MCDERMOTT INTERNATIONAL INC (Form: 10-Q, Received: 08/09/2010 16:12:58)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-08430

McDERMOTT INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)


REPUBLIC OF PANAMA		72-0593134
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

777 N. ELDRIDGE PKWY HOUSTON, TEXAS		77079
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (281) 870-5901

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of the registrant’s common stock outstanding at August 5, 2010 was 232,257,560.

McDERMOTT INTERNATIONAL, INC.

INDEX – FORM 10–Q


		PAGE

PART I – FINANCIAL INFORMATION

Item 1 – Condensed Consolidated Financial Statements		3

Condensed Consolidated Balance Sheets June 30, 2010 (Unaudited) and December 31, 2009		4

Condensed Consolidated Statements of Income Three and Six Months Ended June 30, 2010 and 2009 (Unaudited)		6

Condensed Consolidated Statements of Stockholders’ Equity Six Months Ended June 30, 2010 and 2009 (Unaudited)		7

Condensed Consolidated Statements of Cash Flows Six Months Ended June 30, 2010 and 2009 (Unaudited)		8

Notes to Condensed Consolidated Financial Statements		9

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		22

Item 3 – Quantitative and Qualitative Disclosures About Market Risk		34

Item 4 – Controls and Procedures		34

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings		35

Item 1A – Risk Factors		35

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		35

Item 5 – Other Information		35

Item 6 – Exhibits		36

SIGNATURES		38

PART I

McDERMOTT INTERNATIONAL, INC.

FINANCIAL INFORMATION

I tem 1.

Condensed Consolidated Financial Statements

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS


	June 30, 2010			December 31, 2009
	(Unaudited)
	(In thousands)
Current Assets:
Cash and cash equivalents	$	777,554		$	899,270
Restricted cash and cash equivalents (Note 1)		150,708			69,920
Accounts receivable – trade, net		568,515			642,995
Accounts and notes receivable – unconsolidated affiliates		13,657			5,806
Accounts receivable – other		64,829			68,035
Contracts in progress		351,923			400,831
Inventories (Note 1)		100,636			101,494
Deferred income taxes		90,702			100,828
Other current assets		99,890			68,742

Total Current Assets		2,218,414			2,357,921

Property, Plant and Equipment		2,691,060			2,608,740
Less: Accumulated depreciation		(1,312,985	)		(1,271,135	)

Net Property, Plant and Equipment		1,378,075			1,337,605

Investments		168,195			228,706

Goodwill		334,649			306,497

Deferred Income Taxes		242,826			275,567

Investments in Unconsolidated Affiliates		101,228			86,932

Other Assets		271,262			255,882

TOTAL	$	4,714,649		$	4,849,110

See accompanying notes to condensed consolidated financial statements.

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY


	June 30, 2010			December 31, 2009
	(Unaudited)
	(In thousands)
Current Liabilities:
Notes payable and current maturities of long-term debt	$	15,067		$	16,270
Accounts payable		425,170			471,858
Accrued employee benefits		146,147			217,178
Accrued pension liability – current portion		130,914			173,271
Accrued liabilities – other		162,052			155,773
Accrued contract cost		86,599			103,041
Advance billings on contracts		595,410			689,334
Accrued warranty expense		117,213			118,278
Income taxes payable		59,617			64,029

Total Current Liabilities		1,738,189			2,009,032

Long-Term Debt		49,218			56,714

Accumulated Postretirement Benefit Obligation		105,270			105,605

Self-Insurance		91,247			87,222

Pension Liability		547,031			610,166

Other Liabilities		152,413			147,271

Commitments and Contingencies (Note 3)

Stockholders’ Equity:
Common stock, par value $1.00 per share, authorized 400,000,000 shares; issued 239,263,779 and 236,919,404 shares at June 30, 2010 and December 31, 2009, respectively		239,264			236,919
Capital in excess of par value		1,343,787			1,300,998
Retained earnings		1,087,622			951,647
Treasury stock at cost, 6,718,257 and 6,168,705 shares at June 30, 2010 and December 31, 2009, respectively		(83,284	)		(69,370	)
Accumulated other comprehensive loss		(598,441	)		(612,997	)

Stockholders’ Equity – McDermott International, Inc.		1,988,948			1,807,197
Noncontrolling interest		42,333			25,903

Total Stockholders’ Equity		2,031,281			1,833,100

TOTAL	$	4,714,649		$	4,849,110

See accompanying notes to condensed consolidated financial statements.

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
	(Unaudited)
	(In thousands, except share and per share amounts)
Revenues	$	1,333,562		$	1,564,999		$	2,515,492		$	3,058,262

Costs and Expenses:
Cost of operations		1,006,733			1,275,058			1,941,584			2,503,680
Gains on asset disposals – net		(165	)		(1,897	)		(2,258	)		(656	)
Costs to spin-off The Babcock & Wilcox Company		66,218			—			90,420			—
Selling, general and administrative expenses		154,203			153,195			297,953			294,589

Total Costs and Expenses		1,226,989			1,426,356			2,327,699			2,797,613

Equity in Income of Investees		16,719			9,097			27,307			18,297

Operating Income		123,292			147,740			215,100			278,946

Other Income (Expense):
Interest income (expense) – net		(3,333	)		4,987			(3,034	)		6,844
Other income (expense) – net		(4,494	)		(10,201	)		(8,711	)		(20,971	)

Total Other Income (Expense)		(7,827	)		(5,214	)		(11,745	)		(14,127	)

Income before Provision for Income Taxes		115,465			142,526			203,355			264,819
Provision for Income Taxes		33,872			44,645			53,544			88,523

Net Income		81,593			97,881			149,811			176,296

Less: Net Income Attributable to Noncontrolling Interest		(5,559	)		(5,326	)		(13,836	)		(6,049	)

Net Income Attributable to McDermott International, Inc.	$	76,034		$	92,555		$	135,975		$	170,247

Earnings per Share:
Basic:
Net Income Attributable to McDermott International, Inc.	$	0.33		$	0.40		$	0.59		$	0.74
Diluted:
Net Income Attributable to McDermott International, Inc.	$	0.32		$	0.40		$	0.58		$	0.73

Shares used in the computation of earnings per share (Note 9):
Basic		231,847,145			229,273,441			231,335,723			228,794,113
Diluted		234,423,546			233,105,949			234,588,291			232,846,098

See accompanying notes to condensed consolidated financial statements.

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


	Common Stock			Capital In Excess of Par Value			Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Stockholders’ Equity MII			Non- Controlling Interest			Total Stockholders’ Equity
	Shares	Par Value		Capital In Excess of Par Value			Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Stockholders’ Equity MII			Non- Controlling Interest			Total Stockholders’ Equity
		(In thousands, except share amounts) (Unaudited)
Balance December 31, 2009	236,919,404	$	236,919	$	1,300,998		$	951,647	$	(69,370	)	$	(612,997	)	$	1,807,197		$	25,903		$	1,833,100

Comprehensive Income
Net income	—		—		—			135,975		—			—			135,975			13,836			149,811
Amortization of benefit plan costs	—		—		—			—		—			29,493			29,493			—			29,493
Unrealized gain on investments	—		—		—			—		—			1,065			1,065			—			1,065
Realized gain on investments	—		—		—			—		—			162			162			—			162
Translation adjustments	—		—		—			—		—			(7,646	)		(7,646	)		(9	)		(7,655	)
Unrealized gain on derivatives	—		—		—			—		—			(13,317	)		(13,317	)		—			(13,317	)
Realized gain on derivatives	—		—		—			—		—			4,799			4,799			—			4,799

Total comprehensive income, net of tax								135,975		—			14,556			150,531			13,827			164,358

Exercise of stock options	323,619		324		669			—		(650	)		—			343			—			343
Excess tax benefits on stock options	—		—		2,127			—		—			—			2,127			—			2,127
Contributions to thrift plan	282,022		282		6,641			—		—			—			6,923			—			6,923
Shares returned to treasury	—		—		—			—		(13,264	)		—			(13,264	)		—			(13,264	)
Accelerated vesting	1,738,734		1,739		(1,739	)		—		—			—			—			—			—
Stock-based compensation charges	—		—		35,091			—		—			—			35,091			—			35,091
Distributions to noncontrolling interests	—		—		—			—		—			—			—			(79	)		(79	)
Acquisition of noncontrolling interests	—		—		—			—		—			—			—			2,682			2,682

Balance June 30, 2010	239,263,779	$	239,264	$	1,343,787		$	1,087,622	$	(83,284	)	$	(598,441	)	$	1,988,948		$	42,333		$	2,031,281


Balance December 31, 2008	234,174,088	$	234,174	$	1,252,848		$	564,591	$	(63,026	)	$	(672,415	)	$	1,316,172		$	341		$	1,316,513

Comprehensive income
Net Income	—		—		—			170,247		—			—			170,247			6,049			176,296
Amortization of benefit plan costs	—		—		—			—		—			28,422			28,422			—			28,422
Unrealized loss on investments	—		—		—			—		—			(638	)		(638	)		—			(638	)
Realized loss on investments	—		—		—			—		—			(86	)		(86	)		—			(86	)
Translation adjustments	—		—		—			—		—			15,916			15,916			35			15,951
Unrealized gain on derivatives	—		—		—			—		—			4,765			4,765			—			4,765
Realized loss on derivatives	—		—		—			—		—			(624	)		(624	)		—			(624	)

Total comprehensive income, net of tax								170,247		—			47,755			218,002			6,084			224,086

Exercise of stock options	77,160		77		114			—		151			—			342			—			342
Excess tax benefits on stock options	—		—		(3,132	)		—		—			—			(3,132	)		—			(3,132	)
Contributions to thrift plan	625,823		626		7,698			—		—			—			8,324			—			8,324
Accelerated vesting	1,362,617		1,363		(1,363	)		—		—			—			—			—			—
Purchase of treasury shares	—		—		—			—		(4,904	)		—			(4,904	)		—			(4,904	)
Stock-based compensation charges	—		—		17,947			—		—			—			17,947			—			17,947
Distributions to noncontrolling interests	—		—		—			—		—			—			—			(55	)		(55	)

Balance June 30, 2009	236,239,688	$	236,240	$	1,274,112		$	734,838	$	(67,779	)	$	(624,660	)	$	1,552,751		$	6,370		$	1,559,121

See accompanying notes to condensed consolidated financial statements.

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Six Months Ended June 30,
	2010			2009
	(Unaudited)
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	149,811		$	176,296

Non-cash items included in net income:
Depreciation and amortization		73,816			71,913
Income of investees, less dividends		(12,685	)		(4,012	)
Gains on asset disposals – net		(2,258	)		(656	)
Provision for deferred taxes		45,197			55,221
Amortization of pension and postretirement costs		45,743			44,094
Tax benefits from stock-based compensation		(2,127	)		(235	)
Other, net		26,409			26,725
Changes in assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable		59,764			(19,918	)
Income tax receivable		12,419			56,177
Net contracts in progress and advance billings on contracts		(52,803	)		(205,376	)
Accounts payable		(44,455	)		(69,860	)
Income taxes		(6,315	)		(10,093	)
Accrued and other current liabilities		(9,615	)		24,466
Pension liability, accumulated postretirement benefit obligation and accrued employee benefits		(180,097	)		(12,567	)
Other, net		(31,203	)		(29,155	)

NET CASH PROVIDED BY OPERATING ACTIVITIES		71,601			103,020

CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted cash and cash equivalents		(80,788	)		(30,693	)
Purchases of property, plant and equipment		(126,745	)		(129,386	)
Acquisition of businesses, net of cash acquired		(32,045	)		—
Net decrease in available-for-sale securities		61,716			148,725
Proceeds from asset disposals		4,675			2,311
Other, net		600			(2,117	)

NET CASH USED IN INVESTING ACTIVITIES		(172,587	)		(11,160	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt		(6,045	)		(5,419	)
Issuance of common stock		323			342
Payment of debt issuance costs		(15,390	)		(45	)
Tax benefits from stock-based compensation		2,127			235
Other, net		(13	)		(64	)

NET CASH USED IN FINANCING ACTIVITIES		(18,998	)		(4,951	)

EFFECTS OF EXCHANGE RATE CHANGES ON CASH		(1,732	)		(2,259	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(121,716	)		84,650
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		899,270			586,649

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	777,554		$	671,299


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest (net of amount capitalized)	$	4,930		$	2,548
Income taxes (net of refunds)	$	48,257		$	(16,903	)

See accompanying notes to condensed consolidated financial statements.

McDERMOTT INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

McDermott International, Inc. (“MII”), incorporated under the laws of the Republic of Panama, is an engineering and construction company with specialty manufacturing and service capabilities and is the parent company of the McDermott group of companies, including J. Ray McDermott, S.A. (“JRMSA”) and Babcock & Wilcox Investment Company (“BWICO”). In this quarterly report on Form 10-Q, unless the context otherwise indicates, “we,” “us” and “our” mean MII and its consolidated subsidiaries.

We have presented our condensed consolidated financial statements in U.S. Dollars in accordance with the interim reporting requirements of Form 10-Q and Rule 10-01 of Regulation S-X. Financial information and disclosures normally included in our financial statements prepared annually in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted. Readers of these financial statements should, therefore, refer to the consolidated financial statements and the notes in our annual report on Form 10-K for the year ended December 31, 2009.

We have included all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation. These condensed consolidated financial statements include the accounts of McDermott International, Inc. and its subsidiaries and controlled entities consistent with Financial Accounting Standards Board (“FASB”) Topic Consolidation. We use the equity method to account for investments in entities that we do not control, but over which we have significant influence. We generally refer to these entities as “joint ventures”. We have eliminated all significant intercompany transactions and accounts. We present the notes to our condensed consolidated financial statements on the basis of continuing operations, unless otherwise stated.

On December 7, 2009, we announced plans to separate our Government Operations segment and our Power Generation Systems segment into an independent publicly traded company to be named The Babcock & Wilcox Company (“B&W”). On July 30, 2010, we completed the separation through a spin-off transaction that was intended to be tax-free to our shareholders. On July 2, 2010, our Board of Directors declared the spin-off distribution of all of the outstanding common stock of B&W to our shareholders of record as of July 9, 2010, with the distribution date being July 30, 2010. Accordingly, the spin-off was effected on July 30, 2010. Prior to July 2, 2010, we completed an internal restructuring that separated out the subsidiaries involved in our Government Operations segment and our Power Generation Systems segment operations and established B&W as the direct or indirect parent company of all those subsidiaries. Total estimated costs, consisting primarily of severance and costs for professional services directly related to the spin-off, approximated $102 million, of which $66.2 million and $90.4 million were recognized in the three and six month periods ended June 30, 2010, respectively, and $7.1 million was recognized in the three month period ended December 31, 2009.

Since the spin-off distribution was completed after June 30, 2010, the accounts of B&W and its subsidiaries are reflected as continuing operations in our condensed consolidated financial statements included in this report. For subsequent reporting periods, we expect to report B&W and its subsidiaries as discontinued operations.

At June 30, 2010, we operated in three business segments: Offshore Oil and Gas Construction, Government Operations and Power Generation Systems, further described as follows:

•

Our Offshore Oil and Gas Construction segment includes the business and operations of JRMSA, J. Ray McDermott Holdings, LLC and their respective subsidiaries. This segment supplies services primarily to offshore oil and gas field developments worldwide, including the front-end design and detailed engineering, fabrication and installation of offshore drilling and production facilities and installation of marine pipelines and subsea production systems. It also provides comprehensive project management and procurement services. This segment operates in most major offshore oil and gas producing regions, including the United States, Mexico, Canada, the Middle East, India, the Caspian Sea and Asia Pacific.

•

Our Government Operations segment included the business and operations of BWX Technologies, Inc., Babcock & Wilcox Nuclear Operations Group, Inc., Babcock & Wilcox Technical Services Group, Inc. and their respective subsidiaries. This segment manufactured nuclear components and provided various services to the U.S. Government, including uranium

McDERMOTT INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010

(UNAUDITED)

processing, environmental site restoration services and management and operating services for various U.S. Government-owned facilities, primarily within the nuclear weapons complex of the U.S. Department of Energy.

•

Our Power Generation Systems segment included the business and operations of Babcock & Wilcox Power Generation Group, Inc. (“B&W PGG”), Babcock & Wilcox Nuclear Energy, Inc. and their respective subsidiaries. This segment supplied fossil-fired boilers, commercial nuclear steam generators and components, environmental equipment and components, and related services to customers in different regions around the world. It designed, engineered, manufactured, constructed and serviced large utility and industrial power generation systems, including boilers used to generate steam in electric power plants, pulp and paper making, chemical and process applications and other industrial uses.

Operating results for the three and six months ended June 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. For further information, refer to the consolidated financial statements and the related footnotes included in our annual report on Form 10-K for the year ended December 31, 2009 and other current filings with the Securities and Exchange Commission.

Comprehensive Loss

The components of accumulated other comprehensive loss included in stockholders’ equity are as follows:


	June 30, 2010			December 31, 2009
	(Unaudited)
	(In thousands)
Currency translation adjustments	$	8,718		$	16,364
Net unrealized loss on investments		(5,634	)		(6,861	)
Net unrealized loss on derivative financial instruments		(12,208	)		(3,690	)
Unrecognized losses on benefit obligations		(589,317	)		(618,810	)

Accumulated other comprehensive loss	$	(598,441	)	$	(612,997	)

Inventories

The components of inventories are as follows:


	June 30, 2010		December 31, 2009
	(Unaudited)
	(In thousands)
Raw materials and supplies	$	74,031	$	74,056
Work in progress		6,791		6,382
Finished goods		19,814		21,056

Total inventories	$	100,636	$	101,494

Restricted Cash and Cash Equivalents

At June 30, 2010, we had restricted cash and cash equivalents totaling $150.7 million, $139.7 million of which was held in restricted foreign accounts, $3.5 million of which was held as cash collateral for letters of credit, $4.0 million of which was held for future decommissioning of facilities, $2.9 million of which was held in other restricted cash accounts, and $0.6 million of which was held to meet reinsurance reserve requirements of our captive insurance companies.

Warranty Expense

We accrue estimated expense to satisfy contractual warranty requirements of our Government Operations and Power Generation Systems segments when we recognize the associated revenue on the related contracts. We include warranty costs associated with our Offshore Oil and Gas Construction segment as a component of our total contract cost estimate to satisfy contractual requirements, and we record the associated expense under the percentage -of-completion method of accounting for long-term construction contracts. In addition, we make specific provisions where we expect the actual warranty costs to significantly exceed the accrued estimates. Such provisions could have a material effect on our consolidated financial condition, results of operations and cash flows.

McDERMOTT INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010

(UNAUDITED)

The following summarizes the changes in our accrued warranty expense:


	Six Months Ended June 30,
	2010			2009
	(Unaudited)
	(In thousands)
Balance at beginning of period	$	118,278		$	120,237
Additions and adjustments		3,501			16,417
Charges		(4,566	)		(8,459	)

Balance at end of period	$	117,213		$	128,195

Research & Development Expense

Research and development activities are related to development and improvement of new and existing products and equipment, as well as conceptual and engineering evaluation for translation into practical applications. We charge to cost of operations the costs of research and development unrelated to specific contracts as incurred. Substantially all of these costs are in our Power Generation Systems segment and include costs related to the development of carbon capture and sequestration and our modular and scalable reactor business. For the six months ended June 30, 2010 and 2009 our net research and development expense included in cost of operations totaled approximately $33.5 million and $21.1 million, respectively.

Acquisitions

In April 2010, a subsidiary of BWICO acquired the electrostatic precipitator aftermarket and emissions monitoring business units of GE Energy, a division of General Electric Company, for approximately $22.0 million and recorded approximately $10.0 million in goodwill. This acquisition includes GE Energy’s electrostatic precipitator replacement parts and mechanical components product lines, performance-enhancing hardware, controls and software, remote diagnostics equipment and emissions monitoring products and services. These products and services are used by a wide variety of power generation and industrial customers to monitor and control particulates and other emissions from power plants, factories and other facilities. These business units maintain offices in the United States in Kansas City, Missouri, Folkston, Georgia, Newport News, Virginia and Hatfield, Pennsylvania, as well as locations in Germany, India and China.

In January 2010, a subsidiary of BWICO acquired the net assets of Gotaverken Miljo AB (GMAB), a flue gas cleaning and energy recovery company based in Gothenburg, Sweden. In connection with this acquisition, we recorded goodwill of approximately $8.0 million.

The purchase price allocations for both of these acquisitions are expected to be finalized by the end of 2010.

Goodwill

The following summarizes the changes in the carrying amount of goodwill:


	Offshore Oil and Gas Construction ⁽¹⁾			Government Operations		Power Generation Systems			Total
	(In thousands)
Balance at December 31, 2009	$	43,631		$	167,407	$	95,459		$	306,497
Acquisition of Gotaverken Miljo AB assets		—			—		7,983			7,983
Acquisition of GE Energy assets		—			—		10,312			10,312
Transaction with Oceanteam ASA		11,753			—		—			11,753
Foreign currency translation adjustments		(639	)		—		(1,257	)		(1,896	)

Balance at June 30, 2010	$	54,745		$	167,407	$	112,497		$	334,649

⁽¹⁾	Changes to the gross carrying amount of goodwill primarily relate to preliminary purchase price allocations on 2009 transactions.

McDERMOTT INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010

(UNAUDITED)

Recently Adopted Accounting Standards

In January 2010, the Financial Accounting Standards Board (“FASB”) issued an update to the topic Fair Value Measurements and Disclosures. This update adds new fair value disclosures for certain transfers of investments between Level 1 and Level 2 measurements and clarifies existing disclosures regarding valuation techniques. On January 1, 2010, we adopted this revision. The adoption of this revision did not have an impact on our consolidated financial statements.

In January 2010, the FASB issued a revision to the topic Consolidation. This revision clarifies the scope of partial sale and deconsolidation provisions related to acquisitions and noncontrolling interests. On January 1, 2010, we adopted this revision. The adoption of this revision did not have an impact on our consolidated financial statements.

In June 2009, the FASB issued a revision to the topic Consolidation. This revision was subsequently amended in December 2009 and February 2010. These revisions expand the scope of this topic and amend guidance for assessing and analyzing variable interest entities. These revisions were effective on January 1, 2010 and had no impact on our consolidated financial statements.

New Accounting Standard

In January 2010, the FASB issued a revision to the topic Fair Value Measurements and Disclosures. This revision sets forth new rules on providing enhanced information for Level 3 measurements. The disclosure provisions under this revision will be effective for us in 2011, in both interim and annual disclosures. We do not expect the adoption of this revision to have a material impact on our consolidated financial statements.

Other than as described above, there have been no material changes to the accounting standards discussed in our annual report on Form 10-K for the year ended December 31, 2009.

NOTE 2 – PENSION PLANS AND POSTRETIREMENT BENEFITS

Components of net periodic benefit cost included in net income are as follows:


	Pension Benefits												Other Benefits
	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009			2010			2009			2010			2009
	(Unaudited)
	(In thousands)
Service cost	$	10,231		$	9,611		$	20,434		$	19,176		$	267		$	231		$	534		$	462
Interest cost		40,877			40,086			81,814			80,187			1,969			2,153			3,933			4,323
Expected return on plan assets		(39,264	)		(37,016	)		(78,488	)		(73,925	)		(412	)		(376	)		(823	)		(753	)
Amortization of prior service cost		903			697			1,801			1,387			19			17			37			32
Amortization of transition obligation		—			—			—			—			71			63			141			122
Recognized net actuarial loss		21,549			20,948			43,082			41,749			342			404			682			809

Net periodic benefit cost	$	34,296		$	34,326		$	68,643		$	68,574		$	2,256		$	2,492		$	4,504		$	4,995

Amortization of Benefit Plan Costs in the accompanying Condensed Consolidated Statements of Stockholders’ Equity is shown net of $16.3 million and $15.7 million of taxes, for the six month periods ended June 30, 2010 and 2009, respectively.

NOTE 3 – COMMITMENTS AND CONTINGENCIES

Other than as noted below, there have been no material changes during the period covered by this Form 10-Q in the status of the legal proceedings disclosed in Note 10 to the consolidated financial statements in Part II of our annual report on Form 10-K for the year ended December 31, 2009 (our “2009 10-K”).

Investigations and Litigation

Since January 2010, six suits (including the McMunn Litigation described in our 2009 10-K) involving over 60 plaintiffs have been filed against B&W PGG, Babcock & Wilcox Technical Services Group, Inc., formerly known as B&W Nuclear Environmental Services, Inc. (together with B&W PGG, the “B&W Parties”) and Atlantic Richfield Company, a subsidiary of BP plc (“ARCO”) in the United States District Court for the Western District of Pennsylvania (the “Apollo and Parks Township Litigation”). The plaintiffs

McDERMOTT INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010

(UNAUDITED)

in the Apollo and Parks Township Litigation allege, among other things, that they suffered personal injuries and property damage as a result of alleged radioactive and non-radioactive releases relating to the operation, remediation and/or decommissioning of two former nuclear fuel processing facilities located in Apollo and Parks Township, Pennsylvania. Those facilities previously were owned by Nuclear Materials and Equipment Company, a former subsidiary of ARCO (“NUMEC”), which was acquired by B&W PGG. The plaintiffs in the Apollo and Parks Township Litigation seek compensatory and punitive damages. It is possible that additional, similar lawsuits will be filed.

At the time of ARCO’s sale of NUMEC to B&W PGG, B&W PGG received an indemnity and hold harmless agreement from ARCO from claims or liabilities arising as a result of pre-closing NUMEC or ARCO actions.

We intend to vigorously defend these matters, and believe that in the event of liability, if any, the claims alleged in the Apollo and Parks Township Litigation will be resolved within the limits of coverage of our insurance policies and/or the ARCO indemnity.

On November 17, 2008, December 5, 2008 and January 20, 2009, three separate alleged purchasers of our common stock during the period from February 27, 2008 through November 5, 2008 filed purported class action complaints against MII, Bruce Wilkinson (MII’s former Chief Executive Officer and Chairman of the Board), and Michael S. Taff (MII’s former Chief Financial Officer) in the United States District Court for the Southern District of New York. Each of the complaints alleges that the defendants violated federal securities laws by disseminating materially false and misleading information and/or concealing material adverse information relating to the operational and financial status of three ongoing construction contracts in our Offshore Oil and Gas Construction segment for the installation of pipelines off the coast of Qatar. Each complaint seeks relief, including unspecified compensatory damages and an award for costs and expenses. The three cases were consolidated and transferred to the United States District Court for the Southern District of Texas. In May 2009, the plaintiffs filed an amended consolidated complaint, which, among other things, added Robert A. Deason (JRMSA’s former President and Chief Executive Officer) as a defendant in the proceedings. In July 2009, MII and the other defendants filed a motion to dismiss the complaint, which was referred to a Magistrate Judge. In February 2010, the Magistrate Judge entered a Memorandum and Recommendation on the motion, finding that the plaintiffs had failed to state a claim for relief under the securities laws and therefore recommended to the District Court that motion to dismiss be granted. On March 26, 2010, the Court issued an order adopting the Magistrate Judge’s recommendations in full and dismissing the case. However, the order granted the plaintiffs leave to request to amend their complaint and, on April 30, 2010, the plaintiffs filed a motion with the District Court for leave to amend the complaint. The defendants filed their opposition to plaintiffs’ motion in May 2010 and the District Court has not yet ruled on the matter. We continue to believe the substantive allegations contained in the amended complaint are without merit, and we intend to defend against these claims vigorously.

For further information regarding the Apollo and Parks Township Litigation and other proceedings, please refer to Note 10 to the consolidated financial statements included in Part II of our 2009 10-K, as supplemented by our quarterly report on Form 10-Q for the quarter ended March 31, 2010.

Other

In order to effect the distribution and govern MII’s relationship with B&W after the distribution, MII entered into a master separation agreement with B&W. In addition to the master separation agreement, MII and B&W entered into other agreements in connection with the distribution, including a tax sharing agreement and transition services agreements.

Master Separation Agreement

The master separation agreement between us and B&W contains the key provisions relating to the separation of the B&W business from MII and the distribution of B&W shares of common stock. The master separation agreement identifies the assets that were transferred, liabilities that were assumed and contracts that were assigned to B&W by MII or by B&W to MII in the spin-off and describes how these transfers, assumptions and assignments occurred. Under the master separation agreement we are also indemnifying B&W against various claims and liabilities related to the past operation of MII’s business (other than B&W’s business).

McDERMOTT INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010

(UNAUDITED)

Tax Sharing Agreement

A subsidiary of MII and a subsidiary of B&W have entered into an agreement providing for the sharing of taxes incurred before and after the distribution, various indemnification rights with respect to tax matters and restrictions to preserve the tax-free status of the distribution to MII. Under the terms of the tax sharing agreement, B&W is generally responsible for any taxes imposed on MII or B&W in the event that certain transactions related to the spin-off fail to qualify for tax-free treatment. However, if these transactions fail to qualify for tax-free treatment because of actions or failures to act by MII or its subsidiaries, a subsidiary of MII would be responsible for all such taxes.

Transition Services Agreements

Under the transition services agreements, MII and B&W are providing each other certain transition services on an interim basis. Such services include, among others, accounting, human resources, information technology, legal, risk management, tax and treasury services. In consideration for such services, MII and B&W each pay fees to the other for the services provided, and those fees are generally in amounts intended to allow the party providing the services to recover its direct and indirect costs incurred in providing those services. The transition services agreements contain customary mutual indemnification provisions.

Contracts Containing Liquidated Damages Provisions

Some of our contracts contain penalty provisions that require us to pay liquidated damages if we are responsible for the failure to meet specified contractual milestone dates and the applicable customer asserts a claim under these provisions. These contracts define the conditions under which our customers may make claims against us for liquidated damages. In many cases in which we have had potential exposure for liquidated damages, such damages ultimately were not asserted by our customers. As of June 30, 2010, we were subject to contingent liabilities for liquidated damages aggregating approximately $114 million based on our failure to meet such specified contractual milestone dates, all in our Offshore Oil and Gas Construction segment, of which $14 million has been recorded in our financial statements. We do not believe any additional amounts for these potential liquidated damages are probable of being paid by us. The trigger dates for these potential liquidated damages range from June 2008 to August 2009. We are in active discussions with our customers on the issues giving rise to delays in these projects, and we believe we will be successful in obtaining schedule extensions that should resolve the potential for additional liquidated damages being incurred. However, we may not achieve relief on some or all of the issues.

NOTE 4 – LONG-TERM DEBT AND NOTES PAYABLE

The following table presents information relating to our long-term debt and notes payable:


	June 30, 2010			December 31, 2009
	(Unaudited)
	(In thousands)
Long-term debt:
Unsecured Debt:
Other notes payable through 2012	$	4,873		$	5,916
Secured Debt:
Offshore Oil and Gas Construction – debt acquired in vessel acquisition		55,807			62,330
Power Generation Systems – various notes payable		1,269			1,659
Capitalized lease obligations		—			13

		61,949			69,918
Less: Amounts due within one year		12,731			13,204

Long-term debt	$	49,218		$	56,714

Notes payable and current maturities of long-term debt:
Short-term lines of credit	$	2,336		$	3,066
Current maturities of long-term debt		12,731			13,204

Total	$	15,067		$	16,270

Weighted average interest rate on short-term borrowing		5.3	%		5.3	%

Maturities of long-term debt for the 12-month periods ending subsequent to June 30, 2010 are as follows: 2011 – $15.1 million; 2012 – $5.1 million; 2013 – $6.2 million; 2014 – $6.1 million; 2015 – $31.5 million; thereafter – $0.2 million.

McDERMOTT INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010

(UNAUDITED)

JRMSA Credit Agreement

On May 3, 2010, McDermott International, Inc and J. Ray McDermott, S.A., a direct, wholly owned subsidiary of MII, entered into a Credit Agreement (the “JRMSA Credit Agreement”) with a syndicate of lenders and letter of credit issuers.

The JRMSA Credit Agreement replaces JRMSA’s prior $800.0 million senior secured revolving credit facility. All amounts outstanding under JRMSA’s previous senior secured revolving credit facility have been repaid with borrowings under the JRMSA Credit Agreement, and all letters of credit outstanding under that previous facility are now deemed issued under the JRMSA Credit Agreement. JRMSA was the initial borrower under the JRMSA Credit Agreement and on July 30, 2010, in conjunction with the completion of the spin-off of B&W, MII replaced JRMSA as the borrower under the JRMSA Credit Agreement.

The JRMSA Credit Agreement provides for revolving credit borrowings and issuances of letters of credit in an aggregate outstanding amount of up to $900.0 million, and the credit facility is scheduled to mature on May 3, 2014. Proceeds from borrowings under the JRMSA Credit Agreement are available for working capital needs and other general corporate purposes. The JRMSA Credit Agreement includes procedures for additional financial institutions to become lenders, or for any existing lender to increase its commitment thereunder, subject to an aggregate maximum of $1,200.0 million for all revolving loan and letter of credit commitments under the JRMSA Credit Agreement. In addition, the JRMSA Credit Agreement contains various covenants and other restrictions.

At June 30, 2010, there were no borrowings outstanding and letters of credit issued under the JRMSA Credit Agreement totaled $247.9 million. At June 30, 2010, there was $652.1 million available for borrowings or to meet letter of credit requirements under the JRMSA Credit Agreement. Borrowings under this facility during the June 30, 2010 quarter had an applicable interest rate of approximately 5.25% per year. In addition, JRMSA and its subsidiaries had $310.4 million in outstanding unsecured letters of credit and MII had $6.0 million in secured letters of credit, under separate arrangements with financial institutions at June 30, 2009.

BWICO Credit Agreement

On May 3, 2010, BWICO entered into a credit agreement (the “BWICO Credit Agreement”) with a syndicate of lenders and letter of credit issuers, and Bank of America, N.A., as administrative agent. The BWICO Credit Agreement replaced the previous credit facilities in our Power Generation Systems and Government Operations segments, respectively. The BWICO Credit Agreement provides for revolving credit borrowings and issuances of letters of credit in an aggregate outstanding amount of up to $700.0 million, and the credit facility is scheduled to mature on May 3, 2014. The proceeds of the BWICO Credit Agreement are available for working capital needs and other general corporate purposes of our Government Operations and Power Generation Systems segments.

At June 30, 2010, there were no borrowings outstanding but letters of credit issued under the BWICO Credit Agreement totaled $261.7 million. At June 30, 2010, there was $438.3 million available for borrowings or to meet letter of credit requirements under the BWXT Credit Facility. If there had been borrowings under this facility, the applicable interest rate at June 30, 2010 would have been 4.75% per year.

NOTE 5 – DERIVATIVE FINANCIAL INSTRUMENTS

Our worldwide operations give rise to exposure to market risks from changes in foreign exchange rates. We use derivative financial instruments (primarily foreign currency forward-exchange contracts) to reduce the impact of changes in foreign exchange rates on our operating results. We use these instruments primarily to hedge our exposure associated with revenues or costs on our long-term contracts and other cash flow exposures that are denominated in currencies other than our operating entities’ functional currencies. We do not hold or issue financial instruments for trading or other speculative purposes.

We enter into derivative financial instruments primarily as hedges of certain firm purchase and sale commitments denominated in foreign currencies. We record these contracts at fair value on our consolidated balance sheets. Depending on the hedge designation at the inception of the contract, the related gains and losses on these contracts are either deferred in stockholders’ equity as a component of accumulated other comprehensive loss, until the hedged item is recognized in earnings, or offset against the change in fair value of the hedged firm commitment through earnings. The ineffective portion of a derivative’s change in fair value and any portion excluded from the assessment of effectiveness are immediately recognized in earnings. The gain or loss on a derivative instrument not designated as a hedging instrument is also immediately recognized in earnings. Gains and losses on derivative financial instruments that require immediate recognition are included as a component of other income (expense) – net in our condensed consolidated statements of income.

We have designated all of our forward contracts as cash flow hedging instruments. The hedged risk is the risk of changes in functional-currency-equivalent cash flows attributable to changes in spot exchange rates of forecasted transactions related to long-term contracts and certain capital expenditures. We exclude from our assessment of effectiveness the portion of the fair value of the forward contracts attributable to the difference between spot exchange rates and forward exchange rates. At June 30, 2010, we had deferred approximately $12.2 million of net losses on these derivative financial instruments in accumulated other comprehensive loss and we expect to recognize the net losses on the derivative financial instruments in the periods that we recognize the net gains on the forecasted transactions. We expect to recognize approximately $9.0 million of the deferred net losses over the next 12 months.

McDERMOTT INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010

(UNAUDITED)

At June 30, 2010, all of our derivative financial instruments consisted of foreign currency forward-exchange contracts. The notional value of our forward contracts totaled $505.0 million at June 30, 2010, with maturities extending to June 2013. These instruments consist primarily of contracts to purchase or sell Euros or Canadian Dollars. The fair value of these contracts was in a net liability position totaling $9.7 million at June 30, 2010. The fair value of outstanding derivative contracts is determined using observable financial market inputs and are classified as Level 2 in nature.

We are exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments. However, when possible, we enter into International Swaps and Derivative Association, Inc. agreements with our hedge counterparties to mitigate this risk. We also attempt to mitigate this risk by using major financial institutions with high credit ratings. The counterparties to all of our derivative financial instruments are financial institutions included in the credit agreement described in Note 4. Our hedge counterparties have the benefit of the same collateral arrangements and covenants as described under these facilities.

The following tables summarize our derivative financial instruments:

Asset and Liability Derivatives


	June 30, 2010		December 31, 2009
	(Unaudited)
	(In thousands)
Derivatives Designated as Hedges:
Foreign Exchange Contracts:
Location
Accounts receivable-other	$	2,700	$	3,527
Accounts payable	$	12,366	$	4,313

Derivatives Not Designated as Hedges:
Foreign Exchange Contracts:
Location
Accounts receivable-other	$	—	$	458
Accounts payable	$	—	$	65

McDERMOTT INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010

(UNAUDITED)

The Effects of Derivative Instruments on our Financial Statements


	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
	(Unaudited)
	(In thousands)
Derivatives Designated as Hedges:
Cash Flow Hedges:
Foreign Exchange Contracts:
Amount of gain (loss) recognized in other comprehensive income	$	(10,196	)	$	8,479		$	(13,923	)	$	5,607

Income (loss) reclassified from accumulated other comprehensive loss into income: effective portion
Location
Revenues	$	1,126		$	364		$	1,585		$	(214	)
Cost of operations	$	2,510		$	2,120		$	2,619		$	1,194
Other income (expense) – net	$	972		$	275		$	1,610		$	238
Gain (loss) recognized in income: portion excluded from effectiveness testing
Location
Other income (expense) – net	$	(2,162	)	$	(492	)	$	(6,108	)	$	(1,592	)

Derivatives Not Designated as Hedges:
Foreign Exchange Contracts and Currency Options:
Gain (loss) recognized in income
Location
Other income (expense) – net	$	—		$	1,942		$	34		$	(6,347	)

McDERMOTT INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010

(UNAUDITED)

NOTE 6 – FAIR VALUE MEASUREMENTS

The following tables summarize our available-for-sale securities measured at fair value at June 30, 2010 and December 31, 2009 (In thousands):


	(Unaudited)
	6/30/10		Level 1		Level 2		Level 3
Mutual funds	$	4,710	$	—	$	4,710	$	—
Certificates of deposit		14		—		14		—
U.S. Government and agency securities		137,743		137,743		—		—
Asset-backed securities and collateralized mortgage obligations		10,739		—		3,084		7,655
Corporate notes and bonds		14,997		—		14,997		—

Total ⁽¹⁾	$	168,203	$	137,743	$	22,805	$	7,655


	12/31/09		Level 1		Level 2		Level 3
Mutual funds	$	4,944	$	—	$	4,944	$	—
Certificates of deposit		2,522		—		2,522		—
U.S. Government and agency securities		163,466		148,683		14,783		—
Asset-backed securities and collateralized mortgage obligations		10,555		—		3,061		7,494
Corporate notes and bonds		47,231		—		47,231		—

Total ⁽¹⁾	$	228,718	$	148,683	$	72,541	$	7,494

⁽¹⁾	An immaterial amount of short-term investments are included in other current assets in the accompanying condensed consolidated balance sheets.

Changes in Level 3 Instruments

The following is a summary of the changes in our Level 3 instruments measured on a recurring basis for the period ended June 30, 2010 (In thousands) (Unaudited):


Balance, beginning of the year	$	7,494
Total realized and unrealized gains (losses):		1,277
Included in other income (expense)		25
Included in other comprehensive income		1,252
Purchases, issuances and settlements		(111	)
Principal repayments		(1,005	)

Balance, end of period	$	7,655

Other Financial Instruments

We used the following methods and assumptions in estimating our fair value disclosures for our other financial instruments:

Cash and cash equivalents and restricted cash and cash equivalents . The carrying amounts that we have reported in the accompanying condensed consolidated balance sheets for cash and cash equivalents and restricted cash and cash equivalents approximate their fair values.

Long-term and short-term debt . We base the fair values of debt instruments on quoted market prices. Where quoted prices are not available, we base the fair values on the present value of future cash flows discounted at estimated borrowing rates for similar debt instruments or on estimated prices based on current yields for debt issues of similar quality and terms.

McDERMOTT INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010

(UNAUDITED)

The estimated fair values of our financial instruments are as follows:


	June 30, 2010						December 31, 2009
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
	(In thousands)
Balance Sheet Instruments
Cash and cash equivalents	$	777,554		$	777,554		$	899,270		$	899,270
Restricted cash and cash equivalents	$	150,708		$	150,708		$	69,920		$	69,920
Investments ⁽¹⁾	$	168,203		$	168,203		$	228,718		$	228,718
Debt	$	64,285		$	63,531		$	72,984		$	73,505
Forward contracts	$	(9,666	)	$	(9,666	)	$	(394	)	$	(394	)
Foreign currency options	$	—		$	—		$	4,747		$	4,747

⁽¹⁾	An immaterial amount of short-term investments are included in other current assets in the accompanying condensed consolidated balance sheets.

NOTE 7 – STOCK-BASED COMPENSATION

Total stock-based compensation expense recognized for the three and six months ended June 30, 2010 and 2009 is as follows:


	Compensation Expense		Tax Benefit			Net Impact
	(Unaudited)
	(In thousands)
	Three Months Ended June 30, 2010
Stock options	$	4,322	$	(401	)	$	3,921
Restricted stock		2,492		(272	)		2,220
Performance shares		6,332		(565	)		5,767
Performance and deferred stock units		5,673		(784	)		4,889

Total	$	18,819	$	(2,022	)	$	16,797


	Three Months Ended June 30, 2009
Stock options	$	831	$	(279	)	$	552
Restricted stock		2,216		(366	)		1,850
Performance shares		4,871		(1,712	)		3,159
Performance and deferred stock units		2,768		(923	)		1,845

Total	$	10,686	$	(3,280	)	$	7,406


	Six Months Ended June 30, 2010
Stock options	$	8,062	$	(664	)	$	7,398
Restricted stock		3,801		(556	)		3,245
Performance shares		14,106		(1,746	)		12,360
Performance and deferred stock units		11,307		(1,646	)		9,661

Total	$	37,276	$	(4,612	)	$	32,664


	Six Months Ended June 30, 2009
Stock options	$	1,059	$	(355	)	$	704
Restricted stock		3,378		(728	)		2,650
Performance shares		11,396		(3,894	)		7,502
Performance and deferred stock units		3,878		(1,289	)		2,589

Total	$	19,711	$	(6,266	)	$	13,445

McDERMOTT INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010

(UNAUDITED)

NOTE 8 – SEGMENT REPORTING

An analysis of our operations by segment is as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
	(Unaudited)
	(In thousands)
REVENUES:
Offshore Oil and Gas Construction	$	645,084		$	832,700		$	1,164,629		$	1,541,224
Government Operations		267,175			261,397			520,426			518,502
Power Generation Systems		422,364			471,591			832,095			1,000,164
Adjustments and eliminations		(1,061	)		(689	)		(1,658	)		(1,628	)

	$	1,333,562		$	1,564,999		$	2,515,492		$	3,058,262

OPERATING INCOME:
Offshore Oil and Gas Construction	$	110,562		$	67,802		$	193,346		$	112,840
Government Operations		50,512			57,473			86,465			103,225
Power Generation Systems		39,834			43,865			49,135			102,024

	$	200,908		$	169,140		$	328,946		$	318,089

Unallocated Corporate ⁽¹⁾		(77,616	)		(21,400	)		(113,846	)		(39,143	)

Total Operating Income ⁽²⁾	$	123,292		$	147,740		$	215,100		$	278,946

Other Income (Expense) :
Interest income (expense) – net	$	(3,333	)	$	4,987		$	(3,034	)	$	6,844
Other expense – net		(4,494	)		(10,201	)		(8,711	)		(20,971	)

Total Other Expense	$	(7,827	)	$	(5,214	)	$	(11,745	)	$	(14,127	)

Income before Provision for Income Taxes	$	115,465		$	142,526		$	203,355		$	264,819

⁽¹⁾ Unallocated corporate includes general corporate overhead not allocated to segments, including costs to spin-off B&W.
⁽²⁾ Included in operating income is the following:
Equity in Income (Loss) of Investees :
Offshore Oil and Gas Construction	$	(715	)	$	(1,056	)	$	(4,146	)	$	(2,201	)
Government Operations		9,975			8,652			19,453			17,354
Power Generation Systems		7,459			1,501			12,000			3,144

	$	16,719		$	9,097		$	27,307		$	18,297

McDERMOTT INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010

(UNAUDITED)

NOTE 9 – EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:


	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
	(Unaudited)
	(In thousands, except share and per share amounts)
*Basic:*

Net income attributable to McDermott International, Inc.	$	76,034	$	92,555	$	135,975	$	170,247

Weighted average common shares		231,847,145		229,273,441		231,335,723		228,794,113

Basic earnings per common share	$	0.33	$	0.40	$	0.59	$	0.74

*Diluted:*
Net income attributable to McDermott International, Inc.	$	76,034	$	92,555	$	135,975	$	170,247


Weighted average common shares (basic)		231,847,145		229,273,441		231,335,723		228,794,113
Effect of dilutive securities:
Stock options, restricted stock and performance shares ⁽¹⁾		2,576,401		3,832,508		3,252,568		4,051,985

Adjusted weighted average common shares and assumed exercises of stock options and vesting of stock awards		234,423,546		233,105,949		234,588,291		232,846,098

Diluted earnings per common share	$	0.32	$	0.40	$	0.58	$	0.73

⁽¹⁾	As of June 30, 2010, approximately 701,000 shares underlying outstanding stock-based awards were excluded from the computation of diluted earnings per share because they were antidilutive.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included under Item 1 and the audited consolidated financial statements and the related notes and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our annual report on Form 10-K for the year ended December 31, 2009.

In this quarterly report on Form 10-Q, unless the context otherwise indicates, “we,” “us” and “our” mean MII and its consolidated subsidiaries.

We are including the following discussion to inform our existing and potential security holders generally of some of the risks and uncertainties that can affect our company and to take advantage of the “safe harbor” protection for forward-looking statements that applicable federal securities law affords.

From time to time, our management or persons acting on our behalf make forward-looking statements to inform existing and potential security holders about our company. These statements may include projections and estimates concerning the timing and success of specific projects and our future backlog, revenues, income and capital spending. Forward-looking statements are generally accompanied by words such as “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “plan,” “goal” or other words that convey the uncertainty of future events or outcomes. In addition, sometimes we will specifically describe a statement as being a forward-looking statement and refer to this cautionary statement.

These forward-looking statements include, but are not limited to, statements that relate to, or statements that are subject to risks, contingencies or uncertainties that relate to:

•

effects of the spin-off, including with respect to taxes;

•

future levels of revenues, operating margins, income from operations, net income or earnings per share;

•

outcome of project awards and execution;

•

anticipated levels of demand for our products and services;

•

future levels of capital, environmental or maintenance expenditures;

•

the success or timing of completion of ongoing or anticipated capital or maintenance projects;

•

expectations regarding the acquisition or divestiture of assets;

•

the potential effects of judicial or other proceedings on our business, financial condition, results of operations and cash flows; and

•

the anticipated effects of actions of third parties such as competitors, or federal, foreign, state or local regulatory authorities, or plaintiffs in litigation.

In addition, various statements in this quarterly report on Form 10-Q, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. These forward-looking statements speak only as of the date of this report; we disclaim any obligation to update these statements unless required by securities law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following:

•

general economic and business conditions and industry trends;

•

general developments in the industries in which we are involved;

•

decisions about offshore developments to be made by oil and gas companies;

•

decisions on spending by the U.S. Government and electric power generating companies;

•

the highly competitive nature of most of our operations;

•

cancellations of and adjustments to backlog and the resulting impact from using backlog as an indicator of future earnings;

•

our ability to perform projects on time, in accordance with the schedules established by the applicable contracts with customers;

•

changes in legislation and regulations which impact the ability of inverted companies and their subsidiaries to obtain contracts from the U.S. Government;

•

the ability of our suppliers and subcontractors to deliver raw materials in sufficient quantities and in a timely manner;

•

volatility and uncertainty of the credit markets;

•

our ability to comply with covenants in our credit agreements and other debt instruments and availability, terms and deployment of capital;

•

the impact of our unfunded pension liabilities on liquidity, and our ability to fund such liabilities in the future;

•

the continued availability of qualified personnel;

•

the operating risks normally incident to our lines of business, including the potential impact of liquidated damages;

•

changes in, or our failure or inability to comply with, government regulations;

•

adverse outcomes from legal and regulatory proceedings;

•

impact of potential regional, national and/or global requirements to significantly limit or reduce greenhouse gas emissions in the future;

•

changes in, and liabilities relating to, existing or future environmental regulatory matters;

•

rapid technological changes;

•

the realization of deferred tax assets, including through a reorganization we completed in December 2006;

•

the consequences of significant changes in interest rates and currency exchange rates;

•

difficulties we may encounter in obtaining regulatory or other necessary approvals of any strategic transactions;

•

the risks associated with integrating businesses we acquire;

•

the risk we might not be successful in updating and replacing current key financial and human resources legacy systems with enterprise systems;

•

social, political and economic situations in foreign countries where we do business, including countries in the Middle East and Asia Pacific and the former Soviet Union;

•

the possibilities of war, other armed conflicts or terrorist attacks;

•

the effects of asserted and unasserted claims;

•

our ability to obtain surety bonds, letters of credit and financing;

•

our ability to maintain builder’s risk, liability, property and other insurance in amounts and on terms we consider adequate and at rates that we consider economical;

•

the aggregated risks retained in our captive insurance subsidiaries; and

•

the impact of the loss of insurance rights as part of the Chapter 11 Bankruptcy settlement concluded in 2006 involving B&W PGG and several of its subsidiaries.

We believe the items we have outlined above are important factors that could cause estimates in our financial statements to differ materially from actual results and those expressed in a forward-looking statement made in this report or elsewhere by us or on our behalf. We have discussed many of these factors in more detail elsewhere in this report and in our annual report on Form 10-K for the year ended December 31, 2009. These factors are not necessarily all the factors that could affect us. Unpredictable or unanticipated factors we have not discussed in this report could also have material adverse effects on actual results of matters that are the subject of our forward-looking statements. We do not intend to update our description of important factors each time a potential important factor arises, except as required by applicable securities laws and regulations. We advise our security holders that they should (1) be aware that factors not referred to above could affect the accuracy of our forward-looking statements and (2) use caution and common sense when considering our forward-looking statements.

GENERAL

Capital Intensive Business Segments

In general, our business segments are composed of capital-intensive operations that rely on large contracts for a substantial amount of their revenues. Each of our business segments is currently financed on a stand-alone basis. Our debt covenants limit using the financial resources of or the movement of excess cash from one segment for the benefit of the other. For further discussion, see “Liquidity and Capital Resources” below.

Spin-Off Transaction

Accounting for Contracts

As of June 30, 2010, in accordance with the percentage-of-completion method of accounting, we have estimated our costs to complete all of our ongoing contracts. However, it is possible that current estimates could change due to unforeseen events, which could result in adjustments to overall contract costs. The risk on fixed-priced contracts is that revenue from the customer does not rise to cover increases in our costs. It is possible that current estimates could materially change for various reasons, including, but not limited to, fluctuations in forecasted labor productivity, pipeline lay rates or steel and other raw material prices. In some instances, we guarantee completion dates related to our projects. Increases in costs on our fixed-price contracts could have a material adverse impact on our consolidated results of operations, financial condition and cash flows. Alternatively, reductions in overall contract costs at completion could materially improve our consolidated results of operations, financial condition and cash flows.

Some of our contracts contain penalty provisions that require us to pay liquidated damages if we are responsible for the failure to meet specified contractual milestone dates and the applicable customer asserts a claim under these provisions. These contracts define the conditions under which our customers may make claims against us for liquidated damages. In many cases in which we have had potential exposure for liquidated damages, such damages ultimately were not asserted by our customers. As of June 30, 2010, we were subject to contingent liabilities for liquidated damages aggregating approximately $114.0 million based on our failure to meet such specified contractual milestone dates, all in our Offshore Oil and Gas Construction segment, of which $14.0 million has been recorded in our financial statements. We do not believe any additional amounts for these potential liquidated damages are probable of being paid by us. The trigger dates for these potential liquidated damages range from June 2008 to August 2009. We are in active discussions with our customers on the issues giving rise to delays in these projects, and we believe we will be successful in obtaining schedule extensions that should resolve the potential for additional liquidated damages being incurred. However, we may not achieve relief on some or all of the issues.

Offshore Oil and Gas Construction Segment

Our Offshore Oil and Gas Construction segment’s activity depends mainly on the capital expenditures for offshore construction services of oil and gas companies and foreign governments for construction of development projects in the regions in which we operate. This segment’s operations are generally capital intensive and a number of factors influence its activities, including:

•

oil and gas prices, along with expectations about future prices;

•

the cost of exploring for, producing and delivering oil and gas;

•

the terms and conditions of offshore leases;

•

the discovery rates of new oil and gas reserves in offshore areas;

•

the ability of businesses in the oil and gas industry to raise capital; and

•

local and international political and economic conditions.

Government Operations Segment

The revenues of our Government Operations segment are largely a function of defense spending by the U.S. Government. As a supplier of major nuclear components for certain U.S. Government programs, this segment is a significant participant in the defense industry. With its specialized capabilities of full life-cycle management of special nuclear materials, facilities and technologies, our Government Operations segment also participates in the cleanup, operation and management of the nuclear sites and weapons complexes maintained by the U.S. Department of Energy.

Power Generation Systems Segment

Our Power Generation Systems segment’s overall activity depends mainly on the capital expenditures of electric power generating companies and other steam-using industries. Several factors influence these expenditures, including:

•

prices for electricity, along with the cost of production and distribution;

•

prices for coal and natural gas and other sources used to produce electricity;

•

demand for electricity, paper and other end products of steam-generating facilities;

•

availability of other sources of electricity, paper or other end products;

•

requirements for environmental improvements;

•

impact of potential regional, state, national and/or global requirements to significantly limit or reduce greenhouse gas emissions in the future;

•

level of capacity utilization at operating power plants, paper mills and other steam-using facilities;

•

requirements for maintenance and upkeep at operating power plants and paper mills to combat the accumulated effects of wear and tear;

•

ability of electric generating companies and other steam users to raise capital; and

•

relative prices of fuels used in boilers, compared to prices for fuels used in gas turbines and other alternative forms of generation.

For a summary of the critical accounting policies and estimates that we use in the preparation of our unaudited condensed consolidated financial statements, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended December 31, 2009. There have been no material changes to these policies during the six months ended June 30, 2010, except as disclosed in Note 1 of the notes to condensed consolidated financial statements included in this report.

RESULTS OF OPERATIONS – THREE MONTHS ENDED JUNE 30, 2010 VS. THREE MONTHS ENDED JUNE 30, 2009

McDermott International, Inc. (Consolidated)

Revenues decreased approximately 15%, or $231.4 million, to $1,333.6 million in the three months ended June 30, 2010, compared to $1,565.0 million for the corresponding period of 2009. Our Offshore Oil and Gas Construction segment experienced a $187.6 million, or 23%, decrease in its revenues during the second quarter of 2010 compared to the second quarter of 2009, attributable primarily to decreased revenues in its Middle East operations. In the second quarter of 2010, as compared to the second quarter of 2009, our Power Generation Systems segment experienced a $49.2 million, or 10%, reduction in its revenues attributable primarily to decreases in its new-build steam generation and aftermarket services businesses. Additionally, our Government Operations segment generated a 2%, or $5.8 million increase in its revenues during the three months ended June 30, 2010 compared to the corresponding period of 2009.

Operating income decreased $24.4 million to $123.3 million in the three months ended June 30, 2010 from $147.7 million for the corresponding period of 2009. We experienced costs associated with the spin-off of B&W totaling $66.2 million in the three months ended June 30, 2010. The operating income of our Offshore Oil and Gas Construction segment increased by $42.8 million in the three months ended June 30, 2010 compared to the comparable period in 2009. The operating income of our Power Generation Systems and Government Operations segments decreased $4.0 million and $7.0 million, respectively, in the second quarter of 2010, as compared to the second quarter of 2009. Corporate operating expenses also increased in the three months ended June 30, 2010 compared to the comparable period in 2009.

Offshore Oil and Gas Construction

Revenues decreased approximately 23%, or $187.6 million, to $645.1 million in the three months ended June 30, 2010 compared to $832.7 million for the corresponding 2009 period. The majority of the decrease was concentrated in our Middle East operations, where revenues declined 29%, or $143.7 million, influenced primarily by three projects, one requiring the fabrication and installation of jackets, decks and pipelines, one for fabrication and installation of decks and pipelines and another project for the installation of pipelines. These projects were ongoing during the 2009 quarter but were substantially complete prior to the 2010 period. Project activity to provide platforms, pipelines, jackets and decks, which began in the current quarter only partially offset the revenue decline. We also recognized a $33.0 million decline in revenue from our Asia Pacific region, impacted primarily by the completion of certain projects that were active during the 2009 period but not in the 2010 period.

Operating income increased $42.8 million from $67.8 million in the three months ended June 30, 2009 to $110.6 million in the three months ended June 30, 2010. The increase was primarily attributable to improved project performance in our Middle East operations. In the three months ended June 30, 2009, certain Qatar projects accounted for $11.0 million in contract losses, driven primarily by cost increases due to mechanical downtime on marine vessels and lower productivity, as compared to contract profits of approximately $38.0 million in the second quarter of 2010, driven primarily by change orders and cost savings. Increased activity and project improvements on Saudi Arabia projects in the 2010 period also contributed to the improved performance in the Middle East. These increases were partially offset by declines in our Atlantic region, attributable to lower marine asset utilization in the Gulf of Mexico.

Government Operations

Revenues increased approximately 2%, or $5.8 million, to $267.2 million in the three months ended June 30, 2010 compared to $261.4 million in the corresponding period of 2009, primarily attributable to increased volume in the manufacture of nuclear components for certain U.S. Government programs ($25.6 million) and increased revenues from our management and operating contracts at two government sites. These increases were partially offset by lower volumes in the manufacture of components for a commercial uranium enrichment project ($11.9 million) and lower volumes in commercial manufacturing ($9.0 million).

Operating income decreased $7.0 million to $50.5 million in the three months ended June 30, 2010 compared to $57.5 million in the corresponding period of 2009, primarily attributable to favorable contract cost adjustments related to a downblending contract at our Nuclear Fuel Services, Inc. subsidiary in the three months ended June 30, 2009. We also experienced lower volumes in the manufacture of components for a commercial uranium enrichment project. These decreases were partially offset by increased contract productivity and volume in the manufacture of nuclear components for certain U.S. Government programs and increased fees earned from our management and operating contracts at several government sites. Our equity in income of investees increased $1.3 million to $10.0 million in the three months ended June 30, 2010, compared to $8.7 million in the corresponding period of 2009, primarily attributable to higher fees earned at two of our government sites, partially offset by lower results at our facility in Idaho.

Power Generation Systems

Revenues decreased approximately 10%, or $49.2 million, to $422.4 million in the three months ended June 30, 2010, compared to $471.6 million in the corresponding period of 2009. This decrease was primarily attributable to a $26.5 million decrease in revenues from our new-build steam generation business, which principally consists of our utility, industrial and renewable boiler products operations. In addition, we experienced a $22.9 million decrease in our aftermarket services business, primarily related to a reduction in our repair, alteration and maintenance activities. The main driver for these decreases in revenues was a significant decrease in orders in 2009 and particularly in the last six months of 2009. These reductions in orders booked followed a Federal Appeals Court’s overturning of the Clean Air Interstate Rule, the Clean Air Mercury Rule and the Industrial Boiler Rule on Maximum Achievable Control Technology. The overturning of these rules and regulations, along with the uncertainty concerning any new legislation or replacement rules or regulations, has caused many of our major customers, principally electric utilities, to delay making substantial capital expenditures for new plants, as well as upgrades to existing power plants. In addition, considerations surrounding greenhouse gas limits under consideration by the U.S. Congress and the Environmental Protection Agency (“EPA”) have delayed the construction of new coal-fired power plants in the United States.

Operating income decreased $4.0 million to $39.8 million in the three months ended June 30, 2010 compared to $43.9 million in the corresponding period of 2009. We experienced decreases in our new-build steam generation and aftermarket services businesses totaling $15.6 million, primarily attributable to the reductions in revenues discussed above. These decreases were partially offset by an increase in operating income totaling $6.0 million from our new-build environmental business, which includes the manufacture and sale of scrubber products, particle control products and our selective catalytic reduction systems applications. These increases were primarily attributable to the effects of timing on projects completed in the three months ended June 30, 2010 compared to the corresponding period of 2009. In addition, in the three months ended June 30, 2010, we experienced an increase in our selling, general and administrative expenses totaling $7.7 million, primarily attributable to our acquisition of the electrostatic precipitator aftermarket and emissions monitoring business units of GE Energy, a division of General Electric Company, and increases in our selling and marketing expenses. In the three months ended June 30, 2010, we also experienced an increase in our research and development expense totaling $6.0 million primarily attributable to development work on the B&W mPower ^™ initiative. These reductions in operating income were partially offset by the incurrence of lower warranty expense totaling $11.6 million in the three months ended June 30, 2010 compared to 2009. Our provisions for warranty in the three months ended June 30, 2009 included additional warranty provisions related to specific corrective items. In addition, we experienced an increase in income of investees totaling $6.0 million primarily attributable to improved results in our joint venture in China from improved margins due to reductions in costs on purchases of materials.

Corporate

Unallocated corporate expenses increased $56.2 million to $77.6 million in the three months ended June 30, 2010, as compared to $21.4 million for the corresponding period in 2009, primarily attributable to increased expenses totaling $66.2 million for severance and professional services related to the spin-off of B&W. These increases were partially offset by lower compensation expenses attributable to reductions in headcount and lower expenses associated with systems development activities in the three months ended June 30, 2010 compared to the corresponding period of 2009.

Other Income Statement Items

Interest income (expense) – net decreased $8.3 million to expense of $3.3 million in the three months ended June 30, 2010, primarily due to the write-off of unamortized debt issuance costs associated with the replacement of our previous credit facilities ($4.1 million), lower capitalized interest ($2.9 million), lower cash and investment balances ($1.6 million) and other financing related charges.

Other income (expense) – net decreased by $5.7 million to expense of $4.5 million in the three months ended June 30, 2010, primarily due to higher currency translation exchange losses incurred in the second quarter of 2009.

Provision for Income Taxes

For the three months ended June 30, 2010, the provision for income taxes decreased $10.7 million to $33.9 million, while income before provision for income taxes decreased $27.0 million to $115.5 million. Our effective tax rate for the three months ended June 30, 2010 was approximately 29.3%, as compared to 31.3% for the three months ended June 30, 2009. The 2010 period reflects the effect of setting up valuation allowances on certain domestic deferred tax assets that may not be realized due to the spin-off of the B&W business. The prior year included a benefit associated with our evaluation of amounts ultimately payable for certain proposed audit adjustments.

Income before provision for income taxes, provision for income taxes and effective tax rates for our U.S. and non-U.S. jurisdictions are as shown below (In thousands) (Unaudited):


	Income before Provision for Income Taxes				Provision for Income Taxes				Effective Tax Rate
	For the three months ended June 30,
	2010		2009		2010		2009		2010		2009
United States	$	22,925	$	52,630	$	16,746	$	21,532	73.04	%	40.91	%
Non-United States		92,540		89,896		17,126		23,113	18.50	%	25.71	%

Total	$	115,465	$	142,526	$	33,872	$	44,645	29.33	%	31.32	%

We are subject to U.S. federal income tax at a rate of 35% on our U.S. operations, plus the applicable state income taxes on our profitable U.S. subsidiaries. Our non-U.S. earnings are subject to tax at various tax rates and different tax regimes, such as a deemed profits tax regime. These variances, along with variances in our mix of income from these jurisdictions, contribute to shifts in our effective tax rate.

RESULTS OF OPERATIONS – SIX MONTHS ENDED JUNE 30, 2010 VS. SIX MONTHS ENDED JUNE 30, 2009

McDermott International, Inc. (Consolidated)

Revenues decreased approximately 18%, or $542.8 million, to $2,515.5 million in the six months ended June 30, 2010, compared to $3,058.3 million in the corresponding period of 2009. Our Offshore Oil and Gas Construction segment experienced a 24%, or $376.6 million reduction in its revenues, attributable primarily to its Middle East operations. Our Power Generation Systems segment experienced a 17%, or $168.1 million reduction in its revenues for the six months ended June 30, 2010 compared to the corresponding period of 2009, attributable primarily to decreases in its new-build environmental, and aftermarket services businesses. Our Government Operations segment generated a 0.4%, or $1.9 million increase in revenues in the six months ended June 30, 2010 compared to the corresponding period of 2009.

Operating income decreased $63.8 million, to $215.1 million in the six months ended June 30, 2010 from $278.9 million for the corresponding period of 2009. The operating income of our Power Generation Systems segment decreased $52.9 million in the six months ended June 30, 2010, as compared to the corresponding period in 2009. In addition, the operating income of our Government Operations segment decreased $16.7 million to $86.5 million in the six months ended June 30, 2010, as compared to the corresponding period in 2009. These decreases were partially offset by an $80.5 million increase in the operating income of our Offshore Oil and Gas Construction segment in the six months ended June 30, 2010, as compared to the corresponding period in 2009. In addition, we experienced costs associated with the spin-off of B&W totaling $90.4 million in the six months ended June 30, 2010. Corporate operating expenses also increased in the six months ended June 30, 2010 compared to the comparable period in 2009.

Offshore Oil and Gas Construction

Revenues decreased approximately 24%, or $376.6 million, to $1,164.6 million in the six months ended June 30, 2010 compared to $1,541.2 million in the corresponding 2009 period. The majority of the decline in revenues was concentrated in the Middle East region, where revenues declined 37%, or $332.4 million. Two substantially complete projects primarily contributed to the decrease, a project for fabrication and installation of decks and pipelines and a project requiring the fabrication and installation of jackets, decks and pipelines. These declines were partially offset by revenues from work performed on new contract awards for platforms, pipelines and topsides. Additionally, we experienced a $40.0 million revenue decline in our Atlantic operations, driven principally by lower activity levels in the Gulf of Mexico, resulting in reduced marine asset utilization.

Operating income increased $80.5 million to $193.3 million in the six months ended June 30, 2010 from $112.8 million for the six months ended June 30, 2009. The increase was primarily concentrated in our Middle East and Asia Pacific regions. Increases in the Middle East resulted largely from the substantial completion of work on certain Qatar projects, which in the first six months of the prior year period accounted for $16.0 million in contract losses, compared to contract profits of approximately $78.0 million in the

first six months of 2010, primarily from change orders and cost savings. Change orders and cost savings on Saudi Arabia projects added to the improvement in the Middle East. Increases in our Asia Pacific operations were influenced by increased activity levels and project improvements. These increases were partially offset by declines in the Atlantic and Caspian regions, reflecting reduced activity levels.

Government Operations

Revenues increased approximately 0.4%, or $1.9 million, to $520.4 million in the six months ended June 30, 2010, compared to $518.5 million in the corresponding period of 2009, primarily attributable to increased volumes in the manufacture of nuclear components for certain U.S. Government programs ($57.7 million) and increased revenues from our management and operating contracts at two government sites. These factors were partially offset by lower volumes in the manufacture of components for a commercial uranium enrichment project ($30.8 million) and lower volumes in commercial manufacturing ($24.5 million).

Operating income decreased $16.7 million to $86.5 million in the six months ended June 30, 2010 compared to $103.2 million for the corresponding period of 2009, primarily attributable to production delays and lower productivity at our NFS facility. In December 2009, we temporarily suspended the operations of NFS in consultation with the NRC following the occurrence of two separate incidents that we reported to the NRC in October and November 2009. The October 2009 incident involved the generation of excessive heat and a hazardous gas at a specialized cleaning station. The incident was caused by the processing of a small amount of uranium-aluminum material in nitric acid. This incident resulted in some damage to piping, but did not result in any injuries to personnel or offsite releases of chemical or radioactive material. The November 2009 incident involved a fire in a glovebox enclosure. The incident was caused by a reaction between fluorine gas in a cylinder of uranium and the fiberglass backing of the teflon lining of a vent hose attached to the cylinder within the glovebox enclosure. This incident resulted in damage to a hose and a faceplate within the glove box enclosure, but did not result in any injuries to personnel or offsite releases of chemical or radioactive material. Inspections conducted separately by the NRC, our existing nuclear liability underwriter and us revealed specific modifications necessary to improve Nuclear Fuel Services, Inc.’s overall safety performance. The suspended operations included production operations, the commercial development line and the highly enriched uranium down-blending facility. These operations are in the process of being brought back on line through a phased restart, which we commenced in March 2010 following completion of a third-party review and NRC review of the modifications that were implemented. The production operations are now fully operational. We began bringing the highly enriched uranium down-blending facility back on line, through a phased restart, in May 2010, and the facility is now substantially fully operational. That line represented less than 0.5% of our combined revenues in 2009. The impact of the shutdown on operating income was approximately $10.0 million in the six months ended June 30, 2010. In addition, we experienced lower volumes in the manufacture of components for a commercial uranium enrichment project and increased general and administrative expenses. In addition, the six months ended June 30, 2009 included favorable contract cost adjustments related to a downblending contract. These factors were partially offset by increased contract productivity and volumes in the manufacture of nuclear components for certain U.S. Government programs and increased fees earned from our management and operating contracts at several government sites. Our equity in income from investees increased $2.1 million to $19.5 million in the six months ended June 30, 2010, compared to $17.4 million in the corresponding period of 2009, primarily attributable to higher fees earned at two of our government sites, partially offset by lower results at our facility in Idaho.

Power Generation Systems

Revenues decreased approximately 17%, or $168.1 million, to $832.1 million in the six months ended June 30, 2010, compared to $1,000.2 million in the corresponding period of 2009. This decrease was primarily attributable to decreases totaling $86.7 million in our new-build environmental business and our selective catalytic reductions systems applications, and decreases totaling $75.3 million in our aftermarket services business, primarily related to a reduction in repair, alteration and maintenance activities. These decreases in revenues were partially offset by increases in revenues from our nuclear service and nuclear steam generator operations. The main driver for these decreases in revenues was a significant decrease in orders in 2009 and particularly in the last six months of 2009. These reductions in orders booked followed a Federal Appeals Court’s overturning of the Clean Air Interstate Rule, the Clean Air Mercury Rule and the Industrial Boiler Rule on Maximum Achievable Control Technology. The overturning of these rules and regulations, along with the uncertainty concerning any new legislation or replacement rules or regulations, has caused many of our major customers, principally electric utilities, to delay making substantial capital expenditures for new plants, as well as upgrades to existing power plants. In addition, considerations surrounding greenhouse gas limits under consideration by the U.S. Congress and the

EPA have delayed the construction of new coal-fired power plants in the United States. These decreases were partially offset by increases in revenues from our nuclear service and nuclear steam generator operations.

Operating income decreased $52.9 million to $49.1 million in the six months ended June 30, 2010 compared to $102.0 million in the corresponding period of 2009. We experienced decreases in our new-build environmental business totaling $16.3 million, our new-build steam generation business totaling $22.3 million and our aftermarket services business totaling $13.5 million, primarily attributable to the decreases in revenues discussed above. In addition, we experienced an increase in our selling, general and administrative expenses totaling $13.2 million, primarily attributable to our acquisition of the electrostatic precipitator aftermarket and emissions monitoring business units of GE Energy, a division of General Electric Company, and increases in our selling and marketing expenses. We also experienced an increase in our research and development expense totaling $13.6 million, primarily attributable to development work on the B&W mPower ^™ initiative. These factors were partially offset by the incurrence of lower warranty expense totaling $7.9 million in the six months ended June 30, 2010, compared to 2009. Our provisions for warranty in the 2009 period included additional warranty provisions related to specific corrective items. In addition we experienced an increase in income of investees totaling $8.9 million in the three months ended June 30, 2010 compared to the corresponding 2009 period primarily attributable to improved results in our joint venture in China from improved margins due to reductions in costs on purchases of materials.

Corporate

Unallocated corporate expenses increased $74.7 million to $113.8 million in the six months ended June 30, 2010, as compared to $39.1 million in the corresponding period in 2009, primarily attributable to increased expenses totaling approximately $90.4 million for severance and professional services related to the spin-off of B&W. These factors were partially offset by lower compensation expenses attributable to reductions in headcount and lower expenses associated with systems development activities in the six months ended June 30, 2010 compared to the corresponding period of 2009.

Other Income Statement Items

Interest income (expense) – net decreased $9.9 million to expense of $3.0 million in the six months ended June 30, 2010, primarily attributable to reduced cash and investment balances ($3.8 million) as well as the write-off of unamortized debt issuance costs associated with the replacement of our previous credit facilities ($4.1 million), lower capitalized interest ($1.3 million), increased borrowings ($1.2 million) and other financing related charges.

Other income (expense) – net decreased by $12.3 million to expense of $8.7 million in the six months ended June 30, 2010 from expense of $21.0 million in the corresponding period of 2009, primarily due to higher currency exchange losses incurred in 2009.

Provision for Income Taxes

For the six months ended June 30, 2010, the provision for income taxes decreased $35.0 million to $53.5 million, while income before provision for income taxes decreased $61.4 million to $203.4 million. Our effective tax rate for the six months ended June 30, 2010 was approximately 26.3%, as compared to 33.4% for the six months ended June 30, 2009. The rate decrease is attributable to a higher mix of non-U.S. versus U.S. income for 2010 partially offset by valuation allowances on certain domestic assets due to the spin-off of the B&W business.

Income before provision for income taxes, provision for income taxes and effective tax rates for our U.S. and non-U.S. jurisdictions are as shown below (In thousands) (Unaudited):


	Income before Provision for Income Taxes				Provision for Income Taxes				Effective Tax Rate
	For the six months ended June 30,
	2010		2009		2010		2009		2010		2009
United States	$	36,570	$	129,554	$	22,792	$	54,841	62.32	%	42.33	%
Non-United States		166,785		135,265		30,752		33,682	18.43	%	24.90	%

Total	$	203,355	$	264,819	$	53,544	$	88,523	26.33	%	33.42	%

Backlog

Backlog is not a measure recognized by generally accepted accounting principles. It is possible that our methodology for determining backlog may not be comparable to methods used by other companies. We generally include expected revenue in our backlog when we receive written confirmation from our customers. Backlog may not be indicative of future operating results, and projects in our backlog may be cancelled, modified or otherwise altered by customers.


	June 30, 2010		December 31, 2009
	(Unaudited)
	(In millions)
Offshore Oil and Gas Construction	$	4,266	$	3,371
Government Operations		2,554		2,766
Power Generation Systems		1,816		1,974

Total Backlog	$	8,636	$	8,111

Of the June 30, 2010 backlog, we expect to recognize revenues as follows:


	2010		2011		Thereafter
	(Unaudited)
	(In approximate millions)
Offshore Oil and Gas Construction	$	1,500	$	1,750	$	1,016
Government Operations		500		800		1,254
Power Generation Systems		550		600		666

Total Backlog	$	2,550	$	3,150	$	2,936

At June 30, 2010, Government Operations backlog with the U.S. Government was $2.5 billion, which was substantially fully funded. Only $32.8 million had not been funded as of June 30, 2010.

We believe the current worldwide credit and economic environment and short-term uncertainty regarding environmental regulations, has affected the electric utility industry more than our other customers. As these factors affect electrical consumption and customer demand, our bookings during the two most recent quarters have been lower than recent periods. While we have not experienced significant delays on existing projects in our Power Generation Systems’ backlog, we have experienced increasing delays in expected bookings on new planned projects.

At June 30, 2010, Power Generation Systems backlog with the U.S. Government was $9.3 million, all of which was fully funded.

Liquidity and Capital Resources

Offshore Oil and Gas Construction

On May 3, 2010, MII and JRMSA entered into a Credit Agreement (the “JRMSA Credit Agreement”) with a syndicate of lenders and letter of credit issuers, and Crédit Agricole Corporate and Investment Bank, as administrative agent and collateral agent. The JRMSA Credit Agreement provides for revolving credit borrowings and issuances of letters of credit in an aggregate outstanding amount of up to $900.0 million, and the JRMSA Credit Agreement is scheduled to mature on May 3, 2014. Proceeds from borrowings under the JRMSA Credit Agreement are available for working capital needs and other general corporate purposes of our Offshore Oil and Gas Construction segment.

The JRMSA Credit Agreement is guaranteed by substantially all of JRMSA’s wholly owned subsidiaries, and by certain other subsidiaries of MII.

Other than customary mandatory prepayments in connection with casualty events, the JRMSA Credit Agreement requires only interest payments on a quarterly basis until maturity. The borrower under the JRMSA Credit Agreement may prepay all loans under the JRMSA Credit Agreement at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements, amounts outstanding under the JRMSA Credit Agreement at any time without penalty.

The JRMSA Credit Agreement contains customary financial covenants relating to leverage and interest coverage and includes covenants that restrict, among other things, debt incurrence, liens, investments, acquisitions, asset dispositions, dividends, prepayments of subordinated debt, mergers, and capital expenditures.

Loans outstanding under the JRMSA Credit Agreement bear interest at the borrower’s option at either the Eurodollar rate plus a margin ranging from 2.50% to 3.50% per year or the base rate (the highest of the Federal Funds rate plus 0.50%, the 30-day Eurodollar rate plus 1.0%, or the administrative agent’s prime rate) plus a margin ranging from 1.50% to 2.50% per year. The applicable margin for revolving loans varies depending on the credit ratings of the JRMSA Credit Agreement. The borrower under the JRMSA Credit Agreement is charged a commitment fee on the unused portions of the JRMSA Credit Agreement, and that fee varies between 0.375% and 0.625% per year depending on the credit ratings of the JRMSA Credit Agreement. Additionally, the borrower under the JRMSA Credit Agreement is charged a letter of credit fee of between 2.50% and 3.50% per year with respect to the amount of each financial letter of credit issued under the JMRSA Credit Agreement and a letter of credit fee of between 1.25% and 1.75% per year with respect to the amount of each performance letter of credit issued under the JRMSA Credit Agreement, in each case depending on the credit ratings of the JRMSA Credit Agreement. The borrower under the JRMSA Credit Agreement also pays customary issuance fees and other fees and expenses in connection with the issuance of letters of credit under the JRMSA Credit Agreement. In connection with entering into the JRMSA Credit Agreement, JRMSA paid certain up-front fees to the lenders thereunder, and JRMSA paid certain arrangement and other fees to the arrangers and agents of the JRMSA Credit Agreement. At June 30, 2010, there were no borrowings outstanding and letters of credit issued under the JRMSA Credit Agreement totaled $247.9 million. At June 30, 2010, there was $652.1 million available for borrowings or to meet letter of credit requirements under the JRMSA Credit Agreement. Borrowings under this facility during the June 30, 2010 quarter had an applicable interest rate of approximately 5.25% per year.

Based on the current credit ratings of the JRMSA Credit Agreement, the applicable margin for Eurodollar-rate loans is 3.00%, the applicable margin for base-rate loans is 2.00%, the letter of credit fee for financial letters of credit is 3.00%, the letter of credit fee for performance letters of credit is 1.50%, and the commitment fee for unused portions of the JRMSA Credit Agreement is 0.50%. The JRMSA Credit Agreement does not have a floor for the base rate or the Eurodollar rate.

Government Operations and Power Generation Systems

The BWICO Credit Agreement is guaranteed by substantially all of BWICO’s wholly owned domestic subsidiaries. Upon the completion of the spin-off of The Babcock & Wilcox Company, substantially all of The Babcock & Wilcox Company’s wholly owned domestic subsidiaries that are not already guarantors under the BWICO Credit Agreement will become guarantors. Obligations under the BWICO Credit Agreement are secured by first-priority liens on certain assets owned by BWICO and the guarantors (other than BWX Technologies, Inc. (“BWXT”) and its subsidiaries). Upon completion of the spin-off of The Babcock & Wilcox Company, The Babcock & Wilcox Company and its wholly owned domestic subsidiaries that become guarantors under the BWICO Credit Agreement will grant liens on certain assets owned by them.

The BWICO Credit Agreement requires only interest payments on a quarterly basis until maturity. The borrower under the BWICO Credit Agreement may prepay all loans under the BWICO Credit Agreement at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements.

The BWICO Credit Agreement contains customary financial covenants relating to leverage and interest coverage and includes covenants that restrict, among other things, debt incurrence, liens, investments, acquisitions, asset dispositions, dividends, prepayments of subordinated debt, mergers, and capital expenditures.

Loans outstanding under the BWICO Credit Agreement bear interest at the borrower’s option at either the Eurodollar rate plus a margin ranging from 2.50% to 3.50% per year or the base rate (the highest of the Federal Funds rate plus 0.50%, the 30-day Eurodollar rate plus 1.0%, or the administrative agent’s prime rate) plus a margin ranging from 1.50% to 2.50% per year. The applicable margin for revolving loans varies depending on the credit ratings of the BWICO Credit Agreement. The borrower under the BWICO Credit Agreement is charged a commitment fee on the unused portions of the BWICO Credit Agreement, and that fee varies between 0.375% and 0.625% per year depending on the credit ratings of the BWICO Credit Agreement. Additionally, the borrower under the BWICO Credit Agreement is charged a letter of credit fee of between 2.50% and 3.50% per year with respect to the amount of each financial letter of credit issued under the BWICO Credit Agreement and a letter of credit fee of between 1.25% and 1.75% per year with respect to the amount of each performance letter of credit issued under the BWICO Credit Agreement, in each case depending on the credit ratings of the BWICO Credit Agreement. The borrower under the BWICO Credit Agreement also pays customary issuance fees and other fees and expenses in connection with the issuance of letters of credit under the BWICO Credit Agreement. In connection with entering into the BWICO Credit Agreement, BWICO paid certain upfront fees to the lenders thereunder, and BWICO paid certain arrangement and other fees to the arrangers and agents of the BWICO Credit Agreement. At June 30, 2010, there were no borrowings outstanding but letters of credit issued under the BWICO Credit Agreement totaled $261.7 million. At June 30, 2010, there was $438.3 million available for borrowings or to meet letter of credit requirements under the BWXT Credit Facility. If there had been borrowings under this facility, the applicable interest rate at June 30, 2010 would have been 4.75 % per year.

Based on the current credit ratings of the BWICO Credit Agreement, the applicable margin for Eurodollar-rate loans is 2.50%, the applicable margin for base-rate loans is 1.50%, the letter of credit fee for financial letters of credit is 2.50%, the letter of credit fee for performance letters of credit is 1.25%, and the commitment fee for unused portions of the BWICO Credit Agreement is 0.375%. The BWICO Credit Agreement does not have a floor for the base rate or the Eurodollar rate.

At June 30, 2010, Nuclear Fuel Services, Inc., a subsidiary of BWXT, had $3.5 million in letters of credit issued by various commercial banks on its behalf. The obligations to the commercial banks issuing such letters of credit are secured by cash, short-term certificates of deposit and certain real and intangible assets.

Certain foreign subsidiaries of B&W PGG have credit arrangements with various commercial banks for the issuance of bank guarantees. The aggregate value of all such bank guarantees as of June 30, 2010 was $9.3 million.

MII, B&W PGG and Babcock & Wilcox Holdings, Inc. jointly executed general agreements of indemnity in favor of surety underwriters relating to surety bonds those underwriters issued in support of B&W PGG’s contracting activity. As of June 30, 2010, bonds issued under these arrangements in support of contracts totaled approximately $106.4 million. Any claim successfully asserted against such surety by one or more of the bond obligees would likely be recoverable from MII, B&W PGG and Babcock & Wilcox Holdings, Inc. under the indemnity agreement.

Other

In aggregate, our cash and cash equivalents, restricted cash and cash equivalents and investments decreased by $101.4 million to $1,096.5 million at June 30, 2010 from $1,197.9 million at December 31, 2009, primarily due to cash used in operating activities and purchases of property, plant and equipment.

Our working capital, excluding cash and cash equivalents and restricted cash and cash equivalents, increased by $172.2 million to a negative $448.1 million at June 30, 2010 from a negative $620.3 million at December 31, 2009, primarily due to the increase in the net amount of contracts in progress and advance billings on contracts.

Our net cash provided by operations was $71.6 million in the six months ended June 30, 2010, compared to $103.0 million in the six months ended June 30, 2009. This increase was primarily attributable to a reduction in accounts receivable and improvements in our net contracts in progress and advance billings.

Our net cash used in investing activities increased by $161.4 million to $172.6 million in the six months ended June 30, 2010 from $11.2 million in the six months ended June 30, 2009. This increase was primarily attributable to an increase in capital expenditures and restricted cash in the current period.

Our net cash used in financing activities increased by $14.0 million to $18.9 million in the six months ended June 30, 2010 from $4.9 million in the six months ended June 30, 2009. This increase was primarily attributable to payment of debt issuance costs and payment on our long-term debt in the current period.

At June 30, 2010, we had restricted cash and cash equivalents totaling $150.7 million, $139.7 million of which was held in restricted foreign accounts, $3.5 million, of which was held as cash collateral for letters of credit, $4.0 million, of which was held for future decommissioning of facilities, $2.9 million, of which was held in other restricted cash accounts, and $0.6 million, of which was held to meet reinsurance reserve requirements of our captive insurance companies.

At June 30, 2010, we had investments with a fair value of $168.2 million. Our investment portfolio consists primarily of investments in government obligations and other highly liquid money market instruments. As of June 30, 2010, we had pledged approximately $32.6 million fair value of these investments in connection with certain reinsurance agreements.

Our investments are classified as available for sale and are carried at fair value with unrealized gains and losses, net of tax, reported as a component of other comprehensive loss. Our net unrealized gain (loss) on investments was in an unrealized loss position totaling $5.6 million at June 30, 2010. At December 31, 2009, we had unrealized losses on our investments totaling $6.9 million. The major components of our investments in an unrealized loss position are corporate bonds, asset-backed obligations and commercial paper. Based on our analysis of these investments, we believe that none of our available-for-sale securities were permanently impaired at June 30, 2010.

See Note 1 to our unaudited condensed consolidated financial statements included in this report for information on new and recently adopted accounting standards.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Our exposures to market risks have not changed materially from those disclosed in Item 7A included in Part II of our annual report on Form 10-K for the year ended December 31, 2009.

Item 4.

Controls and Procedures

As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) adopted by the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Our disclosure controls and procedures were developed through a process in which our management applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding the control objectives. You should note that the design of any system of disclosure controls and procedures is based in part upon various assumptions about the likelihood of future

events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based on the evaluation referred to above, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures are effective as of June 30, 2010 to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and such information is accumulated and communicated to management as appropriate to allow timely decisions regarding disclosure. There has been no change in our internal control over financial reporting during the quarter ended June 30, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

For information regarding ongoing investigations and litigation, see Note 3 to our unaudited condensed consolidated financial statements in Part I of this report, which we incorporate by reference into this Item.

Item 1A.

Risk Factors

There have been no material changes from the risk factors as previously disclosed in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009 and “Item 1A. Risk Factors” of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information on our purchases of equity securities during the quarter ended June 30, 2010, all of which involved repurchases of restricted shares of MII common stock pursuant to the provisions of employee benefit plans that permit the repurchase of restricted shares to satisfy statutory tax withholding obligations associated with the lapse of restrictions applicable to those shares:


Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
April 1 – April 30, 2010	—	$	—	not applicable	not applicable
May 1 – May 31, 2010	325,226		23.71	not applicable	not applicable
June 1 – June 30, 2010	863		22.58	not applicable	not applicable

Total	326,089	$	23.21	not applicable	not applicable

Item 5.

Other Information

On August 6, 2010, our Board of Directors approved new forms of change-in-control agreements for use with certain of our officers, including: Stephen M. Johnson, our President and Chief Executive Officer and Perry L. Elders, our Senior Vice President and Chief Financial Officer. Accordingly, we are entering into new change-in-control agreements with these officers based on the new forms. Under the respective agreements, following terminations for various reasons following a “change in control,” we would, among other things, pay: (1) Mr. Johnson a cash severance payment of 2.99 times his annual base salary and target bonus under our executive incentive compensation plan (the “EICP”) and a pro-rated bonus payment under the EICP; and (2) Mr. Elders and each other applicable officer a cash severance payment of two times his or her annual base salary and target bonus under the EICP and a pro-rated bonus payment under the EICP. In addition, each such officer would become fully vested in any outstanding and unvested equity-based awards and their respective account balance in our supplemental executive retirement plan (the “SERP”).

As was the case with the forms of change-in-control agreement we previously had in place, the new change-in-control agreements contain what is commonly referred to as a “double trigger,” that is, they provide benefits only upon an involuntary termination or constructive termination of the executive officer within one year following a change in control. In addition, the new change-in-control agreements: (1) do not provide for excise tax gross-ups (and, therefore, effectively eliminate such tax gross-up provisions that were contained in certain of the agreements being replaced); (2) require the applicable officer’s execution of a release prior to payment of certain benefits; and (3) provide for the potential reduction in payments to an applicable officer in order to avoid excise taxes.

Also on August 6, 2010, our Board of Directors reviewed the annual base salary and Executive Incentive Compensation Plan (“EICP”) award opportunity of Mr. Johnson in connection with his promotion to Chief Executive Officer. The Board of Directors approved an increase in Mr. Johnson’s salary, effective August 1, 2010, from $768,750 to $920,000, and approved an increase in Mr. Johnson’s EICP award opportunity as a percentage of his actual base salary compensation from 85% to 100%.

On the same date, the Compensation Committee of our Board of Directors selected, among others, Mr. Elders to participate in the SERP, effective and for the period beginning on August 1, 2010.

Item 6.

Exhibits

Exhibit 2.1* – Master Separation Agreement, dated as of July 2, 2010, between McDermott International, Inc. and The Babcock & Wilcox Company (incorporated by reference to Exhibit 2.1 to McDermott International, Inc.’s Current Report on Form 8-K filed on July 2, 2010 (File No. 1-08430)).

Exhibit 3.2* – McDermott International, Inc.’s Amended and Restated By-Laws (incorporated by reference to Exhibit 3.1 to McDermott International, Inc.’s Current Report on Form 8-K dated May 3, 2006 (File No. 1-08430)).

Exhibit 3.3* – Amended and Restated Certificate of Designation of Series D Participating Preferred Stock (incorporated by reference to Exhibit 3.3 to McDermott International, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 (File No. 1-08430)).

Exhibit 4.1* – Credit Agreement dated as of May 3, 2010, among J. Ray McDermott, S.A., McDermott International, Inc., the lenders and letter of credit issuers party thereto, and Crédit Agricole Corporate and Investment Bank, as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to McDermott International, Inc.’s Current Report on Form 8-K filed on May 7, 2010 (File No. 1-08430)).

Exhibit 4.2* – Pledge and Security Agreement dated as of May 3, 2010, by McDermott International, Inc., J. Ray McDermott, S.A. and certain of its subsidiaries in favor of Crédit Agricole Corporate and Investment Bank, as administrative agent and collateral Agent (incorporated by reference to Exhibit 10.2 to McDermott International, Inc.’s Current Report on Form 8-K filed on May 7, 2010 (File No. 1-08430)).

Exhibit 4.3 – New Borrower Joinder Agreement dated as of August 6, 2010, among McDermott International, Inc., J. Ray McDermott, S.A., and Crédit Agricole Corporate and Investment Bank, as administrative agent and collateral agent.

Exhibit 4.4* – Credit Agreement dated as of May 3, 2010, among Babcock & Wilcox Investment Company, the lenders and letter of credit issuers party thereto, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.3 to McDermott International, Inc.’s Current Report on Form 8-K filed on May 7, 2010 (File No. 1-08430)).

Exhibit 4.5* – Pledge and Security Agreement dated as of May 3, 2010, by Babcock & Wilcox Investment Company and certain of its subsidiaries in favor of Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.4 to McDermott International, Inc.’s Current Report on Form 8-K filed on May 7, 2010 (File No. 1-08430)).

Exhibit 10.1* – Employee Matters Agreement, dated as of July 2, 2010, among McDermott International, Inc., McDermott Investments LLC, The Babcock & Wilcox Company and Babcock & Wilcox Investment Company (incorporated by reference to Exhibit 10.1 to McDermott International, Inc.’s Current Report on Form 8-K filed on July 2, 2010 (File No. 1-08430)).

Exhibit 10.2 – Amendment to Employee Matters Agreement, dated as of August 2, 2010, among McDermott International, Inc., McDermott Investments, LLC, The Babcock & Wilcox Company and Babcock & Wilcox Investment Company.

Exhibit 10.3 – Tax Sharing Agreement dated as of June 7, 2010 between J. Ray Holdings, Inc. and Babcock & Wilcox Holdings, Inc.

Exhibit 10.4 – Transition Services Agreement dated as of July 2, 2010 between McDermott International, Inc. as service provider and The Babcock & Wilcox Company as service receiver.

Exhibit 10.5 – Transition Services Agreement dated as of July 2, 2010 between The Babcock & Wilcox Company as service provider and McDermott International, Inc. as service receiver.

Exhibit 10.6 – Assumption and Loss Allocation Agreement dated as of May 18, 2010 by and among ACE American Insurance Company and the Ace Affiliates (as defined therein), McDermott International, Inc. and Babcock & Wilcox Holdings, Inc.

Exhibit 10.7 – Novation and Assumption Agreement dated as of May 18, 2010 by and among ACE American Insurance Company and the Ace Affiliates (as defined therein), Creole Insurance Company, Ltd. and Boudin Insurance Company, Ltd.

Exhibit 10.8 – Novation and Assumption Agreement dated as of May 18, 2010 by and among McDermott International, Inc., Babcock & Wilcox Holdings, Inc., Boudin Insurance Company, Ltd. and Creole Insurance Company, Ltd.

Exhibit 10.9 – Form of Change in Control Agreement to be entered into among McDermott International, Inc., J. Ray McDermott, Inc. and Stephen M. Johnson.

Exhibit 10.10 – Form of Change in Control Agreement to be entered into among McDermott International, Inc., J. Ray McDermott, Inc. and each of Perry L. Elders and certain other officers.

Exhibit 10.11 – Form of Change in Control Agreement to be entered into among McDermott International, Inc., J. Ray McDermott, Inc. and each of Liane K. Hinrichs and John T. Nesser, III.

Exhibit 31.1 – Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer.

Exhibit 31.2 – Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer.

Exhibit 32.1 – Section 1350 certification of Chief Executive Officer.

Exhibit 32.2 – Section 1350 certification of Chief Financial Officer.

101.INS – XBTL Instance Document

101.SCH – XBRL Taxonomy Extension Schema Document

101.CAL – XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF – XBRL Taxonomy Extension Definition Linkbase Document

101.LAB – XBRL Taxonomy Extension Label Linkbase Document

101.PRE – XBRL Taxonomy Extension Presentation Linkbase Document

^*	Incorporated by reference to the filing indicated.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


McDERMOTT INTERNATIONAL, INC.

By:		/ S / P ERRY L. E LDERS
		Perry L. Elders
		Senior Vice President and Chief Financial Officer (Principal Financial Officer and Duly Authorized Representative)

August 9, 2010

EXHIBIT INDEX


Exhibit Number		Description

2.1*		Master Separation Agreement, dated as of July 2, 2010, between McDermott International, Inc. and The Babcock & Wilcox Company (incorporated by reference to Exhibit 2.1 to McDermott International, Inc.’s Current Report on Form 8-K filed on July 2, 2010 (File No. 1-08430)).

3.2*		McDermott International, Inc.’s Amended and Restated By-Laws (incorporated by reference to Exhibit 3.1 to McDermott International, Inc.’s Current Report on Form 8-K dated May 3, 2006 (File No. 1-08430)).

3.3*		Amended and Restated Certificate of Designation of Series D Participating Preferred Stock (incorporated by reference to Exhibit 3.3 to McDermott International, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 (File No. 1-08430)).

4.1*		Credit Agreement dated as of May 3, 2010, among J. Ray McDermott, S.A., McDermott International, Inc., the lenders and letter of credit issuers party thereto, and Crédit Agricole Corporate and Investment Bank, as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to McDermott International, Inc.’s Current Report on Form 8-K filed on May 7, 2010 (File No. 1-08430)).

4.2*		Pledge and Security Agreement dated as of May 3, 2010, by McDermott International, Inc., J. Ray McDermott, S.A. and certain of its subsidiaries in favor of Crédit Agricole Corporate and Investment Bank, as administrative agent and collateral Agent (incorporated by reference to Exhibit 10.2 to McDermott International, Inc.’s Current Report on Form 8-K filed on May 7, 2010 (File No. 1-08430)).

4.3		New Borrower Joinder Agreement dated as of August 6, 2010, among McDermott International, Inc., J. Ray McDermott, S.A., and Crédit Agricole Corporate and Investment Bank, as administrative agent and collateral agent.

4.4*		Credit Agreement dated as of May 3, 2010, among Babcock & Wilcox Investment Company, the lenders and letter of credit issuers party thereto, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.3 to McDermott International, Inc.’s Current Report on Form 8-K filed on May 7, 2010 (File No. 1-08430)).

4.5*		Pledge and Security Agreement dated as of May 3, 2010, by Babcock & Wilcox Investment Company and certain of its subsidiaries in favor of Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.4 to McDermott International, Inc.’s Current Report on Form 8-K filed on May 7, 2010 (File No. 1-08430)).

10.1*		Employee Matters Agreement, dated as of July 2, 2010, among McDermott International, Inc., McDermott Investments LLC, The Babcock & Wilcox Company and Babcock & Wilcox Investment Company (incorporated by reference to Exhibit 10.1 to McDermott International, Inc.’s Current Report on Form 8-K filed on July 2, 2010 (File No. 1-08430)).

10.2		Amendment to Employee Matters Agreement, dated as of August 2, 2010, among McDermott International, Inc., McDermott Investments, LLC, The Babcock & Wilcox Company and Babcock & Wilcox Investment Company.

10.3		Tax Sharing Agreement dated as of June 7, 2010 between J. Ray Holdings, Inc. and Babcock & Wilcox Holdings, Inc.

10.4		Transition Services Agreement dated as of July 2, 2010 between McDermott International, Inc. as service provider and The Babcock & Wilcox Company as service receiver.

10.5		Transition Services Agreement dated as of July 2, 2010 between The Babcock & Wilcox Company as service provider and McDermott International, Inc. as service receiver.

10.6		Assumption and Loss Allocation Agreement dated as of May 18, 2010 by and among ACE American Insurance Company and the Ace Affiliates (as defined therein), McDermott International, Inc. and Babcock & Wilcox Holdings, Inc.

10.7		Novation and Assumption Agreement dated as of May 18, 2010 by and among ACE American Insurance Company and the Ace Affiliates (as defined therein), Creole Insurance Company, Ltd. and Boudin Insurance Company, Ltd.



10.8		Novation and Assumption Agreement dated as of May 18, 2010 by and among McDermott International, Inc., Babcock & Wilcox Holdings, Inc., Boudin Insurance Company, Ltd. and Creole Insurance Company, Ltd.

10.9		Form of Change in Control Agreement to be entered into among McDermott International, Inc., J. Ray McDermott, Inc. and Stephen M. Johnson.

10.10		Form of Change in Control Agreement to be entered into among McDermott International, Inc., J. Ray McDermott, Inc. and each of Perry L. Elders and certain other officers.

10.11		Form of Change in Control Agreement to be entered into among McDermott International, Inc., J. Ray McDermott, Inc. and each of Liane K. Hinrichs and John T. Nesser, III.

31.1		Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer.

31.2		Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer.

32.1		Section 1350 certification of Chief Executive Officer.

32.2		Section 1350 certification of Chief Financial Officer.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*	Incorporated by reference to the filing indicated.

Exhibit 4.3

EXECUTION VERSION

NEW BORROWER JOINDER AGREEMENT

This New Borrower Joinder Agreement (this “ Agreement ”) dated August 6, 2010 is made by McDermott International, Inc., a Panamanian corporation (the “ New Borrower ”) and J. Ray McDermott, S.A., a Panamanian corporation (the “ Initial Borrower ”), in favor of (a) Crédit Agricole Corporate and Investment Bank (“ CA CIB ”), as administrative agent (in such capacity and together with its successors in such capacity, the “ Administrative Agent ”) for the Lenders and the Issuers and collateral agent (in such capacity and together with its successors in such capacity, the “ Collateral Agent ”) for the Secured Parties and (b) the Lenders and the Issuers from time to time parties to the Credit Agreement described and defined below.

WHEREAS, the Initial Borrower and the New Borrower entered into the Credit Agreement dated May 3, 2010 (as amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”) with the Lenders, the Issuers and CA CIB, as administrative agent and collateral agent for the Lenders and the Issuers. Terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement;

WHEREAS, in connection with the Credit Agreement, the Initial Borrower, the New Borrower and certain of their Subsidiaries entered into the Pledge and Security Agreement, dated as of May 3, 2010 (as amended, restated, supplemented or otherwise modified from time to time, the “ Pledge and Security Agreement ”) in favor of the Collateral Agent and the Administrative Agent for the benefit of the Secured Parties;

WHEREAS, the Spin occurred on July 30, 2010;

WHEREAS, the Credit Agreement requires (a) the New Borrower to (i) assume the obligations as the “Borrower” under the Credit Agreement, and (ii) assume the obligations as a Grantor under the Pledge and Security Agreement, and (b) the Initial Borrower to assume the obligations as a Guarantor under the Pledge and Security Agreement, in each case substantially simultaneously with the effectiveness of the Spin;

WHEREAS, the New Borrower has agreed to execute and deliver this Agreement in order to confirm its assumption of the obligations as the “Borrower” under the Credit Agreement and the other Loan Documents, as applicable, and to confirm its assumption of the obligations as a “Grantor” under the Pledge and Security Agreement; and

WHEREAS, the Initial Borrower has agreed to execute and deliver this Agreement in order to confirm its assumption of the obligations as a “Guarantor” under the Pledge and Security Agreement.

NOW, THEREFORE, IT IS AGREED:

SECTION 1. Assumption of Borrower and Grantor Obligations .

(a) The New Borrower, as contemplated by Sections 8.19 and 11.21 of the Credit Agreement, hereby confirms that it assumed (i) each and every one of the covenants, promises, agreements, terms, obligations (including the obligations of the Initial Borrower as the “ Borrower ” under the Notes), duties and liabilities of the Borrower under the Credit Agreement and the other Loan Documents applicable to it as the Borrower and (ii) all liability of the Initial Borrower related to each representation, warranty, covenant or obligation made by the Borrower in the Credit Agreement or any other Loan Document, in each case effective as of immediately after the effective time of the Spin (such time, the “ Assumption Time ”), as applicable. Without limiting the generality of the foregoing, the New Borrower hereby expressly (x) assumes, and hereby agrees to perform and observe and be bound by, each and every one of the covenants, promises, agreements, terms, obligations, duties and liabilities of the Borrower under the Credit Agreement and each other Loan Document applicable to it as the Borrower and (y) accepts and assumes all liability of the Initial Borrower related to each representation, warranty, covenant or obligation made by the Borrower in the Credit Agreement or any other Loan Document. The New Borrower hereby certifies that:

(1) after giving effect to the Spin, the representations and warranties set forth in Article IV of the Credit Agreement and in the other Loan Documents that have no materiality or Material Adverse Effect qualification were true and correct in all material respects and the representations set forth in Article IV of the Credit Agreement and in the other Loan Documents that have a materiality or Material Adverse Effect qualification were true and correct in all respects, in each case with the same effect as though made at and as of the Assumption Time or, to the extent such representations and warranties expressly relate to an earlier date, as of such earlier date,

(2) the Spin was undertaken as contemplated by the Spin Steps,

(3) no Default or Event of Default existed at the time of, or after giving effect to, the completion of all transactions entered into in connection with the Spin,

(4) the Borrower was in pro forma compliance with the covenants set forth in Article V of the Credit Agreement as of the last day of the most recently completed four Fiscal Quarter period for which financial statements and certificates required by Section 6.1(a) or (b) of the Credit Agreement were delivered, and

(5) other than the Affiliate Agreements and as otherwise disclosed to the Administrative Agent, there are no material agreements between or among the New Borrower and its Subsidiaries (or any of them), on the one hand, and the Babcock Entities (or any of them), on the other hand, that remain in effect after the Spin.

(b) The New Borrower, as contemplated by Section 11.21 of the Credit Agreement and Section 8.17 of the Pledge and Security Agreement hereby further confirms that it assumed each and every one of the covenants, promises, agreements, terms, obligations, duties

and liabilities of a Grantor (as defined in the Pledge and Security Agreement) under the Pledge and Security Agreement effective as of the Assumption Time. In accordance with the terms of the Pledge and Security Agreement and without limiting the generality of the foregoing, the New Borrower hereby expressly assumes each and every one of the covenants, promises, agreements, terms, obligations, duties and liabilities of a Grantor under the Pledge and Security Agreement and assigns and transfers to the Collateral Agent, and hereby grants to the Collateral Agent, for the ratable benefit of the Secured Parties, a security interest in the New Borrower’s right, title and interest in and to the Collateral (as such term is defined in the Pledge and Security Agreement), wherever located and whether now owned or at any time hereafter acquired by the New Borrower or in which the New Borrower now has or at any time in the future may acquire any right, title or interest, as security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Borrower’s Obligations. The information set forth in Annex 1 hereto is hereby added to the information set forth in Schedules 4.3, 4.4 and 4.7 to the Pledge and Security Agreement.

(c) The undersigned acknowledge that, effective as of the Assumption Time, (i) all references to the term “Borrower” in the Credit Agreement or in any other Loan Document or in any document or instrument executed and delivered or furnished, or to be executed and delivered or furnished, in connection therewith shall be deemed to be a reference to, and shall include, the New Borrower and (ii) all references to the term “Grantor” in the Pledge and Security Agreement or in any document or instrument executed and delivered or furnished, or to be executed and delivered or furnished, in connection therewith shall be deemed to be a reference to, and shall include, the New Borrower.

SECTION 2. Acknowledgment by Initial Borrower and Confirmation of Guarantee . The Initial Borrower, as contemplated by Section 11.21 of the Credit Agreement and Section 8.17 of the Pledge and Security Agreement hereby confirms that, as of the Assumption Time, it (a) assumed each and every one of the covenants, promises, agreements, terms, obligations, duties and liabilities of a Guarantor (as defined in the Pledge and Security Agreement) under the Pledge and Security Agreement and (b) guaranteed the Borrower’s Obligations pursuant to Section 2 of the Pledge and Security Agreement. In accordance with the terms of the Pledge and Security Agreement and without limiting the generality of the foregoing, the Initial Borrower hereby expressly (i) assumes, and hereby agrees to perform and observe and be bound by, each and every one of the covenants, promises, agreements, terms, obligations, duties and liabilities of a Guarantor under the Pledge and Security Agreement and (ii) guarantees the Borrower’s Obligations pursuant to Section 2 of the Pledge and Security Agreement.

SECTION 3. GOVERNING LAW . THIS JOINDER AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICTS OF LAWS PROVISIONS.

[Signature pages follow.]

IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written.


MCDERMOTT INTERNATIONAL, INC.

By:		/s/ John E. Roueche
Name:		John E. Roueche
Title:		Treasurer

J. RAY MCDERMOTT, S.A.

By:		/s/ John E. Roueche
Name:		John E. Roueche
Title:		Treasurer

Acknowledged and agreed to as of the date first above written:


CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK, as administrative agent and collateral agent

By:		/s/ Page Dillehunt
Name:		Page Dillehunt
Title:		Managing Director

By:		/s/ Sharada Manne
Name:		Sharada Manne
Title:		Director

Signature page to New Borrower Joinder Agreement

ANNEX 1

TO NEW BORROWER

JOINDER AGREEMENT

ANNEX 1

SCHEDULE 4.3

TO PLEDGE AND SECURITY AGREEMENT

PERFECTED FIRST PRIORITY LIENS

UCC Filings

A UCC1 Financing Statement listing McDermott International, Inc., as debtor, and the Collateral Agent, as secured party, should be filed in the applicable governmental office set forth below. Such UCC1 Financing Statement will need to include a description of the Collateral that complies with Section 9-504 of the Uniform Commercial Code.


Grantor		Jurisdiction of Filing
McDermott International, Inc.		Texas Secretary of State

SCHEDULE 4.4

TO PLEDGE AND SECURITY AGREEMENT

NAME; JURISDICTION OF ORGANIZATION, ETC.


Exact Legal Name of Grantor	Type of Organization	Jurisdiction of Organization	Organizational Identification Number	Chief Executive Office

McDermott International, Inc.	Corporation	Panama	N/A	757 N. Eldridge Parkway Houston, TX 77079-4435

SCHEDULE 4.7

TO PLEDGE AND SECURITY AGREEMENT

INVESTMENT PROPERTY

Pledged Stock :


Grantor	Issuer	Type of Organization	# of Shares Owned	Total Shares Outstanding	% of Interest ¹ Pledged		Certificate No.	Par Value

McDermott International, Inc.	J. Ray McDermott, S.A.	Corporation	500	500	100	%	5	US$	0.01

McDermott International, Inc.	McDermott Cayman Ltd.	Corporation	1,000	1,000	100	%	1	US$	0.01

McDermott International, Inc.	McDermott International Investments Co., Inc.	Corporation	100,000	100,000	100	%	1	$	1.00

¹	This value represents the percentage interest of the Issuer being pledged by the specific Grantor.

ANNEX 1

TO NEW BORROWER

JOINDER AGREEMENT

Pledged LLC Interests :

Grantor

Issuer

Type of
Organization

# of
Shares Owned

Total
Shares
Outstanding

% of Interest ²
Pledged

Certificate No.

Par Value

McDermott International, Inc.

J. Ray McDermott (Luxembourg) S.a.r.l.

LLC

12,500

100

Uncertificated

Euro$

1.00

McDermott International, Inc.

McDermott Kft.

LLC

100

N/A

100

Uncertificated

N/A

²	This value represents the percentage interest of the Issuer being pledged by the specific Grantor.

Exhibit 10.2

AMENDMENT TO EMPLOYEE MATTERS AGREEMENT

THIS AMENDMENT TO EMPLOYEE MATTERS AGREEMENT dated as of August 3, 2010 (this “Amendment”) is among McDermott International, Inc., a Panamanian corporation (“MII”), McDermott Investments, LLC, a Delaware limited liability company (“MI”), The Babcock & Wilcox Company, a Delaware corporation (“B&W”), and Babcock & Wilcox Investment Company, a Delaware corporation (“BWICO” and, together with MII, MI and B&W, the “Parties”).

PRELIMINARY STATEMENT

WHEREAS, the Parties are parties to an Employee Matters Agreement dated as of July 2, 2010 (the “Employee Matters Agreement”; capitalized terms used but not defined in this Amendment shall have the respective meanings given such terms in the Employee Matters Agreement); and

WHEREAS, the Employee Matters Agreement contains provisions relating to adjustments to equity-based awards held by B&W Employees, McDermott Employees and other grantees, which adjustments are generally designed to preserve the pre-Distribution values of those awards, such that the intrinsic values of those awards generally would be the same immediately after the Distribution as they were immediately prior to the Distribution;

WHEREAS, the defined terms “Post-Distribution B&W Share Price” and “Post-Distribution MII Share Price” were intended to be determined on a basis that, taken together (and after taking into account the Distribution Multiple, as defined in the Master Separation Agreement), they would equal the Pre-Distribution MII Share Price;

WHEREAS, the Parties desire to amend the Employee Matters Agreement as provided herein, to specify the amounts of the Post-Distribution B&W Share Price and Post-Distribution MII Share Price and to clarify how those amounts have been determined;

NOW, THEREFORE, in consideration of the premises and the mutual agreements this Amendment contains and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, MII, MI, B&W and BWICO hereby agree as follows:

Section 1. Amendments . The Employee Matters Agreement is hereby amended as follows:

(a) Section 1.1(rrr) of the Employee Matters Agreement is hereby amended to read in its entirety as follows:

(rrr) “Post-Distribution B&W Share Price” means $22.75, which is the amount equal to the “when issued” closing price on the NYSE of a share of B&W Common Stock on the Distribution Date, as reported on the NYSE’s Consolidated Transactions Reporting System.

(b) Section 1.1(ttt) of the Employee Matters Agreement is hereby amended to read in its entirety as follows:

(ttt) “Post-Distribution MII Share Price” means $12.13, which is the amount equal to (i) the Pre-Distribution MII Share Price minus (ii) the amount equal to (x) the Post-Distribution B&W Share Price multiplied by (y) ¹ / 2 (the Distribution Multiple, as defined in the Master Separation Agreement), rounded up to the nearest whole cent.

Section 2. Effect on Agreement . When this Amendment becomes effective pursuant to the provisions of Section 3 hereof, (i) all references to “this Agreement” in the Employee Matters Agreement shall be deemed to refer to the Employee Matters Agreement as amended by this Amendment, and (ii) all references to the “Employee Matters Agreement” in the Master Separation Agreement or any of the Ancillary Agreements shall be deemed to refer to the Employee Matters Agreement as amended by this Amendment, in each case unless the context otherwise requires. Except as amended hereby, all provisions of the Employee Matters Agreement are and will remain in full force and effect.

Section 3. Execution in Counterparts; Effectiveness . This Amendment may be executed in two or more counterparts, each of which will be deemed an original but all of which together shall be considered one and the same amendment and shall become effective when counterparts have been signed by each of the Parties and delivered to the other Parties, it being understood that each of the Parties need not sign the same counterpart.

Section 4. Governing Law . To the extent not preempted by applicable federal law, this Amendment 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.

[Signatures on Following Pages]

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


MCDERMOTT INTERNATIONAL, INC.

By:	/s/ Liane K. Hinrichs
	Name:	Liane K. Hinrichs
	Title:	Senior Vice President, General Counsel and Corporate Secretary

MCDERMOTT INVESTMENTS, LLC

By:	/s/ Liane K. Hinrichs
	Name:	Liane K. Hinrichs
	Title:	Senior Vice President, General Counsel and Corporate Secretary

THE BABCOCK & WILCOX COMPANY

By:	/s/ Michael S. Taff
	Name:	Michael S. Taff
	Title:	Senior Vice President and Chief Financial Officer

BABCOCK & WILCOX INVESTMENT COMPANY

By:	/s/ Michael S. Taff
	Name:	Michael S. Taff
	Title:	Senior Vice President and Chief Financial Officer

Exhibit 10.3

TAX SHARING AGREEMENT

between

J. RAY HOLDINGS, INC.

and

BABCOCK & WILCOX HOLDINGS, INC.

dated as of

June 7, 2010

TABLE OF CONTENTS


ARTICLE I DEFINITIONS AND EXAMPLES		2
Section1.1	Definitions	2
Section 1.2	Examples	6

ARTICLE II ALLOCATION OF TAX LIABILITIES AND TAX BENEFITS		6
Section 2.1	Liability for and Payment of Taxes	6
(a)	BHI Liabilities and Payments	6
(b)	J. Ray U.S. Liabilities and Payments	7
(c)	Rules for Tax Benefits	7
Section 2.2	Allocation Rules	8
(a)	General Rule	8
(b)	Taxes Resulting from the Separation	8

ARTICLE III PREPARATION AND FILING OF TAX RETURNS		9
Section 3.1	Joint Returns	9
(a)	Preparation of Joint Returns	9
(b)	Provision of Information and Assistance	9
(c)	Allocation of Tax Items Between Joint Return and Separate Return	10
Section 3.2	Separate Returns	10
(a)	Tax Returns to be Prepared by J. Ray U.S.	10
(b)	Tax Returns to be Prepared by BHI	10
(c)	Provision of Information	10
Section 3.3	Special Rules Relating to the Preparation of Tax Returns	10
(a)	General Rule	10
(b)	Joint Returns	11
(c)	Withholding and Reporting	11
(d)	Standard of Performance	11
Section 3.4	Reliance on Exchanged Information	11

ARTICLE IV TAX PAYMENTS		11
Section 4.1	Payment of Taxes to Tax Authorities	11
Section 4.2	Indemnification Payments	12
(a)	Tax Payments Made by the B&W Group	12
(b)	Payments for Tax Benefits	12
Section 4.3	Initial Determinations and Subsequent Adjustments	12
Section 4.4	Interest on Late Payments	13
Section 4.5	Payments by or to Other Group Members	13
Section 4.6	Procedural Matters	13
Section 4.7	Tax Consequences of Payments	13

ARTICLE V ASSISTANCE AND COOPERATION		14
Section 5.1	Cooperation	14
Section 5.2	Supplemental Rulings and Supplemental Tax Opinions	14


ARTICLE VI TAX RECORDS		14
Section 6.1	Retention of Tax Records	14
Section 6.2	Access to Tax Records	15
Section 6.3	Confidentiality	15

ARTICLE VII TAX CONTESTS		16
Section 7.1	Notices	16
Section 7.2	Control of Tax Contests	17
(a)	General Rule	17
(b)	Tax Contests Involving Certain Taxes Reported on a Joint Return	17
(c)	Tax Contests Relating to Certain Tax Items	17
(d)	Non-Controlling Party Participation Rights	17
Section 7.3	Cooperation	18

ARTICLE VIII RESTRICTION ON CERTAIN ACTIONS OF THE GROUPS		18
Section 8.1	General Restrictions	18
Section 8.2	Restricted Actions Relating to Tax Materials	18

ARTICLE IX MISCELLANEOUS		19
Section 9.1	Entire Agreement	19
Section 9.2	Binding Effect; No Third-Party Beneficiaries; Assignment	19
Section 9.3	Amendment; Waivers	19
Section 9.4	Remedies Cumulative	19
Section 9.5	Notices	19
Section 9.6	Counterparts	20
Section 9.7	Severability	20
Section 9.8	Governing Law	20
Section 9.9	Performance Guarantees	20
Section 9.10	Construction	20
Section 9.11	Limitation of Liability	21
Section 9.12	Termination	21
Section 9.13	Authority	21
Section 9.14	Predecessors or Successors	21
Section 9.15	Expenses	21
Section 9.16	Effective Time	21
Section 9.17	Change in Law	21
Section 9.18	Disputes	22

APPENDIX A		25

TAX SHARING AGREEMENT

This TAX SHARING AGREEMENT (this “Agreement”) is entered into as of June 7, 2010, between J. Ray Holdings, Inc., a Delaware corporation (“J. Ray U.S.”) and Babcock &Wilcox Holdings, Inc., a Delaware corporation f/k/a McDermott Holdings, Inc. (“BHI”), and, solely for the purpose set forth on its signature page to this Agreement, The Babcock & Wilcox Company, a Delaware corporation (“B&W”). BHI and J. Ray U.S. are sometimes referred to herein individually as a “Party,” and collectively as the “Parties.” Unless otherwise indicated, all “Section” references in this Agreement are to the various sections of this Agreement.

RECITALS

WHEREAS, J. Ray U.S. is a wholly owned Subsidiary of BHI, and BHI is a wholly owned Subsidiary of McDermott International, Inc., a Panamanian company (“MII”);

WHEREAS, it is anticipated that the Board of Directors of MII will determine that it would be appropriate and in the best interests of MII and its stockholders for MII to separate the B&W Group from the J. Ray Group, as contemplated by the Master Separation Agreement (the “Separation”);

WHEREAS, in furtherance thereof, the Board of Directors of MII has determined that, in connection with the Separation, it would be appropriate and in the best interests of MII and its stockholders for (i) BHI to contribute certain assets and liabilities to J. Ray U.S. and to distribute all of the issued and outstanding capital stock of J. Ray U.S. to MII in what is intended to qualify as a tax-free transaction described under Sections 368(a)(1)(D) and 355 of the Code (the “Internal Distribution”), (ii) MII to contribute all of the issued and outstanding capital stock of BHI to B&W as part of a transaction intended to qualify as a tax-free reorganization under Section 368(a)(1)(F) of the Code (the “F Reorganization”), (iii) MII to distribute all of the issued and outstanding capital stock of B&W on a pro rata basis to holders of MII Common Stock in what is intended to qualify as a tax-free transaction (except, in the case of the holders of MII Common Stock, with respect to cash received in lieu of fractional shares) described under Section 355 of the Code (the “External Distribution”) and (iv) the members of the B&W Group and J. Ray Group to engage in the Related Separation Transactions;

WHEREAS, MII and B&W expect to set forth in a Master Separation Agreement the principal arrangements between them regarding the separation of the B&W Group from the J. Ray Group; and

WHEREAS, the Parties desire to provide for and agree upon the allocation between the Parties of Taxes and Tax Benefits arising prior to, and as a result of, and subsequent to the Separation, and provide for and agree upon other matters relating to Taxes.

NOW, THEREFORE, in consideration of the foregoing and agreements set forth below, the Parties agree as follows:

ARTICLE I

DEFINITIONS AND EXAMPLES

Section 1.1 Definitions . For purposes of this Agreement (including the recitals hereof), the following terms shall have the following meanings:

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by or is under common Control with, such first Person.

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

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

“B&W Group” means B&W and each Person that is a Subsidiary of B&W immediately after the External Distribution on the External Distribution Date.

“BHI” has the meaning set forth in the preamble hereof.

“Business Day” means a day other than a Saturday, a Sunday or a day on which banking institutions located in the State of Texas are authorized or obligated by applicable law or executive order to close.

“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time, or any successor law.

“Confidential Information” has the meaning set forth in Section 6.3.

“Control” means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through ownership of securities or partnership, membership, limited liability company or other ownership interests, by contract or otherwise. “Controlled” has a meaning correlative to the foregoing.

“Controlling Party” means the Party that has full responsibility, control and discretion in handling, settling or contesting a Tax Contest pursuant to Section 7.2.

“Due Date” has the meaning set forth in Section 4.4.

“Effective Time” means the time at which the Internal Distribution is effected on the Internal Distribution Date.

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

“External Distribution Date” means the date on which the External Distribution occurs.

“F Reorganization” has the meaning set forth in the recitals hereof.

“Governmental Authority” shall mean any U.S. federal, state, local or non-U.S. court, government (or political subdivision thereof), department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority.

“Group” means the J. Ray Group or the B&W Group, as the context requires.

“Information Statement” means the information statement and any related documentation to be provided to holders of MII Common Stock in connection with the External Distribution, including any amendments or supplements thereto.

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

“Internal Distribution Date” means the date on which the Internal Distribution occurs.

“IRS” means the Internal Revenue Service.

“IRS Submission” means the Ruling Request and any other correspondence or supplemental materials submitted to the IRS in connection with obtaining the Ruling.

“J. Ray Group” means MII and each Person that is a Subsidiary of MII immediately after the External Distribution on the External Distribution Date.

“J. Ray U.S.” has the meaning set forth in the preamble hereof.

“Joint Return” means any Tax Return, for any Tax Year, that includes Tax Items of one or more members of the J. Ray Group and one or more members of the B&W Group, determined without regard to Tax Items carried forward to such Tax Year.

“Master Separation Agreement” means the Master Separation Agreement that will be entered into between MII and B&W in connection with the Separation.

“MII” has the meaning set forth in the preamble hereof.

“MII Common Stock” means the MII common stock, par value $1.00 per share, outstanding as of the Effective Time.

“Non-Controlling Party” means the Party that does not have full responsibility, control and discretion in handling, settling or contesting a Tax Contest pursuant to Section 7.2.

“Non-Preparer” means the Party that is not responsible for the preparation and filing of the Joint Return or Separate Return, as applicable, pursuant to Section 3.2.

“Party” has the meaning set forth in the preamble to this Agreement.

“Payment Date” means (i) with respect to any U.S. federal income tax return, any of (A) the due date for any required installment of estimated taxes determined under Section 6655 of the Code, (B) the due date (determined without regard to extensions) for filing the return determined under Section 6072 of the Code or (C) the date the return is filed, as applicable, and (ii) with respect to any other Tax Return, any of the corresponding dates determined under the applicable Tax Law.

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, a union, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

“Preparer” means the Party that is responsible for the preparation and filing of the Joint Return or Separate Return, as applicable, pursuant to Section 3.2.

“Prime Rate” means the fluctuating commercial loan rate announced by JPMorgan Chase Bank, National Association from time to time at its New York, NY office as its prime rate or base rate for U.S. Dollar loans in the United States of America in effect on the date of determination.

“Related Separation Transactions” means the transactions described in the Omnibus Restructuring Agreement dated May 10, 2010.

“Requesting Party” has the meaning set forth in Section 5.2.

“Ruling” means PLR-108078-10, which was issued to MII on May 21, 2010.

“Ruling Request” means the request for rulings, dated February 16, 2010, filed by MII with the IRS in connection with the Internal Distribution and the External Distribution, and any other correspondence or supplemental materials submitted to the IRS in connection with obtaining the Ruling.

“Separate Return” means any Tax Return that is not a Joint Return.

“Separation” has the meaning set forth in the recitals hereof.

“Separation Taxes” has the meaning set forth in Section 2.2(b).

“Subsidiary” means, with respect to any specified Person, any corporation, partnership, limited liability company, joint venture or other organization, whether incorporated or unincorporated, of which at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such specified Person or by any one or more of its Subsidiaries, or by such specified Person and one or more of its Subsidiaries.

“Supplemental IRS Submission” means any request for a Supplemental Ruling, each supplemental submission and any other correspondence or supplemental materials submitted to the IRS in connection with obtaining any Supplemental Ruling.

“Supplemental Ruling” means any private letter ruling obtained by MII or BHI from the IRS which supplements or otherwise modifies the Ruling.

“Supplemental Tax Opinion” means, with respect to a specified action, an opinion (other than the Tax Opinion) from Tax Counsel to the effect that (i) such action will not preclude (A) the Internal Distribution from qualifying as a tax-free transaction described under Sections 368(a)(1) and 355 of the Code, (B) the F Reorganization from qualifying as a tax-free transaction under Section 368(a)(1)(D) of the Code or (C) the External Distribution from qualifying as a tax-free transaction described under Section 355 of the Code to MII and the holders of MII Common Stock (except, in the case of the holders of MII Common Stock, with respect to cash received in lieu of fractional shares) and (ii) the tax, if any, imposed on the Related Separation Transactions will not be increased.

“Tax” or “Taxes” means any income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers compensation, unemployment, disability, property, ad valorem, stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, value added, alternative minimum, estimated or other similar tax (including any fee, assessment or other charge in the nature of or in lieu of any tax) imposed by any Tax Authority and any interest, penalties, additions to tax or additional amounts in respect of the foregoing.

“Tax Authority” means, with respect to any Tax, the Governmental Authority that imposes such Tax, and the Governmental Authority (if any) charged with the assessment, determination or collection of such Tax for such the Governmental Authority.

“Tax Benefit” means a Tax Item that could decrease the Tax liability of a taxpayer, including a credit, loss or other deduction, but not including deductions attributable to or arising from the J. Ray Group or the B&W Group, as applicable, to the extent that the aggregate of such deductions in a Tax Year does not exceed the income attributable to or arising from such Group in such Tax Year.

“Tax Contest” means an audit, review, examination or any other administrative or judicial proceeding with the purpose or effect of redetermining Taxes of any member of either Group (including any administrative or judicial review of any claim for refund).

“Tax Counsel” means (i) with respect to the Tax Opinion, Baker Botts L.L.P. or (ii) with respect to a Supplemental Tax Opinion, a nationally recognized law firm or accounting firm designated by the Party to whom such opinion is delivered.

“Tax Item” means, with respect to any Tax, any item of income, gain, loss, deduction, credit or other attribute that may have the effect of increasing or decreasing any Tax.

“Tax Law” means the law of any Governmental Authority and any controlling judicial or administrative interpretations of such law, relating to any Tax.

“Tax Materials” means (i) the Ruling issued by the IRS in connection with the Internal Distribution, the F Reorganization and the External Distribution, (ii) each IRS Submission, (iii) the representation letters delivered to Tax Counsel in connection with the delivery of the Tax Opinion and (iv) any other materials delivered or deliverable by MII, BHI and others in connection with the rendering by Tax Counsel of the Tax Opinion or the issuance by the IRS of any Ruling.

“Tax Opinion” means the opinion to be delivered by Tax Counsel to MII in connection with the Internal Distribution, the F Reorganization, the External Distribution and the Related Separation Transactions to the effect that (subject to the assumptions, qualifications and limitations set forth therein) for the U.S. federal income tax purposes (i) the Internal Distribution will qualify as a tax-free transaction described under Sections 368(a)(1)(D) and 355 of the Code to BHI and MII, (ii) the F reorganization will qualify as a tax-free reorganization under Section 368(a)(1)(F) of the Code to BHI, B&W and MII, (iii) the External Distribution will qualify as a tax-free transaction described under Section 355 of the Code to MII and the holders of MII Common Stock (except, in the case of the holders of MII Common Stock, with respect to cash received in lieu of fractional shares) and (iv) the Related Separation Transactions will be tax-free to the parties involved.

“Tax Records” means Tax Return, Tax Return work papers, documentation relating to any Tax Contests and any other books of account or records required to be maintained under applicable Tax Laws (including but not limited to Section 6001 of the Code) or under any record retention agreement with any Tax Authority.

“Tax Return” means any report of Taxes due (including estimated Taxes), any claims for refund of Taxes paid, any information return with respect to Taxes, or any other similar report, statement, declaration or document required to be filed (by paper, electronically or otherwise) under any applicable Tax Law, including any attachments, exhibits or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing.

“Tax Year” means, with respect to any Tax, the year, or shorter period, if applicable, for which the Tax is reported as provided under applicable Tax Law.

“Treasury Regulations” means the regulations promulgated from time to time under the Code as in effect for the relevant Tax Year.

Section 1.2 Examples . The operation of various provisions of this Agreement is illustrated by examples in Appendix A hereto, and this Agreement shall be interpreted in accordance with such examples.

ARTICLE II

ALLOCATION OF TAX LIABILITIES AND TAX BENEFITS

Section 2.1 Liability for and Payment of Taxes . Except as provided in Section 3.1(b) (Provision of Information and Assistance), Section 3.2(c) (Provision of Information) and Article VII (Tax Contests), and in accordance with Article IV:

(a) BHI Liabilities and Payments . For any Tax Year (or portion thereof), BHI shall, subject to the rules for Tax Benefits in Section 2.1(c):

(i) be liable for and pay the Taxes (determined without regard to Tax Benefits) allocated to it pursuant to Section 2.2, reduced by any Tax Benefits allocated to J. Ray U.S. or BHI that are allowable under applicable Tax Law, to the applicable Tax Authority as required by Article IV; and

(ii) pay J. Ray U.S. for:

(A) any Tax Benefit arising in a Tax Year that begins after the Internal Distribution Date allocated to J. Ray U.S. pursuant to Section 2.2 that BHI uses to reduce Taxes payable by it pursuant to Section 2.1(a)(i) in any Tax Year that begins on or before the Internal Distribution Date;

(B) any Tax Benefit that (i) arises in a Tax Year that begins on or before the Internal Distribution Date, (ii) is allocated to J. Ray U.S. pursuant to Section 2.2, (iii) arises or is used as a result of a Tax Contest or other dispute which is resolved after the Internal Distribution Date and (iv) BHI uses to reduce Taxes payable by it pursuant to Section 2.1(a)(i) in any Tax Year that begins on or before the Internal Distribution Date; and

(C) any Tax Benefit that (i) arises in a Tax Year that begins on or before the Internal Distribution Date, (ii) is allocated to J. Ray U.S. pursuant to Section 2.2, and (iii) BHI uses to reduce Taxes payable by it pursuant to Section 2.1(a)(i) in any Tax Year that begins after the Internal Distribution Date.

(b) J. Ray U.S. Liabilities and Payments . For any Tax Year (or portion thereof), J. Ray U.S. shall, subject to the rules for Tax Benefits in Section 2.1(c):

(i) be liable for and pay the Taxes (determined without regard to Tax Benefits) allocated to it pursuant to Section 2.2, reduced by any Tax Benefits allocated to J. Ray U.S. or BHI that are allowable under applicable Tax Law, either to the applicable Tax Authority or to BHI as required by Article IV; and

(ii) pay BHI for:

(A) any Tax Benefit arising in a Tax Year that begins after the Internal Distribution Date allocated to BHI pursuant to Section 2.2 that J. Ray U.S. uses to reduce Taxes payable by it pursuant to Section 2.1(b)(i) in any Tax Year that begins on or before the Internal Distribution Date; and

(B) any Tax Benefit that (i) arises in a Tax Year that begins on or before the Internal Distribution Date, (ii) is allocated to BHI pursuant to Section 2.2, (iii) arises or is used as a result of a Tax Contest or other dispute which is resolved after the Internal Distribution Date and (iv) J. Ray U.S. uses to reduce Taxes payable by it pursuant to Section 2.1(b)(i) in any Tax Year that begins on or before the Internal Distribution Date.

(i) For any Tax Year that begins on or before the Internal Distribution Date, (A) BHI shall, pursuant to Section 2.1(a)(i), reduce Taxes allocated to it by Tax Benefits allocated to J. Ray U.S. only to the extent such Tax Benefits are not taken into

account by J. Ray U.S. pursuant to Section 2.1(b)(i) in the same Tax Year and (B) J. Ray U.S. shall, pursuant to Section 2.1(b)(i), reduce Taxes allocated to it by Tax Benefits allocated to BHI only to the extent such Tax Benefits are not taken into account by BHI pursuant to Section 2.1(a)(i) in the same Tax Year.

(ii) For purposes of applying Section 2.1(c)(i), for any Tax Year that begins on or before the Internal Distribution Date, (A) BHI shall not take into account any Tax Benefit under Section 2.1(a)(i) unless the utilization of such Tax Benefit would be allowable under applicable Tax Law after taking into account only those Tax Items allocated to BHI during such Tax Year (or portion thereof) and (B) J. Ray U.S. shall not take into account any Tax Benefit under Section 2.1(b)(i) unless the utilization of such Tax Benefit would be allowable under applicable Tax Law after taking into account only those Tax Items allocated to J. Ray U.S. during such Tax Year (or portion thereof).

(iii) Tax Benefits will be treated as used in the order specified under applicable Tax Law, and to the extent that such Tax Law does not specify the order of use then Tax Benefits will be deemed to be used pro rata.

Section 2.2 Allocation Rules . For purposes of Section 2.1:

(a) General Rule . Except as otherwise provided in this Section 2.2, (i) Taxes (determined without regard to Tax Benefits) for any Tax Year (or portion thereof) shall be allocated (A) to BHI to the extent of the net taxable income or other applicable items attributable to members of the B&W Group that gave rise to such Taxes and (B) to J. Ray U.S. to the extent of the net taxable income or other applicable items attributable to members of the J. Ray Group that gave rise to such Taxes and (ii) Tax Benefits for any Tax Year (or portion thereof) shall be allocated (A) to BHI to the extent of the losses, credits or other applicable items attributable to members of the B&W Group that gave rise to such Tax Benefits and (B) to J. Ray U.S. to the extent of the losses, credits or other applicable items attributable to members of the J. Ray Group that gave rise to such Tax Benefits. For purposes of applying this Section 2.2, any Taxes imposed on payments from a member of one Group to a member of the other Group shall be treated as attributable entirely to the payee.

(b) Taxes Resulting from the Separation . For purposes of Section 2.1:

(i) Separation Taxes Allocable to BHI. Except as provided in Section 2.2(b)(ii), Taxes and Tax Items resulting from the Internal Distribution, the F Reorganization, the External Distribution or the Related Separation Transactions (collectively, the “Separation Taxes”) shall be allocated to BHI; provided that Separation Taxes shall not include Taxes resulting from a payment between the Parties under this Agreement.

(ii) Separation Taxes Allocable to J. Ray U.S. Separation Taxes shall be allocated to J. Ray U.S. to the extent that such Separation Taxes are directly attributable to J. Ray U.S.’s breach of any covenant or representation under Article VIII.

ARTICLE III

PREPARATION AND FILING OF TAX RETURNS

Section 3.1 Joint Returns.

(a) Preparation of Joint Returns. BHI shall be responsible for preparing and filing (or causing to be prepared and filed) all Joint Returns, except that J. Ray U.S. shall have the sole discretion over whether any Tax Return is filed on a consolidated, combined or unitary basis, if such Tax Return would include at least one member of each Group and the filing of such Tax Return is elective under the relevant Tax Law.

(b) Provision of Information and Assistance.

(i) Information with Respect to Joint Returns. At the written request of BHI, J. Ray U.S. shall provide BHI with all information in its possession, or in the possession of its Group (as of the time in the immediately following sentence), that is reasonably necessary for BHI to properly and timely file all Joint Returns. J. Ray U.S. shall provide such information no later than 30 Business Days prior to the extended due date of such Joint Return. If J. Ray U.S. or its Group is in possession of information and J. Ray U.S. fails to provide such information within the time period described in this Section 3.1(b)(i) and in the form reasonably requested by BHI to permit the timely filing of any Joint Return, then, notwithstanding any other provision of this Agreement, J. Ray U.S. shall be liable for, and shall indemnify and hold harmless each member of the B&W Group from and against, any penalties, interest or other payment obligation assessed against any member of either Group by reason of any resulting delay in filing such return. If J. Ray U.S. provides information within the time period described in this Section 3.1(b)(i) in the form reasonably requested by BHI to permit the timely filing of a Joint Return, then, notwithstanding any other provision of this Agreement, BHI shall be liable for, and shall indemnify and hold harmless each member of the J. Ray Group from and against, any penalties, interest or other payment obligation assessed against any member of either Group by reason of any delay in filing such return.

(ii) Information with Respect to Estimated Payments and Extension Payments. At the written request of BHI, J. Ray U.S. shall provide BHI with all information that J. Ray U.S. then has in its possession, or that is then in the possession of its Group, and that relates to members of the J. Ray Group that BHI reasonably requests in order to determine the amount of Taxes due on any Payment Date with respect to a Joint Return. J. Ray U.S. shall provide such information no later than 15 Business Days before such Payment Date. In the event that J. Ray U.S. fails to provide information within the time period described in this Section 3.1(b)(ii) in the form reasonably requested by BHI to permit the timely payment of such Taxes, the indemnification principles of Section 3.1(b)(i) shall apply with respect to any penalties, interest or other payments assessed against any member of either Group by reason of any resulting delay in paying such Taxes.

(iii) Assistance. At the written request of BHI, J. Ray U.S. shall take (at its own cost and expense), and shall cause the members of the J. Ray Group to take (at their own cost and expense), any reasonable action ( e.g. , filing a ruling request with the

relevant Tax Authority or executing a limited power of attorney) that is reasonably necessary in order for BHI or any other member of the B&W Group to prepare, file, amend or take any other action with respect to a Joint Return. In the event that J. Ray U.S. fails to take, or cause to be taken, any such requested action, the indemnification principles of Section 3.1(b)(i) shall apply with respect to any penalties, interest or other payments assessed against any member of either Group by reason of a failure to take any such requested action.

(c) Allocation of Tax Items Between Joint Return and Separate Return. BHI must (i) allocate Tax Items between a Joint Return and any related Separate Return for which J. Ray U.S. is responsible pursuant to Section 3.2(a) that are filed with respect to the same Tax Year in a manner that is consistent with the reporting of such Tax Items on such related Separate Return and (ii) make any applicable elections required under applicable Tax Law (including, without limitation, under Treasury Regulations Section 1.1502-76(b)(2)) necessary to effect such allocation.

Section 3.2 Separate Returns.

(a) Tax Returns to be Prepared by J. Ray U.S. J. Ray U.S. shall be responsible for preparing and filing (or causing to be prepared and filed), and shall be considered the Preparer of, all Separate Returns that include Tax Items of members of the J. Ray Group.

(b) Tax Returns to be Prepared by BHI. BHI shall be responsible for preparing and filing (or causing to be prepared and filed), and shall be considered the Preparer of, all Separate Returns that include Tax Items of members of the B&W Group.

(c) Provision of Information. At the written request of the Preparer, the Non-Preparer shall provide to the Preparer any information about members of the Non-Preparer’s Group that the Non-Preparer then has in its possession, or that is then in the possession of its Group, and that the Preparer reasonably requests in order to properly and timely file all Separate Returns for which the Preparer is responsible pursuant to Section 3.2(a) or (b). Such information shall be provided within the time period prescribed by Section 3.1(b) for the provision of information for Joint Returns. In the event that the Non-Preparer fails to provide information within the time period described in Section 3.1(b) and in the form reasonably requested by the Preparer to permit the timely filing of a Separate Return, the indemnification principles of Section 3.1(b)(i) shall apply with respect to any penalties, interest or other payments assessed against any member of either Group by reason of any resulting delay in filing such return.

Section 3.3 Special Rules Relating to the Preparation of Tax Returns.

(a) General Rule. Except as otherwise provided in this Agreement, the Party responsible for filing (or causing to be filed) a Tax Return pursuant to Section 3.1 or Section 3.2 shall have the exclusive right, in its sole discretion, with respect to such Tax Return to determine (i) the manner in which such Tax Return shall be prepared and filed, including the elections, methods of accounting, positions, conventions and principles of taxation to be used, and the manner in which any Tax Item shall be reported, (ii) whether any

extensions may be requested, (iii) whether an amended Tax Return shall be filed, (iv) whether any claims for refund shall be made, (v) whether any refunds shall be paid by way of refund or credited against any liability for the related Tax and (vi) whether to retain outside firms to prepare or review such Tax Return.

(b) Joint Returns. With respect to any Joint Return, BHI may not take (and shall cause the members of the B&W Group not to take) any positions that it knows, or reasonably should know, would adversely affect any member of the J. Ray Group.

(i) MII Stock Awards. With respect to stock of MII delivered to any Person, J. Ray U.S. and BHI shall cooperate (and shall cause their Affiliates to cooperate) so as to permit MII to discharge any applicable Tax withholding and Tax reporting obligations, including the appointment of BHI or one or more of its Affiliates as the withholding and reporting agent if MII or one or more of its Affiliates is not otherwise required or permitted to withhold and report under applicable Tax Law.

(ii) B&W Stock Awards. With respect to stock of B&W delivered to any Person, J. Ray U.S. and BHI shall cooperate (and shall cause their Affiliates to cooperate) so as to permit B&W to discharge any applicable Tax withholding and Tax reporting obligations, including the appointment of J. Ray U.S. or one or more of its Affiliates as the withholding and reporting agent if B&W or one or more of its Affiliates is not otherwise required or permitted to withhold and report under applicable Tax Law.

(d) Standard of Performance. BHI shall prepare Joint Returns with the same general degree of care as it uses in preparing Separate Returns.

Section 3.4 Reliance on Exchanged Information. If a member of the B&W Group supplies information to a member of the J. Ray Group, or a member of the J. Ray Group supplies information to a member of the B&W Group, and an officer of the requesting member intends to sign a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then a duly authorized officer of the member supplying such information shall certify, to such officer’s knowledge and belief, the accuracy and completeness of the information so supplied.

ARTICLE IV

TAX PAYMENTS

Section 4.1 Payment of Taxes to Tax Authorities. J. Ray U.S. shall be responsible for remitting to the proper Tax Authority all Tax shown on any Tax Return for which it is responsible for the preparation and filing pursuant to Section 3.2(a), and BHI shall be responsible for remitting to the proper Tax Authority all Tax shown (including Taxes for which J. Ray U.S. is wholly or partially liable pursuant to Section 2.1 on any Tax Return for which it is responsible for the preparation and filing pursuant to Section 3.1(a) or Section 3.2(b).

Section 4.2 Indemnification Payments.

(a) Tax Payments Made by the B&W Group . If any member of the B&W Group remits a payment to a Tax Authority for Taxes for which J. Ray U.S. is wholly or partially liable under this Agreement, J. Ray U.S. shall remit the amount for which it is liable to BHI within 30 Business Days after receiving notification requesting such amount.

(b) Payments for Tax Benefits .

(i) If a member of the J. Ray Group uses a Tax Benefit for which BHI is entitled to reimbursement pursuant to Section 2.1(b)(ii), J. Ray U.S. shall pay to BHI, within 30 Business Days following the use of such Tax Benefit, an amount equal to the deemed value of such Tax Benefit, as determined in Section 4.2(b)(iv).

(ii) If a member of the B&W Group uses a Tax Benefit for which J. Ray U.S. is entitled to reimbursement pursuant to Section 2.1(a)(ii), BHI shall pay to J. Ray U.S., within 30 Business Days following the use of such Tax Benefit, an amount equal to the deemed value of such Tax Benefit, as determined in Section 4.2(b)(iv).

(iii) For purposes of this Agreement, a Tax Benefit (other than a Tax refund) will be considered used (A) in the case of a Tax Benefit that generates a Tax refund, at the time such Tax refund is received and (B) in all other cases, at the time the Tax Return is filed with respect to such Tax Benefit or, if no Tax Return is filed, at the time the Tax would have been due in the absence of such Tax Benefit.

(iv) The deemed value of any such Tax Benefit will be (A) in the case of a Tax credit, the amount of such credit or (B) in the case of a Tax deduction, an amount equal to the product of (1) the amount of such deduction and (2) the highest statutory rate applicable under Section 11 of the Code or other applicable rate under state, local or foreign law, as appropriate.

Section 4.3 Initial Determinations and Subsequent Adjustments . The initial determination of the amount of any payment that one Party is required to make to another under this Agreement shall be made on the basis of the Tax Return as filed, or, if the Tax to which the payment relates is not reported in a Tax Return, on the basis of the amount of Tax initially paid to the Tax Authority. The amounts paid under this Agreement will be redetermined, and additional payments relating to such redetermination will be made, as appropriate, if as a result of an audit by a Tax Authority, an amended Tax Return, or for any other reason (i) additional Taxes to which such redetermination relates are subsequently paid, (ii) a refund of such Taxes is received, (iii) the Group using a Tax Benefit changes or (iv) the amount or character of any Tax Item is adjusted or redetermined. Each payment required by the immediately preceding sentence (i) as a result of a payment of additional Taxes will be due 30 Business Days after the date on which the additional Taxes were paid or, if later, 15 Business Days after the date of a request from the other Party for the payment, (ii) as a result of the receipt of a refund will be due 30 Business Days after the refund was received, (iii) as a result of a change in use of a Tax Benefit will be due 30 Business Days after the date on which the final action resulting in such change is taken by a Tax Authority or either Party or any member of its Group or (iv) as a result of an

adjustment or redetermination of the amount or character of a Tax Item will be due 30 Business Days after the date on which the final action resulting in such adjustment or redetermination is taken by a Tax Authority or either Party or any member of its Group. If a payment is made as a result of an audit by a Tax Authority which does not conclude the matter, further adjusting payments will be made, as appropriate, to reflect the outcome of subsequent administrative or judicial proceedings.

Section 4.4 Interest on Late Payments . Payments pursuant to this Agreement that are not made by the date prescribed in this Agreement or, if no such date is prescribed, within 30 Business Days after demand for payment is made (the “Due Date”) shall bear interest for the period from and including the date immediately following the Due Date through and including the date of payment at a per annum rate fixed at the Prime Rate plus 2% per annum, subject to any maximum amount permitted by applicable Law, on the Due Date (or, if the Due Date is not a business day, as of 11:00 a.m. New York, NY time on the first business day following the Due Date). Such rate shall be redetermined at the beginning of each calendar quarter following such Due Date. Such interest will be payable at the same time as the payment to which it relates and shall be calculated on the basis of a year of 365 days and the actual number of days for which due.

Section 4.5 Payments by or to Other Group Members . When appropriate under the circumstances to reflect the underlying liability for a Tax or entitlement to a Tax refund or Tax Benefit, a payment which is required to be made by or to J. Ray U.S. or BHI may be made by or to another member of the J. Ray Group or the B&W Group, as appropriate, but nothing in this Section 4.5 shall relieve J. Ray U.S. or BHI of its obligations under this Agreement.

Section 4.6 Procedural Matters . Any written notice for indemnification delivered to the indemnifying Party in accordance with Section 9.5 shall state the amount due and owing together with a schedule calculating in reasonable detail such amount (and shall include any relevant Tax Return, statement, bill or invoice related to such Taxes, costs, expenses or other amounts due and owing). All payments required to be made by one Party to the other Party pursuant to this Article IV shall be made by electronic, same day wire transfer. Payments shall be deemed made when received. If the indemnifying Party fails to make a payment to the indemnified Party within the time period set forth in this Article IV, the indemnifying Party shall pay to the indemnified Party, in addition to interest that accrues pursuant to Section 4.4, any costs or expenses, including any breakage costs, incurred by the indemnified Party to secure such payment or to satisfy the indemnifying Party’s portion of the obligation giving rise to the indemnification payment.

Section 4.7 Tax Consequences of Payments . For all Tax purposes and to the extent permitted by applicable Tax Law, the Parties shall treat any payment made pursuant to this Agreement as a capital contribution by BHI to J. Ray U.S. or a distribution by J. Ray U.S. to BHI, as the case may be, immediately prior to the Internal Distribution. If any such payment (or portion thereof) causes, directly or indirectly, an increase in the Taxes owed by the recipient (or any of the members of its Group) under one or more applicable Tax Laws through withholding or otherwise, the payor’s payment obligation (or portion thereof) under this Agreement shall be grossed up to take into account any additional Taxes that may be owed by the recipient (or any of

the members of its Group) as a result of such payment. In the event that a Tax Authority asserts that J. Ray U.S.’s or BHI’s treatment of a payment pursuant to this Agreement should be other than as required pursuant to this Section 4.7, J. Ray U.S. or BHI, as appropriate, shall use its commercially reasonable efforts to contest such assertion.

ARTICLE V

ASSISTANCE AND COOPERATION

Section 5.1 Cooperation. In addition to the obligations enumerated in Section 3.1(b) and Section 3.2(c), J. Ray U.S. and BHI will cooperate (and cause the members of their respective Groups to cooperate) with each other and with each other’s agents and representatives, including their respective accounting firms and legal counsel, in connection with Tax matters, including provision of relevant documents and information in their possession and making available to each other, as reasonably requested and available, personnel (including officers, employees and agents of the Parties or their Affiliates) responsible for preparing, maintaining, and interpreting information and documents relevant to Taxes, and personnel reasonably required as witnesses or for purposes of providing information or documents in connection with any administrative or judicial proceedings relating to Taxes.

Section 5.2 Supplemental Rulings and Supplemental Tax Opinions. Each of the Parties agrees that at the reasonable request of the other Party (the “Requesting Party”), such Party shall (and shall cause each member of its Group to) cooperate and use reasonable efforts to seek to obtain, as expeditiously as reasonably practicable, a Supplemental Ruling from the IRS. Each of the Parties further agrees that at the reasonable request of the Requesting Party, such other Party shall (and shall cause each member of its Group to) cooperate and use reasonable efforts to assist the Requesting Party in obtaining, as expeditiously as reasonably practicable, a Supplemental Tax Opinion from Tax Counsel. Within 30 Business Days after receiving an invoice from the other Party therefor, the Requesting Party shall reimburse such Party for all reasonable costs and expenses incurred by such Party and the members of its Group in connection with obtaining or requesting a Supplemental Ruling or in connection with assisting the Requesting Party in obtaining a Supplemental Tax Opinion. Notwithstanding the foregoing, J. Ray U.S. shall not be required to file any Supplemental IRS Submission unless BHI represents to J. Ray U.S. that (i) it has reviewed the Supplemental IRS Submission and (ii) all information and representations, if any, relating to any member of the B&W Group contained in the Supplemental IRS Submissions are true, correct and complete in all material respects.

ARTICLE VI

TAX RECORDS

Section 6.1 Retention of Tax Records. Each of J. Ray U.S. and BHI shall preserve, and shall cause the members of its Group to preserve, all Tax Records that are in its possession or in the possession of any member of its Group, and that could affect the liability of any member of the other Group for Taxes, for as long as the contents thereof may become material in the administration of any matter under applicable Tax Law, but in any event until the later of (i) the expiration of any applicable statutes of limitation, as extended and (ii) 7 years after the Internal Distribution Date.

Section 6.2 Access to Tax Records . BHI shall make available, and cause the members of the B&W Group to make available, to members of the J. Ray Group for inspection and copying (i) all Tax Records in their possession at the time of any request therefor that relate to Tax Years that begin on or before the Internal Distribution Date and (ii) the portion of any Tax Record in their possession at the time of any request therefor that relates to Tax Years that begin after the Internal Distribution Date and which is reasonably necessary for the preparation of a Separate Return by a member of the J. Ray Group or with respect to a Tax Contest relating to such return. J. Ray U.S. shall make available, and cause the members of the J. Ray Group to make available, to members of the B&W Group for inspection and copying that portion of any Tax Record in their possession at the time of any request therefor that relates to Tax Years that begin on or before the Internal Distribution Date and which is reasonably necessary for the preparation of a Joint Return or Separate Return by a member of the B&W Group or with respect to a Tax Contest relating to such return.

Section 6.3 Confidentiality .

(a) J. Ray U.S. and BHI shall hold and shall cause the members of the J. Ray Group and the B&W Group, respectively, to hold, and shall each cause their respective officers, employees, accountants, counsel, consultants, advisors and agents to hold, in strict confidence and not to disclose or release without the prior written consent of the other Party, any and all Confidential Information (as defined herein); provided, that the Parties may disclose, or may permit disclosure of, Confidential Information (i) as may be necessary in connection with the filing of Tax Returns or any administrative or judicial proceedings relating to Taxes, to their respective accountants, auditors, attorneys, financial advisors, bankers and other appropriate consultants and advisors who have a need to know such information and are informed of their obligation to hold such information confidential to the same extent as is applicable to the Parties and in respect of whose failure to comply with such obligations, J. Ray U.S. or BHI, as the case may be, will be responsible or (ii) to the extent any member of the J. Ray Group or the B&W Group is compelled to disclose any such Confidential Information by judicial or administrative process or, in the opinion of legal counsel, by other requirements of law. Notwithstanding the foregoing, in the event that any demand or request for disclosure of Confidential Information is made pursuant to clause (ii) above, J. Ray U.S. or BHI, as the case may be, shall promptly notify the other of the existence of such request or demand and shall provide the other a reasonable opportunity to seek an appropriate protective order or other remedy, which both Parties will cooperate in seeking to obtain. In the event that such appropriate protective order or other remedy is not obtained, the Party whose Confidential Information is required to be disclosed shall or shall cause the other Party to furnish, or cause to be furnished, only that portion of the Confidential Information that is legally required to be disclosed. As used in this Section 6.3, “Confidential Information” shall mean all proprietary, technical or operational information, data or material of one Party which, prior to or following the Internal Distribution Date, has been disclosed by J. Ray U.S. or members of the J. Ray Group, on the one hand, or BHI or members of the B&W Group, on the other hand, in written, oral (including by recording), electronic, or visual form to, or otherwise has come into the possession of, the other, including pursuant to the access provisions of Section 3.1(b), Section

3.2(c), Section 6.2 or Section 7.3 hereof or any other provision of this Agreement or by virtue of employees of one Group becoming employees of the other Group as a result of the transactions contemplated by the Master Separation Agreement (except to the extent that such Information can be shown to have been (a) in the public domain through no fault of such Party (or, in the case of J. Ray U.S., any other member of the J. Ray Group or, in the case of BHI, any other member of the B&W Group) or (b) later lawfully acquired from other sources by the Party (or, in the case of J. Ray U.S., such member of the J. Ray Group or, in the case of BHI, such member of the B&W Group) to which it was furnished; provided, however, in the case of (b) that such sources did not provide such Information in breach of any confidentiality obligations).

(b) Notwithstanding anything to the contrary set forth herein, (i) J. Ray U.S. and the other members of the J. Ray Group, on the one hand, and BHI and the other members of the B&W Group, on the other hand, shall be deemed to have satisfied their obligations hereunder with respect to Confidential Information if they exercise the same degree of care (but no less than a reasonable degree of care) as they take to preserve confidentiality for their own similar Information and (ii) confidentiality obligations provided for in any agreement between J. Ray U.S. or any other member of the J. Ray Group, or BHI or any other member of the B&W Group, on the one hand, and any employee of J. Ray U.S. or any other member of the J. Ray Group, or BHI or any other member of the B&W Group, on the other hand, shall remain in full force and effect. Confidential Information of J. Ray U.S. or any other member of the J. Ray Group, on the one hand, or BHI or any other member of the B&W Group, on the other hand, in the possession of and used by the other as of the Internal Distribution Date may continue to be used by such Person in possession of the Confidential Information in and only in the operation of such Person’s business, and may be used only so long as the Confidential Information is maintained in confidence and not disclosed in violation of this Section 6.3. Such continued right to use may not be transferred to any third party unless the third party purchases all or substantially all of the business and assets of J. Ray U.S. or BHI, or any asset of J. Ray U.S. or BHI in which the relevant Confidential Information is used or employed, in one transaction or in a series of related transactions, and such prospective purchaser executes a written agreement with J. Ray U.S. or BHI, as the case may be (which agreement shall be fully and directly enforceable by J. Ray U.S. or BHI, respectively), in which such Party agrees to be bound in perpetuity by the terms of this Section 6.3.

ARTICLE VII

TAX CONTESTS

Section 7.1 Notices . Each Party shall provide prompt notice to the other Party of any pending or threatened Tax audit, assessment, proceeding or other Tax Contest of which it becomes aware relating to (i) Taxes for which it may be indemnified by the other Party hereunder, (ii) the qualification of the Internal Distribution as a tax-free transaction described under Sections 368(a)(1)(D) and 355 of the Code, (iii) the qualification of the F Reorganization as a tax-free transaction described under Section 368(a)(1)(F) of the Code, (iv) the qualification of the External Distribution as a tax-free transaction (except, in the case of the holders of MII Common Stock, with respect to cash received in lieu of fractional shares) described under Section 355 of the Code or (v) the tax treatment of the Related Separation Transactions. Such notice shall contain factual information (to the extent known) describing any asserted Tax

liability in reasonable detail and shall be accompanied by copies of any notice and other documents received from any Tax Authority in respect of any such matters. If (i) an indemnified Party has knowledge of an asserted Tax liability with respect to a matter for which it is to be indemnified hereunder, (ii) such Party fails to give the indemnifying Party prompt notice of such asserted Tax liability and (iii) the indemnifying Party has the right, pursuant to Section 7.2, to control the Tax Contest relating to such Tax liability, then (A) if the indemnifying Party is precluded from contesting the asserted Tax liability as a result of the failure to give prompt notice, the indemnifying Party shall have no obligation to indemnify the indemnified Party for any Taxes arising out of such asserted Tax liability and (B) if the indemnifying Party is not precluded from contesting the asserted Tax liability, but such failure to give prompt notice results in a monetary detriment to the indemnifying Party, then any amount which the indemnifying Party is otherwise required to pay the indemnified Party pursuant to this Agreement shall be reduced by the amount of such detriment.

Section 7.2 Control of Tax Contests.

(a) General Rule . Except as otherwise provided in this Section 7.2, each Party shall be the Controlling Party with respect to any Tax Contest involving a Tax reported on a Tax Return for which it is responsible for preparing and filing (or causing to be prepared and filed) pursuant to Article III of this Agreement.

(b) Tax Contests Involving Certain Taxes Reported on a Joint Return. J. Ray U.S. shall be the Controlling Party with respect to any Tax Contest involving a Tax reported on a Joint Return where such Tax relates exclusively to a member of the J. Ray Group.

(c) Tax Contests Relating to Certain Tax Items. BHI shall be the Controlling Party with respect to any Tax Benefit it utilizes to reduce Taxes pursuant to Section 2.1(a)(i), unless BHI is required to pay J. Ray U.S. for the use of such Tax Benefit pursuant to Section 2.1(a)(ii).

(d) Non-Controlling Party Participation Rights . With respect to a Tax Contest of any Tax Return which involves a Tax liability for which the Non-Controlling Party may be liable, or a Tax Benefit to which the Non-Controlling Party may be entitled, under this Agreement, (i) the Non-Controlling Party shall, at its own cost and expense, be entitled to participate in such Tax Contest, (ii) the Controlling Party shall keep the Non-Controlling Party reasonably informed and consult in good faith with the Non-Controlling Party and its Tax advisors with respect to any issue relating to such Tax Contest, (iii) the Controlling Party shall provide the Non-Controlling Party with copies of all correspondence, notices and other written materials received from any Tax Authority and shall otherwise keep the Non-Controlling Party and its Tax advisors advised of significant developments in the Tax Contest and of significant communications involving representatives of the Tax Authority, (iv) the Non-Controlling Party may request that the Controlling Party take a position in respect of such Tax Contest, and the Controlling Party shall do so provided that (A) there exists substantial authority for such position (within the meaning of the accuracy-related penalty provisions of Section 6662 of the Code) and (B) the adoption of such position would not reasonably be expected to increase the Taxes or reduce the Tax Benefits allocated to the Controlling Party pursuant to Article II of this

Agreement (unless the Non-Controlling Party agrees to indemnify and hold harmless the Controlling Party from such increase in Taxes or reduction in Tax Benefits), (v) the Controlling Party shall provide the Non-Controlling Party with a copy of any written submission to be sent to a Taxing Authority prior to the submission thereof and shall give serious and good faith consideration to any comments or suggested revisions that the Non-Controlling Party or its Tax advisors may have with respect thereto and (vi) there will be no settlement, resolution or closing or other agreement with respect thereto without the consent of the Non-Controlling Party, which consent shall not be unreasonably withheld or delayed.

Section 7.3 Cooperation. At the written request of the Controlling Party, the Non-Controlling Party shall provide to the Controlling Party any information about members of the Non-Controlling Party’s Group that the Non-Controlling Party then has in its possession, or that is then in the possession of its Group, and that the Controlling Party reasonably requests in order to handle, settle or contest the Tax Contest. At the request of the Controlling Party, the Non-Controlling Party shall take any action (e.g., executing a limited power of attorney) that is reasonably necessary in order for the Controlling Party to handle, settle or contest the Tax Contest. BHI shall assist J. Ray U.S., and J. Ray U.S. shall assist BHI, in taking any remedial actions that are necessary or desirable to minimize the effects of any adjustment made by a Tax Authority. The Controlling Party shall reimburse the Non-Controlling Party for any reasonable out-of-pocket costs and expenses incurred in complying with this Section 7.3. The Controlling Party shall have no obligation to indemnify the Non-Controlling Party for any additional Taxes resulting from the Tax Contest, if the Non-Controlling Party fails to cooperate in accordance with this Section 7.3.

ARTICLE VIII

RESTRICTION ON CERTAIN ACTIONS OF THE GROUPS

Section 8.1 General Restrictions. Following the External Distribution Date, BHI shall not, and shall cause the members of the B&W Group not to, and J. Ray U.S. shall not, and shall cause the members of the J. Ray Group not to, take any action that, or fail to take any action the failure of which, (i) would be inconsistent with the Internal Distribution qualifying, or preclude the Internal Distribution from qualifying, as a tax-free transaction described under Sections 368(a)(1)(D) and 355 of the Code, (ii) would be inconsistent with the F Reorganization qualifying, or preclude the F Reorganization from qualifying, as a tax-free transaction described under Section 368(a)(1)(F), (iii) would be inconsistent with the External Distribution qualifying, or preclude the External Distribution from qualifying, as a tax-free transaction (except with respect to cash received in lieu of fractional shares) described under Section 355 of the Code or (iv) would be inconsistent with the treatment of the Related Separation Transactions, or that would increase any tax imposed on the parties thereto.

Section 8.2 Restricted Actions Relating to Tax Materials. Without limiting the other provisions of this Article VIII, following the Effective Time, BHI shall not, and shall cause the members of the B&W Group not to, and J. Ray U.S. shall not, and shall cause the members of the J. Ray Group not to, take any action that, or fail to take any action the failure of which to take, would be reasonably likely to be inconsistent with, or cause any Person to be in breach of, any representation or covenant, or any material statement, made in the Tax Materials.

ARTICLE IX

MISCELLANEOUS

Section 9.1 Entire Agreement . This Agreement, together with the Master Separation Agreement, constitutes the entire agreement and understanding between J. Ray U.S. and BHI 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.

Section 9.2 Binding Effect; No Third-Party Beneficiaries; Assignment. This Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns; and, except for the rights to indemnification provided to the members of the J. Ray Group and the B&W Group under this Agreement, nothing in this Agreement, express or implied, is intended to confer upon any other Person 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 (including by operation of law or otherwise), except with the prior written consent of the other Party.

Section 9.3 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. Either Party 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 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 9.4 Remedies Cumulative. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

Section 9.5 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 as it shall have specified by like notice.

Section 9.6 Counterparts. This Agreement 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 9.7 Severability. If any term or other provision of this Agreement 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. 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 9.8 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.

Section 9.9 Performance Guarantees. J. Ray U.S. and BHI shall cause to be performed, and hereby guarantee the performance of, all actions, agreements and obligations set forth herein to be performed by their respective Subsidiaries and Affiliates.

Section 9.10 Construction. This Agreement shall be construed as if jointly drafted by J. Ray U.S. and BHI 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. 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 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 9.11 Limitation of Liability. IN NO EVENT SHALL ANY MEMBER OF THE J. RAY GROUP OR THE B&W GROUP OR THEIR RESPECTIVE DIRECTORS, OFFICERS AND EMPLOYEES BE LIABLE 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), WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

Section 9.12 Termination.

(a) This Agreement may be terminated at any time prior to the Internal Distribution Date by and in the sole discretion of J. Ray U.S. without the approval of BHI. In the event of termination pursuant to this Section 9.12, neither Party shall have any liability of any kind to the other Party under this Agreement.

(b) This Agreement shall otherwise terminate at such time as all obligations and liabilities of the Parties have been satisfied. The obligations and liabilities of the Parties arising under this Agreement shall continue in full force and effect until all such obligations have been satisfied and such liabilities have been paid in full, whether by expiration of time, operation of law or otherwise.

Section 9.13 Authority. Each of the Parties represents to the other that (a) it has the corporate or other requisite power and authority to execute, deliver and perform this Agreement, (b) the execution, delivery and performance of this Agreement by it has been duly authorized by all necessary corporate or other actions, (c) it has duly and validly executed and delivered this Agreement on or prior to the Internal Distribution Date and (d) this Agreement creates legal, valid and binding obligations, enforceable against it in accordance with its respective terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equity principles.

Section 9.14 Predecessors or Successors. Any reference to J. Ray U.S., BHI, MII, a Person or a Subsidiary in this Agreement shall include any predecessors or successors (e.g., by merger or other reorganization, liquidation or conversion) of J. Ray U.S., BHI, MII, such Person or such Subsidiary, respectively. Notwithstanding the foregoing, BHI (not McDermott Investments, LLC) shall be the successor to McDermott Incorporated.

Section 9.15 Expenses. Except as otherwise expressly provided for herein, each Party and its Subsidiaries shall bear their own expenses incurred in connection with the preparation of Tax Returns and other matters related to Taxes under the provisions of this Agreement for which they are liable.

Section 9.16 Effective Time. This Agreement shall become effective on the date recited above on which the Parties entered into this Agreement.

Section 9.17 Change in Law. Any reference to a provision of the Code or any other Tax Law shall include a reference to any applicable successor provision or law.

Section 9.18 Disputes. The procedures for discussion, negotiation and arbitration set forth in Article V of the Master Separation Agreement, once executed, shall apply to all disputes, controversies or claims (whether sounding in contract, tort or otherwise) that may arise out of or relate to, or arise under or in connection with this Agreement.

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date set forth above.


J. RAY HOLDINGS, INC.

By:		/s/ Dominic A. Savarino
Name:		Dominic A. Savarino
Title:		Vice President, Tax


BABCOCK & WILCOX HOLDINGS, INC.

By:		/s/ Michael S. Taff
Name:		Michael S. Taff
Title:		SVP-CFO

The Babcock & Wilcox Company hereby joins in the execution of this Agreement solely for the purpose of guaranteeing the performance of all actions, agreements and obligations set forth herein to be performed by BHI.


THE BABCOCK & WILCOX COMPANY

By:		/s/ Michael S. Taff
Name:		Michael S. Taff
Title:		VP and Treasurer

APPENDIX A

The following examples illustrate the operation of various provisions of this Agreement. However, no example is intended to illustrate every provision of this Agreement that may be relevant thereto.

Except as otherwise indicated, each example assumes (i) a U.S. federal income tax rate of 35%, (ii) that the Internal Distribution Date was March 31, 2010, (iii) that J. Ray U.S. files a Separate Return with respect to all Taxes in 2011 and later years, (iv) that the Internal Distribution qualifies as a tax-free transaction under Sections 368(a)(1)(D) and 355 of the Code, and (v) that the External Distribution qualifies as a tax-free transaction (except, in the case of holders of MII Common Stock, with respect to cash received in lieu of fractional shares) under Section 355 of the Code.

Example 1. General Tax Allocation on Joint Return.

On its U.S. federal consolidated income Tax Return for the Tax Year that begins on January 1, 2010, and ends on December 31, 2010, the BHI consolidated group reports $200x of consolidated net taxable income, no credits, and a Tax liability of $70x ( viz. , (35%)($200x)). Of the $200x of consolidated net taxable income reported on such Tax Return, $150x is attributable to members of the B&W Group. The remaining $50x of consolidated net taxable income is attributable to members of the J. Ray Group during the period in which J. Ray U.S. joins in the filing of such Tax Return ( viz. , the period beginning on January 1, 2010, and ending on the Internal Distribution Date). BHI’s basis in the stock of J. Ray U.S. immediately prior to the Internal Distribution was $7.5x.

The $150x of taxable income attributable to the B&W Group and the $50x of taxable income attributable to the J. Ray Group in each case includes deductions. However, in neither case are these deductions a Tax Benefit because the aggregate of such deductions in the Tax Year does not exceed the income attributable to or arising from the relevant Group in such Tax Year.

Because BHI’s 2010 U.S. federal consolidated income Tax Return includes Tax Items of one or more members of the B&W Group and one or more members of the J. Ray Group (determined without regard to Tax Items carried forward to such Tax Year), it will be a Joint Return. Pursuant to Section 2.1, each of BHI and J. Ray U.S. will be liable for its allocable portion of the $70x of Tax shown on the Joint Return. Because $150x of the consolidated net taxable income that gave rise to the Tax was attributable to members of the B&W Group and $50x of the consolidated net taxable income that gave rise to the Tax was attributable to members of the J. Ray Group, pursuant to Section 2.2(a), $52.5x of Tax will be allocable to BHI ( viz. , ($150x/$200x)($70x)) and $17.5x of Tax will be allocable to J. Ray U.S. ( viz. , ($50x/$200x)($70x)).

Pursuant to Section 3.1(a), BHI is responsible for preparing and filing the Joint Return, except that J. Ray U.S. will have the sole discretion over whether such Tax Return is filed on a consolidated, combined or unitary basis. BHI will have the right to make those determinations described in Section 3.3(a) with respect to the Joint Return, subject to the

limitations in Section 3.3(b). Pursuant to Section 4.1, BHI must pay the $70x of Tax to the Tax Authority. Pursuant to Section 4.2(a), J. Ray U.S. must remit the amount for which it is liable ( viz. , $17.5x) to BHI within 30 Business Days after receiving notification requesting such amount. If payment is not made within 30 Business Days, J. Ray U.S. must pay interest thereafter on the amount past due at the rate and as determined under Section 4.4.

Pursuant to Section 4.7, the Parties would ordinarily treat J. Ray U.S.’s payment of $17.5x as a distribution to BHI immediately prior to the Internal Distribution. However, under applicable Tax Law ( viz. , Treasury Regulations Sections 1.1552-1(b)(2) and 1.1502-32(b)(3)(iv)(D)), the Parties are required to treat such payment as a payment in satisfaction of indebtedness owed by J. Ray U.S. to BHI. Thus, such payment does not reduce BHI’s basis in the J. Ray U.S. stock.

Example 2. Separate Return Filed by J. Ray U.S.

The facts are the same as in Example 1, except that during the period beginning January 1, 2010, and ending December 31, 2010, J. Ray U.S. and its subsidiaries have $200x of consolidated taxable income. On the Separate Return for the Tax Year that begins on April 1, 2010, and ends on December 31, 2010, the J. Ray U.S. consolidated group reports $150x of taxable income, no credits, and a Tax liability of $52.5x ( viz. , (35%)($150x)). In determining the $150x of consolidated net taxable income reported on the Separate Return, J. Ray U.S. elected, under Treasury Regulations Section 1.1502-76(b)(2)(ii)(D), to allocate the income of J. Ray U.S. and its consolidated subsidiaries ratably between (i) the period beginning on January 1, 2010, and ending on the Internal Distribution Date and (ii) the period beginning on April 1, 2010, and ending on December 31, 2010. No items of income constitute “extraordinary items” within the meaning of Treasury Regulations Section 1.1502-76(b)(2)(ii)(C).

Because no items of income constitute extraordinary items, the result is that (i) $150x of J. Ray U.S.’s net income is allocated to the Separate Return and (ii) the remaining $50x of J. Ray U.S.’s net income is allocated to the period beginning on January 1, 2010, and ending on the Internal Distribution Date. Because the $150x of income allocated to the Separate Return is allocated to J. Ray U.S. pursuant to Section 2.2(a), J. Ray U.S. must pay the $52.5x of Tax shown on such Tax Return to the Tax Authority pursuant to Section 2.1(b)(i).

On the 2010 Joint Return prepared by BHI for the period beginning on January 1, 2010, and ending on the Internal Distribution Date, BHI must, pursuant to Section 3.1(c), also make the election described in Treasury Regulations Section 1.1502-76(b)(2)(ii)(D) so that J. Ray U.S.’s net consolidated income on the Joint Return is allocated consistently with the reporting of income on J. Ray U.S.’s Separate Return.

Example 3. Tax Benefit Allocation on Joint Return .

On the Joint Return for the Tax Year that begins on January 1, 2010, and ends on December 31, 2010, the BHI consolidated group reports no consolidated net taxable income, a consolidated net operating loss (“NOL”) of $300x after carrybacks, and no Tax liability. The $300x consolidated NOL is composed of (i) a $200x NOL attributable to members of the B&W Group and (ii) a $100x NOL attributable to members of the J. Ray Group for the period in which

J. Ray U.S. joins in the filing of such Tax Return ( viz. , the period beginning on January 1, 2010, and ending on the Internal Distribution Date). Of the $100x NOL attributable to members of the J. Ray Group, $25x is attributable to J. Ray McDermott Holdings, LLC (“JRMH LLC”) while it was disregarded as an entity separate from its owner, BHI, for U.S. federal tax purposes.

Because no Tax would be payable pursuant to Section 2.1 in the absence of any Tax Benefit, no allocation of Taxes under Section 2.2 is required. Section 2.2 then allocates the Tax Benefit, consisting of the $300x consolidated NOL. Because $200x of the loss that gave rise to the consolidated NOL was attributable to members of the B&W Group and $100x of the loss that gave rise to the consolidated NOL was attributable to members of the J. Ray Group, pursuant to Section 2.2(a), $200x of such NOL will be allocable to BHI and $100x of such NOL will be allocable to J. Ray U.S.

Under applicable Tax Law, neither BHI nor J. Ray U.S. would be allowed to use any portion of the $300x consolidated NOL on the 2010 Joint Return. Therefore, BHI will carry forward all $200x of the NOL allocated to it pursuant to Section 2.2(a), and J. Ray U.S. will carry forward $75x of the $100x of NOL allocated to it pursuant to Section 2.2(a). But the remaining $25x of the $100x of NOL allocated to J. Ray U.S. pursuant to Section 2.2(a) will, under applicable Tax Law, be carried forward by BHI, as the sole owner of JRMH LLC at the time the $25x NOL was incurred.

BHI will not be required to make payments under Section 2.1(a)(ii) for the use of the $200x of NOL allocated to it and carried forward to subsequent Tax Years. Similarly, J. Ray U.S. will not be required to make payments under Section 2.1(b)(ii) for the use of the $75x of NOL allocated to it and carried forward to subsequent Tax Years. However, BHI will be required under Section 2.1(a)(ii)(C) to pay J. Ray U.S. for its use in a subsequent Tax Year of the $25x of NOL allocated to J. Ray U.S. but carried forward by BHI under applicable Tax Law. As BHI uses its aggregate $225x of NOL carryforward, it will be deemed, pursuant to Section 2.1(c)(iii), to use the $200x of NOL allocated to it and $25x of NOL allocated to J. Ray U.S. on a pro rata basis. For example, if BHI uses $90x of the NOL, it will be deemed to use $10x of the NOL allocated to J. Ray U.S. ( viz. , ($90x)($25x/$225x)) and will be required to pay J. Ray U.S. $3.5x, the deemed value of the NOL pursuant to Section 4.2(b)(iv).

Example 4. Tax and Tax Benefit Allocation on Joint Return .

The facts are the same as in Example 1, except that the $200x of net consolidated taxable income reported on the 2010 Joint Return is composed of (i) $300x of net taxable income attributable to members of the B&W Group and (ii) a $100x net operating loss (“NOL”) attributable to members of the J. Ray Group during the period in which J. Ray U.S. joins in the filing of such Joint Return ( viz. , the period beginning on January 1, 2010, and ending on the Internal Distribution Date). During its short Tax Year beginning on April 1, 2010, and ending on December 31, 2010, the J. Ray Group generated $100x of net taxable income attributable to “extraordinary items” within the meaning of Treasury Regulations Section 1.1502-76(b)(2)(ii)(C). The BHI consolidated group reported no consolidated net taxable income on either its 2008 Joint Return or its 2009 Joint Return.

Section 2.2 first allocates the Tax which would be payable pursuant to Section 2.1 in the absence of any Tax Benefit. Thus, before taking into account the $100x NOL, $105x of Tax would be allocable to BHI ( viz. , (35%)($300x)). Section 2.2 then allocates the Tax Benefit, consisting of the $100x NOL. Because the $100x NOL was attributable to members of the J. Ray Group, it is allocated to J. Ray U.S. pursuant to Section 2.2(a).

Under applicable Tax Law, J. Ray U.S.’s short Tax Year ending on the Internal Distribution Date will be considered the same Tax Year as BHI’s Tax Year ending on December 31, 2010 (and which includes J. Ray U.S.’s short Tax Year), but will be considered a different Tax Year from J. Ray U.S.’s short Tax Year that begins on April 1, 2010. After taking into account only those Tax Items allocated to it as required under Section 2.1(c)(ii), the $100x NOL would not be allowable to J. Ray U.S. under applicable Tax Law because J. Ray U.S. has no net taxable income during its short Tax Year ending on the Internal Distribution Date. Accordingly, pursuant to Sections 2.1(c)(i) and 2.1(a)(i), BHI will be entitled to use such NOL and will not be required to compensate J. Ray U.S. therefor, notwithstanding the fact that J. Ray U.S. would otherwise have been able to use such NOL in its short Tax Year that begins on April 1, 2010.

Thus, the ultimate Tax liability of $70x ( viz. , (35%)($200x)) shown on the 2010 Joint Return will be allocated entirely to BHI.

But see Example 10 below for a different result where BHI uses a Tax Benefit allocated to J. Ray U.S. to reduce BHI’s net taxable income on an amended Joint Return.

Example 5. Tax and Tax Benefit Allocation on Joint Return .

On the Joint Return for the Tax Year that begins on January 1, 2010, and ends on December 31, 2010, the BHI consolidated group reports $200x of consolidated net taxable income, no losses, a $5x foreign tax credit generated in 2009 by a member of the J. Ray Group, and a Tax liability of $65x ( viz. , (35%)($200x)-$5x). Of the $200x of consolidated net taxable income reported on such Tax Return, $150x is foreign source taxable income attributable to members of the B&W Group. The remaining $50x of consolidated net taxable income is U.S. source taxable income attributable to members of the J. Ray Group during the period in which J. Ray U.S. joins in the filing of such Tax Return ( viz. , the period beginning on January 1, 2010, and ending on the Internal Distribution Date). BHI was unable to use the $5x foreign tax credit on its 2009 Joint Return, and under applicable Tax Law, such tax credit is properly carried forward to the 2010 Joint Return. During its short Tax Year beginning on April 1, 2010, and ending on December 31, 2010, the J. Ray Group generated $100x of foreign source taxable income.

Section 2.2 first allocates the Tax which would be payable pursuant to Section 2.1 in the absence of any Tax Benefit. Thus, before taking into account the $5x foreign tax credit, $52.5x of Tax would be allocable to BHI and $17.5x of Tax would be allocable to J. Ray U.S., as in Example 1. Section 2.2 then allocates the Tax Benefit, consisting of the $5x foreign tax credit. Because the $5x foreign tax credit was attributable to members of the J. Ray Group, it is allocated to J. Ray U.S. pursuant to Section 2.2(a).

As in Example 3, under applicable Tax Law, J. Ray U.S.’s short Tax Year ending on the Internal Distribution Date will be considered the same Tax Year as BHI’s Tax Year ending on December 31, 2010 (and which includes J. Ray U.S.’s short Tax Year), but will be considered a different Tax Year from J. Ray U.S.’s short Tax Year that begins on April 1, 2010. After taking into account only those Tax Items allocated to it as required under Section 2.1(c)(ii), the $5x foreign tax credit would not be allowable to J. Ray U.S. under applicable Tax Law because J. Ray U.S. has no foreign source income during its short Tax Year ending on the Internal Distribution Date. Accordingly, pursuant to Sections 2.1(c)(i) and 2.1(a)(i), BHI will be entitled to use such foreign tax credit and will not be required to compensate J. Ray U.S. therefor, notwithstanding the fact that J. Ray U.S. would otherwise have been able to use such foreign tax credit in its short Tax Year that begins on April 1, 2010.

Thus, the ultimate Tax liability of $65x ( viz. , (35%)($200x)—$5x) shown on the 2010 Joint Return will be allocated $47.5x to BHI ( viz. , $52.5x - $5x) and $17.5x to J. Ray U.S.

Example 6. Allocation of Taxes Imposed as a Result of Intergroup Payments.

During the 2009 Tax Year, Foreign Sub, a foreign member of the J. Ray Group, loans $10,000x to U.S. Sub, a domestic member of the B&W Group, and charges interest to U.S. Sub at a rate of 5% per annum, payable annually on January 1. On January 1, 2010, U.S. Sub pays $500x of interest to Foreign Sub, which amount U.S. Sub deducts from its gross taxable income. U.S. Sub withholds 30% of the payment (or $150x) and remits the withheld amount to the Tax Authority. Because the $150x of Tax is imposed on the interest payment from U.S. Sub to Foreign Sub, pursuant to Section 2.2(a), such Tax shall be treated as attributable entirely to Foreign Sub, the payee member of the J. Ray Group, even though the obligation to pay such Tax over to the Tax Authority was imposed on BHI.

Assume that the Tax Authority successfully asserts that the interest paid on the loan from Foreign Sub to U.S. Sub was nondeductible under applicable Tax Law, and U.S. Sub should have recognized additional taxable income of $500x and paid additional Tax of $175x ( viz. , (35%)($500x)). BHI pays $175x to the Tax Authority in settlement of the Tax Contest. Pursuant to Section 2.2(a), such Tax is attributable entirely to U.S. Sub, a member of the B&W Group, because it is imposed on the net taxable income of U.S. Sub.

Example 7. Breach of Covenants and Allocation of Separation Taxes.

Immediately before the Internal Distribution, BHI held the J. Ray U.S. stock with a fair market value of $250x and a basis of $50x. In 2011, MII sells all of the stock of J. Ray U.S. to a third party. Assume that the sale causes BHI to recognize gain on the Internal Distribution by reason of 355(e) of the Code.

As a result of the sale, BHI will be required to recognize its $200x of realized gain on the Internal Distribution ( viz ., $250x - $50x), which results in a Separation Tax liability of $70x ( viz. , (35%)($200x)).

The $70x of Separation Taxes would normally be allocated to BHI under applicable Tax Law and Section 2.2(b)(i). However, pursuant to Section 2.2(b)(ii), the $70x of Separation Taxes will be allocated to J. Ray U.S. because the sale is a breach of J. Ray U.S.’s covenants under Section 8.1.

Pursuant to Section 4.2(a), J. Ray U.S. must remit the $70x of Separation Taxes to BHI within 30 Business Days following the day such Taxes are paid by BHI. Pursuant to Section 4.7, the Parties must treat J. Ray U.S.’s payment of $70x as a distribution to BHI immediately prior to the Internal Distribution. Because the $70x deemed distribution exceeds BHI’s basis in the J. Ray U.S. stock immediately prior to the Internal Distribution, such deemed distribution will create an excess loss account of $20x ( viz. , $50x basis - $70x) in BHI’s J. Ray U.S. stock, which $20x will be included in income by BHI pursuant to Treasury Regulations Section 1.1502-19. Section 4.7 requires J. Ray U.S. to gross up its $20x payment to BHI by the amount of Taxes owed by BHI as a result of this $20x of income and by the amount of the additional Taxes resulting from the gross-up payment itself. However, Section 2.2(b)(i) provides that Taxes resulting from the inclusion of the $20x in income are not Separation Taxes. Therefore, J. Ray U.S. is not also required to indemnify BHI for such Taxes under Section 2.1.

Example 8. Allocation of Separation Taxes Not Resulting from the Breach of Covenants.

J. Ray U.S. has a $10x excess loss account in the stock of one of its Subsidiaries immediately prior to the Internal Distribution. As a result of the Internal Distribution, J. Ray U.S. includes the $10x in income immediately before the Internal Distribution pursuant to Treasury Regulations Section 1.1502-19. Because the Tax on the $10x excess loss account in the stock of J. Ray U.S.’s Subsidiary resulted from the Internal Distribution, it is a Separation Tax that is allocated to BHI pursuant to Section 2.2(b)(i).

Example 9. Redetermination of Amounts Paid.

On the Joint Return for the Tax Year that begins on January 1, 2010, and ends on December 31, 2010, the BHI consolidated group reports $200x of consolidated net taxable income, a $40x foreign tax credit, and a Tax liability of $30x ( viz. , (35%)($200x) - $40x). Of the $200x of consolidated net taxable income reported on such Joint Return, $50x is foreign source income and $50x is U.S. source income attributable to members of the J. Ray Group, and $100x is foreign source income attributable members of the B&W Group. The $40x foreign tax credit is allocated to BHI pursuant to Section 2.2(a).

Section 2.2 first allocates the Tax that would be payable pursuant to Section 2.1 in the absence of any Tax Benefit. Thus, before taking into account the $40x foreign tax credit, $35x of Tax would be allocable to BHI and $35x of Tax would be allocable to J. Ray U.S. Section 2.2 then allocates the Tax Benefit, consisting of the $40x foreign tax credit. After taking into account only those Tax Items allocated to BHI, the $40x foreign tax credit would be allowable to BHI under applicable Tax Law, but BHI would be limited to using an amount thereof equal to its $35x of Tax determined before utilizing the foreign tax credit. As a result, BHI would be liable for $0x of Taxes pursuant to Section 2.1(a)(i) ( viz. , (35%)($100x) - $35x). Pursuant to Section 2.1(c)(i), J. Ray U.S. will be entitled to use the remaining $5x of such foreign tax credit and will not be required to compensate BHI therefor. As a result, J. Ray U.S. would be liable for $30x of Taxes pursuant to Section 2.1(a)(i) ( viz. , (35%)($100x) - $5x). Thus, the Tax liability of $30x ( viz. , (35%)($200x) - $40x) shown on the 2010 Joint Return is allocated $0x to BHI ( viz. , (35%)($100x) - $35x) and $30x to J. Ray U.S. ( viz. , (35%)($100x) - $5x).

In 2011, a foreign Tax Authority initiates a Tax Contest with respect to a Tax Return that was prepared and filed by BHI for the 2010 Tax Year. In the Tax Contest, the foreign Tax Authority asserts that BHI should have paid additional foreign income tax in 2010. Because BHI was responsible for preparing and filing the Tax Return, BHI is the Controlling Party with respect to the Tax Contest pursuant to Section 7.2(a). As a result, BHI has full responsibility, control and discretion in handling, settling or contesting the Tax Contest.

On December 31, 2011, a date subsequent to the Internal Distribution Date, BHI pays $10x to the foreign Tax Authority in settlement of the Tax Contest. Pursuant to Section 3.3(a), BHI amends the BHI consolidated group’s Joint Return for the 2010 Tax Year to claim a foreign tax credit for the $10x paid to the foreign Tax Authority and receives a Tax refund of $10x.

As a result of amending the Joint Return, Section 4.3 requires that the amounts paid under this Agreement be redetermined as follows: Section 2.2 first allocates the Tax that would be payable pursuant to Section 2.1 in the absence of any Tax Benefit. Thus, before taking into account the $50x foreign tax credit, $35x of Tax would be allocable to BHI and $35x of Tax would be allocable to J. Ray U.S. Section 2.2 then allocates the Tax Benefits, consisting of the $50x foreign tax credit. After taking into account only those Tax Items allocated to BHI, the $50x foreign tax credit would be allowable to BHI under applicable Tax Law in an amount equal to its $35x of Tax determined before utilizing the foreign tax credit. As a result, BHI would be liable for $0x of Taxes pursuant to Section 2.1(a)(i) ( viz. , (35%)($100x) - $35x). Pursuant to Section 2.1(b)(i) and 2.1(c)(i), J. Ray U.S. will be entitled to use the remaining $15x of foreign tax credit. As a result, J. Ray U.S. would be liable for $20x of Taxes pursuant to Section 2.1(b)(i) ( viz. , (35%)($100x) - $15x). Thus, the Tax liability of $20x ( viz. , (35%)($200x) - $50x) shown on the amended Joint Return is allocated $0x to BHI ( viz. , (35%)($100x) - $35x) and $20x to J. Ray U.S. ( viz. , (35%)($100x) - $15x).

Because J. Ray U.S. was entitled to use the additional $10x foreign tax credit, J. Ray U.S. is entitled to the $10x Tax refund that BHI received as a result of filing an amended Joint Return. Pursuant to Section 4.3, BHI must pay $10x to J. Ray U.S. within 30 Business Days after receiving the Tax refund. However, because the additional $10x foreign tax credit (i) arose in a Tax Year that begins on or before the Internal Distribution Date, (ii) was allocated to BHI pursuant to Section 2.2, (iii) arose as a result of a Tax Contest that was resolved after the Internal Distribution Date, and (iv) was used by J. Ray U.S. to reduce Taxes payable by it pursuant to Section 2.1(b)(i) in a Tax Year that began on or before the Internal Distribution Date, J. Ray U.S. must, pursuant to Sections 2.1(b)(ii)(B) and 4.2(b)(i), pay to BHI $10x, the deemed value of such tax credit pursuant to Section 4.2(b)(iv), within 30 Business Days following BHI’s receipt of the Tax refund. Because the timing and amount of the payment obligations between J. Ray U.S. and BHI offset, no actual payments are required with respect to the Tax refund and the use of the Tax Benefit.

Example 10. Redetermination of Amounts Paid.

On the Joint Return for the Tax Year that begins on January 1, 2010, and ends on December 31, 2010, the BHI consolidated group reports no consolidated net taxable income, an NOL of $100x and no Tax liability. The $100x NOL is a Tax Benefit that is allocated to J. Ray U.S. pursuant to Section 2.2(a). Because no Tax is owed on the Joint Return, no payments are required to be made under this Agreement.

In 2011, the Tax Authority initiates a Tax Contest with respect to the 2010 Joint Return. In the Tax Contest, the Tax Authority asserts that a member of the B&W Group should have recognized additional taxable income of $100x in 2010. On December 31, 2011, a date subsequent to the Internal Distribution Date, BHI agrees to recognize $100x of additional taxable income in 2010 in settlement of the Tax Contest. Pursuant to Section 3.3(a), BHI amends the 2010 Joint Return to recognize such additional taxable income.

Because the $100x NOL (i) arose in a Tax Year that begins on or before the Internal Distribution Date, (ii) was allocated to J. Ray U.S. pursuant to Section 2.2, (iii) was used as a result of a Tax Contest that was resolved after the Internal Distribution Date, and (iv) was used by BHI to reduce Taxes payable by it pursuant to Section 2.1(a)(i) in a Tax Year that began on or before the Internal Distribution Date, BHI must, pursuant to Sections 2.1(a)(ii)(B) and 4.2(b)(ii), pay to J. Ray U.S. $35x, the deemed value of the NOL pursuant to Section 4.2(b)(iv), within 30 Business Days following the filing of the amended Tax Return.

Example 11. Predecessors and Successors.

As part of an internal restructuring in 2006, J. Ray McDermott Holdings, Inc. (“JRMHI”) converted from a corporation to a limited liability company and changed its name to J. Ray McDermott Holdings, LLC (“JRMH LLC”). After the 2006 internal restructuring, BHI owned all of the outstanding stock of McDermott Incorporated (“MI”) and all of the membership interests in JRMH LLC. In 2010, prior to the External Distribution:

MI converted from a corporation to a limited liability company and changed its name to McDermott Investments, LLC (“MI LLC”), and

BHI contributed its entire interest in MI LLC and JRMH LLC to J. Ray U.S. and distributed all of the stock of J. Ray U.S. to MII in the Internal Distribution.

Immediately after the External Distribution on the External Distribution Date, assume that MI LLC and JRMH LLC are Subsidiaries of MII.

Pursuant to the general rule of Section 9.14, MI LLC would ordinarily be the successor of MI for purposes of applying the provisions of this Agreement. However, Section 9.14 provides a specific exception whereby BHI, rather than MI LLC, is treated as the successor of MI for purposes of this Agreement. Accordingly, because BHI is a member of the B&W Group and is the successor of MI, Tax Items attributable to MI for all periods prior to the conversion of MI into MI LLC will be allocated to BHI.

Because MI LLC is a Subsidiary of MII immediately after the External Distribution on the External Distribution Date, it will be a member of the J. Ray Group. As a result, Tax Items attributable to MI LLC for all periods after its formation (that is, the date MI converted into MI LLC) will be allocable to J. Ray U.S.

Similarly, because JRMH LLC is a Subsidiary of MII immediately after the External Distribution on the External Distribution Date, it will be a member of the J. Ray Group. As a result, Tax Items attributable to JRMH LLC for all periods after its formation (that is, the date JRMHI converted into JRMH LLC) will be allocable to J. Ray U.S. Moreover, pursuant to the general successor rule of Section 9.14, JRMH LLC will be the successor of JRMHI. Accordingly, because JRMH LLC is a member of the J. Ray Group and is the successor of JRMHI, Tax Items attributable to JRMHI for all periods prior to the conversion of JRMHI into JRMH LLC will be allocated to J. Ray U.S.

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

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


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

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.

“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.

(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

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

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.

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

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.

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

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;

(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 .

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.

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.

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.

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.]

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:

Exhibit 10.5

EXECUTION VERSION

TRANSITION SERVICES AGREEMENT

BETWEEN

THE BABCOCK & WILCOX COMPANY

(as service provider)

and

MCDERMOTT INTERNATIONAL, INC.

(as service receiver)

Dated July 2, 2010

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


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 - Corporate Secretary Services

Schedule D - Legal Services

Schedule E - Human Resources Services

Schedule F - Risk Management Services

Schedule G - Treasury Services

Schedule H - Sharepoint

Schedule I - Disaster Recovery

Schedule 2.4 Certain Subcontractors

Schedule 4.1 Payment Instructions

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 The Babcock & Wilcox Company, a Delaware corporation (“B&W”), and McDermott International, Inc., a Panamanian corporation (“McDermott”).

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

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.

“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, B&W, 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 MII Group as set forth in Schedules A through I (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 MII Group, and such Persons shall not be considered or deemed to be employees of any member of the MII Group nor entitled to any employee benefits of MII 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 MII Group in connection therewith, and such Persons shall not be responsible for decision-making on behalf of any member of the MII Group. Such Persons shall not be required to report to management of any member of the MII Group nor be deemed to be under the management or direction of any member of the MII Group. McDermott 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 B&W Group shall be obligated to provide, or cause to be provided, any service or goods to any member of the MII Group.

(c) Notwithstanding anything to the contrary in this Agreement, B&W and members of the B&W 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 B&W’s Code of Business Conduct or other governance policies, as they may be amended from time to time.

Section 2.3 Additional Services . McDermott may request additional Services (the “Additional Services”) from B&W 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 nothwithstanding the foregoing provisions of this Section 2.3, in addition to providing the Services specified in the Schedules, B&W, 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 MII Group as may be requested by any member of the MII 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 B&W 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 B&W 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 . B&W shall have the right to hire third-party subcontractors to provide all or part of any Service hereunder; provided, that B&W shall consult in good faith with McDermott 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 hereof;

provided, further, that, in the event such subcontracting is inconsistent with the practice applied by B&W generally from time to time within its own organization, B&W shall give notice to McDermott of its intent to subcontract any portion of the Services and McDermott 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 McDermott opts to cancel a Service pursuant to the immediately preceding sentence, it shall not be liable to B&W pursuant to Section 6.1 for any costs or expenses B&W or any member of the B&W Group remains obligated to pay to the third-party subcontractor identified in the notice provided by B&W as described above. B&W shall not be required to give notice of its intent to subcontract Services to any party listed on Exhibit 2.4 hereto, nor shall McDermott 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 McDermott 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 B&W and the members of the B&W Group are not professional providers of the types of services included in the Services and that B&W personnel performing Services have other responsibilities and will not be dedicated full-time to performing Services hereunder.

(b) In the event B&W or any member of the B&W 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 McDermott shall be, at McDermott’s sole discretion, within 90 days from the date that B&W or such member of the B&W Group first fails to provide such Service, to not pay for such Service; provided that in the event B&W defaults in the manner described in clause (ii) of Section 7.1, McDermott 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 B&W OR ANY MEMBER OF THE B&W 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. MCDERMOTT (ON ITS OWN BEHALF AND ON BEHALF OF EACH OTHER MEMBER OF THE MII GROUP) HEREBY EXPRESSLY WAIVES ANY RIGHT MCDERMOTT OR ANY MEMBER OF THE MII 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 B&W OR ANY MEMBER OF THE B&W GROUP

UNDER OR RELATING TO THIS AGREEMENT, NOTWITHSTANDING THE NEGLIGENCE OR GROSS NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE) OF B&W OR ANY MEMBER OF THE B&W 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 B&W SHALL BE RESPONSIBLE FOR, SUCH LOSSES CAUSED BY THE WILLFUL MISCONDUCT OF B&W OR ANY MEMBER OF THE B&W GROUP. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL THE B&W GROUP BE LIABLE TO THE MII GROUP WITH RESPECT TO CLAIMS ARISING OUT OF THIS AGREEMENT FOR AMOUNTS IN THE AGGREGATE EXCEEDING THE AGGREGATE SERVICE CHARGES PAID HEREUNDER BY THE MII GROUP.

Section 2.6 Service Boundaries and Scope . Except as provided in a Schedule for a specific Service: (a) B&W shall be required to provide, or cause to be provided, the Services only at (i) the locations such Services are being provided by any member of the B&W Group for any member of the MII Group immediately prior to the Distribution Date and (ii) the corporate headquarters of B&W in Charlotte, North Carolina; provided, however, that, to the extent any such Service is to be provided by an employee of B&W who works in the corporate headquarters of B&W, such Service shall, to the extent feasible, only be provided by such employee from the corporate headquarters of B&W; and (b) the Services shall be available only for purposes of conducting the business of the MII 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, B&W 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 MII 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 MII Group. McDermott acknowledges (on its own behalf and on behalf of the other members of the MII Group) that the employees of B&W or any other members of the B&W 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 B&W or any of the other members of the B&W Group providing Services hereunder at any time for any reason. In no event shall B&W 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 MII Group. To the extent McDermott desires B&W to provide any services in connection with any such acquisitions, divestitures, start-ups or terminations, McDermott shall follow the procedures for requesting Additional Services pursuant to Section 2.3.

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 B&W 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 McDermott by B&W, McDermott will provide B&W and its authorized representatives reasonable access, during regular business hours upon reasonable notice, to McDermott and its employees, representatives, facilities and books and records as B&W 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 B&W 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 MII Group receiving such Service shall pay to B&W or, at the election of B&W, the member of the B&W 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 B&W or, at its option, the member of the B&W Group providing the Service. Except as otherwise provided in a Schedule for a specific Service, McDermott shall make the corresponding payment no later than 60 days after receipt of the invoice. Unless otherwise provided in this Agreement, McDermott 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 MII 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 B&W incurs any reasonable out-of-pocket expenses (including any incremental license fees incurred by B&W in connection with performance of the Services and any travel expenses incurred at the request or with the consent of McDermott) or remits funds to a third-party on behalf of McDermott, in either case in

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

Section 4.2 Payment Disputes . McDermott 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 B&W within 120 days following the date of the disputed invoice. McDermott shall timely pay the disputed items in full while resolution of the dispute is pending; provided, however, that B&W shall pay interest at a rate of five percent (5%) per annum (compounded monthly) on any amounts it is required to return to McDermott 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, B&W will provide to McDermott reasonable detail and support documentation to permit McDermott to verify the accuracy of an invoice.

Section 4.3 Review of Charges; Error Correction . B&W shall maintain accurate books and records (including invoices of third parties) related to the Services sufficient to calculate, and allow McDermott to verify, the amounts owed under this Agreement. From time to time until 120 days following the termination of this Agreement, McDermott shall have the right to review, and B&W 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 B&W. If, as a result of any such review, McDermott determines that it overpaid any amount to B&W, then McDermott may raise an objection pursuant to the provisions of Section 4.2. McDermott shall bear the cost and expense of any such review. B&W 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 B&W 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 B&W Group is required to pay or incur in connection with the provision of Services hereunder (“Tax”), shall be passed on to McDermott as an explicit surcharge and shall be paid by McDermott in addition to any Service fee payment, whether included in the applicable Service fee payment, or added retroactively. If McDermott submits to B&W a timely and valid resale or other exemption certificate acceptable to B&W 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 B&W Group is ever required to pay such Tax, McDermott will promptly reimburse B&W for such Tax, including any interest, penalties and attorney’s fees related thereto. The parties will cooperate to minimize the imposition of any Taxes.

Section 4.5 Records . B&W 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. B&W shall retain such accounting records and make them available to McDermott’s authorized representatives and auditors for a period of not less than one year from the close of each fiscal year of B&W; provided, however, that B&W may, at its option, transfer such accounting records to McDermott upon termination of this Agreement.

ARTICLE V

TERM

Section 5.1 Term . Subject to Articles VI and VII, the B&W Group shall provide the specific Services to the MII 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, McDermott shall undertake to provide to itself and members of the MII Group, and to terminate as soon as reasonably practicable, the Services provided to the MII 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 McDermott or members of the MII 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, McDermott 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 B&W at least 30 days’ prior written notice; provided, however, that any such discontinuation will not affect the amounts payable to B&W hereunder unless (and then only to the extent that) the charges for the discontinued Services have been separately identified in the applicable Schedule. McDermott shall be liable to B&W for all costs and expenses B&W or any member of the B&W Group remains obligated to pay in connection with any discontinued Service or Services, except in the case of a Service terminated by McDermott 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 MII Group of all of the duties and obligations previously performed by B&W or a member of the B&W Group under this Agreement.

ARTICLE VII

DEFAULT

Section 7.1 Termination for Default . In the event (i) of a failure of McDermott 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 B&W, B&W 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 McDermott, McDermott 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. McDermott’s right to terminate this Agreement pursuant to this Article VII and the rights set forth in Section 2.5 shall constitute McDermott’s sole and exclusive rights and remedies for a breach by B&W hereunder (including any breach caused by an Affiliate of B&W or other third party providing a Service hereunder).

ARTICLE VIII

INDEMNIFICATION AND WAIVER

Section 8.2 Services Received . McDermott 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 McDermott 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;

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

(c) it is not the intent of B&W and the other members of the B&W Group to render, nor of McDermott and the other members of the MII Group to receive from B&W and the other members of the B&W 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; McDermott shall not rely on, or construe, any Service rendered by or on behalf of B&W as such professional advice or opinions or technical advice; and McDermott shall seek all third-party professional advice and opinions or technical advice as it may desire or need, and in any event McDermott 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, McDermott 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 B&W’s agreement to provide the Services is the limitation of liability and the release provided by McDermott in this Agreement.

ACCORDINGLY, EXCEPT WITH REGARD TO THE LIMITED REMEDIES EXPRESSLY SET FORTH HEREIN, MCDERMOTT SHALL ASSUME ALL LIABILITY FOR AND SHALL FURTHER RELEASE, DEFEND, INDEMNIFY AND HOLD B&W, ANY MEMBER OF THE B&W 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 B&W, ANY MEMBER OF THE B&W GROUP OR ANY THIRD PARTY SERVICE PROVIDER, OTHER THAN THOSE LOSSES CAUSED BY THE WILLFUL MISCONDUCT OF B&W OR ANY MEMBER OF THE B&W GROUP.

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 B&W Books and Records) provided by any member of the MII Group to any member of the B&W Group after the Distribution Date in connection with the provision of the Services by any member of the B&W Group, or generated, maintained or held in connection with the provision of the Services by any member of the B&W Group after the Distribution Date, in each case that primarily relates to the MII Business, the MII Assets, or the MII Liabilities, shall not be considered Privileged Information of B&W or Confidential Information of B&W.

Section 9.2 System Security .

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”). McDermott 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 McDermott 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) McDermott 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 McDermott and (b) B&W 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.

ARTICLE XI

MISCELLANEOUS

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 B&W (and any other member of the B&W Group which performs Services hereunder) is an independent contractor in the performance of Services for the MII Group under this Agreement.

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

[Signature page follows.]

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


THE BABCOCK & WILCOX COMPANY

By:
		Name:
		Title:

MCDERMOTT INTERNATIONAL, INC.

By:
		Name:
		Title:

Exhibit 10.6

EXECUTION VERSION

ASSUMPTION AND LOSS ALLOCATION AGREEMENT

by and among

ACE American Insurance Company,

acting for itself and the ACE Affiliates (as defined below)

and

MCDERMOTT INTERNATIONAL, INC.,

a Panamanian corporation

and

BABCOCK & WILCOX HOLDINGS, INC.,

a corporation organized and existing under the laws of the State of Delaware

RECITALS

THIS ASSUMPTION AND LOSS ALLOCATION AGREEMENT (the “ Agreement ”), is entered into and effective as of May 18, 2010 (the “ Effective Date ”) by and among ACE AMERICAN INSURANCE COMPANY, individually and acting for the ACE Affiliates (in such capacities, the “ Company ”), MCDERMOTT INTERNATIONAL, INC., a Panamanian corporation (“ MII ”), BABCOCK & WILCOX HOLDINGS, INC., a Delaware corporation (“ B&W ”), to be succeeded by The Babcock & Wilcox Company, a Delaware corporation, after the effective time of the Merger, and, solely with respect to Sections 2, 3 and 5(c), the other MII Entities signatory hereto and the other B&W Entities signatory hereto.

WHEREAS , the Company and/or the ACE Affiliates have issued the Existing Policies to one or more MII Entities and one or more B&W Entities; and

WHEREAS , in connection with the Existing Policies, the Company, the ACE Affiliates, one or more MII Entities, and/or one or more B&W Entities entered into various Existing Insurance Agreements; and

WHEREAS , pursuant to the Existing Policies and the Existing Insurance Agreements, the MII Entities and the B&W Entities are obligated, among other things, to pay or reimburse the Company and/or the ACE Affiliates for certain Obligations, which Obligations are secured by the Existing Collateral; and

WHEREAS , B&W, prior to the Separation, is a wholly owned Subsidiary of MII; and

WHEREAS , MII intends to spin-off B&W from MII through a dividend of common stock of B&W to the shareholders of MII (the “ Separation ”); and

WHEREAS , in connection with the Separation: (a) the MII Entities desire to transfer and the B&W Entities desire to assume any B&W Obligations that were incurred by, or with respect to which there exists any obligation of, an MII Entity, whether such B&W Obligations were existing, accruing or arising before, on or after the Effective Date; and (b) the B&W Entities desire to transfer and the MII Entities desire to assume any MII Obligations that were incurred by, or with respect to which there exists any obligation of, a B&W Entity, whether such MII Obligations were existing, accruing or arising before, on or after the Effective Date; and

WHEREAS , the Company, on its own behalf and on behalf of the ACE Affiliates, is willing to consent to the transfer and assumption of the Obligations as set forth herein, subject to the terms and conditions of this Agreement;

NOW, THEREFORE , in consideration of the mutual promises set out herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, including a one-time administrative fee of $25,000 (the “ Fee ”), and intending to be legally bound, the Parties agree as follows:

1. Definitions. The following terms used herein, including in the recitals and Exhibits hereto, shall have the following meanings:

“ ACE Affiliate ” means each Affiliate of ACE American Insurance Company that is listed on Exhibit V attached hereto and made a part hereof that has issued an Existing Policy or is party to an Existing Insurance Agreement.

“ Affiliate ” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the specified Person. For this purpose “control” of a Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through ownership of voting securities, by contract or otherwise.

“ Agreement ” has the meaning set forth in the recitals to this Agreement.

“ Assumption Time ” means midnight (New York time) on the Effective Date.

“ B&W ” has the meaning set forth in the recitals to this Agreement.

“ B&W Assumed Obligations ” has the meaning set forth in Section 5(b).

“ B&W Assumption ” has the meaning set forth in Section 2(a).

“ B&W Entity ” means B&W and each of the entities listed on Exhibit I attached hereto and made a part hereof. It is acknowledged and understood that, from and after the effectiveness of the Separation, the B&W Entities will not be Subsidiaries or Affiliates of MII or any of the other MII Entities.

“ B&W LOC ” has the meaning set forth in Section 5(b).

“ B&W Obligations ” means any Obligations of, or to the extent arising from the operations, business, or property of, a B&W Entity for which any MII Entity is responsible under the terms of an Existing Policy or Existing Insurance Agreement, whether arising prior to, at or after the Effective Date.

“ B&W Retained Obligations ” has the meaning set forth in Section 2(d).

“ Cash Collateral ” has the meaning set forth in Section 7.

“ Company ” has the meaning set forth in the recitals to this Agreement.

“ Company Designation ” has the meaning set forth in Section 4(a).

“ Effective Date ” has the meaning set forth in the recitals to this Agreement.

“ ESIS ” means ESIS, Inc., an Affiliate of the Company.

“ Existing Collateral ” means any and all of the following forms of security held by the Company or any ACE Affiliate under the terms of any Existing Policy or Existing Insurance Agreement in order to secure any Obligations outstanding as of the date hereof: (i) any and all letters of credit outstanding as of the date hereof provided by or required to be provided by a B&W Entity or a MII Entity; (ii) any and all Cash Collateral provided by or required to be provided by a B&W Entity or a MII Entity; (iii) any securities account pledged by a B&W Entity or a MII Entity pursuant to any Existing Insurance Agreement; or (iv) any other collateral or security previously provided by a B&W Entity or a MII Entity under the terms of any Existing Policy or Existing Insurance Agreement in order to secure any Obligations outstanding as of the date hereof.

“ Existing ESIS Agreement ” means any agreement relating to claims or losses under one or more Existing Policies in which ESIS is in direct contractual privity with any MII Entity or any B&W Entity.

“ Existing Insurance Agreement ” means any agreement entered into on or prior to the date hereof by or on behalf of (or which is otherwise binding on) any B&W Entity and/or MII Entity with the Company or an ACE Affiliate in connection with an Existing Policy, including, without limitation, any high deductible agreement, any notice of election, any collateral agreement, any agreement relating to any deductible or paid loss retrospectively rated insurance program, any agreement relating to deductibles under any of the Existing Policies, any letter or agreement relating to policy dividends, any early close-out agreement relating to any Existing Policy or Existing Insurance Agreement and any agreement described on Exhibit II and Exhibit VI attached hereto and made a part hereof.

“ Existing Policy ” means each policy of general liability insurance, automobile liability insurance and workers compensation insurance (other than any insurance policy that is the subject of any reinsurance agreement) issued prior to the date hereof by the Company or an ACE Affiliate to a B&W Entity or a MII Entity, as applicable, including those policies identified on Exhibit III and Exhibit VII attached hereto and made a part hereof.

“ Fee ” has the meaning set forth in the recitals to this Agreement.

“ Foreign Insurance Agreements ” means the Existing Insurance Agreements listed on Exhibit VI attached hereto and made a part hereof and any other similar written agreements entered into between the Company or any of its Affiliates and a MII Entity or a B&W Entity in connection with or relating to insurance policies issued to cover risks located primarily outside of the continental United States during the period from January 1, 1974 through May 7, 2010.

“ Foreign Policies ” means the Existing Policies listed on Exhibit VII attached hereto and made a part hereof and any other general liability insurance policy issued by the Company or any of its Affiliates to a MII Entity or a B&W Entity to cover risks located primarily outside of the continental United States during the period from January 1, 1974 through May 7, 2010.

“ Master Separation Agreement ” means a Master Separation Agreement to be entered into between MII and The Babcock & Wilcox Company in connection with the Separation.

“ Merger ” means the merger, to occur after the date hereof, of Babcock & Wilcox Holdings, Inc., a Delaware corporation, with and into The Babcock & Wilcox Company, a Delaware corporation and the surviving entity of such Merger.

“ MII ” has the meaning set forth in the recitals to this Agreement.

“ MII Cash Collateral ” has the meaning set forth in Section 5(a).

“ MII Assumed Obligations ” has the meaning set forth in Section 5(a).

“ MII Assumption ” has the meaning set forth in Section 2(c).

“ MII Entity ” means MII and each of the entities listed on Exhibit IV attached hereto and made a part hereof. It is acknowledged and understood that, from and after the effectiveness of the Separation, the MII Entities will not be Subsidiaries or Affiliates of B&W or any of the other B&W Entities.

“ MII LOC ” has the meaning set forth in Section 5(a).

“ MII Obligations ” means any Obligations of, or to the extent arising from the operations, business, or property of, a MII Entity for which any B&W Entity is responsible under the terms of an Existing Policy or Existing Insurance Agreement, whether arising prior to, at or after the Effective Time.

“ MII Retained Obligations ” has the meaning set forth in Section 2(b).

“ Obligations ” means any and all amounts, duties, liabilities and obligations, whether accrued, fixed or contingent, mature or inchoate, known or unknown, including deductibles and premium adjustments, payable by or to be performed by a MII Entity or a B&W Entity to the Company or any ACE Affiliate under the terms of any Existing Policy or any Existing Insurance Agreement.

“ Organizational Documents ” means (a) with respect to any corporation, its certificate or articles of incorporation or organization and its bylaws, (b) with respect to any limited partnership, its certificate of limited partnership and its partnership agreement, (c) with respect to any general partnership, its partnership agreement, and (d) with respect to any limited liability company, its certificate or articles of formation or organization and its operating agreement or other organizational documents.

“ Parties ” means the Company, MII and B&W, collectively (and each individually is a “Party”).

“ Person ” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, a union, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

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

“ Subsidiary ” means, with respect to any specified Person, any corporation, partnership, limited liability company, joint venture or other organization, whether incorporated or unincorporated, of which at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such specified Person or by any one or more of its Subsidiaries, or by such specified Person and one or more of its Subsidiaries.

“ Substituted Collateral ” means (i) the MII LOC and the B&W LOC and (ii) any other collateral or security to be provided on or after the date hereof by a B&W Entity or a MII Entity under the terms of any Existing Policy or Existing Insurance Agreement in order to secure any Obligations outstanding as of the date hereof.

2. Assumption .

(a) B&W Assumption . Notwithstanding anything in any Existing Insurance Agreement or Existing Policy to the contrary, each MII Entity that is a signatory hereto hereby transfers and assigns, and B&W does hereby assume, effective as of the Assumption Time, the B&W Obligations; and B&W hereby agrees to observe, pay, perform, satisfy, fulfill and discharge any and all now existing and hereafter arising duties, terms, provisions, covenants, obligations and liabilities of any MII Entity under the Existing Policies and Existing Insurance Agreements in respect of the B&W Obligations (the “ B&W Assumption ”). The Company, on its own behalf and on behalf of the ACE Affiliates, hereby consents to, and agrees to give full force and effect to, the B&W Assumption. From and after the Assumption Time, the Company (and/or the applicable ACE Affiliate): (i) may enforce its rights under the Existing Policies and the Existing Insurance Agreements in respect of the B&W Obligations against B&W to the same extent such Person could, prior to the B&W Assumption, enforce such rights against the applicable MII Entity and (ii) releases each MII Entity from its obligation to observe, pay, perform, satisfy, fulfill or discharge any such B&W Obligations.

(b) MII Retained Obligations . MII hereby agrees to continue to observe, pay, perform, satisfy, fulfill and discharge any and all of its now existing and hereafter arising Obligations (other than B&W Obligations) (the “ MII Retained Obligations ”) in accordance with the terms of this Agreement and the applicable Existing Policy and Existing Insurance Agreement.

(c) MII Assumption . Notwithstanding anything in any Existing Insurance Agreement or Existing Policy to the contrary, each B&W Entity that is a signatory hereto hereby transfers and assigns, and MII does hereby assume, effective as of the Assumption Time, the MII Obligations; and MII hereby agrees to observe, pay, perform, satisfy, fulfill and discharge any and all now existing and hereafter arising duties, terms, provisions, covenants, obligations and liabilities of any B&W Entity under the Existing Policies and Existing Insurance Agreements in respect of the MII Obligations (the “ MII Assumption ”). The Company, on its own behalf and on behalf of the ACE Affiliates, hereby consents to, and agrees to give full force and effect to, the MII Assumption. From and after the Assumption Time, the Company (and/or the applicable ACE Affiliate): (i) may enforce its rights under the Existing Policies and the Existing Insurance Agreements

in respect of the MII Obligations against MII to the same extent such Person could, prior to the MII Assumption, enforce such rights against the applicable B&W Entity and (ii) releases each B&W Entity from its obligation to observe, pay, perform, satisfy, fulfill or discharge any such MII Obligations.

(d) B&W Retained Obligations . B&W hereby agrees to continue to observe, pay, perform, satisfy, fulfill and discharge any and all of its now existing and hereafter arising Obligations (other than MII Obligations) (the “ B&W Retained Obligations ”) in accordance with the terms of this Agreement and the applicable Existing Policy and Existing Insurance Agreement.

(e) Obligations of the Company and the ACE Affiliates . For the avoidance of doubt, the Parties acknowledge that nothing in this Agreement shall discharge, limit or in any way affect the obligations of the Company or the ACE Affiliates as insurers under any of the Existing Policies. Such obligations shall continue to be performed to the extent and in the manner set forth in the applicable Existing Policy by the Company and/or by the ACE Affiliates, as the case may be, for the benefit of such Persons who are entitled to such performance under the applicable Existing Policy, provided , however , that to the extent that such performance gives rise to Obligations, the responsibility for such Obligations shall be governed by this Agreement.

(f) Existing ESIS Agreements . The Parties shall use commercially reasonable efforts to enter into an agreement with ESIS promptly after the date hereof pursuant to which ESIS shall acknowledge and consent to the B&W Assumption and the MII Assumption and the other provisions of this Agreement with respect to determining any MII Obligations, MII Retained Obligations, B&W Obligations or B&W Retained Obligations (or allocations thereof) in respect of any Existing ESIS Agreement.

3. Joinder. As of the Effective Date, (a) to the extent that B&W is not already a party thereto and an Existing Insurance Agreement contains any B&W Obligations, each Existing Insurance Agreement is hereby deemed amended to add B&W as an “Insured” or other such obligor thereunder solely to the extent necessary to give effect to the B&W Assumption and (b) to the extent that MII is not already a party thereto and an Existing Insurance Agreement contains any MII Obligations, each Existing Insurance Agreement is hereby deemed amended to add MII as an “Insured” or other such obligor thereunder solely to the extent necessary to give effect to the MII Assumption.

4. Allocation.

(a) Company Designations . (i) MII shall continue to pay or perform any and all Obligations constituting MII Retained Obligations pursuant to and in the manner set forth in the applicable Existing Policy and the applicable Existing Insurance Agreement giving rise to such Obligations and (ii) B&W shall continue to pay or perform any and all Obligations constituting B&W Retained Obligations pursuant to and in the manner set forth in the applicable Existing Policy and the applicable Existing Insurance Agreement giving rise to such Obligations; provided , however , that in each case, MII and B&W shall provide to the Company on a timely basis such information as the Company may request so that the Company may determine whether the Obligations constitute MII Retained Obligations or B&W Retained Obligations. The Company shall determine whether such Obligations constitute MII Retained Obligations or B&W Retained Obligations (the “ Company Designation ”) and shall notify the applicable Party of any such Company Designation. With respect to the Obligations arising out of or relating to the Foreign Policies or the Foreign Insurance Agreements, if the Company is unable to make a determination as to whether any such Obligations constitute MII Retained Obligations or B&W Retained Obligations based upon the information available to the Company, the Company will deem the Company Designation for such Obligations to be MII Retained Obligations. B&W agrees that, notwithstanding any dispute or disagreement it may have with respect to any Company Designation, it will pay any B&W Retained Obligation pursuant to and in the manner set forth in the applicable Existing Policy and the applicable Existing Insurance Agreement giving rise to such B&W Retained Obligation; and MII agrees that, notwithstanding any dispute or disagreement it may have with respect to any Company Designation, it will pay such MII Retained Obligation pursuant to and in the manner set forth in the applicable Existing Policy and the applicable Existing Insurance

Agreement giving rise to such MII Retained Obligation; provided , however , that such payment shall not be construed as prejudicial to either Party in any dispute between MII and B&W with respect to any such Company Designation.

(b) Disputes . Notwithstanding any dispute or disagreement between MII and B&W concerning a Company Designation, the applicable Party shall pay any amount payable pursuant to a Company Designation as set forth in Section 4(a), and any such dispute or disagreement between MII and B&W shall be resolved pursuant to Article V of the Master Separation Agreement; provided , that (i) until the Master Separation Agreement is executed and delivered by all parties thereto, the reference to such agreement herein shall be deemed to refer to the draft thereof dated as of April 28, 2010; (ii) the Company will not be made a party to any arbitration proceeding arising from such dispute or disagreement, but may be called as a witness; (iii) any costs incurred by the Company in respect of any such arbitration proceeding will be fully reimbursed to the Company equally by the Disputing Parties promptly following receipt of a reimbursement demand from the Company; (iv) under no circumstances will MII or B&W, as a result of such arbitration proceeding, require the Company to return any amount received by the Company pursuant to a prior Company Designation, whether such amount was received as a result of the Company’s draw against security posted for its benefit or otherwise, and (v) the Company shall comply with the allocation or other resolution of such dispute established by any award or order of such arbitration, or settlement between the Disputing Parties; and (vi) any indemnification and reimbursement of the Company by B&W and MII pursuant to this Agreement, the Existing Policies and the Existing Insurance Agreements and any other agreement relating to the disputed Company Designation shall be in accordance with the allocation established by such award, order or settlement of such dispute.

5. Collateral and Fee.

(a) MII LOC .

(i) MII will, within fifteen (15) days after the Effective Date, provide to the Company, as beneficiary thereof, (A) cash collateral in an amount of $687,236 in respect of its Obligations under the Existing Insurance Agreements and the Existing Policies (other than the Foreign Insurance Agreements and Foreign Policies) and (B) cash collateral in an amount of $6,074,640 in respect of the Foreign Insurance Agreements and Foreign Policies (such cash collateral individually and collectively being referred to herein as the “ MII Cash Collateral ”). The Company shall return the MII Cash Collateral to MII promptly upon receipt of the MII LOC as set forth below. MII will, within fifteen (15) days after July 1, 2010, provide to the Company, as beneficiary thereof, (A) a clean, irrevocable and unconditional letter of credit in an amount of $687,236 in respect of its Obligations under the Existing Insurance Agreements and the Existing Policies (other than the Foreign Insurance Agreements and Foreign Policies) and (B) a clean, irrevocable and unconditional letter of credit in an amount of $6,074,640 in respect of the Foreign Insurance Agreements and Foreign Policies (each such letter of credit individually and collectively being referred to herein as the “ MII LOC ”), issued in a form and by a bank or other financial institution, in each case acceptable to the Company; and/or such other forms of collateral as the Company may permit from time to time. The MII LOC shall be in an aggregate amount that is less than the aggregate amount of the Existing Collateral provided by MII and shall secure the MII Retained Obligations and the Obligations assumed by MII in the MII Assumption (the “ MII Assumed Obligations ”).

(ii) The MII LOC shall be “evergreen,” meaning that it shall provide by its terms that it will be renewed automatically each year for an additional year unless written notice of non-renewal is received by the Company at least sixty (60) days prior to the MII LOC’s anniversary date. If the Company permits MII to provide collateral in a form other than the MII LOC, MII shall provide such collateral in an amount and form acceptable to the Company.

(iii) MII shall keep the MII LOC in place (or other collateral acceptable to the Company) as security for payment of the MII Retained Obligations and the MII Assumed Obligations, until the

Company determines in its sole discretion that there is no longer any need for such collateral. If there shall be a material deterioration in the financial condition of the bank or other financial institution which has issued the MII LOC, the Company shall have the right to require MII to replace the MII LOC with a new letter of credit with similar terms issued by a bank or other financial institution then acceptable to the Company.

(iv) The Company shall have the right to draw against the MII LOC and/or other collateral in each instance where any portion of the MII Retained Obligation or the MII Assumed Obligations for any reason is not fulfilled in the manner and within the time periods required under this Agreement or the Existing Policies or Existing Insurance Agreements giving rise thereto.

(v) Annually, the Company shall review and redetermine the amount of the MII Retained Obligations and the MII Assumed Obligations and the amount of collateral security required pursuant to this Agreement. At such time, MII will provide its most recent audited financial statements, interim financial statements, and any other financial information reasonably requested by the Company for the purpose of evaluating the financial condition of MII. MII will provide any needed increases in the amount of the MII LOC (and/or other collateral if acceptable to the Company) within thirty (30) days of the Company’s written request for any additional required amount of the MII LOC. The Company will effect any decreases in the amount of the MII LOC (and/or other collateral) promptly, provided that MII is not in breach of any of its obligations under this Agreement, the Existing Policies or any Existing Insurance Agreement.

(b) B&W LOC .

(i) B&W will, within fifteen (15) days after the Effective Date, provide to the Company, as beneficiary thereof, (A) a clean, irrevocable and unconditional letter of credit in an amount of $33,828,776 in respect of its Obligations under the Existing Insurance Agreements and the Existing Policies (other than the Foreign Insurance Agreements and Foreign Policies) and (B) a clean, irrevocable and unconditional letter of credit in an amount of $200,000 in respect of the Foreign Insurance Agreements and Foreign Policies (each such letter of credit individually and collectively being referred to herein as the “ B&W LOC ”), issued in a form and by a bank or other financial institution, in each case acceptable to the Company; and/or such other forms of collateral as the Company may permit from time to time. The B&W LOC shall be in an aggregate amount that is less than the aggregate amount of the Existing Collateral provided by B&W and shall secure the B&W Retained Obligations and the Obligations assumed by B&W in the B&W Assumption (the “ B&W Assumed Obligations ”).

(ii) The B&W LOC shall be “evergreen,” meaning that it shall provide by its terms that it will be renewed automatically each year for an additional year unless written notice of non-renewal is received by the Company at least sixty (60) days prior to the B&W LOC’s anniversary date. If the Company permits B&W to provide collateral in a form other than the B&W LOC, B&W shall provide such collateral in an amount and form acceptable to the Company.

(iii) B&W shall keep the B&W LOC in place (or other collateral acceptable to the Company) as security for payment of the B&W Retained Obligations and the B&W Assumed Obligations, until the Company determines in its sole discretion that there is no longer any need for such collateral. If there shall be a material deterioration in the financial condition of the bank or other financial institution which has issued the B&W LOC, the Company shall have the right to require B&W to replace the B&W LOC with a new letter of credit with similar terms issued by a bank or other financial institution then acceptable to the Company.

(iv) The Company shall have the right to draw against the B&W LOC and/or other collateral in each instance where any portion of the B&W Retained Obligations or the B&W Assumed Obligations for any reason is not fulfilled in the manner and within the time periods required under this Agreement or the Existing Policies or Existing Insurance Agreements giving rise thereto.

(v) Annually, the Company shall review and redetermine the amount of the B&W Retained Obligations and the B&W Assumed Obligations and the amount of collateral security required pursuant to this Agreement. At such time, B&W will provide its most recent audited financial statements, interim financial statements, and any other financial information reasonably requested by the Company for the purpose of evaluating the financial condition of B&W. B&W will provide any needed increases in the amount of the B&W LOC (and/or other collateral if acceptable to the Company) within thirty (30) days of the Company’s written request for any additional required amount of the B&W LOC. The Company will effect any decreases in the amount of the B&W LOC (and/or other collateral) promptly, provided that B&W is not in breach of any of its obligations under this Agreement, the Existing Policies or any Existing Insurance Agreement.

(c) Substituted Collateral . Notwithstanding anything in any Existing Policy or Existing Insurance Agreement to the contrary, the Parties, each B&W Entity that is a party hereto and each MII Entity that is a party hereto hereby agree that, upon receipt of the Substituted Collateral as set forth in Section 5(a)(i) and 5(b)(i), the Existing Collateral shall be replaced with such Substituted Collateral and, accordingly, shall be released by the Company and the ACE Affiliates.

(d) Fee . No later than fifteen (15) days after the Effective Date, MII shall pay to the Company the Fee, which shall be paid pursuant to the Company’s wire instructions as provided to MII in writing prior to the date such Fee is payable.

6. Existing Collateral. The Substituted Collateral required to be provided by MII and B&W hereunder shall, except to the extent provided otherwise in this Agreement, be subject to all of the terms and conditions applicable to the Existing Collateral pursuant to the Existing Insurance Agreements to the same extent that such terms and conditions applied to the Existing Collateral thereunder.

7. Security Interest. Each of MII and B&W will separately provide (or have provided) to the Company and ESIS, from time to time, funds to be credited to paid loss deposit funds, deductible funds and/ or loss funds (collectively, “ Cash Collateral ”) that the Company or ESIS shall hold pursuant to the Existing Insurance Agreements with respect to the MII Retained Obligations and the MII Assumed Obligations, in the case of MII, and with respect to the B&W Retained Obligations and the B&W Assumed Obligations, in the case of B&W. Each of MII and B&W hereby grant to the Company, for its benefit and the benefit of the ACE Affiliates, a continuing first priority security interest in and lien on all of their respective right, title and interest, if any, in and to the Cash Collateral and all proceeds thereof as security for their now existing and hereafter arising Obligations to the Company or such ACE Affiliates. The Company shall hold the Cash Collateral in accordance with the terms of the applicable Existing Insurance Agreement pursuant to which such Cash Collateral was provided to the Company or the applicable ACE Affiliate. The Company shall have the sole and exclusive right, and is hereby authorized, to use the Cash Collateral to pay any and all Obligations of MII and/or B&W in accordance with the Company Designation in accordance with the terms of the applicable Existing Insurance Agreement and this Agreement.

8. Billing. On and after the Effective Date, the Company (or any third party administrator acting on behalf of the Company in respect of an Existing Policy) will, in each case in accordance with the billing procedures set forth in the applicable Existing Policy and Existing Insurance Agreement:

(a) bill MII directly for the MII Retained Obligations and the MII Assumed Obligations; and

(b) bill B&W directly for the B&W Retained Obligations and the B&W Assumed Obligations.

9. Amendments. Neither this Agreement nor any provision hereof may be amended, changed, waived, discharged or terminated except by a written instrument signed by the Company, B&W, MII and each other Party, if any, against whom enforcement of such amendment, change, waiver, discharge or termination is sought.

10. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Neither this Agreement nor any right or obligation hereunder may be assigned or conveyed by any Party without the prior written consent of the other Parties, which consent shall not be unreasonably withheld.

11. [Intentionally Omitted].

12. No Waiver. The failure or refusal by any Party to exercise any rights granted hereunder shall not constitute a waiver of such rights or preclude the subsequent exercise thereof, and no oral communication shall be asserted as a waiver of any such rights hereunder unless such communication shall be confirmed in a writing plainly expressing an intent to waive such rights and signed by the Party against whom such waiver is asserted.

13. Counterparts. This Agreement may be executed in any number of counterparts each of which when so executed and delivered shall constitute an original, but such counterparts together shall constitute one and the same agreement. The exchange of copies of this Agreement and of signature pages by facsimile transmission or by electronic mail shall constitute effective execution and delivery of this Agreement as to the Parties and may be used in lieu of the original Agreement for all purposes. Signatures of the Parties and other Persons signatory hereto transmitted by facsimile or by electronic mail shall be deemed to be their original signatures for all purposes.

14. No Third Party Beneficiary. This Agreement shall not be deemed to give any right or remedy to any third party whatsoever unless otherwise specifically granted hereunder.

15. Parties’ Representations. As of the Effective Date, each of the Parties expressly represents on its own behalf: (a) it is an entity in good standing in its jurisdiction of organization; (b) it has all requisite corporate power and authority to enter into this Agreement, and to perform its obligations hereunder; (c) the execution and delivery by it of this Agreement, and the performance by it of its obligations under this Agreement, have been duly authorized by all necessary corporate or other action; (d) this Agreement, when duly executed and delivered by it, and subject to the due execution and delivery hereof by the other Parties, will be a valid and binding obligation of it, enforceable against it, its successors and permitted assigns, in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equity principles; (e) the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby in accordance with the respective terms and conditions hereof will not (i) violate any provision of its Organizational Documents, (ii) violate any applicable order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against it, or binding upon it, or any agreement with, or condition imposed by, any governmental or regulatory body, foreign or domestic, binding upon it as of the date hereof, or (iii) violate any agreement, contract, obligation, promise or undertaking that is legally binding and to which it is a party or by which it is bound; and (f) the signatory hereto on behalf of it is duly authorized and legally empowered to enter into this Agreement on its behalf.

16. Notices. Any and all notices, requests, approvals, authorizations, consents, instructions, designations and other communications that are required or permitted to be given pursuant to this Agreement shall be in writing and may be given either by personal delivery, first class prepaid post (airmail if to another country) or by internationally recognized overnight delivery service to the following address, or to such other address and recipient as such Party may have notified in accordance with the terms of this section as being its address or recipient for notification for the purposes of this Agreement:


If to the Company	ACE American Insurance Company 225 E. John Carpenter Freeway, Suite 1300 Irving, TX 75062
	Attention:	Underwriting Manager ACE Risk Management

	Telephone:	(972) 465.7500
	Facsimile:	(972) 465.7826

If to any MII Entity:	McDermott International, Inc. 757 N. Eldridge Parkway Houston, Texas 77079
	Attention:	VP and Chief Risk Officer (with copy to General Counsel)

	Telephone:	281-870-5785
	Telecopier:	281-870-5923
	Electronic Mail:	twoodard@mcdermott.com

If to any B&W Entity:	Prior to the Separation:

	Babcock & Wilcox Holdings, Inc. 800 Main Street Lynchburg, Virginia 24504
	Attention:	Director, Risk Management (with copy to General Counsel)
	Telephone:	434-522-6800

	with a copy to:
	McDermott International, Inc. 777 N. Eldridge Parkway Houston, Texas 77079
	Attention:	Director, Risk Management (with copy to General Counsel)

	Telephone:	281-870-5476
	Telecopier:	281-870-5923
	Electronic Mail:	cjryan@mcdermott.com

	On and After the Separation :

	The Babcock & Wilcox Company The Harris Building 13024 Ballantyne Corporate Place, Suite 700 Charlotte, North Carolina
	Attention:	Director, Risk Management (with copy to General Counsel)

Any notice or communication to any Person shall be deemed to be received by that Person:

(A) upon personal delivery; or

(B) upon receipt if sent by mail or courier.

17. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Pennsylvania without regard to those provisions concerning conflicts of laws that would result in the application of the laws of any other jurisdiction.

18. Entire Agreement. This Agreement, together with the Existing Policies and Existing Insurance Agreements, constitute the entire agreement among all of the Parties and supersedes all other prior agreements and understandings, both written and oral, with respect to the subject matter hereof.

19. Dispute Resolution. If a dispute between either MII or B&W, on the one hand, and the Company or any ACE Affiliate, on the other hand, involves rights or obligations arising under this Agreement, or any of the Existing Policies or Existing Insurance Agreements, the arbitration provisions in the most recent Existing Insurance Agreement referenced in Exhibit II shall govern the resolution of the entire dispute in all respects. In any such arbitration brought by or against MII or B&W, the other of B&W or MII, as applicable, shall have right to associate effectively in the defense and/or prosecution of such arbitration.

20. Severability. If any term or other provision of this Agreement or the Exhibits 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 any Party. 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.

21. Rules of Construction. The definitions of terms used herein 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”. Unless the context requires otherwise (a) 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, supplemented or otherwise modified, (b) any reference herein to any law shall be construed as referring to such law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to the restrictions contained herein), (d) 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, (e) with respect to the determination of any time period, the word “from” means “from and including” and the word “to” means “to and including” and (f) any reference herein to Articles, Sections and Exhibits shall be construed to refer to Articles and Sections of, and Exhibits to, this Agreement. No provision of this Agreement shall be interpreted or construed against any Person solely because such Person or its legal representative drafted such provision.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the Parties intending to be legally bound hereby have executed this Agreement, by their duly authorized representatives.


ACE AMERICAN INSURANCE COMPANY, on behalf of itself and the ACE Affiliates

By:		/ S / L AURA V EST
Name:		Laura Vest
Title:		Vice President

MCDERMOTT INTERNATIONAL, INC.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Senior Vice President

BABCOCK & WILCOX HOLDINGS, INC.

By:		/ S / M ICHAEL S. T AFF
Name:		Michael S. Taff
Title:		Senior Vice President

Signature Page to Assumption and Loss Allocation Agreement

ACKNOWLEDGED AND AGREED FOR PURPOSES OF SECTIONS 2, 3 and 5(c):


B&W ENTITIES :

AMERICON EQUIPMENT SERVICES, INC.

AMERICON, INC.

APPLIED SYNERGISTICS, INC.

BABCOCK & WILCOX CANADA LTD.

BABCOCK & WILCOX CHINA HOLDINGS, INC.

BABCOCK & WILCOX CONSTRUCTION CO., INC.

BABCOCK & WILCOX DE MONTERREY, S.A. DE C.V.

BABCOCK & WILCOX DENMARK HOLDINGS, INC.

BABCOCK & WILCOX EBENSBURG POWER, INC.

BABCOCK & WILCOX EQUITY INVESTMENTS, INC.

BABCOCK & WILCOX INDIA HOLDINGS, INC.

BABCOCK & WILCOX INTERNATIONAL SALES AND SERVICE CORPORATION

BABCOCK & WILCOX INTERNATIONAL, INC.

By:		/ S / B ENJAMIN H. B ASH
Name:		Benjamin H. Bash
Title:		Assistant Secretary of each of the above

Signature Page to Assumption and Loss Allocation Agreement


BABCOCK & WILCOX MODULAR NUCLEAR ENERGY LLC

BABCOCK & WILCOX NUCLEAR OPERATIONS GROUP, INC.

BABCOCK & WILCOX NUCLEAR ENERGY, INC.

BABCOCK & WILCOX NUCLEAR SERVICES (U.K.) LIMITED

BABCOCK & WILCOX TECHNICAL SERVICES CLINCH RIVER, LLC

BABCOCK & WILCOX POWER GENERATION GROUP, INC.

BABCOCK & WILCOX TECHNICAL SERVICES GROUP, INC.

BABCOCK & WILCOX TECHNICAL SERVICES SAVANNAH RIVER COMPANY

BABCOCK & WILCOX VOLUND A/S

BCE PARTS LTD.

BWX TECHNOLOGIES, INC.

BWXT FEDERAL SERVICES, INC.

BWXT HANFORD COMPANY

BWXT OF IDAHO, INC.

BWXT OF OHIO, INC.

BWXT WASHINGTON, INC.

By:		/ S / B ENJAMIN H. B ASH
Name:		Benjamin H. Bash
Title:		Assistant Secretary of each of the above

Signature Page to Assumption and Loss Allocation Agreement


CREOLE INSURANCE COMPANY, LTD.

DELTA POWER SERVICES, LLC

DIAMOND OPERATING CO., INC.

DIAMOND POWER AUSTRALIA HOLDINGS, INC.

DIAMOND POWER CHINA HOLDINGS, INC.

DIAMOND POWER EQUITY INVESTMENTS, INC.

DIAMOND POWER INTERNATIONAL, INC.

DIAMOND POWER SPECIALTY (PROPRIETARY) LIMITED

DPS BERKELEY, LLC

DPS CADILLAC, LLC

DPS FLORIDA, LLC

DPS GREGORY, LLC

DPS LOWELL COGEN, LLC

DPS MECKLENBURG, LLC

DPS MICHIGAN, LLC

DPS MOJAVE, LLC

DPS SABINE, LLC

GUMBO INSURANCE COMPANY, LTD.

By:		/ S / B ENJAMIN H. B ASH
Name:		Benjamin H. Bash
Title:		Assistant Secretary of each of the above

Signature Page to Assumption and Loss Allocation Agreement


INTECH INTERNATIONAL INC.

INTECH, INC.

IVEY-COOPER SERVICES, L.L.C.

MARINE MECHANICAL CORPORATION

NFS HOLDINGS, INC.

NOG-ERWIN HOLDINGS, INC.

NORTH COUNTY RECYCLING, INC.

NUCLEAR FUEL SERVICES, INC.

O&M HOLDING COMPANY

SOFCO - EFS HOLDINGS LLC

By:		/ S / B ENJAMIN H. B ASH
Name:		Benjamin H. Bash
Title:		Assistant Secretary of each of the above

BABCOCK & WILCOX TECHNICAL SERVICES (U.K.) LIMITED

By:		/ S / B ENJAMIN H. B ASH
Name:		Benjamin H. Bash
Title:		Joint Secretary

Signature Page to Assumption and Loss Allocation Agreement


B&W DE PANAMA, INC.

BABCOCK & WILCOX INTERNATIONAL INVESTMENTS CO., INC.

BABCOCK & WILCOX INVESTMENT COMPANY

By:		/ S / M ICHAEL S. T AFF
Name:		Michael S. Taff
Title:		Senior Vice President, of each of the above

Signature Page to Assumption and Loss Allocation Agreement


BABCOCK & WILCOX INDIA PRIVATE LIMITED

DIAMOND POWER SPECIALTY LIMITED

By:		/ S / R OBERT E. S TUMPF
Name:		Robert E. Stumpf
Title:		Assistant Secretary

NATIONAL ECOLOGY COMPANY

By:		/ S / R OBERT E. S TUMPF
Name:		Robert E. Stumpf
Title:		Secretary

DIAMOND POWER DO BRASIL LIMITADA


DIAMOND POWER INTERNATIONAL, INC.

BABCOCK & WILCOX INTERNATIONAL SALES AND SERVICE CORPORATION (as Shareholders of Diamond Power do Brasil Limitada)

By:		/ S / R OBERT E. S TUMPF
Name:		Robert E. Stumpf
Title:		Assistant Secretary of each of the Shareholders

Signature Page to Assumption and Loss Allocation Agreement


P. T. BABCOCK & WILCOX ASIA

SERVICIOS DE FABRICACION DE VALLE SOLEADO, S.A. DE C.V.

SERVICOS PROFESIONALES DE VALLE SOLEADO, S.A. DE C.V.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Secretary

Signature Page to Assumption and Loss Allocation Agreement


DIAMOND POWER CENTRAL & EASTERN EUROPE S.R.O.

DIAMOND POWER FINLAND OY

By:		/ S / J UHA K. M USTONEN
Name:		Juha K. Mustonen
Title:		Managing Director

Signature Page to Assumption and Loss Allocation Agreement


DIAMOND POWER MACHINE (HUBEI) CO., INC.

By:		/ S / D AVID R. G IBBS
Name:		David R. Gibbs
Title:		Director

Signature Page to Assumption and Loss Allocation Agreement


DIAMOND POWER SWEDEN AB

By:		/ S / M IKA J. H AIKOLA
Name:		Mika J. Haikola
Title:		Managing Director

Signature Page to Assumption and Loss Allocation Agreement

ACKNOWLEDGED AND AGREED FOR PURPOSES OF SECTIONS 2, 3 and 5(c):


MII ENTITIES :

CHARTERING COMPANY (SINGAPORE) PTE. LTD.

J. RAY MCDERMOTT (QINGDAO) PTE. LTD.

J. RAY MCDERMOTT ASIA PACIFIC PTE. LTD.

MALMAC SDN. BHD.

MCDERMOTT (MALAYSIA) SENDIRIAN BERHAD

By:		/ S / J EFF J. H IGHTOWER
Name:		Jeff J. Hightower
Title:		Director of each of the above

BOUDIN INSURANCE COMPANY, LTD.

J. RAY MCDERMOTT EASTERN HEMISPHERE LIMITED

LAGNIAPPE INSURANCE COMPANY, LTD.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Assistant Secretary, of each of the above

Signature Page to Assumption and Loss Allocation Agreement


J. RAY MCDERMOTT UK LTD.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Joint Secretary

EASTERN MARINE SERVICES, INC.

GLOBAL ENERGY - MCDERMOTT LIMITED

HYDRO MARINE SERVICES, INC.

J. RAY MCDERMOTT (CASPIAN), INC.

J. RAY MCDERMOTT (NIGERIA) LTD.

J. RAY MCDERMOTT (NORWAY), AS

J. RAY MCDERMOTT CANADA HOLDING, LTD.

J. RAY MCDERMOTT CANADA, LTD.

J. RAY MCDERMOTT CONTRACTORS, INC.

J. RAY MCDERMOTT DE MEXICO, S.A. DE C.V.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Secretary of each of the above

Signature Page to Assumption and Loss Allocation Agreement



J. RAY MCDERMOTT ENGINEERING SERVICES PRIVATE LIMITED

J. RAY MCDERMOTT ENGINEERING, LLC

J. RAY MCDERMOTT FAR EAST, INC.

J. RAY MCDERMOTT INTERNATIONAL, INC.

J. RAY MCDERMOTT INTERNATIONAL VESSELS, LTD.

J. RAY MCDERMOTT INVESTMENTS B.V.

J. RAY MCDERMOTT KAZAKHSTAN LLP

J. RAY MCDERMOTT LOGISTIC SERVICES PVT. LIMITED

J. RAY MCDERMOTT MIDDLE EAST, INC.

J. RAY MCDERMOTT SOLUTIONS, INC.

J. RAY MCDERMOTT TECHNOLOGY, INC.

J. RAY MCDERMOTT UNDERWATER SERVICES, INC.

J. RAY MCDERMOTT WEST AFRICA HOLDINGS, INC.

J. RAY MCDERMOTT WEST AFRICA, INC.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Secretary of each of the above

Signature Page to Assumption and Loss Allocation Agreement



MCDERMOTT CASPIAN CONTRACTORS, INC.

MCDERMOTT FAR EAST, INC.

MCDERMOTT GULF OPERATING COMPANY, INC.

MCDERMOTT INTERNATIONAL B.V.

MCDERMOTT INTERNATIONAL INVESTMENTS CO., INC.

MCDERMOTT INTERNATIONAL MARINE INVESTMENTS N.V.

MCDERMOTT INTERNATIONAL TRADING CO., INC.

MCDERMOTT INTERNATIONAL VESSELS, INC.

MCDERMOTT MARINE MEXICO, S.A. DE C.V.

MCDERMOTT OFFSHORE SERVICES COMPANY, INC.

MCDERMOTT OLD JV OFFICE, INC.

MCDERMOTT OVERSEAS INVESTMENT CO. N.V.

MCDERMOTT OVERSEAS, INC.

MCDERMOTT TRADE CORPORATION

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Secretary of each of the above

Signature Page to Assumption and Loss Allocation Agreement


MENTOR SUBSEA TECHNOLOGY SERVICES, INC.

NORTH ATLANTIC VESSEL, INC.

OFFSHORE PIPELINES INTERNATIONAL, LTD.

OPI VESSELS, INC.

OPMI, LTD.

SABINE RIVER REALTY, INC.

SERVICIOS DE FABRICACION DE ALTAMIRA, S.A. DE C.V.

SERVICOS PROFESIONALES DE ALTAMIRA, S.A. DE C.V.

SPARTEC, INC.

VARSY INTERNATIONAL N.V.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Secretary of each of the above

MCDERMOTT KFT.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Managing Director

Signature Page to Assumption and Loss Allocation Agreement


J. RAY MCDERMOTT (AUST.) HOLDING PTY. LIMITED

MCDERMOTT AUSTRALIA PTY. LTD.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Corporate Officer of each of the above

MCDERMOTT INCORPORATED

MCDERMOTT PANAMA HOLDINGS, S.A.

J. RAY MCDERMOTT HOLDINGS, LLC

J. RAY MCDERMOTT, INC.

J. RAY MCDERMOTT, S.A.

MCDERMOTT CAYMAN LTD.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Senior Vice President of each of the above

MCDERMOTT INTERNATIONAL MARKETING, INC.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		President

Signature Page to Assumption and Loss Allocation Agreement


FLOATEC, LLC

By:		/ S / R OBERT E. S TUMPF
Name:		Robert E. Stumpf
Title:		Assistant Secretary

MCDERMOTT HOLDINGS (U.K.) LIMITED

MCDERMOTT MARINE CONSTRUCTION LIMITED

By:		/ S / R OBERT E. S TUMPF
Name:		Robert E. Stumpf
Title:		Joint Secretary of each of the above

MCDERMOTT SERVICOS DE CONSTRUCAO, LTDA.

	J. RAY MCDERMOTT INC.

	MCDERMOTT OVERSEAS, INC., (as Shareholders)

	By:	/ S / R OBERT E. S TUMPF
	Name:	Robert E. Stumpf
	Title:	Assistant Secretary

OFFSHORE PIPELINES SDN. BHD.

	OFFSHORE PIPELINES SDN. BLD. (as Sole Shareholder)

	By:	/ S / R OBERT E. S TUMPF
	Name:	Robert E. Stumpf
	Title:	Assistant Secretary

Signature Page to Assumption and Loss Allocation Agreement


INTERNATIONAL VESSELS LTD.

By:		/ S / S TEVEN W. R OLL
Name:		Steven W. Roll
Title:		Director

Signature Page to Assumption and Loss Allocation Agreement


PT. BAJA WAHANA INDONESIA

By:		/ S / S COTT C UMMINS
Name:		Scott Cummins
Title:		President Director

Signature Page to Assumption and Loss Allocation Agreement


SINGAPORE HUANGDAO PTE. LTD.

By:		/ S / R OCKNE L. M OSELEY
Name:		Rockne L. Moseley
Title:		Director

Signature Page to Assumption and Loss Allocation Agreement

EXHIBIT I – B&W ENTITIES

See Schedule 1.1(a) and Schedule 1.1(c) attached hereto. No B&W Entity listed on Schedule 1.1(a) shall be deemed to be an “Insured”, a “Named Insured” or otherwise be deemed to be insured under any Existing Policy or Existing Insurance Agreement solely by virtue of being listed on such Schedule 1.1(a).

6/2/2010

Schedule 1.1(a)

B&W FORMER


Reference ID		Name
333		Ahahsain Hudson Heat Transfer Co. Ltd.
398		Advanced Refractory Technologies, Inc.
		A.M. Lockett & Co., Limited
		Amcermet Corporation
924		ASEA Babcock
235		Ash Acquisition Company
326		B & W Clarion, Inc.
574		B&W Ebensburg Pa., Inc.
460		B&W Energy Investments, Inc.
383		B&W Fort Worth Power, Inc.
950		B&W Fuel Company
535		B&W Fuel, Inc.
922		B&W Mexicana, S.A. de C.V.
9991		B&W North Branch G.P., Inc.
9990		B&W North Branch L.P., Inc.
537		B&W Nuclear Service Company
960		B&W Nuclear Service Company
536		B&W Nuclear, Inc.
586		B&W Saba, Inc.
591		B&W Service Company
579		B&W SOFC G.P., Inc.
578		B&W SOFC L.P., Inc.
381		B&W Special Projects, Inc.
569		B&W Triso Corporation
		B&W Tubular Products Limited
573		B&W/OHM Weldon Spring, Inc.
212		Babcock & Wilcox Asia Investment Co., Inc.
115		Babcock & Wilcox Asia Limited
533		Babcock & Wilcox Canada Leasing Ltd.
503		Babcock & Wilcox Canada Ltd.
215		Babcock & Wilcox China Investment Co., Inc.
594		Babcock & Wilcox do Brasil Limitada
528		Babcock & Wilcox do Brasil Participacoes Limitada

6/2/2010


206		Babcock & Wilcox Egypt SAE
169		Babcock & Wilcox Fibras Ceramicas Limitada
519		Babcock & Wilcox Finance, Inc.
557		Babcock & Wilcox Foreign Sales Corporation
175		Babcock & Wilcox Gama Kazan Teknolojisi A.S.
552		Babcock & Wilcox General Contracting Company
565		Babcock & Wilcox Government Services Company
395		Babcock & Wilcox HRSG Company
		Babcock & Wilcox Industries, Ltd.
531		Babcock & Wilcox International Sales Corporation
549		Babcock & Wilcox International Sales Corporation
342		Babcock & Wilcox Investment Company
305		Babcock & Wilcox Jonesboro Power, Inc.
2007		Babcock & Wilcox Nevada, LLC
		Babcock & Wilcox Refractories Limited
323		Babcock & Wilcox Salt City Power, Inc.
543		Babcock & Wilcox Services, Inc.
322		Babcock & Wilcox Tracy Power, Inc.
314		Babcock & Wilcox Victorville Power, Inc.
727		Babcock & Wilcox Volund France SAS
315		Babcock PFBC, Inc.
559		Babcock Southwest Construction Corporation
945		Babcock-Brown Boveri Reaktor GmbH
936		Babcock-Ultrapower Jonesboro
937		Babcock-Ultrapower West Enfield
951		Bailey Beijing Controls Co., Ltd.
516		Bailey Controls Australia Pty. Limited
517		Bailey Controls International Sales & Services Company, Inc.
954		Bailey Controls Jordan for Process Controls Services, Ltd.
563		Bailey Controls Sales & Service (Australia) Pty. Limited
564		Bailey Controls Sales & Services Canada Inc.
561		Bailey do Brasil Instrumentos Industriais Limitada
114		Bailey International, Inc.
923		Bailey Japan Company Limited
542		Bailey Meter and Controls Company
		Bailey Meter Company
562		Bailey Meter Co. (Japan) Ltd.

6/2/2010


		Bailey Meter Company Limited
		Bailey Meter GmbH
646		Brick Insurance Company, Ltd.
590		BWXT Protec, Inc.
		C.C. Moore & Company Engineers
511		Ceramatec G.P., Inc.
510		Ceramatec SOFC, Inc.
329		Clarion Energy, Inc.
328		Clarion Power Company
321		Conam Nuclear, Inc.
		Control Components France
514		Control Components Italy S.R.L.
		Control Components, Inc. (California)
		Control Components, Inc. (Delaware)
948		Control Components Japan
1914		CTR Solutions, LLC
545		Detroit Broach & Machine Corporation
551		Diamond Blower Company Limited
		Diamond Canapower Ltd.
518		Diamond Power Importacao e Exportacao Ltda.
144		Diamond Power Korea Inc.
526		Diamond Power Specialty (Japan) Ltd.
558		Diamond Power Specialty (Proprietary) Limited
546		Diamond Power Specialty Corporation (Delaware)
		Diamond Power Speciality Corporation (Ohio)
529		Diamond Power Specialty GmbH
		Diescher Tube Mills, Inc.
332		Ebensburg Energy, Inc.
397		Ejendomsaktieselskabet Falkevej2
961		Enserch Environmental Management Company, Inc.
968		EPC Business Trust
919		Especialidades Termomecanicas, S.A. de C.V.
550		Ferry-Diamond Engineering Company Limited
928		Fibras Ceramicas C.A.
509		Fibras Ceramicas, Inc.
547		Globe Steel Tubes Corporation
		Greer Land Co.

6/2/2010


		Holmes Insulations Limited
124		Hudson Heat Transfer International, Inc.
1955		Hudson HEI Pty. Ltd.
914		Hudson Northern Industries Inc.
125		Hudson Products Aktiebolag
567		Hudson Products Corporation (1)
902		Hudson Products de Mexico, S.A. de C.V.
1907		Integran Technologies Inc.
461		International Disarmament Corporation
941		Isolite Babcock Refractories Company, Ltd.
927		Isolite Eastern Union Refractories Co., Ltd.
920		KBW Gasification Systems, Inc.
512		LT Produkter i Skutskar AB
938		Maine Power Services
345		McDermott Heat Transfer Company
344		McDermott Productos Industriales de Mexico, S.A. de C.V.
946		Medidores Bailey, S.A. de C.V.
942		Morganite Ceramic Fibres Limited
943		Morganite Ceramic Fibres Pty. Limited
944		Morganite Ceramic Fibres S. A.
		National Drill & Manufacturing Co.
544		National Ecology (Alabama) Incorporated
575		National Ecology (Utah) Incorporated
976		Nooter/Eriksen - Babcock & Wilcox, L.L.C.
933		North American CWF Partnership
9989		North Branch Power Company L.P.
971		North County Operations Associates
		Nuclear Materials and Equipment Corporation
958		Olin Pantex Inc.
1153		P. T. Heat Exchangers Indonesia
934		Palm Beach Energy Associates
		Piedmont Tool Machine Company
576		Power Computing Company
581		Power Systems Sunnyside Operations GP, Inc.
583		Power Systems Sunnyside Operations LP, Inc.

(1)	a Delaware Corporation

6/2/2010


905		PowerSafety International, Inc.
508		Productos de Caolin, Inc.
577		PSO Caribbean, Inc.
1980		Savannah River Alliance LLC
2008		Savannah River Tactical Services LLC
984		SOFCo L.P.
932		South Point CWF
556		Sunland Construction Co., Inc.
988		Sunnyside Cogeneration Associates
582		Sunnyside II, Inc.
992		Sunnyside II, L.P
303		Sunnyside III, Inc.
993		Sunnyside Operations Associates L.P.
571		Termobloc Industria E Comercio Ltda.
953		Thermax Babcock & Wilcox Limited
502		TLT-Babcock, Inc.
570		Triso
1152		W.E. Smith Hudson Pty. Ltd.
548		W. F. and John Barnes Company

Draft 6/2/2010

Schedule 1.1(c)

B&W CURRENT


Reference ID	Name
553	Americon Equipment Services, Inc.
554	Americon, Inc.
732	Applied Synergistics, Inc.
127	B&W de Panama, Inc.
532	Babcock & Wilcox Canada Ltd.
1570	Babcock & Wilcox China Holdings, Inc.
555	Babcock & Wilcox Construction Co., Inc.
2011	Babcock & Wilcox de Monterrey, S.A. de C.V.
1571	Babcock & Wilcox Denmark Holdings, Inc.
327	Babcock & Wilcox Ebensburg Power, Inc.
302	Babcock & Wilcox Equity Investments, Inc.
1965	Babcock & Wilcox Holdings, Inc.
2028	Babcock & Wilcox India Holdings, Inc.
598	Babcock & Wilcox India Private Limited
126	Babcock & Wilcox International Investments Co., Inc.
530	Babcock & Wilcox International Sales and Service Corporation
541	Babcock & Wilcox International, Inc.
380	Babcock & Wilcox Investment Company
2010	Babcock & Wilcox Modular Nuclear Energy LLC
1974	Babcock & Wilcox Nuclear Operations Group, Inc.
1967	Babcock & Wilcox Nuclear Energy, Inc.	(formerly Babcock & Wilcox Nuclear Power Generation Group, Inc.
2018	Babcock & Wilcox Nuclear Services (U.K.) Limited
500	Babcock & Wilcox Power Generation Group, Inc.
1961	Babcock & Wilcox Technical Services (U.K.) Limited
1970	Babcock & Wilcox Technical Services Clinch River, LLC
572	Babcock & Wilcox Technical Services Group, Inc.	(formerly BWXT Services, Inc.)
587	Babcock & Wilcox Technical Services Savannah River Company	(formerly BWXT Savannah River Company)
599	Babcock & Wilcox Volund A/S	(formerly Babcock & Wilcox Volund ApS)
2000	BCE Parts Ltd.
596	BWX Technologies, Inc.
580	BWXT Federal Services, Inc.
589	BWXT Hanford Company
382	BWXT of Idaho, Inc.

Draft 6/2/2010


592	BWXT of Ohio, Inc.
1576	BWXT Washington, Inc.
189	Creole Insurance Company, Ltd.
1988	Delta Power Services, LLC
766	Diamond Operating Co., Inc.
1572	Diamond Power Australia Holdings, Inc.
1984	Diamond Power Central & Eastern Europe s.r.o.
1573	Diamond Power China Holdings, Inc.
521	Diamond Power do Brasil Limitada
1574	Diamond Power Equity Investments, Inc.
525	Diamond Power Finland OY
504	Diamond Power Germany GmbH	(formerly Diamond Power - Sturm GmbH)
597	Diamond Power International, Inc.
949	Diamond Power Machine (Hubei) Co., Inc.
1908	Diamond Power Services S.E.A. Ltd.
522	Diamond Power Specialty (Proprietary) Limited
523	Diamond Power Specialty Limited
524	Diamond Power Sweden AB
1990	DPS Berkeley, LLC
1997	DPS Cadillac, LLC
1995	DPS Florida, LLC
1993	DPS Gregory, LLC
1996	DPS Lowell Cogen, LLC
1992	DPS Mecklenburg, LLC
1991	DPS Michigan, LLC
1994	DPS Mojave, LLC
1998	DPS Sabine, LLC
278	Gumbo Insurance Company, Ltd.
2003	Intech International Inc.
2002	Intech, Inc.
2001	Ivey-Cooper Services, L.L.C.
1968	Marine Mechanical Corporation
540	National Ecology Company
2005	NFS Holdings, Inc.
2004	NOG-Erwin Holdings, Inc.
501	North County Recycling, Inc.
2006	Nuclear Fuel Services, Inc.

Draft 6/2/2010


1989		O&M Holding Company
707		P. T. Babcock & Wilcox Asia
534		Palm Beach Resource Recovery Corporation
560		Power Systems Operations, Inc.
568		Revloc Reclamation Service, Inc.
2013		Servicios de Fabricacion de Valle Soleado, S.A. de C.V.
2012		Servicios Profesionales de Valle Soleado, S.A. de C.V.
767		SOFCo - EFS Holdings LLC
2029		The Babcock & Wilcox Company

EXHIBIT II – EXISTING INSURANCE AGREEMENTS

See Attached.

Name of Agreement

Party to

Agreement

Party to

Agreement

Party to

Agreement

Party to

Agreement

Party to

Agreement

Effective
Date of
Agreement

Workers Compensation Residual Market Assessments Deductible WC Programs

McDermott International, Inc.

CIGNA Insurance Company of Texas

1992

High Deductible Agreement

McDermott Incorporated

Insurance Company of North America

4/1/1981

High Deductible Agreement

McDermott International

Insurance Company of North America

4/1/1985

High Deductible Agreement

McDermott International

Insurance Company of North America

4/1/1986

High Deductible Agreement

McDermott International, Inc.

Insurance Company of North America

INA of Texas

4/1/1987

Auto & GL only

High Deductible Agreement

McDermott International, Inc.

Insurance Company of North America

4/1/1988

High Deductible Agreement

McDermott International, Inc.

Insurance Company of North America

4/1/1989

High Deductible Agreement

McDermott International, Inc.

Insurance Company of North America

4/1/1990

Cash Flow Deductible Workers’ Compensation Agreement

The Babcock & Wilcox Company

Insurance Company of North America

4/1/1991

High Deductible Agreement

McDermott International, Inc.

Insurance Company of North America

4/1/1991

Workers Compensation Deductible Funding Agreement

Babcock & Wilcox Company

CIGNA Insurance Company of Texas

Pacific Employers Insurance Company

4/1/1992

Agreement for Workers Compensation Residual market Assessments

Cigna Insurance Companyof Texas

Babcock & Wilson Company

Pacific Employers Insurance Company

4/1/1992

Workers Compensation Deductible Funding Agreement

McDermott International, Inc.

CIGNA Insurance Company of Texas

4/1/1992

High Deductible Agreement

McDermott International, Inc.

Insurance Company of North America

4/1/1992

XS, Auto & GL

Casualty Insurance Program Agreement

The Babcock & Wilcox Company

Pacific Employers Insurance Company

4/1/1993

Agreement for Workers Compensation Residual market Assessments Captive Program

Pacific Employers Insurance Company

Creole Insurance Company, Ltd

4/1/1993

Casualty Insurance Program Agreement

McDermott International, Inc.

Pacific Employers Insurance Company

4/1/1993

Collateral Agreement

McDermott International, Inc.

Insurance Company of North America

4/1/1993

Casualty Insurance Program Agreement

The Babcock & Wilcox Company

Pacific Employers Insurance Company

4/1/1994

Agreement for Workers compensation Redidual Market Assessments Captive Program

Pacific Employers Insurance Company

Creole Insurance Company, Ltd

4/1/1994

High Deductible Agreement

McDermott International, Inc.

Insurance Company of North America

4/1/1994

Casualty Insurance Program Agreement

The Babcock & Wilcox Company

CIGNA Insurance Company

Bankers Standard Insurance Company

4/1/1995

Agreement Regarding Additional Premiums

McDermott International, Inc.

Creole Insurance Company, Limited

Bankers Standard Insurance Company

4/1/1995

Casualty Insurance Program Agreement

The Babcock & Wilcox Company

CIGNA Insurance Company

Bankers Standard Insurance Company

4/1/1995

High Deductible Agreement

McDermott International, Inc.

Indemnity Insurance Company of North America

4/1/1995

Addendum I Casualty Insurance Program Agreement

The Babcock & Wilcox Company

CIGNA Insurance Company

Bankers Standard Insurance Company

4/1/1996

Casualty Insurance Program Agreement

McDermott International, Inc.

Bankers Standard Insurance Company

4/1/1996

High Deductible Agreement

McDermott International, Inc.

Indemnity Insurance Company of North America

4/1/1996

Reinsurance Agreement

Honore Insurance Company Limited

CIGNA Insurance Company

4/1/1997

Reinsurance Agreement

Honore Insurance Company Limited

CIGNA Insurance Company of Canada

4/1/1997

Addendum III Casualty Insurance Program Agreement

The Babcock & Wilcox Company

CIGNA Insurance Company

Bankers Standard Insurance Company

Pacific Employers Insurance Company

4/1/1997

High Deductible Agreement

McDermott International, Inc.

Indemnity Insurance Company of North America

4/1/1997

Casualty Insurance Program Agreement

McDermott International, Inc.

Bankers Standard Insurance Company

4/1/1997

Addendum II to the 1996 agreement

Cash Flow Deductible Workers’ Compensation Program

McDermott International, Inc.

Hudson Companies

Bankers Standard Insurance Company

4/1/1997

Cash Flow High Deductible Program

McDermott International, Inc.

Indemnity Insurance Company of North America

4/1/1997

Auto & GL only

Specific Excess Workers’ Compensaiton & Employers’ Liability

McDermott International, Inc.

CIGNA Insurance Company

4/1/1997

Final Summary of Proposal

Aon Risk Services of Texas, Inc

Pacific Employers Ins/Bankers Standard Ins.

4/1/1997

Canadian Proposal included

Canadian Reinsurance Agreement

Honore Insuance Company Limited

CIGNA Insurance Company of Canada

4/1/1997

Addendum I - Canadian Reinsurance Agreement

Honore Insuance Company Limited

CIGNA Insurance Company of Canada

4/1/1997

Agreement Regarding Return Premiums

Babcock & Wilcox Company

Creole Insurance Company, Limited

CIGNA Insurance Company

Indemnity Insurance Company of North American

CIGNA Insurance Company of Canada

7/28/1997

Agreement Regarding Return Premiums

The Babcock & Wilcox Company

Creole Insurance Company, Limited

CIGNA Insurance Company

Indemnity Insurance Company of NA

CIGNA Insuarnce Company fo Canada

7/28/1997

Agreement

The Babcock & Wilcox Company

Pacific Employers Insurance Company

4/1/1998

Casualty Insurance Program Agreement

The Babcock & Wilcox Company

CIGNA Insurance Company of Texas

Pacific Employers Insurance Company

4/1/1998

Addendum I Reinsurance Agreement

Honore Insurance Company Ltd

CIGNA Insurance Company of Canada

4/1/1998

Casualty Insurance Program Agreement

The Babcock & Wilcox Company

CIGNA Insurance Company of Texas

Pacific Employers Insurance Company

4/1/1998

Casualty Insurance Program Agreement

McDermott International, Inc.

Pacific Employers Insurance Company

CIGNA Insurance Company of Texas

4/1/1998

High Deductible Agreement

McDermott International, Inc.

Pacific Employers Insurance Company

4/1/1998

Cash Flow Deductible Workers’ Compensation Program

AON Risk Services of Texas, Inc.

CIGNA Insurance Company of Texas

Pacific Employers Insurance Company

4/1/1998

Cash Flow High Deductible Program

AON Risk Services of Texas, Inc.

Insurance Company of North America

Pacific Employers Insurance Company

4/1/1998

Auto & GL only

Specific Excess Workers’ Compensaiton & Employers’ Liability

AON Risk Services of Texas, Inc.

CIGNA Insurance Company

4/1/1998

Assignment of Dividends

McDermott International, Inc.

Pacific Employers Insurance Company

4/1/1998

TPA Agreement

The Babcock & Wilcox Company

Pacific Employers Insurance Co.

4/1/1998

Casualty Insurance Program Agreement

The Babcock & Wilcox Company

CIGNA Insurance Company of Texas

Pacific Employers Insurance Company

4/1/1998

Casualty Insurance Program Agreement

The Babcock & Wilcox Company

CIGNA Insurance Company of Texas

Pacific Employers Insurance Company

4/1/1998

Final Summary of Proposal

Aon Risk Services of Texas, Inc

Pacific Employers Insurance Co.

CIGNA Insurance Company

4/1/1998

Included: Cash Flow Ded. WC Program and Guaranteed Cost WC Program

Agreement

The Babcock & Wilcox Company

Pacific Employers Insurance Company

4/1/1999

Addendum I Casualty Insurance Program Agreement

The Babcock & Wilcox Company

Pacific Employers Insurance Company

ACE Insurance Company of Texas (formerly CIGNA Insurance company of Texas

4/1/1999

This Addendum is from 04/01/99 to 04/01/00

Addendum II Casualty Insurance Program Agreement

The Babcock & Wilcox Company

Pacific Employers Insurance Company

CIGNA Insurance Company of Texas

4/1/1999

This Addendum is from 04/01/99 to 01/01/00

Addendum II to Reinsurance Agreement

Cigna Insurance Companyof Canada

Honore Insurance Company Limited

4/1/1999

This Addendum is from 04/01/99 to 04/01/00

Addendum III to Reinsurance Agreeement

ACE INA Insurance (formely CIGNA Insurance Company of Canada

Honore Insurance Company Limited

4/1/1999

This Addendum is from 04/01/99 to 01/01/00

Multi-Line Deductible Cash Flow Insurance

AON Risk Services of Texas, Inc.

Pacific Employers Insurance Company

CIGNA Insurance Company

Insurance Company of North America

4/1/1999

High Deductible Agreement

McDermott International, Inc.

Pacific Employers Insurance Company

4/1/1999

Casualty Insurance Program Agreement

McDermott International, Inc.

Pacific Employers Insurance Company

CIGNA Insurance Company of Texas

4/1/1999

Casualty Insurance Program Agreement - Addendum II

McDermott International, Inc.

Pacific Employers Insurance Company

ACE Insurance Company of Texas (formerly CIGNA)

4/1/1999

changing expiration to 01/01/00

Assignment of Dividends

McDermott International, Inc.

Pacific Employers Insurance Company

Hudson Companies

4/1/1999

Combined Miult-Line Program Agreement

Pacific Employers Insurance Company

Babcock & Wilson Company

1/1/2000

Addendum IV Reinsurance Agreement

ACE INA Insurance

Honore Insurance Company Limited

1/1/2000

Combined Multi-Line Program Agreement

McDermott International, Inc.

Pacific Employers Insurance Company

1/1/2000

Addendum I to the 2000 term

Assignment of Dividends

McDermott International, Inc.

Pacific Employers Insurance Company

Hudson Companies

1/1/2000

Addendum II Combined Multi-line Program Agreement

Pacific Employers Insurance Company

Babcock & Wilson Company

1/1/2001

Addendum V to Resinsurance Agreement

ACE INA Insurance

Honore Insurance Company Limited

1/1/2001

Combined Multi-Line Program Agreement

McDermott International, Inc.

Pacific Employers Insurance Company

1/1/2001

Addendum IV to Combined Multi-Line Program Agreement

Pacific Employers Insurance Company

Babcock & Wilson Company

1/1/2002

Addendum VI to Reinsurance Agreement

ACE INA Insurance

Pirogue Insurance Company, Ltd

1/1/2002

Addendum V to Combined Multi-Line Program Agreement

Babcock & Wilcox Company

ACE American Insurance Company

Pacific Employers Insurance Company

1/1/2003

Addendum VII to Reinsurance Agreement

ACE INA Insurance

Pirogue Insurance Company, Ltd

1/1/2003

Addendum VI to Combined multi-Line Program

Babcock & Wilcox Company

ACE American Insurance Company

Pacific Employers Insurance Company

ACE INA Insurance Company

1/1/2004

Addendum VII to Combined Multi-Line Program Agreement

Babcock & Wilcox Company

ACE American Insurance Company

ACE INA Insurance Company

1/1/2005

Addendum II to Combined Multi-Line Program Agreement

McDermott International, Inc.

Pacific Employers Insurance Company

1/1/2002

Addendum IV to Combined Multi-Line Program Agreement

McDermott International, Inc.

ACE American Insurance Company

Pacific Employers Insurance Company

1/1/2003

Addendum V to Combined Multi-Line Program Agreement

McDermott International, Inc.

ACE American Insurance Company

Pacific Employers Insurance Company

1/1/2004

Addendum VI to Combined Multi-Line Program Agreement

McDermott International, Inc.

ACE American Insurance Company

1/1/2005

Casualty Program Binder

The Babcock & Wilcox Company

ACE American Insurance Company

ACE INA Insurance

1/1/2006

Casualty Program Binder

The Babcock & Wilcox Company

ACE American Insurance Company

ACE INA Insurance

1/1/2007

Casualty Program Binder

The Babcock & Wilcox Company

ACE American Insurance Company

ACE INA Insurance

Indemnity Insurance Company of North America

1/1/2008

Casualty Program Proposal

The Babcock & Wilcox Company

ACE American Insurance Company

ACE INA Insurance

Indemnity Insurance Company of North America

1/1/2009

Casualty Program Proposal

The Babcock & Wilcox Company

ACE American Insurance Company

ACE INA Insurance

Indemnity Insurance Company of North America

1/1/2010

Casualty Program Binder

McDermott International, Inc.

ACE American Insurance Company

1/1/2006

Casualty Program Binder

McDermott International, Inc.

ACE American Insurance Company

1/1/2007

Casualty Program Binder

McDermott International, Inc.

ACE American Insurance Company

Indemnity Insurance Company of North America

1/1/2008

Casualty Program Proposal

McDermott International, Inc.

ACE American Insurance Company

Indemnity Insurance Company of North America

1/1/2009

Casualty Program Proposal

McDermott International, Inc.

ACE American Insurance Company

Indemnity Insurance Company of North America

1/1/2010

EXHIBIT III – EXISTING POLICIES

See Attached.

Exhibit 1 - Policies and Named Insured’s


Effective Date	Expiration Date	Policy Number	Named Insured	Type of Policy (LOB)	Issuing Company
4/1/1977	4/1/1978	XWC 6858	J. Ray McDermott & Co., Inc.	XWC	INA
4/1/1980	4/1/1981	XCP 143599	J. Ray McDermott & Company - See attachment 205	XGL	INA
4/1/1982	4/1/1983	GLP 829719	Babcock & Wilcox Company - See attachment 164	GL	INA
4/1/1982	4/1/1985	XCP 014414	Intermountain Power Agency Department of Water & Power City of Los Angeles	XGL	INA
4/1/1983	4/1/1984	RSC C20704202	Babcock & Wilcox Company - See attachment 168	WC	INA - TX
4/1/1983	4/1/1984	RSC C20704226	Babcock & Wilcox Company - See attachment 178	WC	Pacific Employers
4/1/1983	4/1/1984	SCA 5914	The Babcock & Wilcox Company - See attachment 176	Auto	INA - TX
4/1/1984	4/1/1985	RSC C22890785	TLT Babcock, Inc., a Joint Venture	WC	Pacific Employers
3/8/1985	3/8/1986	GLP G05111523	Babcock & Wilcox Company	GL	INA
3/8/1985	9/12/1985	NWC X1939718A	MMC - McDermott - See attachment 137	WC	INA
4/1/1985	4/1/1986	RSC C19396812	Babcock & Wilcox Company - See attachment 274	WC	Cigna
4/1/1985	4/1/1986	XCP G05111730	Commonwealth Edison Company	XGL	INA
4/1/1985	4/1/1986	XCP G0511326A	Intermountain Power Agency Department of Water & Power City of Los Angeles	GL	INA
4/21/1985	5/2/1985	GLP G05111766	Chevron USA	GL	INA
6/30/1985	7/10/1985	GLP G05112588	Chevron USA	GL	INA
4/1/1986	4/1/1987	CPO G03518656	Babcock & Wilcox Company	GL	INA
4/1/1986	4/1/1987	CPO G05114329	Babcock & Wilcox Company - See attachment 187	GL	INA

Page 1 of 25

Exhibit 1 - Policies and Named Insured’s


4/1/1986	4/1/1987	CPO G05114329	Babcock & Wilcox Company - See attachment 203	GL	INA
4/1/1986	4/1/1990	XCE G0519622A	McDermott International, Inc.	XGL	Cigna
4/1/1986	4/1/1987	XCP G05114184	Arco Oil & Gas Company	XGL	INA
4/1/1987	4/1/1988	CPO G05115401	Babcock & Wilcox Company - See attachment 50	XGL	INA
4/1/1987	4/1/1988	CPO G05115620	Babcock & Wilcox Company - See attachment 51	GL	INA ILL
4/1/1987	4/1/1988	CPO G05115632	Babcock & Wilcox Company - See attachment 52	GL	INA Ohio
4/1/1987	4/1/1988	CPO G05115978	Babcock & Wilcox Company	GL	INA
4/1/1987	4/1/1988	SCA 010999	The Babcock & Wilcox Company - See attachment 119	Auto	INA
4/1/1987	4/1/1988	XCE G05115735	McDermott International, Inc.	XGL	Cigna
4/1/1988	4/1/1989	HDO G0519393A	McDermott International, Inc.	GL	INA
4/1/1988	4/1/1989	PLI 519745	McDermott International, Inc. - See attachment 209	GL	Alaska
4/1/1988	4/1/1989	XSL G05194167	The Babcock & Wilcox Company - See attachment 49	XGL	INA
4/1/1988	4/1/1989	XSL G05194179	The Babcock & Wilcox Company - See attachment 48	XGL	Cigna of Ohio
4/1/1989	4/1/1990	CGO G05195792	Babcock & Wilcox Company - See attachment 79	GL	INA
4/1/1989	4/1/1990	CPO G05195809	Babcock & Wilcox Company	GL	INA
4/1/1989	4/1/1990	CPO G05195809	Babcock & Wilcox Company - See attachment 94	GL	INA
4/1/1989	4/1/1990	HDC G05196218	McDermott International, Inc.	GL	INA
4/1/1989	4/1/1990	HDO G05196206	McDermott International, Inc.	GL	INA
4/1/1989	4/1/1990	ISA 582543	McDermott International, Inc. - See attachment 103	Auto	INA

Page 2 of 25

Exhibit 1 - Policies and Named Insured’s


4/1/1989	4/1/1990	NWC C32916909	McDermott International, Inc. - See attachment 152	WC	INA
4/1/1989	4/1/1990	PLI 519746	McDermott International, Inc. - See attachment 106	GL	Alaska
4/1/1989	4/1/1990	RSC C22291312	B & W Fuel Company	WC	INA
4/1/1989	4/1/1990	RSC C32916879	Babcock & Wilcox Company - See attachment 131	WC	Pacific Employers
4/1/1989	4/1/1990	RSC C32916880	Babcock & Wilcox Company - See attachment 147	WC	Cigna
4/1/1989	4/1/1990	RSC C32916892	Babcock & Wilcox Company - See attachment 132	WC	Cigna - ILL
4/1/1989	4/1/1990	RSC C32916922	Babcock & Wilcox Company - See attachment 19	WC	Atlantic Employers
4/1/1989	4/1/1990	SCA 012151	The Babcock & Wilcox Company - See attachment 158	Auto	INA
4/1/1989	4/1/1990	SCA 012152	The Babcock & Wilcox Company - See attachment 84	GL	INA
4/1/1989	4/1/1990	XSL G05195780	The Babcock & Wilcox Company - See acchment 35	XGL	INA
4/1/1989	4/1/1990	XSL G05195780	The Babcock & Wilcox Company - See attachment 90	XGL	INA
4/1/1989	4/1/1990	XSL G0519619A	McDermott International, Inc. - See attachment 99	XGL	INA
4/1/1989	4/1/1990	XWC 11157	McDermott International, Inc.	XWC	Cigna
9/17/1989	9/17/1990	CRL G0519698A	ASEA - Babcock PFBC Joint Venture	GL	INA
4/1/1990	4/1/1991	CGO G0519751A	Babcock & Wilcox Company - See attachment 76	GL	INA
4/1/1990	4/1/1991	CGO G0519751A	Babcock & Wilcox Company - See attachment 83	GL	INA

Page 3 of 25

Exhibit 1 - Policies and Named Insured’s


4/1/1990	4/1/1991	CPO G05197521	Babcock & Wilcox Company - See attachment 54	GL	INA
4/1/1990	4/1/1991	CPO G05197521	Babcock & Wilcox Company - See attachment 80	GL	INA
4/1/1990	4/1/1991	CPO G05197521	Babcock & Wilcox Company - See attachment 80	GL	INA
4/1/1990	4/1/1991	HDC G05197557	McDermott International, Inc.	GL	INA
4/1/1990	4/1/1991	HDO G05197545	McDermott International, Inc.	GL	INA
4/1/1990	4/1/1991	ISA 582563	McDermott International, Inc. - See attachment 111	Auto	INA
4/1/1990	4/1/1991	NWC C22292341	McDermott International, Inc. - See attachment 136	WC	INA
4/1/1990	4/1/1991	PLI 321018	McDermott International, Inc. - See attachment 107	GL	Alaska
4/1/1990	4/1/1991	RSC C22292286	Babcock & Wilcox Company - See attachment 165	WC	Pacific Employers
4/1/1990	4/1/1991	RSC C22292304	Babcock & Wilcox Company - See attachment 179	WC	Cigna - ILL
4/1/1990	4/1/1991	RSC C22292316	Babcock & Wilcox Company - See attachment 188	WC	Atlantic Employers
4/1/1990	4/1/1991	RSC C22292328	B & W Fuel Company	WC	INA
4/1/1990	4/1/1991	RSC C22292730	Babcock & Wilcox Company	WC	INA
4/1/1990	4/1/1991	RSC C2229362A	Babcock & Wilcox Company - See attachment 85	WC	California Union
4/1/1990	4/1/1991	SCA 012197	The Babcock & Wilcox Company - See attachment 97	Auto	INA
4/1/1990	4/1/1991	SCA 012198	The Babcock & Wilcox Company - See attachment 96	Auto	INA
4/1/1990	4/1/1991	XCE G05197569	McDermott International, Inc. - See attachment 101	XGL	Cigna

Page 4 of 25

Exhibit 1 - Policies and Named Insured’s


4/1/1990	4/1/1991	XSL G05197508	The Babcock & Wilcox Company - See attachment 92	XGL	INA
4/1/1990	4/1/1991	XSL G05197533	McDermott International, Inc. - See attachment 115	XGL	INA
4/1/1990	4/1/1991	XWC 011187	McDermott International, Inc. - See attachment 154	XWC	Cigna
4/19/1990	4/1/1991	RSC C22292778	McDermott, Incorporated	WC	Cigna -TX
9/12/1990	9/12/1991	CPO G13210755	Babcock & Wilcox Company Power Generation Group - See attachment 185	GL	INA
4/1/1991	4/1/1992	CGO G13211061	Babcock & Wilcox Company - See attachment 75	GL	INA
4/1/1991	4/1/1992	CGO G13211061	Babcock & Wilcox Company - See attachment 204	GL	INA
4/1/1991	4/1/1992	CPO G13211073	Babcock & Wilcox Company - See attachment 39	GL	INA
4/1/1991	4/1/1992	CPO G13211073	Babcock & Wilcox Company - See attachment 120	GL	INA
4/1/1991	4/1/1992	HDC G13211103	McDermott International, Inc.	GL	INA
4/1/1991	4/1/1992	HDO G13211097	McDermott International, Inc.	GL	INA
4/1/1991	4/1/1992	ISA 582584	McDermott International, Inc. - See attachment 126	Auto	INA
4/1/1991	4/1/1992	NWC C22293667	McDermott International, Inc. - See attachment 192	WC	INA
4/1/1991	4/1/1992	PLI 321112	McDermott International, Inc. - See attachment 102	GL	Alaska
4/1/1991	4/1/1992	RSC C2229354	Babcock & Wilcox Company - See attachment 133	WC	Pacific Employers
4/1/1991	4/1/1992	RSC C22293564	Babcock & Wilcox Company - See attachment 199	WC	Atlantic Employers
4/1/1991	4/1/1992	RSC C22293898	Babcock & Wilcox Company	WC	INA

Page 5 of 25

Exhibit 1 - Policies and Named Insured’s


4/1/1991	4/1/1992	RSC C22293928	McDermott, Incorporated	WC	Cigna - TX
4/1/1991	4/1/1992	SCA 012272	Babcock & Wilcox Company - See attachment 182	Auto	INA
4/1/1991	4/1/1992	WLR C22293552	Babcock & Wilcox Company - See attachment 181	WC	Pacific Employers
4/1/1991	4/1/1992	WLR C22293849	Babcock & Wilcox Company - See attachment 143	WC	Pacific Employers
4/1/1991	4/1/1992	WLR C22293850	Babcock & Wilcox Company - See attachment 144	WC	Pacific Employers
4/1/1991	4/1/1992	WLR C22293862	Babcock & Wilcox Company - See attachment 145	WC	Pacific Employers
4/1/1991	4/1/1992	WLR C22293874	Babcock & Wilcox Company - See attachment 141	WC	Pacific Employers
4/1/1991	4/1/1992	WLR C22293886	Babcock & Wilcox Company - See attachment 20	WC	Pacific Employers
4/1/1991	4/1/1992	XCE G13211048	McDermott International, Inc. - See attachment 124	XGL	Cigna
4/1/1991	4/1/1992	XSL G1321105A	The Babcock & Wilcox Company - See attachment 197	XGL	INA
4/1/1991	4/1/1992	XSL G13211115	McDermott International, Inc. - See attachment 118	XGL	INA
4/1/1991	4/1/1992	XWC 011230	McDermott International, Inc. - See attachment 134	XWC	Cigna
4/1/1991	4/1/1992	XWC 011231	Babcock & Wilcox Company - See attachment 180	XWC	Cigna
7/22/1991	7/22/1992	XCP G13211437	City of Lakeland, Florida Department of Electric & Water Utilities	XGL	INA
8/24/1991	8/24/1992	OGL G1321153A	PowerSafety International, Inc.	GL	INA

Page 6 of 25

Exhibit 1 - Policies and Named Insured’s


9/12/1991	9/12/1992	CPO G13211541	Babcock & Wilcox Company Power Generation Group - See attachment 190	GL	INA
4/1/1992	4/1/1993	CGO G13211887	Babcock & Wilcox Company - See attachment 41	GL	INA
4/1/1992	4/1/1993	CPO G13211899	Babcock & Wilcox Company - See attachment 40	GL	INA
4/1/1992	4/1/1993	CPO G13211899	Babcock & Wilcox Company - See attachment 87	GL	INA
4/1/1992	4/1/1993	HDO G13211930	McDermott International, Inc.	GL	INA
4/1/1992	4/1/1993	ISA 582609	McDermott International, Inc. - See attachment 122	Auto	INA
4/1/1992	4/1/1993	NWC C38326296	McDermott International, Inc.	WC	INA
4/1/1992	4/1/1993	PLI 321195	McDermott International, Inc. - See attachment 207	GL	Alaska
4/1/1992	4/1/1993	RSC C38326259	Babcock & Wilcox Company - See attachment 171	WC	Pacific Employers
4/1/1992	4/1/1993	RSC C38326351	Babcock & Wilcox Company	WC	INA
4/1/1992	4/1/1993	WLR C38326260	Babcock & Wilcox Company - See attachment 186	WC	Pacific Employers
4/1/1992	4/1/1993	WLR C38326338	Babcock & Wilcox Company - See attachment 174	WC	Cigna - TX
4/1/1992	4/1/1993	WLR C38326363	McDermott, Incorporated	WC	Cigna
4/1/1992	4/1/1993	XCP G13211991	Naheola Cogeneration Limited Partnership & Industrial Development Board	XGL	INA
4/1/1992	4/1/1993	XSL G13211905	The Babcock & Wilcox Company - See attachment 71	XGL	INA
4/1/1992	4/1/1993	XSL G13211966	McDermott International, Inc. - See attachment 117	XGL	INA

Page 7 of 25

Exhibit 1 - Policies and Named Insured’s


4/1/1992	4/1/1993	XWC 011301	Babcock & Wilcox Company - See attachment 200	XWC	Cigna
4/1/1992	4/1/1993	XWC 011302	McDermott International, Inc. - See attachment 149	XWC	Cigna
4/1/1993	4/1/1994	CGO G13212612	Babcock & Wilcox Company - See attachment 73	GL	INA
4/1/1993	4/1/1994	CGO G13212612	Babcock & Wilcox Company - See attachment 191	GL	INA
4/1/1993	4/1/1994	CPO G13212600	Babcock & Wilcox Company - See attachment 36	GL	INA
4/1/1993	4/1/1994	HDC G13212648	McDermott International, Inc.	GL	INA
4/1/1993	4/1/1994	HDO G1321265A	McDermott International, Inc.	GL	INA
4/1/1993	4/1/1994	ISA 711093	McDermott International, Inc. - See attachment 98	Auto	INA
4/1/1993	4/1/1994	NWC C39770507	McDermott International, Inc. - See attachment 151	WC	INA
4/1/1993	4/1/1994	PLI 321258	McDermott International, Inc. - See attachment 208	GL	INA
4/1/1993	4/1/1994	RSC C36158621	Babcock & Wilcox Company	WC	INA
4/1/1993	4/1/1994	RSC C39770489	Babcock & Wilcox Company - See attachment 160	WC	Pacific Employers
4/1/1993	4/1/1994	SCA 012527	The Babcock & Wilcox Company - See attachment 184	Auto	INA
4/1/1993	4/1/1994	SCA 012528	The Babcock & Wilcox Company - See attachment 195	Auto	INA
4/1/1993	4/1/1994	WLR C39770490	Babcock & Wilcox Company - See attachment 162	WC	Pacific Employers
4/1/1993	4/1/1994	WLR C39770532	McDermott, Incorporated	WC	Pacific Employers
4/1/1993	4/1/1994	XCE G13212570	McDermott International, Inc. - See attachment 100	XGL	Cigna

Page 8 of 25

Exhibit 1 - Policies and Named Insured’s


4/1/1993	4/1/1994	XCP G13212673	Naheola Cogeneration Limited Partnership & Industrial Development Board	GL	INA
4/1/1993	4/1/1994	XSL G13212569	McDermott International, Inc. - See attachment 104	XGL	INA
4/1/1993	4/1/1994	XSL G13212594	The Babcock & Wilcox Company - See attachment 72	XGL	INA
4/1/1993	4/1/1994	XSL G13212594	Babcock & Wilcox Company - See attachment 166	XGL	INA
4/1/1993	4/1/1994	XWC 011381	McDermott International, Inc. - See attachment 18	XWC	Cigna
8/24/1993	8/24/1994	OGL G13212879	PowerSafety International, Inc.	GL	INA
9/12/1993	9/13/1994	CPO G13212909	Babcock & Wilcox Company Power Generation Group - See attachment 89	GL	INA
10/1/1993	4/1/1994	XSL G13212983	Hudson Companies - See attachment 183	XGL	INA
4/1/1994	4/1/1995	CGO G13213215	Babcock & Wilcox Company - See attachment 38	GL	INA
4/1/1994	4/1/1995	CGO G13213215	Babcock & Wilcox Company - See attachment 159	GL	INA
4/1/1994	4/1/1995	CPO G13213203	Babcock & Wilcox Company - See attachment 37	GL	INA
4/1/1994	4/1/1995	CPO G13213203	Babcock & Wilcox Company - See attachment 169	GL	INA
4/1/1994	4/1/1995	HDC G1321315A	McDermott International, Inc.	GL	INA
4/1/1994	4/1/1995	HDO G13213161	McDermott International, Inc.	GL	INA
4/1/1994	4/1/1995	ISA 042894	McDermott International, Inc. - See attachment 112	Auto	INA
4/1/1994	4/1/1995	NWC C4080951A	McDermott International, Inc. - See attachment 150	WC	INA

Page 9 of 25

Exhibit 1 - Policies and Named Insured’s


4/1/1994	4/1/1995	PLI 321317	McDermott International, Inc. - See attachment 109	GL	INA
4/1/1994	4/1/1995	RSC C40809016	Babcock & Wilcox Company	WC	INA
4/1/1994	4/1/1995	RSC C40809491	Babcock & Wilcox Company - See attachment 172	WC	Pacific Employers
4/1/1994	4/1/1995	RSC C40809521	McDermott, Incorporated	WC	Cigna - TX
4/1/1994	4/1/1995	SCA 012556	The Babcock & Wilcox Company - See attachment 121	Auto	INA
4/1/1994	4/1/1995	WLR C36160159	Babcock & Wilcox Company - See attachment 129	WC	Cigna - TX
4/1/1994	4/1/1995	WLR C40809508	Babcock & Wilcox Company - See attachment 22	WC	Pacific Employers
4/1/1994	4/1/1995	XCE G13213185	McDermott International, Inc. - See attachment 108	XGL	Cigna
4/1/1994	4/1/1995	XSL G13213148	McDermott International, Inc. - See attachment 116	XGL	INA
4/1/1994	4/1/1995	XSL G13213197	The Babcock & Wilcox Company - See attachment 44	XGL	INA
4/1/1994	4/1/1995	XSL G13213197	Babcock & Wilcox Company - See attachment 170	XGL	INA
4/1/1994	4/1/1995	XSL G13213227	Hudson Companies - See attachment 43	XGL	INA
4/1/1994	4/1/1995	XSL G13213227	Hudson Companies - See attachment 86	XGL	INA
4/1/1994	4/1/1995	XWC 011467	McDermott International, Inc. - See attachment 153	XWC	Cigna
8/24/1994	8/24/1995	OGL G13213410	PowerSafety International, Inc.	GL	INA
9/12/1994	9/12/1995	CPO G13213380	Babcock & Wilcox Company Power Generation Group - See attachment 167	GL	INA

Page 10 of 25

Exhibit 1 - Policies and Named Insured’s


4/1/1995	4/1/1996	CGO G13213720	Babcock & Wilcox Company - See attachment 74	GL	INA
4/1/1995	4/1/1996	CPO G13213719	Babcock & Wilcox Company	GL	IND
4/1/1995	4/1/1996	HDC G13213756	McDermott International, Inc.	GL	IND
4/1/1995	4/1/1996	HDO G13213744	McDermott International, Inc.	GL	IND
4/1/1995	4/1/1996	ISA 042936	McDermott International, Inc. - See attachment 125	Auto	IND
4/1/1995	4/1/1996	NWC C3616248A	Babcock & Wilcox Construction Co. - See attachment 173	WC	Cigna
4/1/1995	4/1/1996	PLI 321380	McDermott International, Inc. - See attachment 127	GL	IND
4/1/1995	4/1/1996	RSC C36162028	Babcock & Wilcox Company - See attachment 189	WC	Cigna
4/1/1995	4/1/1996	RSC C36162041	McDermott International, Inc. - See attachment 17	WC	Bankers Standard
4/1/1995	4/1/1996	RSC C36162053	Hudson Companies	WC	Bankers Standard
4/1/1995	4/1/1996	RSC C3616234A	Babcock & Wilcox Company	WC	Cigna
4/1/1995	4/1/1996	WLR C36161991	Babcock & Wilcox Company - See attachment 148	WC	Cigna
4/1/1995	4/1/1996	WLR C36162004	Babcock & Wilcox Company - See attachment 194	WC	Bankers Standard
4/1/1995	4/1/1996	WLR C36162016	Babcock & Wilcox Company - See attachment 196	WC	Cigna
4/1/1995	4/1/1996	XCE G13213768	McDermott International, Inc. - See attachment 114	XGL	IND
4/1/1995	4/1/1996	XSL G13213707	The Babcock & Wilcox Company - See attachment 45	XGL	IND
4/1/1995	4/1/1996	XSL G13213707	The Babcock & Wilcox Company - See attachment 91	XGL	IND
4/1/1995	4/1/1996	XSL G13213732	McDermott International, Inc. - See attachment 110	XGL	IND

Page 11 of 25

Exhibit 1 - Policies and Named Insured’s


4/1/1995	4/1/1996	XSL G13213793	Hudson Companies - See attachment 88	XGL	IND
4/1/1995	4/1/1996	XWC 011541	McDermott International, Inc. - See attachment 138	XWC	Cigna
8/24/1995	8/24/1996	CAL H06353149	Deep Oil Technology, Inc.	Auto	IND
8/24/1995	8/24/1996	NWC C41224319	Deep Oil Technology, Inc.	WC	Cigna
8/24/1995	8/24/1996	OGL G14232096	Deep Oil Technology, Inc.	GL	IND
4/1/1996	4/1/1997	CGO G18967431	Babcock & Wilcox Company - See attachment 77	GL	IND
4/1/1996	4/1/1997	CPO G18968599	Babcock & Wilcox Company - See attachment 46	GL	IND
4/1/1996	4/1/1997	CPO G18968599	Babcock & Wilcox Company - See attachment 82	GL	IND
4/1/1996	4/1/1997	HDC G18967157	McDermott International, Inc.	GL	IND
4/1/1996	4/1/1997	HDO G18967078	McDermott International, Inc.	GL	IND
4/1/1996	4/1/1997	ISA H07131616	McDermott International, Inc. - See attachment 113	Auto	IND
4/1/1996	4/1/1997	PLI G19067236	McDermott International, Inc. - See attachment 105	GL	IND
4/1/1996	4/1/1997	RSC C2733278A	Babcock & Wilcox Company - See attachment 142	WC	Cigna
4/1/1996	4/1/1997	RSC C4206726A	Babcock & Wilcox Company	WC	Cigna
4/1/1996	4/1/1997	SCA 012575	The Babcock & Wilcox Company - See attachment 93	Auto	IND
4/1/1996	4/1/1997	WLR C27332080	Babcock & Wilcox Company - See attachment 201	WC	Cigna
4/1/1996	4/1/1997	WLR C27332742	McDermott International, Inc. - See attachment 155	WC	Bankers Standard
4/1/1996	4/1/1997	WLR C27332766	Hudson Companies	WC	Bankers Standard
4/1/1996	4/1/1997	WLR C27332778	Babcock & Wilcox Company - See attachment 140	WC	Bankers Standard

Page 12 of 25

Exhibit 1 - Policies and Named Insured’s


4/1/1996	4/1/1997	WLR C27332808	Babcock & Wilcox Company - See attachment 146	WC	Cigna
4/1/1996	4/1/1997	XSL G18967911	Babcock & Wilcox Company - See attachment 78	GL	INA
4/1/1996	4/1/1997	XSL G1896823A	Hudson Companies - See attachment 55	XGL	IND
4/1/1996	4/1/1997	XSL G18968277	McDermott International, Inc. - See attachment 123	XGL	IND
4/1/1996	4/1/1997	XWC 011614	McDermott International, Inc. - See attachment 135	XWC	Cigna
8/24/1996	8/24/1997	CAL H07132001	Deep Oil Technology, Inc.	Auto	INA
8/24/1996	8/24/1997	NWC C42181018	Deep Oil Technology, Inc.	WC	INA
8/24/1996	8/24/1997	OGL G18967364	Deep Oil Technology, Inc.	GL	INA
4/1/1997	4/1/1998	RSC C42109484	Babcock & Wilcox Company - See attachment 21	WC	Pacific Employers
4/1/1997	4/1/1998	RSC C42109502	Babcock & Wilcox Company	WC	Cigna
4/1/1997	4/1/1998	WLR C42109460	Babcock & Wilcox Company - See attachment 128	WC	Pacific Employers
4/1/1997	4/1/1998	WLR C42109472	Babcock & Wilcox Company - See attachment 193	WC	Bankers Standard
4/1/1997	4/1/1998	WLR C42109496	Babcock & Wilcox Company - See attachment 81	WC	Pacific Employers
4/1/1997	4/1/1998	WLR C42109514	Hudson Companies	WC	Bankers Standard
4/1/1997	4/1/1998	WLR C42109526	McDermott International, Inc. - See attachment 156	WC	Bankers Standard
8/24/1997	8/24/1998	CAL H07322574	Deep Oil Technology, Inc.	Auto	INA
8/24/1997	8/24/1998	NWC C42425497	Deep Oil Technology, Inc.	WC	INA
8/24/1997	8/24/1998	OGL G19326792	Deep Oil Technology, Inc.	GL	INA

Page 13 of 25

Exhibit 1 - Policies and Named Insured’s


12/18/1997	12/18/1998	OGL G1965722A	Monmouth Couty Materials Processing & Recovery Facility; National Ecology Company & The Babcock and Wilcox Company - See attachment 157	GL	IND
4/1/1998	4/1/1999	HDC G19657280	Babcock & Wilcox Company - See attachment 61	GL	Pacific Employers
4/1/1998	4/1/1999	HDC G19657334	McDermott International, Inc - See attachment 267	GL	Pacific Employers
4/1/1998	4/1/1999	HDO G19657322	McDermott International, Inc - See attachment 265	GL	Pacific Employers
4/1/1998	4/1/1999	HDO G219657292	Babcock & Wilcox Company - See attachment 60	GL	Pacific Employers
4/1/1998	4/1/1999	ISA H07323360	The Babcock & Wilcox Company - See attachment 57	Auto	Pacific Employers
4/1/1998	4/1/1999	ISA H07323372	McDermott International, Inc - See attachment 268	Auto	Pacific Employers
4/1/1998	4/1/1999	PLI G19657346	McDermott International, Inc. - See attachment 59	GL	INA
4/1/1998	4/1/1999	PWC C42460187	Babcock & Wilcox Company - See attachment 163	WC	Pacific Employers
4/1/1998	4/1/1999	WLR C42460151	Babcock & Wilcox Company - See attachment 130	WC	Pacific Employers
4/1/1998	4/1/1999	WLR C42460163	Babcock & Wilcox Company - See attachment 177	WC	Pacific Employers
4/1/1998	4/1/1999	WLR C42460175	Babcock & Wilcox Company - See attachment 175	WC	Cigna - TX
4/1/1998	4/1/1999	WLR C42460199	McDermott International, Inc. - See attachment 139	WC	INA
4/1/1998	4/1/1999	WLR C42460205	Hudson Companies	WC	Cigna - TX

Page 14 of 25

Exhibit 1 - Policies and Named Insured’s


4/1/1998	4/1/1999	XSL G19657279	The Babcock & Wilcox Company - See attachment 62	XGL	Pacific Employers
4/1/1998	4/1/1999	XSL G19657309	Hudson Companies - See attachment 47	XGL	Pacific Employers
4/1/1998	4/1/1999	XSL G19657309	Hudson Companies - See attachment 58	XGL	Pacific Employers
4/1/1998	4/1/1999	XSL G19657310	McDermott International, Inc - See attachment 264	XGL	Pacific Employers
4/1/1998	4/1/1999	XWC 011786	McDermott International, Inc - See attachment 266	XWC	Cigna
8/24/1998	8/24/1999	CAL H07406794	Deep Oil Technology, Inc.	Auto	Cigna
8/24/1998	8/24/1999	OGL G19657905	Deep Oil Technology, Inc.	GL	Cigna
10/1/1998	10/1/2001	XOO G19658193	State Line Energy, LLC	XGL	Cigna
12/18/1998	12/18/1999	CAL H07407385	National Ecology Company - See attachment 161	Auto	Cigna
12/18/1998	12/18/1999	OGL G19327024	National Ecology Company, Power Systems Operations, Inc. and The Babcock & Wilcox Company and Monmouth County Materials Processing and Recovery Facility	GL	Cigna
4/1/1999	1/1/2000	HDC G19657280	Babcock & Wilcox Company - See attachment 61	GL	Pacific Employers
4/1/1999	1/1/2000	HDO G219657292	Babcock & Wilcox Company - See attachment 60	GL	Pacific Employers
4/1/1999	1/1/2000	PLI G19657346	McDermott International, Inc. - See attachment 59	GL	INA
4/1/1999	4/1/2000	PWC C42643890	Babcock & Wilcox Company – See attachment 2	WC	Pacific Employers
4/1/1999	4/1/2000	PWC C42643890	Babcock & Wilcox Company - See attachment 25	WC	Pacific Employers

Page 15 of 25

Exhibit 1 - Policies and Named Insured’s


4/1/1999	4/1/2000	WLR C42643877	McDermott International, Inc - See attachment 263	WC	Pacific Employers
4/1/1999	4/1/2000	WLR C42643889	Hudson Companies - See attachment 262	WC	Pacific Employers
4/1/1999	4/1/2000	WLR C42643907	Babcock & Wilcox Company - See attachment 1	WC	Pacific Employers
4/1/1999	1/1/2000	XSL G19657279	The Babcock & Wilcox Company - See attachment 62	XGL	Pacific Employers
4/1/1999	1/1/2000	XSL G19657309	Hudson Companies - See attachment 58	XGL	Pacific Employers
8/24/1999	8/24/2000	CAL H0767823A	Deep Oil Technology, Inc.	Auto	Cigna
8/24/1999	8/24/2000	NWC C42645254	Deep Oil Technology, Inc.	WC	Cigna
8/24/1999	8/24/2000	OGL G1989521A	Deep Oil Technology, Inc.	GL	Cigna
12/18/1999	12/18/2000	CAL H07678903	National Ecology Company - See attachment 272	AL	Pacific Employers
12/18/1999	12/18/2000	CUA-104533-0	National Ecology Company - See attachment 271	Umb	Westchester Fire Ins Co
12/18/1999	12/18/2000	OGL G19895993	National Ecology Company - See attachment 270	GL	Pacific Employers
1/1/2000	1/1/2001	HDC G19657280	Babcock & Wilcox Company - See attachment 61	GL	Pacific Employers
1/1/2000	1/1/2001	HDO G219657292	Babcock & Wilcox Company - See attachment 60	GL	Pacific Employers
1/1/2000	1/1/2001	PLI G19657346	McDermott International, Inc. - See attachment 59	GL	INA
1/1/2000	1/1/2001	PWC C42645618	Babcock & Wilcox Company - See attachment 13	WC	Pacific Employers
1/1/2000	1/1/2001	WLR C4264562A	McDermott International, Inc. - See attachment 69	WC	Pacific Employers
1/1/2000	1/1/2001	WLR C42645631	Hudson Companies	WC	Pacific Employers

Page 16 of 25

Exhibit 1 - Policies and Named Insured’s


1/1/2000	1/1/2001	WLR C42645643	Babcock & Wilcox Company - See attachment 12	WC	Pacific Employers
1/1/2000	1/1/2001	XOO G20292817	Mid American Energy Company	XGL	Pacific Employers
1/1/2000	1/1/2001	XSL G19657279	The Babcock & Wilcox Company - See attachment 62	XGL	Pacific Employers
1/1/2000	1/1/2001	XSL G19657309	Hudson Companies - See attachment 58	XGL	Pacific Employers
12/11/2000	6/1/2001	XLG G20295624	NRG El Segundo Operations Inc.	XGL	AAI
12/18/2000	12/18/2001	HDO G20295715	National Ecology Company - See attachment 269	GL	Pacific Employers
12/18/2000	12/18/2001	ISA H07668016	National Ecology Company - See attachment 210	Auto	Pacific Employers
12/18/2000	7/31/2001	XLG G20295661	NRG Cabrillo Power I	XGL	AAI
1/1/2001	1/1/2002	HDC G19657280	Babcock & Wilcox Company - See attachment 61	GL	Pacific Employers
1/1/2001	1/1/2002	HDO G219657292	Babcock & Wilcox Company - See attachment 60	GL	Pacific Employers
1/1/2001	1/1/2002	PLI G19657346	McDermott International, Inc. - See attachment 59	GL	INA
1/1/2001	1/1/2002	SCF C43139988	Babcock & Wilcox Company - See attachment 11	WC	Pacific Employers
1/1/2001	1/1/2002	WLR C43139940	Babcock & Wilcox Company - See attachment 10	WC	Pacific Employers
1/1/2001	1/1/2002	WLR C43140024	McDermott International, Inc. - See attachment 277	WC	Pacific Employers
1/1/2001	1/1/2002	WLR C43140061	Hudson Companies	WC	Pacific Employers
1/1/2001	1/1/2002	XOO G20292817	Mid American Energy Company	XGL	Pacific Employers
1/1/2001	1/1/2002	XSL G19657279	The Babcock & Wilcox Company - See attachment 62	XGL	Pacific Employers
1/1/2001	1/1/2002	XSL G19657309	Hudson Companies - See attachment 58	XGL	Pacific Employers

Page 17 of 25

Exhibit 1 - Policies and Named Insured’s


7/2/2001	12/31/2001	XLG G20298017	Mirant Delta LLC	XGL	AAI
7/31/2001	3/31/2002	XLG G20295661	NRG Cabrillo Power I	XGL	AAI
12/18/2001	12/18/2002	HDO G20298431	National Ecology Company - See attachment 276	GL	Pacific Employers
12/18/2001	12/18/2002	ISA H0766946A	National Ecology Company - See attachment 275	AL	Pacific Employers
1/1/2002	1/1/2003	HDC G19657280	Babcock & Wilcox Company - See attachment 61	GL	Pacific Employers
1/1/2002	1/1/2003	HDO G219657292	Babcock & Wilcox Company - See attachment 60	GL	Pacific Employers
1/1/2002	1/1/2003	PLI G19657346	McDermott International, Inc. - See attachment 59	GL	INA
1/1/2002	1/1/2003	SCF C43100075	Babcock & Wilcox Company - See attachment 27	WC	Pacific Employers
1/1/2002	1/1/2003	WLR C43099991	McDermott International, Inc. - See attachment 16	WC	Pacific Employers
1/1/2002	1/1/2003	XSL G19657279	The Babcock & Wilcox Company - See attachment 62	XGL	Pacific Employers
1/1/2002	1/1/2003	XSL G19657309	Hudson Companies - See attachment 58	XGL	Pacific Employers
1/1/2002	1/1/2003	XWC 014129	McDermott International, Inc. - See attachment 56	XWC	AAI
3/31/2002	4/30/2002	XLG G20295661	NRG Cabrillo Power I	XGL	AAI
10/1/2002	1/1/2003	XLG G20580161	Mid American Energy Company	XGL	AAI
12/18/2002	12/18/2003	HDO G2030442A	National Ecology Company - See attachment 273	GL	AAI
12/18/2002	12/18/2003	ISA H07669884	National Ecology Company - See attachment 268	AL	AAI
1/1/2003	1/1/2004	HDC G20580033	McDermott International, Inc.	GL	AAI
1/1/2003	1/1/2004	HDC G20580124	Babcock & Wilocx Company - See attachment 31	GL	AAI

Page 18 of 25

Exhibit 1 - Policies and Named Insured’s


1/1/2003	1/1/2004	HDO G20579997	Babcock & Wilcox Company - See attachment 42	GL	AAI
1/1/2003	1/1/2004	HDO G20580070	McDermott International, Inc.	GL	AAI
1/1/2003	1/1/2004	ISA H07670023	McDermott International, Inc. - See attachment 34	Auto	AAI
1/1/2003	1/1/2004	ISA H07670060	The Babcock & Wilcox Company - See attachment 30	Auto	AAI
1/1/2003	1/1/2004	PLI G20580112	McDermott International, Inc. - See attachment 33	GL	AAI
1/1/2003	1/1/2004	SCF C43497194	Babcock & Wilcox Company - See attachment 24	WC	AAI
1/1/2003	1/1/2004	WLR C43497157	Babcock & Wilcox Company - See attachment 23	WC	AAI
1/1/2003	1/1/2004	WLR C43497169	McDermott International, Inc. - See attachment 70	WC	AAI
1/1/2003	1/1/2004	XSL G20579559	McDermott International, Inc. - See attachment 32	XGL	AAI
1/1/2003	1/1/2004	XSL G20580045	The Babcock & Wilcox Company - See attachment 29	XGL	AAI
2/1/2003	12/17/2003	OCP G20304479	Pasadena ISD	GL	AAI
3/1/2003	3/1/2004	XLG G20579511	Reliant Energy	XGL	AAI
12/17/2003	12/17/2004	OCP G20304479	Pasadena ISD	GL	AAI
12/18/2003	12/18/2004	HDO G2030442A	National Ecology Company - See attachment 273	GL	AAI
12/18/2003	12/18/2004	ISA H07669884	National Ecology Company - See attachment 268	AL	AAI
1/1/2004	1/1/2005	HDC G20300140	Babcock & Wilcox Company - See attachment 66	GL	AAI
1/1/2004	1/1/2005	HDO G20300103	Babcock & Wilcox Company - See attachment 64	GL	AAI

Page 19 of 25

Exhibit 1 - Policies and Named Insured’s


1/1/2004	1/1/2005	ISA H07670485	The Babcock & Wilcox Company - See acchment 63	Auto	AAI
1/1/2004	1/1/2005	SCF C43966169	Babcock & Wilcox Company - See attachment 14	WC	AAI
1/1/2004	1/1/2005	WLR C43966157	Babcock & Wilcox Company - See attachment 15	WC	AAI
1/1/2004	1/1/2005	WLR C43966303	McDermott International, Inc. - See attachment 211	WC	AAI
1/1/2004	1/1/2005	XSL G20300061	The Babcock & Wilcox Company - See attachment 65	XGL	AAI
2/1/2004	2/1/2005	WCU 014570	Babcock and Wilcox Investment Company	XWC	AAI
12/17/2004	12/17/2005	OCP G20304479	Pasadena ISD	GL	AAI
12/18/2004	12/18/2005	HDO G2030442A	National Ecology Company - See attachment 273	GL	AAI
12/18/2004	12/18/2005	ISA H07669884	National Ecology Company - See attachment 268	AL	AAI
1/1/2005	1/1/2006	SCF C4396494A	Babcock & Wilcox Company - See attachment 67	WC	AAI
1/1/2005	1/1/2006	WLR C43988761	Babcock & Wilcox Company - See attachment 68	WC	AAI
1/1/2005	1/1/2006	WLR C43988840	McDermott International, Inc	WC	AAI
9/19/2005	12/18/2005	XSL G20299721	American Electric Power Service Corp	XGL	AAI
9/19/2005	12/18/2005	XSL G20299769	American Electric Power Service Corp	XGL	AAI
12/17/2005	12/17/2006	OCP G20304479	Pasadena ISD	GL	AAI
12/18/2005	12/18/2009	HDO G21703618R	National Ecology Company	GL	AAI
1/1/2006	1/1/2007	HDC G21728007	Babcock & Wilcox Company - See attachment 217	GL	AAI

Page 20 of 25

Exhibit 1 - Policies and Named Insured’s


1/1/2006	1/1/2007	HDC G21728032	McDermott International, Inc.- See attachment 238	GL	AAI
1/1/2006	1/1/2007	HDO G21727994	Babcock & Wilcox Company - See attachment 215	GL	AAI
1/1/2006	1/1/2007	HDO G21728020	McDermott International, Inc.	GL	AAI
1/1/2006	1/1/2007	ISA H07670965	McDermott International, Inc - See attachment 240	Auto	AAI
1/1/2006	1/1/2007	ISA H07670977	Babcock & Wilcox Company - See attachment 214	Auto	AAI
1/1/2006	1/1/2007	PLI G21728044	McDermott International, Inc. See attachment 239	GL	Illinois Union Insurance Company
1/1/2006	1/1/2007	SCF C44185520	Babcock & Wilcox Company - See attachment 5	WC	AAI
1/1/2006	1/1/2007	WCU C44185544	McDermott International, Inc. - See attachment 212	XWC	AAI
1/1/2006	1/1/2007	WLR C44185532	Babcock & Wilcox Company - See attachment 3	WC	AAI
1/1/2006	1/1/2007	WLR C44185556	McDermott International, Inc.	WC	AAI
1/1/2006	1/1/2007	XSL G21728056	McDermott International, Inc.- See attachment 237	GL	AAI
1/1/2006	1/1/2007	XSL G21728068	Babcock & Wilcox Company - See attachment 216	GL	AAI
12/18/2006	12/18/2007	CAL H07670928	National Ecology Company - See attachment 267	AL	AAI
1/1/2007	1/1/2008	HDC G21736727	McDermott International, Inc - See attachment 242	GL	AAI
1/1/2007	1/1/2008	HDC G21736764	Babcock & Wilcox Company - See attachment 229	GL	AAI
1/1/2007	1/1/2008	HDC G2372358A	BWXT Services, Inc. - See attachment 246	GL	AAI

Page 21 of 25

Exhibit 1 - Policies and Named Insured’s


1/1/2007	1/1/2008	HDO G21736739	McDermott International, Inc. - See attachment 243	GL	AAI
1/1/2007	1/1/2008	HDO G21736752	Babcock & Wilcox Company - See attachment 228	GL	AAI
1/1/2007	1/1/2008	ISA H07673206	McDermott International, Inc - See attachment 241	Auto	AAI
1/1/2007	1/1/2008	ISA H07673218	Babcock & Wilcox Company - See attachment 227	Auto	AAI
1/1/2007	1/1/2008	ISA H07834597	BWXT Services, Inc. - See attachment 245	Auto	AAI
1/1/2007	1/1/2008	SCF C44450653	Babcock & Wilcox Company - See attachment 9	WC	AAI
1/1/2007	1/1/2008	WCU C44450550	Babcock & Wilcox Investment Company	WC	AAI
1/1/2007	1/1/2008	WCU C44450604	McDermott International, Inc.	XWC	AAI
1/1/2007	1/1/2008	WLR C44450203	BWXT Services, Inc.	WC	AAI
1/1/2007	1/1/2008	WLR C44450616	Babcock & Wilcox Company - See attachment 4	WC	AAI
1/1/2007	1/1/2008	WLR C44450665	McDermott International, Inc.	WC	AAI
1/1/2007	1/1/2008	XSL G21736235	BWTX Services, Inc. - See attachment 247	GL	AAI
1/1/2007	1/1/2008	XSL G21736740	Babcock & Wilcox Company - See attachment 230	GL	AAI
1/1/2007	1/1/2008	XSL G21736776	McDermott International, Inc. - See attachment 244	GL	AAI
1/1/2008	1/1/2009	HDC G23734758	Babcock & Wilcox Company - See attachement 220	GL	AAI
1/1/2008	1/1/2009	HDC G23734783	McDermott International, Inc. - See attachment 249	GL	AAI
1/1/2008	1/1/2009	HDO G23734746	Babcock & Wilcox Company - See attachment 219	GL	AAI

Page 22 of 25

Exhibit 1 - Policies and Named Insured’s


1/1/2008	1/1/2009	HDO G23734795	McDermott International, Inc. - See attachment 250	Gl	AAI
1/1/2008	1/1/2009	ISA H0823839A	The Babcock &Wilcox Company - See attachment 221	Auto	AAI
1/1/2008	1/1/2009	ISA H08238418	McDermott International, Inc. - See attachment 251	Auto	AAI
1/1/2008	1/1/2009	PLI G2373476A	McDermott International, Inc. - See attachment 248	GL	AAI
1/1/2008	1/1/2009	SCF C44479825	The Babcock & Wilcox Company - See attachment 7	WC	AAI
1/1/2008	1/1/2009	WCU C44479850	McDermott International, Inc.	XWC	AAI
1/1/2008	1/1/2009	WLR C44478596	The Babcock & Wilcox Company	WC	AAI
1/1/2008	1/1/2009	WLR C44479813	The Babcock & Wilcox Company - See attachment 213	WC	IND
1/1/2008	1/1/2009	WLR C44479862	McDermott International, Inc.	WC	IND
1/1/2008	1/1/2009	XSL G23733766	The Babcock & Wilcox Company - See attachment 218	GL	AAI
1/1/2009	1/1/2010	HDC G23749154	McDermott International, Inc. - See attachment 254	GL	AAI
1/1/2009	1/1/2010	HDC G23749270	The Babcock & Wilcox Company - See attachment 223	GL	AAI
1/1/2009	1/1/2010	HDO G23749117	McDermott International, Inc - See attachment 252	GL	AAI
1/1/2009	1/1/2010	HDO G23749233	The Babcock & Wilcox Company - See attachment 225	GL	AAI
1/1/2009	1/1/2010	ISA H08252464	McDermott International, Inc - See attachment 256	Auto	AAI
1/1/2009	1/1/2010	ISA H08252506	The Babcock & Wilcox Company - See attachment 224	Auto	AAI
1/1/2009	1/1/2010	PLI G23749075	McDermott International, Inc. - See attachment 253	GL	AAI

Page 23 of 25

Exhibit 1 - Policies and Named Insured’s


1/1/2009	1/1/2010	SCF C44356909	Babcock & Wilcox Company - See attachment 6	WC	AAI
1/1/2009	1/1/2010	WCU C4435682A	McDermott International, Inc.	XWC	AAI
1/1/2009	1/1/2010	WCU C44356867	Babcock & Wilcox Investment Company	WC	AAI
1/1/2009	1/1/2010	WLR C44356788	McDermott International, Inc.	WC	IND
1/1/2009	1/1/2010	WLR C44356946	The Babcock & Wilcox Company - See attachment 226	WC	IND
1/1/2009	1/1/2010	WLR C44356983	The Babcock & Wilcox Company - See attachment 8	WC	AAI
1/1/2009	1/1/2010	XSL G23749191	McDermott International, Inc. - See attachment 255	GL	AAI
1/1/2009	1/1/2010	XSL G23749312	The Babcock & Wilcox Company - See attachment 222	GL	AAI
1/1/2010	1/1/2011	HDC G24938463	The Babcock & Wilcox Company - See attachment 234	GL	AAI
1/1/2010	1/1/2011	HDC G24938499	McDermott International, Inc. - See attachment 258	GL	AAI
1/1/2010	1/1/2011	HDO G24938475	The Babcock & Wilcox Company - See attachment 233	GL	AAI
1/1/2010	1/1/2011	ISA H0858381A	McDermott International, Inc. - See attachmetn 259	Auto	AAI
1/1/2010	1/1/2011	PLI G24938505	McDermott International, Inc. - See attachment 257	GL	AAI
1/1/2010	1/1/2011	SCF C45709516	The Babcock & Wilcox Company - See attachment 236	WC	AAI
1/1/2010	1/1/2011	WCU C45709541	McDermott International, Inc	WC	AAI
1/1/2010	1/1/2011	WLR C45709498	The Babcock & Wilcox Company - See attachment 231	WC	AAI
1/1/2010	1/1/2011	WLR C45709504	The Babcock & Wilcox Company - See attachment 232	WC	IND

Page 24 of 25

Exhibit 1 - Policies and Named Insured’s


1/1/2010	1/1/2011	WLR C4570953A	McDermott International, Inc. - See attachment 261	WC	IND
1/1/2010	1/1/2011	XSL G24938451	The Babcock & Wilcox Company - See attachment 235	GL	AAI
1/1/2010	1/1/2011	XSL G24938487	McDermott International, Inc. - See attachment 260	GL	AAI

Page 25 of 25

EXHIBIT IV – MII ENTITIES

See Schedule 1.1(b) and Schedule 1.1(j) attached hereto. No MII Entity listed on Schedule 1.1(b) shall be deemed to be an “Insured”, a “Named Insured” or otherwise be deemed to be insured under any Existing Policy or Existing Insurance Agreement solely by virtue of being listed on such Schedule 1.1(b).

6/2/2010

Schedule 1.1(b)

MII FORMER


Reference ID
947		Arabian General Contracting Company
911		Arabian Petroleum Marine Construction Company
8000		Associated Pipe Line Contractors, Inc.
117		Badya Builders, Inc.
242		Beheer-en Beleggingsmaatschappij Belesa B.V.
9996		BJA-Mentor Production Systems Limited
164		Brown & Root McDermott Fabricators Limited
277		Cayenne Insurance Company, Ltd.
629		CCC Fabricaciones y Construcciones S.A. de C.V.
940		Construcciones Maritimas Mexicanas, S.A. de C.V.
952		Davy McDermott Limited
921		DB/McDermott Company
1952		Deep Gulf Contractors LLC
171		Deep Sea Divers Australia Pty. Limited
		Dick Evans, Inc.
997		ETPM International (UK) Limited
955		ETPM International S.A.S.
999		Far East Vessels, Inc.
108		First Emirates Trading Corporation
		Harvey Lumber & Supply Company
174		Heavy Lift Chartering, Inc.
935		HeereMac v.o.f.
956		Heerema-McDermott (Aust.) Pty. Ltd.
190		Honore Insurance Company, Ltd.
917		Initec, Astano y McDermott International Inc., S.A.
		Ingenieria Petrolera Maritima, S.A. de C.V.
		Iranian Marine Contractors, Inc.
102		J. Ray McDermott & Co. (Nederland) B.V.
150		J. Ray McDermott (Aust.) Pty. Ltd.
151		J. Ray McDermott (U.K.) Inc.
350		J. Ray McDermott (Venezuela) C.A.
325		J. Ray McDermott Arctic Ltd.

6/2/2010


307	J. Ray McDermott Gulf Contractors, Inc.	(formerly the Early Company)
394	J. Ray McDermott International Services (No. 1) Limited
101	J. Ray McDermott International Services Limited
152	J. Ray McDermott London, Ltd.
641	J. Ray McDermott Marine Construction AS
1125	J. Ray McDermott Newfoundland, Ltd.
871	J. Ray McDermott Offshore Chartering (U.S.), Inc.
372	J. Ray McDermott Properties, Inc.
238	J. Ray McDermott Underwater Services, Inc.
603	J. Ray McDermott Venture Holdings (U.S.), Inc.
153	Jaramac Associated Services, Ltd.
	Jaramac Petroleum (U.K.) Limited
	Khafji Contractors, Inc.
166	Khor Contractors, Inc.
903	KME a.s.
324	Lan-Dermott, S.A. de C.V.
202	Madock Shipyard Company, Ltd.
203	Macshelf Marine Construction Company, Ltd.
106	Mandato Pty. Limited
360	Marine Contractors, Inc.
146	McAntille, N.V.
168	McDermott - ETPM V.O.F.
158	McDermott (Holland) B.V.
304	McDermott (Nigeria) Limited
245	McDermott Acquisition Company, Inc.
972	McDermott APG Services Limited
352	McDermott Azerbaijan Pipelines, Inc.
156	McDermott Azerbaijan, Inc.
351	McDermott Central & Eastern Europe, Inc.
	McDermott de Mexico, S.A. de C.V.
118	McDermott Denmark ApS
464	McDermott Energy Services, Inc.
178	McDermott Engineering (Europe) Limited
	McDermott Enterprises France, S.A.
128	McDermott Europe Marine Services, Ltd.
313	McDermott Industries, Inc.
354	McDermott Inland Services, Inc.

6/2/2010


201	McDermott International Asset Management, Ltd.
343	McDermott International Aviation, Inc.
346	McDermott International Aviation, Inc.	(formerly McDermott International Aviation Co., Inc.)
	McDermott International (Deutschland) GmbH
237	McDermott International Engineering & Construction Co., Ltd.
139	McDermott International Engineering Investments N.V.
121	McDermott International General Services, Inc.
123	McDermott International Marine Services, Inc.
236	McDermott International Marketing, Inc.
143	McDermott Marine UK Limited
462	McDermott Marketing Services, Inc.
103	McDermott Middle East Trading, Ltd.
172	McDermott Neutral Zone, Inc.
	McDermott Norway, Inc.
	McDermott Petroleum (Iran), Inc.
105	McDermott Sakhalin, Inc.
347	McDermott Shipbuilding, Inc.
111	McDermott Singapore Pte. Ltd.
221	McDermott Submarine Cable Ltd.
1951	McDermott Submarine Cable Systems Limited
205	McDermott Subsea Constructors Limited
110	McDermott Transition Co., Inc.
	McDermott UAR, Inc.
184	McDermott West Indies Company
187	McDermott-ETPM (Norway), Inc.
998	McDermott-ETPM (UK) Limited
963	McDermott-ETPM B.V.
161	McDermott-ETPM East B.V.
167	McDermott-ETPM East N.V.
964	McDermott-ETPM N.V.
965	McDermott-ETPM S.A.
962	McDermott-ETPM West, Inc.
104	Menck GmbH
463	Mentor Engineering Consultants Limited
131	MIMCO, Inc.
908	MMC-McDermott Engineering Sdn. Berhad
317	Mofco N.V.

6/2/2010


129		NOLA, Servicos E Participacoes Ltda.
141		Northern Marine Services, Inc.
107		Oceanic Red Sea Company
620		Offshore Angola, Ltd.
632		Offshore Energy Capital Corporation
622		Offshore Hyundai International Limited
630		Offshore Hyundai International, Ltd.
210		Offshore Marine Chartering N.V.
610		Offshore Petroleum Divers, Inc.
614		Offshore Pipelines (Mauritius) Ltd.
616		Offshore Pipelines Far East Limited
617		Offshore Pipelines International Gulf E.C.
633		Offshore Power Generation Ltd.
635		Offshore Production Vessels, Ltd.
615		OPI Offshore Netherlands Holding B.V.
611		OPI Sales & Service Corporation
628		OPI Towing & Supply, L.L.C.
624		OPMI, E.C.
613		P. T. Armandi Pranaupaya
850		Panama Offshore Chartering Company 1, Inc.
859		Panama Offshore Chartering Company 10, Inc.
860		Panama Offshore Chartering Company 11, Inc.
861		Panama Offshore Chartering Company 12, Inc.
862		Panama Offshore Chartering Company 13, Inc.
863		Panama Offshore Chartering Company 14, Inc.
864		Panama Offshore Chartering Company 15, Inc.
865		Panama Offshore Chartering Company 16, Inc.
866		Panama Offshore Chartering Company 17, Inc.
867		Panama Offshore Chartering Company 18, Inc.
868		Panama Offshore Chartering Company 19, Inc.
851		Panama Offshore Chartering Company 2, Inc.
869		Panama Offshore Chartering Company 20, Inc.
870		Panama Offshore Chartering Company 21, Inc.
852		Panama Offshore Chartering Company 3, Inc.
853		Panama Offshore Chartering Company 4, Inc.
854		Panama Offshore Chartering Company 5, Inc.
855		Panama Offshore Chartering Company 6, Inc.

6/2/2010


856		Panama Offshore Chartering Company 7, Inc.
857		Panama Offshore Chartering Company 8, Inc.
858		Panama Offshore Chartering Company 9, Inc.
154		Panama Offshore Chartering Company, Inc.
990		Personal Administrativo de Vera Cruz, S.A. de C.V.
991		Personal Ejecutivo de Veracruz, S.A. de C.V.
645		Pirogue Insurance Company, Ltd.
981		Sakhalin Energy Investment Company, Ltd.
384		Samburg Holdings, Inc.
109		Sharman, Allen, Gay & Taylor, S.A.
989		Tallares Navales del Golfo, S.A. de C.V.
		The Evelyn Kay Company
		The Roger Thomas Company
		The Rosalie E. Company
		The Walter E. Company
634		TL Marine Sdn. Bhd.
621		TL Offshore Sdn. Bhd.
926		Topside Contractors of Newfoundland
925		Topside Contractors of Newfoundland, Ltd.
642		U.S. Offshore Chartering
918		Universal Fabricators Incorporated
980		US Shipbuilding Corporation, Inc.
318		Wagley, Inc.

6/2/2010

Schedule 1.1(j)

MII - CURRENT


CURRENT Reference ID	Name
873	Barmada McDermott (L) Limited
1953	Barmada McDermott Sdn. Bhd.
276	Boudin Insurance Company, Ltd.
939	Caspian Offshore Fabricators LLC
116	Chartering Company (Singapore) Pte. Ltd.
142	Eastern Marine Services, Inc.
249	Global Energy - McDermott Limited
140	Hydro Marine Services, Inc.
649	International Vessels Ltd.
148	J. Ray McDermott (Aust.) Holding Pty. Limited
1982	J. Ray McDermott (Caspian), Inc.	(formerly J. Ray McDermott Diving International, Inc.)
243	J. Ray McDermott (Nigeria) Ltd.
2025	J. Ray McDermott (Norway), AS
1237	J. Ray McDermott (Qingdao) Pte. Ltd.
194	J. Ray McDermott Asia Pacific Pte. Ltd.	(formerly McDermott South East Asia Pte. Ltd.)
1972	J. Ray McDermott Canada Holding, Ltd.
1969	J. Ray McDermott Canada, Ltd.
204	J. Ray McDermott Contractors, Inc.
246	J. Ray McDermott de Mexico, S.A. de C.V.
208	J. Ray McDermott Eastern Hemisphere Limited	(formerly J. Ray Middle East (Indian Ocean) Ltd.)
1956	J. Ray McDermott Engineering Services Private Limited
1950	J. Ray McDermott Engineering, LLC
220	J. Ray McDermott Far East, Inc.
211	J. Ray McDermott Holdings, LLC	(formerly J. Ray McDermott Holdings, Inc.)
627	J. Ray McDermott International Vessels, Ltd.	(formerly OPI International, Ltd.)
602	J. Ray McDermott International, Inc.
160	J. Ray McDermott Investments B.V.	(formerly Menck B.V.)
1958	J. Ray McDermott Kazakhstan Limited Liability Partnership
1975	J. Ray McDermott Logistic Services Pvt. Limited
136	J. Ray McDermott Middle East, Inc.
239	J. Ray McDermott Solutions, Inc.	(formerly J. Ray McDermott Engineering Holdings, Inc.)
625	J. Ray McDermott Technology, Inc.
1957	J. Ray McDermott UK Ltd.

6/2/2010


1960	J. Ray McDermott Underwater Services, Inc.
248	J. Ray McDermott West Africa Holdings, Inc.
244	J. Ray McDermott West Africa, Inc.
601	J. Ray McDermott, Inc.
207	J. Ray McDermott, S.A.
644	Lagniappe Insurance Company, Ltd.
193	Malmac Sdn. Bhd.
132	McDermott (Malaysia) Sendirian Berhad
904	McDermott Abu Dhabi Offshore Construction Company
915	McDermott Arabia Company Limited
149	McDermott Australia Pty. Ltd.	(formerly McDermott Industries (Aust.) Pty. Limited)
183	McDermott Azerbaijan Marine Construction, Inc.
241	McDermott Caspian Contractors, Inc.
275	McDermott Cayman Ltd.
181	McDermott Far East, Inc.
133	McDermott Gulf Operating Company, Inc.
177	McDermott Holdings (U.K.) Limited
300	McDermott Incorporated
147	McDermott International B.V.
120	McDermott International Investments Co., Inc.
119	McDermott International Marine Investments N.V.
213	McDermott International Marketing, Inc.	(formerly McDermott International Beijing, Inc.)
130	McDermott International Trading Co., Inc.
1971	McDermott International Vessels, Inc.
100	McDermott International, Inc.
1962	McDermott Kft.
349	McDermott Marine Construction Limited
1986	McDermott Marine Mexico, S.A. de C.V.
135	McDermott Offshore Services Company, Inc.
176	McDermott Old JV Office, Inc.
162	McDermott Overseas Investment Co. N.V.
390	McDermott Overseas, Inc.
1966	McDermott Panama Holdings, S.A.
170	McDermott Servicos de Construcao, Ltda.
320	McDermott Trade Corporation
306	Mentor Subsea Technology Services, Inc.
138	North Atlantic Vessel, Inc.

6/2/2010


2021	North Ocean II AS
2023	North Ocean II KS
2022	North Ocean V AS
612	Offshore Pipelines International, Ltd.
618	Offshore Pipelines Nigeria Limited
619	Offshore Pipelines Sdn. Bhd.
626	OPI Vessels, Inc.
623	OPMI, Ltd.
185	P. T. Bataves Fabricators
180	P. T. McDermott Indonesia
901	PT. Baja Wahana Indonesia	(formerly P.T. Babcock & Wilcox Indonesia)
643	PT. J. Ray McDermott Indonesia	(formerly PT. Jay Ray)
636	Sabine River Realty, Inc.
1977	Servicios de Fabricacion de Altamira, S.A. de C.V.
1976	Servicos Profesionales de Altamira, S.A. de C.V.
2019	Singapore Huangdao Pte. Ltd.
640	SparTEC, Inc.	(formerly J. Ray McDermott Spars, Inc.)
145	Varsy International N.V.

EXHIBIT V

ACE AFFILIATES

ACE American Insurance Company

ACE Fire Underwriters Insurance Company

ACE Indemnity Insurance Company

ACE Insurance Company of the Midwest

ACE Property and Casualty Insurance Company

Illinois Union Insurance Company

Indemnity Insurance Company of North America

Insurance Company of North America

Pacific Employers Insurance Company

Bankers Standard Insurance Company

Atlantic Employers Insurance Company

EXHIBIT VI –FOREIGN INSURANCE AGREEMENTS


EFFECTIVE DATE/ YEAR	PARTIES	TYPE	PROGRAMS COVERED	POLICIES COVERED
1985	Mcdermott Int., Inc. and Insurance Co. of N.A.	High Deductible Agreement	General Liability Auto Liability	XWC11051 ISGG05111444 92HF60007 92HF60006
1986	Mcdermott Int., Inc. and Insurance Co. of N.A.	High Deductible Agreement	General Liability Auto Liability	XWC11075 ISA480419 OGLGO511414-7 HDCGO511431-7

EXHIBIT VI (Continued)


Name Of Agreement	Party To Agreement	Effective Date of Agreement
Security Agreement	McDermott International, Inc and CIGNA Property and Casualty Insurance Company	April 1, 1992

Security Agreement	McDermott International, Inc and CIGNA Property and Casualty Insurance Company	April 1, 1993

Indemnity and Security Agreement	McDermott International, Inc. and CIGNA Insurance Company and Seguros CIGNA, S.A.	December 19, 1995

Security Agreement	McDermott International, Inc. and CIGNA Insurance Company	April 1, 1996

Pledge and Security Agreement	Pledgor : McDermott International, Inc. Pledgees :CIGNA Property and Casualty CIGNA Insurance Company	September 15, 1997

Security Agreement	McDermott International, Inc. and ACE American Insurance Company	January 1, 2004

INAMAR Claims Service Agreement	McDermott International, Inc. and INAMAR	Annual agreements incepting January 1, 2001 – December 31, 2005

INAMAR Claims Service Agreement	McDermott International LLC, and Babcock and Wilcox and INAMAR	Effective with respect to Claims resulting from occurrences during the period beginning 12:00am January 1, 2006

Security Agreement	McDermott International, Inc. and ACE American Insurance Company	January 1, 2006

EXHIBIT VII –FOREIGN POLICIES


Effective Date	Policy Number	Named Insured	Type of Policy	Issuing Company	Relating ACE Policy or Policies
1 Jan 2007 - 31 December 2007	B1003	J. Ray McDermott Inc. and related subsidiary and affiliated companies.	General	ACE American Ins. Co.	CMX043526
			Automobile	ACE American Ins. Co.	CMX043527
			Workers Comp.	ACE American Ins. Co.	CMX043525

1 Jan 2007 - 31 December 2007	B1004	J. Ray McDermott Inc. and related subsidiary and affiliated companies.	General	ACE American Ins. Co.	CMX043526
1 Jan 2007 - 31 December 2007	B1004		Workers Comp.	ACE American Ins. Co.	CMX043525

1 Jan 2005 - 31 December 2005	C1001	J. Ray McDermott Inc. and related subsidiary and affiliated companies.	General	ACE American Ins. Co.	CMX043411
			Automobile	ACE American Ins. Co.	CMX043412
			Workers Comp.	ACE American Ins. Co.	CMX043410

1 Jan 2006 - 31 December 2006	C1001	J. Ray McDermott Inc. and related subsidiary and affiliated companies.	General	ACE American Ins. Co.	CMX043526
			Automobile	ACE American Ins. Co.	CMX043527
			Workers Comp.	ACE American Ins. Co.	CMX043525

1 Jan 2005 - 31 December 2005	C1002	J. Ray McDermott Inc. and related subsidiary and affiliated companies.	General	ACE American Ins. Co.	CMX043411
1 Jan 2005 - 31 December 2005	C1002		Workers Comp.	ACE American Ins. Co.	CMX043410

1 Jan 2006 - 31 December 2006	C1002	J. Ray McDermott Inc. and related subsidiary and affiliated companies.	General	ACE American Ins. Co.	CMX043411
1 Jan 2006 - 31 December 2006	C1002		Workers Comp.	ACE American Ins. Co.	CMX043410

1 January 1974 - 31 December 1974	23002	Oceanic Contractors Inc. and any subsidiary, associated or affiliated companies as their interests may appear, as now or hereafter existing, acquired or constituted	Workers Comp.	CIGNA	50HF2295
1 January 1974 - 31 December 1974	23002		General & Auto	CIGNA	45HF3277

1 January 1975 - 31 December 1975	23002	Oceanic Contractors Inc. and any subsidiary, associated or affiliated companies as their interests may appear, as now or hereafter existing, acquired or constituted	Workers Comp.	CIGNA	50HF2296
1 January 1975 - 31 December 1975	23002		General & Auto	CIGNA	45HF3278


Effective Date	Policy Number	Named Insured	Type of Policy	Issuing Company	RelatingACE Policy or Policies

1 January 1976 - 31 December 1976	23002	Oceanic Contractors Inc. and any subsidiary, associated or affiliated companies as their interests may appear, as now or hereafter existing, acquired or constituted	Workers Comp.	CIGNA	50HF2296

			General & Auto	CIGNA	45HF3278

1 January 1977 - 31 December 1977	23002	Oceanic Contractors Inc. and any subsidiary, associated or affiliated companies as their interests may appear, as now or hereafter existing, acquired or constituted	Workers Comp.	CIGNA	50HF2296

			General & Auto	CIGNA	45HF3278

1 January 1978 - 31 December 1978	23002	Oceanic Contractors Inc. and any subsidiary, associated or affiliated companies as their interests may appear, as now or hereafter existing, acquired or constituted	Workers Comp.	CIGNA	50HF2296

			General & Auto	CIGNA	45HF3277

1 January 1979 - 31 December 1979	23002	Oceanic Contractors Inc. and any subsidiary, associated or affiliated companies as their interests may appear, as now or hereafter existing, acquired or constituted	Workers Comp.	CIGNA	50HF2295

			General & Auto	CIGNA	45HF3277

1 January 1980 - 1 April 1981	23002	Oceanic Contractors Inc. and any subsidiary, associated or affiliated companies as their interests may appear, as now or hereafter existing, acquired or constituted McDermott International Inc effective March 14, 1980	Workers Comp.	CIGNA	50HF2295

			General & Auto	CIGNA	45HF3277

1 April 1981 -	23002	McDermott International	Workers Comp.	CIGNA	50HF2295


Effective Date	Policy Number	Named Insured	Type of Policy	Issuing Company	Relating ACE Policy or Policies
1 April 1982		Incorporated	General & Auto	CIGNA	45HF3277

1 April 1982 - 1 April 1983	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	CIGNA	92HF0001 & ISG1163

1 April 1983 - 1 April 1984	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	CIGNA	92HF0001 & ISG351763

1 April 1984 - 1 April 1985	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	CIGNA	92HF0001 & ISG351764

1 April 1985 - 1 April 1986	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	CIGNA	92HF0001 & ISG351763

1 April 1986 - 1 April 1987	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	Aetna Insurance Company	92AET-34599, 92AET-34598 & 28AET-41012 NO

1 April 1987 - 1 April 1988	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	Aetna Insurance Company	92AET-34599, 92AET-34598 & 28AET-41012

1 April 1988 - 1 April 1989	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	Aetna Insurance Company	92AET-34599, 92AET-34598 & 28AET-41012

1 April 1989 - 1 April 1990	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	CIGNA Property and Casualty Insurance Company	CMX-12871, CMX-12870 & CMX-12871


Effective Date	Policy Number	Named Insured	Type of Policy	Issuing Company	Relating ACE Policy or Policies
1 April 1990 - 1 April 1991	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	CIGNA Property and Casualty Insurance Company	CMX-12871, CMX-12870 & CMX-12871

1 April 1991 - 1 April 1992	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	CIGNA Property and Casualty Insurance Company	CMX-12871, CMX-12870 & CMX-12871

1 April 1992 - 1 April 1993	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	CIGNA Property and Casualty Insurance Company	CMX-12871, CMX-12870 & CMX-12871

1 April 1993 - 1 April 1994	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	CIGNA Property and Casualty Insurance Company	CMX043410, CMX043411& CMX043412

1 April 1994 - 1 April 1995	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	CIGNA Property and Casualty Insurance Company	CMX043410, CMX043411& CMX043412

1 April 1995 - 1 April 1996	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	CIGNA Property and Casualty Insurance Company	CMX043410, CMX043411& CMX043412

1 April 1996 - 1 April 1997	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	CIGNA Property and Casualty Insurance Company	CMX043410, CMX043411& CMX043412

1 April 1997 - 1 April 1998	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	CIGNA Property and Casualty Insurance Company	CMX043410, CMX043411& CMX043412


Effective Date	Policy Number	Named Insured	Type of Policy	Issuing Company	Relating ACE Policy or Policies
1 April 1998 - 1 April 1999	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	CIGNA Property and Casualty Insurance Company	CMX043410, CMX043411& CMX043412

1 April 1999 - 31 December 1999	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	CIGNA Property and Casualty Insurance Company	CMX043410, CMX043411& CMX043412

1 January 2000 - 31 December 2000	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	ACE American Ins. Co.	CMX043410, CMX043411& CMX043412

1 January 2001 - 31 December 2001	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	ACE American Ins. Co.	CMX043410, CMX043411& CMX043412

1 January 2002 - 31 December 2002	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	ACE American Ins. Co.	CMX043410, CMX043411& CMX043412

1 January 2003 - 31 December 2003	23002	McDermott International Incorporated et al	Worker’s Compensation / Employer’s Liability / Comprehensive General and Comprehensive Automobile Liability	ACE American Ins. Co.	CMX043410, CMX043411& CMX043412

1 April 1986 - 1 April 1987	23010	McDermott International Inc. et al	worker’s compensation, voluntary compensation of employer’s liability coverages	CIGNA	92AET-34599
			General Liability coverages	CIGNA	92AET-34598
			Auto Liability coverages	CIGNA	28AET-41012 87-88

1 April 1987 - 1 April 1988	23010	McDermott International Inc. et al	worker’s compensation, voluntary compensation of employer’s liability coverages	CIGNA	92AET-34599
1 April 1987 - 1 April 1988	23010	McDermott International Inc. et al	General Liability Coverages	CIGNA	92AET-34598


Effective Date	Policy Number	Named Insured	Type of Policy	Issuing Company	Relating ACE Policy or Policies
1 April 1988 - 1 April 1989	23010	McDermott International Inc. et al	worker’s compensation, voluntary compensation of employer’s liability coverages	CIGNA	92AET-41640
1 April 1988 - 1 April 1989	23010	McDermott International Inc. et al	General Liability Coverages	CIGNA	92AET-41639

1 April 1989 - 1 April 1990	23010	McDermott International Inc. et al	worker’s compensation, voluntary compensation of employer’s liability coverages	CIGNA	CMX-12871
1 April 1989 - 1 April 1990	23010	McDermott International Inc. et al	General Liability Coverages	CIGNA	CMX-12869

1 April 1990 - 1 April 1991	23010	McDermott International Inc.	worker’s compensation, voluntary compensation of employer’s liability coverages	CIGNA	CMX-12871
1 April 1990 - 1 April 1991	23010	McDermott International Inc.	General Liability Coverages	CIGNA	CMX-12869

1 April 1991 - 1 April 1992	23010	McDermott International Inc.	worker’s compensation, voluntary compensation of employer’s liability coverages	CIGNA	CMX-12871
1 April 1991 - 1 April 1992	23010	McDermott International Inc.	General Liability Coverages	CIGNA	CMX-12869

1 April 1992 - 1 April 1993	23010	McDermott International Inc.	worker’s compensation, voluntary compensation of employer’s liability coverages	CIGNA	CMX-12871
1 April 1992 - 1 April 1993	23010	McDermott International Inc.	General Liability Coverages	CIGNA	CMX-12869

1 April 1993 - 1 April 1994	23010	McDermott International Inc.	worker’s compensation, voluntary compensation of employer’s liability coverages	CIGNA	CMX043410
1 April 1993 - 1 April 1994	23010	McDermott International Inc.	General Liability Coverages	CIGNA	CMX043411

1 April 1994 - 1 April 1995	23010	McDermott International Inc.	worker’s compensation, voluntary compensation of employer’s liability coverages	CIGNA	CMX043410
1 April 1994 - 1 April 1995	23010	McDermott International Inc.	General Liability Coverages	CIGNA	CMX043411

1 April 1995 - 1 April 1996	23010	McDermott International Inc.	worker’s compensation, voluntary compensation of employer’s liability coverages	CIGNA	CMX043410
1 April 1995 - 1 April 1996	23010	McDermott International Inc.	General Liability Coverages	CIGNA	CMX043411


Effective Date	Policy Number	Named Insured	Type of Policy	Issuing Company	Relating ACE Policy or Policies
1 April 1996 - 1 April 1997	23010	McDermott International Inc.	worker’s compensation, voluntary compensation of employer’s liability coverages	CIGNA	CMX043410
1 April 1996 - 1 April 1997	23010	McDermott International Inc.	General Liability Coverages	CIGNA	CMX043411

1 April 1997 - 1 April 1998	23010	McDermott International Inc.	worker’s compensation, voluntary compensation of employer’s liability coverages	CIGNA	CMX043410
1 April 1997 - 1 April 1998	23010	McDermott International Inc.	General Liability Coverages	CIGNA	CMX043411

1 April 1998 - 1 April 1999	23010	McDermott International Inc.	worker’s compensation, voluntary compensation of employer’s liability coverages	CIGNA	CMX043410
1 April 1998 - 1 April 1999	23010	McDermott International Inc.	General Liability Coverages	CIGNA	CMX043411

1 April 1999 - 31 December 1999	23010	McDermott International Inc.	worker’s compensation, voluntary compensation of employer’s liability coverages	CIGNA	CMX043410
1 April 1999 - 31 December 1999	23010	McDermott International Inc.	General Liability Coverages	CIGNA	CMX043411

1 January 2000 - 31 December 2000	23010	McDermott International Inc.	worker’s compensation, voluntary compensation of employer’s liability coverages	ACE American Ins. Co.	CMX043410
1 January 2000 - 31 December 2000	23010	McDermott International Inc.	General Liability Coverages	ACE American Ins. Co.	CMX043411

Exhibit 10.7

GROUP II AGREEMENT- EXECUTION VERSION

NOVATION AND ASSUMPTION AGREEMENT

by and among

ACE American Insurance Company, acting for itself and its affiliates including, without

limitation, Pacific Employers Insurance Company;

ACE INA Insurance Company;

ACE Insurance Company;

Insurance Company of North America

and

Creole Insurance Company, Ltd., a Bermuda company,

and

Boudin Insurance Company, Ltd., a Bermuda company

RECITALS

THIS NOVATION AND ASSUMPTION AGREEMENT (the “ Agreement ”), is entered into and effective as of May 18, 2010 (the “ Effective Date ”) by and among ACE American Insurance Company, individually and acting for the ACE Affiliates (in such capacities, the “ Company ”), Creole Insurance Company, Ltd., a Bermuda company (“ Creole ”), and Boudin Insurance Company, Ltd., a Bermuda company (“ Boudin ”).

WHEREAS , the Company and/or the ACE Affiliates have entered into the Existing Reinsurance Agreements with Creole and Boudin; and

WHEREAS , pursuant to the Existing Reinsurance Agreements, Creole and Boudin are obligated, among other things, to reinsure the Company and/or the ACE Affiliates with regard to certain Existing Policies; and

WHEREAS , Creole, prior to the Separation, is a wholly owned Subsidiary of MII; and

WHEREAS , MII intends to spin-off the B&W Entities (including Creole) from MII in connection with a dividend of common stock of B&W to the shareholders of MII (the “ Separation ”); and

WHEREAS , in connection with the Separation, the Parties wish to provide that Boudin be the reinsurer with respect to cessions arising from the operations, business, or property of MII and that Creole be the reinsurer with respect to cessions arising from the operations, business, or property of B&W, in each case whether such obligations were existing, accruing or arising before, on or after the Effective Date; and

WHEREAS , the Company, on its own behalf and on behalf of the ACE Affiliates, is willing to consent to the transfer, assumption, and novation of the matters as set forth herein, subject to the terms and conditions of this Agreement;

1. Definitions. The following terms used herein, including in the recitals and Exhibits hereto, shall have the following meanings:

“ ACE Affiliate ” means each Affiliate of ACE that has issued an Existing Policy, including Pacific Employers Insurance Company, ACE INA Insurance Company, ACE Insurance Company and Insurance Company of North America.

“ Agreement ” has the meaning set forth in the recitals to this Agreement.

“ ALAA ” means the Assumption and Loss Allocation Agreement, dated as of the date hereof, among the Company, B&W, MII and certain other MII Entities and B&W Entities signatory thereto.

“ Assumption Time ” means midnight (New York time) on the Effective Date.

“ B&W ” means Babcock & Wilcox Holdings, Inc., a Delaware corporation, to be succeeded by The Babcock & Wilcox Company, a Delaware corporation, after the effective time of the merger, to occur after the date hereof, of Babcock & Wilcox Holdings, Inc., with and into The Babcock & Wilcox Company, the surviving entity of such merger.

“ Boudin Assumption and Novation ” has the meaning set forth in Section 2(a).

“ Boudin LOC ” has the meaning set forth in Section 3(a).

“ Company ” has the meaning set forth in the recitals to this Agreement.

“ Company B&W Obligation ” means any obligation of the Company or an ACE Affiliate to or for the benefit of an Insured under an Existing Policy that arises, will arise, or has arisen from the operations, business, or property of a B&W Entity.

“ Company MII Obligation ” means any obligation of the Company or an ACE Affiliate to or for the benefit of an Insured under an Existing Policy that arises, will arise, or has arisen from the operations, business, or property of an MII Entity.

“ Creole Assumption and Novation ” has the meaning set forth in Section 2(c).

“ Creole LOC ” has the meaning set forth in Section 3(b).

“ Effective Date ” has the meaning set forth in the recitals to this Agreement.

“ ESIS ” means ESIS, Inc., an Affiliate of the Company.

“ Existing Collateral ” means any and all letters of credit or trust agreements outstanding as of the date hereof provided by or required to be provided by Creole or Boudin under the terms of any Existing Reinsurance Agreement in order to secure obligations arising thereunder.

“ Existing Policy ” means each policy of general liability insurance, automobile liability insurance, or workers compensation insurance issued prior to the date hereof by the Company or an ACE Affiliate to one or more B&W Entities and/or one or more MII Entities that is subject to an Existing Reinsurance Agreement.

“ Existing Reinsurance Agreement ” means each reinsurance agreement (whether denominated a treaty, a reinsurance policy, a reinsurance agreement, a facultative certificate, or otherwise) in which (a) Creole or Boudin is the reinsurer, (b) one or more of the Company and/or ACE Affiliates is or are the reinsureds, and (c) the ceded risk includes risk under any Existing Policy. “Existing Reinsurance Agreements” shall not mean or include any Existing Security Agreements (as defined below). Exhibit II attached hereto and made a part hereof reflects the Parties’ best efforts to list all Existing Reinsurance Agreements, but the definitions in this Agreement shall control in the event of any errors or omissions on such Exhibit.

“ Existing Security Agreements ” shall mean and include any trust agreement, collateral agreement, pledge and security agreement or other similar contract between the Company or an ACE Affiliate and Boudin or between the Company or an ACE Affiliate and Creole, which was entered into in connection with or pursuant to any Existing Reinsurance Agreement (as defined above), and which are embodied in separately-executed written instruments.

“ Go-Forward Boudin Obligations ” means the obligations of Boudin under (a) the Transferable Boudin Reinsurance Agreements, (b) the Novated-to-Boudin Reinsurance Agreements and (c) the Wholly Retained Boudin Reinsurance Agreements, in each case after giving effect to the transfers, assumptions, novations, and releases effected by this Agreement.

“ Go-Forward Creole Obligations ” means the obligations of Creole under (a) the Transferable Creole Reinsurance Agreements, (b) the Novated-to-Creole Reinsurance Agreements and (c) the Wholly Retained Creole Reinsurance Agreements, in each case after giving effect to the transfers, assumptions, novations, and releases effected by this Agreement.

“ Insured ,” as a noun in reference to one or more insurance policies, means any Person who is insured by such policy or policies, regardless of whether such Person is designated an “Insured” or a “Named Insured” in such policy or is otherwise expressly identified therein.

“ Master Separation Agreement ” means a Master Separation Agreement to be entered into between MII and The Babcock & Wilcox Company in connection with the Separation.

“ MII ” means McDermott International, Inc., a Panamanian corporation.

“ MII Entity ” means MII and each of the entities listed on Exhibit III attached hereto and made a part hereof. It is acknowledged and understood that, from and after the effectiveness of the Separation, the MII Entities will not be Subsidiaries or Affiliates of B&W or any of the other B&W Entities.

“ Novated Reinsurance Agreement ” means a Novated-to-Boudin Reinsurance Agreement or a Novated-to-Creole Reinsurance Agreement.

“ Novated-to-Boudin Reinsurance Agreement ” means, as to any Transferable Creole Reinsurance Agreement after the Assumption Time and giving effect to this Agreement, the aggregate of (a) all rights, duties, and obligations of Boudin to and in respect of the Company under such Transferable Creole Reinsurance Agreement as and to the extent novated to Boudin, and (b) all rights, duties, and obligations of the Company to and in respect of Boudin under such Transferable Creole Reinsurance Agreement as and to the extent novated to Boudin.

“ Novated-to-Creole Reinsurance Agreement ” means, as to any Transferable Boudin Reinsurance Agreement after the Assumption Time and giving effect to this Agreement, the aggregate of (a) all rights, duties, and obligations of Creole to and in respect of the Company under such Transferable Boudin Reinsurance Agreement as and to the extent novated to Creole, and (b) all rights, duties, and obligations of the Company to and in respect of Creole under such Transferable Boudin Reinsurance Agreement as and to the extent novated to Creole.

“ Parties ” means the Company, Creole and Boudin, collectively (and each individually is a “Party”).

“ Person ” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, a union, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

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

“ Subsidiary ” means, with respect to any specified Person, any corporation, partnership, limited liability company, joint venture or other organization, whether incorporated or unincorporated, of which at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such specified Person or by any one or more of its Subsidiaries, or by such specified Person and one or more of its Subsidiaries.

“ Substituted Collateral ” means the MII LOC and the B&W LOC.

“ Transferable Boudin Reinsurance Agreements ” means those Existing Reinsurance Agreements in which Boudin is the reinsurer and that reinsure, in whole or in part and whether or not including other obligations, Company B&W Obligations.

“ Transferable Creole Reinsurance Agreements ” means those Existing Reinsurance Agreements in which Creole is the reinsurer and that reinsures, in whole or in part and whether or not including other obligations, Company MII Obligations.

“ Wholly Retained Boudin Reinsurance Agreement ” means an Existing Reinsurance Agreement in which Boudin is the reinsurer and that is not a Transferable Boudin Reinsurance Agreement.

“ Wholly Retained Creole Reinsurance Agreement ” means an Existing Reinsurance Agreement in which Creole is the reinsurer and that is not a Transferable Creole Reinsurance Agreement.

2. Assumption and Novation.

(a) Boudin Assumption and Novation . Notwithstanding anything in any Transferable Creole Reinsurance Agreement to the contrary, and effective as of the Assumption Time, Creole hereby transfers and assigns, and Boudin hereby assumes by novation, so much of each Transferable Creole Reinsurance Agreement as reinsures any Company MII Obligation. In connection with such transfer, assignment, and novation:

(i) Boudin hereby agrees to observe, pay, perform, satisfy, fulfill and discharge, to the extent and in the manner required under the applicable Transferable Creole Reinsurance Agreement, any and all now existing and hereafter arising duties, terms, provisions, covenants, obligations and liabilities of Creole under the Transferable Creole Reinsurance Agreement with respect to the Company MII Obligations insofar as transferred above (the “ Boudin Assumption and Novation ”); and

(ii) The Company and each ACE Affiliate hereby consent to, and agree to give full force and effect to, the Boudin Assumption and Novation. From and after the Assumption Time, Boudin and not Creole shall be treated as the Company’s (or applicable ACE Affiliate’s) contractual counterparty with respect the contracts and mutual rights and obligations subject to the Boudin Assumption and Novation. Without limitation, the Company and each ACE Affiliate, as applicable:

may enforce against Boudin its rights with respect to the Company MII Obligations under the Transferable Creole Reinsurance Agreements to the same extent such Person could, prior to the Boudin Assumption and Novation, enforce such rights against Creole, and

shall perform for the benefit of Boudin any obligation with respect to the Company MII Obligations under the Transferable Creole Reinsurance Agreements to the same extent such Person was obligated, prior to the Boudin Assumption and Novation, to perform such obligations for the benefit of Creole, and

releases Creole from its obligation to observe, pay, perform, satisfy, fulfill or discharge any obligations under any Transferable Creole Reinsurance Agreements with respect to any Company MII Obligation.

(b) No Transfer or Novation of Creole Obligations arising from B&W Operations . The Wholly Retained Creole Reinsurance Agreements are not novated or otherwise affected by the Boudin Assumption

and Novation. The Transferable Creole Reinsurance Agreements are novated to Boudin as set forth above only to the extent that they reinsure Company MII Obligations. To the extent that the Transferable Creole Reinsurance Agreements reinsure Company B&W Obligations, the Parties acknowledge that Creole and not Boudin shall continue to observe, pay, perform, satisfy, fulfill and discharge any and all now existing and hereafter arising duties, terms, provisions, covenants, obligations and liabilities of the reinsurer under the Transferable Creole Reinsurance Agreements.

(c) Creole Assumption and Novation . Notwithstanding anything in any Transferable Boudin Reinsurance Agreement to the contrary, and effective as of the Assumption Time, Boudin hereby transfers and assigns, and Creole hereby assumes by novation so much of each Transferable Boudin Reinsurance Agreement as reinsures any Company B&W Obligation. In connection with such transfer and assignment,

(i) Creole hereby agrees to observe, pay, perform, satisfy, fulfill and discharge, to the extent and in the manner required under the applicable Transferable Boudin Reinsurance Agreement, any and all now existing and hereafter arising duties, terms, provisions, covenants, obligations and liabilities of Boudin under the Transferable Boudin Reinsurance Agreements with respect to the Company B&W Obligations insofar as transferred above (the “ Creole Assumption and Novation ”); and

(ii) The Company and each ACE Affiliate hereby consent to, and agree to give full force and effect to, the Creole Assumption and Novation. From and after the Assumption Time, Creole and not Boudin shall be treated as the Company’s (or applicable ACE Affiliate’s) contractual counterparty with respect the contracts and mutual rights and obligations subject to the Creole Assumption and Novation. Without limitation, the Company and each ACE Affiliate, as applicable:

may enforce against Creole its rights under the Transferable Boudin Reinsurance Agreements to the same extent such Person could, prior to the Creole Assumption and Novation, enforce such rights against Boudin, and

shall perform for the benefit of Creole any obligation under the Transferable Boudin Reinsurance Agreements to the same extent such Person was obligated, prior to the Creole Assumption and Novation, to perform such obligations for the benefit of Boudin, and

releases Boudin from its obligation to observe, pay, perform, satisfy, fulfill or discharge any obligations under any Transferable Boudin Reinsurance Agreements with respect to any Company B&W Obligation.

(d) No Transfer or Novation of Boudin Obligations arising from MII Operations . The Wholly Retained Boudin Reinsurance Agreements are not novated or otherwise affected by the Creole Assumption and Novation. The Transferable Boudin Reinsurance Agreements are novated to Creole as set forth above only to the extent that they reinsure Company B&W Obligations. To the extent that the Transferable Boudin Reinsurance Agreements reinsure Company MII Obligations, the Parties acknowledge that Boudin and not Creole shall continue to observe, pay, perform, satisfy, fulfill and discharge any and all now existing and hereafter arising duties, terms, provisions, covenants, obligations and liabilities of the reinsurer under the Transferable Boudin Reinsurance Agreements.

(e) No Effect on Aggregate Limits of Liability . For the avoidance of doubt, it is understood and agreed that the aggregate liability of Creole and Boudin, taken together, under the Existing Reinsurance Agreements (or any of them) is not intended to be, and shall be deemed not to be, increased by implementation of this Agreement. In particular, and without limitation, to the extent that any Transferable Creole Reinsurance Agreement (or Transferable Boudin Reinsurance Agreement) contains an aggregate limit of liability, that aggregate limit of liability shall, after the Assumption Time, apply as a single, joint aggregate limit of liability as between (i) the resulting Novated Reinsurance Agreement and (ii) the portions of the Transferable Creole Reinsurance Agreement (or Transferable Boudin Reinsurance Agreement) that are retained pursuant to Section 2(b) (or Section 2(d)) above. Neither Creole or Boudin shall have any further liability under a Novated Reinsurance Agreement upon actual exhaustion by payment of the single, joint aggregate limit of liability thereunder; provided, however, that each of Creole and Boudin agree that

the Company may determine the order in which any such single, joint aggregate limit of liability may be payable by each of them under such Novated Reinsurance Agreement, and provided further that (x) neither Creole or Boudin may refuse to pay any amount due to the Company on the basis of any claim or contention that in determining the order in which such limits are to be paid thereunder, the Company has not acted in good faith or has acted improperly, and (y) neither Creole nor Boudin may assert any such claim or contention as a defense to liability or payment or otherwise.

3. Collateral .

(a) Boudin LOC .

(i) Boudin (including for purposes of this Section 3, and if MII and Boudin so elect, MII on Boudin’s behalf) will, within fifteen (15) days after the Effective Date, provide to the Company, as beneficiary thereof, an irrevocable letter of credit (the “ Boudin LOC ”) in an amount of $696.00 (which amount shall be less than the aggregate amount of the Existing Collateral), issued in a form and by a bank or other financial institution, in each case acceptable to the Company; and/or such other forms of collateral as the Company may permit in writing from time to time. The Boudin LOC shall secure the Go-Forward Boudin Obligations.

(ii) The Boudin LOC shall be “evergreen,” meaning that it shall provide by its terms that it will be renewed automatically each year for an additional year unless written notice of non-renewal is received by the Company at least sixty (60) days prior to the Boudin LOC’s anniversary date. If the Company permits Boudin to provide collateral in a form other than the Boudin LOC, Boudin shall provide such collateral in an amount and form acceptable to the Company.

(iii) Boudin shall continue to provide the Boudin LOC (or other collateral acceptable to the Company) as security for payment of the Go-Forward Boudin Obligations, until the Company determines that there is no longer any need for such collateral. If there shall be a material deterioration in the financial condition of the bank or other financial institution which has issued the Boudin LOC, the Company shall have the right to require Boudin to replace the Boudin LOC with a new letter of credit with similar terms issued by a bank or other financial institution then acceptable to the Company.

(iv) The Company shall have the right to draw against the Boudin LOC and/or other collateral solely (a) in accordance with the terms of the applicable Wholly Retained Boudin Reinsurance Agreement or Novated-to-Boudin Reinsurance Agreement, as the case may be, and/or as required and permitted by the laws and regulations of the Commonwealth of Pennsylvania, or (b) in the event that a notice of nonrenewal is received pursuant to the evergreen clause.

(v) Annually, the Company shall review and redetermine the amount of the Go-Forward Boudin Obligations and the amount of collateral security required pursuant to this Agreement. At such time, MII will provide its most recent audited financial statements, interim financial statements, and any other financial information reasonably requested by the Company for the purpose of evaluating the financial condition of MII. MII will provide any needed increases in the amount of the Boudin LOC (and/or other collateral if acceptable to the Company) within thirty (30) days of the Company’s written request for any additional required amount of the Boudin LOC. The Company will effect any decreases in the amount of the Boudin LOC (and/or other collateral) promptly, provided that Boudin is not in breach of any of its obligations under this Agreement or the Existing Reinsurance Agreements as transferred and novated hereunder and MII is not in breach of any of its obligations to the Company under the ALAA.

(b) Creole LOC .

(i) Creole (including for purposes of this Section 3, and if B&W and Creole so elect, B&W on Creole’s behalf) will, within fifteen (15) days after the Effective Date, provide to the Company, as beneficiary thereof, an irrevocable letter of credit (the “ Creole LOC ”) in an amount of $4,171,230.00 (which amount shall be less than the aggregate amount of the Existing Collateral), issued in a form and

by a bank or other financial institution, in each case acceptable to the Company; and/or such other forms of collateral as the Company may permit in writing from time to time. The Creole LOC shall secure the Go-Forward Creole Obligations.

(ii) The Creole LOC shall be “evergreen,” meaning that it shall provide by its terms that it will be renewed automatically each year for an additional year unless written notice of non-renewal is received by the Company at least sixty (60) days prior to the Creole LOC’s anniversary date. If the Company permits Creole to provide collateral in a form other than the Creole LOC, Creole shall provide such collateral in an amount and form acceptable to the Company.

(iii) Creole shall continue to provide the Creole LOC (or other collateral acceptable to the Company) as security for payment of the Go-Forward Creole Obligations, until the Company determines that there is no longer any need for such collateral. If there shall be a material deterioration in the financial condition of the bank or other financial institution which has issued the Creole LOC, the Company shall have the right to require Creole to replace the Creole LOC with a new letter of credit with similar terms issued by a bank or other financial institution then acceptable to the Company.

(iv) The Company shall have the right to draw against the Creole LOC and/or other collateral solely (a) in accordance with the terms of the applicable Wholly Retained Creole Reinsurance Agreement or Novated-to-Creole Reinsurance Agreement, as the case may be, and/or as required and permitted by the laws and regulations of the Commonwealth of Pennsylvania, or (b) in the event that a notice of nonrenewal is received pursuant to the evergreen clause.

(v) Annually, the Company shall review and redetermine the amount of the Go-Forward Creole Obligations and the amount of collateral security required pursuant to this Agreement. At such time, B&W will provide its most recent audited financial statements, interim financial statements, and any other financial information reasonably requested by the Company for the purpose of evaluating the financial condition of B&W. B&W will provide any needed increases in the amount of the Creole LOC (and/or other collateral if acceptable to the Company) within thirty (30) days of the Company’s written request for any additional required amount of the Creole LOC. The Company will effect any decreases in the amount of the Creole LOC (and/or other collateral) promptly, provided that Creole is not in breach of any of its obligations under this Agreement or the Existing Reinsurance Agreements as transferred and novated hereunder and B&W is not in breach of any of its obligations to the Company under the ALAA.

(c) Existing Security Agreements; Substituted Collateral . Notwithstanding anything in any Existing Reinsurance Agreement or any Existing Security Agreement to the contrary, the Company shall release the Existing Collateral (including, without limitation, providing the necessary directions to issuing banks of letters of credit, trustees of reinsurance trusts, and/or similar third parties) upon receipt of the Substituted Collateral as set forth in Section 3(a)(i) and 3(b)(i), and the Parties shall take all actions and execute any documents necessary to terminate the Existing Security Agreements.

(d) Adjustments of Funds Withheld . To the extent that the Company has retained funds of Creole or Boudin as funds withheld under any Existing Reinsurance Agreement (including, without limitation, by allocating reinsurance premium or other funds of the reinsurers to claim payment funds held by ESIS), such funds shall continue to be maintained following the transactions contemplated by this Agreement. If the Company desires to effect a one-time reallocation of such funds withheld as between Creole and Boudin as a result of the transactions contemplated by this Agreement, it shall provide notice of such reallocation as promptly as possible after the Assumption Time, but in any event on or prior to October 1, 2010, and Creole and Boudin shall accept the Company’s determination of the amount of such reallocation.

4. Existing Collateral. The Substituted Collateral required to be provided by Creole and Boudin hereunder shall, except to the extent provided otherwise in this Agreement, be subject to all of the terms and conditions applicable to the Existing Collateral pursuant to the Existing Reinsurance Agreements to the same extent that such terms and conditions applied to the Existing Collateral thereunder.

5. Allocation .

(a) Company Designations . The Company’s determination as to whether an obligation is a Go-Forward Boudin Obligation or a Go-Forward Creole Obligation (a “ Company Designation ”) shall be binding on Creole and Boudin, and they shall not delay, or make any deduction with respect to, their payment or other response to such obligation on account of any disagreement with such determination, provided , however , that such payment or other response shall not be construed as prejudicial to either Party in any dispute between Creole and Boudin with respect to any such Company Designation.

(b) Disputes . Any dispute or disagreement between Creole and Boudin with respect to the correctness of a Company Designation shall be resolved pursuant to Article V of the Master Separation Agreement by MII on behalf of Boudin and B&W on behalf of Creole; provided , that (i) the Company will not be made a party to any arbitration proceeding arising from such dispute or disagreement, but may be called as a witness; (ii) any reasonable costs incurred by the Company in respect of any such arbitration proceeding will be fully reimbursed to the Company promptly following receipt of a reimbursement demand from the Company; (iii) under no circumstances will MII or B&W or Creole or Boudin, as a result of such arbitration proceeding, require the Company to return any amount received by the Company pursuant to a prior Company Designation, whether such amount was received as a result of the Company’s draw against security posted for its benefit or otherwise, and (iv) the Company shall comply with the allocation or other resolution of such dispute.

6. Billing . On and after the Effective Date, the Company will (in each case in accordance with the billing procedures set forth in the applicable Existing Reinsurance Agreement)

(a) bill Creole directly for such of the Go-Forward Creole Obligations as are then due and payable, and provide Creole with appropriate reports and accounting with respect to such obligations; and

(b) bill Boudin directly for such of the Go-Forward Boudin Obligations as are then due and payable, and provide Boudin with appropriate reports and accounting with respect to such obligations.

7. Amendments . Neither this Agreement nor any provision hereof may be amended, changed, waived, discharged or terminated except by a written instrument signed by each Party.

8. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Neither this Agreement nor any right or obligation hereunder may be assigned or conveyed by any Party without the prior written consent of the other Parties, which consent shall not be unreasonably withheld.

9. No Waiver . The failure or refusal by any Party to exercise any rights granted hereunder shall not constitute a waiver of such rights or preclude the subsequent exercise thereof, and no oral communication shall be asserted as a waiver of any such rights hereunder unless such communication shall be confirmed in a writing plainly expressing an intent to waive such rights and signed by the Party against whom such waiver is asserted.

10. Counterparts . This Agreement may be executed in any number of counterparts each of which when so executed and delivered shall constitute an original, but such counterparts together shall constitute one and the same agreement. The exchange of copies of this Agreement and of signature pages by facsimile transmission shall constitute effective execution and delivery of this Agreement as to the Parties and may be used in lieu of the original Agreement for all purposes. Signatures of the Parties and other Persons signatory hereto transmitted by facsimile shall be deemed to be their original signatures for all purposes.

11. No Third Party Beneficiary . This Agreement shall not be deemed to give any right or remedy to any third party whatsoever unless otherwise specifically granted hereunder.

12. Parties’ Representations . As of the Effective Date, each of the Parties expressly represents on its own behalf: (a) it is an entity in good standing in its jurisdiction of organization; (b) it has all requisite corporate power and authority to enter into this Agreement, and to perform its obligations hereunder; (c) the execution and delivery by it of this Agreement, and the performance by it of its obligations under this Agreement, have been duly authorized by all necessary corporate or other action; (d) this Agreement, when duly executed and delivered by it, and subject to the due execution and delivery hereof by the other Parties, will be a valid and binding obligation of it, enforceable against it, its successors and permitted assigns, in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equity principles; (e) the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby in accordance with the respective terms and conditions hereof will not (i) violate any provision of its Organizational Documents, (ii) violate any applicable order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against it, or binding upon it, or any agreement with, or condition imposed by, any governmental or regulatory body, foreign or domestic, binding upon it as of the date hereof, or (iii) violate any agreement, contract, obligation, promise or undertaking that is legally binding and to which it is a party or by which it is bound; and (f) the signatory hereto on behalf of it is duly authorized and legally empowered to enter into this Agreement on its behalf.

13. Notices . Any and all notices, requests, approvals, authorizations, consents, instructions, designations and other communications that are required or permitted to be given pursuant to this Agreement shall be in writing and may be given either by personal delivery, first class prepaid post (airmail if to another country) or by internationally recognized overnight delivery service to the following address, or to such other address and recipient as such Party may have notified in accordance with the terms of this section as being its address or recipient for notification for the purposes of this Agreement:


If to the Company	ACE American Insurance Company 225 E. John Carpenter Freeway, Suite 1300 Irving, TX 75062
	Attention:	Underwriting Manager ACE Risk Management

	Telephone:	(972) 465.7500
	Facsimile:	(972) 465.7826

If to Boudin:	Boudin Insurance Company, Ltd., c/o McDermott International, Inc. 757 N. Eldridge Parkway Houston, Texas 77079
	Attention:	VP and Chief Risk Officer (with copy to General Counsel)

	Telephone:	281-870-5785
	Telecopier:	281-870-5923
	Electronic Mail:	twoodard@mcdermott.com

	with a copy to:
	Boudin Insurance Company, Ltd. Cedar House 41 Cedar Avenue P.O. Box HM 1838 Hamilton HM HX Bermuda Bermuda Fax (441) 295-3982
	Telephone:	281-870-5476
	Telecopier:	281-870-5923
	Electronic Mail:	cjryan@mcdermott.com


If to any MII Entity:	McDermott International, Inc. 757 N. Eldridge Parkway Houston, Texas 77079
	Attention:	VP and Chief Risk Officer (with copy to General Counsel)

	Telephone:	281-870-5785
	Telecopier:	281-870-5923
	Electronic Mail:	twoodard@mcdermott.com

If to Creole:	Creole Insurance Company, Ltd.

	Prior to the Separation:

	Creole Insurance Company, Ltd., c/o Babcock & Wilcox Holdings, Inc. 800 Main Street Lynchburg, Virginia 24504
	Attention:	Director, Risk Management (with copy to General Counsel)
	Telephone:	434-522-6800

	with a copy to:
	McDermott International, Inc. 777 N. Eldridge Parkway Houston, Texas 77079
	Attention:	Director, Risk Management (with copy to General Counsel)

	with an additional copy to:
	Creole Insurance Company, Ltd. Cedar House 41 Cedar Avenue P.O. Box HM 1838 Hamilton HM HX Bermuda Bermuda Fax (441) 295-3982
	Telephone:	281-870-5476
	Telecopier:	281-870-5923
	Electronic Mail:	cjryan@mcdermott.com

	On and After the Separation:

	The Babcock & Wilcox Company The Harris Building 13024 Ballantyne Corporate Place, Suite 700 Charlotte, North Carolina
	Attention:	Director, Risk Management (with copy to General Counsel)

	with a copy to:
	Creole Insurance Company, Ltd. Cedar House 41 Cedar Avenue P.O. Box HM 1838 Hamilton HM HX Bermuda Bermuda Fax (441) 295-3982
	Telephone:	281-870-5476
	Telecopier:	281-870-5923
	Electronic Mail:	cjryan@mcdermott.com


If to any B&W Entity:	Prior to the Separation:

	Babcock & Wilcox Holdings, Inc. (f/k/a The Babcock & Wilcox Company) 800 Main Street Lynchburg, Virginia 24504
	Attention:	Director, Risk Management (with copy to General Counsel)
	Telephone:	434-522-6800

	with a copy to:
	McDermott International, Inc. 777 N. Eldridge Parkway Houston, Texas 77079
	Attention:	Director, Risk Management (with copy to General Counsel)

	Telephone:	281-870-5476
	Telecopier:	281-870-5923
	Electronic Mail:	cjryan@mcdermott.com

	On and After the Separation:

	The Babcock & Wilcox Company The Harris Building 13024 Ballantyne Corporate Place, Suite 700 Charlotte, North Carolina
	Attention:	Director, Risk Management (with copy to General Counsel)

Any notice or communication to any Person shall be deemed to be received by that Person:

(A) upon personal delivery; or

(B) upon receipt if sent by mail or courier.

14. Governing Law . This Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Pennsylvania without regard to those provisions concerning conflicts of laws that would result in the application of the laws of any other jurisdiction.

15. Entire Agreement . THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT AMONG ALL OF THE PARTIES WITH RESPECT TO THE TRANSFERS, ASSUMPTIONS, AND NOVATIONS DESCRIBED HEREIN AND SUPERSEDES ALL OTHER PRIOR AGREEMENTS AND UNDERSTANDINGS, BOTH WRITTEN AND ORAL, WITH RESPECT TO SUCH TRANSFERS, ASSUMPTIONS, AND NOVATIONS. SOLELY FOR INTERPRETATION PURPOSES, THE PARTIES ACKNOWLEDGE THAT THIS AGREEMENT IS INTENDED TO BE READ TOGETHER WITH THE ALAA.

16. Dispute Resolution .

(a) For dispute resolution purposes as between Creole and Boudin, and all disputes between Creole and Boudin arising out of this Agreement, including without limitation as to whether a given obligation is a Go-Forward Creole Obligation or a Go-Forward Boudin Obligation, shall be resolved in accordance with the procedures set forth in the Master Separation Agreement (provided, however, that until the Master Separation Agreement is executed and delivered by all parties thereto, the reference to such agreement in this Section 16(a) shall be deemed to refer to the draft thereof dated as of April 28, 2010).

(b) As between the Company on the one hand and Creole and/or Boudin, on the other hand, all disputes arising hereunder shall be resolved in accordance with the arbitration provisions of the most recent Existing Reinsurance Agreement. In any such arbitration, the entity named in the applicable Company Designation shall be the party formally opposed to the Company, but the other of Boudin or Creole shall have right to associate effectively in the defense and/or prosecution of such arbitration.

17. Severability . If any term or other provision of this Agreement or the Exhibits 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 any Party. 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.

18. Rules of Construction . The definitions of terms used herein 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”. Unless the context requires otherwise (a) 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, supplemented or otherwise modified, (b) any reference herein to any law shall be construed as referring to such law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to the restrictions contained herein), (d) 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, (e) with respect to the determination of any time period, the word “from” means “from and including” and the word “to” means “to and including” and (f) any reference herein to Articles, Sections and Exhibits shall be construed to refer to Articles and Sections of, and Exhibits to, this Agreement. No provision of this Agreement shall be interpreted or construed against any Person solely because such Person or its legal representative drafted such provision.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the Parties intending to be legally bound hereby have executed this Agreement, by their duly authorized representatives.


ACE AMERICAN INSURANCE COMPANY

By:	/ S / L AURA V EST
Printed Name:		Laura Vest
Title:		Vice President


CREOLE INSURANCE COMPANY, LTD.

By:		/ S / B ENJAMIN H. B ASH
		Benjamin H. Bash
		Assistant Secretary

BOUDIN INSURANCE COMPANY, LTD.

By:		/ S / L IANE K. H INRICHS
		Liane K. Hinrichs
		Assistant Secretary

Consented to for Purposes of Section 3:


MCDERMOTT INTERNATIONAL INC.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Senior Vice President

BABCOCK & WILCOX HOLDINGS, INC.

By:		/ S / M ICHAEL S. T AFF
Name:		Michael S. Taff
Title:		Senior Vice President

EXHIBIT I – B&W ENTITIES

See Schedule 1.1(a) and Schedule 1.1(c) attached hereto. No B&W Entity listed on Schedule

1.1(a) shall be deemed to be an “Insured”, a “Named Insured” or otherwise be deemed to be insured

under any Existing Policy or Existing Reinsurance Agreement solely by virtue of being

listed on such Schedule 1.1(a).


Schedule 1.1(a) B&W FORMER

Reference ID		Name
333		Ahahsain Hudson Heat Transfer Co. Ltd.
398		Advanced Refractory Technologies, Inc.
		A.M. Lockett & Co., Limited
		Amcermet Corporation
924		ASEA Babcock
235		Ash Acquisition Company
326		B & W Clarion, Inc.
574		B&W Ebensburg Pa., Inc.
460		B&W Energy Investments, Inc.
383		B&W Fort Worth Power, Inc.
950		B&W Fuel Company
535		B&W Fuel, Inc.
922		B&W Mexicana, S.A. de C.V.
9991		B&W North Branch G.P., Inc.
9990		B&W North Branch L.P., Inc.
537		B&W Nuclear Service Company
960		B&W Nuclear Service Company
536		B&W Nuclear, Inc.
586		B&W Saba, Inc.
591		B&W Service Company
579		B&W SOFC G.P., Inc.
578		B&W SOFC L.P., Inc.
381		B&W Special Projects, Inc.
569		B&W Triso Corporation
		B&W Tubular Products Limited
573		B&W/OHM Weldon Spring, Inc.
212		Babcock & Wilcox Asia Investment Co., Inc.
115		Babcock & Wilcox Asia Limited
533		Babcock & Wilcox Canada Leasing Ltd.
503		Babcock & Wilcox Canada Ltd.
215		Babcock & Wilcox China Investment Co., Inc.
594		Babcock & Wilcox do Brasil Limitada
528		Babcock & Wilcox do Brasil Participacoes Limitada
206		Babcock & Wilcox Egypt SAE


169		Babcock & Wilcox Fibras Ceramicas Limitada
519		Babcock & Wilcox Finance, Inc.
557		Babcock & Wilcox Foreign Sales Corporation
175		Babcock & Wilcox Gama Kazan Teknolojisi A.S.
552		Babcock & Wilcox General Contracting Company
565		Babcock & Wilcox Government Services Company
395		Babcock & Wilcox HRSG Company
		Babcock & Wilcox Industries, Ltd.
531		Babcock & Wilcox International Sales Corporation
549		Babcock & Wilcox International Sales Corporation
342		Babcock & Wilcox Investment Company
305		Babcock & Wilcox Jonesboro Power, Inc.
2007		Babcock & Wilcox Nevada, LLC
		Babcock & Wilcox Refractories Limited
323		Babcock & Wilcox Salt City Power, Inc.
543		Babcock & Wilcox Services, Inc.
322		Babcock & Wilcox Tracy Power, Inc.
314		Babcock & Wilcox Victorville Power, Inc.
727		Babcock & Wilcox Volund France SAS
315		Babcock PFBC, Inc.
559		Babcock Southwest Construction Corporation
945		Babcock-Brown Boveri Reaktor GmbH
936		Babcock-Ultrapower Jonesboro
937		Babcock-Ultrapower West Enfield
951		Bailey Beijing Controls Co., Ltd.
516		Bailey Controls Australia Pty. Limited
517		Bailey Controls International Sales & Services Company, Inc.
954		Bailey Controls Jordan for Process Controls Services, Ltd.
563		Bailey Controls Sales & Service (Australia) Pty. Limited
564		Bailey Controls Sales & Services Canada Inc.
561		Bailey do Brasil Instrumentos Industriais Limitada
114		Bailey International, Inc.
923		Bailey Japan Company Limited
542		Bailey Meter and Controls Company
		Bailey Meter Company
562		Bailey Meter Co. (Japan) Ltd.
		Bailey Meter Company Limited
		Bailey Meter GmbH


646		Brick Insurance Company, Ltd.
590		BWXT Protec, Inc.
		C.C. Moore & Company Engineers
511		Ceramatec G.P., Inc.
510		Ceramatec SOFC, Inc.
329		Clarion Energy, Inc.
328		Clarion Power Company
321		Conam Nuclear, Inc.
		Control Components France
514		Control Components Italy S.R.L.
		Control Components, Inc. (California)
		Control Components, Inc. (Delaware)
948		Control Components Japan
1914		CTR Solutions, LLC
545		Detroit Broach & Machine Corporation
551		Diamond Blower Company Limited
		Diamond Canapower Ltd.
518		Diamond Power Importacao e Exportacao Ltda.
144		Diamond Power Korea Inc.
526		Diamond Power Specialty (Japan) Ltd.
558		Diamond Power Specialty (Proprietary) Limited
546		Diamond Power Specialty Corporation (Delaware)
		Diamond Power Speciality Corporation (Ohio)
529		Diamond Power Specialty GmbH
		Diescher Tube Mills, Inc.
332		Ebensburg Energy, Inc.
397		Ejendomsaktieselskabet Falkevej2
961		Enserch Environmental Management Company, Inc.
968		EPC Business Trust
919		Especialidades Termomecanicas, S.A. de C.V.
550		Ferry-Diamond Engineering Company Limited
928		Fibras Ceramicas C.A.
509		Fibras Ceramicas, Inc.
547		Globe Steel Tubes Corporation
		Greer Land Co.
		Holmes Insulations Limited
124		Hudson Heat Transfer International, Inc.
1955		Hudson HEI Pty. Ltd.


914		Hudson Northern Industries Inc.
125		Hudson Products Aktiebolag
567		Hudson Products Corporation (1)
902		Hudson Products de Mexico, S.A. de C.V.
1907		Integran Technologies Inc.
461		International Disarmament Corporation
941		Isolite Babcock Refractories Company, Ltd.
927		Isolite Eastern Union Refractories Co., Ltd.
920		KBW Gasification Systems, Inc.
512		LT Produkter i Skutskar AB
938		Maine Power Services
345		McDermott Heat Transfer Company
344		McDermott Productos Industriales de Mexico, S.A. de C.V.
946		Medidores Bailey, S.A. de C.V.
942		Morganite Ceramic Fibres Limited
943		Morganite Ceramic Fibres Pty. Limited
944		Morganite Ceramic Fibres S. A.
		National Drill & Manufacturing Co.
544		National Ecology (Alabama) Incorporated
575		National Ecology (Utah) Incorporated
976		Nooter/Eriksen - Babcock & Wilcox, L.L.C.
933		North American CWF Partnership
9989		North Branch Power Company L.P.
971		North County Operations Associates
		Nuclear Materials and Equipment Corporation
958		Olin Pantex Inc.
1153		P. T. Heat Exchangers Indonesia
934		Palm Beach Energy Associates
		Piedmont Tool Machine Company
576		Power Computing Company
581		Power Systems Sunnyside Operations GP, Inc.
583		Power Systems Sunnyside Operations LP, Inc.

		(1) a Delaware Corporation
905		PowerSafety International, Inc.
508		Productos de Caolin, Inc.
577		PSO Caribbean, Inc.
1980		Savannah River Alliance LLC


2008		Savannah River Tactical Services LLC
984		SOFCo L.P.
932		South Point CWF
556		Sunland Construction Co., Inc.
988		Sunnyside Cogeneration Associates
582		Sunnyside II, Inc.
992		Sunnyside II, L.P
303		Sunnyside III, Inc.
993		Sunnyside Operations Associates L.P.
571		Termobloc Industria E Comercio Ltda.
953		Thermax Babcock & Wilcox Limited
502		TLT-Babcock, Inc.
570		Triso
1152		W.E. Smith Hudson Pty. Ltd.
548		W. F. and John Barnes Company

Schedule 1.1(c)

B&W CURRENT


Reference ID	Name
553	Americon Equipment Services, Inc.
554	Americon, Inc.
732	Applied Synergistics, Inc.
127	B&W de Panama, Inc.
532	Babcock & Wilcox Canada Ltd.
1570	Babcock & Wilcox China Holdings, Inc.
555	Babcock & Wilcox Construction Co., Inc.
2011	Babcock & Wilcox de Monterrey, S.A. de C.V.
1571	Babcock & Wilcox Denmark Holdings, Inc.
327	Babcock & Wilcox Ebensburg Power, Inc.
302	Babcock & Wilcox Equity Investments, Inc.
1965	Babcock & Wilcox Holdings, Inc.
2028	Babcock & Wilcox India Holdings, Inc.
598	Babcock & Wilcox India Private Limited
126	Babcock & Wilcox International Investments Co., Inc.
530	Babcock & Wilcox International Sales and Service Corporation
541	Babcock & Wilcox International, Inc.
380	Babcock & Wilcox Investment Company
2010	Babcock & Wilcox Modular Nuclear Energy LLC
1974	Babcock & Wilcox Nuclear Operations Group, Inc.
1967	Babcock & Wilcox Nuclear Energy, Inc.	(formerly Babcock & Wilcox Nuclear Power Generation Group, Inc.
2018	Babcock & Wilcox Nuclear Services (U.K.) Limited
500	Babcock & Wilcox Power Generation Group, Inc.
1961	Babcock & Wilcox Technical Services (U.K.) Limited
1970	Babcock & Wilcox Technical Services Clinch River, LLC
572	Babcock & Wilcox Technical Services Group, Inc.	(formerly BWXT Services, Inc.)
587	Babcock & Wilcox Technical Services Savannah River Company	(formerly BWXT Savannah River Company)
599	Babcock & Wilcox Volund A/S	(formerly Babcock & Wilcox Volund ApS)
2000	BCE Parts Ltd.
596	BWX Technologies, Inc.
580	BWXT Federal Services, Inc.
589	BWXT Hanford Company
382	BWXT of Idaho, Inc.
592	BWXT of Ohio, Inc.


1576	BWXT Washington, Inc.
189	Creole Insurance Company, Ltd.
1988	Delta Power Services, LLC
766	Diamond Operating Co., Inc.
1572	Diamond Power Australia Holdings, Inc.
1984	Diamond Power Central & Eastern Europe s.r.o.
1573	Diamond Power China Holdings, Inc.
521	Diamond Power do Brasil Limitada
1574	Diamond Power Equity Investments, Inc.
525	Diamond Power Finland OY
504	Diamond Power Germany GmbH	(formerly Diamond Power - Sturm GmbH)
597	Diamond Power International, Inc.
949	Diamond Power Machine (Hubei) Co., Inc.
1908	Diamond Power Services S.E.A. Ltd.
522	Diamond Power Specialty (Proprietary) Limited
523	Diamond Power Specialty Limited
524	Diamond Power Sweden AB
1990	DPS Berkeley, LLC
1997	DPS Cadillac, LLC
1995	DPS Florida, LLC
1993	DPS Gregory, LLC
1996	DPS Lowell Cogen, LLC
1992	DPS Mecklenburg, LLC
1991	DPS Michigan, LLC
1994	DPS Mojave, LLC
1998	DPS Sabine, LLC
278	Gumbo Insurance Company, Ltd.
2003	Intech International Inc.
2002	Intech, Inc.
2001	Ivey-Cooper Services, L.L.C.
1968	Marine Mechanical Corporation
540	National Ecology Company
2005	NFS Holdings, Inc.
2004	NOG-Erwin Holdings, Inc.
501	North County Recycling, Inc.
2006	Nuclear Fuel Services, Inc.
1989	O&M Holding Company
707	P. T. Babcock & Wilcox Asia


534		Palm Beach Resource Recovery Corporation
560		Power Systems Operations, Inc.
568		Revloc Reclamation Service, Inc.
2013		Servicios de Fabricacion de Valle Soleado, S.A. de C.V.
2012		Servicios Profesionales de Valle Soleado, S.A. de C.V.
767		SOFCo - EFS Holdings LLC
2029		The Babcock & Wilcox Company

EXHIBIT II - EXISTING REINSURANCE AGREEMENTS

See Attached.

Name of Agreement

Party to Agreement

Effective Date of Agreement

Reinsurance Agreement (agreement # 22004)

Creole Insurance Company, Ltd.

Insurance Company of North America

McDermott Incorporated Et AI.

6/1/1975

mcdermott

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

4/1/1977

WC only

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

4/1/1977

Auto & GL only

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

INA of Texas

4/1/1978

WC only

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

4/1/1978

Auto & GL only

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

INA of Texas

4/1/1979

WC only

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

INA of Texas

4/1/1979

Auto & GL only

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

INA of Texas

4/1/1980

WC only

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

INA of Texas

4/1/1980

Auto & GL only

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

4/1/1982

Various other issuing companies included

Addendum Number Five to Reinsurance Agreement effective 4/1/1982

Creole Insurance Company, Ltd.

Insurance Company of North America

4/1/1983

Various other issuing companies included

Addendum Number Six to Reinsurance Agreement effective 4/1/1982

Creole Insurance Company, Ltd.

Insurance Company of North America

4/1/1984

Various other issuing companies included

Addendum Number Seven to Reinsurance Agreement effective 4/1/1982

Creole Insurance Company, Ltd.

Insurance Company of North America

4/1/1985

Various other issuing companies included

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

4/1/1986

Various other issuing companies included

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

4/1/1987

Various other issuing companies included; Amended to include CIGNA Insurance Company

Reinsurance Agreement

Creole Insurance Company, Ltd.

CIGNA Insurance Company

4/1/1987

Excess Liability

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

4/1/1988

Various other issuing companies included; for Auto, WC and GL

Reinsurance Agreement

Creole Insurance Company, Ltd.

CIGNA Insurance Company

4/1/1988

for Excess Liability policy

Trust Agreement

Creole Insurance Company, Ltd.

Pacific Employers Insurance Company

Morgan Guaranty Trust Company of New York

6/24/1988

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

4/1/1989

Various other issuing companies included

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

4/1/1990

Various other issuing companies included; for Auto, WC and GL

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

4/1/1990

for Maritime policy

Reinsurance Agreement

Creole Insurance Company, Ltd.

CIGNA Insurance Company

4/18/1990

Reinsurance Agreement - Addendum I

Creole Insurance Company, Ltd.

CIGNA Insurance Company

4/19/1990

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

4/1/1991

Various other issuing companies included; for Auto, WC and GL

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

4/1/1991

for Maritime policy

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

Pacific Employers Insurance Company

4/1/1992

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

Pacific Employers Insurance Company

4/1/1993

Reinsurance Agreement

Creole Insurance Company, Ltd.

Insurance Company of North America

Pacific Employers Insurance Company

4/1/1994

Reinsurance Agreement

Creole Insurance Company, Ltd.

CIGNA Insurance Company of Texas

4/1/1994

Workers Compensation Residual Market Assessments Captive Programs

Creole Insurance Company, Ltd.

CIGNA Insurance Company of Texas

4/1/1994

Reinsurance Agreement

Creole Insurance Company, Ltd.

CIGNA Insurance Company

4/1/1995

Agreement for Workers Compensation Residual Market Assessments Captive Programs

Creole Insurance Company, Ltd.

CIGNA Insurance Company

4/1/1995

Reinsurance Agreement

Creole Insurance Company, Ltd.

CIGNA Insurance Company

Indemnity Insurance Company of North America

CIGNA
Insurance
Company
of
Canada

4/1/1995

Reinsurance Agreement

Creole Insurance Company, Ltd.

Bankers Standard Insurance Company

4/1/1995

Workers Compensation Residual Market Assessments 1995 Captive Programs

Creole Insurance Company, Ltd.

Bankers Standard Insurance Company

4/1/1995

Reinsurance Agreement

Creole Insurance Company, Ltd.

Indemnity Insurance Co. of N.A.

CIGNA Insurance Company

CIGNA
Insurance
Company
of
Canada

4/1/1995

Addendum 1 effective 4/1/96

Addendum I to Reinsurance Agreement

Creole Insurance Company, Ltd.

Indemnity Insurance Company of North America

CIGNA Insurance Company

CIGNA
Insurance
Company
of
Canada

4/1/1996

Reinsurance Agreement

Creole Insurance Company, Ltd.

Indemnity Insurance Co. of N.A.

CIGNA Insurance Company

CIGNA
Insurance
Company
of
Canada

Pacific
Employers
Insurance
Company

4/1/1997

Addendum 2 effective 4/1/97

EXHIBIT III - MII ENTITIES

See Schedule 1.1(b) and Schedule 1.1(j) attached hereto. No MII Entity listed on Schedule 1.1(b) shall be deemed to be an “Insured”, a “Named Insured” or otherwise be deemed to be insured under any Existing Policy or Existing Reinsurance Agreement solely by virtue of being listed on such Schedule 1.1(b).

Schedule 1.1(b)

MII FORMER


Reference ID
947		Arabian General Contracting Company
911		Arabian Petroleum Marine Construction Company
8000		Associated Pipe Line Contractors, Inc.
117		Badya Builders, Inc.
242		Beheer-en Beleggingsmaatschappij Belesa B.V.
9996		BJA-Mentor Production Systems Limited
164		Brown & Root McDermott Fabricators Limited
277		Cayenne Insurance Company, Ltd.
629		CCC Fabricaciones y Construcciones S.A. de C.V.
940		Construcciones Maritimas Mexicanas, S.A. de C.V.
952		Davy McDermott Limited
921		DB/McDermott Company
1952		Deep Gulf Contractors LLC
171		Deep Sea Divers Australia Pty. Limited
		Dick Evans, Inc.
997		ETPM International (UK) Limited
955		ETPM International S.A.S.
999		Far East Vessels, Inc.
108		First Emirates Trading Corporation
		Harvey Lumber & Supply Company
174		Heavy Lift Chartering, Inc.
935		HeereMac v.o.f.
956		Heerema-McDermott (Aust.) Pty. Ltd.
190		Honore Insurance Company, Ltd.
917		Initec, Astano y McDermott International Inc., S.A.
		Ingenieria Petrolera Maritima, S.A. de C.V.
		Iranian Marine Contractors, Inc.
102		J. Ray McDermott & Co. (Nederland) B.V.
150		J. Ray McDermott (Aust.) Pty. Ltd.
151		J. Ray McDermott (U.K.) Inc.
350		J. Ray McDermott (Venezuela) C.A.
325		J. Ray McDermott Arctic Ltd.
307		J. Ray McDermott Gulf Contractors, Inc. (formerly the Early Company)


394		J. Ray McDermott International Services (No. 1) Limited
101		J. Ray McDermott International Services Limited
152		J. Ray McDermott London, Ltd.
641		J. Ray McDermott Marine Construction AS
1125		J. Ray McDermott Newfoundland, Ltd.
871		J. Ray McDermott Offshore Chartering (U.S.), Inc.
372		J. Ray McDermott Properties, Inc.
238		J. Ray McDermott Underwater Services, Inc.
603		J. Ray McDermott Venture Holdings (U.S.), Inc.
153		Jaramac Associated Services, Ltd.
		Jaramac Petroleum (U.K.) Limited
		Khafji Contractors, Inc.
166		Khor Contractors, Inc.
903		KME a.s.
324		Lan-Dermott, S.A. de C.V.
202		Madock Shipyard Company, Ltd.
203		Macshelf Marine Construction Company, Ltd.
106		Mandato Pty. Limited
360		Marine Contractors, Inc.
146		McAntille, N.V.
168		McDermott - ETPM V.O.F.
158		McDermott (Holland) B.V.
304		McDermott (Nigeria) Limited
245		McDermott Acquisition Company, Inc.
972		McDermott APG Services Limited
352		McDermott Azerbaijan Pipelines, Inc.
156		McDermott Azerbaijan, Inc.
351		McDermott Central & Eastern Europe, Inc.
		McDermott de Mexico, S.A. de C.V.
118		McDermott Denmark ApS
464		McDermott Energy Services, Inc.
178		McDermott Engineering (Europe) Limited
		McDermott Enterprises France, S.A.
128		McDermott Europe Marine Services, Ltd.
313		McDermott Industries, Inc.
354		McDermott Inland Services, Inc.
201		McDermott International Asset Management, Ltd.
343		McDermott International Aviation, Inc.


346	McDermott International Aviation, Inc.	(formerly McDermott International Aviation Co., Inc.)
	McDermott International (Deutschland) GmbH
237	McDermott International Engineering & Construction Co., Ltd.
139	McDermott International Engineering Investments N.V.
121	McDermott International General Services, Inc.
123	McDermott International Marine Services, Inc.
236	McDermott International Marketing, Inc.
143	McDermott Marine UK Limited
462	McDermott Marketing Services, Inc.
103	McDermott Middle East Trading, Ltd.
172	McDermott Neutral Zone, Inc.
	McDermott Norway, Inc.
	McDermott Petroleum (Iran), Inc.
105	McDermott Sakhalin, Inc.
347	McDermott Shipbuilding, Inc.
111	McDermott Singapore Pte. Ltd.
221	McDermott Submarine Cable Ltd.
1951	McDermott Submarine Cable Systems Limited
205	McDermott Subsea Constructors Limited
110	McDermott Transition Co., Inc.
	McDermott UAR, Inc.
184	McDermott West Indies Company
187	McDermott-ETPM (Norway), Inc.
998	McDermott-ETPM (UK) Limited
963	McDermott-ETPM B.V.
161	McDermott-ETPM East B.V.
167	McDermott-ETPM East N.V.
964	McDermott-ETPM N.V.
965	McDermott-ETPM S.A.
962	McDermott-ETPM West, Inc.
104	Menck GmbH
463	Mentor Engineering Consultants Limited
131	MIMCO, Inc.
908	MMC-McDermott Engineering Sdn. Berhad
317	Mofco N.V.
129	NOLA, Servicos E Participacoes Ltda.
141	Northern Marine Services, Inc.
107	Oceanic Red Sea Company


620		Offshore Angola, Ltd.
632		Offshore Energy Capital Corporation
622		Offshore Hyundai International Limited
630		Offshore Hyundai International, Ltd.
210		Offshore Marine Chartering N.V.
610		Offshore Petroleum Divers, Inc.
614		Offshore Pipelines (Mauritius) Ltd.
616		Offshore Pipelines Far East Limited
617		Offshore Pipelines International Gulf E.C.
633		Offshore Power Generation Ltd.
635		Offshore Production Vessels, Ltd.
615		OPI Offshore Netherlands Holding B.V.
611		OPI Sales & Service Corporation
628		OPI Towing & Supply, L.L.C.
624		OPMI, E.C.
613		P. T. Armandi Pranaupaya
850		Panama Offshore Chartering Company 1, Inc.
859		Panama Offshore Chartering Company 10, Inc.
860		Panama Offshore Chartering Company 11, Inc.
861		Panama Offshore Chartering Company 12, Inc.
862		Panama Offshore Chartering Company 13, Inc.
863		Panama Offshore Chartering Company 14, Inc.
864		Panama Offshore Chartering Company 15, Inc.
865		Panama Offshore Chartering Company 16, Inc.
866		Panama Offshore Chartering Company 17, Inc.
867		Panama Offshore Chartering Company 18, Inc.
868		Panama Offshore Chartering Company 19, Inc.
851		Panama Offshore Chartering Company 2, Inc.
869		Panama Offshore Chartering Company 20, Inc.
870		Panama Offshore Chartering Company 21, Inc.
852		Panama Offshore Chartering Company 3, Inc.
853		Panama Offshore Chartering Company 4, Inc.
854		Panama Offshore Chartering Company 5, Inc.
855		Panama Offshore Chartering Company 6, Inc.
856		Panama Offshore Chartering Company 7, Inc.
857		Panama Offshore Chartering Company 8, Inc.
858		Panama Offshore Chartering Company 9, Inc.
154		Panama Offshore Chartering Company, Inc.


990		Personal Administrativo de Vera Cruz, S.A. de C.V.
991		Personal Ejecutivo de Veracruz, S.A. de C.V.
645		Pirogue Insurance Company, Ltd.
981		Sakhalin Energy Investment Company, Ltd.
384		Samburg Holdings, Inc.
109		Sharman, Allen, Gay & Taylor, S.A.
989		Tallares Navales del Golfo, S.A. de C.V.
		The Evelyn Kay Company
		The Roger Thomas Company
		The Rosalie E. Company
		The Walter E. Company
634		TL Marine Sdn. Bhd.
621		TL Offshore Sdn. Bhd.
926		Topside Contractors of Newfoundland
925		Topside Contractors of Newfoundland, Ltd.
642		U.S. Offshore Chartering
918		Universal Fabricators Incorporated
980		US Shipbuilding Corporation, Inc.
318		Wagley, Inc.

Schedule 1.1(j)

MII - CURRENT


CURRENT Reference ID	Name
873	Barmada McDermott (L) Limited
1953	Barmada McDermott Sdn. Bhd.
276	Boudin Insurance Company, Ltd.
939	Caspian Offshore Fabricators LLC
116	Chartering Company (Singapore) Pte. Ltd.
142	Eastern Marine Services, Inc.
249	Global Energy - McDermott Limited
140	Hydro Marine Services, Inc.
649	International Vessels Ltd.
148	J. Ray McDermott (Aust.) Holding Pty. Limited
1982	J. Ray McDermott (Caspian), Inc.	(formerly J. Ray McDermott Diving International, Inc.)
243	J. Ray McDermott (Nigeria) Ltd.
2025	J. Ray McDermott (Norway), AS
1237	J. Ray McDermott (Qingdao) Pte. Ltd.
194	J. Ray McDermott Asia Pacific Pte. Ltd.	(formerly McDermott South East Asia Pte. Ltd.)
1972	J. Ray McDermott Canada Holding, Ltd.
1969	J. Ray McDermott Canada, Ltd.
204	J. Ray McDermott Contractors, Inc.
246	J. Ray McDermott de Mexico, S.A. de C.V.
208	J. Ray McDermott Eastern Hemisphere Limited	(formerly J. Ray Middle East (Indian Ocean) Ltd.)
1956	J. Ray McDermott Engineering Services Private Limited
1950	J. Ray McDermott Engineering, LLC
220	J. Ray McDermott Far East, Inc.
211	J. Ray McDermott Holdings, LLC	(formerly J. Ray McDermott Holdings, Inc.)
627	J. Ray McDermott International Vessels, Ltd.	(formerly OPI International, Ltd.)
602	J. Ray McDermott International, Inc.
160	J. Ray McDermott Investments B.V.	(formerly Menck B.V.)
1958	J. Ray McDermott Kazakhstan Limited Liability Partnership
1975	J. Ray McDermott Logistic Services Pvt. Limited
136	J. Ray McDermott Middle East, Inc.
239	J. Ray McDermott Solutions, Inc.	(formerly J. Ray McDermott Engineering Holdings, Inc.)
625	J. Ray McDermott Technology, Inc.
1957	J. Ray McDermott UK Ltd.
1960	J. Ray McDermott Underwater Services, Inc.


248	J. Ray McDermott West Africa Holdings, Inc.
244	J. Ray McDermott West Africa, Inc.
601	J. Ray McDermott, Inc.
207	J. Ray McDermott, S.A.
644	Lagniappe Insurance Company, Ltd.
193	Malmac Sdn. Bhd.
132	McDermott (Malaysia) Sendirian Berhad
904	McDermott Abu Dhabi Offshore Construction Company
915	McDermott Arabia Company Limited
149	McDermott Australia Pty. Ltd.	(formerly McDermott Industries (Aust.) Pty. Limited)
183	McDermott Azerbaijan Marine Construction, Inc.
241	McDermott Caspian Contractors, Inc.
275	McDermott Cayman Ltd.
181	McDermott Far East, Inc.
133	McDermott Gulf Operating Company, Inc.
177	McDermott Holdings (U.K.) Limited
300	McDermott Incorporated
147	McDermott International B.V.
120	McDermott International Investments Co., Inc.
119	McDermott International Marine Investments N.V.
213	McDermott International Marketing, Inc.	(formerly McDermott International Beijing, Inc.)
130	McDermott International Trading Co., Inc.
1971	McDermott International Vessels, Inc.
100	McDermott International, Inc.
1962	McDermott Kft.
349	McDermott Marine Construction Limited
1986	McDermott Marine Mexico, S.A. de C.V.
135	McDermott Offshore Services Company, Inc.
176	McDermott Old JV Office, Inc.
162	McDermott Overseas Investment Co. N.V.
390	McDermott Overseas, Inc.
1966	McDermott Panama Holdings, S.A.
170	McDermott Servicos de Construcao, Ltda.
320	McDermott Trade Corporation
306	Mentor Subsea Technology Services, Inc.
138	North Atlantic Vessel, Inc.
2021	North Ocean II AS
2023	North Ocean II KS


2022	North Ocean V AS
612	Offshore Pipelines International, Ltd.
618	Offshore Pipelines Nigeria Limited
619	Offshore Pipelines Sdn. Bhd.
626	OPI Vessels, Inc.
623	OPMI, Ltd.
185	P. T. Bataves Fabricators
180	P. T. McDermott Indonesia
901	PT. Baja Wahana Indonesia	(formerly P.T. Babcock & Wilcox Indonesia)
643	PT. J. Ray McDermott Indonesia	(formerly PT. Jay Ray)
636	Sabine River Realty, Inc.
1977	Servicios de Fabricacion de Altamira, S.A. de C.V.
1976	Servicos Profesionales de Altamira, S.A. de C.V.
2019	Singapore Huangdao Pte. Ltd.
640	SparTEC, Inc.	(formerly J. Ray McDermott Spars, Inc.)
145	Varsy International N.V.

Exhibit 10.8

GROUP IV AGREEMENT

NOVATION AND ASSUMPTION AGREEMENT

by and among

MCDERMOTT INTERNATIONAL, INC.,

a Panamanian corporation,

and

BABCOCK & WILCOX HOLDINGS, INC.,

a corporation organized and existing under the laws of the State of Delaware,

and

BOUDIN INSURANCE COMPANY, LTD., a Bermuda company

and

CREOLE INSURANCE COMPANY, LTD., a Bermuda company,

RECITALS

THIS NOVATION AND ASSUMPTION AGREEMENT (the “ Agreement ”), is entered into and effective as of May 18, 2010 (the “ Effective Date ”) by and among MCDERMOTT INTERNATIONAL, INC., a Panamanian corporation (“ MII ”), BABCOCK & WILCOX HOLDINGS, INC., a Delaware corporation (“ B&W ”), to be succeeded by The Babcock & Wilcox Company, a Delaware corporation, after the effective time of the Merger, CREOLE INSURANCE COMPANY, LTD., a Bermuda company (“ Creole ”), and BOUDIN INSURANCE COMPANY, LTD., a Bermuda company (“ Boudin ”) and, solely with respect to Sections 2(a)(ii) and 2(c)(ii), respectively, the other MII Entities signatory hereto and the other B&W Entities signatory hereto.

WHEREAS , Boudin or Creole have issued the Existing Policies to one or more MII Entities and one or more B&W Entities; and

WHEREAS , pursuant to the Existing Policies, Boudin and Creole are obligated, among other things, to pay or reimburse MII Entities and/or B&W Entities for certain obligations; and

WHEREAS , B&W, prior to the Separation, is a wholly owned Subsidiary of MII; and

WHEREAS , MII intends to spin-off B&W from MII through a dividend of common stock of B&W to the shareholders of MII (the “ Separation ”); and

WHEREAS , in connection with the Separation: (a) Boudin desires to transfer and Creole desires to assume any Transferable Boudin Policies insofar as such policies relate to B&W Entities; and (b) Creole desires to transfer and Boudin desires to assume any Transferable Creole Policies insofar as such policies relate to MII Entities; and

WHEREAS , MII and B&W are parties, together with ACE American Insurance Company and certain of its affiliates (collectively, “ ACE ”) to a certain Assumption and Loss Allocation Agreement (the “ ALAA ”) that, among other things, assists in effecting the Separation by identifying certain MII Obligations and certain B&W Obligations and allocating liability and responsibility therefor; and

WHEREAS , certain of the liabilities of MII and/or B&W and their respective Affiliates that are insured by the Existing Policies under this Agreement are MII Obligations and/or B&W Obligations under the ALAA, and the parties desire that the allocation of liability in this Agreement conform to that in the ALAA insofar as such overlap may exist; and

WHEREAS , each of MII and B&W, each for itself and for its respective Subsidiaries, is willing to consent to the transfer, assumption, and novation of the matters set forth herein, subject to the terms and conditions of this Agreement;

1. Definitions. The following terms used herein, including in the recitals and Exhibits hereto, shall have the following meanings:

“ ACE ” has the meaning set forth in the recitals to this Agreement.

“ Agreement ” has the meaning set forth in the recitals to this Agreement.

“ ALAA ” has the meaning set forth in the recitals to this Agreement.

“ Assumption Time ” means midnight (New York time) on the Effective Date.

“ B&W ” has the meaning set forth in the recitals to this Agreement.

“ B&W Obligations ” shall have the meaning ascribed to such term in the ALAA and shall be interpreted under this Agreement to conform to interpretations under the ALAA.

“ Boudin Assumption and Novation ” has the meaning set forth in Section 2(a)(i).

“ Creole Assumption and Novation ” has the meaning set forth in Section 2(c)(i).

“ Effective Date ” has the meaning set forth in the recitals to this Agreement.

“ Existing Policies ” means the Transferable Boudin Policies, the Transferable Creole Policies, the Wholly Retained Boudin Policies, and the Wholly Retained Creole Policies.

“ Insured B&W Obligation ” means an obligation of Creole or Boudin under the Existing Policies that arises from an obligation to ACE or its Affiliates that is a B&W Obligation under the ALAA.

“ Insured MII Obligation ” means an obligation of Creole or Boudin under the Existing Policies that arises from an obligation to ACE or its Affiliates that is an MII Obligation under the ALAA.

“ Insurer ,” as a noun in reference to one or more insurance policies, means the Person identified in such policy or policies as the insurer.

“ Inter-Captive Reinsurance Agreements ” has the meaning set forth in Section 2(e).

“ Master Separation Agreement ” means a Master Separation Agreement to be entered into between MII and The Babcock & Wilcox Company in connection with the Separation.

“ MII ” has the meaning set forth in the recitals to this Agreement.

“ MII Entity ” means MII and each of the entities listed on Exhibit II attached hereto and made a part hereof. It is acknowledged and understood that, from and after the effectiveness of the Separation, the MII Entities will not be Subsidiaries or Affiliates of B&W or any of the other B&W Entities.

“ MII Obligations ” shall have the meaning ascribed to such term in the ALAA and shall be interpreted under this Agreement to conform to interpretations under the ALAA.

“ Parties ” means MII, B&W, Boudin and Creole collectively (and each individually is a “Party”).

“ Person ” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, a union, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

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

“ Subsidiary ” means, with respect to any specified Person, any corporation, partnership, limited liability company, joint venture or other organization, whether incorporated or unincorporated, of which at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such specified Person or by any one or more of its Subsidiaries, or by such specified Person and one or more of its Subsidiaries.

“ Transferable Boudin Policy ” means each insurance policy issued prior to the date hereof by Boudin on which a B&W Entity is named or otherwise identified as an insured (including without limitation by being within a generic description such as “affiliates” or “subsidiaries”).

“ Transferable Creole Policy ” means each insurance policy issued prior to the date hereof by Creole on which an MII Entity is named or otherwise identified as an insured (including without limitation by being within a generic description such as “affiliates” or “subsidiaries”).

“ Transferred Boudin Policy ” means, as to any Transferable Creole Policy after the Assumption Time and giving effect to this Agreement, the aggregate of (a) all rights, duties, and obligations of Boudin vis-à-vis the MII Entities that were, prior to the Assumption Time, Insureds of Creole under such Transferable Creole Policy, and (b) all rights, duties, and obligations vis-à-vis Boudin of the MII Entities that were, prior to the Assumption Time, Insureds of Creole under such Transferable Creole Policy.

“ Transferred Creole Policy ” means, as to any Transferable Boudin Policy after the Assumption Time and giving effect to this Agreement, the aggregate of (a) all rights, duties, and obligations of Creole vis-à-vis the B&W Entities that were, prior to the Assumption Time, Insureds of Boudin under such Transferable Boudin Policy, and (b) all rights, duties, and obligations vis-à-vis Creole of the B&W Entities that were, prior to the Assumption Time, Insureds of Boudin under such Transferable Boudin Policy.

“ Wholly Retained Boudin Policy ” means an insurance policy issued by Boudin to one or more MII Entities (and possibly others) that is not a Transferable Boudin Policy.

“ Wholly Retained Creole Policy ” means an insurance policy issued by Creole to one or more B&W Entities (and possibly others) that is not a Transferable Creole Policy.

2. Assumption .

(a) Boudin Assumption and Novation . Notwithstanding anything in any Transferable Creole Policy to the contrary, and effective as of the Assumption Time, Creole hereby transfers and assigns, and Boudin hereby assumes by novation, (x) so much of each Transferable Creole Policy as relates to MII or any MII Entity as an Insured thereunder; and (y) any and all obligations of Creole under any of the Existing Policies that arise from Insured MII Obligations. In connection with and implementation of such transfer, assignment, and novation:

(i) Boudin hereby agrees to observe, pay, perform, satisfy, fulfill and discharge any and all now existing and hereafter arising duties, terms, provisions, covenants, obligations and liabilities of Creole under the Transferable Creole Policies and with respect to the Insured MII Obligations, both insofar as transferred above (the “ Boudin Assumption and Novation ”); and

(ii) Each MII Entity that is a signatory hereto hereby consents to, and agrees to give full force and effect to, the Boudin Assumption and Novation. From and after the Assumption Time, Boudin and not Creole shall be treated as the applicable MII Entity’s contractual counterparty with respect to the contracts and mutual rights and obligations subject to the Boudin Assumption and Novation. Without limitation, each MII Entity:

may enforce against Boudin its rights under the Transferable Creole Policies or with respect to any Insured MII Obligation to the same extent such Person could, prior to the Boudin Assumption and Novation, enforce such rights against Creole, and

shall perform for the benefit of Boudin any obligation under the Transferable Creole Policies or with respect to any Insured MII Obligation to the same extent such Person was obligated, prior to the Boudin Assumption and Novation, to perform such obligations for the benefit of Creole, and

releases Creole from its obligation to observe, pay, perform, satisfy, fulfill or discharge any obligations under any Transferable Creole Policy or with respect to any Insured MII Obligation.

(iii) With respect to each Transferable Creole Policy that is subject to the Boudin Assumption and Novation, the aggregate of rights, duties, and obligations set forth in subsections (a)(i) and (a)(ii) above shall be treated as the Transferred Boudin Policy relating to such Transferable Creole Policy.

(b) No Transfer or Novation of Creole Obligations to B&W Entities . Except to the extent (which the Parties do not expect) that the Wholly Retained Creole Policies are determined to cover Insured MII Obligations notwithstanding the absence of any MII Entity as an Insured thereunder, the Wholly Retained Creole Policies are not novated or otherwise affected by the Boudin Assumption and Novation. The Transferable Creole Policies are novated to Boudin as set forth above only to the extent that one or more MII Entities is an insured thereunder. To the extent that B&W Entities are insureds under the Transferable Creole Policies, the Parties acknowledge that Creole and not Boudin shall continue to observe, pay, perform, satisfy, fulfill and discharge any and all now existing and hereafter arising duties, terms, provisions, covenants, obligations and liabilities of the Insurer under the Transferable Creole Policies. The Parties further acknowledge that Creole and not Boudin shall continue to observe, pay, perform, satisfy, fulfill and discharge any and all now existing and hereafter arising duties, terms, provisions, covenants, obligations and liabilities of the Insurer with respect to the Insured B&W Obligations.

(c) Creole Assumption and Novation . Notwithstanding anything in any Transferable Boudin Policy to the contrary, and effective as of the Assumption Time, Boudin hereby transfers and assigns, and Creole hereby assumes by novation, (x) so much of each Transferable Boudin Policy as relates to B&W or any

B&W Affiliate as an Insured thereunder; and (y) any and all obligations of Boudin under any of the Existing Policies that arise from Insured B&W Obligations. In connection with and in implementation of such transfer, assignment, and novation:

(i) Creole hereby agrees to observe, pay, perform, satisfy, fulfill and discharge any and all now existing and hereafter arising duties, terms, provisions, covenants, obligations and liabilities of Boudin under the Transferable Boudin Policies and with respect to the Insured B&W Obligations, both insofar as transferred above (the “ Creole Assumption and Novation ”); and

(ii) Each B&W Entity that is a signatory hereto hereby consents to, and agrees to give full force and effect to, the Creole Assumption and Novation. From and after the Assumption Time, Creole and not Boudin shall be treated as the B&W Entity’s contractual counterparty with respect the contracts and mutual rights and obligations subject to the Creole Assumption and Novation. Without limitation, each B&W Entity:

may enforce against Creole its rights under the Transferable Boudin Policies or with respect to any Insured B&W Obligation to the same extent such Person could, prior to the Creole Assumption and Novation, enforce such rights against Boudin, and

shall perform for the benefit of Creole any obligation under the Transferable Boudin Policies or with respect to any Insured B&W Obligation to the same extent such Person was obligated, prior to the Creole Assumption and Novation, to perform such obligations for the benefit of Boudin, and

releases Boudin from its obligation to observe, pay, perform, satisfy, fulfill or discharge any obligations under any Transferable Boudin Policy or with respect to any Insured B&W Obligation.

(iii) With respect to each Transferable Boudin Policy that is subject to the Creole Assumption and Novation, the aggregate of rights, duties, and obligations set forth in subsections (c)(i) and (c)(ii) above shall be treated as the Transferred Creole Policy relating to such Transferable Boudin Policy.

(d) No Transfer or Novation of Boudin Obligations to MII Entities . Except to the extent (which the Parties do not expect) that the Wholly Retained Boudin Policies are determined to cover Insured B&W Obligations notwithstanding the absence of any B&W Entity as an Insured thereunder, the Wholly Retained Boudin Policies are not novated or otherwise affected by the Creole Assumption and Novation. The Transferable Boudin Policies are novated to Creole as set forth above only to the extent that one or more B&W Entities is an insured thereunder. To the extent that MII Entities are insureds under the Transferable Boudin Policies, the Parties acknowledge that Boudin and not Creole shall continue to observe, pay, perform, satisfy, fulfill and discharge any and all now existing and hereafter arising duties, terms, provisions, covenants, obligations and liabilities of the Insurer under the Transferable Boudin Policies. The Parties further acknowledge that Boudin and not Creole shall continue to observe, pay, perform, satisfy, fulfill and discharge any and all now existing and hereafter arising duties, terms, provisions, covenants, obligations and liabilities of the Insurer with respect to the Insured MII Obligations.

(e) Commutation and Release of Mutual Reinsurance by Boudin and Creole . Effective at the Assumption Time, Creole and Boudin do hereby commute any and all contracts of reinsurance by which one of them reinsured the other (the “ Inter-Captive Reinsurance Agreements ”). In furtherance of such commutation, and also effective at the Assumption Time, Creole and Boudin do hereby fully release and discharge one another from and against any past, present, or future liabilities or obligations, known or unknown, arising under the Inter-Captive Reinsurance Agreements.

(f) No Effect on Aggregate Limits of Liability . For the avoidance of doubt, it is understood and agreed that the aggregate liability of Creole and Boudin, taken together, is not intended to be, and shall be deemed not to be, increased by implementation of this Agreement. In particular, and without limitation, to the extent that any Transferable Creole Policy (or Transferable Boudin Policy) contains an aggregate limit of liability,

that aggregate limit of liability shall, after the Assumption Time, apply as a single, joint aggregate limit of liability as between (i) the resulting Transferred Boudin Policy (or Transferred Creole Policy) and (ii) the portions of the Transferable Creole Policy (or Transferable Boudin Policy) that are retained pursuant to Section 2(b) (or Section 2(d)) above. Disputes as to priority of claims and/or allocation of the single, joint aggregate limit of liability shall be resolved pursuant to Section 12 hereof.

3. Amendments . Neither this Agreement nor any provision hereof may be amended, changed, waived, discharged or terminated except by a written instrument signed by each Party.

4. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Neither this Agreement nor any right or obligation hereunder may be assigned or conveyed by any Party without the prior written consent of the other Parties, which consent shall not be unreasonably withheld.

5. No Waiver . The failure or refusal by any Party to exercise any rights granted hereunder shall not constitute a waiver of such rights or preclude the subsequent exercise thereof, and no oral communication shall be asserted as a waiver of any such rights hereunder unless such communication shall be confirmed in a writing plainly expressing an intent to waive such rights and signed by the Party against whom such waiver is asserted.

6. Counterparts . This Agreement may be executed in any number of counterparts each of which when so executed and delivered shall constitute an original, but such counterparts together shall constitute one and the same agreement. The exchange of copies of this Agreement and of signature pages by facsimile transmission shall constitute effective execution and delivery of this Agreement as to the Parties and may be used in lieu of the original Agreement for all purposes. Signatures of the Parties and other Persons signatory hereto transmitted by facsimile shall be deemed to be their original signatures for all purposes.

7. No Third Party Beneficiary . This Agreement shall not be deemed to give any right or remedy to any third party whatsoever unless otherwise specifically granted hereunder.

8. Parties’ Representations . As of the Effective Date, each of the Parties expressly represents on its own behalf: (a) it is an entity in good standing in its jurisdiction of organization; (b) it has all requisite corporate power and authority to enter into this Agreement, and to perform its obligations hereunder; (c) the execution and delivery by it of this Agreement, and the performance by it of its obligations under this Agreement, have been duly authorized by all necessary corporate or other action; (d) this Agreement, when duly executed and delivered by it, and subject to the due execution and delivery hereof by the other Parties, will be a valid and binding obligation of it, enforceable against it, its successors and permitted assigns, in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equity principles; (e) the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby in accordance with the respective terms and conditions hereof will not (i) violate any provision of its Organizational Documents, (ii) violate any applicable order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against it, or binding upon it, or any agreement with, or condition imposed by, any governmental or regulatory body, foreign or domestic, binding upon it as of the date hereof, or (iii) violate any agreement, contract, obligation, promise or undertaking that is legally binding and to which it is a party or by which it is bound; and (f) the signatory hereto on behalf of it is duly authorized and legally empowered to enter into this Agreement on its behalf.

9. Notices . Any and all notices, requests, approvals, authorizations, consents, instructions, designations and other communications that are required or permitted to be given pursuant to this Agreement shall be in writing and may be given either by personal delivery, first class prepaid post (airmail if to another country) or by internationally recognized overnight delivery service to the following address, or to such other address and recipient as such Party may have notified in accordance with the terms of this section as being its address or recipient for notification for the purposes of this Agreement:


If to Boudin:	Boudin Insurance Company, Ltd., c/o McDermott International, Inc.
	757 N. Eldridge Parkway Houston, Texas 77079
	Attention:	VP and Chief Risk Officer (with copy to General Counsel)

	Telephone:	281-870-5785
	Telecopier:	281-870-5923
	Electronic Mail:	twoodard@mcdermott.com

	with a copy to:
	Boudin Insurance Company, Ltd. Cedar House 41 Cedar Avenue P.O. Box HM 1838 Hamilton HM HX Bermuda Bermuda
	Fax	(441) 295-3982
	Telephone:	281-870-5476
	Telecopier:	281-870-5923
	Electronic Mail:	cjryan@mcdermott.com

If to any MII Entity:	McDermott International, Inc. 757 N. Eldridge Parkway Houston, Texas 77079
	Attention:	VP and Chief Risk Officer (with copy to General Counsel)

	Telephone:	281-870-5785
	Telecopier:	281-870-5923
	Electronic Mail:	twoodard@mcdermott.com

If to Creole:	Creole Insurance Company, Ltd.

	Prior to the Separation:

	Creole Insurance Company, Ltd., c/o Babcock & Wilcox Holdings, Inc. 800 Main Street Lynchburg, Virginia 24504
	Attention:	Director, Risk Management (with copy to General Counsel)
	Telephone:	434-522-6800

	with a copy to:
	McDermott International, Inc. 777 N. Eldridge Parkway Houston, Texas 77079
	Attention:	Director, Risk Management (with copy to General Counsel)


	with an additional copy to:
	Creole Insurance Company, Ltd. Cedar House 41 Cedar Avenue P.O. Box HM 1838 Hamilton HM HX Bermuda Bermuda
	Fax	(441) 295-3982
	Telephone:	281-870-5476
	Telecopier:	281-870-5923
	Electronic Mail:	cjryan@mcdermott.com

	On and After the Separation:

	The Babcock & Wilcox Company The Harris Building 13024 Ballantyne Corporate Place, Suite 700 Charlotte, North Carolina
	Attention:	Director, Risk Management (with copy to General Counsel)

	with a copy to:
	Creole Insurance Company, Ltd. Cedar House 41 Cedar Avenue P.O. Box HM 1838 Hamilton HM HX Bermuda Bermuda
	Fax	(441) 295-3982
	Telephone:	281-870-5476
	Telecopier:	281-870-5923
	Electronic Mail:	cjryan@mcdermott.com

If to any B&W Entity:	Prior to the Separation:

	Babcock & Wilcox Holdings, Inc. 800 Main Street Lynchburg, Virginia 24504
	Attention:	Director, Risk Management (with copy to General Counsel)
	Telephone:	434-522-6800

	with a copy to:
	McDermott International, Inc. 777 N. Eldridge Parkway Houston, Texas 77079
	Attention:	Director, Risk Management (with copy to General Counsel)

	Telephone:	281-870-5476
	Telecopier:	281-870-5923
	Electronic Mail:	cjryan@mcdermott.com

	On and After the Separation:

	The Babcock & Wilcox Company The Harris Building 13024 Ballantyne Corporate Place, Suite 700 Charlotte, North Carolina
	Attention:	Director, Risk Management (with copy to General Counsel)

Any notice or communication to any Person shall be deemed to be received by that Person:

(A) upon personal delivery; or

(B) upon receipt if sent by mail or courier.

10. Governing Law . This Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Pennsylvania without regard to those provisions concerning conflicts of laws that would result in the application of the laws of any other jurisdiction.

11. Entire Agreement . THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT AMONG ALL OF THE PARTIES WITH RESPECT TO THE TRANSFERS, ASSUMPTIONS, AND NOVATIONS DESCRIBED HEREIN AND SUPERSEDES ALL OTHER PRIOR AGREEMENTS AND UNDERSTANDINGS, BOTH WRITTEN AND ORAL, WITH RESPECT TO THE SUBJECT MATTER HEREOF. SOLELY FOR INTERPRETATION PURPOSES, THE PARTIES ACKNOWLEDGE THAT THIS AGREEMENT IS INTENDED TO BE READ TOGETHER WITH THE ALAA, AND THE PARTIES FURTHER ACKNOWLEDGE THE CONTROLLING NATURE OF THE ALAA WITH RESPECT TO DISPUTE RESOLUTION, AS SET FORTH IN THE FOLLOWING PARAGRAPH.

12. Dispute Resolution . Any and all disputes arising out of this Agreement shall be resolved in accordance with the procedures set for in the Master Separation Agreement (or, in the event the Master Separation Agreement is not entered into by MII and The Babcock & Wilcox Company, in accordance with the procedures set forth in the draft thereof dated as of April 28, 2010). Issues as to whether a given obligation is an Insured B&W Obligation or an Insured MII Obligation shall be resolved as set forth in the ALAA, which resolution shall be binding for all purposes of this Agreement, notwithstanding (by way of example only) any assertion that the putative Insured B&W Obligation arose under a Wholly Retained Boudin Policy or the putative Insured MII Obligation arose under a Wholly Retained Creole Policy, or any other assertion that the terms of this Agreement prohibit the allocation reached under the ALAA. Any such assertions may be made, to the extent appropriate, in connection with the dispute resolution under the ALAA but may not be made as a basis for challenging such resolution.

13. Severability . If any term or other provision of this Agreement or the Exhibits 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 any Party. 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.

14. Rules of Construction . The definitions of terms used herein 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”. Unless the context requires otherwise (a) 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, supplemented or otherwise modified, (b) any reference herein to any law shall be construed as referring to such law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to the restrictions contained herein), (d) 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, (e) with respect to the determination of any time period, the word “from” means “from and including” and the word “to” means “to and including” and (f) any reference herein to Articles, Sections and Exhibits shall be construed to refer to Articles and Sections of, and Exhibits to, this Agreement. No provision of this Agreement shall be interpreted or construed against any Person solely because such Person or its legal representative drafted such provision.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the Parties intending to be legally bound hereby have executed this Agreement, by their duly authorized representatives.


MCDERMOTT INTERNATIONAL, INC.

By:		/ S / L IANE K. H INRICHS
		Liane K. Hinrichs
		Senior Vice President

BOUDIN INSURANCE COMPANY, LTD.

By:		/ S / L IANE K. H INRICHS
		Liane K. Hinrichs
		Assistant Secretary

BABCOCK & WILCOX HOLDINGS, INC.

By:		/ S / M ICHAEL S. T AFF
		Michael S. Taff
		Senior Vice President

CREOLE INSURANCE COMPANY, LTD.

By:		/ S / B ENJAMIN H. B ASH
		Benjamin H. Bash
		Assistant Secretary

Signature Page to Group IV Agreement

ACKNOWLEDGED AND AGREED FOR PURPOSES OF SECTION 2:


B&W ENTITIES :

AMERICON EQUIPMENT SERVICES, INC.

AMERICON, INC.

APPLIED SYNERGISTICS, INC.

BABCOCK & WILCOX CANADA LTD.

BABCOCK & WILCOX CHINA HOLDINGS, INC.

BABCOCK & WILCOX CONSTRUCTION CO., INC.

BABCOCK & WILCOX DE MONTERREY, S.A. DE C.V.

BABCOCK & WILCOX DENMARK HOLDINGS, INC.

BABCOCK & WILCOX EBENSBURG POWER, INC.

BABCOCK & WILCOX EQUITY INVESTMENTS, INC.

BABCOCK & WILCOX INDIA HOLDINGS, INC.

BABCOCK & WILCOX INTERNATIONAL SALES AND SERVICE CORPORATION

BABCOCK & WILCOX INTERNATIONAL, INC.

By:		/ S / B ENJAMIN H. B ASH
Name:		Benjamin H. Bash
Title:		Assistant Secretary of each of the above

Signature Page to Group IV Agreement


BABCOCK & WILCOX MODULAR NUCLEAR ENERGY LLC

BABCOCK & WILCOX NUCLEAR OPERATIONS GROUP, INC.

BABCOCK & WILCOX NUCLEAR ENERGY, INC.

BABCOCK & WILCOX NUCLEAR SERVICES (U.K.) LIMITED

BABCOCK & WILCOX TECHNICAL SERVICES CLINCH RIVER, LLC

BABCOCK & WILCOX POWER GENERATION GROUP, INC.

BABCOCK & WILCOX TECHNICAL SERVICES GROUP, INC.

BABCOCK & WILCOX TECHNICAL SERVICES SAVANNAH RIVER COMPANY

BABCOCK & WILCOX VOLUND A/S

BCE PARTS LTD.

BWX TECHNOLOGIES, INC.

BWXT FEDERAL SERVICES, INC.

BWXT HANFORD COMPANY

BWXT OF IDAHO, INC.

BWXT OF OHIO, INC.

BWXT WASHINGTON, INC.

By:		/ S / B ENJAMIN H. B ASH
Name:		Benjamin H. Bash
Title:		Assistant Secretary of each of the above

Signature Page to Group IV Agreement


CREOLE INSURANCE COMPANY, LTD.

DELTA POWER SERVICES, LLC

DIAMOND OPERATING CO., INC.

DIAMOND POWER AUSTRALIA HOLDINGS, INC.

DIAMOND POWER CHINA HOLDINGS, INC.

DIAMOND POWER EQUITY INVESTMENTS, INC.

DIAMOND POWER INTERNATIONAL, INC.

DIAMOND POWER SPECIALTY (PROPRIETARY) LIMITED

DPS BERKELEY, LLC

DPS CADILLAC, LLC

DPS FLORIDA, LLC

DPS GREGORY, LLC

DPS LOWELL COGEN, LLC

DPS MECKLENBURG, LLC

DPS MICHIGAN, LLC

DPS MOJAVE, LLC

DPS SABINE, LLC

GUMBO INSURANCE COMPANY, LTD.

By:		/ S / B ENJAMIN H. B ASH
Name:		Benjamin H. Bash
Title:		Assistant Secretary of each of the above

Signature Page to Group IV Agreement


INTECH INTERNATIONAL INC.

INTECH, INC.

IVEY-COOPER SERVICES, L.L.C.

MARINE MECHANICAL CORPORATION

NFS HOLDINGS, INC.

NOG-ERWIN HOLDINGS, INC.

NORTH COUNTY RECYCLING, INC.

NUCLEAR FUEL SERVICES, INC.

O&M HOLDING COMPANY

SOFCO - EFS HOLDINGS LLC

By:		/ S / B ENJAMIN H. B ASH
Name:		Benjamin H. Bash
Title:		Assistant Secretary of each of the above

BABCOCK & WILCOX TECHNICAL SERVICES (U.K.) LIMITED

By:		/ S / B ENJAMIN H. B ASH
Name:		Benjamin H. Bash
Title:		Joint Secretary

Signature Page to Group IV Agreement


B&W DE PANAMA, INC.

BABCOCK & WILCOX INTERNATIONAL INVESTMENTS CO., INC.

BABCOCK & WILCOX INVESTMENT COMPANY

By:		/ S / M ICHAEL S. T AFF
Name:		Michael S. Taff
Title:		Senior Vice President, of each of the above

Signature Page to Group IV Agreement


BABCOCK & WILCOX INDIA PRIVATE LIMITED

DIAMOND POWER SPECIALTY LIMITED

By:		/ S / R OBERT E. S TUMPF
Name:		Robert E. Stumpf
Title:		Assistant Secretary

NATIONAL ECOLOGY COMPANY

By:		/ S / R OBERT E. S TUMPF
Name:		Robert E. Stumpf
Title:		Secretary

DIAMOND POWER DO BRASIL LIMITADA


DIAMOND POWER INTERNATIONAL, INC.

BABCOCK & WILCOX INTERNATIONAL SALES AND SERVICE CORPORATION
(as Shareholders of Diamond Power do Brasil Limitada)

By:		/ S / R OBERT E. S TUMPF
Name:		Robert E. Stumpf
Title:		Assistant Secretary of each of the Shareholders

Signature Page to Group IV Agreement


P. T. BABCOCK & WILCOX ASIA

SERVICIOS DE FABRICACION DE VALLE SOLEADO, S.A. DE C.V.

SERVICOS PROFESIONALES DE VALLE SOLEADO, S.A. DE C.V.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Secretary

Signature Page to Group IV Agreement


DIAMOND POWER CENTRAL & EASTERN EUROPE S.R.O.

DIAMOND POWER FINLAND OY

By:		/ S / J UHA K. M USTONEN
Name:		Juha K. Mustonen
Title:		Managing Director

Signature Page to Group IV Agreement


DIAMOND POWER MACHINE (HUBEI) CO., INC.

By:		/ S / D AVID R. G IBBS
Name:		David R. Gibbs
Title:		Director

Signature Page to Group IV Agreement


DIAMOND POWER SWEDEN AB

By:		/ S / M IKA J. H AIKOLA
Name:		Mika J. Haikola
Title:		Managing Director

Signature Page to Group IV Agreement

ACKNOWLEDGED AND AGREED FOR PURPOSES OF SECTION 2:


MII ENTITIES :

CHARTERING COMPANY (SINGAPORE) PTE. LTD.

J. RAY MCDERMOTT (QINGDAO) PTE. LTD.

J. RAY MCDERMOTT ASIA PACIFIC PTE. LTD.

MALMAC SDN. BHD.

MCDERMOTT (MALAYSIA) SENDIRIAN BERHAD

By:		/ S / J EFF J. H IGHTOWER
Name:		Jeff J. Hightower
Title:		Director of each of the above

BOUDIN INSURANCE COMPANY, LTD.

J. RAY MCDERMOTT EASTERN HEMISPHERE LIMITED

LAGNIAPPE INSURANCE COMPANY, LTD.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Assistant Secretary, of each of the above

Signature Page to Group IV Agreement


J. RAY MCDERMOTT UK LTD.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Joint Secretary

EASTERN MARINE SERVICES, INC.

GLOBAL ENERGY - MCDERMOTT LIMITED

HYDRO MARINE SERVICES, INC.

J. RAY MCDERMOTT (CASPIAN), INC.

J. RAY MCDERMOTT (NIGERIA) LTD.

J. RAY MCDERMOTT (NORWAY), AS

J. RAY MCDERMOTT CANADA HOLDING, LTD.

J. RAY MCDERMOTT CANADA, LTD.

J. RAY MCDERMOTT CONTRACTORS, INC.

J. RAY MCDERMOTT DE MEXICO, S.A. DE C.V.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Secretary of each of the above

Signature Page to Group IV Agreement


J. RAY MCDERMOTT ENGINEERING SERVICES PRIVATE LIMITED

J. RAY MCDERMOTT ENGINEERING, LLC

J. RAY MCDERMOTT FAR EAST, INC.

J. RAY MCDERMOTT INTERNATIONAL, INC.

J. RAY MCDERMOTT INTERNATIONAL VESSELS, LTD.

J. RAY MCDERMOTT INVESTMENTS B.V.

J. RAY MCDERMOTT KAZAKHSTAN LLP

J. RAY MCDERMOTT LOGISTIC SERVICES PVT. LIMITED

J. RAY MCDERMOTT MIDDLE EAST, INC.

J. RAY MCDERMOTT SOLUTIONS, INC.

J. RAY MCDERMOTT TECHNOLOGY, INC.

J. RAY MCDERMOTT UNDERWATER SERVICES, INC.

J. RAY MCDERMOTT WEST AFRICA HOLDINGS, INC.

J. RAY MCDERMOTT WEST AFRICA, INC.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Secretary of each of the above

Signature Page to Group IV Agreement


MCDERMOTT CASPIAN CONTRACTORS, INC.

MCDERMOTT FAR EAST, INC.

MCDERMOTT GULF OPERATING COMPANY, INC.

MCDERMOTT INTERNATIONAL B.V.

MCDERMOTT INTERNATIONAL INVESTMENTS CO., INC.

MCDERMOTT INTERNATIONAL MARINE INVESTMENTS N.V.

MCDERMOTT INTERNATIONAL TRADING CO., INC.

MCDERMOTT INTERNATIONAL VESSELS, INC.

MCDERMOTT MARINE MEXICO, S.A. DE C.V.

MCDERMOTT OFFSHORE SERVICES COMPANY, INC.

MCDERMOTT OLD JV OFFICE, INC.

MCDERMOTT OVERSEAS INVESTMENT CO. N.V.

MCDERMOTT OVERSEAS, INC.

MCDERMOTT TRADE CORPORATION

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Secretary of each of the above

Signature Page to Group IV Agreement


MENTOR SUBSEA TECHNOLOGY SERVICES, INC.

NORTH ATLANTIC VESSEL, INC.

OFFSHORE PIPELINES INTERNATIONAL, LTD.

OPI VESSELS, INC.

OPMI, LTD.

SABINE RIVER REALTY, INC.

SERVICIOS DE FABRICACION DE ALTAMIRA, S.A. DE C.V.

SERVICOS PROFESIONALES DE ALTAMIRA, S.A. DE C.V.

SPARTEC, INC.

VARSY INTERNATIONAL N.V.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Secretary of each of the above

MCDERMOTT KFT.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Managing Director

Signature Page to Group IV Agreement


J. RAY MCDERMOTT (AUST.) HOLDING PTY. LIMITED

MCDERMOTT AUSTRALIA PTY. LTD.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Corporate Officer of each of the above

MCDERMOTT INCORPORATED

MCDERMOTT PANAMA HOLDINGS, S.A.

J. RAY MCDERMOTT HOLDINGS, LLC

J. RAY MCDERMOTT, INC.

J. RAY MCDERMOTT, S.A.

MCDERMOTT CAYMAN LTD.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		Senior Vice President of each of the above

MCDERMOTT INTERNATIONAL MARKETING, INC.

By:		/ S / L IANE K. H INRICHS
Name:		Liane K. Hinrichs
Title:		President

Signature Page to Group IV Agreement


FLOATEC, LLC

By:		/ S / R OBERT E. S TUMPF
Name:		Robert E. Stumpf
Title:		Assistant Secretary

MCDERMOTT HOLDINGS (U.K.) LIMITED

MCDERMOTT MARINE CONSTRUCTION LIMITED

By:		/ S / R OBERT E. S TUMPF
Name:		Robert E. Stumpf
Title:		Joint Secretary of each of the above

MCDERMOTT SERVICOS DE CONSTRUCAO, LTDA.

J. RAY MCDERMOTT INC.

MCDERMOTT OVERSEAS, INC.,
(as Shareholders)

By:		/ S / R OBERT E. S TUMPF
Name:		Robert E. Stumpf
Title:		Assistant Secretary

OFFSHORE PIPELINES SDN. BHD.

OFFSHORE PIPELINES SDN. BLD.
(as Sole Shareholder)

By:		/ S / R OBERT E. S TUMPF
Name:		Robert E. Stumpf
Title:		Assistant Secretary

Signature Page to Group IV Agreement


INTERNATIONAL VESSELS LTD.

By:		/ S / S TEVEN W. R OLL
Name:		Steven W. Roll
Title:		Director

Signature Page to Group IV Agreement


PT. BAJA WAHANA INDONESIA

By:		/ S / S COTT C UMMINS
Name:		Scott Cummins
Title:		President Director

Signature Page to Group IV Agreement


SINGAPORE HUANGDAO PTE. LTD.

By:		/ S / R OCKNE L. M OSELEY
Name:		Rockne L. Moseley
Title:		Director

Signature Page to Group IV Agreement

EXHIBIT I – B&W ENTITIES

See Schedule 1.1(a) and Schedule 1.1(c) attached hereto. No B&W Entity listed on Schedule

1.1(a) shall be deemed to be an “Insured”, a “Named Insured” or otherwise be deemed to be

insured under any Existing Policy solely by virtue of being listed on such Schedule 1.1(a).

Schedule 1.1(a)

B&W FORMER


Reference ID		Name
333		Ahahsain Hudson Heat Transfer Co. Ltd.
398		Advanced Refractory Technologies, Inc.
		A.M. Lockett & Co., Limited
		Amcermet Corporation
924		ASEA Babcock
235		Ash Acquisition Company
326		B & W Clarion, Inc.
574		B&W Ebensburg Pa., Inc.
460		B&W Energy Investments, Inc.
383		B&W Fort Worth Power, Inc.
950		B&W Fuel Company
535		B&W Fuel, Inc.
922		B&W Mexicana, S.A. de C.V.
9991		B&W North Branch G.P., Inc.
9990		B&W North Branch L.P., Inc.
537		B&W Nuclear Service Company
960		B&W Nuclear Service Company
536		B&W Nuclear, Inc.
586		B&W Saba, Inc.
591		B&W Service Company
579		B&W SOFC G.P., Inc.
578		B&W SOFC L.P., Inc.
381		B&W Special Projects, Inc.
569		B&W Triso Corporation
		B&W Tubular Products Limited
573		B&W/OHM Weldon Spring, Inc.
212		Babcock & Wilcox Asia Investment Co., Inc.
115		Babcock & Wilcox Asia Limited
533		Babcock & Wilcox Canada Leasing Ltd.
503		Babcock & Wilcox Canada Ltd.
215		Babcock & Wilcox China Investment Co., Inc.
594		Babcock & Wilcox do Brasil Limitada
528		Babcock & Wilcox do Brasil Participacoes Limitada
206		Babcock & Wilcox Egypt SAE


169		Babcock & Wilcox Fibras Ceramicas Limitada
519		Babcock & Wilcox Finance, Inc.
557		Babcock & Wilcox Foreign Sales Corporation
175		Babcock & Wilcox Gama Kazan Teknolojisi A.S.
552		Babcock & Wilcox General Contracting Company
565		Babcock & Wilcox Government Services Company
395		Babcock & Wilcox HRSG Company
		Babcock & Wilcox Industries, Ltd.
531		Babcock & Wilcox International Sales Corporation
549		Babcock & Wilcox International Sales Corporation
342		Babcock & Wilcox Investment Company
305		Babcock & Wilcox Jonesboro Power, Inc.
2007		Babcock & Wilcox Nevada, LLC
		Babcock & Wilcox Refractories Limited
323		Babcock & Wilcox Salt City Power, Inc.
543		Babcock & Wilcox Services, Inc.
322		Babcock & Wilcox Tracy Power, Inc.
314		Babcock & Wilcox Victorville Power, Inc.
727		Babcock & Wilcox Volund France SAS
315		Babcock PFBC, Inc.
559		Babcock Southwest Construction Corporation
945		Babcock-Brown Boveri Reaktor GmbH
936		Babcock-Ultrapower Jonesboro
937		Babcock-Ultrapower West Enfield
951		Bailey Beijing Controls Co., Ltd.
516		Bailey Controls Australia Pty. Limited
517		Bailey Controls International Sales & Services Company, Inc.
954		Bailey Controls Jordan for Process Controls Services, Ltd.
563		Bailey Controls Sales & Service (Australia) Pty. Limited
564		Bailey Controls Sales & Services Canada Inc.
561		Bailey do Brasil Instrumentos Industriais Limitada
114		Bailey International, Inc.
923		Bailey Japan Company Limited
542		Bailey Meter and Controls Company
		Bailey Meter Company
562		Bailey Meter Co. (Japan) Ltd.
		Bailey Meter Company Limited
		Bailey Meter GmbH


646		Brick Insurance Company, Ltd.
590		BWXT Protec, Inc.
		C.C. Moore & Company Engineers
511		Ceramatec G.P., Inc.
510		Ceramatec SOFC, Inc.
329		Clarion Energy, Inc.
328		Clarion Power Company
321		Conam Nuclear, Inc.
		Control Components France
514		Control Components Italy S.R.L.
		Control Components, Inc. (California)
		Control Components, Inc. (Delaware)
948		Control Components Japan
1914		CTR Solutions, LLC
545		Detroit Broach & Machine Corporation
551		Diamond Blower Company Limited
		Diamond Canapower Ltd.
518		Diamond Power Importacao e Exportacao Ltda.
144		Diamond Power Korea Inc.
526		Diamond Power Specialty (Japan) Ltd.
558		Diamond Power Specialty (Proprietary) Limited
546		Diamond Power Specialty Corporation (Delaware)
		Diamond Power Speciality Corporation (Ohio)
529		Diamond Power Specialty GmbH
		Diescher Tube Mills, Inc.
332		Ebensburg Energy, Inc.
397		Ejendomsaktieselskabet Falkevej2
961		Enserch Environmental Management Company, Inc.
968		EPC Business Trust
919		Especialidades Termomecanicas, S.A. de C.V.
550		Ferry-Diamond Engineering Company Limited
928		Fibras Ceramicas C.A.
509		Fibras Ceramicas, Inc.
547		Globe Steel Tubes Corporation
		Greer Land Co.
		Holmes Insulations Limited
124		Hudson Heat Transfer International, Inc.
1955		Hudson HEI Pty. Ltd.


914		Hudson Northern Industries Inc.
125		Hudson Products Aktiebolag
567		Hudson Products Corporation (1)
902		Hudson Products de Mexico, S.A. de C.V.
1907		Integran Technologies Inc.
461		International Disarmament Corporation
941		Isolite Babcock Refractories Company, Ltd.
927		Isolite Eastern Union Refractories Co., Ltd.
920		KBW Gasification Systems, Inc.
512		LT Produkter i Skutskar AB
938		Maine Power Services
345		McDermott Heat Transfer Company
344		McDermott Productos Industriales de Mexico, S.A. de C.V.
946		Medidores Bailey, S.A. de C.V.
942		Morganite Ceramic Fibres Limited
943		Morganite Ceramic Fibres Pty. Limited
944		Morganite Ceramic Fibres S. A.
		National Drill & Manufacturing Co.
544		National Ecology (Alabama) Incorporated
575		National Ecology (Utah) Incorporated
976		Nooter/Eriksen - Babcock & Wilcox, L.L.C.
933		North American CWF Partnership
9989		North Branch Power Company L.P.
971		North County Operations Associates
		Nuclear Materials and Equipment Corporation
958		Olin Pantex Inc.
1153		P. T. Heat Exchangers Indonesia
934		Palm Beach Energy Associates
		Piedmont Tool Machine Company
576		Power Computing Company
581		Power Systems Sunnyside Operations GP, Inc.
583		Power Systems Sunnyside Operations LP, Inc.

		(1) a Delaware Corporation
905		PowerSafety International, Inc.
508		Productos de Caolin, Inc.
577		PSO Caribbean, Inc.
1980		Savannah River Alliance LLC


2008		Savannah River Tactical Services LLC
984		SOFCo L.P.
932		South Point CWF
556		Sunland Construction Co., Inc.
988		Sunnyside Cogeneration Associates
582		Sunnyside II, Inc.
992		Sunnyside II, L.P
303		Sunnyside III, Inc.
993		Sunnyside Operations Associates L.P.
571		Termobloc Industria E Comercio Ltda.
953		Thermax Babcock & Wilcox Limited
502		TLT-Babcock, Inc.
570		Triso
1152		W.E. Smith Hudson Pty. Ltd.
548		W. F. and John Barnes Company

Schedule 1.1(c)

B&W CURRENT


Reference ID	Name
553	Americon Equipment Services, Inc.
554	Americon, Inc.
732	Applied Synergistics, Inc.
127	B&W de Panama, Inc.
532	Babcock & Wilcox Canada Ltd.
1570	Babcock & Wilcox China Holdings, Inc.
555	Babcock & Wilcox Construction Co., Inc.
2011	Babcock & Wilcox de Monterrey, S.A. de C.V.
1571	Babcock & Wilcox Denmark Holdings, Inc.
327	Babcock & Wilcox Ebensburg Power, Inc.
302	Babcock & Wilcox Equity Investments, Inc.
1965	Babcock & Wilcox Holdings, Inc.
2028	Babcock & Wilcox India Holdings, Inc.
598	Babcock & Wilcox India Private Limited
126	Babcock & Wilcox International Investments Co., Inc.
530	Babcock & Wilcox International Sales and Service Corporation
541	Babcock & Wilcox International, Inc.
380	Babcock & Wilcox Investment Company
2010	Babcock & Wilcox Modular Nuclear Energy LLC
1974	Babcock & Wilcox Nuclear Operations Group, Inc.
1967	Babcock & Wilcox Nuclear Energy, Inc.	(formerly Babcock & Wilcox Nuclear Power Generation Group, Inc.
2018	Babcock & Wilcox Nuclear Services (U.K.) Limited
500	Babcock & Wilcox Power Generation Group, Inc.
1961	Babcock & Wilcox Technical Services (U.K.) Limited
1970	Babcock & Wilcox Technical Services Clinch River, LLC
572	Babcock & Wilcox Technical Services Group, Inc.	(formerly BWXT Services, Inc.)
587	Babcock & Wilcox Technical Services Savannah River Company	(formerly BWXT Savannah River Company)
599	Babcock & Wilcox Volund A/S	(formerly Babcock & Wilcox Volund ApS)
2000	BCE Parts Ltd.
596	BWX Technologies, Inc.
580	BWXT Federal Services, Inc.
589	BWXT Hanford Company
382	BWXT of Idaho, Inc.
592	BWXT of Ohio, Inc.


1576	BWXT Washington, Inc.
189	Creole Insurance Company, Ltd.
1988	Delta Power Services, LLC
766	Diamond Operating Co., Inc.
1572	Diamond Power Australia Holdings, Inc.
1984	Diamond Power Central & Eastern Europe s.r.o.
1573	Diamond Power China Holdings, Inc.
521	Diamond Power do Brasil Limitada
1574	Diamond Power Equity Investments, Inc.
525	Diamond Power Finland OY
504	Diamond Power Germany GmbH	(formerly Diamond Power - Sturm GmbH)
597	Diamond Power International, Inc.
949	Diamond Power Machine (Hubei) Co., Inc.
1908	Diamond Power Services S.E.A. Ltd.
522	Diamond Power Specialty (Proprietary) Limited
523	Diamond Power Specialty Limited
524	Diamond Power Sweden AB
1990	DPS Berkeley, LLC
1997	DPS Cadillac, LLC
1995	DPS Florida, LLC
1993	DPS Gregory, LLC
1996	DPS Lowell Cogen, LLC
1992	DPS Mecklenburg, LLC
1991	DPS Michigan, LLC
1994	DPS Mojave, LLC
1998	DPS Sabine, LLC
278	Gumbo Insurance Company, Ltd.
2003	Intech International Inc.
2002	Intech, Inc.
2001	Ivey-Cooper Services, L.L.C.
1968	Marine Mechanical Corporation
540	National Ecology Company
2005	NFS Holdings, Inc.
2004	NOG-Erwin Holdings, Inc.
501	North County Recycling, Inc.
2006	Nuclear Fuel Services, Inc.
1989	O&M Holding Company
707	P. T. Babcock & Wilcox Asia


534		Palm Beach Resource Recovery Corporation
560		Power Systems Operations, Inc.
568		Revloc Reclamation Service, Inc.
2013		Servicios de Fabricacion de Valle Soleado, S.A. de C.V.
2012		Servicios Profesionales de Valle Soleado, S.A. de C.V.
767		SOFCo - EFS Holdings LLC
2029		The Babcock & Wilcox Company

EXHIBIT II – MII ENTITIES

See Schedule 1.1(b) and Schedule 1.1(j) attached hereto. No MII Entity listed on Schedule 1.1(b) shall be deemed to be an “Insured”, a “Named Insured” or otherwise be deemed to be insured under any Existing Policy solely by virtue of being listed on such Schedule 1.1(b).

Schedule 1.1(b)

MII FORMER


Reference ID
947	Arabian General Contracting Company
911	Arabian Petroleum Marine Construction Company
8000	Associated Pipe Line Contractors, Inc.
117	Badya Builders, Inc.
242	Beheer-en Beleggingsmaatschappij Belesa B.V.
9996	BJA-Mentor Production Systems Limited
164	Brown & Root McDermott Fabricators Limited
277	Cayenne Insurance Company, Ltd.
629	CCC Fabricaciones y Construcciones S.A. de C.V.
940	Construcciones Maritimas Mexicanas, S.A. de C.V.
952	Davy McDermott Limited
921	DB/McDermott Company
1952	Deep Gulf Contractors LLC
171	Deep Sea Divers Australia Pty. Limited
	Dick Evans, Inc.
997	ETPM International (UK) Limited
955	ETPM International S.A.S.
999	Far East Vessels, Inc.
108	First Emirates Trading Corporation
	Harvey Lumber & Supply Company
174	Heavy Lift Chartering, Inc.
935	HeereMac v.o.f.
956	Heerema-McDermott (Aust.) Pty. Ltd.
190	Honore Insurance Company, Ltd.
917	Initec, Astano y McDermott International Inc., S.A.
	Ingenieria Petrolera Maritima, S.A. de C.V.
	Iranian Marine Contractors, Inc.
102	J. Ray McDermott & Co. (Nederland) B.V.
150	J. Ray McDermott (Aust.) Pty. Ltd.
151	J. Ray McDermott (U.K.) Inc.
350	J. Ray McDermott (Venezuela) C.A.
325	J. Ray McDermott Arctic Ltd.
307	J. Ray McDermott Gulf Contractors, Inc.	(formerly the Early Company)


394		J. Ray McDermott International Services (No. 1) Limited
101		J. Ray McDermott International Services Limited
152		J. Ray McDermott London, Ltd.
641		J. Ray McDermott Marine Construction AS
1125		J. Ray McDermott Newfoundland, Ltd.
871		J. Ray McDermott Offshore Chartering (U.S.), Inc.
372		J. Ray McDermott Properties, Inc.
238		J. Ray McDermott Underwater Services, Inc.
603		J. Ray McDermott Venture Holdings (U.S.), Inc.
153		Jaramac Associated Services, Ltd.
		Jaramac Petroleum (U.K.) Limited
		Khafji Contractors, Inc.
166		Khor Contractors, Inc.
903		KME a.s.
324		Lan-Dermott, S.A. de C.V.
202		Madock Shipyard Company, Ltd.
203		Macshelf Marine Construction Company, Ltd.
106		Mandato Pty. Limited
360		Marine Contractors, Inc.
146		McAntille, N.V.
168		McDermott - ETPM V.O.F.
158		McDermott (Holland) B.V.
304		McDermott (Nigeria) Limited
245		McDermott Acquisition Company, Inc.
972		McDermott APG Services Limited
352		McDermott Azerbaijan Pipelines, Inc.
156		McDermott Azerbaijan, Inc.
351		McDermott Central & Eastern Europe, Inc.
		McDermott de Mexico, S.A. de C.V.
118		McDermott Denmark ApS
464		McDermott Energy Services, Inc.
178		McDermott Engineering (Europe) Limited
		McDermott Enterprises France, S.A.
128		McDermott Europe Marine Services, Ltd.
313		McDermott Industries, Inc.
354		McDermott Inland Services, Inc.
201		McDermott International Asset Management, Ltd.
343		McDermott International Aviation, Inc.


346	McDermott International Aviation, Inc.	(formerly McDermott International Aviation Co., Inc.)
	McDermott International (Deutschland) GmbH
237	McDermott International Engineering & Construction Co., Ltd.
139	McDermott International Engineering Investments N.V.
121	McDermott International General Services, Inc.
123	McDermott International Marine Services, Inc.
236	McDermott International Marketing, Inc.
143	McDermott Marine UK Limited
462	McDermott Marketing Services, Inc.
103	McDermott Middle East Trading, Ltd.
172	McDermott Neutral Zone, Inc.
	McDermott Norway, Inc.
	McDermott Petroleum (Iran), Inc.
105	McDermott Sakhalin, Inc.
347	McDermott Shipbuilding, Inc.
111	McDermott Singapore Pte. Ltd.
221	McDermott Submarine Cable Ltd.
1951	McDermott Submarine Cable Systems Limited
205	McDermott Subsea Constructors Limited
110	McDermott Transition Co., Inc.
	McDermott UAR, Inc.
184	McDermott West Indies Company
187	McDermott-ETPM (Norway), Inc.
998	McDermott-ETPM (UK) Limited
963	McDermott-ETPM B.V.
161	McDermott-ETPM East B.V.
167	McDermott-ETPM East N.V.
964	McDermott-ETPM N.V.
965	McDermott-ETPM S.A.
962	McDermott-ETPM West, Inc.
104	Menck GmbH
463	Mentor Engineering Consultants Limited
131	MIMCO, Inc.
908	MMC-McDermott Engineering Sdn. Berhad
317	Mofco N.V.
129	NOLA, Servicos E Participacoes Ltda.
141	Northern Marine Services, Inc.
107	Oceanic Red Sea Company


620		Offshore Angola, Ltd.
632		Offshore Energy Capital Corporation
622		Offshore Hyundai International Limited
630		Offshore Hyundai International, Ltd.
210		Offshore Marine Chartering N.V.
610		Offshore Petroleum Divers, Inc.
614		Offshore Pipelines (Mauritius) Ltd.
616		Offshore Pipelines Far East Limited
617		Offshore Pipelines International Gulf E.C.
633		Offshore Power Generation Ltd.
635		Offshore Production Vessels, Ltd.
615		OPI Offshore Netherlands Holding B.V.
611		OPI Sales & Service Corporation
628		OPI Towing & Supply, L.L.C.
624		OPMI, E.C.
613		P. T. Armandi Pranaupaya
850		Panama Offshore Chartering Company 1, Inc.
859		Panama Offshore Chartering Company 10, Inc.
860		Panama Offshore Chartering Company 11, Inc.
861		Panama Offshore Chartering Company 12, Inc.
862		Panama Offshore Chartering Company 13, Inc.
863		Panama Offshore Chartering Company 14, Inc.
864		Panama Offshore Chartering Company 15, Inc.
865		Panama Offshore Chartering Company 16, Inc.
866		Panama Offshore Chartering Company 17, Inc.
867		Panama Offshore Chartering Company 18, Inc.
868		Panama Offshore Chartering Company 19, Inc.
851		Panama Offshore Chartering Company 2, Inc.
869		Panama Offshore Chartering Company 20, Inc.
870		Panama Offshore Chartering Company 21, Inc.
852		Panama Offshore Chartering Company 3, Inc.
853		Panama Offshore Chartering Company 4, Inc.
854		Panama Offshore Chartering Company 5, Inc.
855		Panama Offshore Chartering Company 6, Inc.
856		Panama Offshore Chartering Company 7, Inc.
857		Panama Offshore Chartering Company 8, Inc.
858		Panama Offshore Chartering Company 9, Inc.
154		Panama Offshore Chartering Company, Inc.


990		Personal Administrativo de Vera Cruz, S.A. de C.V.
991		Personal Ejecutivo de Veracruz, S.A. de C.V.
645		Pirogue Insurance Company, Ltd.
981		Sakhalin Energy Investment Company, Ltd.
384		Samburg Holdings, Inc.
109		Sharman, Allen, Gay & Taylor, S.A.
989		Tallares Navales del Golfo, S.A. de C.V.
		The Evelyn Kay Company
		The Roger Thomas Company
		The Rosalie E. Company
		The Walter E. Company
634		TL Marine Sdn. Bhd.
621		TL Offshore Sdn. Bhd.
926		Topside Contractors of Newfoundland
925		Topside Contractors of Newfoundland, Ltd.
642		U.S. Offshore Chartering
918		Universal Fabricators Incorporated
980		US Shipbuilding Corporation, Inc.
318		Wagley, Inc.

Schedule 1.1(j)

MII - CURRENT


CURRENT Reference ID	Name
873	Barmada McDermott (L) Limited
1953	Barmada McDermott Sdn. Bhd.
276	Boudin Insurance Company, Ltd.
939	Caspian Offshore Fabricators LLC
116	Chartering Company (Singapore) Pte. Ltd.
142	Eastern Marine Services, Inc.
249	Global Energy - McDermott Limited
140	Hydro Marine Services, Inc.
649	International Vessels Ltd.
148	J. Ray McDermott (Aust.) Holding Pty. Limited
1982	J. Ray McDermott (Caspian), Inc.	(formerly J. Ray McDermott Diving International, Inc.)
243	J. Ray McDermott (Nigeria) Ltd.
2025	J. Ray McDermott (Norway), AS
1237	J. Ray McDermott (Qingdao) Pte. Ltd.
194	J. Ray McDermott Asia Pacific Pte. Ltd.	(formerly McDermott South East Asia Pte. Ltd.)
1972	J. Ray McDermott Canada Holding, Ltd.
1969	J. Ray McDermott Canada, Ltd.
204	J. Ray McDermott Contractors, Inc.
246	J. Ray McDermott de Mexico, S.A. de C.V.
208	J. Ray McDermott Eastern Hemisphere Limited	(formerly J. Ray Middle East (Indian Ocean) Ltd.)
1956	J. Ray McDermott Engineering Services Private Limited
1950	J. Ray McDermott Engineering, LLC
220	J. Ray McDermott Far East, Inc.
211	J. Ray McDermott Holdings, LLC	(formerly J. Ray McDermott Holdings, Inc.)
627	J. Ray McDermott International Vessels, Ltd.	(formerly OPI International, Ltd.)
602	J. Ray McDermott International, Inc.
160	J. Ray McDermott Investments B.V.	(formerly Menck B.V.)
1958	J. Ray McDermott Kazakhstan Limited Liability Partnership
1975	J. Ray McDermott Logistic Services Pvt. Limited
136	J. Ray McDermott Middle East, Inc.
239	J. Ray McDermott Solutions, Inc.	(formerly J. Ray McDermott Engineering Holdings, Inc.)
625	J. Ray McDermott Technology, Inc.
1957	J. Ray McDermott UK Ltd.
1960	J. Ray McDermott Underwater Services, Inc.


248	J. Ray McDermott West Africa Holdings, Inc.
244	J. Ray McDermott West Africa, Inc.
601	J. Ray McDermott, Inc.
207	J. Ray McDermott, S.A.
644	Lagniappe Insurance Company, Ltd.
193	Malmac Sdn. Bhd.
132	McDermott (Malaysia) Sendirian Berhad
904	McDermott Abu Dhabi Offshore Construction Company
915	McDermott Arabia Company Limited
149	McDermott Australia Pty. Ltd.	(formerly McDermott Industries (Aust.) Pty. Limited)
183	McDermott Azerbaijan Marine Construction, Inc.
241	McDermott Caspian Contractors, Inc.
275	McDermott Cayman Ltd.
181	McDermott Far East, Inc.
133	McDermott Gulf Operating Company, Inc.
177	McDermott Holdings (U.K.) Limited
300	McDermott Incorporated
147	McDermott International B.V.
120	McDermott International Investments Co., Inc.
119	McDermott International Marine Investments N.V.
213	McDermott International Marketing, Inc.	(formerly McDermott International Beijing, Inc.)
130	McDermott International Trading Co., Inc.
1971	McDermott International Vessels, Inc.
100	McDermott International, Inc.
1962	McDermott Kft.
349	McDermott Marine Construction Limited
1986	McDermott Marine Mexico, S.A. de C.V.
135	McDermott Offshore Services Company, Inc.
176	McDermott Old JV Office, Inc.
162	McDermott Overseas Investment Co. N.V.
390	McDermott Overseas, Inc.
1966	McDermott Panama Holdings, S.A.
170	McDermott Servicos de Construcao, Ltda.
320	McDermott Trade Corporation
306	Mentor Subsea Technology Services, Inc.
138	North Atlantic Vessel, Inc.
2021	North Ocean II AS
2023	North Ocean II KS


2022	North Ocean V AS
612	Offshore Pipelines International, Ltd.
618	Offshore Pipelines Nigeria Limited
619	Offshore Pipelines Sdn. Bhd.
626	OPI Vessels, Inc.
623	OPMI, Ltd.
185	P. T. Bataves Fabricators
180	P. T. McDermott Indonesia
901	PT. Baja Wahana Indonesia	(formerly P.T. Babcock & Wilcox Indonesia)
643	PT. J. Ray McDermott Indonesia	(formerly PT. Jay Ray)
636	Sabine River Realty, Inc.
1977	Servicios de Fabricacion de Altamira, S.A. de C.V.
1976	Servicos Profesionales de Altamira, S.A. de C.V.
2019	Singapore Huangdao Pte. Ltd.
640	SparTEC, Inc.	(formerly J. Ray McDermott Spars, Inc.)
145	Varsy International N.V.

Exhibit 10.9

CHANGE IN CONTROL AGREEMENT

This Change in Control Agreement (this “Agreement”) is by and among McDermott International, Inc. (the “Company”), J. Ray McDermott, Inc. (the “Employer”), and Stephen M. Johnson (“Executive”).

The Company and the Employer consider it essential to the interests of the Company’s stockholders to secure the continued employment of key management personnel. The Board of Directors of the Company recognizes that the possibility of a Change in Control (as defined in Exhibit A ) exists and that the uncertainty this raises may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. In order to encourage the continued attention and dedication of key management personnel, this Agreement is being entered into by the Company, the Employer and Executive.

The Company, the Employer and Executive agree as follows:

1.	D EFINITIONS . Capitalized terms used but not otherwise defined herein are defined in Exhibit A hereto.

2.	S EVERANCE B ENEFITS .

(a)

Entitlement to Benefits If Executive experiences a Covered Termination and executes a Waiver and Release in accordance with Section 2(b) below that is no longer subject to rescission, Executive will be entitled to the following:

(i)

Accrued Benefits. The Accrued Benefits, payable on the 60th day after the Covered Termination Date, or such earlier date as may be required by applicable law.

(ii)

SERP. As of the Covered Termination Date, a fully vested and non-forfeitable interest in Executive’s account balance in the SERP, payable in accordance with the terms of the SERP.

(iii)

Unvested Equity-Based Awards. As of the Covered Termination Date, unless otherwise settled in accordance with the provisions of Section 3 of this Agreement and the plans and agreements referred to therein, a fully vested and non-forfeitable interest in any outstanding unvested equity-based awards, and to the extent applicable, payable on the 60th day after the Covered Termination Date; provided that no such award that is subject to Code Section 409A will be paid on a date earlier than is provided in the applicable plan and award agreement.

(iv)

Severance Payment Based on Salary. An amount equal to 2.99 times the sum of (i) the Salary, and (ii) Executive’s target award under the EICP for the year in which the Covered Termination Date occurs, in a lump sum in cash on the 60th day after the Covered Termination Date.

(v)

Severance Payment Based on Bonus .

(1)

Current Performance Year . An amount equal to the product of (A) the Salary and (B) the Target Bonus Percentage, with the product of (A) and (B) prorated based on the number of days Executive was employed during the bonus year in which Executive’s Covered Termination Date occurs, in a lump sum in cash on the 60th day after the Covered Termination Date.

(2)

Prior Performance Year. If a bonus is paid under the EICP after Executive’s Covered Termination Date occurs for the immediately preceding calendar year, then Executive will be entitled to an amount equal to the product of (A) the Salary and (B) the Target Bonus Percentage (or, if greater, the actual amount of the bonus determined under the EICP for such prior calendar year), in a lump sum in cash at the later of (i) the 60th day after the Covered Termination Date and (ii) the time such bonus is paid to other EICP participants.

(vi)

Other Compensation. The Other Compensation payable or provided in the manner and time specified in applicable documents governing such amounts.

(b)

Waiver and Release. Notwithstanding any provision of this Agreement to the contrary, in order to receive the severance benefits payable under any provision of Section 2(a)(ii), (iii), (iv) and (v) of this Agreement, Executive must first execute an appropriate waiver and release agreement in a form acceptable to the Company (a currently acceptable form is attached hereto as Exhibit B (the “Waiver and Release”)), whereby Executive shall agree to release and waive, in return for such severance benefits, any claims that Executive may have against the Company and the Employer and their respective Affiliates, directors, officers and other customary persons from any claim or liability arising out of or related to Executive’s employment with or termination of employment from the Employer and any of its Affiliates (except for amounts to which Executive is legally entitled pursuant to employee benefit plans and rights to indemnification); provided, however, such Waiver and Release shall not release any claim or cause of action by or on behalf of Executive for any payment or vested benefit that is due under either this Agreement or any employee benefit plan or program of the Company or the Employer until fully paid prior to the receipt thereof. Executive shall have 21 days after receipt of the Waiver and Release to consider and timely execute and return it to the Company. After return, Executive shall have an additional seven days in which Executive can revoke the Waiver and Release; thereafter, the Waiver and Release shall be irrevocable. The Company or the Employer shall provide the Waiver and Release to Executive no later than five days after his Termination Date. If the Waiver and Release is not timely executed and returned, or it is revoked within the seven-day revocation period, no benefits shall be paid

under this Agreement except those to which the Executive has a vested interest without regard to Section 2(a) of this Agreement.

(c)

Reduction to Avoid Parachute Taxes . Exhibit C hereto sets forth the manner of reduction to be applied to avoid parachute taxes.

In no event shall the payments or benefits provided for in Sections 2(a)(i), 2(a)(iii), 2(a)(iv) and 2(a)(v) above that are not subject to Code Section 409A be paid later than March 15th of the calendar year immediately following the calendar year in which Executive’s Covered Termination Date occurs.

C HANGE IN C ONTROL E QUITY -B ASED B ENEFITS . If a Change in Control occurs, any benefits Executive may be entitled to with respect to any equity-based compensation shall be determined in accordance with the applicable plans and award agreements. In the event of any conflict between the terms of any such plan or award agreement and Section 2(a)(iii) of this Agreement, the terms of such plan or award agreement shall control.

4.	I NTERNAL R EVENUE C ODE S ECTION 409A .

(a)

Compliance . It is the intent of the parties that the provisions of this Agreement either comply with Code Section 409A and the Treasury regulations and guidance issued thereunder or that one or more elements of compensation or benefits be exempt from Code Section 409A. Accordingly, the parties intend that this Agreement be interpreted and operated in a manner consistent with such requirements in order to avoid the application of penalty taxes under Code Section 409A to the extent reasonably practicable. The Company and the Employer shall neither cause nor permit: (i) any payment, benefit or consideration to be substituted for a benefit that is payable under this Agreement if such action would result in the failure of any amount that is subject to Code Section 409A to comply with the applicable requirements of Code Section 409A; or (ii) any adjustments to any equity interest to be made in a manner that would result in the equity interest’s becoming subject to Code Section 409A unless, after such adjustment, the equity interest is in compliance with the requirements of Code Section 409A to the extent applicable. A Covered Termination is an “involuntary separation from service” for purposes of Code Section 409A.

(b)

Waiting Period for Specified Employees . Notwithstanding any provision of this Agreement to the contrary, if Executive is a “Specified Employee” (as that term is defined in Code Section 409A) as of Executive’s Covered Termination Date, then any amounts or benefits which are payable under this Agreement upon Executive’s “Separation from Service” (within the meaning of Code Section 409A), which are subject to the provisions of Code Section 409A and not otherwise excluded under Code Section 409A, and would otherwise be payable during the first six-month period following such Separation from Service, shall be paid on the first business day that (i) is at least six months after the date after

Executive’s Covered Termination Date or (ii) follows Executive’s date of death, if earlier.

C ONFIDENTIALITY AND N ON -D ISCLOSURE . Executive acknowledges that, pursuant to this Agreement, the Company and the Employer agree to provide Executive with Confidential Information regarding the Company and the Employer and their respective businesses and have previously provided Executive other such Confidential Information. In return for this and other consideration provided under this Agreement, Executive agrees that Executive will not, while employed by the Employer or any of its Affiliates and thereafter, disclose or make available to any other person or entity, or use for Executive’s own personal gain, any Confidential Information, except for such disclosures as required in the performance of Executive’s duties hereunder as may otherwise be required by applicable law or legal process (in which case Executive shall notify the Company and the Employer of such legal or judicial proceeding as soon as practicable following Executive’s receipt of notice of such a proceeding, and permit the Company and the Employer to seek to protect its interests and information). For purposes of this Agreement, “Confidential Information” shall mean any and all information, data and knowledge that has been created, discovered, developed or otherwise become known to the Company, the Employer or any of their respective Affiliates or ventures or in which property rights have been assigned or otherwise conveyed to the Company, the Employer or any of their respective Affiliates or ventures, which information, data or knowledge has commercial value in the business in which the Company, the Employer or any of their respective affiliates is engaged, except such information, data or knowledge as is or becomes known to the public without Executive’s violation of any of the terms of this Section 5. By way of illustration, but not limitation, Confidential Information includes business trade secrets, secrets concerning the Company’s and the Employer’s plans and strategies, nonpublic information concerning material market opportunities, technical trade secrets, processes, formulas, know-how, improvements, discoveries, developments, designs, inventions, techniques, marketing plans, manuals, records of research, reports, memoranda, computer software, strategies, forecasts, new products, unpublished financial information, projections, licenses, prices, costs, and employee, customer and supplier lists or parts thereof.

R ETURN OF P ROPERTY . Executive agrees that at the time of Executive’s leaving employ with the Employer or any of its Affiliates, Executive will deliver to the Employer (and will not keep in his possession, recreate or deliver to anyone else) all Confidential Information as well as all other devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, customer or client lists or information, or any other documents or property (including all reproductions of the aforementioned items) belonging to the Company, the Employer or any of their respective Affiliates, regardless of whether such items were prepared by Executive.

7.	N ON -S OLICITATION .

(a)

For consideration provided under this Agreement, including but not limited to the agreement of the Company and the Employer to provide Executive with

Confidential Information (as defined in Section 5 above) regarding the Company, the Employer and their respective businesses, Executive agrees that while employed by the Employer or any of its Affiliates and for twelve months following a Covered Termination Executive shall not, without the prior written consent of the Company and the Employer, directly or indirectly, (i) hire or induce, entice or solicit (or attempt to induce, entice or solicit) any employee of the Company, the Employer or any of their respective Affiliates or ventures to leave the employment of the Company, the Employer or any of their respective Affiliates or ventures or (ii) solicit or attempt to solicit the business of any customer or acquisition prospect of the Company, the Employer or any of their respective Affiliates or ventures with whom Executive had any actual contact while employed at the Employer.

(b)

Executive acknowledges that these restrictive covenants under this Agreement, for which Executive received valuable consideration from the Company and the Employer as provided in this Agreement, including, but not limited to the agreement of the Company and the Employer to provide Executive with Confidential Information regarding the Company, the Employer and their respective businesses are ancillary to otherwise enforceable provisions of this Agreement that the consideration provided by the Company and the Employer gives rise to the interest of each of the Company and the Employer in restraining Executive and that the restrictive covenants are designed to enforce Executive’s consideration or return promises under this Agreement. Additionally, Executive acknowledges that these restrictive covenants contain limitations as to time and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other legitimate business interests of the Company and the Employer, including, but not limited to, the Company’s and the Employer’s need to protect their Confidential Information.

8.	N OTICES . For purposes of this Agreement, notices and all other communications must be in writing and will be deemed to have been given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:


If to the Company or the Employer:		777 N. Eldridge Parkway
		Houston, TX 77079
		ATTN: Gary L. Carlson,
		Senior Vice President,
		Human Resources

If to Executive:

or to such other address as either party may furnish to the other in writing in accordance with this Section.

A PPLICABLE L AW . The validity, interpretation, construction and performance of this Agreement will be governed by and construed in accordance with the substantive laws of the State of Texas, but without giving effect to any principles of conflict of laws thereunder which would result in the application of the laws of any other jurisdiction.

10.

S EVERABILITY . If any provision of this Agreement is determined to be invalid or unenforceable, then the invalidity or unenforceability of that provision will not affect the validity or enforceability of any other provision of this Agreement and all other provisions shall remain in full force and effect.

11.	W ITHHOLDING OF T AXES . The Company or the Employer, as applicable, may withhold from any payments under this Agreement all federal, state, local or other taxes as may be required pursuant to any applicable law or governmental regulation or ruling.

12.

N O A SSIGNMENT ; S UCCESSORS . Executive’s right to receive payments or benefits under this Agreement shall not be assignable or transferable, whether by pledge, creation of a security interest or otherwise, whether voluntary, involuntary, by operation of law or otherwise, other than a transfer by will or by the laws of descent or distribution, and in the event of any attempted assignment or transfer contrary to this Section 12 the Company or Employer will have no liability to pay any amount so attempted to be assigned or transferred. This Agreement inures to the benefit of and is enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

This Agreement is binding upon and inures to the benefit of the Company and the Employer and their respective successors and assigns (including, without limitation, any company into or with which the Company may merge or consolidate).

13.	N UMBER AND G ENDER . Wherever appropriate herein, words used in the singular will include the plural, the plural will include the singular, and the masculine gender will include the feminine gender.

14.

C ONFLICTS . This Agreement constitutes the entire understanding of the parties with respect to its subject matter and supersedes any other agreement or other understanding, whether oral or written, express or implied, between them concerning, related to or otherwise in connection with, the subject matter hereof; provided that: if Executive is entitled to payments and benefits under both Section 2 of this Agreement and the Restructuring Transaction Retention Agreement between the Company and Executive, dated as of December 10, 2009 (the “Retention Agreement”), Executive will receive payments and benefits only under the Retention Agreement (and not under Section 2 of this Agreement), (it being the intention of the parties hereto that, in no event, shall substantially the same benefits become payable under both the Retention Agreement and Section 2 of this Agreement). Without limiting the generality of the foregoing, this Agreement supersedes the Change in Control Agreement by and between the Company, and Executive, dated April 1, 2009 (the “Prior Change in Control Agreement”) which is hereby terminated.

15.

A MENDMENT AND W AIVER . No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and such officer as may be specifically designated by the Board. No written waiver by any party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by any other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time (unless specifically provided in such written waiver).

16.	C OUNTERPARTS . This Agreement may be executed in several counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.

17.

T ERM . The effective date of this Agreement shall commence on August 9, 2010 (“Effective Date”) and shall end on the earlier of (a) the date one year after a Change in Control occurs, or (b) the date on which Executive’s employment is terminated under circumstances that do not constitute a Covered Termination; provided that terms of this Agreement which must survive the expiration of the term of this Agreement in order to be effectuated (including the provisions of Sections 5, 6 and 7 and the related definitional provisions) will survive.

[Intentionally Left Blank]


McDERMOTT INTERNATIONAL, INC.

By:
Name:
Title:

Date:


J. RAY McDERMOTT, INC.

By:
Name:
Title:

Date:


EXECUTIVE

By:
Name:

Date:

EXHIBIT A

D EFINITIONS

The following terms have the meanings set forth below.

“Accrued Benefits” means

(i)

any portion of Executive’s Salary earned through the Covered Termination Date and not yet paid;

(ii)

reimbursement for any and all amounts advanced in connection with Executive’s employment for reasonable and necessary expenses incurred by Executive through the date of Covered Termination in accordance with the Company’s policies and procedures on reimbursement of expenses; and

(iii)

any earned vacation pay not theretofore used or paid in accordance with the Company’s policy for payment of earned and unused vacation time.

“Affiliate” means an Affiliate within the meaning of Rule 12b-2 promulgated under Section 12 of the Exchange Act.

“Board” means the Board of Directors of the Company.

“ Cause ” means

(i)

the continued failure of Executive to perform substantially Executive’s duties with the Company (occasioned by reason other than physical or mental illness or disability of Executive) after a written demand for substantial performance is delivered to Executive by the Compensation Committee of the Board which specifically identifies the manner in which the Compensation Committee of the Board or the Chief Executive Officer believes that Executive has not substantially performed Executive’s duties, after which Executive shall have 30 days to defend or remedy such failure to substantially perform Executive’s duties;

(ii)

the engaging by Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company; or

(iii)

the conviction of Executive with no further possibility of appeal for, or plea of guilty or nolo contendere by Executive to, any felony.

The cessation of employment of Executive under subparagraph (i) and (ii) above shall not be deemed to be for “Cause” unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Compensation Committee of the Board at a meeting of such Committee called and held for such purpose (after reasonable notice is provided to Executive and Executive is given

A-1

an opportunity, together with counsel, to be heard before such Committee), finding that, in the good faith opinion of such Committee, Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.

A “Change in Control” will be deemed to have occurred upon the occurrence of any of the following:

(a)

30% Ownership Change : Any Person, other than an ERISA-regulated pension plan established by the Company, the Employer, or an Affiliate of either of them, makes an acquisition of Outstanding Voting Stock and is, immediately thereafter, the beneficial owner of 30% or more of the then Outstanding Voting Stock, unless such acquisition is made directly from the Company in a transaction approved by a majority of the Incumbent Directors; or any group is formed that is the beneficial owner of 30% or more of the Outstanding Voting Stock; or

(b)

Board Majority Change : Individuals who are Incumbent Directors cease for any reason to constitute a majority of the members of the Board; or

(c)

Major Mergers and Acquisitions : Consummation of a Business Combination unless, immediately following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Voting Stock immediately before such Business Combination beneficially own, directly or indirectly, at least 50% of the then outstanding shares of voting stock of the parent corporation resulting from such Business Combination in substantially the same relative proportions as their ownership, immediately before such Business Combination, of the Outstanding Voting Stock, (ii) if the Business Combination involves the issuance or payment by the Company of consideration to another entity or its shareholders, the total fair market value of such consideration plus the principal amount of the consolidated long-term debt of the entity or business being acquired (in each case, determined as of the date of consummation of such Business Combination by a majority of the Incumbent Directors) does not exceed 50% of the sum of the fair market value of the Outstanding Voting Stock plus the principal amount of the Company’s consolidated long-term debt (in each case, determined immediately before such consummation by a majority of the Incumbent Directors), (iii) no Person (other than any corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of the then outstanding shares of voting stock of the parent corporation resulting from such Business Combination and (iv) a majority of the members of the board of directors of the parent corporation resulting from such Business Combination were Incumbent Directors of the Company immediately before consummation of such Business Combination; or

A-2

(d)

Major Asset Dispositions : Consummation of a Major Asset Disposition unless, immediately following such Major Asset Disposition, (i) individuals and entities that were beneficial owners of the Outstanding Voting Stock immediately before such Major Asset Disposition beneficially own, directly or indirectly, at least 50% of the then outstanding shares of voting stock of the Company (if it continues to exist) and of the entity that acquires the largest portion of such assets (or the entity, if any, that owns a majority of the outstanding voting stock of such acquiring entity) and (ii) a majority of the members of the Board (if it continues to exist) and of the entity that acquires the largest portion of such assets (or the entity, if any, that owns a majority of the outstanding voting stock of such acquiring entity) were Incumbent Directors of the Company immediately before consummation of such Major Asset Disposition; or

(e)

Other Circumstances : Such other circumstances as may be deemed by the Board in its sole discretion to constitute a change in control of the Company.

For purposes of the definition of a “Change in Control”,

(1)

“Person” means an individual, entity or group;

(2)

“group” has the same meaning as used in Section 13(d)(3) of the Exchange Act;

(3)

“beneficial owner” is used as it is defined for purposes of Rule 13d-3 under the Exchange Act;

(4)

“Outstanding Voting Stock” means outstanding voting securities of the Company entitled to vote generally in the election of directors; and any specified percentage or portion of the Outstanding Voting Stock (or of other voting stock) is determined based on the combined voting power of such securities;

(5)

“Incumbent Director” means a director of the Company (x) who was a director of the Company on the effective date of this Agreement or (y) who becomes a director after such date and whose election, or nomination for election by the Company’s shareholders, was approved by a vote of a majority of the Incumbent Directors at the time of such election or nomination, except that any such director will not be deemed an Incumbent Director if his or her initial assumption of office occurs as a result of an actual or threatened election contest or other actual or threatened solicitation of proxies by or on behalf of a Person other than the Board;

A-3

(6)

“election contest” is used as it is defined for purposes of Rule 14a-11 under the Exchange Act;

(7)

“Business Combination” means

(x)

a merger or consolidation involving the Company or its stock, or

(y)

an acquisition by the Company, directly or through one or more subsidiaries, of another entity or its stock or assets;

(8)

“parent corporation resulting from a Business Combination” means the Company if its stock is not acquired or converted in the Business Combination and otherwise means the entity which as a result of such Business Combination owns the Company or all or substantially all the Company’s assets either directly or through one or more subsidiaries; and

(9)

“Major Asset Disposition” means the sale or other disposition in one transaction or a series of related transactions of 50% or more of the assets of the Company and its subsidiaries on a consolidated basis; and any specified percentage or portion of the assets of the Company will be based on fair market value, as determined by a majority of the Incumbent Directors.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” means McDermott International, Inc., and, except for purposes of determining whether a Change in Control has occurred, any successor thereto.

“Confidential Information” means any and all information, data and knowledge that has been created, discovered, developed or otherwise become known to the Company, the Employer or any of their respective Affiliates or in which property rights have been assigned or otherwise conveyed to the Company, the Employer or any of their respective Affiliates, which information, data or knowledge has commercial value in the business in which the Company, the Employer or any of their respective Affiliates or ventures is engaged, except such information, data or knowledge as is or becomes known to the public without violation of the terms of this Agreement. By way of illustration, but not limitation, Confidential Information includes business trade secrets, secrets concerning the Company’s, the Employer’s or any of their respective Affiliates’ plans and strategies, nonpublic information concerning material market opportunities, technical trade secrets, processes, formulas, know-how, improvements, discoveries, developments, designs, inventions, techniques, marketing plans, manuals, records of research, reports, memoranda, computer software, strategies, forecasts, new products, unpublished financial information, projections, licenses, prices, costs, and employee, customer and supplier lists.

“Covered Termination” means a termination of Executive’s employment (such that Executive ceases to be employed by the Employer, the Company or any of their respective

A-4

Affiliates) that is a “Separation from Service” (as defined in Code Section 409A and the Treasury regulations and guidance issued thereunder) within the one-year period following a Change in Control during the term of this Agreement due to:

(a)

an involuntary termination that does not result from any of the following:

(1)

death;

(2)

Disability; or

(3)

termination for Cause; or

(b)

a termination by Executive for Good Reason.

“Covered Termination Date” means (i) if Executive’s employment is terminated for Cause, the date on which the Company delivers to Executive the requisite resolution, or, with respect to a termination under subparagraph (iii) of the definition of Cause, the date on which the Employer notifies Executive of such termination, (ii) if Executive’s employment is terminated by the Employer for a reason other than Cause or Executive’s death, the date on which the Employer notifies Executive of such termination, (iii) if Executive’s employment is terminated by Executive for Good Reason, the date on which Executive notifies the Employer of such termination (after having given the Company notice and a 30-day cure period), or (iv) if Executive’s employment is terminated by reason of death, the date of death of Executive.

“Disability” means circumstances which would qualify Executive for long-term disability benefits under the Company’s or the Employer’s long-term disability plan, whether or not Executive is covered under such plan.

“EICP” means the McDermott International, Inc. Executive Incentive Compensation Plan, or any successor plan thereto.

“Employer” means J. Ray McDermott, Inc., and any successor thereto.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Excise Tax” means any excise tax imposed under Code Section 4999.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Good Reason” means any one or more of the following events which occurs following a Change in Control:

(a)

a material diminution in the duties or responsibilities of Executive from those applicable immediately before the date on which a Change in Control occurs;

A-5

(b)

a material reduction in Executive’s annual Salary as in effect on the Effective Date of this Agreement or as the same may be increased from time to time;

(c)

the failure by the Company or the Employer to continue in effect any compensation plan in which Executive participates immediately before the Change in Control which is material to Executive’s total compensation, unless a comparable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company or the Employer to continue Executive’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than existed immediately before the Change in Control, unless the action by the Company or the Employer applies to all similarly situated employees;

(d)

the failure by the Company and the Employer to continue to provide Executive with material benefits in the aggregate that are substantially similar to those enjoyed by Executive under any of the Company’s (or the Employer’s or their respective Affiliates’) pension, savings, life insurance, medical, health and accident, or disability plans in which Executive was participating immediately before the Change in Control if such benefits are material to Executive’s total compensation, the taking of any other action by the Company or the Employer which would directly or indirectly materially reduce any of such benefits or deprive Executive of any fringe benefit enjoyed by Executive at the time of the Change in Control if such fringe benefit is material to Executive’s total compensation, unless the action by the Company or the Employer applies to all similarly situated employees; or

(e)

a change in the location of Executive’s principal place of employment with the Employer or the Company by more than 50 miles from the location where Executive was principally employed immediately before the Change in Control without Executive’s consent.

If a Change in Control occurs and any of the events described above occurs prior to the first anniversary of such Change in Control (an “Event”), Executive shall give the Company written notice (the “Executive Notice”) within 60 days following Executive’s knowledge of an Event that Executive intends to terminate employment as a result. The Company shall have 30 days following receipt of the Executive Notice in which to cure the Event. If the Company does not take such action within that time, the Event shall constitute Good Reason. If Executive does not provide the Executive Notice within 60 days as required above then the Event shall not constitute Good Reason, and thereafter, for purposes of determining whether Executive has Good Reason, Executive’s terms and conditions of employment after the occurrence of the Event shall be substituted for those terms and conditions of Executive’s employment in effect immediately prior to the date of this Agreement.

A-6

“Other Compensation” shall mean all payments and benefits to which Executive may be entitled under the terms of any applicable compensation arrangement or benefit plan or program of the Company that do not specify the time of distribution, other than such payments and benefits provided for under Section 2(a)(i) through Section 2(a)(v) of this Agreement; provided that Other Compensation shall not include any entitlement to severance under any severance policy of the Company generally applicable to the salaried employees of the Company.

“Salary” means Executive’s annual base salary as in effect immediately before the termination of Executive’s employment or, if higher, the base salary in effect immediately before the first event or circumstance constituting Good Reason.

“SERP” means the McDermott International, Inc. New Supplemental Executive Retirement Plan, as in effect on the Covered Termination Date.

“Target Bonus Percentage” means Executive’s target incentive award opportunity under the EICP in effect immediately before the termination of Executive’s employment or, if higher, immediately before the first event or circumstance constituting Good Reason.

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EXHIBIT B

W AIVER A ND R ELEASE

FORM WAIVER AND RELEASE

Pursuant to the terms of the Change in Control Agreement made as of , , by and among McDermott International, Inc. (the “Company”), J. Ray McDermott, Inc. (the “Employer”) and me, and in consideration of the payments made to me and other benefits to be received by me pursuant thereto, I, , do freely and voluntarily enter into this WAIVER AND RELEASE (the “Release”), which shall become effective and binding on the eighth day following my signing the Release as provided herein (the “Effective Date”). It is my intent to be legally bound, according to the terms set forth below.

In exchange for the payments and other benefits to be provided to me by the Company and the Employer pursuant to Section 2 of the Change in Control Agreement (the “Separation Payment” and “Separation Benefits”), I hereby agree and state as follows:

I, individually and on behalf of my heirs, personal representatives, successors, and assigns, release, waive, and discharge the Company and the Employer, their respective predecessors, successors, parents, subsidiaries, merged entities, operating units, affiliates, divisions, insurers, administrators, trustees, and the agents, representatives, officers, directors, shareholders, employees and attorneys of each of the foregoing (hereinafter “Released Parties”), from all claims, debts, liabilities, demands, obligations, promises, acts, agreements, costs, expenses, damages, actions, and causes of action, whether in law or in equity, whether known or unknown, suspected or unsuspected, arising from my employment and termination from employment with the Employer and its affiliates, including but not limited to any and all claims pursuant to Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991 (42 U.S.C. § 2000e, et seq .), which prohibits discrimination in employment based on race, color, national origin, religion or sex; the Civil Rights Act of 1866 (42 U.S.C. §§1981, 1983 and 1985), which prohibits violations of civil rights; the Age Discrimination in Employment Act of 1967, as amended, and as further amended by the Older Workers Benefit Protection Act (29 U.S.C. §621, et seq .), which prohibits age discrimination in employment; the Employee Retirement Income Security Act of 1974, as amended (29 U.S.C. § 1001, et seq .), which protects certain employee benefits; the Americans with Disabilities Act of 1990, as amended (42 U.S.C. § 12101, et seq .), which prohibits discrimination against the disabled; the Family and Medical Leave Act of 1993 (29 U.S.C. § 2601, et seq .), which provides medical and family leave; the Fair Labor Standards Act (29 U.S.C. § 201, et seq. ), including the wage and hour laws relating to payment of wages; and all other federal, state and local laws and regulations prohibiting employment discrimination. This Release also includes, but is not limited to, a release of any claims for breach of contract, mental pain, suffering and anguish, emotional upset, impairment of economic opportunities, unlawful interference with employment rights, defamation, intentional or negligent infliction of emotional distress, fraud, wrongful termination, wrongful discharge in violation of public policy, breach of any express or implied covenant of good faith and fair dealing, that the Company, the Employer or any of their respective

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Affiliates has dealt with me unfairly or in bad faith, and all other common law contract and tort claims.

Notwithstanding the foregoing, I am not waiving any rights or claims that may arise after this Release is signed by me. Moreover, this Release does not apply to any claims or rights which, by operation of law, cannot be waived, including the right to file an administrative charge or participate in an administrative investigation or proceeding; however, by signing this Release I disclaim and waive any right to share or participate in any monetary award resulting from the prosecution of such charge or investigation or proceeding. Nothing in this Release shall affect in any way my rights of indemnification and directors and officers liability insurance coverage provided to me pursuant to the Company’s by-laws and/or pursuant to any agreement in effect prior to the effective date of my termination, which shall continue in full force and effect, in accordance with their respective terms, following the effective date of this Release.

I forever waive and relinquish any right or claim to reinstatement to active employment with the Company, the Employer, their respective affiliates, subsidiaries, divisions, parent, and successors. I further acknowledge that neither the Company nor the Employer has any obligation to rehire or return me to active duty at any time in the future.

I acknowledge that all agreements applicable to my employment respecting noncompetition, nonsolicitation and the confidential or proprietary information of the Company and the Employer and their respective affiliates shall continue in full force and effect in accordance with the terms of such agreements.

I agree that I will refrain from any libel, slander, defamation or other disparaging comments about the Company, the Employer, their respective affiliates, or any current or former officer, director or employee of the Company, the Employer or any of their respective affiliates; provided, however, that nothing in this paragraph shall apply to or restrict in any way the communication of information by me to any state or federal law enforcement agency or require notice to the Company, the Employer or any of their respective affiliates thereof, and I will not be in breach of the covenant contained in this paragraph solely by reason of my testimony which is compelled by process of law.

5.	I hereby acknowledge and affirm as follows:

I have been advised to consult with an attorney prior to signing this Release.

I have been extended a period of 21 days in which to consider this Release.

I understand that for a period of seven days following my execution of this Release, I may revoke the Release by notifying Company and the Employer, in writing, of my desire to do so. I understand that after the seven-day period has elapsed and I have not revoked the Release, it shall then become effective and enforceable. I understand that the Separation Payment will not be made under the Change in Control Agreement and I will not be entitled to the Severance Benefits

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made under the Change in Control Agreement until after the seven-day period has elapsed and I have not revoked the Release.

I acknowledge that I have received payment for all wages due at time of my employment termination, including reimbursement for any and all business related expenses. I further acknowledge that the Separation Payment and the Separation Benefits are consideration to which I am not otherwise entitled under any Company plan, program, or prior agreement.

I certify that I have returned all property of the Company, the Employer and their respective affiliates, including but not limited to, keys, credit and fuel cards, files, lists, and documents of all kinds regardless of the medium in which they are maintained.

I have carefully read the contents of this Release and I understand its contents. I am executing this Release voluntarily, knowingly, and without any duress or coercion.

6.	I acknowledge that this Release shall not be construed as an admission by any of the Released Parties of any liability whatsoever, or as an admission by any of the Released Parties of any violation of my rights or of any other person, or any violation of any order, law, statute, duty or contract.

I agree that the terms and conditions of this Release are confidential and that I will not, directly or indirectly, disclose the existence of or terms of this Release to anyone other than my attorney or tax advisor, except to the extent such disclosure may be required for accounting or tax reporting purposes or otherwise be required by law or direction of a court. Nothing in this provision shall be construed to prohibit me from disclosing this Release to the Equal Employment Opportunity Commission in connection with any complaint or charge submitted to that agency.

8.	In the event that any provision of this Release should be held void, voidable, or unenforceable, the remaining portions shall remain in full force and effect.

I hereby declare that this Release constitutes the entire and final settlement between me and the Company and the Employer, superseding any and all prior agreements, and that neither the Company nor the Employer has made any promise or offered any other agreement, except those expressed in this Release, to induce or persuade me to enter into this Release.

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IN WITNESS WHEREOF, I have signed this Release on the day of , 20 .

Printed Name

Social Security Number

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EXHIBIT C

Excise Tax Modified Cutback Provisions

Anything in this Agreement to the contrary notwithstanding, in the event the Firm (as defined below) shall determine that Executive shall become entitled to payments and/or benefits provided by this Agreement which would be subject to the excise tax imposed by Code Section 4999 (the “ Payments ”), the Firm shall determine whether to reduce any of the Payments to the Reduced Amount (as defined below). The Payments shall be reduced to the Reduced Amount only if the Firm determines that Executive would have a greater Net After-Tax Receipt (as defined below) of aggregate Payments if the Executive’s Payments were reduced to the Reduced Amount. If such a determination is not made by the Firm, Executive shall receive all Payments to which Executive is entitled under this Agreement.

If the Firm determines that aggregate Payments should be reduced to the Reduced Amount, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof. All determinations made by the Firm under this Exhibit C shall be binding upon the Company and Executive absent manifest error and shall be made as soon as reasonably practicable and in no event later than 15 business days of the receipt of notice from the Company that there has been a Payment, or such earlier time as is requested by the Company. For purposes of reducing the Payments to the Reduced Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced. The reduction of the amounts payable hereunder, if applicable, shall be made by reducing, in order, cash payments otherwise due under Sections 2(a)(iv), 2(a)(v)(1) and 2(a)(v)(2) of this Agreement, and then by reducing equity-based compensation otherwise due under Section 2(a)(iii) of this Agreement in chronological order with the most recent equity based compensation awards reduced first.

As a result of the uncertainty in the application of Code Section 4999 at the time of the initial determination by the Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefit of Executive pursuant to this Agreement which should not have been so paid or distributed (“ Overpayment ”) or that additional amounts which will have not been paid or distributed by the Company to or for the benefit of Executive pursuant to this Agreement could have been so paid or distributed (“ Underpayment ”), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or Executive which the Firm believes has a high probability of success determines that an Overpayment has been made, Executive shall pay any such Overpayment to the Company together with interest at the applicable federal rate provided for in Code Section 7872(f)(2); provided , however, that no amount shall be payable by Executive to the Company if and to the extent such payment would not either reduce the amount on which Executive is subject to tax under Code Sections 1 and 4999 or generate a refund of such taxes. In the event that the Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be paid promptly (and in no event later than 60 days following the date on which the Underpayment is determined) by the Company to or for the benefit of Executive together with interest at the applicable federal rate provided for in Code Section 7872(f)(2).

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For purposes hereof, the following terms have the meanings set forth below:

“ Firm ” shall mean an internationally recognized accounting or employee benefits consulting firm selected by the Company with the input of Executive (but without Executive’s consent) and which shall not, during the one year preceding the date of its selection, have acted in any way on behalf of the Company or its affiliated companies.

“ Net After-Tax Receipt ” shall mean the present value (as determined in accordance with Code Sections 280G(b)(2)(A)(ii) and 280G(d)(4)) of a Payment net of all taxes imposed on Executive with respect thereto under Code Sections 1 and 4999 and under applicable state and local laws, determined by applying the highest marginal rate under Code Section 1 and under state and local laws which applied to the Executive’s taxable income for the immediately preceding taxable year, or such other rate(s) as Executive certifies, in Executive’s sole discretion, as likely to apply to Executive in the relevant tax year(s).

“ Reduced Amount ” shall mean the greatest amount of Payments that can be paid that would not result in the imposition of the excise tax under Code Section 4999 if the Firm determines to reduce Payments pursuant to the first paragraph of this Exhibit C .

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Exhibit 10.10

CHANGE IN CONTROL AGREEMENT

This Change in Control Agreement (this “Agreement”) is by and among McDermott International, Inc. (the “Company”), J. Ray McDermott, Inc. (the “Employer”), and [NAME] (“Executive”).

The Company, the Employer and Executive agree as follows:

1.	D EFINITIONS . Capitalized terms used but not otherwise defined herein are defined in Exhibit A hereto.

2.	S EVERANCE B ENEFITS .

(a)

(i)

Accrued Benefits. The Accrued Benefits, payable on the 60th day after the Covered Termination Date, or such earlier date as may be required by applicable law.

(ii)

SERP. As of the Covered Termination Date, a fully vested and non-forfeitable interest in Executive’s account balance in the SERP, payable in accordance with the terms of the SERP.

(iii)

(iv)

Severance Payment Based on Salary. An amount equal to two (2) times the sum of (i) the Salary, and (ii) Executive’s target award under the EICP for the year in which the Covered Termination Date occurs, in a lump sum in cash on the 60th day after the Covered Termination Date.

(v)

Severance Payment Based on Bonus .

(1)

(2)

(vi)

Other Compensation. The Other Compensation payable or provided in the manner and time specified in applicable documents governing such amounts.

(b)

under this Agreement except those to which the Executive has a vested interest without regard to Section 2(a) of this Agreement.

(c)

Reduction to Avoid Parachute Taxes. Exhibit C hereto sets forth the manner of reduction to be applied to avoid parachute taxes.

4.	I NTERNAL R EVENUE C ODE S ECTION 409A .

(a)

(b)

Executive’s Covered Termination Date or (ii) follows Executive’s date of death, if earlier.

7.	N ON -S OLICITATION .

(a)

For consideration provided under this Agreement, including but not limited to the agreement of the Company and the Employer to provide Executive with

(b)

8.	N OTICES . For purposes of this Agreement, notices and all other communications must be in writing and will be deemed to have been given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:


If to the Company or the Employer:		777 N. Eldridge Parkway
		Houston, TX 77079
		ATTN: Gary L. Carlson,
		Senior Vice President,
		Human Resources

If to Executive:

or to such other address as either party may furnish to the other in writing in accordance with this Section.

10.

11.	W ITHHOLDING OF T AXES . The Company or the Employer, as applicable, may withhold from any payments under this Agreement all federal, state, local or other taxes as may be required pursuant to any applicable law or governmental regulation or ruling.

12.

13.	N UMBER AND G ENDER . Wherever appropriate herein, words used in the singular will include the plural, the plural will include the singular, and the masculine gender will include the feminine gender.

14.

15.

16.	C OUNTERPARTS . This Agreement may be executed in several counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.

17.

[Intentionally Left Blank]


McDERMOTT INTERNATIONAL, INC.

By:
Name:
Title:

Date:

J. RAY McDERMOTT, INC.

By:
Name:
Title:

Date:

EXECUTIVE

By:
Name:

Date:

EXHIBIT A

D EFINITIONS

The following terms have the meanings set forth below.

“Accrued Benefits” means

(i)

any portion of Executive’s Salary earned through the Covered Termination Date and not yet paid;

(ii)

(iii)

any earned vacation pay not theretofore used or paid in accordance with the Company’s policy for payment of earned and unused vacation time.

“Affiliate” means an Affiliate within the meaning of Rule 12b-2 promulgated under Section 12 of the Exchange Act.

“Board” means the Board of Directors of the Company.

“ Cause ” means

(i)

(ii)

the engaging by Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company; or

(iii)

the conviction of Executive with no further possibility of appeal for, or plea of guilty or nolo contendere by Executive to, any felony.

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A “Change in Control” will be deemed to have occurred upon the occurrence of any of the following:

(a)

(b)

Board Majority Change : Individuals who are Incumbent Directors cease for any reason to constitute a majority of the members of the Board; or

(c)

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(d)

(e)

Other Circumstances : Such other circumstances as may be deemed by the Board in its sole discretion to constitute a change in control of the Company.

For purposes of the definition of a “Change in Control”,

(1)

“Person” means an individual, entity or group;

(2)

“group” has the same meaning as used in Section 13(d)(3) of the Exchange Act;

(3)

“beneficial owner” is used as it is defined for purposes of Rule 13d-3 under the Exchange Act;

(4)

(5)

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(6)

“election contest” is used as it is defined for purposes of Rule 14a-11 under the Exchange Act;

(7)

“Business Combination” means

(x)

a merger or consolidation involving the Company or its stock, or

(y)

an acquisition by the Company, directly or through one or more subsidiaries, of another entity or its stock or assets;

(8)

(9)

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” means McDermott International, Inc., and, except for purposes of determining whether a Change in Control has occurred, any successor thereto.

“Covered Termination” means a termination of Executive’s employment (such that Executive ceases to be employed by the Employer, the Company or any of their respective

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(a)

an involuntary termination that does not result from any of the following:

(1)

death;

(2)

Disability; or

(3)

termination for Cause; or

(b)

a termination by Executive for Good Reason.

“EICP” means the McDermott International, Inc. Executive Incentive Compensation Plan, or any successor plan thereto.

“Employer” means J. Ray McDermott, Inc., and any successor thereto.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Excise Tax” means any excise tax imposed under Code Section 4999.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Good Reason” means any one or more of the following events which occurs following a Change in Control:

(a)

a material diminution in the duties or responsibilities of Executive from those applicable immediately before the date on which a Change in Control occurs;

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(b)

a material reduction in Executive’s annual Salary as in effect on the Effective Date of this Agreement or as the same may be increased from time to time;

(c)

(d)

(e)

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“SERP” means the McDermott International, Inc. New Supplemental Executive Retirement Plan, as in effect on the Covered Termination Date.

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EXHIBIT B

W AIVER A ND R ELEASE

FORM WAIVER AND RELEASE

I, individually and on behalf of my heirs, personal representatives, successors, and assigns, release, waive, and discharge the Company and the Employer, their respective predecessors, successors, parents, subsidiaries, merged entities, operating units, affiliates, divisions, insurers, administrators, trustees, and the agents, representatives, officers, directors, shareholders, employees and attorneys of each of the foregoing (hereinafter “Released Parties”), from all claims, debts, liabilities, demands, obligations, promises, acts, agreements, costs, expenses, damages, actions, and causes of action, whether in law or in equity, whether known or unknown, suspected or unsuspected, arising from my employment and termination from employment with the Employer and its affiliates, including but not limited to any and all claims pursuant to Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991 (42 U.S.C. § 2000e, et seq .), which prohibits discrimination in employment based on race, color, national origin, religion or sex; the Civil Rights Act of 1866 (42 U.S.C. §§1981, 1983 and 1985), which prohibits violations of civil rights; the Age Discrimination in Employment Act of 1967, as amended, and as further amended by the Older Workers Benefit Protection Act (29 U.S.C. §621, et seq .), which prohibits age discrimination in employment; the Employee Retirement Income Security Act of 1974, as amended (29 U.S.C. § 1001, et seq . ), which protects certain employee benefits; the Americans with Disabilities Act of 1990, as amended (42 U.S.C. § 12101, et seq .), which prohibits discrimination against the disabled; the Family and Medical Leave Act of 1993 (29 U.S.C. § 2601, et seq .), which provides medical and family leave; the Fair Labor Standards Act (29 U.S.C. § 201, et seq. ), including the wage and hour laws relating to payment of wages; and all other federal, state and local laws and regulations prohibiting employment discrimination. This Release also includes, but is not limited to, a release of any claims for breach of contract, mental pain, suffering and anguish, emotional upset, impairment of economic opportunities, unlawful interference with employment rights, defamation, intentional or negligent infliction of emotional distress, fraud, wrongful termination, wrongful discharge in violation of public policy, breach of any express or implied covenant of good faith and fair dealing, that the Company, the Employer or any of their respective

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Affiliates has dealt with me unfairly or in bad faith, and all other common law contract and tort claims.

5.	I hereby acknowledge and affirm as follows:

I have been advised to consult with an attorney prior to signing this Release.

I have been extended a period of 21 days in which to consider this Release.

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made under the Change in Control Agreement until after the seven-day period has elapsed and I have not revoked the Release.

I have carefully read the contents of this Release and I understand its contents. I am executing this Release voluntarily, knowingly, and without any duress or coercion.

6.	I acknowledge that this Release shall not be construed as an admission by any of the Released Parties of any liability whatsoever, or as an admission by any of the Released Parties of any violation of my rights or of any other person, or any violation of any order, law, statute, duty or contract.

8.	In the event that any provision of this Release should be held void, voidable, or unenforceable, the remaining portions shall remain in full force and effect.

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IN WITNESS WHEREOF, I have signed this Release on the day of , 20 .

Printed Name

Social Security Number

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EXHIBIT C

Excise Tax Modified Cutback Provisions

C-1

For purposes hereof, the following terms have the meanings set forth below:

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Exhibit 10.11

CHANGE IN CONTROL AGREEMENT

The Company, the Employer and Executive agree as follows:

1.	D EFINITIONS . Capitalized terms used but not otherwise defined herein are defined in Exhibit A hereto.

2.	S EVERANCE B ENEFITS .

(a)

(i)

Accrued Benefits. The Accrued Benefits, payable on the 60th day after the Covered Termination Date, or such earlier date as may be required by applicable law.

(ii)

SERP. As of the Covered Termination Date, a fully vested and non-forfeitable interest in Executive’s account balance in the SERP, payable in accordance with the terms of the SERP.

(iii)

(iv)

(v)

Severance Payment Based on Bonus .

(1)

(2)

(vi)

Other Compensation. The Other Compensation payable or provided in the manner and time specified in applicable documents governing such amounts.

(b)

under this Agreement except those to which the Executive has a vested interest without regard to Section 2(a) of this Agreement.

(c)

Reduction to Avoid Parachute Taxes. Exhibit C hereto sets forth the manner of reduction to be applied to avoid parachute taxes.

4.	I NTERNAL R EVENUE C ODE S ECTION 409A.

(a)

(b)

Executive’s Covered Termination Date or (ii) follows Executive’s date of death, if earlier.

7.	N ON -S OLICITATION .

(a)

For consideration provided under this Agreement, including but not limited to the agreement of the Company and the Employer to provide Executive with

(b)

8.	N OTICES . For purposes of this Agreement, notices and all other communications must be in writing and will be deemed to have been given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:


If to the Company or the Employer:		777 N. Eldridge Parkway
		Houston, TX 77079
		ATTN: Gary L. Carlson,
		Senior Vice President,
		Human Resources

If to Executive:

or to such other address as either party may furnish to the other in writing in accordance with this Section.

10.

11.	W ITHHOLDING OF T AXES . The Company or the Employer, as applicable, may withhold from any payments under this Agreement all federal, state, local or other taxes as may be required pursuant to any applicable law or governmental regulation or ruling.

12.

13.	N UMBER AND G ENDER . Wherever appropriate herein, words used in the singular will include the plural, the plural will include the singular, and the masculine gender will include the feminine gender.

14.

C ONFLICTS . This Agreement constitutes the entire understanding of the parties with respect to its subject matter and supersedes any other agreement or other understanding, whether oral or written, express or implied, between them concerning, related to or otherwise in connection with, the subject matter hereof; provided that: if Executive is entitled to payments and benefits under both Section 2 of this Agreement and the Restructuring Transaction Retention Agreement between the Company and Executive, dated as of December 10, 2009 (the “Retention Agreement”), Executive will receive payments and benefits only under the Retention Agreement (and not under Section 2 of this Agreement), (it being the intention of the parties hereto that, in no event, shall substantially the same benefits become payable under both the Retention Agreement and Section 2 of this Agreement). Without limiting the generality of the foregoing, this Agreement supersedes the Change in Control Agreement by and between the Company, and Executive, dated October 1, 2008 (the “Prior Change in Control Agreement”) which is hereby terminated. Additionally, Paragraph X of the Retention Agreement is hereby

amended to eliminate the preservation of benefits under Section I(f) of the Prior Change in Control Agreement.

15.

16.	C OUNTERPARTS . This Agreement may be executed in several counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.

17.

[Intentionally Left Blank]


McDERMOTT INTERNATIONAL, INC.

By:
Name:
Title:

Date:

J. RAY McDERMOTT, INC.

By:
Name:
Title:

Date:

EXECUTIVE

By:
Name:

Date:

EXHIBIT A

D EFINITIONS

The following terms have the meanings set forth below.

“Accrued Benefits” means

(i)

any portion of Executive’s Salary earned through the Covered Termination Date and not yet paid;

(ii)

(iii)

any earned vacation pay not theretofore used or paid in accordance with the Company’s policy for payment of earned and unused vacation time.

“Affiliate” means an Affiliate within the meaning of Rule 12b-2 promulgated under Section 12 of the Exchange Act.

“Board” means the Board of Directors of the Company.

“ Cause ” means

(i)

(ii)

the engaging by Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company; or

(iii)

the conviction of Executive with no further possibility of appeal for, or plea of guilty or nolo contendere by Executive to, any felony.

A-1

A “Change in Control” will be deemed to have occurred upon the occurrence of any of the following:

(a)

(b)

Board Majority Change : Individuals who are Incumbent Directors cease for any reason to constitute a majority of the members of the Board; or

(c)

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(d)

(e)

Other Circumstances : Such other circumstances as may be deemed by the Board in its sole discretion to constitute a change in control of the Company.

For purposes of the definition of a “Change in Control”,

(1)

“Person” means an individual, entity or group;

(2)

“group” has the same meaning as used in Section 13(d)(3) of the Exchange Act;

(3)

“beneficial owner” is used as it is defined for purposes of Rule 13d-3 under the Exchange Act;

(4)

(5)

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(6)

“election contest” is used as it is defined for purposes of Rule 14a-11 under the Exchange Act;

(7)

“Business Combination” means

(x)

a merger or consolidation involving the Company or its stock, or

(y)

an acquisition by the Company, directly or through one or more subsidiaries, of another entity or its stock or assets;

(8)

(9)

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” means McDermott International, Inc., and, except for purposes of determining whether a Change in Control has occurred, any successor thereto.

“Covered Termination” means a termination of Executive’s employment (such that Executive ceases to be employed by the Employer, the Company or any of their respective

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(a)

an involuntary termination that does not result from any of the following:

(1)

death;

(2)

Disability; or

(3)

termination for Cause; or

(b)

a termination by Executive for Good Reason.

“EICP” means the McDermott International, Inc. Executive Incentive Compensation Plan, or any successor plan thereto.

“Employer” means J. Ray McDermott, Inc., and any successor thereto.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Excise Tax” means any excise tax imposed under Code Section 4999.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Good Reason” means any one or more of the following events which occurs following a Change in Control:

(a)

a material diminution in the duties or responsibilities of Executive from those applicable immediately before the date on which a Change in Control occurs;

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(b)

a material reduction in Executive’s annual Salary as in effect on the Effective Date of this Agreement or as the same may be increased from time to time;

(c)

(d)

(e)

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“SERP” means the McDermott International, Inc. New Supplemental Executive Retirement Plan, as in effect on the Covered Termination Date.

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EXHIBIT B

W AIVER A ND R ELEASE

FORM WAIVER AND RELEASE

I, individually and on behalf of my heirs, personal representatives, successors, and assigns, release, waive, and discharge the Company and the Employer, their respective predecessors, successors, parents, subsidiaries, merged entities, operating units, affiliates, divisions, insurers, administrators, trustees, and the agents, representatives, officers, directors, shareholders, employees and attorneys of each of the foregoing (hereinafter “Released Parties”), from all claims, debts, liabilities, demands, obligations, promises, acts, agreements, costs, expenses, damages, actions, and causes of action, whether in law or in equity, whether known or unknown, suspected or unsuspected, arising from my employment and termination from employment with the Employer and its affiliates, including but not limited to any and all claims pursuant to Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991 (42 U.S.C. § 2000e, et seq .), which prohibits discrimination in employment based on race, color, national origin, religion or sex; the Civil Rights Act of 1866 (42 U.S.C. §§1981, 1983 and 1985), which prohibits violations of civil rights; the Age Discrimination in Employment Act of 1967, as amended, and as further amended by the Older Workers Benefit Protection Act (29 U.S.C. §621, et seq .), which prohibits age discrimination in employment; the Employee Retirement Income Security Act of 1974, as amended (29 U.S.C. § 1001, et seq . ), which protects certain employee benefits; the Americans with Disabilities Act of 1990, as amended (42 U.S.C. § 12101, et seq .), which prohibits discrimination against the disabled; the Family and Medical Leave Act of 1993 (29 U.S.C. § 2601, et seq .), which provides medical and family leave; the Fair Labor Standards Act (29 U.S.C. § 201, et seq. ), including the wage and hour laws relating to payment of wages; and all other federal, state and local laws and regulations prohibiting employment discrimination. This Release also includes, but is not limited to, a release of any claims for breach of contract, mental pain, suffering and anguish, emotional upset, impairment of economic opportunities, unlawful interference with employment rights, defamation, intentional or negligent infliction of emotional distress, fraud, wrongful termination, wrongful discharge in violation of public policy, breach of any express or implied covenant of good faith and fair dealing, that the Company, the Employer or any of their respective

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Affiliates has dealt with me unfairly or in bad faith, and all other common law contract and tort claims.

5.	I hereby acknowledge and affirm as follows:

I have been advised to consult with an attorney prior to signing this Release.

I have been extended a period of 21 days in which to consider this Release.

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made under the Change in Control Agreement until after the seven-day period has elapsed and I have not revoked the Release.

I have carefully read the contents of this Release and I understand its contents. I am executing this Release voluntarily, knowingly, and without any duress or coercion.

6.	I acknowledge that this Release shall not be construed as an admission by any of the Released Parties of any liability whatsoever, or as an admission by any of the Released Parties of any violation of my rights or of any other person, or any violation of any order, law, statute, duty or contract.

8.	In the event that any provision of this Release should be held void, voidable, or unenforceable, the remaining portions shall remain in full force and effect.

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IN WITNESS WHEREOF, I have signed this Release on the day of , 20 .





Printed Name


Social Security Number

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EXHIBIT C

Excise Tax Modified Cutback Provisions

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For purposes hereof, the following terms have the meanings set forth below:

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EXHIBIT 31.1

CERTIFICATIONS

I, Stephen M. Johnson, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of McDermott International, Inc. for the quarterly period ended June 30, 2010;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 9, 2010

/s/ Stephen M. Johnson

Stephen M. Johnson

President and Chief Executive Officer

EXHIBIT 31.2

I, Perry L. Elders, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of McDermott International, Inc. for the quarterly period ended June 30, 2010;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 9, 2010

/s/ Perry L. Elders

Perry L. Elders

Senior Vice President and Chief Financial Officer

EXHIBIT 32.1

MCDERMOTT INTERNATIONAL, INC.

Certification Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), I, Stephen M. Johnson, Chief Executive Officer of McDermott International, Inc., a Panamanian corporation (the “Company”), hereby certify, to my knowledge, that:

(1)

the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 9, 2010

/s/ Stephen M. Johnson

Stephen M. Johnson

President and Chief Executive Officer

EXHIBIT 32.2

MCDERMOTT INTERNATIONAL, INC.

Certification Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), I, Perry L. Elders, Senior Vice President and Chief Financial Officer of McDermott International, Inc., a Panamanian corporation (the “Company”), hereby certify, to my knowledge, that:

(1)

(2)

information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 9, 2010

/s/ Perry L. Elders

Perry L. Elders

Senior Vice President and Chief Financial Officer