
organizational documents or any material contractual restriction binding on the Secured Party or its assets. 
  
 (c) Execution and Delivery; Enforceability. This Agreement has been duly executed and delivered by authorized officers or agents of the Secured
Party and is a legal, valid, and binding agreement of the Secured Party, enforceable against the Secured Party in accordance with its terms, except as such enforceability may be limited by: (i) bankruptcy, insolvency, reorganization, fraudulent
transfer or conveyance, and other laws of general applicability relating to or affecting the creditors’ rights generally; and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in
equity or at law). 
  
 (d) Compliance with Plan. This
Agreement and the Note comply in all material respects with the terms of the Plan Documents and the Confirmation Order applicable to the provisions of this Agreement and the Note. 
  

 4 

 Section 5. Further Assurances; Remedies. In furtherance of the pledge and grant of
security interest pursuant to Section 3 and for so long as the Guarantee Obligations continue to exist and remain unsatisfied and this Agreement remains in effect, the Company agrees with the Collateral Agent and the Secured Party as follows:

  
 5.01 Delivery and Perfection. The Company shall:

  
 (a) deliver to the Collateral Agent all certificated Pledged
Stock, accompanied by properly executed stock powers in blank; and 
  
 (b) after the occurrence and during the continuance of an Acceleration Event and at the reasonable request of the Collateral Agent (in accordance with the provisions of Section 5.06), execute and deliver all such documents as may be
necessary to cause any or all of the Pledged Stock to be transferred of record into the name of the Collateral Agent or to enable the Collateral Agent to exercise and enforce its rights hereunder in accordance with the UCC (or any successor statute)
(and the Collateral Agent agrees that, if any Pledged Stock is transferred into its name, the Collateral Agent will thereafter promptly give to the Company copies of any notices and communications received by the Collateral Agent with respect to the
Pledged Stock); provided, however, that no subsequent transfer of the Pledged Stock may be made by the Collateral Agent unless and until it has foreclosed on the Collateral in accordance with the provisions of Section 5.06; provided, further,
that nothing in this Agreement shall require the Company to take any action (or to assist any other person or entity to take any action) to register with any governmental authority any public offering of the Pledged Stock or any interest therein.

  
 5.02 Financing Statements. The Company hereby
authorizes the Collateral Agent to file one or more financing statements in respect of the Company as debtor in such filing offices in such jurisdictions with which such a filing is (a) required to perfect the security interest granted
hereunder by the Company or (b) desirable (in the reasonable judgment of the Collateral Agent) to give notice of the security interest granted hereunder by the Company. 
  
 5.03 Other Financing Statements and Control. Without the prior written consent of the Collateral Agent and the
Secured Party, the Company shall not (a) authorize the filing in any jurisdiction of any financing statement or like instrument with respect to the Collateral in which the Collateral Agent is not named as the sole secured party or
(b) cause or authorize any person other than the Company or the Collateral Agent to acquire “control” (as defined in Section 8-106 of the UCC or as otherwise construed for purposes of Article 8 or 9 of the UCC) over any
Collateral that is Investment Property. 
  
 5.04 Locations;
Names. Without at least 30 days’ prior notice to the Collateral Agent, the Company shall not change its name or the jurisdiction or form of its organization from the same shown on Annex 1. 
  
 5.05 Special Provisions Relating to Pledged Stock. 
  
 (a) So long as no Acceleration Event shall have occurred and be continuing,
the Company shall have the right to exercise all voting, consensual, and other powers of ownership pertaining to the Pledged Stock, and the Collateral Agent shall execute and deliver to the Company, or cause to be executed and delivered to the
Company, all such proxies, powers of attorney, dividend, and other orders, and all such instruments, without recourse, as the Company may reasonably request for the purpose of enabling the Company to exercise the rights and 

  

 5 

 
powers that it is entitled to exercise pursuant to this Section 5.05(a); provided that any such request by the Company shall be in the form of written
instructions addressed to the Collateral Agent (with a copy thereof provided to the Secured Party). 
  
 (b) Unless and until an Acceleration Event has occurred and is continuing, the Company shall be entitled to receive and retain any and all dividends and
distributions paid on the Pledged Stock (provided that such dividends and distributions have not been paid in violation of the provisions of Section 2(m) of the Note). 
  
 (c) If any Acceleration Event shall have occurred, then so long as such Acceleration Event shall continue, all dividends and
other distributions on the Pledged Stock shall be paid or distributed directly to the Collateral Agent, and, if the Collateral Agent shall so request in writing, the Company agrees to execute and deliver to the Collateral Agent appropriate
additional dividend, distribution, and other orders and documents to that end. 
  
 (d) If either the Company or the Secured Party delivers a notice or instruction to the Collateral Agent regarding the Pledged Stock, such party shall concurrently deliver a copy of such notice or instruction to the
other party. 
  
 5.06 Acceleration Event, Etc.
Notwithstanding any other provision contained in this Agreement or the Note, if an Acceleration Event shall have occurred and be continuing as a result of an Event of Default described in Section 3(a)(ii) of the Note, the Collateral Agent may
exercise its rights hereunder arising as a result of such Acceleration Event only following the receipt of written notice of such Acceleration Event executed by the Company and the Secured Party or written notice from the Secured Party that a final,
non-appealable judgment determining that such an Event of Default has occurred and is continuing (accompanied by an appropriately certified copy of such judgment). The period beginning with the receipt of any such notice and continuing for so long
as the Acceleration Event referred to in such notice is continuing is hereinafter referred to as an “Acceleration Event Period.” After receipt of such notice, the Collateral Agent shall take only such action with respect to an Acceleration
Event as shall be directed by written instructions from the Secured Party or by such judgment and shall not be required to take any such action absent such written instructions or such judgment. The Secured Party shall provide the Collateral Agent
with written notice in the event that any Acceleration Event is rescinded. Subject to the prior provisions of this Section 5.06, in the period during which an Acceleration Event shall have occurred and be continuing: 
  
 (a) the Collateral Agent shall have all of the rights and
remedies with respect to the Collateral of a secured party under the UCC (subject to the provisions of clause (b) of this Section 5.06), including the right, to the fullest extent permitted by applicable law, to exercise all voting,
consensual, and other powers of ownership pertaining to the Collateral as if the Collateral Agent were the sole and absolute owner thereof (and the Company agrees to take all such action as the Collateral Agent may reasonably request to give effect
to such right); and 
  
 (b) the Collateral Agent
may, upon 30 days’ prior written notice to the Company of the time and place, with respect to the Collateral or any part thereof that shall then be or shall thereafter come into the possession, custody, or control of the Collateral Agent, sell,
assign, or otherwise dispose of all or any part of the Collateral at such place or places as specifically instructed by the Secured Party or by a judgment and for cash or for credit or for future delivery (without thereby assuming any credit risk),
at 

  

 6 

 
public sale, without demand of performance or notice of intention to effect any such disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and the Collateral Agent or anyone else may be the purchaser, assignee, or recipient of any or all of the Collateral so disposed of at any such public sale and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any right or equity of redemption (statutory or otherwise) of the Company, any such demand, notice, and right or equity being hereby expressly waived and released; the Collateral
Agent may, without notice, or publication, adjourn any public sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the sale may be
so adjourned. 
  
 The Company recognizes that, by reason of
certain prohibitions contained in the Securities Act of 1933, as amended, and applicable state securities laws, the Collateral Agent may be compelled, with respect to any sale of all or any part of the Collateral, to limit purchasers to those who
will agree to acquire the Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. The Company (i) acknowledges that any such private sales may be at prices and on terms less favorable to the
Collateral Agent than those obtainable through a public sale without such restrictions and (ii) agrees that such circumstances shall not, without taking into account the other circumstances of such private sale, prevent such private sale from
being deemed to have been made in a commercially reasonable manner, and that the Collateral Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any of the Collateral for the period of time necessary to
permit the issuer thereof to register it for public sale. 
  
 5.07
Application of Proceeds. Upon the occurrence and during the continuance of an Acceleration Event, the proceeds of any sale of, or other realization upon, all or any part of the Collateral and any cash held shall be applied by the Collateral
Agent in the following order of priorities: 
  
 (a) to payment of the expenses of such sale or other realization, including any taxes arising from such sale or other realization, and all expenses, liabilities, and advances incurred or made by the Collateral Agent in connection therewith;

  
 (b) to the payment of unpaid Guarantee
Obligations, until all Guarantee Obligations shall have been fully satisfied or terminated pursuant to the terms of the Note; and 
  
 (c) to payment to the Company or its successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds. 
  
 5.08 Deficiency. The
Company shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Guarantee Obligations and the fees and disbursements of any attorneys employed by the Collateral Agent to
collect such deficiency. 
  
 5.09 Attorney-in-Fact. Without
limiting any rights or powers granted by this Agreement to the Collateral Agent while no Acceleration Event has occurred and is continuing, upon the occurrence and during the continuance of any Acceleration Event, the Collateral Agent is hereby
appointed the attorney-in-fact of the Company for the purpose of carrying out the 

  

 7 

 
provisions of this Section 5 and taking any action and executing any instruments that the Collateral Agent may reasonably deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable (subject to the termination provision set forth) and coupled with an interest. Without limiting the generality of the foregoing, so long as the Collateral Agent
shall be entitled under this Section 5 to make collections in respect of the Collateral, the Collateral Agent shall have the right and power to receive, endorse, and collect all checks made payable to the order of the Company representing any
dividend, payment, or other distribution in respect of the Collateral or any part thereof and to give full discharge for the same. The appointment (and all the associated rights) provided by this Section 5.09 shall terminate immediately upon
receipt by the Collateral Agent of written notice executed by the Company and the Secured Party of the satisfaction or termination of the Guaranteed Obligations (which notice each of the Company and the Secured Party hereby undertakes to provide
immediately upon the satisfaction or termination of the Guaranteed Obligations) or receipt of a judgment to the effect that such satisfaction or termination has occurred. 
  
 5.10 No Marshalling. Upon the occurrence and continuance of an Acceleration Event, the Collateral Agent shall not be
required to marshal the order of its enforcement of its security interest in any part of the Collateral for the benefit of any person. 
  
 Section 6. General Provisions Concerning the Collateral Agent. 
  
 6.01 No Implied Duties or Responsibilities. 
  
 (a) In connection with its appointment and acting hereunder, the Collateral Agent shall not be a trustee or be subject to
any fiduciary or other implied duties or responsibilities, regardless of whether an Acceleration Event has occurred and is continuing, and none of the Collateral Agent, its agents, or any of their respective affiliates will be liable for any action
taken or omitted to be taken by any of them under or in connection with this Agreement, except that the foregoing provisions of this sentence will not excuse any such person from liability arising out of or resulting from its own gross negligence or
willful misconduct or a material breach of this Agreement. Without limiting the generality of the foregoing, the Collateral Agent: (a) shall treat the payee of the Note as the holder thereof until the Collateral Agent receives written notice of
the assignment or transfer thereof signed by such payee and B&W and in form satisfactory to the Collateral Agent; (b) may consult with legal counsel of its selection, independent public accountants, and other experts selected by it and will
not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants, or experts; (c) makes no representation or warranty to the Secured Party or the Company; (d) will not
have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants, or conditions of the Note or this Agreement or to inspect the books and records or any other property of B&W, the Company or any of
their respective affiliates; and (e) will not be responsible to the Secured Party for the existence, genuineness, or value of the Collateral or for the validity, perfection, priority, or enforceability of any security interest in the
Collateral. The Collateral Agent will not be deemed to have knowledge or notice of any Acceleration Event unless and until it has received written notice from the Secured Party referring to this Agreement, describing the Acceleration Event and
stating that such notice is a “notice of acceleration event.” 
  
 (b) The Collateral Agent shall have no duty to make any evaluation or to advise anyone of the suitability or propriety of action or proposed action of the Company or the Secured Party in any particular transaction involving the Collateral.
The Collateral Agent shall 

  

 8 

 
have no duty or authority to review, question, approve or make inquiries as to any instructions of the Company or, during any Acceleration Event Period, the
Secured Party. The Collateral Agent shall not be liable for any loss or diminution of the Collateral by reason of its actions taken in reliance upon an instruction from the Company or, during any Acceleration Event Period, the Secured Party. The
Collateral Agent shall have no duty or responsibility to monitor or otherwise investigate the actions or omissions of the Company or the Secured Party. The Collateral Agent shall only be responsible for the performance of such duties as are
expressly set forth herein or in instructions of the Company or, during any Acceleration Event Period, the Secured Party which are not contrary to the provisions of this Agreement. In no event shall the Collateral Agent be liable for special,
punitive, exemplary, incidental, indirect or consequential damages. 
  
 6.02 Refusal to Act. The Collateral Agent may refuse to take action on any notice, consent, direction, or instruction from the Company or the Secured Party that, in the Collateral Agent’s opinion, (a) is contrary to law or
the provisions of the Note or this Agreement or (b) may expose the Collateral Agent to liability (unless the Collateral Agent shall have been indemnified, to its satisfaction, for such liability by the party requesting the Collateral Agent to
take such action). 
  
 6.03 Indemnification. The Company
hereby agrees to indemnify the Collateral Agent and, in their respective capacities as such, its officers, directors, controlling persons, employees, agents and representatives (each an “Indemnified Party”) from and against any and all
claims, damages, losses, liabilities, obligations, penalties, actions, causes of action, judgments, suits, costs, expenses, or disbursements (including, without limitation, reasonable attorneys’ and consultants’ fees and expenses) of any
kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any Indemnified Party (or which may be claimed against any Indemnified Party by any person) by reason of, in connection with or in any way relating to or
arising out of, any action taken or omitted by the Collateral Agent in compliance with the provisions of this Agreement or in reliance on written instructions from the Company or, during any Acceleration Event Period, the Secured Party; provided,
however, that the Company shall not be liable to any Indemnified Party for any portion of such claims, liabilities, obligations, losses, damages, penalties, judgments, costs, expenses, or disbursements resulting from Indemnified Party’s gross
negligence or willful misconduct as determined by a final, non-appealable judgment of a court of competent jurisdiction. The Company further shall, upon demand by any Indemnified Party, pay to such Indemnified Party all documented costs and expenses
incurred by such Indemnified Party in enforcing any rights under this Agreement, including reasonable fees and expenses of counsel. If the Company shall fail to make any payment or reimbursement to any Indemnified Party for any amount as to which
the Company is obligated to indemnify such Indemnified Party under this Section 6.03, following exhaustion of all remedies against the Company and promptly after demand therefor, the Secured Party agrees to pay to such Indemnified Party the
amount that has not been paid by the Company. The agreements in this Section 6.03 shall survive the termination of this Agreement. 
  
 6.04 Resignation or Removal of the Collateral Agent. The Collateral Agent may resign at any time by giving at least 60 days’ prior written
notice thereof to the Secured Party and the Company and may be removed at any time by the Secured Party and the Company acting together, with any such resignation or removal to become effective upon the appointment of a successor Collateral Agent or
as otherwise provided by this Section 6.04. Upon any such resignation or removal, (a) the Secured Party will have the right to appoint a successor Collateral Agent, and (b) unless an Acceleration Event shall have occurred and be
continuing, the Company 

  

 9 

 
shall have the right to approve such appointed successor Collateral Agent, such approval not to be unreasonably withheld or delayed. If no successor
Collateral Agent will have been so appointed by the Secured Party and will have accepted its appointment within 45 days after the resignation or removal of the retiring Collateral Agent, the retiring Collateral Agent, the Company or the Secured
Party may, at the expense of the Company, petition a court of competent jurisdiction for the appointment of a successor Collateral Agent. Upon the acceptance of its appointment as Collateral Agent, the successor Collateral Agent will thereupon
succeed to and be vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent will be discharged from its duties and obligations under this Agreement. After any retiring Collateral
Agent’s resignation or removal, the provisions of this Agreement will inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral Agent. 
  
 6.05 Reliance by Collateral Agent. The Collateral Agent shall be entitled to rely upon the authenticity of any
certificate, notice or other document (including any cable, telegram, telecopy, electronic mail message or telex) and believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper person, and upon advice and
statements of legal counsel, independent accountants and other experts selected by the Collateral Agent. As to any matters related to this Agreement or the transactions contemplated hereby, the Collateral Agent shall not be required to take any
action or exercise any discretion, but the Collateral Agent shall be required to act or to refrain from acting upon written instructions of the Secured Party delivered during any Acceleration Event Period and shall in all cases be fully protected in
acting, or in refraining from acting, hereunder in accordance with the written instructions of the Secured Party delivered during any Acceleration Event Period, and such written instructions of the Secured Party and any action taken or failure to
act pursuant thereto shall be binding on the Secured Party. 
  
 6.06 Right of Interpleader. Should any controversy arise involving the parties hereto or any of them or any other person, firm or entity with respect to this Agreement or the Collateral, or should a substitute Collateral Agent fail
to be designated as provided in Section 6.04 hereof, or if the Collateral Agent should be in doubt as to what action to take, the Collateral Agent shall have the right, but not the obligation, either to (a) withhold delivery of the
Collateral until the controversy is resolved, the conflicting demands are withdrawn or its doubt is resolved or (b) institute a petition for interpleader in Bankruptcy Court or the District Court to determine the rights of the parties hereto.

  
 6.07 No Tax Responsibility. Notwithstanding any other
terms or conditions contained herein, the Collateral Agent shall not be responsible for, and the Company and Secured Party do hereby waive all duties or functions of the Collateral Agent (imposed by law or otherwise) relating to, the withholding and
government deposit of any and all taxes, or amounts with respect thereto, that may be incurred or payable in connection with the Collateral and the transactions contemplated hereunder, income or gain realized on the Collateral held therein or
transactions undertaken with respect thereto. Except as required by law in such manner that cannot be delegated to or assumed by the Company, the Collateral Agent shall have no responsibility to undertake any federal, state or local tax reporting in
connection with the Collateral or transactions contemplated by this Agreement. 
  

 10 

 Section 7. Miscellaneous. 
  
 7.01 Entire Agreement. This Agreement, the Note, and the Settlement
Agreement constitute the entire agreement and understanding among the Company, the Secured Party, and the Collateral Agent with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, among such
parties with respect to the subject matter hereof. 
  
 7.02
Notices. All notices, responses, consents, waivers, requests, statements, and other communications provided for herein shall be in writing and sent (a) by facsimile if the sender on the same day sends a confirming copy of such notice by
a recognized overnight-delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight-delivery service (with charges prepaid). Any such notice
shall be sent: 
  
 (a) if to the Secured Party, at such address
as the Secured Party shall have specified to the Company in writing, with copies (which shall not constitute notice) to: 
  
 B. Thomas Florence 
 Executive Director

 The Babcock & Wilcox Company Asbestos PI Trust 
 c/o ARPC 
 1220 19th Street, N.W., Suite 700 
 Washington, D.C. 20036 
 Facsimile: (202) 797-3619 
  
 Campbell & Levine, LLC 
 1700 Grant
Building 
 Pittsburgh, PA 15219-2399 
 Attention: Douglas A. Campbell, Esq. 
 Facsimile: (412) 261-5066 
  
 Eric D. Green, Esq. 
 Resolutions, LLC 
 222 Berkeley Street, Suite 1060 
 Boston, Massachusetts 02116 
 Facsimile: (617) 556-9900 
  
 Young Conaway Stargatt & Taylor, LLP 
 The Brandywine Building 
 1000 West Street,
17th Floor 
 P.O. Box 391 
 Wilmington, Delaware 19801 
 Attention: James L. Patton, Jr., Esq. 
 Facsimile: (302) 571-1253 
  

 11 

	 	(b)	if to the Company: 

  
 Babcock & Wilcox Investment Company 
 777 N. Eldridge Parkway 
 Houston, Texas 77079 
 Attention: Liane K. Hinrichs 
 Facsimile: (281) 870-5015 
  
 with a copy to: 
  
 McDermott International, Inc. 
 777 North Eldridge Parkway 
 Houston, Texas
77079 
 Attention: John T. Nesser, III 
 Facsimile: (281) 870-5015 
  
 or; 
  

	 	(c)	if to the Collateral Agent: 

  
 U.S. Bank National Association 
 5847 San
Felipe Street 
 Suite 1050 
 Houston, Texas 77057 
 Attention: Corporate Trust Services 
 Facsimile: 713-278-4329 
  
 7.03 No Waiver. No failure on the part of any party hereto to exercise, and no course of dealing with respect to, and no delay in exercising, any
right, power, or remedy of such party hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by any party hereto of any right, power, or remedy of such party hereunder preclude any other or further exercise thereof or
the exercise of any other right, power, or remedy. 
  
 7.04
Amendments, Etc. Neither this Agreement nor any provision hereof may be changed, waived, discharged, or (except as provided in Section 7.10) terminated except in writing signed by the Company, the Secured Party, and the Collateral Agent.
The Collateral Agent shall be provided executed or true and correct copies of each amendment, notice, waiver, consent, or certificate made or delivered with respect to this Agreement sufficiently far in advance of the Collateral Agent being required
to take action under this Agreement or in respect of any such notice, waiver, consent, or other certificate delivered in connection therewith so as to allow the Collateral Agent sufficient time to take any such action. 
  
 7.05 Successors and Assigns; No Third-Party Beneficiaries. This
Agreement is for the benefit of the parties hereto and their successors and permitted assigns pursuant to the applicable provisions of the Note and this Agreement. In the event of an assignment of the Note by the Secured Party, the Secured
Party’s rights and obligations hereunder shall be transferred with the Note. Subject to the foregoing provisions of this Section 7.05, this Agreement shall be binding on each of the parties hereto and their respective successors and
assigns. Except as provided in Section 6.03, nothing in this Agreement, express or implied, is intended or shall be construed to confer upon, or to give to, any person other than the parties hereto and their respective permitted 

  

 12 

 
successors and assigns any right, remedy, or claim under or by reason of this Agreement or any provision hereof, and the provision contained in this
Agreement are and shall be for the sole and exclusive benefit of the parties hereto and their respective permitted successors and assigns. 
  
 7.06 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same
agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. 
  
 7.07 Governing Law. The construction, validity, and enforceability of this Agreement shall be governed by the substantive laws of the State of
Louisiana, without giving effect to any principles of conflicts of laws thereof that would result in the application of the laws of any other jurisdiction. 
  
 7.08 Captions. The captions and Section headings appearing herein are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement. 
  
 7.09
Severability. If any provision contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, that provision will, to the extent possible, be modified in such manner as to be valid, legal,
and enforceable but so as to most nearly retain the intent of the parties hereto as expressed herein, and if such a modification is not possible, that provision will be severed from this Agreement, and in either case the validity, legality, and
enforceability of the remaining provisions of this Agreement will not in any way be affected or impaired thereby. 
  
 7.10 Termination. This Agreement shall terminate concurrently with the termination of the Guarantee Obligations pursuant to Section 5(e) of
the Note. Upon such termination: (a) the Collateral Agent shall promptly return to the Company all the certificated Pledged Stock and the stock powers previously delivered to the Secured Party pursuant to Section 5.01(a); and
(b) the Secured Party and the Collateral Agent shall execute and deliver to the Company such other documentation as the Company may reasonably request to evidence the termination of this Agreement. The provisions of Section 7.01 through
Section 7.09 and this Section 7.10 shall survive any termination of this Agreement. 
  
 [signature pages follow] 
  

 13 

 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of
the day and year first above written. 
  

			
	BABCOCK & WILCOX INVESTMENT COMPANY
		
	By:	 	 /s/    John T. Nesser, III

	Name:	 	John T. Nesser, III
	Title:	 	Executive Vice President, General Counsel and Corporate Secretary
	
	THE BABCOCK &WILCOX COMPANY ASBESTOS PI TRUST
		
	By:	 	 /s/    Victor Bussie

	 	 	Victor Bussie
	 	 	Trustee
		
	By:	 	 /s/    James J. McMonagle

	 	 	James J. McMonagle, Esq.
	 	 	Trustee
		
	By:	 	 /s/    Phillip A. Pahigian

	 	 	Phillip A. Pahigian, Esq.
	 	 	Trustee
	
	U.S. BANK NATIONAL ASSOCIATION, as Collateral Agent
		
	By:	 	 /s/    Ronda L. Parman

	Name:	 	Ronda L. Parman
	Title:	 	Authorized Agent

  

 14 

 Annex 1 
  

Company Information; Locations 
  

									
	 Name

	  	 Location of
 Chief Executive Office

	  	Jurisdiction
of Organization

	  	Organizational
Number

	  	IRS Taxpayer
I.D. No.

	 Babcock & Wilcox Investment Company
	  	777 N. Eldridge Parkway
Houston, Texas 77079	  	Delaware	  	0002235817	  	72-1172705

 Annex 2 
  

Description of Pledged Stock 
  

													
	 Owner

	  	 Issuer

	  	Class of Stock

	  	No. of
Shares

	  	Certificate
Nos.

	  	Percent
Owned

	 	Percent
Pledged

	 Babcock & Wilcox Investment Company (a Delaware corporation)
	  	The Babcock & Wilcox Company (a Delaware corporation)	  	Common Stock	  	100,100	  	1 & 2	  	100%	 	100%

 Annex 3 
  

U.S. Bank National Association 
 Collateral Agent Fees 
 Babcock & Wilcox Investment Company 
  

			
	Schedule of Fees	  	 
	 Acceptance Fee:
	  	Waived
	 Administration Fee
	  	4,000
	 Counsel Fee
	  	at cost

  
 The above-mentioned Fees are basic
charges and do not include out-of-pocket expenses, which will be billed in addition to the regular charges as required. Out-of-pocket expenses shall include, but are not limited to: telephone tolls, stationery, travel and postage expenses.

  
 Charges for performing extraordinary or other services not contemplated at the
time of the execution of the transaction or not specifically covered elsewhere in this schedule will be determined by appraisal in amounts commensurate with the service to be provided. 
  
 To help the government fight the funding of terrorism and money laundering activities, Federal Law requires all financial institutions to
obtain, verify and record information that identifies each client who opens an account. 
  
 For a non-individual person such as a business entity, a charity, a Trust or other legal entity we will ask for documentation to verify its formation and existence as a legal entity. We may also ask to see financial statements, licenses,
identification and authorization documents from individuals claiming authority to represent the entity or other relevant documentation. 
  
 Our proposal is subject in all aspects to our review and acceptance of the final documents, which set forth our duties and responsibilities. 
  
 Please sign and date this letter and return a copy to Ronda Parman at fax 713.278.4329 as
acknowledgement of the fees and terms contained herein. 
  
 Signed
name                                       
                          Printed
name                                       
                                         

  
 Date                                     
   
Title                                       
         
Company

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