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, 2018

OR
¨

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. 001-36876  

BABCOCK & WILCOX ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
 
47-2783641
(State or other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
THE HARRIS BUILDING
 
 
13024 BALLANTYNE CORPORATE PLACE, SUITE 700
 
 
CHARLOTTE, NORTH CAROLINA
 
28277
(Address of Principal Executive Offices)
 
(Zip Code)
Registrant's Telephone Number, Including Area Code: (704) 625-4900

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, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
x
  
Accelerated filer
 
¨

 
 
 
 
Non-accelerated filer
 
¨   (Do not check if a smaller reporting company)
  
Smaller reporting company
 
¨

 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extension transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 3, 2018 was 168,675,097 .

1





BABCOCK & WILCOX ENTERPRISES, INC.
FORM 10-Q
TABLE OF CONTENTS
 
 
PAGE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2






PART I - FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements

BABCOCK & WILCOX ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands, except per share amounts)
2018
2017
 
2018
2017
Revenues
$
291,337

$
306,231

 
$
544,513

$
654,303

Costs and expenses:

 
 
 
 
Cost of operations
332,403

375,824

 
609,748

674,282

Selling, general and administrative expenses
52,248

57,370

 
114,746

114,056

Goodwill impairment
37,540


 
37,540


Restructuring activities and spin-off transaction costs
3,826

1,952

 
10,688

4,984

Research and development costs
1,287

2,437

 
2,429

4,230

Loss on asset disposals, net
1,384

2

 
1,384

2

Total costs and expenses
428,688

437,585

 
776,535

797,554

Equity in income and impairment of investees

(15,232
)
 
(11,757
)
(14,614
)
Operating loss
(137,351
)
(146,586
)
 
(243,779
)
(157,865
)
Other income (expense):
 
 
 
 
 
Interest income
107

125

 
260

237

Interest expense
(11,877
)
(6,283
)
 
(25,329
)
(7,986
)
Loss on debt extinguishment
(49,241
)

 
(49,241
)

Benefit plans, net
7,086

5,249

 
14,083

9,462

Foreign exchange
(20,198
)
2,294

 
(17,741
)
2,339

Other – net
(131
)
43

 
266

78

Total other income (expense)
(74,254
)
1,428

 
(77,702
)
4,130

Loss before income tax expense (benefit)
(211,605
)
(145,158
)
 
(321,481
)
(153,735
)
Income tax expense (benefit)
(1,934
)
3,458

 
5,029

346

Loss from continuing operations
(209,671
)
(148,616
)
 
(326,510
)
(154,081
)
Loss from discontinued operations, net of tax
(55,932
)
(2,234
)
 
(59,428
)
(3,610
)
Net loss
(265,603
)
(150,850
)
 
(385,938
)
(157,691
)
Net income attributable to noncontrolling interest
(165
)
(149
)
 
(263
)
(353
)
Net loss attributable to stockholders
$
(265,768
)
$
(150,999
)
 
$
(386,201
)
$
(158,044
)
 
 
 
 
 
 
Basic and diluted loss per share - continuing operations
$
(1.68
)
$
(3.05
)

$
(3.85
)
$
(3.16
)
Basic and diluted loss per share - discontinued operations
(0.44
)
(0.04
)

(0.70
)
(0.08
)
Basic and diluted loss per share
$
(2.12
)
$
(3.09
)

$
(4.55
)
$
(3.24
)










Shares used in the computation of earnings per share:
 
 
 
 
 
Basic and diluted
125,207

48,854

 
84,921

48,797

See accompanying notes to condensed consolidated financial statements.

3





BABCOCK & WILCOX ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2018
2017
 
2018
2017
Net loss
$
(265,603
)
$
(150,850
)
 
$
(385,938
)
$
(157,691
)
Other comprehensive income (loss):
 
 
 
 
 
 Currency translation adjustments (CTA), net of taxes
8,517

6,757

 
11,740

12,174

 
 
 
 
 
 
Reclassification adjustment for CTA gains included in net loss, net of taxes


 
(2,044
)

 
 
 
 
 
 
Derivative financial instruments:
 
 
 
 
 
Unrealized (gains) losses on derivative financial instruments
(602
)
(3,657
)
 
999

2,244

Income taxes
(89
)
(1,453
)
 
288

(139
)
Unrealized (gains) losses on derivative financial instruments, net of taxes
(513
)
(2,204
)
 
711

2,383

Derivative financial instrument (gains) losses reclassified into net income
489

(1,550
)
 
(1,139
)
(6,448
)
Income taxes
108

(892
)
 
(248
)
(1,947
)
Reclassification adjustment for (gains) losses included in net loss, net of taxes
381

(658
)
 
(891
)
(4,501
)
 
 
 
 
 
 
Benefit obligations:
 
 
 
 
 
Unrealized gains (losses) on benefit obligations
112

(97
)
 
57

(141
)
Unrealized gains (losses) on benefit obligations, net of taxes
112

(97
)
 
57

(141
)
Amortization of benefit plan benefits
(1,366
)
(789
)
 
(1,750
)
(1,662
)
Income taxes
1,892

11

 
1,892

20

Amortization of benefit plan benefits, net of taxes
(3,258
)
(800
)
 
(3,642
)
(1,682
)
 
 
 
 
 
 
Other

(20
)
 
(38
)
14

 
 
 
 
 
 
Other comprehensive income
5,239

2,978

 
5,893

8,247

Total comprehensive loss
(260,364
)
(147,872
)
 
(380,045
)
(149,444
)
Comprehensive income (loss) attributable to noncontrolling interest
(125
)
164

 
(198
)
(26
)
Comprehensive loss attributable to stockholders
$
(260,489
)
$
(147,708
)
 
$
(380,243
)
$
(149,470
)
See accompanying notes to condensed consolidated financial statements.

4





BABCOCK & WILCOX ENTERPRISES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amount)
June 30, 2018
December 31, 2017
Cash and cash equivalents
$
28,512

$
43,717

Restricted cash and cash equivalents
32,302

25,980

Accounts receivable – trade, net
236,718

252,508

Accounts receivable – other
37,807

78,813

Contracts in progress
149,040

135,811

Inventories
67,274

72,917

Other current assets
37,787

34,039

Current assets of discontinued operations
83,331

88,472

Total current assets
672,771

732,257

Net property, plant and equipment
105,765

114,707

Goodwill
47,179

85,678

Deferred income taxes
99,080

97,467

Investments in unconsolidated affiliates
8,421

43,278

Intangible assets
36,368

42,065

Other assets
28,013

25,741

Noncurrent assets of discontinued operations
106,510

181,036

Total assets
$
1,104,107

$
1,322,229

 
 
 
Foreign revolving credit facilities
$
4,124

$
9,173

Second lien term loan facility

160,141

Accounts payable
191,664

205,396

Accrued employee benefits
27,072

27,058

Advance billings on contracts
149,768

171,997

Accrued warranty expense
53,138

33,514

Other accrued liabilities
88,351

89,549

Current liabilities of discontinued operations
57,316

47,499

Total current liabilities
571,433

744,327

U.S. revolving credit facility
196,300

94,300

Pension and other accumulated postretirement benefit liabilities
235,369

250,002

Other noncurrent liabilities
37,214

29,897

Noncurrent liabilities of discontinued operations
8,236

13,000

Total liabilities
1,048,552

1,131,526

Commitments and contingencies


Stockholders' equity:
 
 
Common stock, par value $0.01 per share, authorized 200,000 shares; issued and outstanding 168,660 and 44,065 shares at June 30, 2018 and December 31, 2017, respectively
1,746

499

Capital in excess of par value
1,045,901

800,968

Treasury stock at cost, 5,830 and 5,681 shares at June 30, 2018 and December 31, 2017, respectively
(105,531
)
(104,785
)
Retained deficit
(878,823
)
(492,150
)
Accumulated other comprehensive loss
(16,536
)
(22,429
)
Stockholders' equity attributable to shareholders
46,757

182,103

Noncontrolling interest
8,798

8,600

Total stockholders' equity
55,555

190,703

Total liabilities and stockholders' equity
$
1,104,107

$
1,322,229


See accompanying notes to condensed consolidated financial statements.

5





BABCOCK & WILCOX ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
Six Months Ended June 30,
(in thousands)
 
2018
2017
Cash flows from operating activities:
 
 
Net loss
 
$
(385,938
)
$
(157,691
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization of long-lived assets
 
16,938

21,465

Amortization of debt issuance costs and debt discount
 
7,236

764

Loss on debt extinguishment
 
49,241


Goodwill impairment of discontinued operations
 
72,309


Goodwill impairment
 
37,540


Income from equity method investees
 
(6,605
)
(3,579
)
Other than temporary impairment of equity method investment in TBWES
 
18,362

18,193

Losses on asset disposals and impairments
 
1,934

114

Reserve for claims receivable
 
15,523


Provision for (benefit from) deferred income taxes
 
(1,477
)
(1,326
)
Mark to market gains and prior service cost amortization for pension and postretirement plans
 
(1,149
)
(600
)
Stock-based compensation, net of associated income taxes
 
1,030

6,522

Changes in assets and liabilities
 
 
 
Accounts receivable
 
40,641

6,343

Contracts in progress and advance billings on contracts
 
(30,494
)
6,704

Inventories
 
5,925

3,381

Income taxes
 
(4,036
)
(899
)
Accounts payable
 
(15,103
)
25,454

Accrued and other current liabilities
 
30,051

13,839

Pension liabilities, accrued postretirement benefits and employee benefits
 
(17,579
)
(13,040
)
Other, net
 
15,008

(7,331
)
Net cash from operating activities
 
(150,643
)
(81,687
)
Cash flows from investing activities:
 
 
 
Purchase of property, plant and equipment
 
(4,350
)
(7,741
)
Acquisition of business, net of cash acquired
 

(52,547
)
Proceeds from sale of business
 
5,105


Proceeds from sale of equity method investment in a joint venture
 
21,078


Purchases of available-for-sale securities
 
(11,383
)
(20,328
)
Sales and maturities of available-for-sale securities
 
13,578

21,840

Other, net
 
189

(90
)
Net cash from investing activities
 
24,217

(58,866
)

6





 
 
Six Months Ended June 30,
(in thousands)
 
2018
2017
Cash flows from financing activities:
 
 
 
Borrowings under our U.S. revolving credit facility
 
307,300

423,823

Repayments of our U.S. revolving credit facility
 
(205,300
)
(315,493
)
Repayments of our second lien term loan facility
 
(212,590
)

Borrowings under our foreign revolving credit facilities
 

240

Repayments of our foreign revolving credit facilities
 
(5,022
)
(2,157
)
Proceeds from rights offering
 
248,375


Costs related to rights offering
 
(3,225
)

Debt issuance costs
 
(6,736
)
(1,422
)
Shares of our common stock returned to treasury stock
 
(746
)
(873
)
Other, net
 

(571
)
Net cash from financing activities
 
122,056

103,547

Effects of exchange rate changes on cash
 
(7,026
)
4,049

Net decrease in cash, cash equivalents and restricted cash
 
(11,396
)
(32,957
)
Less net increase (decrease) in cash and cash equivalents of discontinued operations
 
(2,513
)
167

Net decrease in cash, cash equivalents and restricted cash of continuing operations
 
(8,883
)
(33,124
)
Cash, cash equivalents and restricted cash of continuing operations, beginning of period
 
69,697

115,196

Cash, cash equivalents and restricted cash of continuing operations, end of period
 
$
60,814

$
82,072


See accompanying notes to condensed consolidated financial statements.

7





BABCOCK & WILCOX ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018

NOTE 1 – BASIS OF PRESENTATION

These interim financial statements of Babcock & Wilcox Enterprises, Inc. ("B&W," "we," "us," "our" or "the Company") have been prepared in accordance with accounting principles generally accepted in the United States and Securities and Exchange Commission instructions for interim financial information, and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2017 ("Annual Report"). Accordingly, significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed in our Annual Report. We have included all adjustments, in the opinion of management, consisting only of normal, recurring adjustments, necessary for a fair presentation of the interim financial statements. We have eliminated all intercompany transactions and accounts. We present the notes to our condensed consolidated financial statements on the basis of continuing operations, unless otherwise stated.

Going Concern Considerations

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty.

We face liquidity challenges from additional losses recognized in the fourth quarter of 2017 and the first half of 2018 on our European renewable energy contracts described in Note 5 to the condensed consolidated financial statements, which caused us to be out of compliance with certain financial covenants in the agreements governing certain of our debt at December 31, 2017, March 31, 2018 and June 30, 2018. To avoid default, we obtained amendments and waivers to our U.S. revolving credit facility, dated May 11, 2015 (as amended, the "U.S. Revolving Credit Facility") that temporarily waived these financial covenant defaults, as described in Note 17 .

In an effort to address our liquidity needs and the going concern uncertainty, we have:
raised gross proceeds of $248.4 million on April 30, 2018 through a rights offering as described in Note 19 (the "Rights Offering");
repaid on May 4, 2018 the Second Lien Term Loan Facility described in Note 18 , which will save approximately $25 million in annual interest payments and $30 million of annual interest expense;
entered into an agreement on June 5, 2018 to sell our MEGTEC and Universal businesses for $130 million (subject to adjustment);
entered into an agreement on August 9, 2018 to sell a subsidiary that holds two operations and maintenance contracts for waste-to-energy facilities in West Palm Beach, Florida for $45 million (subject to adjustment), as described in Note 25 ;
sold our equity method investments in Babcock & Wilcox Beijing Company, Ltd. ("BWBC"), a joint venture in China, and Thermax Babcock & Wilcox Energy Solutions Private Limited ("TBWES"), a joint venture in India, and settled related contractual claims, resulting in proceeds of $21.1 million in the second quarter of 2018 and $15.0 million in July 2018, respectively;
sold another non-core business for $5.1 million in the first quarter of 2018;
initiated restructuring actions and other additional cost reductions in the second quarter of 2018 that are designed to save approximately $34 million annually; and
entered into several waivers and amendments to avoid default to our U.S. Revolving Credit Facility as described in Note 17, the most recent of which is dated August 9, 2018. As part of this latest amendment, our lenders agreed to reduce the minimum liquidity required under the facility, which has the effect of increasing the amount we may borrow by up to $25 million Other liquidity measures that must also be completed include: a) the receipt of $30 million in net proceeds from the Last Out Loan, for which a binding commitment letter with Vintage Capital Management LLC, a related party, was executed on August 9, 2018, which is fully backstopped by B. Riley FBR, Inc., a related party; and b) obtaining $25 million of written commitments for concessions from customers on the Renewable loss contracts through a combination of cash contributions, loans and forgiveness of indebtedness and performance obligations by September 30, 2018.


8





Additionally, we continue to evaluate further dispositions and additional opportunities for cost savings. We also continue to pursue insurance recoveries, additional relief from customers and will pursue other claims where appropriate and available. Management believes it is taking all prudent actions to address the substantial doubt about our ability to continue as a going concern, but we cannot assert that it is probable that our plans will fully mitigate the liquidity challenges we face. Our plan is designed to provide us with what we believe will be adequate liquidity to meet our obligations for at least the twelve month period following August 9, 2018; however, our remediation plan depends on conditions and matters that may be outside of our control, including regulatory approvals that may be required to sell certain assets, agreement to concessions from customers on the Renewable loss contracts as required under the amended terms of our U.S. Revolving Credit Facility and our ability to obtain and maintain sufficient capacity to support contract security requirements for current and future business. Additionally, our ability to operate within the amended covenants and borrowing limits associated with our U.S. Revolving Credit Facility are dependent on our future financial operating results. If we cannot continue as a going concern, material adjustments to the carrying values and classifications of our assets and liabilities and the reported amounts of income and expense would be required.

NOTE 2 – EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share of our common stock, net of noncontrolling interest:
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands, except per share amounts)
2018
2017
 
2018
2017
Loss from continuing operations
$
(209,836
)
$
(148,765
)
 
$
(326,773
)
$
(154,434
)
Loss from discontinued operations, net of tax
(55,932
)
(2,234
)
 
(59,428
)
(3,610
)
Net loss attributable to shareholders
$
(265,768
)
$
(150,999
)
 
$
(386,201
)
$
(158,044
)
 
 
 
 
 
 
Weighted average shares used to calculate basic and diluted earnings per share
125,207

48,854

 
84,921

48,797

 
 
 
 
 
 
Basic and diluted loss per share - continuing operations
$
(1.68
)
$
(3.05
)
 
$
(3.85
)
$
(3.16
)
Basic and diluted loss per share - discontinued operations
(0.44
)
(0.04
)
 
(0.70
)
(0.08
)
Basic and diluted loss per share
$
(2.12
)
$
(3.09
)
 
$
(4.55
)
$
(3.24
)

Because we incurred a net loss in the three and six months months ended June 30, 2018 and 2017 , basic and diluted shares are the same.

If we had net income in the three months ended June 30, 2018 and 2017 , diluted shares would include an additional 0.8 million and 0.3 million shares, respectively. If we had net income in the six months ended June 30, 2018 and 2017, diluted shares would include an additional 0.9 million and 0.4 million shares, respectively.

We excluded 3.2 million and 1.9 million shares related to stock options from the diluted share calculation for the three months ended June 30, 2018 and 2017 , respectively, because their effect would have been anti-dilutive. We excluded 2.5 million and 1.9 million shares related to stock options from the diluted share calculation for the six months ended June 30, 2018 and 2017 , respectively, because their effect would have been anti-dilutive.

NOTE 3 – DISCONTINUED OPERATIONS

On June 5, 2018, we entered into a stock purchase agreement with Dürr AG and its wholly owned subsidiary, Dürr Inc., to sell our MEGTEC and Universal businesses for $130 million , subject to adjustment. As a result, the MEGTEC and Universal businesses, which were previously included in our Industrial segment, are classified as held for sale and as discontinued operations because the disposal represents a strategic shift that will have a major effect on our operations. Accordingly, we recorded a $72.3 million non-cash impairment charge in June 2018 to reduce the carrying value of the MEGTEC and Universal businesses to the fair value, less an amount of estimated sale costs; the non-cash impairment charge is included in Loss from discontinued operations, net of tax , and is presented below as a goodwill impairment. The sale is expected to close in third quarter 2018, subject to the satisfaction of customary closing conditions, including approval by the Committee on

9





Foreign Investment in the United States. We expect to use proceeds from the transaction primarily to reduce outstanding balances under our bank credit facilities.

The following table presents selected financial information regarding the discontinued operations included in the Condensed Consolidated Statement of Operations:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2018
2017
 
2018
2017
Revenue
$
58,257

$
43,598

 
$
116,439

$
86,630

Cost of operations
$
45,521

$
35,076

 
$
90,189

$
69,097

Selling, general and administrative
$
7,597

$
11,214

 
$
17,024

$
21,444

Goodwill impairment
$
72,309

$

 
$
72,309

$

Restructuring charge
$

$
151

 
$

$
151

Research and development
$
390

$
464

 
$
756

$
933

Loss on asset disposal
$

$
2

 
$

$
2

Operating loss
$
(67,560
)
$
(3,309
)
 
$
(63,839
)
$
(4,997
)
Net loss
$
(55,932
)
$
(2,234
)
 
$
(59,428
)
$
(3,610
)

The following table presents the major classes of assets that have been presented as assets and liabilities held for sale in our Condensed Consolidated Balance Sheets:
(in thousands)
June 30, 2018
 
December 31, 2017
Cash and cash equivalents
$
10,437

 
$
12,950

Accounts receivable – trade, net
37,821

 
39,196

Accounts receivable – other
(1,430
)
 
157

Contracts in progress
25,514

 
25,409

Inventories
8,540

 
9,245

Other current assets
2,449

 
1,515

Current assets of discontinued operations
83,331

 
88,472

Net property, plant and equipment
26,234

 
27,224

Goodwill
46,411

 
118,720

Deferred income taxes
1,462

 
359

Intangible assets
32,364

 
34,715

Other assets
39

 
18

Noncurrent assets of discontinued operations
106,510

 
181,036

Total assets of discontinued operations
$
189,841

 
$
269,508

 
 
 
 
Accounts payable
16,520

 
19,838

Accrued employee benefits
3,027

 
3,095

Advance billings on contracts
12,521

 
9,073

Accrued warranty expense
5,645

 
5,506

Other accrued liabilities
19,603

 
9,987

Current liabilities of discontinued operations
57,316

 
47,499

Pension and other accumulated postretirement benefit liabilities
6,231

 
6,388

Other noncurrent liabilities
2,005

 
6,612

Noncurrent liabilities of discontinued operations
8,236

 
13,000

Total liabilities of discontinued operations
$
65,552

 
$
60,499



10





The significant components included in our Condensed Consolidated Statements of Cash Flows for the discontinued operations are as follows:
 
Six Months Ended June 30,
(in thousands)
2018
2017
Depreciation and amortization
$
3,036

$
5,307

Goodwill impairment
$
72,309

$

Provision for (benefit from) deferred income taxes
$
(815
)
$
(275
)
Purchase of property, plant equipment
$
77

$
486

Acquisition of Universal, net of cash acquired
$

$
(52,547
)

NOTE 4 – SEGMENT REPORTING

Our operations are assessed based on three reportable segments, which are summarized as follows:

Power segment : focused on the supply of and aftermarket services for steam-generating, environmental and auxiliary equipment for power generation and other industrial applications.
Renewable segment : focused on the supply of steam-generating systems, environmental and auxiliary equipment for the waste-to-energy and biomass power generation industries.
Industrial segment : focused on custom-engineered cooling systems for steam applications along with related aftermarket services.

The segment information presented in the table below reflects the product line revenues that are reviewed by each segment's manager. These gross product line revenues exclude eliminations of revenues generated from sales to other segments or to other product lines within the segment. The primary component of the Power segment elimination is revenue associated with construction services. An analysis of our operations by segment is as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2018
2017
 
2018
2017
Revenues:
 
 
 
 
 
Power segment
 
 
 
 
 
Retrofits & continuous emissions monitoring systems
$
69,344

$
82,070

 
$
131,327

$
143,444

New build utility and environmental
42,194

44,859

 
55,041

97,550

Aftermarket parts and field engineering services
63,299

62,448

 
136,372

137,581

Industrial steam generation
28,464

41,940

 
43,370

64,813

Eliminations
(5,549
)
(17,561
)
 
(9,232
)
(33,336
)
 
197,752

213,756

 
356,878

410,052

Renewable segment
 
 
 
 
 
Renewable new build and services
40,077

32,130

 
84,788

121,002

Operations and maintenance
14,925

15,944

 
30,172

32,608

 
55,002

48,074

 
114,960

153,610

Industrial segment
 
 
 
 
 
New build cooling systems
33,699

30,532

 
62,744

66,906

Aftermarket cooling system services
12,316

16,100

 
20,015

28,911

 
46,015

46,632

 
82,759

95,817

 
 
 
 
 
 
Eliminations
(7,432
)
(2,231
)
 
(10,084
)
(5,176
)
 
$
291,337

$
306,231

 
$
544,513

$
654,303



11





Beginning in 2018, we changed our primary measure of segment profitability from gross profit to adjusted earnings before interest, tax, depreciation and amortization ("EBITDA"). The presentation of the components of our gross profit and adjusted EBITDA in the tables below are consistent with the way our chief operating decision maker reviews the results of our operations and makes strategic decisions about our business. Items such as gains or losses on asset sales, mark-to-market ("MTM") pension adjustments, restructuring and spin costs, impairments, losses on debt extinguishment, costs related to financial consulting required under Amendments 3 and 5 to our U.S. Revolving Credit Facility and other costs that may not be directly controllable by segment management are not allocated to the segment. Adjusted EBITDA for each segment is presented below with a reconciliation to net income. Adjusted EBITDA is not a recognized term under GAAP and should not be considered in isolation or as an alternative to net earnings (loss), operating profit (loss) or as an alternative to cash flows from operating activities as a measure of our liquidity. Adjusted EBITDA as presented below differs from the calculation used to compute our leverage ratio and interest coverage ratio as defined by our U.S. Revolving Credit Facility. Because all companies do not use identical calculations, the amounts presented for Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

 
Three Months ended June 30,
 
Six Months Ended June 30,
(in thousands)
2018
2017
 
2018
2017
Gross profit (loss) (1) :
 
 
 
 
 
Power segment
$
30,011

$
43,852

 
$
60,876

$
81,562

Renewable segment
(69,329
)
(110,894
)
 
(119,778
)
(100,300
)
Industrial segment
79

187

 
(2,672
)
4,886

Intangible amortization expense included in cost of operations
(1,827
)
(2,738
)
 
(3,661
)
(6,127
)

(41,066
)
(69,593
)
 
(65,235
)
(19,979
)
Selling, general and administrative ("SG&A") expenses
(52,090
)
(57,272
)
 
(114,351
)
(113,852
)
Goodwill impairment
(37,540
)

 
(37,540
)

Restructuring activities and spin-off transaction costs
(3,826
)
(1,952
)
 
(10,688
)
(4,984
)
Research and development costs
(1,287
)
(2,437
)
 
(2,429
)
(4,230
)
Intangible amortization expense included in SG&A
(158
)
(98
)
 
(395
)
(204
)
Equity in loss of investees

(15,232
)
 
(11,757
)
(14,614
)
Loss on asset disposals, net
(1,384
)
(2
)
 
(1,384
)
(2
)
Operating loss
$
(137,351
)
$
(146,586
)
 
$
(243,779
)
$
(157,865
)
(1) Gross profit by segment excludes intangible amortization but includes depreciation.


12






Three Months Ended June 30,

Six Months Ended June 30,
(in thousands)
2018
2017

2018
2017
Adjusted EBITDA









Power segment (1)
$
16,439

$
27,401


$
27,613

$
44,810

Renewable segment
(78,603
)
(123,302
)

(140,357
)
(122,375
)
Industrial segment
(6,222
)
(4,880
)

(13,532
)
(5,385
)
Corporate (2)
(6,194
)
(9,665
)

(17,808
)
(19,393
)
Research and development costs
(1,287
)
(2,437
)

(2,429
)
(4,230
)
Foreign exchange
(20,198
)
2,294

 
(17,741
)
2,339

Other – net
(131
)
43


266

78


(96,196
)
(110,546
)

(163,988
)
(104,156
)










Gain on sale of equity method investment (BWBC)



6,509


Other than temporary impairment of equity method investment in TBWES

(18,193
)

(18,362
)
(18,193
)
Loss on debt extinguishment
(49,241
)


(49,241
)

Loss on asset disposal
(1,513
)


(1,513
)

MTM gain (loss) from benefit plans
544



544

(1,062
)
Financial advisory services included in SG&A
(5,142
)


(8,231
)

Acquisition and integration costs included in SG&A

(535
)


(1,432
)
Goodwill impairment
(37,540
)

 
(37,540
)

Restructuring activities and spin-off transaction costs
(3,826
)
(1,952
)

(10,688
)
(4,984
)
Depreciation & amortization
(6,921
)
(7,774
)

(13,902
)
(16,159
)
Interest expense, net
(11,770
)
(6,158
)

(25,069
)
(7,749
)
Loss before income tax expense
(211,605
)
(145,158
)

(321,481
)
(153,735
)
Income tax expense (benefit)
(1,934
)
3,458


5,029

346

Loss from continuing operations
(209,671
)
(148,616
)

(326,510
)
(154,081
)
Loss from discontinued operations, net of tax
(55,932
)
(2,234
)

(59,428
)
(3,610
)
Net loss
(265,603
)
(150,850
)

(385,938
)
(157,691
)
Net income attributable to noncontrolling interest
(165
)
(149
)

(263
)
(353
)
Net loss attributable to stockholders
$
(265,768
)
$
(150,999
)

$
(386,201
)
$
(158,044
)
(1) Power segment adjusted EBITDA includes $6.4 million and $5.0 million of net benefit from pension and other postretirement benefit plans excluding MTM adjustments in the three months ended June 30, 2018 and 2017, respectively. Power segment adjusted EBITDA includes $13.2 million and $10.0 million of net benefit from pension and other postretirement benefit plans excluding MTM adjustments in the six months ended June 30, 2018 and 2017, respectively.
(2) Allocations are excluded from discontinued operations. Accordingly, allocations previously absorbed by the MEGTEC and Universal businesses in the Industrial segment have been included with other unallocated costs in Corporate, and total $2.9 million and $2.2 million in the three months ended June 30, 2018 and 2017, respectively, and $5.7 million and $4.4 million in the six months ended June 30, 2018 and 2017, respectively.

NOTE 5 – REVENUE RECOGNITION AND CONTRACTS

Adoption of Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("Topic 606")

On January 1, 2018, we adopted Topic 606 using the modified retrospective method applied to all contracts that were not completed as of January 1, 2018. Results for reporting periods beginning on or after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. We recorded a $0.5 million net increase to opening retained earnings as of January 1, 2018 from the cumulative effect of adopting Topic 606 that primarily related to transitioning the timing of certain sales commissions expense. The effect on revenue from adopting Topic 606 was not material for the six months ended June 30, 2018.


13





Revenue Recognition

A performance obligation is a contractual promise to transfer a distinct good or service to the customer. A contract's transaction price is allocated to each distinct performance obligation and is recognized as revenue when (point in time) or as (over time) the performance obligation is satisfied.

Revenue from goods and services transferred to customers at a point in time, which includes certain aftermarket parts and services primarily in the Power and Industrial segments, accounted for 23% and 18% of our revenue for the three months ended June 30, 2018 and 2017, respectively, and 23% and 22% of our revenue for the six months ended June 30, 2018 and 2017, respectively. Revenue on these contracts is recognized when the customer obtains control of the asset, which is generally upon shipment or delivery and acceptance by the customer. Standard commercial payment terms generally apply to these sales.

Revenue from products and services transferred to customers over time accounted for 77% and 82% of our revenue for the three months ended June 30, 2018 and 2017, respectively, and 77% and 78% of our revenue for the six months ended June 30, 2018 and 2017, respectively. Revenue recognized over time primarily relates to customized, engineered solutions and construction services from all three of our segments. Typically, revenue is recognized over time using the percentage-of-completion method that uses costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, overhead and, when appropriate, SG&A expenses. Variable consideration in these contracts includes estimates of liquidated damages, contractual bonuses and penalties, and contract modifications. Substantially all of our revenue recognized over time under the percentage-of-completion method contain a single performance obligation as the interdependent nature of the goods and services provided prevents them from being separately identifiable within the contract. Generally, we try to structure contract milestones to mirror our expected cash outflows over the course of the contract; however, the timing of milestone receipts can greatly affect our overall cash position and have in 2018 in our Renewable segment. Refer to Note 4 for our disaggregation of revenue by product line.

Contract modifications are routine in the performance of our contracts. Contracts are often modified to account for changes in the contract specifications or requirements. In most instances, contract modifications are for goods or services that are not distinct and, therefore, are accounted for as part of the existing contract, with cumulative adjustment to revenue.

We recognize accrued claims in contract revenues for extra work or changes in scope of work to the extent of costs incurred when we believe we have an enforceable right to the modification or claim and the amount can be estimated reliably and its realization is probable. In evaluating these criteria, we consider the contractual/legal basis for the claim, the cause of any additional costs incurred, the reasonableness of those costs and the objective evidence available to support the claim.

We generally recognize sales commissions in equal proportion as revenue is recognized. Our sales agreements are structured such that commissions are only payable upon receipt of payment, thus a capitalized asset at contract inception has not been recorded for sales commission as a liability has not been incurred at that point.

Contract Balances

Contracts in progress, a current asset in our condensed consolidated balance sheets, includes revenues and related costs so recorded, plus accumulated contract costs that exceed amounts invoiced to customers under the terms of the contracts. Advance billings, a current liability in our consolidated balance sheets, includes advance billings on contracts invoices that exceed accumulated contract costs and revenues and costs recognized under the percentage-of-completion method. Most long-term contracts contain provisions for progress payments. Our unbilled receivables do not contain an allowance for credit losses as we expect to invoice customers and collect all amounts for unbilled revenues. We review contract price and cost estimates periodically as the work progresses and reflect adjustments proportionate to the percentage-of-completion in income in the period when those estimates are revised. For all contracts, if a current estimate of total contract cost indicates a loss on a contract, the projected contract loss is recognized in full in the statement of operations and an accrual for the estimated loss on the uncompleted contract is included in other current liabilities in the balance sheet. In addition, when we determine that an uncompleted contract will not be completed on-time and the contract has liquidated damages provisions, we recognize the estimated liquidated damages we will incur and record them as a reduction of the estimated selling price in the period the change in estimate occurs. Losses accrued in advance of the percentage-of-completion of a contract are included in other accrued liabilities, a current liability, in our consolidated balance sheets.


14





The following represent the components of our contracts in progress and advance billings on contracts included in our condensed consolidated balance sheets:
 
June 30,
December 31,
(in thousands)
2018
2017
Contract assets - included in contracts in progress:
 
 
Costs incurred less costs of revenue recognized
$
59,552

$
69,576

Revenues recognized less billings to customers
89,488

66,235

Contracts in progress
$
149,040

$
135,811

Contract liabilities - included in advance billings on contracts:
 
 
Billings to customers less revenues recognized
$
148,313

$
168,880

Costs of revenue recognized less cost incurred
1,455

3,117

Advance billings on contracts
$
149,768

$
171,997

 
 
 
Accrued contract losses
$
53,699

$
40,634


The impact of adopting Topic 606 on components of our contracts in progress and advance billings on contracts was not material at June 30, 2018.

Backlog

On June 30, 2018 we had $1,518 million of remaining performance obligations, which we also refer to as total backlog. We expect to recognize approximately 33% , 17% and 49% of our remaining performance obligations as revenue in the remainder of 2018, 2019 and thereafter, respectively.

Changes in Contract Estimates

As of June 30, 2018, we have estimated the costs to complete all of our in-process contracts in order to estimate revenues in accordance with the percentage-of-completion method of accounting. 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 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, transportation, fluctuations in foreign exchange rates or steel and other raw material prices. Increases in costs on our fixed-price contracts could have a material adverse impact on our consolidated financial condition, results of operations and cash flows. Alternatively, reductions in overall contract costs at completion could materially improve our consolidated financial condition, results of operations and cash flows. Variations from estimated contract performance could result in material adjustments to operating results for any fiscal quarter or year.

In the three and six months ended June 30, 2018 and 2017 , we recognized changes in estimated gross profit related to long-term contracts accounted for on the percentage-of-completion basis, which are summarized as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2018
2017
 
2018
2017
Increases in gross profits for changes in estimates for over time contracts
$
6,019

$
4,982

 
$
13,946

$
14,182

Decreases in gross profits for changes in estimates for over time contracts
(50,327
)
(121,217
)
 
(110,498
)
(124,588
)
Net changes in gross profits for changes in estimates for over time contracts
$
(44,308
)
$
(116,235
)
 
$
(96,552
)
$
(110,406
)

Renewable Loss Contracts

We had four renewable energy contracts in Europe that were loss contracts at December 31, 2016. During the three months ended June 30, 2017, two additional renewable energy contracts in Europe became loss contracts. In the three months ended June 30, 2018 and June 30, 2017, we recorded $57.3 million and $115.2 million in net losses, respectively, inclusive of warranty expense as described in Note 15 , resulting from changes in the estimated revenues and costs to complete certain

15





European renewable energy contracts. These changes in estimates in the three months ended June 30, 2018 and 2017 included increases in our estimates of anticipated liquidated damages that reduced revenue associated with these six contracts by $3.1 million and $16.7 million , respectively. The total anticipated liquidated damages associated with these six contracts was $93.4 million and $49.6 million at June 30, 2018 and December 31, 2017 , respectively. During the sixth months ended June 30, 2017 were corrections that reduced (increased) estimated contract losses at completion by  $1.0 million $(6.0) million  and  $1.1 million  relating to the three months ended December 31, 2016, March 31, 2017 and June 30, 2017, respectively. Management has determined these amounts are immaterial to the consolidated financial statements in both previous periods.

In the six months ended June 30, 2018 and June 30, 2017, we recorded $110.0 million and $112.2 million in net losses, respectively, inclusive of warranty expense as described in Note 15 , resulting from changes in the estimated revenues and costs to complete certain European renewable energy contracts. These changes in estimates in the six months ended June 30, 2018 and 2017 included increases in our estimates of anticipated liquidated damages that reduced revenue associated with these six contracts by $16.3 million and $13.8 million , respectively.

The charges recorded in the three and six months ended June 30, 2018 and June 30, 2017 were due to revisions in the estimated revenues and costs at completion during the period across the six loss contracts described below. Also, as described in Note 17, the August 9, 2018 amendment to the U.S. Revolving Credit Facility requires $25.0 million of concessions from customers on these Renewable loss contracts to be secured by August 31, 2018; however, these concessions have not been included in the contract estimates as of June 30, 2018 because they remained unsigned as of the filing date of these condensed consolidated financial statements. As of June 30, 2018 , the status of these six loss contracts was as follows:

The first contract, a waste-to-energy plant in Denmark, became a loss contract in the second quarter of 2016. As of June 30, 2018 , this contract is approximately 97%  complete and construction activities are complete as of the date of this report. The unit became operational during the second quarter of 2017, and is only pending completion of contractual trial operations and takeover activities and requirements, to which the customer has not yet agreed. Our estimates at June 30, 2018 assume complete takeover by the customer at the end of 2018. During the three and six months ended June 30, 2018 , we recognized additional contract losses of $8.3 million and $15.3 million , respectively, on the contract as a result of differences in actual and estimated costs, schedule delays, issues encountered during trial operations and increases in expected warranty costs. Our estimate at completion as of June 30, 2018 includes $9.4 million of total expected liquidated damages. As of June 30, 2018 , the reserve for estimated contract losses recorded in "other accrued liabilities" in our condensed consolidated balance sheet was $3.1 million . In the three and six months ended June 30, 2017 , we recognized additional contract losses of $10.5 million as a result of differences in actual and estimated costs and schedule delays in the second quarter of 2017. As of June 30, 2017 , this contract had $3.9 million of accrued losses and was 94% complete.

The second contract, a biomass plant in the United Kingdom, became a loss contract in the fourth quarter of 2016. As of June 30, 2018 , this contract was approximately 86% complete. Commissioning activities began in the first quarter of 2018, construction activities are substantially complete, startup activities are underway and takeover by the customer is expected early in the fourth quarter of 2018. During the three and six months ended June 30, 2018 , we recognized additional contract losses of $9.3 million and $13.4 million , respectively, on this contract as a result of repairs required during startup commissioning activities in the second quarter of 2018, increases in expected warranty costs, changes in construction cost estimates, subcontractor productivity being lower than previous estimates, and additional expected punch list and other commissioning costs. Our estimate at completion as of June 30, 2018 includes $19.8 million of total expected liquidated damages due to schedule delays. Our estimate at completion as of June 30, 2018 also includes contractual bonus opportunities for guaranteed higher power output (discussed further below). As of June 30, 2018 , the reserve for estimated contract losses recorded in "other accrued liabilities" in our condensed consolidated balance sheet was $10.6 million . In the three and six months ended June 30, 2017 , we recognized losses of $41.2 million and $37.4 million , respectively, from changes in construction cost estimates schedule delays, and as of June 30, 2017 , this contract had $16.6 million of accrued losses and was 69% complete.

The third contract, a biomass plant in Denmark, became a loss contract in the fourth quarter of 2016. As of June 30, 2018 , this contract was approximately 99% complete and construction activities are complete as of the date of this report. The unit became operational during the second quarter of 2017, and partial takeover was achieved in March 2018, when the contract moved into the warranty phase. Remaining activities relate to punch list finalization and are planned to be completed in the third quarter of 2018 after the customer's next planned outage. During the three and six months ended June 30, 2018 , we recognized additional contract losses of $1.6 million and $3.5 million , respectively, as a result of changes in the estimated costs at completion. Our estimate at completion as of June 30, 2018 includes $7.0 million of total expected liquidated damages due to schedule delays. As of June 30, 2018 , the reserve for estimated contract losses recorded in "other accrued liabilities" in our condensed consolidated balance sheet was $0.5 million . In the three and six

16





months ended June 30, 2017 , we recognized charges of $2.7 million and $5.5 million , respectively, from changes in our estimate at completion, and as of June 30, 2017 , this contract had $1.5 million of accrued losses and was 95% complete.

The fourth contract, a biomass plant in the United Kingdom, became a loss contract in the fourth quarter of 2016. As of June 30, 2018 , this contract was approximately 88% complete. Commissioning activities began in the first quarter of 2018, construction was substantially complete at June 30, 2018. Startup of the unit occurred in May 2018, and synchronization to the electrical grid while firing on biomass fuel occurred in July 2018. We expect takeover by the customer in the third quarter after successful completion of trial operations and resolution of punchlist items. During the three and six months ended June 30, 2018 , we revised our estimated revenue and costs at completion for this loss contract, which resulted in $12.8 million and $24.8 million , respectively, of additional contract losses due to challenges in startup commissioning activities in the second quarter of 2018, increases in expected warranty costs, subcontractor productivity being lower than previous estimates, additional expected punch list and other commissioning cost, estimated claim settlements and estimated liquidated damages. Our estimate at completion as of June 30, 2018 includes $19.7 million of total expected liquidated damages due to schedule delays. Our estimate at completion as of June 30, 2018 also includes contractual bonus opportunities for guaranteed higher power output (discussed further below). As of June 30, 2018 , the reserve for estimated contract losses recorded in "other accrued liabilities" in our condensed consolidated balance sheet was $6.3 million . In the three and six months ended June 30, 2017 , we recognized additional contract losses of $23.8 million and $21.9 million , respectively, from changes in our estimate at completion, and as of June 30, 2017 , this contract had $8.8 million of accrued losses and was 66% complete.

The fifth contract, a biomass plant in the United Kingdom, became a loss contract in the second quarter of 2017. As of June 30, 2018 , this contract was approximately 62% complete, and we expect construction will be substantially completed on this contract in late 2018 with takeover by the customer in the third quarter of 2019. During the three and six months ended June 30, 2018 , we revised our estimated revenue and costs at completion for this loss contract, which resulted in $21.4 million and $39.7 million , respectively, of additional contract losses. First quarter 2018 changes in estimate on this fifth contract relate primarily to taking over of the civil scope from our joint venture partner, which entered administration (similar to filing for bankruptcy in the U.S.) in late February 2018 and receiving regulatory release later than expected (March 29, 2018) to begin repairs to the failed steel beam, which further increased costs to complete remaining work streams in a compressed time frame. Full access to the site was obtained on June 6, 2018 after the steel beam repairs were completed. Second quarter 2018 changes in estimated costs to complete this contract reflect an extended schedule from greater challenges in restarting work on a site that had been idle pending repairs on the failed steel beam, including the extent of items that had been damaged from weather exposure, and increases in expected warranty costs. Our estimate at completion as of June 30, 2018 includes $21.0 million of total expected liquidated damages due to schedule delays. As of June 30, 2018 , the reserve for estimated contract losses recorded in "other accrued liabilities" in our condensed consolidated balance sheet was $29.0 million . In the three and six months ended June 30, 2017 , we recognized charges of $23.3 million from changes in our estimate at completion, and as of June 30, 2017 , this contract had $9.4 million of accrued losses and was 57% complete. This fifth project also includes a rejection clause that gives the customer the option to reject the deliverable, recover all monies paid to us and our partner (up to approximately $144 million ), and require us to restore the property to its original state if a certain contractual milestone is not met by September 30, 2018. As of June 30, 2018, we believe we will meet the regulatory approval requirements intended by the milestone, but do not expect to be able to meet the milestone as defined in the contract unless modified by the customer. Our June 30, 2018 estimate at completion does not assume the customer's exercise of the rejection right because management believes the customer will not exercise its rejection right; however, we cannot control whether the customer will agree to modify the contract or exercise its right to reject the contract and no assurances can be given in this regard. Additionally, meeting the regulatory approval requirements intended by the contract milestone by September 30, 2018 will require, among other things, the coordination of and cooperation from various subcontractors and the customer.  Our project plans include accelerating construction work and taking other remedial actions, if necessary. Any material productivity or timing issues relating to those subcontractors may jeopardize our ability to meet the regulatory requirements intended by the contract milestone.

The sixth contract, a waste-to-energy plant in the United Kingdom, became a loss contract in the second quarter of 2017. As of June 30, 2018 , this contract was approximately 87% complete. Commissioning activities began in the first quarter of 2018, initial startup activities are underway, construction was substantially completed in July 2018, and customer takeover by the customer is expected early in the fourth quarter of 2018. During the three and six months ended June 30, 2018 , we revised our estimated revenue and costs at completion for this loss contract, which resulted in additional contract losses of $3.9 million and $13.3 million due to additional schedule delays, inclusive of liquidated damages, estimated claim settlements, and increases in expected warranty costs. Our estimate at completion as of June 30, 2018 includes $16.4 million of total expected liquidated damages due to schedule delays. The change in the status of this contract in 2018 was primarily attributable to changes in the estimated costs at completion and schedule delays. As of June 30, 2018 , the reserve for estimated contract losses recorded in "other accrued liabilities" in our condensed

17





consolidated balance sheet was $2.6 million . In the three and six months ended June 30, 2017 , we recognized additional contract losses of $18.5 million from changes in our estimate at completion, and as of June 30, 2017 , this contract had $4.0 million of accrued losses and was 59% complete.

In September 2017, we identified the failure of a structural steel beam on the fifth contract, which stopped work in the boiler building and other areas pending corrective actions to stabilize the structure. Provisional regulatory approval to begin structural repairs to the failed beam was obtained at the end of March 2018 (later than previously estimated), and full approval to proceed with repairs was obtained in April 2018. Full access to the site was obtained in June 2018 after completion of the repairs to the structure. The engineering, design and manufacturing of the steel structure were the responsibility of our subcontractors. A similar design was also used on the second and fourth contracts, and although no structural failure occurred on these two other contracts, work was also stopped in certain restricted areas while we added reinforcement to the structures, which also resulted in delays that lasted until late January 2018. The total costs related to the structural steel issues on these three contracts, including contract delays, are estimated to be approximately $46 million , which is included in the June 30, 2018 estimated losses at completion for these three contracts.

Also during the third quarter of 2017, we implemented a design change in three of the renewable facilities to increase the guaranteed power output, which will allow us to achieve contractual bonus opportunities for the higher output. In the fourth quarter of 2017, we obtained agreement from certain customers to increase the value of these bonus opportunities and to provide partial relief on liquidated damages. The bonus opportunities and liquidated damages relief increased the estimated selling price of the three contracts by approximately $19 million in total, and this positive change in estimated cost to complete was fully recognized in 2017 because each was a loss contract.

During the third quarter of 2016, we determined it was probable that we would receive a $15.5 million (DKK 100.0 million ) insurance recovery for a portion of the losses on the first European renewable energy contract discussed above. In late May 2018, our insurer disputed coverage on our insurance claim. We believe that the dispute from the insurer is without merit and continue to believe we are entitled to the full value of the claim. We intend to aggressively pursue full recovery under the policy, and filed for arbitration in July 2018. However, an allowance for the entire receivable was recorded in the second quarter of 2018 based upon the dispute by the insurer, which is considered contradictory evidence in the accounting probability assessment of this loss recovery, even if it is believed to be without merit. The insurance recovery of $0 million and $15.5 million , net of allowance is recorded in accounts receivable - other in our condensed consolidated balance sheet at June 30, 2018 and December 31, 2017 , respectively.

NOTE 6 – RESTRUCTURING ACTIVITIES AND SPIN-OFF TRANSACTION COSTS

Restructuring Liabilities

At the end of June 2018, we eliminated 74 positions, primarily in our U.S. and Canadian operations and corporate functions. These actions were intended to appropriately size our operations and support functions in response to the continuing decline in global markets for new build coal-fired power generation, the announcement of the MEGTEC and Universal sale and our liquidity needs. These severance actions are expected to result in $18.3 million of annual savings. Severance cost associated with these actions is expected to total approximately $5.5 million , of which $3.4 million was recorded in June 2018 and the remainder will be recorded in the balance of 2018 over the remaining service periods. Severance payments are expected to extend through mid-2019. Additionally, we implemented other initiatives and benefit changes expected to avoid or reduce costs totaling approximately $15.8 million annually.

Restructuring also includes executive severance totaling $0.2 million and $5.1 million in the three and six months ended June 30, 2018 , respectively. In the first quarter of 2018, the Senior Vice President and Chief Business Development Officer was terminated and the position eliminated as our opportunities in the Power segment continue to shift more toward aftermarket parts and service and retrofit opportunities in the Americas, and away from large international new-build prospects. This action was also in-line with our strategy to optimize the Power segment and overall cost structure for the current market environment. Also in the first quarter of 2018, the Chief Executive Officer position was transitioned to Leslie C. Kass.

The remainder of the restructuring costs in the six months ended June 30, 2018 primarily relate to actions from the second half of 2017 that were intended to improve our global cost structure and increase our financial flexibility. These restructuring actions included a workforce reduction at both the business segment and corporate levels totaling approximately 9% of our global workforce, SG&A expense reductions and new cost control measures, and office closures and consolidations in non-core geographies. These actions included reduction of approximately 30% of B&W Vølund's workforce to align with a new

18





execution model focused on B&W Vølund's core boiler, grate and environmental equipment technologies, with the balance-of-plant and civil construction scope being executed by a partner.

In the three and six months ended June 30, 2017 , restructuring costs relate primarily to a series of activities that took place prior to 2017 that were intended to help us maintain margins, make our costs more volume-variable and allow our business to be more flexible. These actions were primarily in the Power segment in advance of lower projected demand for power generation from coal in the United States. We made our manufacturing costs more volume-variable through the closure of manufacturing facilities and development of manufacturing arrangements with third parties. Also, we made our cost of engineering and supply chain more variable by creating a matrix organization capable of delivering products across multiple segments, and developing more volume-variable outsourcing arrangements with our joint venture partners and other third parties to meet fluctuating demand. Until the second quarter of 2018, these restructuring actions achieved the goal of maintaining gross margins in the Power segment. Quantification of cost savings, however, is significantly dependent upon volume assumptions that have changed since the restructuring actions were initiated.

Restructuring liabilities are included in other accrued liabilities on our condensed consolidated balance sheets. Activity related to the restructuring liabilities is as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2018
2017
 
2018
2017
Balance at beginning of period  
$
5,914

$
558

 
$
2,320

$
1,809

Restructuring expense
4,276

1,887

 
10,164

3,857

Payments
(2,308
)
(1,607
)
 
(4,602
)
(4,828
)
Balance at June 30,
$
7,882

$
838

 
$
7,882

$
838


Accrued restructuring liabilities at June 30, 2018 and 2017 relate primarily to employee termination benefits. Excluded from restructuring expense in the table above are non-cash restructuring charges that did not impact the accrued restructuring liability. In the three months ended June 30, 2018 and 2017, we recognized $0.4 million and $0.2 million , respectively, in restructuring related to gains on disposals of long-lived assets. In the six months ended June 30, 2018 and 2017, we recognized $0.2 million and $0.3 million , respectively, in non-cash restructuring expense related to losses on the disposals of long-lived assets.

Spin-Off Transaction Costs

Spin-off costs were primarily attributable to employee retention awards directly related to the spin-off from our former parent, The Babcock & Wilcox Company (now known as BWX Technologies, Inc.). In the three months ended June 30, 2017, spin costs were $0.5 million . In the six months ended June 30, 2018 and 2017, we recognized spin-off costs of $0.3 million and $0.9 million , respectively.

NOTE 7 – PROVISION FOR INCOME TAXES

In the three months ended June 30, 2018, we recognized an income tax benefit of $1.9 million , resulting in an effective tax rate of 0.9% . Our effective tax rate for the three months ended June 30, 2018 was lower than our statutory rate primarily due to foreign losses in our Renewable segment and disallowed interest expense pursuant to the United States Tax Cuts and Jobs Act (the "Tax Act") that are subject to valuation allowances as well as the impact of the $37.5 million non-deductible goodwill impairment and other nondeductible expenses, offset by favorable discrete items of $0.4 million . The effective tax rate for the three months ended June 30, 2018 also reflects the reduced federal corporate income tax rate enacted as part of the Tax Act and the impact of a change in our mix of domestic and foreign earnings. We continue to analyze the different aspects of the Tax Act, which could potentially affect the provisional estimates that were recorded at December 31, 2017.

In the three months ended June 30, 2017, income tax expense was $3.5 million , an effective tax rate of (2.4)% that was lower than our statutory rate primarily due to foreign losses in our Renewable segment that are subject to a valuation allowance, nondeductible expenses and unfavorable discrete items of $3.2 million . The discrete items include withholding tax on a forecasted distribution outside the US, partly offset by favorable adjustments to prior year foreign tax returns and the effect of vested and exercised share-based compensation awards. The tax benefit associated with the $18.2 million impairment of our equity method investment in India was offset by a valuation allowance.


19





In the six months ended June 30, 2018, income tax expense was $5.0 million , an effective tax rate of (1.6)% that was lower than our statutory rate primarily due to the reasons noted above as well as an $18.4 million impairment of our equity method investment in India that was offset by valuation allowances and unfavorable discrete items of $1.8 million in the first quarter. The discrete items include a valuation allowance on the net deferred tax assets of one of our foreign subsidiaries and the income tax effects of vested and exercised share-based compensation awards.

In the six months ended June 30, 2017, income tax benefit was $0.3 million , an effective tax rate of (0.2)% that was lower than our statutory rate primarily due to the reasons noted above and nondeductible transaction costs, which were offset by the effect of vested and exercised share-based compensation awards, both of which were discrete items in the first quarter of 2017.

As a result of accumulations of the Company's stock among several large shareholders and the impact of the Rights Offering that was completed on April 30, 2018 we continue to monitor for the possibility of an ownership change as defined under Internal Revenue Code ("IRC") Section 382. Under IRC Section 382, a company has undergone an ownership change if shareholders owning at least 5% of the company have increased their holdings by more than 50% during the prior three-year period.  Based on information that is publicly available, the Company does not currently believe it has experienced an ownership change. Small changes in ownership by shareholders owning at least 5% of the Company could result in an ownership change; however, if we had experienced an ownership change as of June 30, 2018, the future utilization of our federal net operating loss and credit carryforwards would be limited to approximately $9 million , annually, but quantification is dependent upon the value of the company multiplied by the long-term interest rate at the time of the ownership change.

20





  
NOTE 8 – COMPREHENSIVE INCOME

Gains and losses deferred in accumulated other comprehensive income (loss) ("AOCI") are reclassified and recognized in the condensed consolidated statements of operations once they are realized. The changes in the components of AOCI, net of tax, for the first two quarters in 2018 and 2017 were as follows:
(in thousands)
Currency translation gain (loss)
Net unrealized gain (loss) on investments (net of tax) 1
Net unrealized gain (loss) on derivative instruments
Net unrecognized gain (loss) related to benefit plans (net of tax)
Total
Balance at December 31, 2017
$
(27,837
)
$
38

$
1,737

$
3,633

$
(22,429
)
Impact of ASU 2016-1 on changes in the components of AOCI, net of tax (1)

(38
)


(38
)
Other comprehensive income (loss) before reclassifications
3,223


1,224

(55
)
4,392

Amounts reclassified from AOCI to net income (loss)
(2,044
)

(1,272
)
(384
)
(3,700
)
Net current-period other comprehensive income (loss)
1,179


(48
)
(439
)
692

Balance at March 31, 2018
$
(26,658
)
$

$
1,689

$
3,194

$
(21,775
)
Other comprehensive income (loss) before reclassifications
8,517


(513
)
112

8,116

Amounts reclassified from AOCI to net income (loss)


381

(427
)
(46
)
Amounts reclassified from AOCI to pension, other accumulated postretirement benefit liabilities and deferred income taxes   (2)



(2,831
)
(2,831
)
Net current-period other comprehensive income (loss)
8,517


(132
)
(3,146
)
5,239

Balance at June 30, 2018
$
(18,141
)
$

$
1,557

$
48

$
(16,536
)
(in thousands)
Currency translation gain (loss)
Net unrealized gain (loss) on investments (net of tax)
Net unrealized gain (loss) on derivative instruments
Net unrecognized gain (loss) related to benefit plans (net of tax)
Total
Balance at December 31, 2016
$
(43,987
)
$
(37
)
$
802

$
6,740

$
(36,482
)
Other comprehensive income (loss) before reclassifications
5,417

61

4,587

(44
)
10,021

Amounts reclassified from AOCI to net income (loss)

(27
)
(3,843
)
(882
)
(4,752
)
Net current-period other comprehensive income (loss)
5,417

34

744

(926
)
5,269

Balance at March 31, 2017
$
(38,570
)
$
(3
)
$
1,546

$
5,814

$
(31,213
)
Other comprehensive income (loss) before reclassifications
6,757

(19
)
(2,204
)
(97
)
4,437

Amounts reclassified from AOCI to net income (loss)

(1
)
(658
)
(800
)
(1,459
)
Net current-period other comprehensive income (loss)
6,757

(20
)
(2,862
)
(897
)
2,978

Balance at June 30, 2017
$
(31,813
)
$
(23
)
$
(1,316
)
$
4,917

$
(28,235
)
(1) ASU 2016-1, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, requires investments to be measured at fair value through earnings each reporting period as opposed to changes in fair value being reported in other comprehensive income. The standard is effective as of January 1, 2018 and requires application by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption.
(2) Includes the reclassification of the unamortized balance of the curtailment gain, net of tax as described in Note 16.


21





The amounts reclassified out of AOCI by component and the affected condensed consolidated statements of operations line items are as follows (in thousands):
AOCI component
Line items in the Condensed Consolidated Statements of Operations affected by reclassifications from AOCI
Three Months Ended June 30,
 
Six Months Ended June 30,
2018
2017
 
2018
2017
Release of currency translation gain with the sale of equity method investment
Equity in income and impairment of investees
$

$

 
$
2,044

$

 
Provision for income taxes


 


 
Net income (loss)
$

$

 
$
2,044

$

 
 
 
 
 
 
 
Derivative financial instruments
Revenues
$
(478
)
$
714

 
$
1,138

$
6,002

 
Cost of operations
(11
)
(49
)
 
1

(46
)
 
Other-net

885

 

492

 
Total before tax
(489
)
1,550

 
1,139

6,448

 
Provision for income taxes
(108
)
892

 
248

1,947

 
Net income (loss)
$
(381
)
$
658

 
$
891

$
4,501

 
 
 
 
 
 
 
Amortization of prior service cost on benefit obligations
Benefit plans, net
$
427

$
789

 
$
811

$
1,662

 
Provision for income taxes

(11
)
 

(20
)
 
Net income (loss)
$
427

$
800

 
$
811

$
1,682

 
 
 
 
 
 
 
Realized gain on investments
Other-net
$

$
1

 
$

$
44

 
Provision for income taxes


 

16

 
Net income (loss)
$

$
1

 
$

$
28


NOTE 9 – CASH AND CASH EQUIVALENTS

The components of cash and cash equivalents are as follows:
(in thousands)
June 30, 2018
December 31, 2017
Held by foreign entities
$
27,955

$
42,490

Held by United States entities
557

1,227

Cash and cash equivalents
$
28,512

$
43,717

 
 
 
Reinsurance reserve requirements
$
25,269

$
21,061

Sale proceeds and claim held in escrow
591


Restricted foreign accounts
6,442

4,919

Restricted cash and cash equivalents
$
32,302

$
25,980

 
 
 
Total cash, cash equivalents and restricted cash
$
60,814

$
69,697


Our U.S. Revolving Credit Facility described in Note 17 allows for nearly immediate borrowing of available capacity to fund cash requirements in the normal course of business, meaning that the minimum United States cash on hand is maintained to minimize borrowing costs.

22






NOTE 10 – INVENTORIES

The components of inventories are as follows:
(in thousands)
June 30, 2018
December 31, 2017
Raw materials and supplies
$
49,834

$
54,291

Work in progress
5,971

6,918

Finished goods
11,469

11,708

Total inventories
$
67,274

$
72,917


NOTE 11 – EQUITY METHOD INVESTMENTS

Joint ventures in which we have significant ownership and influence, but not control, are accounted for in our consolidated financial statements using the equity method of accounting. We assess our investments in unconsolidated affiliates for other-than-temporary-impairment when significant changes occur in the investee's business or our investment philosophy. Such changes might include a series of operating losses incurred by the investee that are deemed other than temporary, the inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment or a change in the strategic reasons that were important when we originally entered into the joint venture. As noted below, an other-than-temporary-impairment occurred for our equity method investment in TBWES and we measured our investment in the unconsolidated affiliate at fair value.

Our former equity method investment in BWBC had a manufacturing facility that designs, manufactures, produces and sells various power plant and industrial boilers primarily in China. During the first quarter of 2018, we sold our interest in BWBC to our joint venture partner in China for approximately $21.1 million , resulting in a gain of approximately $6.5 million . Proceeds from this sale, net of $1.3 million of withholding tax, was $19.8 million .

After the sale of our interest in BWBC, our primary remaining equity method investment is in TBWES. TBWES has a manufacturing facility that produces boiler parts and equipment intended primarily for new build coal boiler contracts in India. During the second quarter of 2017, both we and our joint venture partner decided to make a strategic change in the Indian joint venture due to the decline in forecasted market opportunities in India, at which time we recorded in an $18.2 million other-than-temporary-impairment to the expected recoverable value of our investment in the joint venture. During the first quarter of 2018, based on a preliminary agreement to sell our investment in TBWES, we recognized an additional $18.4 million other-than-temporary-impairment. The impairment charge was based on the difference in the carrying value of our investment in TBWES and the preliminary sale price. In July 2018, we completed the sale of our investment in TBWES together with the settlement of related contractual claims and received $15.0 million in cash, of which $7.7 million related to our investment in TBWES. The remaining carrying value of our interest in TBWES was $7.7 million at June 30, 2018 and $26.0 million at December 31, 2017 . Additionally, AOCI includes $2.6 million at June 30, 2018 for AOCI related to cumulative currency translation loss from our investment in TBWES, and is expected to be recognized as a loss in connection with closing the sale in the third quarter of 2018.

NOTE 12 - GOODWILL

The following summarizes the changes in the carrying amount of goodwill:
(in thousands)
Power
 
Renewable
 
Industrial (1)
 
Total
Balance at December 31, 2017 (2)
$
47,370

 
$

 
$
38,308

 
$
85,678

Currency translation adjustments
(191
)
 

 
(768
)
 
(959
)
Second quarter 2018 impairment charges

 

 
(37,540
)
 
(37,540
)
Balance at June 30, 2018 (2)
$
47,179

 
$

 
$

 
$
47,179

(1) Goodwill for MEGTEC and Universal are shown as part of noncurrent assets of discontinued operations. See Note 3 for a further description of discontinued operations.
(2) Accumulated goodwill impairments were $50.0 million for the Renewable segment as of December 31, 2017 and $74.4 million and $36.9 for the Industrial segment as of June 30, 2018 and December 31, 2017, respectively.


23





In January 2017, the FASB issued ASU 2017-04,  Intangibles—Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment  (ASU 2017-04) .   The standard simplifies the subsequent measurement of goodwill by removing the requirement to perform a hypothetical purchase price allocation to compute the implied fair value of goodwill to measure impairment. Instead, goodwill impairment is measured as the difference between the fair value of the reporting unit and the carrying value of the reporting unit. The standard also clarifies the treatment of the income tax effect of tax-deductible goodwill when measuring goodwill impairment loss. This standard is effective for annual or any interim goodwill impairment test in fiscal years beginning after December 15, 2019, with early adoption permitted for impairment tests performed after January 1, 2017. We early adopted ASU 2017-04 on April 1, 2018, effective the first day of our 2018 second quarter.

ASC 350-30, Goodwill and Other Intangible Assets , requires that goodwill and other unamortizable intangible assets be tested for impairment at least annually or earlier if there are impairment indicators. Interim impairment testing as of June 30, 2018 was performed at SPIG due to lower bookings in the second quarter of 2018 than previously forecasted, which resulted in a reduction in the forecast for the reporting unit.

We compared the fair value of the reporting unit and the carrying value of the reporting unit to measure goodwill impairment loss as required by ASU 2017-04. Fair value was determined using the combination of a discounted cash flow method (income approach) and the guideline public company method (market comparable approach), weighted equally in determining the fair value. The market comparable approach estimates fair value using market multiples of various financial measures compared to a set of comparable public companies. In performing the valuations, significant assumptions utilized include unobservable Level 3 inputs including cash flows and long-term growth rates reflective of management’s forecasted outlook, and discount rates inclusive of risk adjustments consistent with current market conditions. A discount rate of 14.5% was used, which is based on the weighted average cost of capital using guideline public company data, factoring in current market data and company specific risk factors. As a result of the impairment test, we recognized a $37.5 million impairment of goodwill in the SPIG reporting unit. After the impairment, the SPIG reporting unit did not have any remaining goodwill.

NOTE 13 – INTANGIBLE ASSETS

Our intangible assets are as follows:
(in thousands)
June 30, 2018
December 31, 2017
Definite-lived intangible assets
 
 
Customer relationships
$
24,876

$
25,494

Unpatented technology
12,454

12,910

Patented technology
6,546

6,542

Tradename
12,650

13,951

Backlog
17,760

18,060

All other
8,641

7,611

Gross value of definite-lived intangible assets
82,927

84,568

Customer relationships amortization
(13,643
)
(12,455
)
Unpatented technology amortization
(3,002
)
(2,184
)
Patented technology amortization
(2,309
)
(2,213
)
Tradename amortization
(3,372
)
(3,042
)
Acquired backlog amortization
(17,760
)
(16,622
)
All other amortization
(7,778
)
(7,292
)
Accumulated amortization
(47,864
)
(43,808
)
Net definite-lived intangible assets
$
35,063

$
40,760

 
 
 
Indefinite-lived intangible assets:
 
 
Trademarks and trade names
$
1,305

$
1,305

Total indefinite-lived intangible assets
$
1,305

$
1,305



24





The following summarizes the changes in the carrying amount of intangible assets:
 
Six months ended June 30,
(in thousands)
2018
2017
Balance at beginning of period
$
42,065

$
65,496

Amortization expense
(4,056
)
(6,334
)
Currency translation adjustments and other
(1,641
)
(14,088
)
Balance at end of the period
$
36,368

$
45,074


Amortization of intangible assets is included in cost of operations and SG&A in our condensed consolidated statement of operations but it is not allocated to segment results.

Estimated future intangible asset amortization expense is as follows (in thousands):
Year ending
Amortization expense
Three months ending September 30, 2018
$
1,311

Three months ending December 31, 2018
$
1,311

Twelve months ending December 31, 2019
$
4,763

Twelve months ending December 31, 2020
$
4,002

Twelve months ending December 31, 2021
$
3,772

Twelve months ending December 31, 2022
$
3,685

Twelve months ending December 31, 2023
$
3,677

Thereafter
$
12,542


NOTE 14 – PROPERTY, PLANT & EQUIPMENT

Property, plant and equipment is stated at cost. The composition of our property, plant and equipment less accumulated depreciation is set forth below:
(in thousands)
June 30, 2018
December 31, 2017
Land
$
3,590

$
3,631

Buildings
107,100

107,944

Machinery and equipment
195,276

205,331

Property under construction
2,249

5,979

 
308,215

322,885

Less accumulated depreciation
202,450

208,178

Net property, plant and equipment
$
105,765

$
114,707


NOTE 15 – WARRANTY EXPENSE

We may offer assurance type warranties on products and services we sell. Changes in the carrying amount of our accrued warranty expense are as follows: 
 
Six Months Ended June 30,
(in thousands)
2018
2017
Balance at beginning of period
$
33,514

$
36,520

Additions
28,008

12,093

Expirations and other changes
(1,592
)
(3,244
)
Payments
(5,791
)
(6,089
)
Translation and other
(1,001
)
1,193

Balance at end of period
$
53,138

$
40,473


25





We accrue estimated expense included in cost of operations to satisfy contractual warranty requirements when we recognize the associated revenues on the related contracts, or in the case of a loss contract, the full amount of the estimated warranty costs is accrued when the contract becomes a loss contract. In addition, we record specific provisions or reductions where we expect the actual warranty costs to significantly differ from the accrued estimates. Such changes could have a material effect on our consolidated financial condition, results of operations and cash flows. Warranty expense in the three months ended June 30, 2018 includes a $15.1 million increase in expected warranty costs for the six European renewable energy loss contracts based on experience from the startup and commissioning activities in the second quarter of 2018 and $5.3 million of specific provisions on certain contracts in the Power segment for specific technical matters and customer requirements.

NOTE 16 – PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

Components of net periodic benefit cost (benefit) included in net income (loss) 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,
(in thousands)
2018
2017
2018
2017
 
2018
2017
2018
2017
Interest cost
9,741

10,255

19,498

20,490

 
95

140

192

361

Expected return on plan assets
(16,215
)
(14,854
)
(32,445
)
(29,710
)
 




Amortization of prior service cost
25

26

50

51

 
(188
)
(816
)
(834
)
(1,716
)
Recognized net actuarial loss (gain)
(544
)

(544
)
1,062

 




Benefit plans, net
(6,993
)
(4,573
)
(13,441
)
(8,107
)
 
(93
)
(676
)
(642
)
(1,355
)
Service cost included in COS
$
187

$
231

$
376

$
482

 
$
4

$
4

$
8

$
8

Net periodic benefit cost (benefit)
$
(6,806
)
$
(4,342
)
$
(13,065
)
$
(7,625
)
 
$
(89
)
$
(672
)
$
(634
)
$
(1,347
)

During the second quarter of 2018, lump sum payments from our Canadian pension plan resulted in a plan settlement gain of $0.1 million , which also resulted in interim mark to market accounting for the pension plan. The mark to market adjustment in the second quarter of 2018 was a gain of $0.4 million . The effect of these charges and mark to market adjustments are reflected in the "Recognized net actuarial loss (gain) " in the table above. The recognized net actuarial (gain) loss was recorded in our condensed consolidated statements of operations in the "Benefit plans, net" line item. There were no lump sum payments from our Canadian pension plan during the first quarter of 2018.

During the first quarter of 2017, lump sum payments from our Canadian pension plan resulted in a plan settlement loss of $0.4 million , which also resulted in interim mark to market accounting for the pension plan. The mark to market adjustment in the first quarter of 2017 was a loss of $0.7 million . The effect of these charges and mark to market adjustments are reflected in the " Recognized net actuarial loss (gain)" in the table above. The recognized net actuarial (gain) loss was recorded in our condensed consolidated statements of operations in the "Benefit plans, net" line item. There were no lump sum payments from our Canadian pension plan during the second quarter of 2017.

We terminated the Babcock & Wilcox Retiree Medical Plan (the "Retiree OPEB plan") effective December 31, 2016. The Retiree OPEB plan was originally established to provide secondary medical insurance coverage for retirees that had reached the age of 65 , up to a lifetime maximum cost. In exchange for terminating the Retiree OPEB plan, the participants had the option to enroll in a third-party health care exchange, to which B&W agreed to contribute up to $750 a year for each of the next three years (beginning in 2017) to a health reimbursement account (“HRA”), provided the plan participant had not yet reached their lifetime maximum under the terminated Retiree OPEB plan. Based on the number of participants who enrolled in the new benefit plan, we recognized a curtailment gain of  $10.8 million  on December 31, 2016 for the actuarially determined difference in the liability for these participants in the Retiree OPEB plan and the new plan. The curtailment gain was deferred in accumulated other comprehensive income and was being recognized as income through 2020. Participants in the Retiree OPEB plan filed a class action lawsuit against B&W in 2017 asserting that the change in health care coverage breached B&W’s obligations under collective bargaining agreements. In April 2018, the court approved a settlement whereby B&W will contribute $1,000 a year for 2018 and 2019, and $1,100 a year thereafter for the life of a participant to an HRA. As a result of the settlement, the revised Retiree OPEB plan was actuarially remeasured as of April 1, 2018. The unamortized balance of the curtailment gain of $5.2 million and the related deferred tax of $1.3 million was reversed from AOCI and we recorded $5.2 million in other accumulated postretirement benefit liabilities for the actuarial value of the Retiree OPEB plan.

26






We made contributions to our pension and other postretirement benefit plans totaling $4.7 million and $8.5 million during the three and six months ended June 30, 2018, respectively, as compared to $5.0 million and $6.4 million during the three and six months ended June 30, 2017, respectively.

NOTE 17 – REVOLVING DEBT

The components of our revolving debt are comprised of separate revolving credit facilities in the following locations:
(in thousands)
June 30, 2018
December 31, 2017
United States
$
196,300

$
94,300

Foreign
4,124

9,173

Total revolving debt
$
200,424

$
103,473


U.S. Revolving Credit Facility

On May 11, 2015, we entered into a credit agreement with a syndicate of lenders ("Credit Agreement") in connection with our spin-off from The Babcock & Wilcox Company which governs the U.S. Revolving Credit Facility. The Credit Agreement, which is scheduled to mature on June 30, 2020, provides for a senior secured revolving credit facility, initially in an aggregate amount of up to $600.0 million . The proceeds from loans under the Credit Agreement are available for working capital needs and other general corporate purposes, and the full amount is available to support the issuance of letters of credit, subject to the limits specified in the amendment described below.

Since June 2016, we have entered into a number of amendments to the Credit Agreement (the "Amendments" and the Credit Agreement, as amended to date, the "Amended Credit Agreement"). The most recent Amendment, which we entered into on August 9, 2018, among other things, provided for the following modifications: (1) modifies the definition of adjusted EBITDA in the Amended Credit Agreement to exclude up to an additional $ 72.8 million of charges for certain Renewable segment contracts for periods including the quarter ended June 30, 2018 and allow further add backs to EBITDA for restructuring and other similar expenses; (2) modifies the financial covenants as described below; (3) modifies the amount of liquidity (as defined in the Amended Credit Agreement) we are required to maintain from at least $65.0 million as of the last business day of any calendar month to at least $50.0 million (or $40.0 million upon the consummation of certain asset sales and the receipt of at least $10.0 million of proceeds from the Last Out Loan described below) as of the last business day of any calendar month and on any day that a borrowing is made; (4) lowers the amount of outstanding borrowings under the U.S. Revolving Credit Facility that we are required to repay (without any reduction in commitments) with certain excess cash from $60.0 million to $50.0 million ; (5) modifies the Company's ability to reinvest net cash proceeds from asset sales that trigger prepayment requirements to allow for the ability to retain up to $25.0 million of asset sale proceeds after receipt of the initial Last Out Loan funding described below; (6) permits an additional $15.0 million of cumulative net income losses attributable to eight specified Vølund contracts for the fiscal quarter ending September 30, 2018; (7) modifies certain contract completion milestones that we are required to meet in connection with six European Renewable loss contracts; (8) modifies the date by which we are required to sell at least $100 million of assets from March 31, 2019 to October 31, 2018; (9) requires us to achieve certain concessions from our renewable contract customers by September 30, 2018 that will generate at least $25.0 million of incremental benefits to us, (10) adds additional events of default related to the termination or rejection of certain contracts related to our Renewables segment; (11) permits and requires us to raise up to an additional net $30.0 million of last-out loans under the Amended Credit Agreement in connection with the Vintage Commitment described below; 12) consents to the sale of our Palm Beach Resource Recovery Corporation; and (13) eliminates a requirement to adjust on a pro forma basis our EBITDA after the sales of Megtec and Universal, and
Palm Beach Resource Recovery Corporation.

The Amended Credit Agreement and our obligations under certain hedging agreements and cash management agreements with our lenders and their affiliates continue to be (1) guaranteed by substantially all of our wholly owned domestic subsidiaries and certain of our foreign subsidiaries, but excluding our captive insurance subsidiary, and (2) secured by first-priority liens on certain assets owned by us and the guarantors. The Amended Credit Agreement requires interest payments on revolving loans on a periodic basis until maturity. We may prepay all loans at any time without premium or penalty (other than customary LIBOR breakage costs), subject to notice requirements. The Amended Credit Agreement requires us to make certain prepayments on any outstanding revolving loans after receipt of cash proceeds from certain asset sales or other events, subject to certain exceptions. Such prepayments may require us to reduce the commitments under the Amended Credit Agreement by a corresponding amount of such prepayments. Following the covenant relief period, such prepayments will not require us to reduce the commitments under the Amended Credit Agreement.


27





After giving effect to the Amendments, loans outstanding under the Amended Credit Agreement bear interest at our option at either (1) the LIBOR rate plus 5.0% per annum during 2018, 6.0% per annum during 2019 and 7.0% per annum during 2020, or (2) the Base Rate plus 4.0% per annum during 2018, 5.0% per annum during 2019, and 6.0% per annum during 2020. The Base Rate is the highest of the Federal Funds rate plus 0.5% , the one month LIBOR rate plus 1.0% , or the administrative agent's prime rate. Interest expense associated with our U.S. Revolving Credit Facility loans for the six months ended June 30, 2018 was $14.1 million . Included in interest expense was $7.5 million of non-cash amortization of direct financing costs for the six months ended June 30, 2018. A commitment fee of 1.0% per annum is charged on the unused portions of the U.S. Revolving Credit Facility. A letter of credit fee of 2.5% per annum is charged with respect to the amount of each financial letter of credit outstanding, and a letter of credit fee of 1.5% per annum is charged with respect to the amount of each performance and commercial letter of credit outstanding. Additionally, an annual facility fee of $1.5 million is payable on the first business day of 2018 and 2019, and a pro rated amount is payable on the first business day of 2020. A deferred fee of 2.5% is charged, but may be reduced by up to 1.5% if the Company achieves certain asset sales.

The Amended Credit Agreement includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. The maximum permitted senior debt leverage ratio as defined in the Amended Credit Agreement is:
9.75 :1.0 for the quarters ending June 30, 2018 and September 30, 2018,
4.00 :1.0 for the quarter ending December 31, 2018,
3.50 :1.0 for the quarter ending March 31, 2019, and
2.25 :1.0 for the quarters ending June 30, 2019 and each quarter thereafter.

The minimum consolidated interest coverage ratio as defined in the Amended Credit Agreement is:
1.00 :1.0 for the quarter ending June 30, 2018,
1.25 :1.0 for the quarter ending September 30, 2018,
2.00 :1.0 for the quarter ending December 31, 2018,
2.50 :1.0 for the quarter ending March 31, 2019, and
3.50 :1.0 for the quarters ending June 30, 2019 and each quarter thereafter.

Consolidated capital expenditures in each fiscal year are limited to $27.5 million .

At June 30, 2018 , borrowings under the Amended Credit Agreement and foreign facilities consisted of $200.4 million at an effective interest rate of 7.22% . Usage under the Amended Credit Agreement consisted of $196.3 million of borrowings, $20.4 million of financial letters of credit and $157.0 million of performance letters of credit. After giving effect to the Amendments, at June 30, 2018 , we had approximately $28.6 million available for borrowings or to meet letter of credit requirements primarily based on our borrowing sublimit, our trailing 12 month adjusted EBITDA (as defined in the Amended Credit Agreement), and our leverage and interest coverage ratios (as defined in the Amended Credit Agreement) which were 7.51 and 1.94 , respectively. As a result of the sale of our interest in TBWES, as discussed in Note 11 , the U.S. Revolving Credit Facility was reduced from $450.0 million to $440.4 million in July 2018.

As referenced above, our Amended Credit Agreement allows for us to incur up to $30.0 million of net proceeds of last-out loans. On August 9, 2018 we entered into a commitment letter (the “Vintage Commitment Letter”) with Vintage Capital Management LLC (the “Last Out Lender”), a related party, which provides a commitment for an aggregate principal amount of last-out loans (the “Last Out Loans”) that, when borrowed, will result in us receiving $30.0 million of aggregate net proceeds. The face principal amount of Last Out Loans is expected to be approximately $ 36 .0 million, which includes the payment of a $2.0 million up-front fee that will be payable to the Last Out Lender on the date of the first funding of the Last Out Loans and to reflect original issue discount of 10% . The Last Out Loans will be incurred under our Amended Credit Agreement and will share on a pari passu basis with the guaranties and collateral provided thereunder to the existing lenders; provided, that the Last Out Loans will be subordinated in right of payment to the prior payment in full of all amounts owing to the existing lenders. The Last Out Loans will mature and be due in payable in full the day after the current maturity date of the U.S. Revolving Credit Facility. The Last Out Loans will be implemented by way of a further amendment to our Amended Credit Agreement prior to September 30, 2018 and, once implemented, will be available in multiple advances subject to the same conditions to borrowing as our existing U.S. Revolving Credit Facility. The first $10.0 million of Last Out Loans will be made available on the date of consummation of the sale of all of the issued and outstanding capital stock of Palm Beach Resource Recovery Corporation, as further described in Note 25. Advances of Last Out Loans thereafter will be made upon our borrowing request but in formula that results in the aggregate amount of all loans requested being funded on a 50/ 50 basis between the Last Out Lender and the existing lenders under our U.S. Revolving Credit Facility. Once made, Last Out Loans may be prepaid, subject to the subordination provisions, but not re-borrowed. Last Out Loans will bear interest at

28





a rate per annum equal to the then applicable LIBOR rate plus 14.00% , with 5.50% of such interest rate to be paid in cash and the remaining 8.50% payable in kind by adding such accrued interest to the principal amount of the Last Out Loans. Subject to the subordination provisions, the Last Out Loans shall be subject to all of the other same representations and warranties, covenants and events of default under the Amended Credit Agreement. The commitment evidenced by the Vintage Commitment Letter is fully backstopped by B. Riley FBR, Inc., a related party, pursuant to a backstop commitment letter between B. Riley FBR, Inc. and the Last Out Lender.  In the event that the Last Out Lender is unable to, or fails to, fund any of its commitments under the Vintage Commitment Letter, then B. Riley FBR, Inc. will be required to do so.

Foreign Revolving Credit Facilities

Outside of the United States, we have revolving credit facilities in Turkey that are used to provide working capital to our operations in that country. These foreign revolving credit facilities allow us to borrow up to $4.1 million in aggregate and each have less than a year remaining to maturity. At June 30, 2018, we had $4.1 million in borrowings outstanding under these foreign revolving credit facilities at an effective weighted-average interest rate of 9.57% .

Letters of Credit, Bank Guarantees and Surety Bonds

Certain subsidiaries primarily outside of the United States have credit arrangements with various commercial banks and other financial institutions for the issuance of letters of credit and bank guarantees in association with contracting activity. The aggregate value of all such letters of credit and bank guarantees opened outside of the U.S. Revolving Credit Facility as of June 30, 2018 and December 31, 2017 was $195.4 million and $269.1 million , respectively. The aggregate value of all such letters of credit and bank guarantees that are partially secured by the U.S. Revolving Credit Facility as of June 30, 2018 was $67.2 million . The aggregate value of the letters of credit provided by the U.S. Revolving Credit Facility in support of letters of credit outside of the United States was $38.8 million as of June 30, 2018 .

We have posted surety bonds to support contractual obligations to customers relating to certain contracts. We utilize bonding facilities to support such obligations, but the issuance of bonds under those facilities is typically at the surety's discretion. Although there can be no assurance that we will maintain our surety bonding capacity, we believe our current capacity is adequate to support our existing contract requirements for the next 12 months. In addition, these bonds generally indemnify customers should we fail to perform our obligations under the applicable contracts. We, and certain of our subsidiaries, have jointly executed general agreements of indemnity in favor of surety underwriters relating to surety bonds those underwriters issue in support of some of our contracting activity. As of June 30, 2018 , bonds issued and outstanding under these arrangements in support of contracts totaled approximately $426.1 million .

NOTE 18 – SECOND LIEN TERM LOAN FACILITY

Extinguishment of the Second Lien Term Loan Facility

Using $212.6 million of the proceeds from the Rights Offering, we fully repaid the Second Lien Term Loan Facility (described below) on May 4, 2018, plus accrued interest of $2.3 million . A loss on extinguishment of this debt of approximately $49.2 million was recognized in the second quarter of 2018 as a result of the remaining $32.5 million unamortized debt discount on the date of the repayment, $16.2 million of make-whole interest, and $0.5 million of fees associated with the extinguishment.

Terms of the Second Lien Term Loan Facility

On August 9, 2017 , we entered into a second lien credit agreement (the "Second Lien Credit Agreement") with an affiliate of AIP, governing the Second Lien Term Loan Facility. The Second Lien Term Loan Facility consisted of a second lien term loan in the principal amount of $175.9 million , all of which was borrowed on August 9, 2017 , and a delayed draw term loan facility in the principal amount of up to $20.0 million , which was drawn in a single draw on December 13, 2017.

Borrowings under the second lien term loan, other than the delayed draw term loan, had a coupon interest rate of 10% per annum, and borrowings under the delayed draw term loan had a coupon interest rate of 12% per annum, in each case payable quarterly. As of March 7, 2018, the interest rates increased to 12% and 14% per annum, respectively, due to the covenant

29





default. Undrawn amounts under the delayed draw term loan accrued a commitment fee at a rate of 0.50% , which was paid at closing. The second lien term loan and the delayed draw term loan had a scheduled maturity of December 30, 2020.

In connection with our entry into the Second Lien Term Loan Facility, we used $50.9 million of the proceeds to repurchase and retire approximately 4.8 million shares of our common stock (approximately 10% of our shares outstanding) held by an affiliate of AIP, which was one of the conditions precedent for the Second Lien Term Loan Facility. Based on observable and unobservable market data, we determined the fair value of the shares we repurchased from the related party on August 9, 2017 was $16.7 million . We utilized a discounted cash flow model and estimates of our weighted average cost of capital on the transaction date to derive the estimated fair value of the share repurchase. The $34.2 million difference between the share repurchase price and the fair value of the repurchased shares was recorded as a discount on the Second Lien Term Loan Facility borrowing. Non-cash amortization of the debt discount and direct financing costs were being accreted to the carrying value of the loan through interest expense utilizing the effective interest method and an effective interest rate of 20.08% .

Interest expense associated with our Second Lien Credit Agreement was comprised of the following:
(in thousands)
Coupon
Interest
Accretion of debt discount and amortization of financing costs
Total
Interest
Expense
For the three months ended June 30, 2018
$2,191
$833
$3,024
For the six months ended June 30, 2018
$7,460
$3,202
$10,662

The Second Lien Credit Agreement contained representations and warranties, affirmative and restrictive covenants, financial covenants and events of default substantially similar to those contained in the Amended Credit Agreement, subject to certain cushions. At March 31, 2018 and December 31, 2017, we were in default of several financial covenants associated with the Second Lien Credit Agreement, which resulted in our classification of all of the net carrying value as a current liability in our condensed consolidated balance sheet. Under the terms of the intercreditor agreement among the lenders under the Amended Credit Agreement and the Second Lien Credit Agreement, the lenders under the Second Lien Credit Agreement cannot enforce remedies against the collateral until after they provide notice of enforcement and after the expiration of a 180-day standstill period. The lenders under the Second Lien Credit Agreement did not provide such notice. The March 1, 2018 and April 10, 2018 Amended Credit Agreement amendments temporarily waived all events of default, including cross-default provisions.

NOTE 19 – RIGHTS OFFERING

On March 19, 2018, we distributed to holders of our common stock one nontransferable subscription right to purchase 1.4 common shares for each common share held as of 5:00 p.m., New York City time, on March 15, 2018 at a price of $3.00 per common share. On April 10, 2018, we extended the expiration date and amended certain other terms regarding the Rights Offering. As amended, each right entitled holders to purchase 2.8  common shares at a price of $2.00 per share. The Rights Offering expired at 5:00 p.m., New York City time, on April 30, 2018. The Company did not issue fractional rights, or pay cash in lieu of fractional rights. The Rights Offering did not include an oversubscription privilege.

The Rights Offering concluded on April 30, 2018, resulting in the issuance of 124.3 million common shares on April 30, 2018. Gross proceeds from the Rights Offering were $248.4 million . Of the proceeds received, $214.9 million were used to fully repay the Second Lien Credit Agreement, including $2.3 million of accrued interest, and the remainder were used for working capital purposes. Direct costs of the Rights Offering totaled $3.2 million .

NOTE 20 – CONTINGENCIES

Stockholder Litigation

On March 3, 2017 and March 13, 2017, the Company and certain of its officers were named as defendants in two separate but largely identical complaints alleging violations of the federal securities laws. The complaints were brought on behalf of a putative class of investors who purchased the Company's common stock between July 1, 2015 and February 28, 2017 and were filed in the United States District Court for the Western District of North Carolina (collectively, the "Stockholder Litigation"). During the second quarter of 2017, the Stockholder Litigation was consolidated into a single action and a lead plaintiff was selected by the Court. Through subsequent amendments, the putative class period was expanded to include

30





investors who purchased shares between June 17, 2015 and August 9, 2017. We filed a motion to dismiss in late 2017; the court denied the motion in early 2018.

The plaintiff in the Stockholder Litigation alleges fraud, misrepresentation and a course of conduct relating to the facts surrounding certain projects underway in the Company's Renewable segment, which, according to the plaintiff, had the effect of artificially inflating the price of the Company's common stock. The plaintiff further alleges that stockholders were harmed when the Company later disclosed that it would incur losses on these projects. The plaintiff seeks an unspecified amount of damages.

On February 16, 2018 and February 22, 2018, the Company and certain of its present and former officers and directors were named as defendants in three separate but substantially similar derivative lawsuits filed in the United States District Court for the District of Delaware (the “Derivative Litigation”). On April 23, 2018, the United States District Court for the District of Delaware entered an order consolidating the related derivative actions and designating co-lead and co-liaison counsel. On June 1, 2018, plaintiffs filed a consolidated derivative complaint. Plaintiffs assert a variety of claims against defendants including alleged violations of the federal securities laws, waste, breach of fiduciary duties and unjust enrichment. Plaintiffs, who all purport to be current shareholders of the Company's common stock, are suing on behalf of the Company to recover costs and an unspecified amount of damages, and force implementation of corporate governance changes.

On June 28, 2018, the Derivative Litigation was transferred to the United States District Court for the Western District of North Carolina, where the Stockholder Litigation is pending. The parties have filed a motion asking the Court to stay the Derivative Litigation.

We believe the allegations in the Stockholder Litigation and the Derivative Litigation are without merit, and that the respective outcomes of the Stockholder Litigation and the Derivative Litigation will not have a material adverse impact on our consolidated financial condition, results of operations or cash flows, net of any insurance coverage.

Other

Due to the nature of our business, we are, from time to time, involved in routine litigation or subject to disputes or claims related to our business activities, including, among other things: performance or warranty-related matters under our customer and supplier contracts and other business arrangements; and workers' compensation, premises liability and other claims. Based on our prior experience, we do not expect that any of these other litigation proceedings, disputes and claims will have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

NOTE 21 – DERIVATIVE FINANCIAL INSTRUMENTS

Our foreign currency exchange ("FX") forward contracts that qualify for hedge accounting are designated as cash flow hedges. The hedged risk is the risk of changes in functional-currency-equivalent cash flows attributable to changes in FX spot rates of forecasted transactions related to long-term contracts. We exclude from our assessment of effectiveness the portion of the fair value of the FX forward contracts attributable to the difference between FX spot rates and FX forward rates. At June 30, 2018 and 2017 , we had deferred approximately $1.6 million and $(1.3) million , respectively, of net gains (losses) on these derivative financial instruments in AOCI.

At June 30, 2018 , our derivative financial instruments consisted solely of FX forward contracts. The notional value of our FX forward contracts totaled $23.0 million at June 30, 2018 with maturities extending to November 2019. These instruments consist primarily of contracts to purchase or sell euros and British pounds sterling. We are exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments. We attempt to mitigate this risk by using major financial institutions with high credit ratings. The counterparties to all of our FX forward contracts are financial institutions party to our U.S. Revolving Credit Facility. Our hedge counterparties have the benefit of the same collateral arrangements and covenants as described under our U.S. Revolving Credit Facility. During the third quarter of 2017, our hedge counterparties removed the lines of credit supporting new FX forward contracts. Subsequently, we have not entered into any new FX forward contracts.

31






The following tables summarize our derivative financial instruments:
 
Asset and Liability Derivative
(in thousands)
June 30, 2018
December 31, 2017
Derivatives designated as hedges:
 
 
Foreign exchange contracts:
 
 
Location of FX forward contracts designated as hedges:
 
 
Accounts receivable-other
$
731

$
1,088

Other assets
1,631

312

Accounts payable
1

105

 
 
 
Derivatives not designated as hedges:
 
 
Foreign exchange contracts:
 
 
Location of FX forward contracts not designated as hedges:
 
 
Accounts receivable-other
$

$
7

Accounts payable
3

1,722

Other liabilities

12


The effects of derivatives on our financial statements are outlined below:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2018
2017
 
2018
2017
Derivatives designated as hedges:
 
 
 
 
 
Cash flow hedges
 
 
 
 
 
Foreign exchange contracts
 
 
 
 
 
Amount of gain (loss) recognized in other comprehensive income
$
(602
)
$
(3,657
)
 
$
999

$
2,244

Effective portion of gain (loss) reclassified from AOCI into earnings by location:
 
 
 
 
 
Revenues
(478
)
714

 
1,138

6,002

Cost of operations
(11
)
(49
)
 
1

(46
)
Other-net

885

 

492

Portion of gain (loss) recognized in income that is excluded from effectiveness testing by location:
 
 
 
 
 
Other-net
(412
)
(113
)
 
(499
)
(3,519
)
 
 
 
 
 
 
Derivatives not designated as hedges:
 
 
 
 
 
Forward contracts
 
 
 
 
 
Loss recognized in income by location:
 
 
 
 
 
Other-net
$
(3
)
$
(36
)
 
$
(28
)
$
(345
)

32






NOTE 22 – FAIR VALUE MEASUREMENTS

The following tables summarize our financial assets and liabilities carried at fair value, all of which were valued from readily available prices or using inputs based upon quoted prices for similar instruments in active markets (known as "Level 1" and "Level 2" inputs, respectively, in the fair value hierarchy established by the Financial Accounting Standards Board ("FASB") Topic, Fair Value Measurements and Disclosures ).
(in thousands)
 
 
 
 
Available-for-sale securities
June 30, 2018
Level 1
Level 2
Level 3
Commercial paper
$
1,989

$

$
1,989

$

Certificates of deposit
2,999


2,999


Mutual funds
1,351


1,351


Corporate notes and bonds
1,594

1,594



United States Government and agency securities
5,680

5,680



Total fair value of available-for-sale securities
$
13,614

$
7,274

$
6,340

$


(in thousands)
 
 
 
 
Available-for-sale securities
December 31, 2017
Level 1
Level 2
Level 3
Commercial paper
$
1,895

$

$
1,895

$

Certificates of deposit
2,398


2,398


Mutual funds
1,331


1,331


Corporate notes and bonds
4,447

4,447



United States Government and agency securities
5,738

5,738



Total fair value of available-for-sale securities
$
15,809

$
10,185

$
5,624

$


Derivatives
June 30, 2018
December 31, 2017
Forward contracts to purchase/sell foreign currencies
$
2,358
 
$
(432
)

Available-For-Sale Securities

We estimate the fair value of available-for-sale securities based on quoted market prices. Our investments in available-for-sale securities are presented in "other assets" on our condensed consolidated balance sheets.

Derivatives

Derivative assets and liabilities currently consist of FX forward contracts. Where applicable, the value of these derivative assets and liabilities is computed by discounting the projected future cash flow amounts to present value using market-based observable inputs, including FX forward and spot rates, interest rates and counterparty performance risk adjustments.

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 due to their highly liquid nature.
Revolving 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

33





similar debt instruments or on estimated prices based on current yields for debt issues of similar quality and terms. The fair value of our debt instruments approximated their carrying value at June 30, 2018 and December 31, 2017 .

Non-Recurring Fair Value Measurements

The measurement of the net actuarial gain or loss associated with our pension and other postretirement plans was determined using unobservable inputs (see Note 16 ). These inputs included the estimated discount rate, expected return on plan assets and other actuarial inputs associated with the plan participants.

Our interim goodwill impairment tests and second quarter 2018 impairment charges required significant fair value measurements using unobservable inputs (see Note 12). The fair value of the reporting unit was based on an income approach using a discounted cash flow analysis, a market approach using multiples of revenue and EBITDA of guideline companies, and a market approach using multiples of revenue and EBITDA from recent, similar business combinations.

Our second quarter 2018 impairment charges to assets held for sale of discontinued operations required significant fair value measurements using unobservable inputs (see Note 3). The fair value of the net assets held for sale were based on the expected net proceeds for the sale of MEGTEC and Universal.

NOTE 23 – SUPPLEMENTAL INFORMATION

During the six months ended June 30, 2018 and 2017 , we recognized the following non-cash activity in our condensed consolidated financial statements:
(in thousands)
2018
2017
Accrued capital expenditures in accounts payable
$
123

$
703

Accreted interest expense on our second lien term loan facility
$
3,202

$


During the six months ended June 30, 2018 and 2017 , we recognized the following cash activity in our condensed consolidated financial statements:
(in thousands)
2018
2017
Income tax payments
$
2,938

$
2,657

Interest payments on our U.S. revolving credit facility
$
4,599

$
1,389

Interest payments on our second lien term loan facility
$
7,627

$



34





During the three and six months ended June 30, 2018 and 2017 , interest expense in our condensed consolidated financial statements consisted of the following components:
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands)
2018
2017
 
2018
2017
Components associated with borrowings from:
 
 
 
 
 
U.S. Revolving Credit Facility
$
3,434

$
1,428

 
$
5,779

$
2,128

Second Lien Term Loan Facility
2,191


 
7,460


Foreign revolving credit facilities
145

233

 
279

474

 
5,770

1,661

 
13,518

2,602

Components associated with amortization or accretion of:
 
 
 
 
 
U.S. Revolving Credit Facility deferred financing fees and commitment fees
5,113

872

 
8,314

1,588

Second Lien Term Loan Facility deferred financing fees and discount
833


 
3,202


 
5,946

872

 
11,516

1,588

 
 
 
 
 
 
Other interest expense
161

3,750

 
295

3,796

 
 
 
 
 
 
Total interest expense
$
11,877

$
6,283

 
$
25,329

$
7,986


The following table provides a reconciliation of cash, cash equivalents and restricted cash reporting within the consolidated balance sheets that sum to the total of the same amounts in the consolidated statements of cash flows:
(in thousands)
June 30, 2018
December 31, 2017
June 30, 2017
December 31, 2016
Cash and cash equivalents of continuing operations (1)
$
28,512

$
43,717

$
59,239

$
87,426

Restricted cash and cash equivalents
32,302

25,980

22,833

27,770

Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows
$
60,814

$
69,697

$
82,072

$
115,196

(1) Cash and cash equivalents of discontinued operations is included in current assets of discontinued operations in the consolidated balance sheet. See Note 3 for further information.

NOTE 24 – NEW ACCOUNTING STANDARDS

New accounting standards that could affect our consolidated financial statements in the future are summarized as follows:

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . With adoption of this standard, lessees will have to recognize long-term leases as a right-of-use asset and a lease liability on their balance sheet. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are similar to those applied in current lease accounting, but without explicit bright lines. The new accounting standard is effective for us beginning in 2019. We do not expect the new accounting standard to have a significant impact on our financial results when adopted, but will result in new balances in the consolidated balance sheets and new disclosures in the Notes.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income . The new guidance provides companies with the election to reclassify stranded tax effects resulting from the Tax Act from accumulated other comprehensive income to retained earnings. Existing guidance requiring the effect of a change in tax law or rates to be recorded in continuing operations is not affected. This standard is effective for all public business entities for fiscal years beginning after December 15, 2018, and any interim periods within those fiscal years. Early adoption is permitted in any interim period. We expect the impact of this standard on our financial statements would be immaterial, but we do not plan on early adopting this standard and have not determined whether we will exercise the election upon adoption.


35





New accounting standards that were adopted during the six months ended June 30, 2018 are summarized as follows:

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers . The new accounting standard provides a comprehensive model to use in accounting for revenue from contracts with customers and replaces most existing revenue recognition guidance. In 2016, the FASB issued accounting standards updates to address implementation issues and to clarify the guidance for identifying performance obligations for licenses, for determining if an entity is the principal or agent in a revenue arrangement, and for technical corrections and improvements on topics including contract costs, loss provisions on construction and production contracts and disclosures for remaining and prior-period performance obligations. The new accounting standard also requires more detailed disclosures to enable financial statement users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new accounting standard is effective for interim and annual reporting periods beginning after December 15, 2017, and permits retrospectively applying the guidance to each prior reporting period presented (full retrospective method) or prospectively applying the guidance and providing additional disclosures comparing results to previous guidance, with the cumulative effect of initially applying the guidance recognized in beginning retained earnings at the date of initial application (modified retrospective method). We adopted the new accounting standard as of January 1, 2018 under the modified retrospective method. See Note 5 for additional accounting policy and transition disclosures.

In January 2016, the FASB issued ASU 2016-1, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities . The new accounting standard is effective for us beginning in 2018, but early adoption is permitted. The new accounting standard requires investments such as available-for-sale securities to be measured at fair value through earnings each reporting period as opposed to changes in fair value being reported in other comprehensive income. We adopted the new accounting standard prospectively as of January 1, 2018, which resulted in an immaterial impact on our financial results.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments . The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. Of the eight classification-related changes this new standard will require in the statement of cash flows, only two of the classification requirements are relevant to our historical cash flow statement presentation (presentation of debt prepayments and presentation of distributions from equity method investees). However, the new classification requirements did not change our historical statement of cash flows. We adopted the new accounting standard as of January 1, 2018, which resulted in an immaterial impact on our financial results.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash . The new guidance requires the changes in the total of cash, cash equivalents and restricted cash to be shown together in the statement of cash flows and no longer presenting transfers between cash and cash equivalents and restricted cash in the statement of cash flows. Historically, we have presented the transfer of cash to restricted cash and cash equivalents in the investing section of the statement of cash flows. With the adoption of ASU 2016-18, changes in restricted cash are also included in statement of cash flows based on the nature of the change together with unrestricted cash flows. We retrospectively adopted the new accounting standard as of January 1, 2018. The only meaningful effect on our financial statements is related to the restricted cash received from the sale of BWBC as described in Note 11 , which is reflected as investing cash flow. The detail of cash, cash equivalents, and restricted cash is included in Note 23 .

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Benefit Cost and Net Periodic Postretirement Benefit Cost . The new guidance classifies service cost as the only component of net periodic benefit cost presented in cost of operations, whereas the other components will be presented in other income. Upon adoption, this affected not only how we present net periodic benefit cost, but also Power segment gross profit. We adopted the new accounting standard retrospectively as of January 1, 2018. The changes in the classification of the historical components of net periodic benefit costs from operating expense to other expense for the three and six months ended June 30, 2017 amounted to $5.2 million and $9.5 million , respectively, and are reflected in our condensed consolidated statements of operations.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The standard simplifies the subsequent measurement of goodwill by removing the requirement to perform a hypothetical purchase price allocation to compute the implied fair value of goodwill to measure impairment. Instead, goodwill impairment is measured as the difference between the fair value of the reporting unit and the carrying value of the reporting unit. The standard also clarifies the treatment of the income tax effect of tax-deductible goodwill when measuring goodwill impairment loss. This standard is effective for annual or any interim goodwill impairment test in fiscal

36





years beginning after December 15, 2019, with early adoption permitted for impairment tests performed after January 1, 2017. We early adopted ASU 2017-04 on April 1, 2018, effective the first day of our 2018 second quarter. See Note 12 for further discussion of the goodwill impairment we recognized in the second quarter of 2018.

NOTE 25 – SUBSEQUENT EVENT

On August 9, 2018 , the Company entered into a definitive agreement to sell all of the issued and outstanding capital stock of Palm Beach Resource Recovery Corporation, a B&W subsidiary that holds two operations and maintenance contracts for waste-to-energy facilities in West Palm Beach, Florida, to Covanta Pasco, Inc., a wholly owned subsidiary of Covanta Holding Company, for $45 million .  The purchase price is subject to adjustment for net working capital at closing and other adjustments as set forth in the definitive purchase agreement.  The sale is expected to close in the third quarter of 2018, subject to the satisfaction of customary closing conditions, including approval by the Solid Waste Authority of West Palm Beach.  We expect to use proceeds from the transaction primarily to reduce outstanding balances under our bank credit facilities. Total assets of the subsidiary as of June 30, 2018 were $11.3 million and revenues for the six months ended June 30, 2018 were $30.2 million .

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This quarterly report, including Management's Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You should not place undue reliance on these statements. Statements that include the words "expect," "intend," "plan," "believe," "project," "forecast," "estimate," "may," "should," "anticipate" and similar statements of a future or forward-looking nature identify forward-looking statements.

These forward-looking statements address matters that involve risks and uncertainties and include statements that reflect the current views of our senior management with respect to our financial performance and future events with respect to our business and industry in general. There are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Differences between actual results and any future performance suggested in our forward-looking statements could result from a variety of factors, including the following: our ability to continue as a going concern; our ability to obtain and maintain sufficient financing to provide liquidity to meet our business objectives, surety bonds, letters of credit and similar financing; our ability to satisfy the liquidity and other requirements under U.S. revolving credit facility as recently amended, including our ability to successfully enter into and borrow under a new term loan and receive concessions from customers on our Renewable energy loss contracts; the highly competitive nature of our businesses; general economic and business conditions, including changes in interest rates and currency exchange rates; general developments in the industries in which we are involved; cancellations of and adjustments to backlog and the resulting impact from using backlog as an indicator of future earnings; our ability to perform contracts on time and on budget, in accordance with the schedules and terms established by the applicable contracts with customers; failure by third-party subcontractors, partners or suppliers to perform their obligations on time and as specified; our ability to realize anticipated savings and operational benefits from our restructuring plans, and other cost-savings initiatives; our ability to successfully integrate and realize the expected synergies from acquisitions; our ability to successfully address productivity and schedule issues in our Renewable segment, including the ability to complete our Renewable energy contracts within the expected time frame and the estimated costs; willingness of customers to waive liquidated damages or agree to bonus opportunities; our ability to successfully partner with third parties to win and execute renewable contracts; changes in our effective tax rate and tax positions; our ability to maintain operational support for our information systems against service outages and data corruption, as well as protection against cyber-based network security breaches and theft of data; our ability to protect our intellectual property and renew licenses to use intellectual property of third parties; our use of the percentage-of-completion method to recognize revenue over time; our ability to successfully manage research and development projects and costs, including our efforts to successfully develop and commercialize new technologies and products; the operating risks normally incident to our lines of business, including professional liability, product liability, warranty and other claims against us; changes in, or our failure or inability to comply with, laws and government regulations; actual of anticipated changes in governmental regulation, including trade and tariff policies; difficulties we may encounter in obtaining regulatory or other necessary permits or approvals; changes in, and liabilities relating to, existing or future environmental regulatory matters; potential violations of the Foreign Corrupt Practices Act; our ability to successfully compete with current and future competitors; the loss of key personnel and the continued availability

37





of qualified personnel; our ability to negotiate and maintain good relationships with labor unions; changes in pension and medical expenses associated with our retirement benefit programs; social, political, competitive and economic situations in foreign countries where we do business or seek new business; the possibilities of war, other armed conflicts or terrorist attacks; the willingness of customers and suppliers to continue to do business with us on reasonable terms and conditions; our ability to successfully consummate the sale of our MEGTEC and Universal businesses and the sale of our subsidiary that holds two operations and maintenance contracts for waste-to-energy facilities in West Palm Beach, Florida, as well as our ability to successfully consummate strategic alternatives for other assets, if we determine to pursue them. These factors include the cautionary statements included in this report and the factors set forth under Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2017 ("Annual Report") filed with the Securities and Exchange Commission.

These factors are not necessarily all the factors that could affect us. We assume no obligation to revise or update any forward-looking statement included in this or the Annual Report for any reason, except as required by law.

OVERVIEW OF RESULTS

In this report, unless the context otherwise indicates, "B&W," "we," "us," "our" and "the Company" mean Babcock & Wilcox Enterprises, Inc. and its consolidated subsidiaries. The presentation of the components of our revenues, gross profit and earnings before interest, taxes, depreciation and amortization ("EBITDA"), as reconciled in the table on the following pages of this Management's Discussion and Analysis of Financial Condition and Results of Operations is consistent with the way our chief operating decision maker reviews the results of operations and makes strategic decisions about the business.

In the three and six months ended June 30, 2018, we recorded operating losses of $137.4 million and $243.8 million compared to $146.6 million and $157.9 million in the three and six months ended June 30, 2017. Our consolidated results and the results of the Renewable segment are primarily driven by changes in estimated revenues and costs to complete the six European loss contracts described in more detail in Note 5 to the condensed consolidated financial statements. We intend to seek insurance recoveries and additional relief from customers and will pursue other claims where appropriate and available. There can be no assurance as to recovery amounts that we may realize. Renewable loss contract positions at June 30, 2018 do not take into account any of these potential recoveries to mitigate these losses.

In the three and six months ended June 30, 2018, we recorded $57.3 million and $110.0 million increases in estimated losses on these six contracts, even as we continue to make considerable progress on each. The largest portion of these charges, $21.4 million and $39.7 million , respectively, relate to the fifth contract, where the structural steel beam failed in the third quarter of 2017 and work was stopped for an extended period until the structure could be stabilized. In the first quarter of 2018, increases in estimated losses on this fifth loss contract relate primarily to assumption of the civil scope from our joint venture partner, which entered administration (similar to filing for bankruptcy in the U.S.) in late February 2018, and to receiving regulatory approval approximately one month later than previously expected to begin repairs to the failed steel beam, which further increased costs to complete remaining work streams in a compressed time frame. Costs increase when construction activities accelerate because productivity of subcontractors decreases and risk of rework increases. In the second quarter 2018, further increases in estimated losses on this fifth contract reflect greater challenges in restarting work on a site that had been idle for an extended period, including the extent of items that had been damaged from weather exposure, and increases in expected warranty costs. Increases in estimated losses on the second and fourth Renewable loss contracts totaled $22.1 million and $38.2 million in the three and six months ended June 30, 2018, respectively, primarily as a result of repairs required from startup commissioning activities in the second quarter of 2018, subcontractor productivity being lower than previous estimates, additional expected punch list and other commissioning cost, estimated claim settlements and estimated liquidated damages from extending estimated construction time lines. Experience from the startup and commissioning activities in the second quarter of 2018 also resulted in increased estimated warranty costs across the six loss contracts. Additionally, in late May 2018, our insurer disputed our $15.5 million (DKK 100.0 million ) insurance claim to recover a portion of the losses on the first project. We believe that the dispute from the insurer is without merit and continue to believe we are entitled to the full value of the claim. We intend to aggressively pursue full recovery under the policy, and filed for arbitration in July 2018. However, an allowance for the entire receivable was recorded in the second quarter of 2018 based upon the dispute by the insurer, which is considered contradictory evidence in the accounting probability assessment of this loss recovery, even if it is believed to be without merit.

In the three and six months ended June 30, 2017, we recorded a total of  $115.2 million  and $112.2 million in losses from changes in the estimated revenues and costs to complete the six European loss contracts, primarily as a result of scheduling

38





delays and shortcomings in our subcontractors estimated productivity. Two of the six became loss contracts in the second quarter of 2017.

In the Power segment, 2018 revenues are below the corresponding periods due to anticipated lower demand in the global market for new build coal-fired power generation and from lower demand for retrofit projects driven by the Coal Combustion Residue regulations in the U.S. Restructuring occurred in 2017 to maintain margins by reducing costs associated with the projected declines in demand, and further restructuring occurred in June 2018. Comparisons are further affected by increases in estimated warranty costs on certain projects in the second quarter of 2018, favorable results in closing out contracts in the second quarter of 2017 and a reduction of employee benefit expenses that benefited the second quarter of 2017.

The Industrial segment now represents our cooling systems business. While our second quarter 2018 results of the Industrial segment are consistent with the second quarter of the prior year, profitability in this business has been affected by increases in costs to complete new build cooling systems. In 2017, we implemented strategy changes to focus on core geographies and products, and we expect margins to begin to normalize in late 2018 as legacy new build cooling system contracts are completed and both our productivity and profitability increase. On June 5, 2018, we entered into a stock purchase agreement with Dürr AG and its wholly owned subsidiary, Dürr Inc., to sell our MEGTEC and Universal businesses for $130 million , subject to adjustment. We expect the sale to close in the third quarter of 2018, subject to the satisfaction of customary closing conditions, and expect use the proceeds from the transaction primarily to reduce outstanding balances under our bank credit facilities, improving our balance sheet and financial flexibility. As a result, the MEGTEC and Universal businesses, which were previously included in our Industrial segment, are classified as discontinued operations because the disposal represents a strategic shift that will have a major effect on our operations. Accordingly, we recorded a $72.3 million non-cash impairment charge in June 2018 to reduce the carrying value of the MEGTEC and Universal businesses to the fair value, less an amount of estimated sale costs; the non-cash impairment charge is included in Loss from discontinued operations, net of tax .

On April 30, 2018, we raised $248.4 million in a rights offering ("Rights Offering"), resulting in the issuance of 124.3 million shares of common stock. On May 4, 2018, we used $214.9 million of the proceeds from the Rights Offering to fully repay and terminate our second lien term loan facility, dated August 9, 2017 (the "Second Lien Term Loan Facility"), including $2.3 million of accrued interest, resulting in an extinguishment loss of approximately $49.2 million due to the remaining unamortized debt discount and the make-whole interest required from its early repayment. Repayment of the Second Lien Term Loan Facility, which had been in default beginning March 1, 2018, is expected to save approximately $25 million in annual interest payments and $30 million of annual interest expense. We used the remaining net proceeds from the Rights Offering for working capital purposes. The repayment of the Second Lien Term Loan Facility and the Rights Offering are described more fully in Note 18 and Note 19 , respectively, to the condensed consolidated financial statements.

Year-over-year comparisons of our results were also affected by:
$37.5 million to fully impair goodwill related to our SPIG reporting unit in the second quarter of 2018 due to lower bookings than previously forecasted, which resulted in a reduction in the forecast for the reporting unit. See further discussion in Note 12 to the condensed consolidated financial statements.
$5.1 million and $8.2 million of financial advisory services are included in selling, general and administrative expenses ("SG&A") in the three and six months ended June 30, 2018, respectively. These services are requirements of Amendments 3 and 5 to the U.S. Revolving Credit Facility, as described more fully in Note 17 to the condensed consolidated financial statements.
$3.8 million and $10.7 million of restructuring and spin-off costs were recognized in the three and six months ended June 30, 2018, respectively, compared to $2.0 million and $5.0 million of restructuring and spin-off costs in the three and six months ended June 30, 2017, respectively. The actions in the first six months of 2018 are primarily related to executive severance, workforce reductions and the remaining severance costs of other restructuring initiatives. In the first six months of 2017, restructuring cost related to severance costs from prior initiatives to restructure the business serving the power generation market in advance of lower demand for power generation from coal in the United States.
$6.5 million of gain on the sale of an equity method investment in China was recognized in the first quarter of 2018 and is included in Equity in income and impairment of investees. The sale was completed in early 2018 with proceeds, net of withholding tax of $19.8 million .
$18.4 million and $18.2 million of other-than-temporary impairment of our equity method investment in India in the first quarter of 2018 and the second quarter of 2017, respectively, based on a change in strategy and then an agreement to sell it, which was completed in July 2018. The impairments are included in Equity in income and impairment of investees. See further discussion in Note 11 to the condensed consolidated financial statements.

39





$1.5 million to dispose and write off unused IT equipment and cancel in-process IT projects in the second quarter of 2018.
$0.5 million and $1.1 million of actuarially determined mark-to-market ("MTM") losses caused by lump sum settlement payments from our Canadian pension plan in the second quarter 2018 and the first quarter of 2017, respectively.
$0.5 million and $1.4 million of acquisition and integration costs in the three and six months ended June 30, 2017, respectively, related to the acquisitions of SPIG and Universal.

In an effort to address our liquidity needs from the accrued losses on the six European loss contracts in the Renewable segment, we have:
raised $248.4 million of equity on April 30, 2018 through the Rights Offering;
repaid on May 4, 2018 the Second Lien Term Loan Facility, which will save approximately $25 million in annual interest payments and $30 million of annual interest expense;
entered into an agreement on June 5, 2018 to sell our MEGTEC and Universal businesses for $130 million (subject to adjustment);
entered into an agreement on August 9, 2018 to sell a subsidiary that holds two operations and maintenance contracts for waste-to-energy facilities in West Palm Beach, Florida for $45 million (subject to adjustment);
sold our equity method investments in Babcock & Wilcox Beijing Company, Ltd. ("BWBC"), our former joint venture in China, and Thermax Babcock & Wilcox Energy Solutions Private Limited ("TBWES"), our former joint venture in India, resulting in proceeds of $21.1 million in the second quarter of 2018 and $15.0 million in July 2018, respectively;
sold another non-core business for $5.1 million in the first quarter of 2018;
initiated restructuring actions and other additional cost reductions in the second quarter of 2018 that are designed to save approximately $34 million annually; and
entered into several waivers and amendments to avoid default to our U.S. Revolving Credit Facility as described in Note 17, the most recent of which is dated August 9, 2018. As part of this latest amendment, our lenders agreed to reduce the minimum liquidity required under the facility, which has the effect of increasing the amount we may borrow by up to $25 million Other liquidity measures that must also be completed include: a) the receipt of $30 million in net proceeds from the Last Out Loan, for which a binding commitment letter with Vintage Capital Management LLC, a related party, was executed on August 9, 2018, which is fully backstopped by B. Riley FBR, Inc., a related party; and b) obtaining $25 million of written commitments for concessions from customers on the Renewable loss contracts through a combination of cash contributions, loans and forgiveness of indebtedness and performance obligations by September 30, 2018.

Additionally, we continue to evaluate further dispositions and additional opportunities for cost savings. We also continue to pursue insurance recoveries, additional relief from customers and will pursue other claims where appropriate and available. Management believes it is taking all prudent actions to address the substantial doubt about our ability to continue as a going concern, but we cannot assert that it is probable that our plans will fully mitigate the liquidity challenges we face. Our plan is designed to provide us with what we believe will be adequate liquidity to meet our obligations for at least the twelve month period following August 9, 2018; however, our remediation plan depends on conditions and matters that may be outside of our control, including regulatory approvals that may be required to sell certain assets, agreement to concessions from customers on the Renewable loss contracts as required under the amended terms of our U.S. Revolving Credit Facility and our ability to obtain and maintain sufficient capacity to support contract security requirements for current and future business. Additionally, our ability to operate within the amended covenants and borrowing limits associated with our U.S. Revolving Credit Facility are dependent on our future financial operating results. If we cannot continue as a going concern, material adjustments to the carrying values and classifications of our assets and liabilities and the reported amounts of income and expense would be required.

40





RESULTS OF OPERATIONS

Beginning in 2018, we changed our primary measure of segment profitability from gross profit to adjusted EBITDA. The presentation of the components of our gross profit and adjusted EBITDA in the tables below are consistent with the way our chief operating decision maker reviews the results of our operations and makes strategic decisions about our business. Items such as gains or losses on asset sales, mark-to-market ("MTM") pension adjustments, restructuring and spin costs, impairments, losses on debt extinguishment, costs related to financial consulting required under Amendments 3 and 5 to our U.S. Revolving Credit Facility and other costs that may not be directly controllable by segment management are not allocated to the segment. Adjusted EBITDA for each segment is presented below with a reconciliation to net income. Adjusted EBITDA is not a recognized term under GAAP and should not be considered in isolation or as an alternative to net earnings (loss), operating profit (loss) or as an alternative to cash flows from operating activities as a measure of our liquidity. Adjusted EBITDA as presented below differs from the calculation used to compute our leverage ratio and interest coverage ratio as defined by our U.S. Revolving Credit Facility. Because all companies do not use identical calculations, the amounts presented for Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In thousands)
2018
2017
$ Change
 
2018
2017
$ Change
Revenues:
 
 
 
 
 
 
 
Power segment
$
197,752

$
213,756

$
(16,004
)
 
$
356,878

410,052

$
(53,174
)
Renewable segment
55,002

48,074

6,928

 
114,960

153,610

(38,650
)
Industrial segment
46,015

46,632

(617
)
 
82,759

95,817

(13,058
)
Eliminations
(7,432
)
(2,231
)
(5,201
)
 
(10,084
)
(5,176
)
(4,908
)
 
291,337

306,231

(14,894
)
 
544,513

654,303

(109,790
)
Gross profit (loss) (1) :
 
 
 
 
 
 
 
Power segment
30,011

43,852

(13,841
)
 
60,876

81,562

(20,686
)
Renewable segment
(69,329
)
(110,894
)
41,565

 
(119,778
)
(100,300
)
(19,478
)
Industrial segment
79

187

(108
)
 
(2,672
)
4,886

(7,558
)
Intangible amortization expense included in cost of operations
(1,827
)
(2,738
)
911

 
(3,661
)
(6,127
)
2,466

 
(41,066
)
(69,593
)
28,527

 
(65,235
)
(19,979
)
(45,256
)
Selling, general and administrative ("SG&A") expenses
(52,090
)
(57,272
)
5,182

 
(114,351
)
(113,852
)
(499
)
Goodwill impairment
(37,540
)

(37,540
)
 
(37,540
)

(37,540
)
Restructuring activities and spin-off transaction costs
(3,826
)
(1,952
)
(1,874
)
 
(10,688
)
(4,984
)
(5,704
)
Research and development costs
(1,287
)
(2,437
)
1,150

 
(2,429
)
(4,230
)
1,801

Intangible amortization expense included in SG&A
(158
)
(98
)
(60
)
 
(395
)
(204
)
(191
)
Equity in loss of investees

(15,232
)
15,232

 
(11,757
)
(14,614
)
2,857

Loss on asset disposals, net
(1,384
)
(2
)
(1,382
)
 
(1,384
)
(2
)
(1,382
)
Operating loss
$
(137,351
)
$
(146,586
)
$
9,235

 
$
(243,779
)
$
(157,865
)
$
(85,914
)
(1) Gross profit excludes intangible amortization but includes depreciation.


41





 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2018
2017
$ Change
 
2018
2017
$ Change
Adjusted EBITDA




 
 




 
Power segment (1)
$
16,439

$
27,401

$
(10,962
)
 
$
27,613

$
44,810

$
(17,197
)
Renewable segment
(78,603
)
(123,302
)
44,699

 
(140,357
)
(122,375
)
(17,982
)
Industrial segment
(6,222
)
(4,880
)
(1,342
)
 
(13,532
)
(5,385
)
(8,147
)
Corporate (2)
(6,194
)
(9,665
)
3,471

 
(17,808
)
(19,393
)
1,585

Research and development costs
(1,287
)
(2,437
)
1,150

 
(2,429
)
(4,230
)
1,801

Foreign exchange
(20,198
)
2,294

(22,492
)
 
(17,741
)
2,339

(20,080
)
Other – net
(131
)
43

(174
)
 
266

78

188

 
 
 
 
 
 
 
 
Gain on sale of equity method investment (BWBC)



 
6,509


6,509

Other than temporary impairment of equity method investment in TBWES

(18,193
)
18,193

 
(18,362
)
(18,193
)
(169
)
Loss on debt extinguishment
(49,241
)

(49,241
)
 
(49,241
)

(49,241
)
Loss on asset disposal
(1,513
)

(1,513
)
 
(1,513
)

(1,513
)
MTM loss from benefit plans
544


544

 
544

(1,062
)
1,606

Financial advisory services included in SG&A
(5,142
)

(5,142
)
 
(8,231
)

(8,231
)
Acquisition and integration costs included in SG&A

(535
)
535

 

(1,432
)
1,432

Goodwill impairment
(37,540
)

(37,540
)
 
(37,540
)

(37,540
)
Restructuring activities and spin-off transaction costs
(3,826
)
(1,952
)
(1,874
)
 
(10,688
)
(4,984
)
(5,704
)
Depreciation & amortization
(6,921
)
(7,774
)
853

 
(13,902
)
(16,159
)
2,257

Interest expense, net
(11,770
)
(6,158
)
(5,612
)
 
(25,069
)
(7,749
)
(17,320
)
Loss before income tax expense
(211,605
)
(145,158
)
(66,447
)
 
(321,481
)
(153,735
)
(167,746
)
Income tax expense (benefit)
(1,934
)
3,458

(5,392
)
 
5,029

346

4,683

Income (loss) from continuing operations
(209,671
)
(148,616
)
(61,055
)
 
(326,510
)
(154,081
)
(172,429
)
Income (loss) from discontinued operations, net of tax
(55,932
)
(2,234
)
(53,698
)
 
(59,428
)
(3,610
)
(55,818
)
Net income (loss)
(265,603
)
(150,850
)
(114,753
)
 
(385,938
)
(157,691
)
(228,247
)
Net income attributable to noncontrolling interest
(165
)
(149
)
(16
)
 
(263
)
(353
)
90

Net loss attributable to stockholders
$
(265,768
)
$
(150,999
)
$
(114,769
)
 
$
(386,201
)
$
(158,044
)
$
(228,157
)

(1) Power segment adjusted EBITDA includes $6.4 million and $5.0 million of net benefit from pension and other postretirement benefit plans excluding MTM adjustments in the three months ended June 30, 2018 and 2017, respectively. Power segment adjusted EBITDA includes $13.2 million and $10.0 million of net benefit from pension and other postretirement benefit plans excluding MTM adjustments in the six months ended June 30, 2018 and 2017, respectively.
(2) Allocations are excluded from discontinued operations. Accordingly, allocations previously absorbed by the MEGTEC and Universal businesses in the Industrial segment have been included with other unallocated costs in Corporate, and total $2.9 million and $2.2 million in the three months ended June 30, 2018 and 2017, respectively, and $5.7 million and $4.4 million in the six months ended June 30, 2018 and 2017, respectively.

Condensed and Consolidated Results of Operations

Three Months Ended June 30, 2018 vs. 2017

Revenues decreased by $14.9 million to $291.3 million in the second quarter of 2018 as compared to $306.2 million in the second quarter of 2017 primarily from anticipated lower demand in the Power segment for retrofit projects driven by the Coal Combustion Residue regulations in the U.S. In the Renewable segment, changes in estimated contract progress and estimated liquidated damages ("LDs") in the second quarter of 2018 reduced revenue less than the second quarter of 2017.

42






Gross profit improved by $28.5 million , to a loss of $41.1 million in the second quarter of 2018 as compared to a loss of $69.6 million in the second quarter of 2017. In the second quarter of 2018 and 2017, we recorded $57.3 million and $115.2 million in net losses, respectively, resulting from changes in the estimated revenues and costs to complete the six European loss contracts, as described in greater detail in Note 5 to the condensed consolidated financial statements. The lower level of losses recorded in the Renewable segment were partly offset by a decrease in the Power segment from the lower volume of revenue, increases in estimated warranty costs on certain projects, favorable results in closing out contracts in the second quarter of 2017 and a reduction of employee benefits that occurred in the second quarter of 2017.

SG&A expenses were $5.2 million lower in the second quarter of 2018 primarily due to the benefits of prior restructuring initiatives and conscious reduction of discretionary costs, which more than offset increases in financial advisory fees, litigation costs and support costs in the Renewable segment.
 
Equity in income of investees was a loss of $15.2 million in the second quarter of 2017, which included an $18.2 million other-than-temporary-impairment of our investment in TBWES, which was partly offset by $3.0 million of equity in income of BWBC. Our former joint ventures and the related equity in income of investees is described more fully below and in Note 11 to the condensed consolidated financial statements.

Six Months Ended June 30, 2018 vs. 2017

Revenues decreased by $109.8 million to $544.5 million in the first six months of 2018 as compared to $654.3 million in the first six months of 2017. Revenue in the Power segment decreased by $53.2 million primarily due to lower demand in the global market for new build coal-fired power generation and from lower demand for retrofit projects driven by the Coal Combustion Residue regulations in the U.S. Revenue in the Renewable segment decreased by $38.7 million primarily due to the changes in the estimated contract progress and increases in estimated LDs on the six European loss contracts in our Renewable segment and from lower levels of activity as progress is made on these loss projects. Revenue in the Industrial segment declined $13.1 million primarily due to lower volume of aftermarket cooling system services.

Gross profit decreased by $45.3 million , to a loss of $65.2 million in the first six months of 2018 as compared to a loss of $20.0 million in the first six months of 2017. Gross profit in the Renewable segment decreased $19.5 million primarily from changes in the estimated revenues and costs to complete the six European loss contracts, as described in greater detail in Note 5 to the condensed consolidated financial statements. Gross profit in the Power segment decreased $20.7 million primarily from the lower volume of revenue, increases in estimated warranty costs on certain projects, favorable results in closing out contracts in the second quarter of 2017 and a reduction of employee benefits that occurred in the second quarter of 2017. Gross profit in the Industrial segment decreased primarily from increases in estimated costs to complete new build cooling contracts.

SG&A expenses were $0.5 million lower in the first six months of 2018, primarily due to the benefits of prior restructuring initiatives and conscious reduction of discretionary costs, which more than offset increases in financial advisory fees, litigation costs and support costs in the Renewable segment.
 
Equity in income of investees were losses of $11.8 million and $14.6 million in the first six months of 2018 and 2017, respectively. In the first six months of 2018, we recognized a $18.4 million other-than-temporary impairment in our investment in TBWES, which was partly offset by a gain on sale of our investment in BWBC of approximately $6.5 million . In the first six months of 2017, we recognized a $18.2 million other-than-temporary impairment in our investment in TBWES, which was partly offset by $3.6 million of equity in earnings of our investment in BWBC. Our former joint ventures and the related equity in income of investees is described more fully below and in Note 11 to the condensed consolidated financial statements.


43





Power Segment Results
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In thousands)
2018
2017
$ Change
 
2018
2017
$ Change
Revenues
$
197,752

$
213,756

$
(16,004
)
 
$
356,878

$
410,052

$
(53,174
)
Gross profit (loss)
$
30,011

$
43,852

$
(13,841
)
 
$
60,876

$
81,562

$
(20,686
)
Adjusted EBITDA
$
16,439

$
27,401

$
(10,962
)
 
$
27,613

$
44,810

$
(17,197
)
Gross profit %
15.2
%
20.5
%
 
 
17.1
%
19.9
%
 

Three Months Ended June 30, 2018 vs. 2017

Revenues in the Power segment decreased 7% , or $16.0 million , to $197.8 million in the quarter ended June 30, 2018, compared to $213.8 million in the corresponding quarter in 2017. The revenue decrease is attributable to the the anticipated continued decline in the global new build market for coal-fired power generation and the anticipated lower demand in the Power segment for retrofit projects driven by the Coal Combustion Residue regulations in the U.S., which have been delayed or suspended along with other U.S. environmental regulations.

Gross profit in the Power segment decreased 32% , or $13.8 million , to $30.0 million in the quarter ended June 30, 2018, compared to $43.9 million in the corresponding quarter in 2017 due to lower volume of revenue, increases in estimated warranty costs on certain projects, favorable results in closing out contracts in the second quarter of 2017 and a reduction of employee benefits that occurred in the second quarter of 2017.

Adjusted EBITDA in the Power segment decreased 40% , or $11.0 million , to $16.4 million in the quarter ended June 30, 2018, compared to $27.4 million in the corresponding quarter in 2017. The adjusted EBITDA decrease is attributable to lower gross profit discussed above. Power segment SG&A also decreased year-over-year in the second quarter of 2018, but it did not reduce at the same rate as revenue.

As a result of a new accounting standard that became effective in 2018, Power segment gross profit has been adjusted retrospectively. Net benefit from pension and other postretirement benefit plans excluding MTM adjustments totaling $6.4 million and $5.0 million in the three months ended June 30, 2018 and 2017, respectively, are excluded from Power segment gross profit, but are included in Power segment adjusted EBITDA.

Six Months Ended June 30, 2018 vs. 2017

Revenues in the Power segment decreased 13% , or $53.2 million , to $356.9 million in the six months ended June 30, 2018, compared to $410.1 million in the corresponding period in 2017. The revenue decrease is attributable to the the anticipated continued decline in the global new build market for coal-fired power generation and the anticipated lower demand in the Power segment for retrofit projects driven by the Coal Combustion Residue regulations in the U.S., which have been delayed or suspended along with other U.S. environmental regulations.

Gross profit in the Power segment decreased 25% , or $20.7 million , to $60.9 million in the six months ended June 30, 2018, compared to $81.6 million in the corresponding period in 2017. The decrease in gross profit is related to lower volume of revenue, increases in estimated warranty costs on certain projects, favorable results in closing out contracts in the second quarter of 2017 and a reduction of employee benefits that occurred in the second quarter of 2017.

Adjusted EBITDA in the Power segment decreased 38% , or $17.2 million , to $27.6 million in the six months ended June 30, 2018, compared to $44.8 million in the corresponding period in 2017. The adjusted EBITDA decrease is attributable to lower gross profit discussed above. Power segment SG&A also decreased year-over-year in the first six months, but it did not reduce at the same rate as revenue.

As a result of a new accounting standard that became effective in 2018, Power segment gross profit has been adjusted retrospectively. Net benefit from pension and other postretirement benefit plans excluding MTM adjustments totaling $13.2 million and $10.0 million in the six months ended June 30, 2018 and 2017, respectively, are excluded from Power segment gross profit, but are included in Power segment adjusted EBITDA.



44






Renewable Segment Results
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2018
2017
$ Change
 
2018
2017
$ Change
Revenues
$
55,002

$
48,074

$
6,928

 
$
114,960

$
153,610

$
(38,650
)
Gross profit (loss)
$
(69,329
)
$
(110,894
)
$
41,565

 
$
(119,778
)
$
(100,300
)
$
(19,478
)
Adjusted EBITDA
$
(78,603
)
$
(123,302
)
$
44,699

 
$
(140,357
)
$
(122,375
)
$
(17,982
)
Gross profit %
(126.0
)%
(230.7
)%
 
 
(104.2
)%
(65.3
)%
 

The results of the Renewable segment are primarily driven by changes in estimated revenues and costs to complete the six European loss contracts described in more detail in the Overview of Results above and in Note 5 to the condensed consolidated financial statements. The August 9, 2018 amendment to the U.S. Revolving Credit Facility requires $25.0 million of concessions from customers on these Renewable loss contracts to be secured by August 31, 2018; however, these concessions have not been included in the contract estimates as of June 30, 2018 because they remained unsigned as of the filing date of these condensed consolidated financial statements.

Three Months Ended June 30, 2018 vs. 2017

Revenues in the Renewable segment increased 14% , or $6.9 million to $55.0 million in the quarter ended June 30, 2018 from $48.1 million in the corresponding quarter in 2017. Changes in estimated contract progress and estimated LDs in the second quarter of 2018 reduced revenue less than the second quarter of 2017.

Gross profit in the Renewable segment was a loss of $69.3 million in the quarter ended June 30, 2018 compared to a $110.9 million loss in the corresponding quarter in 2017. In the second quarter of 2018 and 2017, we recorded $57.3 million and $115.2 million in net losses, respectively, resulting from changes in the estimated revenues and costs to complete the six European loss contracts. Additionally, in late May 2018, our insurer disputed our $15.5 million (DKK 100.0 million ) insurance claim to recover a portion of the losses on the first project. We believe that the dispute from the insurer is without merit and continue to believe we are entitled to the full value of the claim. We intend to aggressively pursue full recovery under the policy, and filed for arbitration in July 2018. However, an allowance for the entire receivable was recorded in the second quarter of 2018 based upon the dispute by the insurer, which is considered contradictory evidence in the accounting probability assessment of this loss recovery, even if it is believed to be without merit.

Adjusted EBITDA in the Renewable segment improved $44.7 million to a loss of $78.6 million in the quarter ended June 30, 2018, compared to $123.3 million the corresponding quarter in 2017. The improvement is primarily due to the changes in gross profit described above, partly offset by lower SG&A, which reflects benefits of restructuring, lower proposal costs and active reductions in discretionary spend.

Six Months Ended June 30, 2018 vs. 2017

Revenues in the Renewable segment decreased 25% , or $38.7 million to $115.0 million in the six months ended June 30, 2018 from $153.6 million in the corresponding period in 2017. The decrease in revenue was primarily due to the effect on the percentage of completion of the increases in estimated costs to complete and increases in estimated LDs on the six European loss contracts and from lower levels of activity as progress is made on these loss projects.

Gross profit in the Renewable segment worsened $19.5 million to a loss of $119.8 million in the six months ended June 30, 2018, compared to a loss of $100.3 million in the corresponding period in 2017. In the six months ended June 30, 2018 and June 30, 2017, we recorded $110.0 million and $112.2 million in net losses, respectively, resulting from changes in the estimated revenues and costs to complete the six European loss contracts.

Adjusted EBITDA in the Renewable segment worsened $18.0 million to a loss of $140.4 million in the six months ended June 30, 2018, compared to a loss of $122.4 million in the corresponding period of 2017. The decrease in adjusted EBITDA was primarily due to the changes in gross profit described above, partly offset by lower SG&A, which reflects benefits of restructuring, lower proposal costs and active reductions in discretionary spend.

45






Industrial Segment Results
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In thousands)
2018
2017
$ Change
 
2018
2017
$ Change
Revenues
$
46,015

$
46,632

$
(617
)
 
$
82,759

$
95,817

$
(13,058
)
Gross profit (loss)
$
79

$
187

$
(108
)
 
$
(2,672
)
$
4,886

$
(7,558
)
Adjusted EBITDA
$
(6,222
)
$
(4,880
)
$
(1,342
)
 
$
(13,532
)
$
(5,385
)
$
(8,147
)
Gross profit %
0.2
%
0.4
%
 
 
(3.2
)%
5.1
%



Three Months Ended June 30, 2018 vs. 2017

Revenues in the Industrial segment decreased $0.6 million , to $46.0 million in the quarter ended June 30, 2018 from $46.6 million in the corresponding quarter in 2017. The slight decrease in revenues in the Industrial segment is primarily due to lower volume of aftermarket cooling systems services, mostly offset by increases in new build cooling systems activity.

Gross profit in the Industrial segment decreased $0.1 million , to $0.1 million in the quarter ended June 30, 2018, compared to $0.2 million in the corresponding quarter in 2017. Gross profit remained relatively unchanged due to the continued effort in closing out legacy new build cooling system projects that were in low margin or loss positions. Remaining legacy new build cooling system contracts are generally expected to be completed in the second half of 2018, and at June 30, 2018, accrued Industrial contract losses totaled $2.2 million.

Adjusted EBITDA in the Industrial segment decreased by $1.3 million to a loss of $6.2 million in the quarter ended June 30, 2018, compared to a loss of $4.9 million in the quarter ended June 30, 2017. The decrease primarily reflects legal expenses related to legacy litigation.

Six Months Ended June 30, 2018 vs. 2017

Revenues in the Industrial segment decreased 14% , or $13.1 million , to $82.8 million in the six months ended June 30, 2018 from $95.8 million in the corresponding six months in 2017. The decrease is primarily due to lower volume of aftermarket cooling systems services.

Gross profit in the Industrial segment decreased $7.6 million , to a loss of $2.7 million in the six months ended June 30, 2018, compared to $4.9 million of gross profit in the corresponding six months in 2017. The decrease primarily reflects increases in estimated costs to complete new build cooling systems contracts.

Adjusted EBITDA in the Industrial segment decreased by $8.1 million to a loss of $13.5 million in the six months ended June 30, 2018, compared to the six months ended June 30, 2017. The decrease primarily reflects increases in estimated costs to complete legacy new build cooling systems contracts and legal expenses related to legacy litigation.

Bookings and Backlog

Bookings and backlog are our measure of remaining performance obligations under our sales contracts. It is possible that our methodology for determining bookings and backlog may not be comparable to methods used by other companies.

We generally include expected revenue from contracts in our backlog when we receive written confirmation from our customers authorizing the performance of work and committing the customers to payment for work performed. Backlog may not be indicative of future operating results, and contracts in our backlog may be canceled, modified or otherwise altered by customers. Additionally, because we operate globally, our backlog is also affected by changes in foreign currencies each period. We do not include orders of our unconsolidated joint ventures in backlog.

Bookings represent changes to the backlog. Bookings include additions from booking new business, subtractions from customer cancellations or modifications, changes in estimates of liquidated damages that affect selling price and revaluation of backlog denominated in foreign currency. We believe comparing bookings on a quarterly basis or for periods less than one year is less meaningful than for longer periods, and that shorter term changes in bookings may not necessarily indicate a material trend.

46





 
Three months ended June 30,
 
Six months ended June 30,
(In millions)
2018
2017
 
2018
2017
Power
$
132

$
177

 
$
403

$
354

Renewable (1)
(23
)
15

 
23

50

Industrial
18

79

 
45

144

Other/eliminations
(1
)
(37
)
 
(2
)
(38
)
Bookings
$
126

$
234

 
$
469

$
510

(1 ) Renewable bookings primarily represents the revaluation of backlog denominated in currency other than U.S. dollars. The foreign exchange impact on Renewable bookings in the three months ended June 30, 2018 and 2017 was $(30.3) million and $30.3 million, respectively, and the foreign exchange impact on Renewable bookings in the six months ended June 30, 2018 and 2017 was $(12.3) million and $43.3 million, respectively.

(In approximate millions)
June 30, 2018
December 31, 2017
June 30, 2017
Power
$
500

$
453

$
562

Renewable (1)
916

1,008

1,137

Industrial
137

175

221

Other/eliminations
(35
)
(43
)
(36
)
Backlog
$
1,518

$
1,593

$
1,884

(1 ) Renewable backlog at June 30, 2018 includes $714 million related to long-term operation and maintenance contracts for renewable energy plants, with remaining durations ranging to between 2019 and 2035. Generally such contracts have a duration of 10-20 years and include options to extend.

Of the backlog at June 30, 2018, we expect to recognize revenues as follows:
(In approximate millions)
2018
2019
Thereafter
Total
Power
$
283

$
123

$
94

$
500

Renewable
152

130

634

$
916

Industrial
91

25

21

$
137

Other/eliminations
(19
)
(15
)
(1
)
$
(35
)
Expected revenue from backlog
$
507

$
263

$
748

$
1,518


Corporate

Corporate costs include SG&A expenses that are not allocated to the reportable segments. These costs include certain executive, compliance, strategic, reporting and legal expenses associated with governance of the total organization and being an SEC registrant. Corporate costs decreased $3.5 million to $6.2 million in the second quarter of 2018 from $9.7 million in the second quarter of 2017. Corporate costs decreased $1.6 million to $17.8 million in the six months ended June 30, 2018 from $19.4 million in the six months ended June 30, 2107. The decrease primarily reflects benefits of restructuring, lower incentive and stock-based compensation and reductions in discretionary spend.

Allocations are excluded from discontinued operations. Accordingly, allocations previously absorbed by the MEGTEC and Universal businesses in the Industrial segment have been included with other unallocated costs in Corporate, and total $2.9 million and $2.2 million in the three months ended June 30, 2018 and 2017, respectively, and $5.7 million and $4.4 million in the six months ended June 30, 2018 and 2017, respectively.

Research and Development

Research and development expenses relate to the development and improvement of new and existing products and equipment, as well as conceptual and engineering evaluation for translation into practical applications. These expenses were $1.3 million and $2.4 million for the quarter ended June 30, 2018 and 2017, respectively, and $2.4 million and $4.2 million for the six months ended June 30, 2018 and 2017, respectively. We continuously evaluate each research and development project and collaborate with our business teams to ensure that we believe we are developing technology and products that are currently desired by the market and will result in future sales.

47






Restructuring

Restructuring costs totaled $3.8 million and $10.7 million in the three and six months ended June 30, 2018, respectively, and $2.0 million and $5.0 million in the three and six months ended June 30, 2017, respectively. At the end of June 2018, we eliminated 74 positions, primarily in our U.S., Canada and corporate functions. These actions were intended to appropriately size our operations and support functions in response to the continuing decline in global markets for new build coal-fired power generation, the announcement of the MEGTEC and Universal sale and our liquidity needs. These severance actions are expected to result in $18.3 million of annual savings. Severance cost associated with these actions is expected to total approximately $5.5 million , of which $3.4 million was recorded in June 2018 and the remainder will be recorded in the balance of 2018 over the remaining service periods. Executive severance totaling $0.2 million and $5.1 million in the three and six months ended June 30, 2018 , respectively, related to the elimination of the SVP and Chief Business Development Officer role and the transition of the CEO. Severance payments are expected to extend through mid-2019. Additionally, we implemented other initiatives and benefit changes to avoid or reduce costs totaling approximately $15.8 million annually.

As described further in Note 6 to the condensed consolidated financial statements, other restructuring costs in 2018 relate to executive severance and actions from the second half of 2017 that were intended to improve our global cost structure and increase our financial flexibility. These restructuring actions included a workforce reduction at both the business segment and corporate levels totaling approximately 9% of our global workforce, SG&A expense reductions and new cost control measures, and office closures and consolidations in non-core geographies. These actions included reduction of approximately 30% of B&W Vølund's workforce to align with a new execution model focused on B&W Vølund's core boiler, grate and environmental equipment technologies, with the balance-of-plant and civil construction scope being executed by a partner.

In the three and six months ended June 30, 2017 , restructuring costs relate primarily to a series of activities that took place prior to 2017 that were intended to help us maintain margins, make our costs more volume-variable and allow our business to be more flexible. These actions were primarily in the Power segment in advance of lower projected demand for power generation from coal in the United States. We made our manufacturing costs more volume-variable through the closure of manufacturing facilities and development of manufacturing arrangements with third parties. Also, we made our cost of engineering and supply chain more variable by creating a matrix organization capable of delivering products across multiple segments, and developing more volume-variable outsourcing arrangements with our joint venture partners and other third parties to meet fluctuating demand. Until the second quarter of 2018, these restructuring actions achieved the goal of maintaining gross margins in the Power segment. Quantification of cost savings, however, is significantly dependent upon volume assumptions that have changed since the restructuring actions were initiated.

Spin-off transaction costs

Spin-off costs were primarily attributable to employee retention awards directly related to the spin-off from our former parent, The Babcock & Wilcox Company (now known as BWX Technologies, Inc.). In the six months ended June 30, 2018 and 2017, we recognized spin-off costs of $0.3 million and $0.9 million , respectively. We do not expect additional costs related to the spin-off transaction in the second half of 2018.

Goodwill Impairment

ASC 350-30, Goodwill and Other Intangible Assets , requires that goodwill and other unamortizable intangible assets be tested for impairment at least annually or earlier if there are impairment indicators. Interim impairment testing as of June 30, 2018 was performed at SPIG due to lower bookings in the second quarter of 2018 than previously forecasted, which resulted in a reduction in the forecast for the reporting unit.

As described further in Note 12 to the condensed consolidated financial statements, we compared the fair value of the reporting unit and the carrying value of the reporting unit to measure goodwill impairment loss as required by ASU 2017-04. As a result of the impairment test, we recognized a $37.5 million impairment of goodwill in the SPIG reporting unit of our Industrial segment. After the impairment, the SPIG reporting unit did not have any remaining goodwill.

At June 30, 2018, all of our remaining goodwill related to the Power segment.

48






Equity in Income (Loss) of Investees

In the first quarter of 2018, we sold all of our interest in BWBC to our joint venture partner for approximately $21.1 million , which resulted in a gain of approximately $6.5 million during the first quarter of 2018. The sale of our interest in BWBC joint venture in China is further described in Note 11 to the condensed consolidated financial statements. We recognized $3.0 million and $3.6 million of equity in earnings of BWBC in the three and six months ended June 30, 2017, respectively.

At June 30, 2018 , our total investment in equity method investees is $8.4 million , which included a $7.7 million investment in TBWES, which has a manufacturing facility intended primarily for new build coal boiler projects in India. In the second quarter of 2017, we recognized an $18.2 million other-than-temporary impairment charge of our investment in TBWES as a result of a strategic change we and our joint venture partner made due to the decline in forecasted market opportunities in India. In the first quarter of 2018, we recognized an additional $18.4 million other-than-temporary-impairment charge of our investment in TBWES based on a preliminary agreement to sell our investment in TBWES. The additional impairment charge was based on the difference in the carrying value of our investment in TBWES and the preliminary sale price. In July 2018, we completed the sale of our investment in TBWES together with the settlement of related contractual claims and received $15.0 million in cash, of which $7.7 million related to our investment in TBWES. Additionally, AOCI includes $2.6 million at June 30, 2018 for AOCI related to cumulative currency translation loss from our investment in TBWES, and is expected to be recognized as a loss in connection with closing the sale in the third quarter of 2018.

Equity in income of investees is described more fully below and in Note 11 to the condensed consolidated financial statements.

Depreciation and Intangible Asset Amortization

Depreciation expense was $4.9 million in each of the quarters ended June 30, 2018 and 2017 and $9.8 million in each of the six months ended June 30, 2018 and 2017.

We recorded $2.0 million and $2.8 million of intangible asset amortization expense during the quarters ended June 30, 2018 and 2017, respectively and $4.1 million and $6.3 million for the six months ended June 30, 2018 and 2017, respectively. We expect intangible asset amortization expense will be approximately $2.6 million for the remainder of 2018.

Mark to Market Adjustments of Pension and Retirement Plans

During the first six months of 2018, lump sum payments from our Canadian pension plan resulted in a plan settlement gain of $0.1 million and an interim mark to market gain of $0.4 million . Lump sum payments from our Canadian pension plan resulted in a plan settlement loss of $0.4 million and an interim mark to market loss of $0.7 million during the first six months of 2017. These charges during the first six month of 2018 and 2017 are not necessarily representative of future interim accounting adjustments as such events are not currently predicted and interim measurement of mark to market adjustments are subject to the current actuarial assumptions.

Foreign Exchange

We translate assets and liabilities of our foreign operations into United States dollars at current exchange rates, and we translate items in our statement of operations at average exchange rates for the periods presented. We record adjustments resulting from the translation of foreign currency financial statements as a component of accumulated other comprehensive income (loss). We report foreign currency transaction gains and losses in income.

Foreign exchange gain (loss) was $(20.2) million and $2.3 million in the three months ended June 30, 2018 and 2017, respectively, and $(17.7) million and $2.3 million in the six months ended June 30, 2018 and 2017, respectively. Foreign exchange gains and losses are primarily related to unhedged intercompany loans denominated in European currencies to fund foreign operations. Foreign exchange losses in the three and six months ended June 30, 2018 were driven by a strengthening U.S. dollar compared to the underlying European currencies.

49






Income Taxes
 
Three months ended June 30,
 
Six months ended June 30,
(In thousands, except for percentages)
2018
2017
$ Change
 
2018
2017
$ Change
Loss before income taxes
(211,605
)
(145,158
)
$
(66,447
)
 
(321,481
)
(153,735
)
$
(167,746
)
Income tax expense (benefit)
(1,934
)
3,458

$
(5,392
)
 
5,029

346

$
4,683

Effective tax rate
0.9
%
(2.4
)%
 
 
(1.6
)%
(0.2
)%
 

Our effective tax rate can be significantly impacted by valuation allowances related to losses incurred in certain jurisdictions where the ability to utilize those losses in the foreseeable future is less than more likely than not. Additionally, we operate in numerous countries that have statutory tax rates that differ from that of the United States federal statutory rate of 21%. The most significant of these foreign operations are located in Canada, Denmark, Germany, Italy, Mexico, Sweden and the United Kingdom with effective tax rates ranging between 20% and approximately 30%. In addition to statutory rate differences, the jurisdictional mix of our income (loss) before tax can be significantly affected by mark to market adjustments related to our pension and postretirement plans, which have been primarily in the United States, and the impact of discrete items and other nondeductible expenses.

Loss before provision for income taxes generated in the United States and foreign locations for the three and six months ended June 30, 2018 and 2017 is presented in the table below.
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands)
2018
2017
 
2018
2017
United States
$
(66,146
)
$
(27,192
)
 
$
(91,170
)
$
(33,486
)
Other than the United States
(145,459
)
(117,966
)
 
(230,311
)
(120,249
)
Income (loss) before provision for (benefit from) income taxes
$
(211,605
)
$
(145,158
)
 
$
(321,481
)
$
(153,735
)

See Note 7 of the condensed consolidated financial statements for explanation of differences between our effective income tax rate and our statutory rate.

Liquidity and Capital Resources

We face liquidity challenges from additional losses recognized in the fourth quarter of 2017 and the first half of 2018 on our European renewable energy contracts described in Note 5 to the condensed consolidated financial statements, which caused us to be out of compliance with certain financial covenants in the agreements governing certain of our debt at December 31, 2017, March 31, 2018 and June 30, 2018. To avoid default, we obtained amendments and waivers to our U.S. revolving credit facility, dated May 11, 2015 (as amended, the "U.S. Revolving Credit Facility") that temporarily waived these financial covenant defaults, as described in Note 17 to the condensed consolidated financial statements.

In an effort to address our liquidity needs and the going concern uncertainty, we have:
raised gross proceeds of $248.4 million on April 30, 2018 through a rights offering as described in Note 19 to the condensed consolidated financial statements;
repaid on May 4, 2018 the Second Lien Term Loan Facility as described in Note 18 to the condensed consolidated financial statements, which will save approximately $25 million in annual interest payments and $30 million of annual interest expense;
entered into an agreement on June 5, 2018 to sell our MEGTEC and Universal businesses for $130 million (subject to adjustment);
entered into an agreement on August 9, 2018 to sell a subsidiary that holds two operations and maintenance contracts for waste-to-energy facilities in West Palm Beach, Florida for $45 million (subject to adjustment);
sold our equity method investments in BWBC and TBWES and settled related contractual claims, resulting in proceeds of $21.1 million in the second quarter of 2018 and $15.0 million in July 2018, respectively;
sold another non-core business for $5.1 million in the first quarter of 2018;
initiated restructuring actions and other additional cost reductions in the second quarter of 2018 that are designed to save approximately $34 million annually; and

50





entered into several waivers and amendments to avoid default to our U.S. Revolving Credit Facility as described in Note 17, the most recent of which is dated August 9, 2018. As part of this latest amendment, our lenders agreed to reduce the minimum liquidity required under the facility, which has the effect of increasing the amount we may borrow by up to $25 million Other liquidity measures that must also be completed include: a) the receipt of $30 million in net proceeds from the Last Out Loan, for which a binding commitment letter with Vintage Capital Management LLC, a related party, was executed on August 9, 2018, which is fully backstopped by B. Riley FBR, Inc., a related party; and b) obtaining $25 million of written commitments for concessions from customers on the Renewable loss contracts through a combination of cash contributions, loans and forgiveness of indebtedness and performance obligations by September 30, 2018.

Additionally, we continue to evaluate further dispositions and additional opportunities for cost savings. We also continue to pursue insurance recoveries, additional relief from customers and will pursue other claims where appropriate and available. Management believes it is taking all prudent actions to address the substantial doubt about our ability to continue as a going concern, but we cannot assert that it is probable that our plans will fully mitigate the liquidity challenges we face. Our plan is designed to provide us with what we believe will be adequate liquidity to meet our obligations for at least the twelve month period following August 9, 2018; however, our remediation plan depends on conditions and matters that may be outside of our control, including regulatory approvals that may be required to sell certain assets, agreement to concessions from customers on the Renewable loss contracts as required under the amended terms of our U.S. Revolving Credit Facility and our ability to obtain and maintain sufficient capacity to support contract security requirements for current and future business. Additionally, our ability to operate within the amended covenants and borrowing limits associated with our U.S. Revolving Credit Facility are dependent on our future financial operating results. If we cannot continue as a going concern, material adjustments to the carrying values and classifications of our assets and liabilities and the reported amounts of income and expense would be required.
 
At June 30, 2018 , our cash and cash equivalents of continuing operations totaled $28.5 million and we had $200.4 million of total borrowings. Our foreign business locations held $28.0 million of our $28.5 million of unrestricted cash and cash equivalents of continuing operations at June 30, 2018 . Our U.S. Revolving Credit Facility allows for nearly immediate borrowing of available capacity to fund cash requirements in the normal course of business, meaning that U.S. cash on hand is minimized to reduce borrowing costs. In general, our foreign cash balances are not available to fund our U.S. operations unless the funds are repatriated or used to repay intercompany loans made from the U.S. to foreign entities, which could expose us to taxes we presently have not made a provision for in our results of operations. We presently have no plans to repatriate these funds to the U.S.

After giving effect to the amendments to our U.S. Revolving Credit Facility, we had approximately $28.6 million of availability as of June 30, 2018 . Based on our forecasted results of operations for twelve months after the filing of this document, availability under the U.S. Revolving Credit Facility, proceeds from required asset sales, backlog, cash on-hand and our ability to manage future discretionary cash outflows will provide adequate liquidity until our operations begin to generate cash, which we expect to be in the second half of 2019. Our forecasted use of cash during 2018 will primarily be in the Renewable segment as we fund accrued contract losses and work down advanced bill positions. After required asset sales are completed, we expect to have sufficient borrowing capacity under the U.S. Revolving Credit Facility to meet our liquidity needs. However, there can be no assurance that we will be able to complete such required asset sales on favorable terms, or at all.

Net operating cash flow was a use of $150.6 million in the six months ended June 30, 2018, which was primarily due to funding progress on the six European renewable energy loss contracts in the Renewable segment, corporate overhead (inclusive of interest, pension and other postretirement benefits, financial advisory services, restructuring and spin costs, and research and development) and working capital build within the Power segment related to the timing and mix of work. These cash flows are primarily represented in the $243.8 million operating loss. In the six months ended June 30, 2017, cash used in operations was $81.7 million and related to the operating loss of continuing operations of $157.9 million , offset primarily by changes in advance billings.

Cash flows from investing activities provided net cash of $24.2 million in the six months ended June 30, 2018, primarily from the sale of our equity method investment in BWBC for $21.1 million and the sale of a small emissions monitoring business for $5.1 million , offset by $4.4 million of capital expenditures. In the six months ended June 30, 2017, net cash used by investing activities was $58.9 million , primarily related to $52.5 million for the Universal acquisition and $7.7 million of capital expenditures.


51





Cash flows from financing activities provided net cash of $122.1 million in the six months ended June 30, 2018, primarily related to the $102.0 million net borrowings from the U.S. Revolving Credit Facility for working capital purposes. Gross proceeds received from the rights offering were $248.4 million , of which $212.6 million were used to repay the Second Lien Term Loan of and the remainder was also used to fund operations. Cost associated with the financing activity in the six months ended June 30, 2018 totaled $10.0 million . Net cash provided by financing activities in the six months ended June 30, 2017 was $103.5 million primarily related to $108.3 million of net borrowings under the U.S. Revolving Credit Facility used for working capital purposes.

Rights Offering

On March 19, 2018, we distributed to holders of our common stock one nontransferable subscription right to purchase 1.4 common shares for each common share held as of 5:00 p.m., New York City time, on March 15, 2018 at a price of $3.00 per common share. On April 10, 2018, we extended the expiration date and amended certain other terms regarding the Rights Offering. As amended, each right entitled holders to purchase 2.8  common shares at a price of $2.00 per share. The Rights Offering expired at 5:00 p.m., New York City time, on April 30, 2018. The Company did not issue fractional rights, or pay cash in lieu of fractional rights. The Rights Offering did not include an oversubscription privilege.

The Rights Offering concluded on April 30, 2018, resulting in the issuance of 124.3 million common shares on April 30, 2018. Gross proceeds from the Rights Offering were $248.4 million . Of the proceeds received, $214.9 million were used to fully repay the Second Lien Credit Agreement, including $2.3 million of accrued interest, and the remainder will be used for working capital purposes. Direct costs of the Rights Offering totaled $3.2 million .

U.S. Revolving Credit Facility

On May 11, 2015, we entered into a credit agreement with a syndicate of lenders ("Credit Agreement") in connection with our spin-off from The Babcock & Wilcox Company which governs the U.S. Revolving Credit Facility. The Credit Agreement, which is scheduled to mature on June 30, 2020, provides for a senior secured revolving credit facility, initially in an aggregate amount of up to $600.0 million . The proceeds from loans under the Credit Agreement are available for working capital needs and other general corporate purposes, and the full amount is available to support the issuance of letters of credit, subject to the limits specified in the amendments described below.

Since June 2016, we have entered into a number of amendments to the Credit Agreement (the "Amendments" and the Credit Agreement, as amended to date, the "Amended Credit Agreement"). The most recent Amendment, which we entered into on August 9, 2018, among other things, provided for the following modifications: (1) modifies the definition of adjusted EBITDA in the Amended Credit Agreement to exclude up to an additional $72.8 million of charges for certain Renewable segment contracts for periods including the quarter ended June 30, 2018 and allow further add backs to EBITDA for restructuring and other similar expenses; (2) modifies the financial covenants as described below; (3) modifies the amount of liquidity (as defined in the Amended Credit Agreement) we are required to maintain from at least $65.0 million as of the last business day of any calendar month to at least $50.0 million (or $40.0 million upon the consummation of certain asset sales and the receipt of at least $10.0 million of proceeds from the Last Out Loan described below) as of the last business day of any calendar month and on any day that a borrowing is made; (4) lowers the amount of outstanding borrowings under the U.S. Revolving Credit Facility that we are required to repay (without any reduction in commitments) with certain excess cash from $60.0 million to $50.0 million; (5) modifies the Company's ability to reinvest net cash proceeds from asset sales that trigger prepayment requirements to allow for the ability to retain up to $25.0 million of asset sale proceeds after receipt of the initial Last Out Loan funding described below; (6) permits an additional $15.0 million of cumulative net income losses attributable to eight specified Vølund contracts for the fiscal quarter ending September 30, 2018; (7) modifies certain contract completion milestones that we are required to meet in connection with six European Renewable loss contracts; (8) modifies the date by which we are required to sell at least $100 million of assets from March 31, 2019 to October 31, 2018; (9) requires us to achieve certain concessions from our renewable contract customers by September 30, 2018 that will generate at least $25.0 million of incremental benefits to us, (10) adds additional events of default related to the termination or rejection of certain contracts related to our Renewables segment; (11) permits and requires us to raise up to an additional net $30.0 million of last-out loans under the Amended Credit Agreement in connection with the Vintage Commitment described below; 12) consents to the sale of our Palm Beach Resource Recovery business; and (13) eliminates a requirement to adjust on a pro forma basis our EBITDA after the sales of Megtec and Universal, and Palm Beach Resource Recovery Corporation.

The Amended Credit Agreement and our obligations under certain hedging agreements and cash management agreements with our lenders and their affiliates continue to be (1) guaranteed by substantially all of our wholly owned domestic

52





subsidiaries and certain of our foreign subsidiaries, but excluding our captive insurance subsidiary, and (2) secured by first-priority liens on certain assets owned by us and the guarantors. The Amended Credit Agreement requires interest payments on revolving loans on a periodic basis until maturity. We may prepay all loans at any time without premium or penalty (other than customary LIBOR breakage costs), subject to notice requirements. The Amended Credit Agreement requires us to make certain prepayments on any outstanding revolving loans after receipt of cash proceeds from certain asset sales or other events, subject to certain exceptions. Such prepayments may require us to reduce the commitments under the Amended Credit Agreement by a corresponding amount of such prepayments. Following the covenant relief period, such prepayments will not require us to reduce the commitments under the Amended Credit Agreement.

After giving effect to the Amendments, loans outstanding under the Amended Credit Agreement bear interest at our option at either LIBOR rate plus 7.0% per annum or the Base Rate plus 6.0% per annum until we complete the Rights Offering and prepay the Second Lien Term Loan facility and thereafter at our option at either (1) the LIBOR rate plus 5.0% per annum during 2018, 6.0% per annum during 2019 and 7.0% per annum during 2020, or (2) the Base Rate plus 4.0% per annum during 2018, 5.0% per annum during 2019, and 6.0% per annum during 2020. The Base Rate is the highest of the Federal Funds rate plus 0.5% , the one month LIBOR rate plus 1.0% , or the administrative agent's prime rate. Interest expense associated with our U.S. Revolving Credit Facility loans for the three months ended March 31, 2018 was $14.1 million . Included in interest expense was $7.5 million of non-cash amortization of direct financing costs for the three months ended March 31, 2018. A commitment fee of 1.0% per annum is charged on the unused portions of the U.S. Revolving Credit Facility. A letter of credit fee of 2.5% per annum is charged with respect to the amount of each financial letter of credit outstanding, and a letter of credit fee of 1.5% per annum is charged with respect to the amount of each performance and commercial letter of credit outstanding. Additionally, an annual facility fee of $1.5 million is payable on the first business day of 2018 and 2019, and a pro rated amount is payable on the first business day of 2020. A deferred fee of 2.5% is charged, but may be reduced by up to 1.5% if the Company achieves certain asset sales.

The Amended Credit Agreement includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. After completion of the Rights Offering and the repayment of the outstanding balance of our Second Lien Term Loan Facility, the maximum permitted senior debt leverage ratio as defined in the Amended Credit Agreement is:
9.75:1.0 for the quarters ending June 30, 2018 and September 30, 2018,
4.00:1.0 for the quarter ending December 31, 2018,
3.50:1.0 for the quarter ending March 31, 2019, and
2.25:1.0 for the quarters ending June 30, 2019 and each quarter thereafter.

After completion of the Rights Offering and the repayment of the outstanding balance of our Second Lien Term Loan Facility, the minimum consolidated interest coverage ratio as defined in the Amended Credit Agreement is:
1.00 :1.0 for the quarter ending June 30, 2018,
1.25:1.0 for the quarter ending September 30, 2018,
2.00:1.0 for the quarter ending December 31, 2018,
2.50:1.0 for the quarter ending March 31, 2019, and
3.50:1.0 for the quarters ending June 30, 2019 and each quarter thereafter.

Consolidated capital expenditures in each fiscal year are limited to $27.5 million .

At June 30, 2018 , borrowings under the Amended Credit Agreement and foreign facilities consisted of $200.4 million at an effective interest rate of 7.22% . Usage under the Amended Credit Agreement consisted of $196.3 million of borrowings, $20.4 million of financial letters of credit and $157.0 million of performance letters of credit. After giving effect to the Amendments, at June 30, 2018 , we had approximately $28.6 million available for borrowings or to meet letter of credit requirements primarily based on our borrowing sublimit, our trailing 12 month adjusted EBITDA (as defined in the Amended Credit Agreement), and our leverage and interest coverage ratios (as defined in the Amended Credit Agreement) which were 7.51 and 1.94 , respectively.

As referenced above, our Amended Credit Agreement allows for us to incur up to $30.0 million of net proceeds of last-out loans. On August 9, 2018 we entered into a commitment letter (the “Vintage Commitment Letter”) with Vintage Capital Management LLC (the “Last Out Lender”), a related party, which provides a commitment for an aggregate principal amount of last-out loans (the “Last Out Loans”) that, when borrowed, will result in us receiving $30.0 million of aggregate net proceeds. The face principal amount of Last Out Loans is expected to be approximately $36.0 million, which includes the payment of a $2.0 million up-front fee that will be payable to the Last Out Lender on the date of the first funding of the Last

53





Out Loans and to reflect original issue discount of 10%. The Last Out Loans will be incurred under our Amended Credit Agreement and will share on a pari passu basis with the guaranties and collateral provided thereunder to the existing lenders; provided, that the Last Out Loans will be subordinated in right of payment to the prior payment in full of all amounts owing to the existing lenders. The Last Out Loans will mature and be due and payable in full the day after the current maturity date of the U.S. Revolving Credit Facility. The Last Out Loans will be implemented by way of a further amendment to our Amended Credit Agreement prior to September 30, 2018 and, once implemented, will be available in multiple advances subject to the same conditions to borrowing as our existing U.S. Revolving Credit Facility. The first $10.0 million of Last Out Loans will be made available on the date of consummation of the sale of all of the issued and outstanding capital stock of Palm Beach Resource Recovery Corporation, as further described in Note 25. Advances of Last Out Loans thereafter will be made upon our borrowing request but in a formula that results in the aggregate amount of all loans requested being funded on a 50/50 basis between the Last Out Lender and the existing lenders under our U.S. Revolving Credit Facility. Once made, Last Out Loans may be prepaid, subject to the subordination provisions, but not re-borrowed. Last Out Loans will bear interest at a rate per annum equal the then applicable LIBOR rate plus 14.00%, with 5.50% of such interest rate to be paid in cash and the remaining 8.50% payable in kind by adding such accrued interest to the principal amount of the Last Out Loans. Subject to the subordination provisions, the Last Out Loans shall be subject to all of the other same representations and warranties, covenants and events of default under the Amended Credit Agreement. The commitment evidenced by the Vintage Commitment Letter is fully backstopped by B. Riley FBR, Inc., a related party, pursuant to a backstop commitment letter between B. Riley FBR, Inc. and the Last Out Lender.  In the event that the Last Out Lender is unable to, or fails to, fund any of its commitments under the Vintage Commitment Letter, then B. Riley FBR, Inc. will be required to do so.

Second Lien Term Loan

On August 9, 2017 , we entered into the Second Lien Term Loan Facility with an affiliate of AIP. The Second Lien Term Loan Facility consisted of a second lien term loan in the principal amount of $175.9 million , all of which we borrowed on August 9, 2017, and a delayed draw term loan in the principal amount of up to $20.0 million , which was drawn in a single draw on December 13, 2017. Through March 7, 2018, the interest rates were 10% and 12% per annum under the second lien term loan and the delayed draw term loan, respectively; each increased by 200 basis points to 12% and 14% per annum, respectively, beginning March 7, 2018, and in each case interest was payable quarterly.

Using $214.9 million of the proceeds from the Rights Offering described above, we fully repaid the Second Lien Term Loan Facility (described below), including $2.3 million of accrued interest, on May 4, 2018. A loss on extinguishment of this debt of approximately $49.2 million was recognized in the second quarter of 2018 as a result of the $32.5 million unamortized debt discount on the date of the repayment, $16.2 million of make whole interest, and $0.5 million of fees associated with the extinguishment.

Foreign Revolving Credit Facilities

Outside of the United States, we have revolving credit facilities in Turkey that are used to provide working capital to our operations in that country. These foreign revolving credit facilities allow us to borrow up to $4.1 million in aggregate and each have less than a year remaining to maturity. At June 30, 2018 , we had $4.1 million in borrowings outstanding under these foreign revolving credit facilities at an effective weighted-average interest rate of 9.57% .

Letters of Credit, Bank Guarantees and Surety Bonds

Certain subsidiaries primarily outside of the United States have credit arrangements with various commercial banks and other financial institutions for the issuance of letters of credit and bank guarantees in association with contracting activity. The aggregate value of all such letters of credit and bank guarantees opened outside of the U.S. Revolving Credit Facility as of June 30, 2018 and December 31, 2017 was $195.4 million and $269.1 million , respectively. The aggregate value of all such letters of credit and bank guarantees that are partially secured by the U.S. Revolving Credit Facility as of June 30, 2018 was $67.2 million . The aggregate value of the letters of credit provided by the U.S. Revolving Credit Facility in support of letters of credit outside of the United States was $38.8 million as of June 30, 2018 .

We have posted surety bonds to support contractual obligations to customers relating to certain contracts. We utilize bonding facilities to support such obligations, but the issuance of bonds under those facilities is typically at the surety's discretion. Although there can be no assurance that we will maintain our surety bonding capacity, we believe our current capacity is adequate to support our existing contract requirements for the next 12 months. In addition, these bonds generally indemnify customers should we fail to perform our obligations under the applicable contracts. We, and certain of our subsidiaries, have

54





jointly executed general agreements of indemnity in favor of surety underwriters relating to surety bonds those underwriters issue in support of some of our contracting activity. As of June 30, 2018 , bonds issued and outstanding under these arrangements in support of contracts totaled approximately $426.1 million .

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

For a summary of the critical accounting policies and estimates that we use in the preparation of our unaudited condensed consolidated financial statements, see "Critical Accounting Policies and Estimates" in our Annual Report. There have been no significant changes to our policies during the quarter ended June 30, 2018.

Adoption of ASC Topic 606, "Revenue from Contracts with Customers," did not have a significant effect on our critical accounting policies and estimates. See Note 5 to the condensed and consolidated financial statements for further discussion.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposures to market risks have not changed materially from those disclosed under "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company's management, with the participation of our Chief Executive Officer and the Chief Financial Officer, has evaluated 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 Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Our disclosure 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, 2018 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.


Changes in Internal Control Over Financial Reporting

Beginning January 1, 2018, we implemented ASC 606, "Revenue from Contracts with Customers." Although the new revenue- standard is expected to have an immaterial impact on our ongoing net income, we did implement changes to our processes related to revenue recognition and the control activities within them. These changes included the development of new policies based on the five-step model provided in the new revenue standard, new training, ongoing contract review requirements, and gathering of information provided for disclosures.

Other than the process changes described above, there were no changes in our internal control over financial reporting during the quarter ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



55





PART II - OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding ongoing investigations and litigation, see Note 20 to the unaudited condensed consolidated financial statements in Part I of this report, which we incorporate by reference into this Item.

Additionally, the Company has received subpoenas from the staff of the SEC in connection with an investigation into the accounting charges and related matters involving its Renewable segment in 2016, 2017 and 2018. We are cooperating with the staff of the SEC related to the subpoenas and investigation. We cannot predict the length, scope or results of the investigation, or the impact, if any, of the investigation on our results of operations.

Item 1A. Risk Factors

We are subject to various risks and uncertainties in the course of our business. The discussion of such risks and uncertainties may be found under "Risk Factors' in our Annual Report. There have been no material changes to such risk factors.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In August 2015, we announced that our Board of Directors authorized a share repurchase program. The following table provides information on our purchases of equity securities during the quarter ended June 30, 2018. Any shares purchased that were not part of a publicly announced plan or program are related to repurchases of common stock pursuant to the provisions of employee benefit plans that permit the repurchase of shares to satisfy statutory tax withholding obligations.
Period
  
Total number of shares purchased (1)
Average
price paid
per share
Total number of
shares purchased as
part of publicly
announced plans or
programs
Approximate dollar value of shares that may 
yet be purchased under 
the plans or programs
(in thousands)  (2)
April 1, 2018 - April 30, 2018
 
196
 
$—
 
$100,000
May 1, 2018 - May 31, 2018
 
3,410
 
$—
 
$100,000
June 1, 2018 - June 30, 2018
 
7,140
 
$—
 
$100,000
Total
 
10,746
 
 
 
 
(1)
Includes 196, 3,410 and 7,140 shares repurchased in April, May and June, respectively, pursuant to the provisions of employee benefit plans that require us to repurchase shares to satisfy employee statutory income tax withholding obligations.
(2)
On August 4, 2016, we announced that our board of directors authorized the repurchase of an indeterminate number of our shares of common stock in the open market at an aggregate market value of up to $100 million over the next twenty-four months. As of August 7, 2018, we have not made any share repurchases under the August 4, 2016 share repurchase authorization.

56






Item 6. Exhibits
 
Stock Purchase Agreement, dated as of June 5, 2018, among B&W Equity Investments, LLC, Babcock & Wilcox MEGTEC Holdings, Inc., Babcock & Wilcox MEGTEC, LLC, The Babcock & Wilcox Company, Babcock & Wilcox Enterprises, Inc., DURR, Inc., and DURR Aktiengesellschaft
 
 
 
 
Equity Commitment agreement, dated April 10, 2018, by and between Babcock & Wilcox Enterprises, Inc. and Vintage Capital Management, LLC (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed April 11, 2018 (File No. 001-36786))
 
 
 
 
Babcock & Wilcox Enterprises, Inc. Amended and Restated 2015 Long-Term Incentive Plan (Amended and Restated as of May 16, 2018) (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed May 21, 2018 (File No. 001-36876))
 
 
 
 
Amendment No. 6, dated April 10, 2018, to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed April 11, 2018 (File No. 001-36876))
 
 
 
 
Amendment No. 7, dated May 31, 2018, to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto
 
 
 
 
Babcock & Wilcox Enterprises, Inc. Executive Severance Plan, as revised effective June 1, 2018
 
 
 
  
Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer
 
 
  
Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer
 
 
  
Section 1350 certification of Chief Executive Officer
 
 
  
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.LAB
  
XBRL Taxonomy Extension Label Linkbase Document
 
 
101.PRE
  
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
101.DEF
  
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
*
 
Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request.


57






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.

August 9, 2018
 
 
BABCOCK & WILCOX ENTERPRISES, INC.
 
 
 
 
 
By:
/s/ Daniel W. Hoehn
 
 
 
Daniel W. Hoehn
 
 
 
Vice President, Controller & Chief Accounting Officer
 
 
 
(Principal Accounting Officer and Duly Authorized Representative)


58

Exhibit 2.1



STOCK PURCHASE AGREEMENT

AMONG


B&W EQUITY INVESTMENTS, LLC


BABCOCK & WILCOX MEGTEC HOLDINGS, INC.,


BABCOCK & WILCOX MEGTEC, LLC,


THE BABCOCK & WILCOX COMPANY,


BABCOCK & WILCOX UNIVERSAL, INC.,


BABCOCK & WILCOX ENTERPRISES, INC.,


DURR INC.,


AND


DÜRR AKTIENGESELLSCHAFT
(SOLELY FOR SECTIONS 3.1-3.5, 4.5, 8.2 AND 8.14)





DATED AS OF June 5, 2018







TABLE OF CONTENTS

Page


I.
THE TRANSACTION    1
1.1
Purchase and Sale    1
1.2
Closing    2
1.3
Deliveries at the Closing    2
1.4
Payment of Transaction Expenses    3
1.5
Estimated Closing Proceeds and Adjustment    3
1.6
Escrow Account    5
1.7
Termination of Intercompany and Related-Party Agreements    5
1.8
Withholding    6
II.
SELLER REPRESENTATIONS AND WARRANTIES    6
2.1
Organization and Good Standing    6
2.2
Authorization    7
2.3
Ownership of Interests    7
2.4
Capitalization    7
2.5
Subsidiaries    8
2.6
Consents and Approvals    9
2.7
Non-Contravention    9
2.8
Financial Statements; Undisclosed Liabilities    10
2.9
Litigation and Claims    10
2.10
Permits; Compliance with Laws    10
2.11
Taxes    11
2.12
Real and Tangible Personal Property    13
2.13
Intellectual Property    14
2.14
Material Contracts    15
2.15
Employee Benefits Plans    17

 
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(continued)
Page


2.16
Labor    19
2.17
Environmental Matters    20
2.18
Financial Advisors    21
2.19
Absence of Changes    21
2.20
Transactions with Affiliates    21
2.21
Suppliers and Customers    21
2.22
Sufficiency of Assets    22
2.23
Insurance    22
2.24
Solvency    22
2.25
No Other Representations or Warranties    22
III.
BUYER AND PARENT REPRESENTATIONS AND WARRANTIES    23
3.1
Organization and Qualification    23
3.2
Authorization    23
3.3
Consents and Approvals    23
3.4
Non-Contravention    24
3.5
Litigation and Claims    24
3.6
Financing    24
3.7
Investment Representation    24
3.8
No Other Representations and Warranties    25
IV.
COVENANTS    25
4.1
Access to Information    25
4.2
Conduct of the Business Pending the Closing    26
4.3
Regulatory Approvals    29
4.4
Reasonable Best Efforts    31
4.5
Confidentiality    32

 
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(continued)
Page


4.6
Indemnification and Insurance    32
4.7
Preservation of Records    33
4.8
Publicity    34
4.9
Employment and Employee Benefits    34
4.10
Release of Liens    36
4.11
Business Guarantees    36
4.12
Taxes    36
4.13
Non-Solicitation of Employees; Non-Competition    44
4.14
Certain Intellectual Property Matters    45
4.15
Beloit Early Termination Option    50
4.16
Interim Services    50
V.
CONDITIONS TO CLOSING    50
5.1
Conditions to the Obligations of the Parties    50
5.2
Additional Conditions to the Obligations of Buyer    50
5.3
Additional Conditions to Obligations of Seller Parent and Sellers    51
5.4
Frustration of Closing Conditions    51
VI.
TERMINATION    52
6.1
Termination of Agreement    52
6.2
Effect of Termination    53
VII.
INDEMNITY    53
7.1
Survival    53
7.2
Indemnification    53
7.3
Limitations on Liability    54
7.4
Indemnity Escrow Amount    56
7.5
Exclusivity    57

 
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7.6
Indemnification Claims    57
7.7
Defense of Third-Party Claims    57
7.8
Treatment of Indemnity Payments    58
VIII.
MISCELLANEOUS    58
8.1
Disclosure Schedules    58
8.2
Remedies    59
8.3
Expenses    59
8.4
Jurisdiction; Consent to Service of Process    59
8.5
Entire Agreement; Amendments and Waivers    59
8.6
Governing Law    60
8.7
Notices    60
8.8
Waiver of Jury Trial    61
8.9
Severability    61
8.10
No Third-Party Beneficiaries; No Assignment    61
8.11
Non-Recourse    61
8.12
Counterparts    62
8.13
Provision Respecting Legal Representation    62
8.14
Guarantee    62
IX.
DEFINITIONS AND CONSTRUCTION    62
9.1
Certain Definitions    62
9.2
Construction    73

Schedules and Annexes
Annex I:        Closing Schedule
Schedule 1.1(b):        Ownership
Schedule 1.7:        Continuing Contracts

 
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Schedule 2.1:         Organization and Good Standing
Schedule 2.3:        Ownership of Interests
Schedule 2.6:        Required Regulatory Approvals; Consents of Governmental Bodies
Schedule 2.8(a):        Financial Statements
Schedule 2.8(b):        Liabilities
Schedule 2.9:        Litigation and Claims
Schedule 2.11:        Taxes
Schedule 2.12:        Company Properties
Schedule 2.13(a):    Intellectual Property
Schedule 2.13(e):    Third Party Rights
Schedule 2.14:        Material Contracts
Schedule 2.15:        Employee Benefit Plans
Schedule 2.16:        Labor Agreements
Schedule 2.20:        Affiliate Transactions
Schedule 2.21:        Suppliers and Customers
Schedule 2.23:        Insurance
Schedule 4.2:        Conduct of Business
Schedule 4.3:        Competition Law Approvals
Schedule 4.6(a):        Indemnification and Insurance
Schedule 4.11(a):     Business Guarantees
Schedule 4.11(b):     Parent Guarantees
Schedule 4.13:        Non-Solicitation of Employees; Non-Competition
Schedule 4.16:         Interim Services
Schedule 9.1(a):        Cash, Indebtedness and Working Capital
Schedule 9.1(b):     Knowledge of the Companies
Exhibits
Exhibit A:        Escrow Agreement
Exhibit B:        Transition Services Agreement



 
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is dated as of June 5, 2018 (this “ Agreement ”) and is among B&W Equity Investments, LLC, a Delaware limited liability company (“ MEGTEC Seller ”), The Babcock & Wilcox Company, a Delaware corporation (“ Universal Seller ” and together with MEGTEC Seller, each, a “ Seller ” and together, the “ Sellers ”), Babcock & Wilcox MEGTEC Holdings, Inc., a Delaware corporation (“ Holdings ”), Babcock & Wilcox MEGTEC, LLC, a Delaware limited liability company (“ MEGTEC US ”), Babcock & Wilcox Universal, Inc., a Wisconsin corporation (“ Universal ” and together with Holdings and MEGTEC US, each a “ Company ” and together, the “ Companies ”), Babcock & Wilcox Enterprises, Inc., a Delaware corporation (“ Seller Parent ”), Durr Inc., a Delaware corporation (“ Buyer ”) and a wholly owned Subsidiary of Dürr Aktiengesellschaft, a German stock corporation (“ Parent ”), and Parent (collectively, the “ Parties ”) solely for purposes of Sections ‎3.1 - ‎3.5 , ‎4.5 , ‎ 8.2 and ‎8.14 . Capitalized terms, unless defined in the relevant Section of this Agreement, will have the meanings set forth in Section ‎9.1 .
RECITALS
1.    MEGTEC Seller is the sole legal and beneficial owner of all issued and outstanding equity interests in Holdings (the “ MEGTEC Shares ”) and MEGTEC US (the “ MEGTEC Units ”).
2.    Universal Seller is the sole legal and beneficial owner of all issued and outstanding equity interests in Universal (the “ Universal Shares ” and together with the MEGTEC Shares and MEGTEC Units, the “ Equity Interests ”).
3.    The Parties intend that, on the terms and subject to the conditions hereof, Buyer purchase from Sellers, and Sellers sell to Buyer, all of the Equity Interests on the terms and subject to the conditions set forth in this Agreement.
4.    In consideration of the representations, warranties and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
I. THE TRANSACTION
1.1      Purchase and Sale .
(a)      On the terms and subject to the conditions set forth in this Agreement, at the Closing, Buyer will purchase from Sellers, and Sellers will sell and transfer to Buyer, the Equity Interests for the Purchase Price free and clear of all Liens (such purchase and





sale, together with the other transactions contemplated hereby, the “ Transaction ”). The “ Purchase Price ” means the Estimated Closing Proceeds as adjusted pursuant to, and in accordance with, Section ‎1.5 .
(b)      Schedule 1.1(b) sets forth a list of (i) each Company and the Subsidiaries of each Company, including each other Person in which the Companies or any of their Subsidiaries has an equity interest (including joint ventures) as of the date hereof, together with its jurisdiction of organization and its authorized and outstanding capital stock, and (ii) each branch (city and country) of the Companies and their Subsidiaries.
1.2      Closing . The closing of the transactions contemplated by this Agreement (the “ Closing ”) will take place at 10:00 a.m., New York time, on a date to be specified by the Parties, but no later than the fifth Business Day after satisfaction or waiver of the conditions set forth in Article ‎V (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions), pursuant to an electronic exchange of documents and other actions herein contemplated (or the Closing may be consummated in such other manner and at such place and/or time as Buyer and Sellers may mutually agree). The date on which the Closing actually occurs is hereinafter referred to as the “ Closing Date .”
1.3      Deliveries at the Closing .
(a)      Deliveries by Sellers . At the Closing, Seller Parent will deliver or cause Sellers, Holdings, MEGTEC US or Universal, as applicable, to deliver to Buyer:
(i)      the resignation of each Person who serves as a director or manager (or in a comparable capacity) of any Company or any of their respective Subsidiaries in his or her capacity as such, as requested by Buyer at least five Business Days prior to the Closing Date;
(ii)      instruments of assignment of the MEGTEC Shares and Universal Shares endorsed in blank in proper form for transfer;
(iii)      instruments of assignment of the MEGTEC Units endorsed in blank in proper form for transfer;
(iv)      the Escrow Agreement, duly executed by each Seller;

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(v)      an affidavit of non-foreign status in form and substance reasonably satisfactory to Buyer and in compliance with Treasury Regulations Section 1.1445-2(b)(2), duly executed and acknowledged by each Seller;
(vi)      a properly completed IRS Form W-9 executed by each Seller; and
(vii)      the Transition Services Agreement, duly executed by each Seller.
(b)      Deliveries by Buyer . At the Closing, Buyer will:
(i)      pay to Sellers, by wire transfer of immediately available funds to the accounts specified in writing by Seller Parent to Buyer no later than five Business Days prior to the Closing Date, an amount equal to the Estimated Closing Proceeds, less the Escrow Amount;
(ii)      deposit (or cause to be deposited) with the Escrow Agent, by wire transfer of immediately available funds to the account specified in writing by the Escrow Agent (the “ Escrow Account ”) to Buyer and Seller Parent no later than five Business Days prior to the Closing Date, the Escrow Amount; and
(iii)      deliver to Sellers the Escrow Agreement, duly executed by Buyer;
(iv)      deliver to Sellers the Transition Services Agreement, duly executed by Buyer; and
(v)      deliver to Sellers the executed originals of IRS Forms 8023 (and all other applicable forms under applicable Tax Law) with respect to the Section 338(h)(10) Elections as required pursuant to Section ‎4.12(o) hereof.
(c)      Other Deliveries. At the Closing, the certificates and other documents required to be delivered pursuant to Article ‎V with respect to the Closing will be exchanged.
1.4      Payment of Transaction Expenses . At the Closing, Buyer will pay on behalf of the Companies, or cause the Companies to pay, the Estimated Transaction Expenses reflected in the Closing Schedule, if any, to the obligees thereof.

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1.5      Estimated Closing Proceeds and Adjustment.
(a)      Estimated Closing Proceeds . No later than five Business Days prior to the Closing Date, Seller Parent will deliver to Buyer a statement in the form attached as Annex I setting forth in reasonable detail the Sellers’ good faith calculations of their estimates of (i) the Cash as of the close of business on the Closing Date (the “ Estimated Closing Cash ”), (ii) the Working Capital as of the close of business on the Closing Date (the “ Estimated Closing Working Capital ”), (iii) the Indebtedness as of the close of business on the Closing Date (the “ Estimated Closing Indebtedness ”), (iv) the Transaction Expenses (the “ Estimated Transaction Expenses ”) and (v) the Estimated Closing Proceeds (the “ Closing Schedule ”). Buyer will have the opportunity to review the materials and information used by Seller Parent in preparing the Closing Schedule and its calculation of the Estimated Closing Proceeds, and the Companies will make available such personnel as are reasonably necessary to assist Buyer in its review of the Closing Schedule and discuss in good faith any modifications thereto proposed by Buyer. If Sellers and Buyer are unable to agree on the amount of the Estimated Closing Proceeds, the applicable values proposed by Seller Parent will be utilized for purposes of the cash payment made at the Closing as contemplated by Section 1.3(b) , but in no event will the determination of the amounts set forth in Seller Parent’s estimate delivered hereunder prejudice Seller Parent’s or Buyer’s rights under any other provision of this Section ‎1.5 .
(b)      Adjustment . As soon as reasonably practicable, but no later than 75 days after the Closing Date, Buyer will either confirm Seller Parent’s calculation referred to in Section ‎1.5(a) or cause to be prepared and delivered to Seller Parent a closing statement in the form attached as Annex I (the “ Closing Statement ”) setting forth in reasonable detail Buyer’s calculation of Cash, Working Capital, Indebtedness, Transaction Expenses and the Purchase Price (the “ Closing Date Purchase Price ”) as of the Closing Date, which will be prepared in accordance with the Accounting Principles. During the period from the Closing through the end of the Review Period, Seller Parent and its representatives will be permitted to review the Companies’ work papers and will be provided reasonable access to the Companies’ relevant personnel in connection with the preparation of the Closing Statement and the calculation of Closing Date Purchase Price, as well as the relevant books and records of each Company reasonably related to the preparation of the Closing Statement.
(c)      Disputes . If Seller Parent disagrees with Buyer’s calculation of Cash, Working Capital, Indebtedness, Transaction Expenses or Purchase Price set forth on the Closing Statement delivered pursuant to Section ‎1.5(b) , Seller Parent may, within 45 days after delivery of the Closing Statement (such 45-day period, the “ Review Period ”), deliver a notice (the “ Notice of Disagreement ”) to Buyer describing in reasonable detail the reason

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for any disagreement and setting forth Seller Parent’s calculation of any amount set forth on or reflected in a revised Closing Statement. Any such Notice of Disagreement must specify all items or amounts as to which Seller Parent disagrees. If and to the extent no Notice of Disagreement is delivered to Buyer on or prior to the expiration of the Review Period, then the Closing Statement and the amount of the Closing Date Purchase Price set forth therein will be deemed to have been accepted by Seller Parent and will become final and binding upon the Parties.
(d)      Independent Accountants’ Determination . If a Notice of Disagreement is delivered pursuant to Section ‎1.5(c) , Seller Parent and Buyer will, during the 30 days following such delivery, use their respective reasonable efforts to reach agreement on the disputed items or amounts in order to determine the Closing Date Purchase Price. If, during such period, Seller Parent and Buyer are unable to reach such an agreement, they will promptly thereafter cause KPMG LLP (the “ Independent Accountant ”) to review the relevant portions of this Agreement and the disputed items or amounts for the purpose of calculating the Closing Date Purchase Price (it being understood that, in making such calculation, the Independent Accountant will be functioning as an expert and not as an arbitrator). Such calculation will be made by the Independent Accountant in accordance with this Agreement, including the same accounting principles, practices, methodologies and policies used in the preparation of Annex I and applying the Accounting Principles. In making such calculation, the Independent Accountant will consider only those items or amounts as to which Seller Parent and Buyer have disagreed. For purposes of its review, the Independent Accountant will make its determination based solely on presentations and supporting material provided by Buyer and Seller Parent and not pursuant to any independent audit or review. The Independent Accountant will deliver to Seller Parent and Buyer, as promptly as practicable (and Buyer and Seller Parent will use their respective reasonable efforts to cause the Independent Accountant to deliver such report no later than 30 days from the date of engagement of the Independent Accountant), a report setting forth its calculation of the items in dispute; provided that the Independent Accountant may not assign a value to any item greater than the greatest value for such item or less than the smallest value for such item in each case claimed by either Party. Such report will be final and binding upon the Parties. The cost of any such review and report by the Independent Accountant will be paid on a proportionate basis by Buyer, on the one hand, and Seller Parent, on the other hand, based on the percentage which the portion of the contested amount not awarded to such Party bears to the amount contested, as finally determined by the Independent Accountant.
(e)      Net Adjustment Amount .

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(i)      If the Net Adjustment Amount is positive or zero, (A) Buyer will promptly deliver the Net Adjustment Amount (if any) to Sellers and (B) the Escrow Agent will promptly deliver the NWC Escrow Amount to Sellers.
(ii)      If the Net Adjustment Amount is negative, the Escrow Agent (on behalf of Seller Parent) will promptly deliver to Buyer from the NWC Escrow Amount the absolute value of the Net Adjustment Amount. To the extent the absolute value of the Net Adjustment Amount (if negative) is greater than the NWC Escrow Amount, Seller Parent will promptly deliver such excess amount to Buyer. If the Net Adjustment Amount payable to Buyer under this Section ‎1.5(e)(ii) is less than the NWC Escrow Amount, the Escrow Agent will deliver to Sellers the remaining portions of the NWC Escrow Amount.
(iii)      Any payment pursuant to this Section ‎1.5(e) will be made as soon as practicable, but in no event more than five Business Days after the Net Adjustment Amount has been determined, by wire transfer by Buyer, the Escrow Agent (on behalf of Sellers) or Seller Parent, as the case may be, of immediately available funds to the account of Seller Parent or Buyer, as applicable, as may be designated in writing by Seller Parent or Buyer, as applicable.
1.6      Escrow Account . The Escrow Agent will hold the Escrow Amount delivered to the Escrow Agent pursuant to Section ‎1.3(b) and Article ‎VII on behalf of Sellers and Seller Parent to satisfy any of their obligations pursuant to Section ‎1.5 , Section ‎4.15 , and Article ‎VII . The Escrow Amount will be retained by the Escrow Agent in accordance with the terms of this Agreement and the Escrow Agreement.
1.7      Termination of Intercompany and Related-Party Agreements.
(a)      Except as set forth in Schedule ‎1.7 , each Company and its respective Subsidiaries, on the one hand, and each Seller, on behalf of itself, each of its Affiliates and each of its and their respective shareholders, members or partners (other than the Companies and their Subsidiaries), on the other hand, will terminate any and all Contracts between or among such Company and its respective Subsidiaries, on the one hand, and such Seller, any of its Affiliates or any of its respective shareholders, members or partners (other than the Companies or any of their Subsidiaries), on the other hand, effective without further action as of the Closing. No such Contract (including any provision thereof which purports to survive termination) or any account payable or receivable, will be of any further force or effect after the Closing, and all parties will be released from all Liabilities thereunder. Intercompany payables and receivables between any Company and its respective Subsidiaries, on the one hand, and any Seller, any of its Affiliates or any of its respective

6




shareholders, members or partners (other than the Companies or any of their Subsidiaries), on the other hand, as of immediately prior to the Closing will be netted against each other and the net balance will be a deemed dividend to such Seller or, if applicable, contributed to the capital of Holdings, MEGTEC US or Universal, in each case without further action. Each Party will, at the reasonable request of any other Party, take, or cause to be taken, such other actions as may be necessary to effect the foregoing. Sellers will indemnify Buyer and its Affiliates for any Taxes incurred by them as a result of this Section ‎1.7 .
(b)      Notwithstanding the foregoing, the provisions of Section ‎1.7(a) will not apply to this Agreement and the Ancillary Agreements.
1.8      Withholding . Buyer and its Affiliates will be entitled to deduct and withhold from the Purchase Price any amounts required for any applicable Taxes required to be withheld under applicable Law; provided , that Buyer will promptly, and in any event within a reasonable period of time prior to the date on which any such payment is to be made, notify Seller of Buyer’s intention to withhold any amounts from payments due hereunder; and provided further, that Buyer and its Affiliates will reasonably cooperate with Sellers to reduce or eliminate any such withholding, to the extent permitted under applicable Law. To the extent that any amounts are so withheld, such withheld amounts (i) will be remitted by Buyer to the applicable Tax Authority, and (ii) will be treated for all purposes of this Agreement as having been paid to the Person in respect of which such withholding was made. If Buyer withholds any amounts from any payment otherwise due pursuant to this Agreement, Buyer will provide to Parent, within ten Business Days following the date that the applicable amount is required to be paid to the applicable Tax Authority, reasonable written documentation evidencing that such amounts were paid to the applicable Tax Authority.
II.      SELLER REPRESENTATIONS AND WARRANTIES
Except as set forth in the Disclosure Schedules, Seller Parent and Sellers hereby represent and warrant, jointly and severally, to Buyer as of the date hereof and as of the Closing Date (or, if a representation or warranty is made as of a specified date, as of such date) that:
2.1      Organization and Good Standing . Seller Parent, each Seller and each Company is duly organized, validly existing and in good standing under the Laws of its jurisdiction of incorporation or formation, as applicable. Each Company has the requisite corporate power and authority to own, lease and operate all of its properties and assets and to carry on its business as currently conducted, and is duly qualified to do business and is in good standing (to the extent such concept exists) as a foreign corporation in each

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jurisdiction set forth in Schedule 2.1 , which are all the jurisdictions in which such qualification is required, except for failures to be so qualified or in good standing, as the case may be, that would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Companies or their Subsidiaries. There is no pending or, to the Knowledge of the Companies, threatened proceeding for the dissolution, liquidation or insolvency of Seller Parent or any Seller. Complete copies of the Organizational Documents of the Companies and their Subsidiaries as in effect as of the date of this Agreement have been made available to Buyer.
2.2      Authorization . Seller Parent, each Seller and each Company has the requisite power and authority to execute and deliver this Agreement and each Ancillary Agreement to which it is or will be a party, as applicable, and to perform its obligations hereunder and thereunder, as applicable. The execution, delivery and performance by each Seller and each Company of this Agreement and each Ancillary Agreement to which it is or will be a party, as applicable, has been duly and validly authorized and no additional authorization or consent is required under its Organizational Documents in connection with the execution, delivery and performance by it of this Agreement or any of the Ancillary Agreements to which it is or will be a party, as applicable. This Agreement, when executed and delivered by the other Parties, and each of the Ancillary Agreements, when executed and delivered by the other parties thereto, will constitute a valid and legally binding obligation of Seller Parent, each Seller and each Company, as applicable, enforceable against it in accordance with their respective terms, as applicable, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting or relating to creditors’ rights and remedies generally and the availability of injunctive relief and other equitable remedies (the “ Enforceability Exception ”).
2.3      Ownership of Interests . The applicable Seller has title to the Equity Interests owned or purported to be owned by it and listed on Schedule 2.3 , free and clear of all Liens. The Equity Interests listed on Schedule 2.3 constitute all of the issued and outstanding equity interests of each Company.
2.4      Capitalization .
(a)      The Equity Interests (i) are authorized and validly issued and are fully paid and non-assessable and (ii) were not issued in breach of any Contract to which Seller Parent, any Seller or any Company is a party or subject to or in violation of any preemptive or similar rights.
(b)      There are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights,

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agreements, arrangements or commitments under which Seller Parent, any Seller or any Company is or may become obligated to issue or sell, or giving any Person a right to subscribe for or acquire, or dispose of, any shares of the capital stock or other equity interests, or any securities or obligations exercisable or exchangeable for or convertible into any shares of the capital stock or other equity interests of any Company, and no securities or obligations evidencing such rights are authorized, issued or outstanding.
(c)      There are no outstanding obligations of any Company to repurchase, redeem or otherwise acquire its Equity Interests or other securities of such Company, and the Equity Interests of such Company are not subject to any voting trust agreement or similar arrangement relating to the voting or disposition of the Equity Interests.
2.5      Subsidiaries .
(a)      Schedule 1.1(b) is true, correct and complete. Each Subsidiary is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the requisite corporate or similar power and authority to own, lease and operate all of its properties and assets and to carry on its business as currently conducted and is duly qualified to do business and is in good standing (to the extent such concept exists) as a foreign corporation or other entity in each jurisdiction set forth in Schedule 1.1(b) , which are all the jurisdictions where the ownership or operation of its assets or the conduct of its business requires such qualification, except for failures to be so duly organized, validly existing, qualified or in good standing that would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Companies or their Subsidiaries. All of the outstanding stock and other equity interests of the Subsidiaries have been duly authorized and validly issued and are fully paid and non-assessable.
(b)      There are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements or commitments under which the Companies’ Subsidiaries are or may become obligated to issue or sell, or giving any Person a right to subscribe for or acquire, or dispose of, any shares of the capital stock or other equity interests, or any securities or obligations exercisable or exchangeable for or convertible into any shares of the capital stock or other equity interests, of such Subsidiaries, and no securities or obligations evidencing such rights are authorized, issued or outstanding. There are no outstanding obligations of the Companies’ Subsidiaries to repurchase, redeem or otherwise acquire any capital stock, equity interest or other securities of such Subsidiaries, and the outstanding stock and other equity interests of such Subsidiaries are not subject to any

9




voting trust agreement or similar arrangement relating to the voting or disposition of such stock or other equity interests.
(c)      Each Company owns, directly or indirectly, all of the issued and outstanding stock and other equity interests, as applicable, of each of their Subsidiaries.
(d)      Except for the Subsidiaries listed on Schedule 1.1(b) , the Companies do not own, directly or indirectly, any capital stock or other equity interests of any Person or have any direct or indirect equity or ownership interest in any business.
2.6      Consents and Approvals .
(a)      Except in connection, or in compliance, with the approvals, filings and notifications required or advisable by applicable Laws set forth on Schedule 2.6 (the “ Required Regulatory Approvals ”), no consent, approval, waiver, authorization, notice, exemption or filing is required to be obtained by Seller Parent, any Seller or the Companies from, or to be given by Seller Parent, any Seller or the Companies to, or be made by Seller Parent, any Seller or the Companies with, any Governmental Body, in connection with the execution, delivery and performance by Seller Parent, Sellers or the Companies of this Agreement and the Ancillary Agreements to which they are a Party or will be a party, as applicable, other than those the failure of which to obtain, give or make would not, individually or in the aggregate, materially delay or impair such Party’s ability to effect the Closing or to perform its obligations under this Agreement and the Ancillary Agreements.
(b)      Except as set forth on Schedule 2.6 , no consent, approval, waiver, authorization, notice, exemption or filing is required to be obtained by Seller Parent, any Seller or the Companies from, or to be given by Seller Parent, any Seller or the Companies to, or made by Seller Parent, any Seller or the Companies with, any Person which is not a Governmental Body in connection with the execution, delivery and performance by Seller Parent and its Affiliates of this Agreement and the Ancillary Agreements to which they are or will be a party, as applicable, except for those the failure of which to obtain, give or make would not, individually or in the aggregate, materially delay or impair such Party’s ability to effect the Closing or to perform its respective obligations under this Agreement and the Ancillary Agreements.
2.7      Non-Contravention . Assuming the receipt of all Required Regulatory Approvals, the execution, delivery and performance by Seller Parent, Sellers or the Companies of this Agreement and the Ancillary Agreements to which they are or will be a party, as applicable, and the consummation of the Transaction or the other transactions contemplated by the Ancillary Agreements, do not and will not (a) violate any provision of the Organizational Documents of Seller Parent, any Seller or any of the Companies, (b)

10




conflict with, or result in the breach of, or constitute a default under, or result in the termination, cancellation, modification or acceleration (whether after the filing of notice or the lapse of time or both) of any right or obligation of Seller Parent, any Seller, the Companies or any of their Subsidiaries, or result in a loss of any benefit to which Seller Parent, any Seller or the Companies or any of their Subsidiaries is entitled, under any Material Contract or Real Property Lease, or (c) assuming the receipt of all consents, approvals, waivers, exemptions and authorizations and the making of notices and filings required to be made or obtained by Buyer, violate or result in a breach of or constitute a default under any Law to which Seller Parent, any Seller or any of the Companies or their Subsidiaries is subject, or under any Permit, other than, in the cases of clauses (b) and (c), conflicts, breaches, terminations, defaults, cancellations, accelerations, losses or violations that would not, individually or in the aggregate, materially delay or impair such Party’s ability to perform its obligations under this Agreement and the Ancillary Agreements.
2.8      Financial Statements; Undisclosed Liabilities .
(a)      Set forth on Schedule 2.8(a) are true, correct and complete copies of the consolidated balance sheets of the Companies and their Subsidiaries and the related consolidated statements of income of the Companies and their Subsidiaries for the fiscal years ended December 31, 2016 and December 31, 2017 (the “ Financial Statements ”). The Financial Statements were derived from the books and records of the Companies and their Subsidiaries and have been prepared in accordance with the Accounting Principles, consistently applied, and fairly present in all material respects the consolidated financial condition and results of operations of the Companies and their Subsidiaries as of the dates thereof or the periods then ended subject to the absence of footnote disclosures.
(b)      Except as specifically reflected as a liability or specifically reserved against or otherwise expressly and specifically disclosed in the Financial Statements, the Companies and their Subsidiaries have no Liabilities other than (i) Liabilities that were incurred since December 31, 2017 in the Ordinary Course of Business, (ii) Liabilities incurred in connection with the Transaction, (iii) Liabilities that involve future performance obligations under any Contract to which any Company or any of their respective Subsidiaries are a party that arise in the Ordinary Course of Business and that did not result from any breach or default thereunder, and (iv) Liabilities set forth on Schedule 2.8(b) .
(c)      The Companies and their Subsidiaries maintain a system of internal controls over financial reporting sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Accounting Principles.

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2.9      Litigation and Claims . Except Legal Proceedings with respect to workers’ compensation claims and as set forth on Schedule 2.9 (collectively, the “ Known Legal Proceedings ”), there is no Legal Proceeding pending, or to the Knowledge of the Companies, threatened, against or relating to the Companies, any of their Subsidiaries or the Transaction. There is no outstanding Order against the Companies or any of their Subsidiaries that enjoins or seeks to enjoin any activity by the Companies or any of their Subsidiaries in any respect. The consolidated balance sheets of the Companies and their Subsidiaries reflect appropriate reserves for the Known Legal Proceedings, if required in accordance with the Accounting Principles, or the Known Legal Proceedings are covered by insurance policies held by or for the benefit of the applicable Company.
2.10      Permits; Compliance with Laws .
(a)      Except for such matters as would not interfere in any material respect with the conduct of the business of the Companies and their respective Subsidiaries, (i) the Companies and their Subsidiaries hold all licenses, franchises, permits and authorization issued by or obtained from a Governmental Body necessary for the lawful conduct of their respective businesses (each, a “ Permit ”), (ii) all Permits are in full force and effect, (iii) no Permit will become null or void, or subject to annulment, cancellation or other termination rights in consequence of, or on or in connection with the Closing of the Transaction, (iv) the Companies and their Subsidiaries and their properties and assets are, and at all times since January 1, 2015 have been, in compliance in all material respects with all applicable Laws, including Export/Import Control Laws, and (v) none of the Companies or their Subsidiaries has, since January 1, 2015, received any written notice alleging any violation under any applicable Law.
(a)      Since January 1, 2015, none of the Companies, their Subsidiaries or any of their directors, officers, agents, distributors, employees or, to the Knowledge of the Companies, any other Person associated with the Companies or their Subsidiaries or acting on their behalf has been in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any rules or regulations thereunder or any similar anti-corruption or anti-bribery Laws applicable to the Companies or their Subsidiaries in any jurisdiction.
(b)      The Companies and their Subsidiaries do not have, and to the Knowledge of the Companies, have never had any Contracts or other business dealings with any Person with whom the Companies or their Subsidiaries were, at the time of such Contract or business dealings, restricted from doing business with under the regulations of the Office of Foreign Asset Control of the Department of Treasury of the United States of America.

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2.11      Taxes .
(a)      The Companies and their Subsidiaries have timely filed all income Tax Returns and all other material Tax Returns required to be filed by them (taking into account applicable extensions to file such Tax Returns), and all material Taxes required to be paid by them have either been paid or adequate provisions therefor have been made in accordance with the Accounting Principles in the Financial Statements. No deficiencies for any Taxes have been proposed, asserted or assessed in writing against the Companies or any of their Subsidiaries that are still pending.
(b)      Except as set forth on Schedule 2.11 , there are no outstanding Contracts or waivers extending the statutory period of limitation applicable to any claim for, or the period for the collection or assessment of, any material amount of Taxes due from or with respect to the Companies or any of their Subsidiaries for any taxable period.
(c)      To the Knowledge of the Companies, no examination or outstanding audit or assessment by any Tax Authority concerning any material Tax Liability of the Companies or any of their Subsidiaries is currently in progress.
(d)      None of the Companies or any of their Subsidiaries has any Liability for any Person (other than the Companies or any of their Subsidiaries) arising from the application of Treasury Regulation Section 1.1502-6 or any analogous provision of state, local or foreign Law.
(e)      Except as set forth on Schedule 2.11 , neither the Companies nor any of their Subsidiaries is party to any Tax sharing or Tax indemnity Contract or similar Contract (other than any commercial Contracts entered into in the Ordinary Course of Business that do not relate primarily to Taxes). Neither the Companies nor any of their Subsidiaries has, and will not have as a result of the Transaction, any Liability under any Tax sharing or Tax indemnity Contract or similar Contract (other than any commercial Contracts entered into in the Ordinary Course of Business that do not relate primarily to Taxes).
(f)      There are no liens for any Taxes on any of the assets of the Companies or any of their Subsidiaries (other than liens for Taxes not yet due and payable).
(g)      Subsequent to June 20, 2014 with respect to Holdings, MEGTEC US and their Subsidiaries and January 11, 2017 with respect to Universal and its Subsidiaries, and, to the Knowledge of Sellers prior to such dates, neither Holdings, MEGTEC US or any of their Subsidiaries, on the one hand, nor Universal nor any of its Subsidiaries, on the other hand, respectively has received any notice or inquiry from any Tax Authority with which Tax Returns have not been filed with respect to the Companies or any of their

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Subsidiaries to the effect that the filing of Tax Returns may be required. There is no power of attorney given by or binding upon the Companies or any of their Subsidiaries beyond the Closing Date with respect to Taxes for any period for which the statute of limitations (including any waivers or extensions) has not yet expired.
(h)      Neither the Companies nor any of their Subsidiaries will be required to include any item of income, or exclude any item of deduction from, taxable income for any Tax period ending after the Closing Date as a result of any (i) change in method of accounting for a Tax period ending on or prior to the Closing Date, (ii) closing agreement (as described in Section 7121 of the Code) executed on or prior to the Closing Date, (iii) installment sale or open transaction disposition made on or prior to the Closing Date, (iv) prepaid amounts received on or prior to the Closing Date, (v) “intercompany transaction” or “excess loss account” within the meaning of the Treasury Regulations under Section 1502 of the Code, or (vi) “dual consolidated loss” within the meaning of Section 1503 of the Code and the Treasury Regulations promulgated thereunder.
(i)      Neither the Companies nor any of their Subsidiaries are or have been a party to any “listed transaction” as defined in Treasury Regulation Section 1.6011-4(b)(2).
(j)      No Subsidiaries have been a “controlled corporation” or a “distributing corporation” in any distribution of stock qualifying for tax-free treatment under Section 355 of the Code occurring during the two-year period ending on the date hereof.
(k)      The Companies and their Subsidiaries have complied in all material respects with all applicable Laws, rules and regulations relating to the payment and withholding of Taxes (including, without limitation, withholding of Taxes pursuant to Sections 1441 and 1442 of the Code or similar provisions under any non-U.S. laws) and have, within the time and the manner prescribed by law, withheld and paid over to the proper Tax Authorities all amounts required to be so withheld and paid over under applicable Laws.
(l)      The Companies and their Subsidiaries have included in income any amounts required to be included in income as a result of Section 965 of the Code and paid any Taxes due as a result of such provision. For any Tax period after the Closing Date, neither the Companies nor any of their Subsidiaries are required to, or will be required to, include any amounts in income or pay any Taxes as a result of Section 965 of the Code.
(m)      MEGTEC US is, and will be at the Closing, classified as an entity whose existence is disregarded as separate from MEGTEC Seller for United States federal income Tax purposes pursuant to Treasury Regulation Section 301.7701-3.

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2.12      Real and Tangible Personal Property .
(a)      The Companies and each of their Subsidiaries have good and valid title to, or a valid license or leasehold interest in, all tangible personal property required for the continued operation of the businesses of the Companies and their Subsidiaries, free and clear of any Liens, except Permitted Exceptions.
(b)      Schedule 2.12 sets forth a complete list of (i) all real property and interests in real property owned in fee by the Companies and their Subsidiaries (the “ Owned Property ”) and (ii) all agreements, including all material amendments and modifications thereto, relating to real property leased, subleased, license, used or otherwise occupied by the Companies or any of their Subsidiaries (each individually, a “ Real Property Lease ” and together with the Owned Property, being referred to herein as the “ Company Properties ”).
(c)      Except as set forth on Schedule 2.12 , the Companies or one of their Subsidiaries have good and valid fee title to all Owned Property, free and clear of all Liens except Permitted Exceptions.
(d)      (i) Seller has made available to Buyer, in all material respects, true, correct and complete copies of the Real Property Leases, (ii) each of the Real Property Leases is in full force and effect and is a legal, valid and binding obligation of the Companies or their Subsidiaries, enforceable against them in accordance with its terms, subject to the Enforceability Exception, (iii) neither the Companies nor any of their Subsidiaries is in default under any Real Property Lease or has received any written notice of any default or event that with notice or lapse of time, or both, would constitute a material default by the Companies or any of their Subsidiaries under any of the Real Property Leases, and (iv) to the Knowledge of the Companies, no other party is in default thereof and no party to any Real Property Lease has exercised any termination rights with respect thereto.
(e)      There are no pending or, to Sellers’ Knowledge, threatened material appropriation, condemnation, eminent domain or like proceedings relating to the Owned Property or, to the Knowledge of the Companies, the real property subject to the Real Property Leases.
(f)      Except as set forth on Schedule 2.12 , neither the Company nor any of its Subsidiaries lease, sublease, license to any other Person or permit any other Person to occupy any of the Company Properties.

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2.13      Intellectual Property .
(a)      Schedule 2.13(a) sets forth a list of all unexpired Intellectual Property registrations and applications owned or purported to be owned by each of the Companies and their Subsidiaries. All of such items are subsisting and unexpired and, to the Knowledge of the Companies, valid and enforceable, and the Companies and their Subsidiaries have complied in all material respects with all procedural and ministerial requirements necessary for the prosecution and maintenance of such items.
(b)      The Companies and their Subsidiaries (i) solely and exclusively own the Intellectual Property set forth on Schedule ‎2.13(a) , except as set forth therein, and (ii) otherwise own or have the right to use all other Intellectual Property currently used in the conduct of their respective businesses in all material respects, in each case free and clear of all Liens (other than Permitted Exceptions). The Companies’ and their Subsidiaries’ conduct of their respective businesses does not infringe or misappropriate, and since January 1, 2015 has not infringed or misappropriated, the Intellectual Property of any other Person in any material respect. There is no pending or, to the Knowledge of the Companies, threatened Legal Proceeding (i) alleging that the Companies or any of their Subsidiaries is infringing or misappropriating, or, since January 1, 2015, has infringed or misappropriated, any Intellectual Property of any Person or (ii) challenging the ownership, registrability, scope, validity or enforceability of any Intellectual Property owned or purported to be owned by the Companies or any of their Subsidiaries. To the Knowledge of the Companies, (i) no Person is infringing or misappropriating the Intellectual Property of the Companies or their Subsidiaries in any material respect and (ii) there is no Legal Proceeding pending or threatened alleging the foregoing. For purposes of this Section ‎2.13 , references to Intellectual Property owned or purported to be owned by the Companies or their Subsidiaries includes Intellectual Property assigned, or required to be assigned, to the Companies or their Subsidiaries pursuant to Section ‎4.14(b) .
(c)      The Companies and their Subsidiaries take and have taken commercially reasonable actions to protect their material trade secrets, as do and have the Sellers and their Affiliates (excluding the Companies and their Subsidiaries), to the extent they have or had knowledge or possession of such material trade secrets, and to the Knowledge of the Companies, there has been no unintended loss or compromise of any material trade secrets since January 1, 2015.
(d)      The Companies and their Subsidiaries, as well as the Sellers and their Affiliates (excluding the Companies and their Subsidiaries), to the extent they have or had knowledge or possession thereof, (i) take and have taken commercially reasonable actions to protect the personal data possessed or controlled by, and the proprietary Software and

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information technology systems used by or on behalf of, the Companies and their Subsidiaries, (ii) comply and have complied in all material respects with all applicable Law, contractual obligations and their own rules, policies and procedures with respect to personal data and cybersecurity, and (iii) have not suffered any material failures or outages of their information technology systems since January 1, 2015. To the Knowledge of the Companies, there has been no breach, compromise or violation with respect to any of the foregoing in subsections (i) and (ii) of this Section ‎2.13(d) since January 1, 2015, and there is no pending or, to the Knowledge of the Companies, threatened Legal Proceeding alleging any such breach, compromise or violation.
(e)      Except as set forth on Schedule ‎2.13(e) and other than pursuant to a Material Contract, (i) no royalties or per unit license fees are payable to third parties with respect to the Companies’ and their Subsidiaries’ products and services and (ii) no source code owned by the Companies or their Subsidiaries that is included or embodied in any of their products and services are licensed to, or subject to escrow or contingent license rights for the benefit of, any third parties, nor subject to the terms of any Restrictive Open Source License Agreement.
2.14      Material Contracts .
(a)      Schedule 2.14 sets forth a list of the following Contracts in effect as of the date hereof to which the Companies or any of their Subsidiaries is a party (collectively, the “ Material Contracts ”) that:
(i)      is reasonably expected to call for any payments by or on behalf of the Companies or any of their Subsidiaries, individually or in the aggregate, in respect of (A) Holdings, MEGTEC US or any of their respective Subsidiaries, in excess of $1,250,000 per annum and (B) Universal or any of its Subsidiaries, in excess of $500,000;
(ii)      provides for the Companies or any of their Subsidiaries to receive any payments in excess of, individually or in the aggregate, in respect of (A) Holdings, MEGTEC US or any of their respective Subsidiaries, in excess of $1,250,000 and (B) Universal or any of its Subsidiaries, in excess of $500,000, in each case during the current fiscal year;
(iii)      contains covenants restricting the ability of the Companies or any of their Subsidiaries to compete in any line of business or geographical area;
(iv)      contains covenants requiring the Companies to purchase its total requirements of any product or service from a third party;

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(v)      grants the Companies or any of their Subsidiaries an interest in any partnership, joint venture or similar arrangement;
(vi)      pursuant to which the Companies or any of their Subsidiaries (A) licenses or is granted rights in Intellectual Property from a third party or (B) licenses or grants rights in its owned Intellectual Property to third parties, in each case that is material to any of the Companies and their Subsidiaries, taken as a whole, but excluding (1) generally commercially available in-bound licenses for Software acquired in the Ordinary Course of Business and (2) nonexclusive licenses to Intellectual Property granted by the Companies or their Subsidiaries either (I) to contractors, customers, vendors or service providers incidental to the provision of products or services to the Companies or their Subsidiaries or (II) substantially on the Companies’ standard terms for the sale, lease, license or support of the Companies’ and their Subsidiaries’ products and services to customers;
(vii)      constitutes a promissory note, loan, Contract, indenture, or other instrument related to the lending of money whether as borrower, lender or guarantor, other than in the Ordinary Course of Business;
(viii)      is with any Affiliate, director, officer, or holder of 5% or more of the equity interests of a Company, other than intercompany agreements that will be terminated in connection with the Closing;
(ix)      is an employment, individual service provider, severance, change in control or similar Contract (other than for employment at-will or similar arrangements) that is not terminable by a Company without notice or without cost to such Company, or that may be terminable by the employee with cost to such Company;
(x)      involves the disposition or acquisition of securities or material assets of the Companies and any of their Subsidiaries pursuant to which there remain any ongoing obligations;
(xi)      contains “earn-out” or other contingent payment obligations;
(xii)      requires the Companies or any of their Subsidiaries to make any payment to another Person as a result of a change of control of such party (a “ Change of Control Payment ”) or gives another Person a right to receive or elect to receive a Change of Control Payment, in either case, excluding Seller Benefit Plans and Company Benefit Plans;

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(xiii)      is a hedging, swap, derivative or similar Contract;
(xiv)      is a Contract for the purchase, sale, lease or sublease of any real property;
(xv)      relates to any settlement of litigation or an Order of a Governmental Body, in each case that is ongoing, in excess of $500,000; or
(xvi)      is material to the Companies and their Subsidiaries and not previously disclosed pursuant to this Section ‎2.14 .
(b)      Each Company has provided or made available, as the case may be, to Buyer true and complete copies of each Material Contract set forth or required to be set forth on Schedule 2.14 . Each Material Contract is a valid and binding obligation of the Companies or any of their Subsidiaries that is party thereto and, to the Knowledge of the Companies, each other party to such Material Contract. Each Material Contract is enforceable against the Companies or any of their Subsidiaries that is party thereto and, to the Knowledge of the Companies, each other party to such Material Contract in accordance with its terms (subject in each case to the Enforceability Exception). None of the Companies or any of their Subsidiaries or, to the Knowledge of the Companies, any other party to a Material Contract, is in default or breach of a Material Contract and, to the Knowledge of the Companies, there does not exist any event, condition or omission that would constitute such a default or breach (whether by lapse of time or notice or both).
2.15      Employee Benefits Plans .
(a)      Schedule 2.15 lists each material Seller Benefit Plan. “ Seller Benefit Plan ” means each “employee benefit plan” (as that is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), whether or not ERISA by its terms applies), each bonus or other incentive compensation, equity or equity-based, employment, deferred compensation, profit sharing, change in control, retention, severance, termination, fringe benefit, retirement, cafeteria, disability and each other employee benefit plan, program, agreement or arrangement that is maintained, contributed to or required to be contributed to by the Companies or any of their Subsidiaries or any ERISA Affiliates of the Companies for the benefit of any employee of the Companies or any of their Subsidiaries or with respect to which the Companies or any of their Subsidiaries could reasonably be expected to have any Liability following the Closing (other than any such plan, program, agreement or arrangement required by Law to be provided, including workers’ compensation or similar benefits). Schedule 2.15 indicates by an asterisk those material Seller Benefit Plans that are maintained, contributed to or sponsored solely by any of the Companies or any of their Subsidiaries (each, a “ Company Benefit Plan ”).

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Each Company has made available to Buyer correct and complete copies of all material Seller Benefit Plans and trust agreements, material amendments, the most recent financial statements and actuarial valuation reports, the most recent determination letter issued by the IRS with respect to each material Seller Benefit Plan that is intended to be a “qualified plan” under Section 401 of the Code, all governmental and regulatory approvals received from any foreign Governmental Body, the two most recent annual reports on Form 5500 (including all exhibits and attachments thereto) and any comparable documents with respect to material Seller Benefit Plans that are required to be prepared or filed under the applicable laws of a non-U.S. jurisdiction, in each case, as applicable, related thereto.
(b)      (i) Each Company Benefit Plan was established and has been administered in all material respects in accordance with its terms and in compliance with the applicable provisions of applicable Laws; (ii) each Seller Benefit Plan which is intended to be qualified within the meaning of Section 401(a) of the Code has received a favorable determination letter as to its qualification and, to the Knowledge of the Companies, no event has occurred that would reasonably be expected to adversely affect the qualified status of any such Seller Benefit Plan; and (iii) except as would not, individually or in the aggregate, reasonably be expected to have a material effect on the Companies or their Subsidiaries, no Legal Proceeding is pending, or to the Knowledge of the Companies, threatened, with respect to any Company Benefit Plan (other than routine claims for benefits).
(c)      At no time have the Companies or any ERISA Affiliate of the Companies contributed to or been obligated to contribute to, or otherwise participated in, any (i) multiemployer plan (as defined in Section 3(37) of ERISA), (ii) multiple employer plan (within the meaning of Sections 4063/4064 of ERISA and Section 413(c) of the Code), and (iii) any similar plan under the laws of a non-U.S. jurisdiction. Neither the Companies nor any of their ERISA Affiliates have (i) ever sponsored, participated in, contributed to, or had any Liability with respect to, any pension plan which is subject to Title IV of ERISA or Section 412 of the Code or (ii) incurred or reasonably could expect to incur any Liability pursuant to Title I or Title IV of ERISA. No Seller Benefit Plan provides for post-employment or retiree welfare coverage, except to the extent required by Part 6 of Subtitle B of Title I of ERISA or Section 4980B of the Code.
(d)      Each Foreign Plan (i) if required to be registered or approved by a non-U.S. Governmental Body, has been registered or approved and has been maintained in good standing in all material respects with applicable regulatory authorities, and, to the Knowledge of the Companies, no event or circumstance has occurred since the date of the most recent approval or application therefor relating to any such Foreign Plan that would reasonably be expected to adversely affect any such approval or good standing; (ii)

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that is intended to qualify for special Tax treatment meets all requirements for such treatment; (iii) is fully funded or fully insured on an ongoing and termination or solvency basis (determined using reasonable actuarial assumptions) to the extent required to be in compliance with applicable Laws; and (iv) is not subject to any pending or, to the Knowledge of the Companies, threatened claims by or on behalf of any participant in any Foreign Plan, or otherwise involving any such Foreign Plan or the assets of any Foreign Plan, other than routine claims for benefits.  
(e)      Neither the execution of this Agreement nor the consummation of the Transaction, whether alone or in combination with any other event or circumstance, would (i) constitute a triggering event entitling any current or former employee, director, officer, independent contractor or other service provider of any of the Companies or their Subsidiaries to severance pay or benefits or any other payment, (ii) accelerate the time of payment or vesting or result in any payment of compensation or benefits, increase the amount payable or result in any other material obligation to any such person, (iii) require the funding of any payment of compensation or benefits to any such person or (iv) result in any payments that would not be deductible under Section 280G of the Code or which would be subject to an excise tax under Section 4999 of the Code. No current or former employee, director, officer, independent contractor or other service provider of the Companies or any of their Subsidiaries is entitled to any gross-up, indemnification or other reimbursement for any Tax incurred by such person pursuant to Section 409A or Section 4999 of the Code.
2.16      Labor .
(a)      Except as set forth in Schedule 2.16 , neither the Companies nor any of their Subsidiaries is a party to, or bound by, any Collective Bargaining Agreement. Neither the Company nor any of its Subsidiaries has experienced any union organizing activity with respect to any employees of the Companies or their Subsidiaries since January 1, 2015.
(b)      Since January 1, 2015, to the Knowledge of the Companies, there have been no organized strikes, work stoppages, work slowdowns, lockouts or other labor disputes pending or, to the Knowledge of the Companies, threatened against or involving the Companies or any of their Subsidiaries. Since January 1, 2015, there have been no unfair labor practice charges pending by or on behalf of any employee or group of employees against the Companies or any of their Subsidiaries with any Governmental Body.

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(c)      The execution of this Agreement and the consummation of the Transaction will not result in any breach or other violation of any Collective Bargaining Agreement, employment agreement, consulting agreement or any other labor-related agreement to which the Companies or any of their Subsidiaries is a party or bound.
(d)      The Companies and their Subsidiaries have satisfied any pre-signing legal or contractual requirement to provide notice to, or to enter into any consultation procedure with, any labor organization, works council or other representative body that, to the Knowledge of the Companies, represents any group of employees of the Companies or any of their Subsidiaries in connection with the execution of this Agreement or the consummation of the Transaction.
(e)      The Companies and their Subsidiaries are not delinquent in payments to any employees or former employees for any services or amounts required to be reimbursed or otherwise paid.
(f)      To the Knowledge of the Companies, no current employee of the Companies or their Subsidiaries, who is above the level of a director, intends to terminate his or her employment.
(g)      To the Knowledge of the Companies, no employee of the Companies or their Subsidiaries is in any respect in violation of any term of any employment agreement, nondisclosure agreement, common law nondisclosure obligation, fiduciary duty, non-competition agreement, restrictive covenant or other obligation: (i) to the Companies or any of their Subsidiaries or (ii) to a former employer of any such employee relating (A) to the right of any such employee to be employed by the Companies or their Subsidiaries or (B) to the knowledge or use of trade secrets or proprietary information.
2.17      Environmental Matters . Except in each case as would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Companies or their Subsidiaries:
(a)      the operations of the Companies and each of their Subsidiaries are, and, except for matters which have been fully resolved, have been since January 1, 2015, in compliance with all Environmental Laws, which includes the possession and compliance with all required Permits under applicable Environmental Laws;
(b)      neither the Companies nor any of their Subsidiaries are the subject of any outstanding Order or Contract with any Governmental Body requiring, or are otherwise liable for, any Remedial Action;

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(c)      neither the Companies nor any of their Subsidiaries is subject to any pending claims or Legal Proceedings or, to the Knowledge of the Companies, threatened claims or Legal Proceedings alleging non-compliance with or liability under Environmental Laws and, to the Knowledge of the Companies, there are no facts or conditions which would be reasonably likely to give rise to any claim or Legal Proceeding; and
(d)      there are no pending or, to the Knowledge of the Companies, threatened investigations of the Companies or their Subsidiaries or their respective businesses, or currently or previously owned, operated or leased property of the Companies or any of their Subsidiaries.
(e)      Neither the Companies nor any of their Subsidiaries own, lease or operate any property in New Jersey which is an industrial establishment under the New Jersey Industrial Site Recovery Act, N.J.S.A. 13:1K-6, et seq. and its implementing rules and regulations.
(f)      Seller Parent has made available to Buyer copies and results of (i) any material environmental reports, investigations, audits, assessments (including Phase I environmental site assessments and Phase II environmental site assessments), studies, or analyses and (ii) any material documents related to non-compliance with any Environmental Law by the Companies or any of their Subsidiaries since June 1, 2008 that, in each case, are in the possession or control of the Companies or any of their Subsidiaries.
2.18      Financial Advisors . No agent, broker, investment banker, financial advisor, intermediary, finder, consultant or other firm (each, a “ Financial Advisor ”) acting on behalf of Seller Parent, any Seller, the Companies or any of their Affiliates will be entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission, directly or indirectly, in connection with the Transaction for which the Companies, their Subsidiaries, Buyer or Parent could be liable. Neither the Companies nor any of their Subsidiaries have directly engaged a Financial Advisor in connection with the Transaction.
2.19      Absence of Changes . Except as contemplated by this Agreement, from March 31, 2018 to the date hereof, (a) there has not been any Material Adverse Effect and (b) none of the Companies or any of their Subsidiaries has taken any action that, if Section ‎4.2 applied in such period, would have required the consent of Buyer.
2.20      Transactions with Affiliates . Schedule 2.20 sets forth all Contracts between or among the Companies and/or any of their Subsidiaries, on the one hand, and any present or former director, officer, interest holder, relative or Affiliate of Seller Parent, any Seller, the Companies or any of their Subsidiaries (each a “ Related Person ”), on the other hand, except Contracts for compensation or benefits with respect to such Related Person’s role

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as an employee or officer of the Companies or their Subsidiaries payable in the Ordinary Course of Business. Except as set forth in Schedule 2.20 , no Related Person (a) owns any property or right, whether tangible or intangible, which is used by the Companies or any of their Subsidiaries or which is used by Seller Parent or Sellers in connection with the business, (b) has any claim or cause of action against the Companies or any of their Subsidiaries or (c) owes any money to the Companies or any of their Subsidiaries or is owed money from the Companies or any of their Subsidiaries.
2.21      Suppliers and Customers . Schedule 2.21 lists (a) by purchase orders issued for the 12 months ended December 31, 2017, the 10 largest suppliers of the MEGTEC Business and the Universal Business and (b) by revenue recorded for the 12 months ended December 31, 2017, the 10 largest customers of the MEGTEC Business and the Universal Business. Except as set forth in Schedule 2.21 , during the 12-month period ending on the date hereof, neither the Companies nor any of their Subsidiaries have (i) received any written notice from any such customer or supplier indicating that such customer or supplier plans to stop or materially decrease the amount of business done with the MEGTEC Business or Universal Business, (ii) materially decreased the prices charged to any such customer in a manner inconsistent with the terms of its existing agreement or order with any such customer, or (iii) materially increased the prices charged to any such supplier in a manner inconsistent with the terms of its existing supply agreement with any such supplier. In addition, except for such matters as would not interfere in any material respect with the conduct of the business of the Companies and their respective Subsidiaries, or otherwise be material to any of the Companies, neither the MEGTEC Business nor the Universal Business is involved with any claim or dispute with any customer or supplier of the MEGTEC Business or Universal Business set forth on Schedule 2.21 .
2.22      Sufficiency of Assets . Except for such matters as would not interfere in any material respect with the conduct of the MEGTEC Business or the Universal Business, the buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property of the Companies and their Subsidiaries are in good operating condition and repair, and are adequate for the uses to which they are being put, and none of such buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles or other items of tangible personal property is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost. The assets, properties, rights, titles and interests currently owned, leased or licensed by the Companies and their Subsidiaries, together with any assets, properties, rights, titles and interests to be made available to Buyer or the Companies and their Subsidiaries following the Closing pursuant to any Ancillary Agreement or other Contract executed at Closing for the benefit of Buyer or the Companies, including the Transition Services Agreement, are sufficient for the continued conduct of the MEGTEC Business and

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Universal Business after Closing in all material respects in substantially the same manner as conducted as of just prior to Closing.
2.23      Insurance . Schedule 2.23 contains a complete and correct list of all material policies or binders of insurance held by Seller Parent or its Affiliates on behalf of or for the benefit of the Companies or any of their Subsidiaries. Such policies are in full force and effect, all premiums due and payable have been paid, there is no existing default with respect to any such policy, and no notice of cancellation, termination, expiration or non-renewal of any such policy has been received by Seller Parent, Sellers, the Companies or any of their Subsidiaries. Such policies (a) comply in all material respects with requirements of Law and of all Contracts to which the Companies or any of their Subsidiaries is a party and (b) are commercially reasonable for the industry of the Companies’ and their Subsidiaries’ assets and operations.
2.24      Solvency . Based on the financial condition of Seller Parent and Sellers, both immediately before and after giving effect to the proposed Transaction, Seller Parent is Solvent.
2.25      No Other Representations or Warranties . Except for the representations and warranties expressly set forth in this Article ‎II , the certificate contemplated by Section 5.2(c) and the Ancillary Agreements, Buyer acknowledges and agrees that neither Seller nor any other Person on behalf of either Seller makes any representation or warranty, express or implied, whether at law or in equity, with respect to the Companies or their Subsidiaries or with respect to the Equity Interests, including with respect to merchantability or fitness for any particular purpose, and any such other representations or warranties are expressly disclaimed. Buyer hereby acknowledges and agrees that, (a) except to the extent specifically set forth in this Article ‎II , Buyer is acquiring the Equity Interests on an “as is, where is” basis, (b) neither Seller Parent, Sellers nor any other Person will have or be subject to any Liability or indemnification obligation to Buyer or any other Person resulting from the distribution to Buyer, or Buyer’s (or its Affiliates’ or their representatives’) use, of any information, including any projections, budgets, forecasts or other written or oral information, that may have been or may be provided to Buyer by or on behalf of Seller Parent or Sellers, including any information, documents, projections, forecasts or other material made available in certain “data rooms” or management presentations in expectation of the Transaction or otherwise, and (c) any cost estimates, projections or other predictions, any data, any financial information or any memoranda or offering materials or presentations (whether written or oral) provided or addressed to Buyer are not and will not be deemed to be or to include representations and warranties of Seller or any of its Affiliates.

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III.      BUYER AND PARENT REPRESENTATIONS AND WARRANTIES
Buyer and Parent hereby represent and warrant, each for and with respect to itself, to Sellers as of the date hereof and as of the Closing Date (or, if a representation or warranty is made as of a specified date, as of such date) that:
3.1      Organization and Qualification . Each of Buyer and Parent is duly organized, validly existing and in good standing under the laws its jurisdiction of incorporation or formation, as applicable. Each of Buyer and Parent has the requisite corporate or other power and authority to own, lease and operate its properties and assets and to carry on its business as currently conducted and is in good standing (to the extent such concept exists) as a foreign corporation in each jurisdiction where the conduct of its business requires such qualification, except for failures to be so qualified or in good standing, as the case may be, that would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Buyer. There is no pending or threatened proceeding for the dissolution, liquidation or insolvency of Buyer or Parent.
3.2      Authorization . Each of Buyer and Parent has the requisite corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is or will be a party and to perform its obligations hereunder and thereunder. The execution, delivery and performance by each of Buyer and Parent of this Agreement and the Ancillary Agreements to which it is or will be a party has been duly and validly authorized and no additional authorization or consent is required under such Party’s Organizational Documents in connection with its execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is or will be a party. Parent has duly approved the execution, delivery and performance by Buyer of this Agreement and the Ancillary Agreements to which it is or will be a party. This Agreement and each Ancillary Agreement to which Buyer is or will be a party, when executed and delivered by the other Parties, will constitute a valid and legally binding obligation of Buyer, enforceable against Buyer in accordance with its terms (subject to the Enforceability Exception). This Agreement, when executed and delivered by the other Parties, will constitute a valid and legally binding obligation of Parent, enforceable against Parent in accordance with its terms (subject to the Enforceability Exception).
3.3      Consents and Approvals.
(a)      Except for the Required Regulatory Approvals, no consent, approval, waiver, exception, authorization, notice or filing is required to be obtained by Buyer or Parent from, or to be given by Buyer or Parent to, or be made by Buyer or Parent with, any Governmental Body in connection with the execution, delivery and performance by

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Buyer or Parent of this Agreement and the Ancillary Agreements to which Buyer is or will be a party other than those the failure of which to obtain, give or make would not, individually or in the aggregate, materially delay or impair such Party’s ability to effect the Closing or to perform its obligations under this Agreement and the Ancillary Agreements.
(b)      No consent, approval, waiver, authorization, notice, exemption or filing is required to be obtained by Buyer or Parent from, or to be given by Buyer or Parent to, or made by Buyer or Parent with, any Person which is not a Governmental Body in connection with the execution, delivery and performance by Buyer and its Affiliates of this Agreement and the Ancillary Agreements to which they are or will be a party, as applicable, except for those the failure of which to obtain, give or make would not, individually or in the aggregate, materially delay or impair such Party’s ability to effect the Closing or to perform its respective obligations under this Agreement and the Ancillary Agreements.
3.4      Non-Contravention . Assuming the receipt of all Required Regulatory Approvals, the execution, delivery and performance by each of Buyer and Parent of this Agreement, the Ancillary Agreements to which it is or will be a party, and the consummation of the Transaction and the other transactions contemplated by the Ancillary Agreements, do not and will not (a) violate any provision of the Organizational Documents of Buyer or Parent, (b) conflict with, or result in the breach of, or constitute a default under, or result in the termination, cancellation, modification or acceleration (whether after the filing of notice or the lapse of time or both) of any right or obligation of Buyer or Parent under, or result in a loss of any benefit to which Buyer or any of its Affiliates is entitled under, any material Contract, or (c) assuming the receipt of all consents, approvals, waivers and authorizations and the making of notices and filings required to be made or obtained by Sellers, violate or result in a breach of or constitute a default under any Law to which Buyer or its Affiliates is subject, other than, in the case of clauses (b) and (c), conflicts, breaches, terminations, defaults, cancellations, accelerations, losses or violations that would not, individually or in the aggregate, materially delay or impair Buyer’s or Parent’s ability to perform its obligations hereunder.
3.5      Litigation and Claims . There is no Legal Proceeding pending or, to the Buyer’s and Parent’s Knowledge, threatened against the Parent or Buyer that, individually or in the aggregate, would materially delay or impair Buyer’s ability to effect the Closing.
3.6      Financing . Buyer has, and will have at the Closing, cash on hand and/or undrawn amounts available under existing credit facilities sufficient to satisfy all of its obligations hereunder.

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3.7      Investment Representation . Buyer is acquiring the Equity Interests for its own account with the present intention of holding such securities for investment purposes and not with a view to, or for sale in connection with, any distribution of such securities in violation of any federal or state securities Laws. Buyer is an “accredited investor” as defined in Regulation D promulgated by the SEC under the Securities Act. Buyer acknowledges that it is informed as to the risks of the Transaction and of ownership of the Shares. Buyer acknowledges that the Equity Interests have not been registered under the Securities Act or any state or foreign securities Laws and that the Equity Interests may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of unless such transfer, sale, assignment, pledge, hypothecation or other disposition is pursuant to the terms of an effective registration statement under the Securities Act and the Equity Interests are registered under any applicable state or foreign securities Laws or sold pursuant to an exemption from registration under the Securities Act and any applicable state or foreign securities Laws. Buyer acknowledges that in making its determination to enter into this Agreement and consummate the Transaction, Buyer has relied only on the results of its own independent investigation and the representations and warranties made in this Agreement (as qualified by the Disclosure Schedules) and has not relied on any other representations or warranties, whether written or oral and whether express or implied, made by Sellers or any other Person.
3.8      No Other Representations and Warranties . Except for the representations and warranties contained in this Article ‎III , the certificate contemplated by Section ‎5.3(c) and the Ancillary Agreements, Sellers acknowledge that neither Buyer or Parent, nor any other Person on behalf of Buyer or Parent, makes any other express or implied representation or warranty with respect to Buyer or Parent or with respect to any other information provided to Sellers.
IV.      COVENANTS
4.1      Access to Information .
(a)      From the date hereof until the Closing and subject to applicable Laws and the terms of the Confidentiality Agreement, upon reasonable prior notice, Buyer will be entitled, through its officers, employees and representatives (including its legal advisors and accountants), to have such access to the properties, businesses and operations of the Companies and their Subsidiaries and such examination of the books and records of Seller Parent, Sellers and the Companies and their Subsidiaries as it reasonably requests in connection with Buyer’s efforts to consummate the Transaction and to make extracts and copies of such records at its own expense; provided , however , that (i) such investigation may not unreasonably interfere with any of the businesses or operations of Seller Parent,

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Sellers, the Companies or their Subsidiaries and (ii) Buyer will not be permitted to examine Sellers’ or their Affiliates’ Tax Returns, except for Tax Returns solely of the Companies and their Subsidiaries or selected information relevant to the Companies and their Subsidiaries, with the applicable Seller’s consent (which consent will not be unreasonably withheld, conditioned, or delayed), on any consolidated, combined, unitary or similar Tax Return of which the Companies or any of their Subsidiaries is a part.
(b)      Any such access and examination permitted hereunder will be conducted during regular business hours and under reasonable circumstances and will be subject to restrictions under applicable Law. Each Company will cause the officers, employees and representatives (including legal advisors and accountants) of such Company and its Subsidiaries to cooperate with Buyer, and Buyer and its representatives will use their reasonable best efforts to minimize any disruption to the business of the Companies and their Subsidiaries. Any disclosure during such investigation by Buyer, its officers, employees and representatives will not constitute any enlargement or additional representation or warranty of Sellers beyond those specifically set forth in this Agreement. Notwithstanding anything herein to the contrary, no such access or examination will be permitted to the extent that it would require any Company or any of their respective Subsidiaries to disclose information subject to attorney-client privilege or any confidentiality obligations to which such Company or any of its Subsidiaries is bound; provided , however , that Seller Parent, Sellers and the Companies will use commercially reasonable efforts to obtain any consent required to permit the access afforded to Buyer pursuant to Section ‎4.1(a) .
(c)      Notwithstanding anything to the contrary contained herein, prior to the Closing, without the prior written consent of Seller Parent, Buyer (i) will not contact any suppliers to, or customers, strategic partners or employees (other than the Companies’ senior executives) of, the Companies or any of their Subsidiaries in connection with the Transaction and (ii) will have no right to perform invasive or subsurface investigations of the properties or facilities of the Companies or any of their Subsidiaries.
4.2      Conduct of the Business Pending the Closing .
(a)      From the date of this Agreement until the Closing, except (w) as set forth on Schedule 4.2 , (x) as required by applicable Law, (y) as otherwise contemplated by this Agreement, or (z) with the prior written consent of Buyer (which consent will not be unreasonably withheld, conditioned or delayed, and which consent will be deemed to have been given if Buyer does not object within one Business Day after receiving a request for such consent from Seller Parent or any Sellers), Seller Parent and Sellers will cause the Companies and their Subsidiaries to:

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(i)      conduct their respective businesses in all material respects in the Ordinary Course of Business; and
(ii)      use their respective commercially reasonable efforts to preserve in all material respects the present (A) business operations, organization and goodwill of the Companies and their Subsidiaries and (B) relationships with material customers, suppliers, licensors, licensees, contractors, distributors and others having material business dealings with the Companies and their Subsidiaries.
(b)      From the date of this Agreement until the Closing, except (v) as set forth on Schedule 4.2 , (w) as required by applicable Law, (x) as required by the terms of any Collective Bargaining Agreement, (y) as otherwise contemplated by this Agreement, or (z) with the prior written consent of Buyer (which consent will not be unreasonably withheld, conditioned or delayed, and which consent will be deemed to have been given if Buyer does not object within one Business Day after receiving a request for such consent from Seller Parent or any Sellers), Seller Parent and Sellers will cause the Companies and their Subsidiaries not to:
(i)      sell, lease, license, transfer, allow to lapse, abandon, dispose of, pledge or encumber any material assets (including any of the items listed on Schedule ‎2.13(a) ) of the Companies or any of their Subsidiaries (other than in the Ordinary Course of Business (excluding any exclusive licenses to Intellectual Property) or for the purpose of disposing of obsolete or worthless assets);
(ii)      make any material acquisition of any assets or businesses;
(iii)      (A) incur, assume or guarantee any Indebtedness that will not be repaid at Closing, other than unsecured current liabilities incurred in the Ordinary Course of Business, or (B) make or forgive any loans or advances, or capital contributions to or investments in, any other Person;
(iv)      enter into any Contract that would have been deemed a Material Contract if it had been in effect as of the date hereof, or terminate or extend or modify or amend such Contract or any Material Contract, in each case except for renewals, terminations or expirations in accordance with the terms of such Contract or any Material Contract;
(v)      enter into any Contract for the purchase, sale, lease or sublease of any real property, or any interest therein;

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(vi)      declare, set aside or pay any dividend or distribution on any Equity Interests, other than dividends or distributions paid in cash or those described in Section ‎1.7(a) ;
(vii)      amend the Organizational Documents of the Companies or any of their Subsidiaries;
(viii)      issue, sell, pledge, transfer, dispose of or encumber or agree to issue, sell, pledge, transfer, dispose of, or encumber any shares or equity interests of the Companies or any of their Subsidiaries or grant options, warrants, calls or other rights to purchase or otherwise acquire shares of the capital stock, equity interests or other securities of the Companies or any of their Subsidiaries;
(ix)      effect any recapitalization, reclassification or like change in the capitalization of any Company or any of its respective Subsidiaries;
(x)      Except as may be required by any Seller Benefit Plan in existence on the date hereof, (A) materially increase the annual level of compensation or benefits of any employee, director, manager or officer of any Company or any Subsidiary of any Company other than in the Ordinary Course of Business, (B) grant or pay any retention, severance, bonus or other benefit to any employee of any Company, (C) amend any Seller Benefit Plan in a manner that could increase the costs to Buyer, the Companies, or any Subsidiaries of the Companies under Section ‎4.9 as compared to the date hereof or amend any Company Benefit Plan in a manner that would materially increase the applicable Company’s cost of maintaining such Company Benefit Plan, (D) loan any money to any employee, director, manager or officer of any Company or any Subsidiary of any Company, or (E) grant any equity or equity-based awards of a Company to any employee of any Company or any Subsidiary of any Company;
(xi)      (A) hire or offer to hire any new employee with an annual base salary in excess of $120,000, (B) terminate or encourage any employee to resign (other than a termination for cause) or (C) announce any general layoff of employees or implement any early retirement plan;
(xii)      except to the extent required by applicable Laws or any Collective Bargaining Agreement, (A) modify, extend or enter into any Collective Bargaining Agreement or arrangements with any labor organization or works council; or (B) recognize or certify any labor organization or works council or group of employees of the Companies or their Subsidiaries as the bargaining representative for any employees of the Companies or their Subsidiaries;

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(xiii)      merge or consolidate with any Person or adopt a plan of complete or partial liquidation or authorize or undertake a dissolution, consolidation, restructuring or other reorganization;
(xiv)      make any capital expenditure (or series of related capital expenditures) involving more than $100,000 or outside the Ordinary Course of Business, or postpone or delay any capital expenditures otherwise planned or budgeted for the current fiscal year;
(xv)      terminate any insurance policies held by Seller Parent or its Affiliates on behalf of or for the benefit of the Companies or any of their Subsidiaries currently in force or lower the coverages and limits as are in effect as of the date of this Agreement;
(xvi)      make a material change in its accounting or Tax principles, methods or policies;
(xvii)      make, revoke or change any material Tax election, file any amended Tax Return, change or revoke any material Tax accounting method, fail to file any material Tax Return when due, or settle or compromise any material Tax Liability;
(xviii)      except for Legal Proceedings as to which such settlement does not contain terms that would be binding on the Companies or any of their Subsidiaries after the Closing, waive, release, compromise or settle any pending or threatened Legal Proceeding; or
(xix)      authorize or enter into any agreement or commitment with respect to any of the foregoing.
(c)      From the date of this Agreement until the Closing, except (i) as required by applicable Law, (ii) as otherwise contemplated by this Agreement, or (iii) with the prior written consent of Buyer (which consent will not be unreasonably withheld, conditioned or delayed), Sellers and their Affiliates (excluding the Companies and their Subsidiaries) will not make any assignment, transfer or other disposal to a third party of any Intellectual Property owned by any of them that, but for such assignment, transfer or other disposal, would be Licensed IP or Licensed Patents (as defined in Section ‎‎4.14(c) ).
(d)      Buyer acknowledges and agrees that (i) nothing contained in this Agreement will give Buyer, directly or indirectly, the right to control or direct the operations of the Companies or their Subsidiaries prior to the Closing and (ii) prior to the Closing, the

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Companies will exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over the Companies’ and their Subsidiaries’ respective operations.
4.3      Regulatory Approvals.
(a)      Subject to the terms and conditions herein, each of the Parties agrees to use its reasonable best efforts to take, or cause to be taken, all action, and to do, or cause to be done as promptly as practicable, all things necessary, proper and advisable under applicable Laws or required by any Governmental Body in connection with this Agreement and to consummate and make effective as promptly as practicable the Transaction. Subject to appropriate confidentiality protections, each Party will furnish to the other Parties such necessary information and reasonable assistance as such other Party may reasonably request in connection with the foregoing.
(b)      Each of the Parties will cooperate with one another and use reasonable best efforts to prepare all necessary documentation (including furnishing all information required under any Competition Law or FINSA) to effect promptly all necessary or advisable filings with any Governmental Body and to obtain (i) all consents, waivers and approvals and waiting period expirations and terminations of any Governmental Body necessary to consummate the Transaction set forth on Schedule 4.3 (“ Competition Law Approvals ”) and (ii) CFIUS Clearance. Each Party will provide to the other Parties copies of all correspondence between it (or its advisors) and any Governmental Body relating to the Transaction or any of the matters described in this Section ‎4.3 . Each such Party will promptly inform the other Parties of any oral communication with, and provide copies of written communications with, any Governmental Body regarding any such filings or the Transaction. No Party will independently participate in any formal meeting with any Governmental Body in respect of any such filings, investigation or other inquiry without giving the other Parties prior notice of the meeting and, to the extent permitted by such Governmental Body, the opportunity to attend and/or participate. To the extent permissible under applicable Law, the Parties will consult and cooperate with one another in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any Party relating to proceedings with respect to Competition Law Approvals and CFIUS Clearance. The Parties may, as they deem advisable, designate any competitively sensitive materials provided to the other under this Section ‎4.3(b) or any other Section of this Agreement as “outside counsel only.” Such materials and the information contained therein will be given only to outside counsel of the recipient and will not be disclosed by such outside counsel to employees, officers or directors of the recipient without the advance written consent of the party providing such materials.

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(c)      Without limiting the generality of the undertakings pursuant to this Section ‎4.3 , the Parties will provide or cause to be provided (including by their ultimate parent entities) to any Governmental Body information and documents requested by any Governmental Body or necessary, proper or advisable to permit consummation of the Transaction, including filing any notification and report form and related material required with respect to Competition Law Approvals and CFIUS Clearance in each case enforced by any Governmental Body regarding pre-acquisition notifications for the purpose of competition reviews, as promptly as practicable, (i) but in no event later than 10 Business Days after the date of this Agreement with respect to any filing with respect to the Competition Law Approvals and (ii) as soon as reasonably practicable after the date of this Agreement and in any event within two Business Days with respect to all other required or advisable notifications to CFIUS under FINSA, and thereafter to respond promptly to any request for additional information or documentary material that may be made. Buyer will use reasonable best efforts to cause the filings under applicable Competition Laws to be considered for grant of “early termination,” and make any further filings pursuant thereto that may be necessary, proper or advisable in connection therewith. Buyer will be responsible for all filing fees under the Competition Laws or FINSA applicable to Buyer, as well as all fees and expenses (other than advisory and/or consultancy fees and expenses) of Seller, the Companies or any of their Subsidiaries, in responding to any requests for additional information.
(d)      If any objections are asserted with respect to the transactions contemplated hereby under any Competition Law or if any Legal Proceeding is instituted by any Governmental Body or any private party challenging the Transaction as violative of any Competition Law, Buyer, Seller Parent and each Seller will use its respective reasonable best efforts to (i) oppose or defend against any action to prevent or enjoin consummation of this Agreement (and the Transaction) and/or (ii) take such action as reasonably necessary to overturn any regulatory action by any Governmental Body to prevent or enjoin consummation of this Agreement (and the Transactions), including by defending any Legal Proceeding brought by any Governmental Body in order to avoid entry of, or to have vacated, overturned or terminated, including by appeal if necessary in order to resolve, any such objections or challenge as such Governmental Body or private party may have to the Transaction under such Competition Law so as to permit consummation of the Transaction.
(e)      In connection with securing CFIUS Clearance with respect to consummation of the Transaction, (i) Buyer will, and will cause it Affiliates to, take any and all actions available to Buyer or to its Affiliates (including the Companies and their respective Subsidiaries effective as of and following the Closing) and requested by CFIUS to secure CFIUS Clearance, including effecting divestitures, hold separate orders, sequestration,

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non-disturbance or interference and other remedial measures as may be requested or required by CFIUS, so long as such actions would not (x) reasonably be expected to result in the loss of more than $7,500,000 of annual net revenues of the Companies and their Subsidiaries, taken as a whole, based on actual 2017 results of operations or (y) reasonably be expected to violate any applicable Law (provided that the application of FINSA or obtaining the CFIUS Clearance generally will not be deemed in any manner to comprise a violation of Law under clause (y), and the foregoing will apply only with respect to specific remedial or mitigation actions required as a condition of securing the CFIUS Clearance), and (ii) Sellers, Seller Parent and the Companies will use reasonable best efforts to fully and promptly support and cooperate with Buyer, including providing such necessary information and reasonable assistance as Buyer may reasonably request.
(f)      Without limiting the foregoing, Buyer will, and will cause its Affiliates to, take all commercially reasonable actions necessary to avoid or eliminate each and every impediment under any Competition Law and FINSA so as to enable the consummation of the Transaction to occur as soon as reasonably possible (and in any event no later than the Outside Date).
(g)      From the date of this Agreement until Closing, none of the Parties nor any of their respective Affiliates will acquire or agree to acquire, by merging with or into or consolidating with, or by purchasing a substantial portion of the assets of or any equity in, or by any other manner, any assets or Person, if the execution and delivery of a definitive agreement relating to, or the consummation of, such acquisition would reasonably be expected to (i) impose any delay in obtaining, or increase the risk of not obtaining, consents of a Governmental Body necessary to consummate the Transaction or the expiration or termination of any applicable waiting period, (ii) increase the risk of a Governmental Body seeking or entering an Order prohibiting the consummation of the Transaction, (iii) increase the risk of not being able to remove any such Order on appeal or otherwise, or (iv) otherwise prevent or delay the consummation of the Transaction.
4.4      Reasonable Best Efforts . The Parties agree that they will (a) use their reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary to cause the conditions to the other Parties’ obligation to close the Transaction as set forth in Article ‎V to be satisfied as promptly as practicable and to consummate the Transaction and (b) execute and deliver, or use their reasonable best efforts to cause their respective controlled Affiliates to execute and deliver, such further instruments, and take or cause their respective Subsidiaries to take, such other action as may be reasonably necessary to carry out the purposes and intents of this Agreement. The Parties also will use their reasonable best efforts to refrain from taking any action

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which could be reasonably expected to materially delay the consummation of the Transaction.
4.5      Confidentiality . Each of the Parties acknowledges that the information provided to it and its representatives in connection with this Agreement and the transactions contemplated hereby are subject to the terms of the confidentiality agreement between Parent and William Blair & Company, L.L.C. on behalf of Seller Parent, dated November 13, 2017 (the “ Confidentiality Agreement ”), the terms of which are incorporated herein by reference, but excluding (i) “Confidential Information” as defined in Section ‎4.14(d) , which is governed by Section ‎4.14(d) only, and (ii) “Confidential Information” as defined in the Transition Services Agreement, which is governed only by such agreement.
4.6      Indemnification and Insurance.
(a)      Buyer agrees that all rights to indemnification, advancement of expenses and exculpation by any Company now existing in favor of each Person who is now, or has been at any time prior to the date of this Agreement, or who becomes prior to the Closing, a director, officer or employee of any of the Companies or any of their Subsidiaries, or who is or was serving at the request of any Company or any of its respective Subsidiaries as a director, officer, employee or agent of another Person, is, or is threatened to be, made a party or witness based in whole or in part on, or arising in whole or in part out of, or pertaining in whole or in part to, (i) the fact that such Person is serving or did serve in any such capacity or (ii) matters existing or occurring at or prior to the Closing Date (including this Agreement and the Transaction and any actions contemplated hereby) as provided by the Organizational Documents of the applicable Company, or pursuant to any other agreements in effect on the date hereof and disclosed in Schedule 4.6(a) (collectively, the “ Indemnified Persons ”), will survive the Closing Date and will continue in full force and effect in accordance with their respective terms.
(b)      For a period of six years from the Closing Date, Buyer will, at its sole cost and expense, cause the Companies to maintain in effect directors’ and officers’ liability insurance covering those Persons who are currently covered by any directors’ and officers’ liability insurance policies maintained by Seller Parent or its Affiliates on behalf of the Companies and their Subsidiaries (the “ D&O Indemnitees ”) on terms not less favorable than the terms of such current insurance coverage with respect to claims arising out of or relating to events which occurred before the Closing Date; provided that Buyer will not be required to pay with respect to such insurance policies in respect of any one policy year annual premiums in excess of 250% of the current annual premium paid by Seller Parent or any applicable Affiliates prior to the date hereof in respect of the coverage required to be obtained pursuant hereto, but in such case will purchase as much coverage as

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reasonably practicable for payment of annual premiums equal to 250% of current annual premiums; and provided further that, if any claim is asserted or made within such six-year period, such insurance will be continued in respect of such claim until the final disposition thereof. Notwithstanding the foregoing, Buyer and the Companies will be permitted at their sole cost and expense, to cause coverage to be extended by obtaining a six-year “tail policy” on such terms; provided that if the coverage thereunder costs more than 250% of such current annual premium, Buyer and the Companies will purchase the maximum amount of coverage that can be obtained for 250% of such current annual premium.
(c)      The provisions of this Section ‎4.6 will survive the Closing and are intended to be for the benefit of, and will be enforceable by, each Indemnified Person hereunder and its successors and representatives. The rights of the Indemnified Persons under this Section ‎4.6 will be in addition to any rights such Persons may have under the Organizational Documents or indemnification agreements of Buyer, the Companies or any of their respective Subsidiaries, by Contract or by Law.
(d)      The obligations under this Section ‎4.6 will not be terminated or modified by Buyer or the Companies in a manner as to adversely affect any Indemnified Person to whom this Section ‎4.6 applies without the consent of the affected Indemnified Person. In the event that either Buyer or the Companies or any of their respective successors or assigns (i) consolidates with or merges into any other Person or (ii) transfers at least 50% of its properties or assets to any Person, then and in each case, proper provision will be made so that the applicable successors and assigns or transferees assume the obligations set forth in this Section ‎4.6 .
4.7      Preservation of Records . From and after the Closing, Buyer will, and will cause the Companies and their Subsidiaries to, preserve and keep the records held by them relating to the respective businesses of the Companies and their Subsidiaries for a period of seven years from the Closing Date (or longer if required by applicable Law) and will make such records (or copies) and personnel available to Sellers or their Affiliates, during normal business hours and upon reasonable notice and in accordance with the procedures established by Buyer, as may be reasonably required by Sellers or their Affiliates in connection with any insurance claims by, Legal Proceedings or Tax audits or other disputes against, or governmental investigations of, or compliance with Law by, Sellers or any of their Affiliates; provided that no such access or examination will be permitted to the extent that it (i) would unreasonably disrupt the operations of the Companies or any of their Subsidiaries or (ii) would require the Companies or any of their Subsidiaries to disclose information that, in the reasonable judgment and good faith of counsel to the Companies or any of their Subsidiaries, is subject to attorney-client privilege

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or may conflict with any applicable Law or confidentiality obligations to which the Companies or any of their Subsidiaries are bound.
4.8      Publicity . Other than any press releases to be issued in connection with the execution of this Agreement substantially in the form as previously agreed by Buyer and Seller Parent, the Parties will not publish any press release or other public announcement concerning this Agreement or the Transaction inconsistent with such press release without obtaining the prior written approval of Buyer and Seller Parent, which approval will not be unreasonably withheld, conditioned or delayed, unless, in the judgment of Buyer or Seller Parent, disclosure is otherwise required by applicable Law, and in any event a party will use its reasonable best efforts to consult with the other party a reasonable time in advance of such required disclosure.
4.9      Employment and Employee Benefits .
(a)      From and after the Closing, Buyer will cause the Companies and their Subsidiaries to honor all Company Benefit Plans, as such Company Benefit Plans are in effect on the Closing Date (it being understood that this Section ‎4.9 will not be deemed to prohibit Buyer or the Companies from amending, modifying, replacing or terminating such Company Benefit Plans in accordance with their terms), and except as required by Law or otherwise by this Section 4.9 , all employees of the Companies and any of their Subsidiaries will cease active participation in, and any benefit accrual under, each of the Seller Benefit Plans that is not a Company Benefit Plan.
(b)      Except as otherwise provided in any Collective Bargaining Agreement covering employees of the Companies or any of their Subsidiaries, Buyer will cause the Companies and their Subsidiaries to provide the employees of the Companies and their Subsidiaries from the Closing Date until the 12-month anniversary thereof, for so long as each such employee continues employment with the applicable Company or any of its respective Subsidiaries during such 12-month period, with (i) base salary and rates of pay, (ii) bonus and other cash incentive compensation opportunities, and (iii) benefits and other terms of employment (including severance protections but excluding defined benefit pension and retiree medical benefits) that are, in the aggregate, no less favorable than those provided to each such employee immediately prior to the Closing Date. In respect of the fiscal year of each Company during which the Closing occurs, Buyer will cause each Company and its Subsidiaries to pay bonuses and other incentive compensation at a level no less than that which has been accrued as of the Closing for such year(s).
(c)      Buyer will give credit to each employee of the Companies or any of their Subsidiaries for such employee’s years of service with the Companies or any of their

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Subsidiaries, to the same extent as such employees were entitled, before the Closing, to credit for such service under similar Seller Benefits Plans, for purposes of eligibility, and, solely with respect to severance and vacation benefits, benefit accrual under each employee benefit plan or program of Buyer or any of its Affiliates in which such employee becomes eligible to participate after the Closing Date, in each case other than to the extent such service credit would result in a duplication of benefits. To the extent that Buyer or any of its Affiliates modifies any coverage or benefit plans under which the employees of the Companies or any of their Subsidiaries participate, to the extent permitted under the terms of such benefit plans of Buyer or any of its Affiliates, Buyer or its Affiliates will waive any applicable waiting periods or pre-existing conditions, to the extent already waived or satisfied under the corresponding Seller Benefit Plan by an employee during the year in which such coverage or plan modification occurs and will give such employees credit under the new coverages or benefit plans for deductibles, co-payments and out-of-pocket payments that have been paid during the year in which such coverage or plan modification occurs.
(d)      The Parties hereby agree that none of the provisions in this Section ‎4.9 are intended to, and do not, confer upon any Person (including any employee of the Companies or beneficiary or dependent thereof), other than Sellers and Buyer, any rights or remedies hereunder, including the right to enforce any obligations of Sellers or Buyer and their Affiliates contained herein. Nothing in this Section ‎4.9 will prevent Buyer from terminating the employment of any employee of the Companies or any of their Subsidiaries or from terminating or amending any benefit plan, program, agreement or arrangement.
(e)      The Companies and their Subsidiaries will satisfy all legal or contractual requirements to provide notice to, or to carry out any consultation procedure with, any employees, labor organization, works council or other representative body which represents any employees of the Companies or any of their Subsidiaries in connection with the execution of this Agreement and the consummation of the Transaction.
(f)      Prior to Closing, Seller Parent will use commercially reasonable efforts to assist Buyer with establishing outsourced payroll services with respect to U.S. Employees for the Companies and their respective U.S. Subsidiaries as of the Closing Date, including transferring employee payroll data to the Companies or their respective U.S. Subsidiaries, as the case may be, for use with the outsourced payroll services. Buyer understands and agrees that (i) Seller Parent’s current senior human resources manager and human resources generalist at the Company’s location in De Pere, Wisconsin, will identify and engage the payroll service provider, and (ii) Seller Parent’s human resources team at the Company’s location in De Pere, Wisconsin may begin recruiting and interviewing to hire a payroll specialist. The costs associated with all actions taken by

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representatives of Seller Parent or its Affiliates under this Section ‎4.9(f) will be borne by Buyer provided that Seller Parent has first notified Buyer of such costs.
(g)      Prior to Closing, Seller Parent will use commercially reasonable efforts to assist Buyer with establishing health and welfare and retirement benefits for U.S. Employees (“ New Benefits ”) as of the Closing Date. The New Benefits will comply with Section 4.9(b)(iii) . It is understood by Buyer and Seller Parent that the post-Closing plan sponsor of the New Benefits has not yet been determined. Buyer will authorize Parent’s benefit consulting firm, Hylant, to work with Seller Parent, the Companies, their respective U.S. Subsidiaries and their respective benefit providers to timely establish the New Benefits. Buyer further agrees that Seller Parent’s human resources team at the Company’s location in De Pere, Wisconsin may begin recruiting and interviewing to hire a benefit specialist. The costs associated with all actions taken by representatives of Seller Parent or its Affiliates under this Section ‎4.9(g) will be borne by Buyer provided that Seller Parent has first notified Buyer of such costs.
4.10      Release of Liens . At or prior to Closing, Seller Parent will deliver to Buyer documentation pursuant to which all Liens against assets and equity interests of the Companies or any of their Subsidiaries are released, if applicable.
4.11      Business Guarantees . Sellers and Buyer will cooperate and use their respective commercially reasonable efforts to obtain from the respective financial instiutions, in form and substance reasonably satisfactory to Sellers and Buyer, on or before the Closing, valid and binding written releases of Seller Parent, Sellers and their Subsidiaries, as applicable, from any liability, whether arising before, on or after the Closing Date, under any Business Guarantees listed on Schedule 4.11(a) and any other Business Guarantees entered into after the date hereof to which Buyer has consented as provided in the next sentence, in each case in effect as of the Closing, which will be effective as of the Closing, including, as applicable, by providing substitute guarantees, furnishing letters of credit, instituting escrow agreements, posting surety or performance bonds or making other arrangements as the counterparty may reasonably request. To the extent Sellers intend to enter into any Business Guarantee or Parent Guarantee after the date of this Agreement in connection with a Contract subject to Buyer’s approval under Section 4.2(b)(iv) , Sellers will provide Buyer with written notice thereof, including the proposed form, amount, counterparty and purpose of such Business Guarantee or Parent Guarantee, as applicable, and Sellers will not enter into any such Business Guarantee or Parent Guarantee unless Buyer consents to such Business Guarantee or Parent Guarantee, such consent not to be unreasonably withheld, conditioned or delayed. With respect to any Parent Guarantees, and if any Business Guarantee has not been released as of the Closing Date (a “ Scheduled Guarantee ”), Sellers and Buyer will use their respective reasonable

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best efforts after the Closing to cause each such unreleased Scheduled Guarantee to be released promptly. No later than at Closing, Parent will grant to Seller Parent a guarantee to backstop the obligations of Seller Parent under the Parent Guarantees as of Closing (the “ Back-to-Back Guarantee ”). The Back-to-Back Guarantee will be adjusted monthly to reflect any reduction of obligations under the Parent Guarantees. Buyer will indemnify and hold harmless Sellers and their respective Subsidiaries from and after the Closing for any amounts required to be paid under any Scheduled Guarantees.
4.12      Taxes .
(a)      Payment of Transfer Taxes . Notwithstanding any provision of this Agreement to the contrary, fifty percent (50%) of Transfer Taxes will be borne by Sellers, and fifty percent (50%) of Transfer Taxes will be borne by Buyer. Sellers or Buyer, as required by applicable Law, will timely file all necessary Tax Returns and other documentation with respect to all such Transfer Taxes and will share all expenses in respect of such filings equally.
(b)      Proration of Taxes . Except as provided in Section ‎4.12(a) , the portion of any Tax related to the Companies and their Subsidiaries payable with respect to a Straddle Period that is allocable to the portion of the Straddle Period ending on the Closing Date applicable to the Companies and their Subsidiaries will be (i) in the case of property and similar ad valorem Taxes and any other Taxes not described in clause (ii) below relating to the Companies and their Subsidiaries, equal to the amount of such Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that fall on or prior to the Closing Date and the denominator of which is the number of days in the entire Straddle Period, and (ii) in the case of income Taxes, sales and similar Taxes, employment Taxes and other Taxes that are readily apportionable based on an actual or deemed closing of the books, computed as if such taxable period ended as of the close of business on the Closing Date. Sellers will be liable for the proportionate amount of such Taxes that is attributable to the Pre-Closing Tax Period, and Buyer will be liable for the proportionate amount of such Taxes that is attributable to any Post-Closing Tax Period. If any Taxes subject to proration pursuant to the preceding sentence are paid by Buyer or its Affiliates, on the one hand, or Sellers, on the other hand, then the proportionate amount of such Taxes for which the non-paying Party is responsible under the terms of this Agreement will be promptly reimbursed to the paying Party by the non-paying Party after the payment of such Taxes; provided , however , that Sellers and their Affiliates will not be responsible for any Taxes with respect to any Pre-Closing Tax Period to the extent such Taxes were taken into account pursuant to Section ‎1.5 hereof in determining Estimated Closing Proceeds, the Closing Date Purchase Price or the Net Adjustment Amount.

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(c)      Refunds or Credits . Buyer will promptly remit to Sellers any refunds or credits of Taxes received by Buyer, the Companies or their Subsidiaries after the Closing: (i) relating to the Companies or their Subsidiaries for any taxable year or taxable period or portions of a taxable year (described in Section ‎4.12(b) ) ending on or before the Closing Date, or (ii) attributable to any amount paid by Sellers or for which Sellers are responsible; provided , however , that Buyer will not be required to remit to Sellers any refunds or credits of Taxes received by Buyer to the extent such refunds or credits of Taxes were taken into account pursuant to Section ‎1.5 hereof in determining Estimated Closing Proceeds, the Closing Date Purchase Price or the Net Adjustment Amount. Buyer will be entitled to all other refunds and credits of Taxes.
(d)      Tax Returns . Sellers will prepare or cause to be prepared and/or cause to be filed in a timely manner (i) all Tax Returns with respect to the Companies or their Subsidiaries for all Pre-Closing Tax Periods which have not been filed as of the Closing Date, and (ii) any combined, consolidated or unitary Tax Return that includes any Seller or any of its Affiliates (other than the Companies and their Subsidiaries), on the one hand, and any of the Companies or their Subsidiaries, on the other hand. Such Tax Returns described in the foregoing clauses (i) and (ii) will be prepared in a manner consistent with the Companies’ and their Subsidiaries’ prior practice; provided that, with respect to the preparation and filing of the Tax Returns under this Section ‎4.12(d) , with respect to income Taxes, such Tax Returns will reflect all applicable Transaction Tax Deductions so long as such Transaction Tax Deductions are “more likely than not” deductible (or deductible at a higher confidence level) in any Pre-Closing Tax Period, as reasonably determined in good faith by the Sellers. At least 15 days prior to the filing of each such Tax Return, Sellers will provide any Tax Returns described in the foregoing clauses (i) and (ii) to Buyer for their review and comment and Sellers will incorporate any reasonable comments received from Buyer to such Tax Return; provided , however , that in the case of Tax Returns of any Seller or any of its Affiliates (or of a combined, consolidated or unitary Tax group including any of them), such Seller may, in lieu of delivering Tax Returns, deliver to Buyer pro-forma statements with respect to the Companies or any of their Subsidiaries setting forth in sufficient detail the information relevant for determining the amount of any Taxes attributable to Pre-Closing Tax Periods and Post-Closing Tax Periods. Sellers will be responsible for payment of any Taxes for any Pre-Closing Tax Periods; provided , however , that Sellers and their Affiliates will not be responsible for any Taxes with respect to any Pre-Closing Tax Period to the extent such Taxes were taken into account pursuant to Section ‎1.5 hereof in determining Estimated Closing Proceeds, the Closing Date Purchase Price or the Net Adjustment Amount. Buyer will prepare or cause to be prepared and Buyer will timely file or cause to be filed any Tax Returns with respect to the Companies or their Subsidiaries for Straddle Periods. At least 15 days prior to the filing of each such Tax Return with respect

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to Straddle Periods, Buyer will provide copies of such Tax Return, and a statement showing the computation of Buyer’s determination of the Taxes for which Sellers are responsible pursuant to the terms of this Agreement, to Sellers for Sellers’ review and comment and Buyer will incorporate any reasonable comments received from Seller to such Tax Return. For Tax Returns relating to the Straddle Periods, Sellers will pay to Buyer within five days before the date on which such Taxes are to be paid the portion of such Taxes which relates to the portion of such Taxable period ending on the Closing Date for which Sellers are liable under this Section ‎4.12 ; provided , however , that Sellers and their Affiliates will not be responsible for any Taxes with respect to any Pre-Closing Tax Period to the extent such Taxes were taken into account pursuant to Section ‎1.5 hereof in determining Estimated Closing Proceeds, the Closing Date Purchase Price or the Net Adjustment Amount. Any Tax Dispute arising with respect to this Section ‎4.12(d) will be resolved pursuant to the provisions of Section ‎4.12(l) .
(e)      Cooperation . Buyer and Sellers will cooperate reasonably in (i) giving the other Party timely written notice of and responding to any inquiries, audits or similar proceedings by any Tax Authority relating to Taxes of the Companies and their Subsidiaries (a “ Tax Claim ”), (ii) resolving all disputes and audits with any Tax Authority relating to Taxes of the Companies and their Subsidiaries, (iii) providing information and assistance required in connection with the preparation, review and filing of Tax Returns, (iv) providing information and assistance required in connection with preparing, reviewing, and agreeing to the purchase price allocation provided for in Section 4.12(g) , and (v) determining the obligation of any Party for Taxes under this Agreement.
(f)      Tax Claims .
(i)      With respect to any Tax Claim (A) relating to a Pre-Closing Tax Period of the Companies or any of their Subsidiaries, (B) relating to a consolidated Tax Return that includes the Companies or any of their Subsidiaries of which Sellers or any of their Affiliates (other than the Companies and their Subsidiaries) is the common parent, or (C) for which Sellers would have an indemnification obligation pursuant to this Section ‎4.12 , Sellers will control all proceedings and may make all decisions in connection with such Tax Claim (including selection of counsel) at its own expense, provided that, if such a Tax Claim relates solely to the Companies or any of their Subsidiaries, Buyer will have the right to participate in any proceedings (at its own expense). To the extent such Tax Claim or the resolution or settlement thereof could reasonably be expected to have an impact on Buyer or any of its Affiliates (including the Companies and their Subsidiaries) after the Closing Date, (x) Sellers will provide Buyer with a timely and reasonably detailed account of each stage of such Tax Claim and will consult with Buyer before taking any significant

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action in connection with such Tax Claim, and (y) Sellers will not settle, compromise or abandon any such Tax Claim without obtaining the prior written consent of Buyer, which consent will not be unreasonably withheld, conditioned or delayed.
(ii)      With respect to any Tax Claim relating to a Straddle Period of the Companies or any of their Subsidiaries, Buyer will have the right and obligation to conduct, at its own expense, such Tax Claim; provided , however , that (A) the Buyer will provide Sellers with a timely and reasonably detailed account of each stage of such Tax Claim, (B) Buyers will consult with Sellers before taking any significant action in connection with such Tax Claim, (C) Buyer will defend such Tax Claim diligently and in good faith as if it were the only party in interest in connection with such Tax Claim, (D) Sellers will have the opportunity to participate, at their own expense, with respect to the Tax Claim if the Tax Claim could reasonably be expected to result in an indemnity obligation of the Sellers pursuant to Section ‎4.12(h) hereof, and (E) Buyer will not settle, compromise or abandon any such Tax Claim without obtaining the prior written consent of Sellers, which consent will not be unreasonably withheld, conditioned or delayed.
(iii)      Buyer will control all other Tax Claims with respect to Post-Closing Tax Periods (other than Straddle Periods); provided , however , that Sellers will have the right to participate, at their own expense, in any Tax Claim with respect to a Post-Closing Tax Period for which Sellers or any of their Affiliates could reasonably be expected to have an indemnification obligation under this Agreement.
(g)      Purchase Price Allocation .
(i)      The Parties agree to allocate the “aggregate deemed sales price” under Treasury Regulation Section 1.338-4 among the property sold by MEGTEC Seller and Universal Seller as follows: seventy-five percent (75%) to the property sold by the MEGTEC Seller, and twenty-five percent (25%) to the property sold by the Universal Seller. The Parties further agree that seventy percent (70%) of the aggregate deemed sales price and any other items required to be included in the amount realized for United States federal income Tax purposes allocated to MEGTEC Seller will be further allocated to the MEGTEC Units. As a result of the Section 338(h)(10) Elections, the amounts allocated to the Universal Seller, the MEGTEC Units, and the MEGTEC Shares pursuant to the two preceding sentences will be further allocated among the assets of Universal, MEGTEC US and Holdings respectively in accordance with Sections 338 and 1060 of the Code and the Treasury Regulations promulgated thereunder (and any similar provision of federal, state, local or non-U.S. Law, as appropriate). Buyer will prepare a written statement setting

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forth the allocations described herein (the “ Draft Allocation Statement ”) and deliver same to Sellers within 90 days following the final determination of the Purchase Price. Within 30 days following the delivery to Sellers of the Draft Allocation Statement, Sellers may deliver comments to Buyer with respect to the Draft Allocation Statement that are consistent with the methodology described in this Section 4.12(g)(i) . If within 20 days following the receipt of comments Buyer and Sellers cannot agree upon an allocation, the Parties will submit the allocation to the Tax Dispute process provided in Section ‎4.12(l) hereto. The final allocation resulting from this dispute resolution process will be the final allocation (the “ Final Allocation ”).
(ii)      Buyer and Sellers and each of their respective Affiliates will: (A) be bound by the Final Allocation for purposes of determining any Taxes; (B) prepare and file, and cause their respective Affiliates to prepare and file, their Tax Returns on a basis consistent with the Final Allocation; and (C) take no position, and cause their Affiliates to take no position, inconsistent with the Final Allocation on any applicable Tax Return or in any Tax Claim. If the Final Allocation is disputed by any Tax Authority, the Party receiving written notice of the dispute will promptly notify the other Party in writing, and the Parties agree (and will cause their respective Affiliates) to use their reasonable best efforts to defend such Final Allocation in any Tax Claim.
(h)      Seller Indemnification . Sellers will be jointly and severally liable for, and will indemnify and hold Buyer, the Companies, their Subsidiaries and Buyer’s Affiliates harmless against (without duplication), all Losses and Taxes suffered by Buyer, the Companies, their Subsidiaries and Buyer’s Affiliates arising out of, incident to, or as a result of: (i) the breach or inaccuracy of any representation or warranty contained in Section ‎2.11 (without giving effect to any “Material Adverse Effect,” “materiality,” or similar qualifications); (ii) any breach of any covenant of Sellers contained in this Section ‎4.12 ; (iii) Taxes of or attributable to the Companies or their Subsidiaries for any Pre-Closing Tax Periods or that are the responsibility of Sellers under Section ‎4.12(a) ; (iv) the portion of any Straddle Period for which Sellers are liable under Section ‎4.12(b) ; (v) Taxes payable by any Subsidiary in any period by reason of such Subsidiary being severally liable for the Tax of any Person pursuant to Treasury Regulation Section 1.1502-6 or any analogous foreign, state or local Tax Law in any Pre-Closing Tax Period or pre-closing portion of any Straddle Period; and (vi) any Taxes imposed on the Companies as a result of Section 965 of the Code.
(i)      Buyer Indemnification . Parent and Buyer will jointly and severally indemnify and hold Sellers and their Affiliates harmless against (without duplication), all Losses and Taxes suffered by Sellers and their Affiliates arising out of, incident to, or as a result of: (i) any breach of any covenant of Parent or Buyer contained in this Section ‎4.12 ;

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(ii) Taxes of or attributable to the Companies or their Subsidiaries for any Post-Closing Tax Periods or that are the responsibility of Buyer under Section ‎4.12(a) hereof; and (iii) Taxes with respect to the portion of any Straddle Period for which Buyer is responsible under Section ‎4.12(b) .
(j)      Notwithstanding any other provision in this Agreement, the indemnification provided under this Section ‎4.12 will be limited as follows:
(i)      None of Sellers or any of their Affiliates will be obligated to indemnify Buyers or any of its Affiliates with respect to any Taxes that were taken into account pursuant to Section ‎1.5 in determining Estimated Closing Proceeds, the Closing Date Purchase Price or the Net Adjustment Amount.
(ii)      Without limiting the effect of any other limitation contained in this Section ‎4.12(j) , for purposes of computing the amount of any Losses incurred by Buyer or Sellers, as applicable, under this Section ‎4.12 for which such Buyer or Sellers, as applicable, would otherwise be entitled to receive indemnification payments under this Section ‎4.12 , there will be deducted an amount equal to (A) any cash payments actually recovered (net of reasonable collection costs expended in recovering such amount) by Buyer or Sellers, as applicable, under or pursuant to any insurance policy, title insurance policy, indemnity, reimbursement arrangement or Contract pursuant to which or under which Buyer is, or Sellers are, as applicable, a party or has rights; provided that in the event any amounts recovered under insurance policies or other collateral sources are not received before any claim for indemnification is paid, the Buyer or Sellers, as applicable, will pay the full amount of the Loss, and (B) any net Tax benefit actually realized by Buyer or Sellers, as applicable, no later than the conclusion of the second taxable year immediately subsequent to the taxable year during which such indemnification payment was made with respect of such Losses. If Buyer or Sellers, as applicable, make(s) any payment on any claim pursuant to Section ‎4.12 and the Buyer or Sellers, as applicable, subsequently recovers an amount from a third party in respect of the indemnifiable Losses underlying any such payment, then the Buyer or Sellers, as applicable, will (solely to prevent duplicative recovery) remit to the Buyer or Sellers, as applicable, the excess (if any) of (x) the amount paid by the Buyer or Sellers, as applicable, in respect of such Losses plus the amount received by the Buyer or Sellers, as applicable, in respect of such Losses over (y) the full amount of such Losses.
(iii)      Buyer and Sellers will (A) take reasonable steps to mitigate all Losses for which such Buyer or Sellers, as applicable, is or are entitled or may be

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entitled to indemnification under this Section ‎4.12 , (B) use commercially reasonable efforts to submit claims and seek recovery from available insurance policies (including under the RWI Policy) or other third party indemnitors in respect of any Losses; provided that in no event will Buyer or Sellers, as applicable, be required to commence or threaten litigation against any third party in respect of such recovery.
(k)      Purchaser Tax Act . None of Buyer or any of its Affiliates (including, after the Closing, the Companies) will, following the Closing (including the portion of the Closing Date after the Closing), other than an action required by applicable Law or contemplated hereunder, without the prior written consent of Sellers which will not be unreasonably withheld, conditioned, or delayed: (i) make any Tax elections, including but not limited to entity classification elections pursuant to Treasury Regulations Section 301.7701-3, with respect to either Company or any Subsidiary of either Company with an effective date on or prior to the Closing Date or during a Straddle Period, or (ii) amend a Tax Return filed by or with respect to the Companies or any of their Subsidiaries for any Pre-Closing Tax Period or Straddle Tax Period. Upon the request of Buyer or any of its Affiliates, Sellers and their Affiliates on the one hand, and Buyer and its Affiliates on the other hand, will cooperate in good faith to determine, in advance of any proposed action by Buyer or any of its Affiliates that may be described in this Section ‎4.12(k) , the amount of any income, gain, deduction or credit that would be realized as a result of such proposed action.
(l)      Tax Disputes . If any dispute between the Parties should arise regarding their respective rights and obligations pursuant to this Section ‎4.12 (a “ Tax Dispute ”), Sellers and Buyer will use commercially reasonable efforts to settle such Tax Dispute. If, within 30 days, such commercially reasonable efforts do not resolve such Tax Dispute, Sellers and Buyer will submit all matters that remain in dispute with respect to such Tax Dispute to KPMG US LLP or other mutually agreed upon law firm or accounting firm with a national or global reputation as being expert in taxation, valuation or other subject matter of primary relevance to the Tax Dispute (the “ Tax Referee ”). Within 30 days after submission of such matters to the Tax Referee, the Tax Referee will make a final determination pursuant to such procedures as the Tax Referee deems advisable. The Tax Referee will resolve the Tax Dispute according to such procedures as the Tax Referee deems advisable and will furnish written notice to the Parties of its resolution of any such Tax Dispute as soon as practicable, but in any event no later than 45 days after its acceptance of the matter for resolution. Any such resolution by the Tax Referee will be consistent with the terms of this Agreement, and if so consistent will be conclusive and binding on the Parties. The fees and expenses of the Tax Referee will be borne by Sellers on the one hand and Buyer on the other hand in inverse proportion as they may prevail on matters resolved by the Tax Referee, which proportionate allocations will also be

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determined by the Tax Referee at the time the determination of the Tax Referee is rendered on the Tax Dispute. During the review by the Tax Referee, each of Buyer and Sellers will, and will cause its respective Affiliates (including, in the case of Buyer, the Company) and its and their respective employees, accountants and other representatives to each make available to the Tax Referee interviews with such personnel and such information, books and records and work papers, as may be reasonably requested by the Tax Referee to fulfill its obligations under this Section ‎4.12(l) ; provided , that the accountants of Sellers or Buyer will not be obliged to make any work papers available to the Tax Referee except in accordance with such accountants’ normal disclosure procedures and then only after such Tax Referee has signed a customary nondisclosure agreement relating to such access to work papers.
(m)      Adjustment to Purchase Price . Any payment under this Section ‎4.12 will, to the extent such payment can be properly so characterized under applicable Tax Law, be treated by the Parties as an adjustment to the Purchase Price.
(n)      Survival of Obligations and Sole Remedy . Notwithstanding anything to the contrary in this Agreement, the obligations of the Parties set forth in this Section ‎4.12 will be unconditional and absolute, will survive until 30 days after the expiration of the applicable statutory reassessment or appeal periods for the Taxes in question, having regard, without limitation to (i) any waiver given by the Companies or their Subsidiaries in respect of the Taxes in question and (ii) any entitlement of a Tax Authority to assess or reassess the Companies or their Subsidiaries without limitation in the event of Fraud. The rights and obligations of the Parties with respect to indemnification for any and all matters relating to Taxes and Tax Returns will be governed solely by this Section ‎4.12 and not by Article ‎VII .
(o)      Tax Elections . Sellers (or their Affiliates) and Buyer will join in making (or causing to be made) elections under Section 338(h)(10) of the Code (and all corresponding elections under any other applicable Law) (collectively the “ Section 338(h)(10) Elections ”) with respect to (i) the purchase of the Universal Shares and the MEGTEC Shares, and (ii) the deemed purchase (as a result of the Section 338(h)(10) Elections made with respect to the purchase of the Universal Shares and the MEGTEC Shares) of all the issued and outstanding stock of MEGTEC TurboSonic Technologies, Inc., MTS Asia, Inc., and MEGTEC Sys Australia, Inc. Sellers and Buyer will take (or cause to be taken) all steps necessary in order to effectuate the Section 338(h)(10) Elections in accordance with applicable Laws (including the preparation and timely filing of IRS Form 8023 and all similar state and local forms) and will cooperate with each other in making such elections. Sellers will deliver (or cause to be delivered) to Buyers, at least five Business Days prior to the Closing Date, three original executed IRS Forms 8023 (and all applicable corresponding

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state or local forms) with respect to each Section 338(h)(10) Election. Buyer will thereafter execute such forms that relate to the Section 338(h)(10) Elections, and will provide Sellers with the executed originals of all such forms no later than the Closing Date. Sellers will thereafter file such forms that relate to the Section 338(h)(10) Elections and will provide Buyer with copies of all such forms so filed within 15 days after filing. Except to the extent otherwise required pursuant to a “determination” (as defined in Section 1313(a) of the Code or any similar provision of state, local or foreign Law), Sellers and Buyer agree to report the purchase of the Universal Shares and the MEGTEC Shares, and the deemed purchase of all the issued and outstanding stock of MEGTEC TurboSonic Technologies, Inc., MTS Asia, Inc., and MEGTEC Sys Australia, Inc. consistent with such Section 338(h)(10) Elections and will take no position inconsistent therewith. Buyer agrees not to assign its right to purchase all or any portion of the Universal Shares or the MEGTEC Shares to one or more of its Affiliates if such assignment would make the acquisition of the Universal Shares or the MEGTEC Shares ineligible for the Section 338(h)(10) Elections. Except as described in this Section ‎4.12(o) , Buyer and its Affiliates will not, other than a Tax election required by applicable Law or contemplated hereunder, without the prior written consent of Sellers which will not be unreasonably withheld, conditioned, or delayed, make any Tax elections that would reasonably be expected to adversely affect the Sellers or their Affiliates in any Pre-Closing Tax Period.
4.13      Non-Solicitation of Employees; Non-Competition .
(a)      For a period of two years from the Closing Date, without the prior written consent of Buyer, the Sellers will not, and will cause their Affiliates not to, solicit for employment any employee who is above the level of director (each a “ Management-Level Employee ”) of the Companies or any of their Subsidiaries (each, a “ Covered Person ”); provided that each Seller and its Affiliates will not be precluded from soliciting, hiring or taking any other action with respect to any such individual (i) whose employment with Buyer or any of its Subsidiaries (including the Companies or any of their Subsidiaries) has been terminated by Buyer or such Affiliate or (ii) who responds to any solicitation not specifically targeted at employees of Buyer or any of its Subsidiaries (including the Companies or any of their Subsidiaries); and provided , further , that each Seller and its Affiliates will not be restricted from engaging in solicitations or advertising not specifically targeted at any Covered Persons described above.
(b)      For a period of two years from the Closing Date, without the prior written consent of the applicable Seller, Buyer will not, and will cause its Affiliates not to, solicit for employment any Management-Level Employee of the Sellers and their Affiliates (other than the Companies or any of their Subsidiaries); provided that Buyer and its Affiliates will not be precluded from soliciting, hiring or taking any other action with respect to any

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such individual (i) whose employment with the Sellers or any of their Subsidiaries has been terminated by such Seller or such Affiliate or (ii) who responds to any solicitation not specifically targeted at employees of the Sellers or any of their Affiliates; and provided , further , that Buyer and its Affiliates will not be restricted from engaging in solicitations or advertising not specifically targeted at any employees of the Sellers or their Affiliates described in this Section ‎4.13(b) .
(c)      Each Seller agrees and acknowledges that in order to assure Buyer that the MEGTEC Business, Universal Business and the Companies and their Subsidiaries will retain their value as a going concern, it is necessary that such party undertake to not utilize its special confidential knowledge of the MEGTEC Business, Universal Business, the Companies and their Subsidiaries and their respective relationships with clients or customers to compete with Buyer. Each Seller further agrees and acknowledges that the MEGTEC Business and Universal Business could be irreparably damaged if the Sellers or any of their Subsidiaries were to engage in the MEGTEC Business or Universal Business as each such business is conducted immediately prior to the Closing (a “ Competing Business ”) during the Restricted Period. Therefore, as a significant inducement to Buyer to enter into and perform its obligations under this Agreement, each Seller agrees that for a period of three years from the Closing Date (the “ Restricted Period ”), without the prior written consent of Buyer, it will not, and will cause each of its Affiliates to not, anywhere in the world, directly or indirectly, either for itself or any other Person, engage in, own, operate, manage, control, invest in or participate in any manner in any Competing Business, or permit its name to be used by, act as a consultant or advisor to, render services for (alone or in association with any Person), or otherwise assist in any manner any Person in any Competing Business, including by granting licenses, or undertaking covenants not to assert, with respect to Intellectual Property to any such Person in connection with any Competing Business, in each case, except with respect to businesses operated by any acquiror of either Seller or their respective Affiliates. Notwithstanding the foregoing, nothing in this Agreement will preclude either Seller or their respective Affiliates from (i) owning 5% or less of the outstanding securities of any Person, (ii) making, using, selling, offering for sale, importing or providing services (alone or in association with any Person) related to the products set forth on Schedule 4.13 or licensing, undertaking covenants not to assert, or otherwise permitting any other Person to do any of the foregoing or (iii) acquiring any Person, whether through a business combination, acquisition or otherwise, (x) whose gross revenues (including revenues of Affiliates of such Person only to the extent acquired) generated from the Competing Business does not exceed 20% of the total gross revenues of such Person (including revenues of Affiliates of such Person to the extent acquired) during the 12-month period immediately preceding the acquisition or (y) if the Competing Business operated or owned by such Person exceeds 20% of the total gross revenues of

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such Person (including revenues of Affiliates of such Person only to the extent acquired) and is sold or otherwise disposed of by such Seller during the 12-month period immediately following such acquisition.
(d)      Each Seller recognizes that the territorial, time and scope limitations set forth in this Section ‎4.13 are reasonable and are properly required for the protection of the Companies’ and their Subsidiaries’ and Buyer’s legitimate interests in client relationships, goodwill and trade secrets, and in the event that any such territorial, time or scope limitation is deemed to be unreasonable or by a court of competent jurisdiction, Buyer and each Seller agree to submit to the reduction of any or all of said territorial, time or scope limitations to such area, period or scope as said court will deem reasonable or enforceable under the circumstances, and in its reduced form, such provision will then be enforceable.
4.14      Certain Intellectual Property Matters .
(a)      Transitional Trademark License . For a period of up to six months following the Closing, the Companies and their Subsidiaries may continue to use Seller Marks that are in use by the Companies and their Subsidiaries as of the Closing, pending the transition of the Companies and their Subsidiaries to their own Trademarks, in each case solely in the same manner that such Trademarks are being used by the Companies and their Subsidiaries just prior to the Closing, where “ Seller Marks ” means the Trademarks of Sellers and their Affiliates (other than the Companies and their Subsidiaries) that are in use by the Companies and their Subsidiaries as of the Closing, including “B&W” and “Babcock & Wilcox”, in block letters or otherwise, and whether alone or in combination with other words or marks, and all Trademarks confusingly similar to or containing, comprising or embodying any of the foregoing. Buyer will cause the Companies and their Subsidiaries to (i) use commercially reasonable efforts to cease to make any use of all Seller Marks (subject to the last sentence of this Section ‎4.14(a) ), as soon as reasonably practicable (in light of other transition activities), and (ii) in any event cease all such uses by no later than the end of the six-month period following the Closing. In furtherance thereof, Buyer will cause each of the Companies and their Subsidiaries to (i) use commercially reasonable efforts to remove, strike over, or otherwise obliterate all Seller Marks from all assets and other materials owned by the Companies and their Subsidiaries, including any vehicles, business cards, schedules, stationery, packaging materials, displays, signs, promotional materials, manuals, forms, websites, email, computer software and other materials and systems, in each case that are customer- or public-facing, as soon as reasonably practicable (in light of other transition activities), and (ii) in any event, complete all such activities by no later than the aforementioned six-month period following the Closing. Any use by the Companies and their Subsidiaries of any of the Seller Marks

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as permitted in this Section ‎4.14(a) is subject to their use of the Seller Marks in a form and manner, and with standards of quality, of that in effect for the Seller Marks as of the Closing. Following the Closing, Buyer will cause the Companies and their Subsidiaries to cease holding themselves out as having any affiliation with Sellers or any of their Affiliates and, notwithstanding anything in this Section ‎4.14(a) to the contrary, subject to any delays or additional time requirements required or caused by any applicable Governmental Bodies, Buyer will cause the Companies and their Subsidiaries, no later than 30 days following the Closing, to submit required filings with Governmental Bodies to change their names, and to cause their certificates of incorporation (or equivalent organizational documents), as applicable, to be amended to remove any reference to any Seller Mark, and to diligently pursue such changes of name and amendments to certificates of incorporation until completed. Notwithstanding the foregoing, this Section ‎4.14(a) does not restrict accurate historical references to the Seller Marks or any fair use permitted by applicable Law.
(b)      Exclusively Used IP . Each of the Sellers will, and will cause each of its Affiliates (other than the Companies and their Subsidiaries), to assign to a Company or one of its Subsidiaries, as directed by Buyer, for no additional consideration, all of their right, title and interest in and to any Intellectual Property identified either by (i) Sellers and their Affiliates (other than the Companies and their Subsidiaries) between the date hereof and Closing, or (ii) Buyer, the Companies or any of their Subsidiaries after the Closing, that is owned or purported to be owned by Sellers and their Affiliates (other than the Companies and their Subsidiaries), and that is used exclusively by or for the Companies and/or their Subsidiaries, such assignment, if any, to be made pursuant to an Intellectual Property assignment instrument.
(c)      IP License Grant . Effective as of the Closing, each of the Sellers, on behalf of themselves and their Affiliates (excluding the Companies and their Subsidiaries), hereby grants the following worldwide, perpetual, irrevocable, royalty-free and fully paid-up (it being understood and agreed that the consideration for the rights granted pursuant to this Section ‎4.14(c) is included in the Purchase Price), nonexclusive licenses, without any right to grant sublicenses (except as set forth in Section ‎4.14(c)(iii)(1)-(2) ):
(i)      to the Companies and their Affiliates (including Buyer and its Affiliates), to Exploit (and, subject to the confidentiality obligations set forth in Section ‎4.14(d) and to export control Laws, to have Exploited) the Licensed IP in the Licensed Field for any and all purposes, and through any and all means, in each case now known or hereafter created or discovered, in connection with their businesses, including any evolutions, extensions and expansions of such businesses, where (A) “ Licensed IP ” means any Intellectual Property, including any proprietary technology, (excluding Patents and Trademarks, and also excluding all copyrights

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to any edition of the publication Steam: Its Generation and Use , by Babcock and Wilcox) that (I) is owned by any of the Sellers or their Affiliates (excluding the Companies and their Subsidiaries) as of just prior to the Closing, (II) is being Exploited by or on behalf of any of the Companies or their Subsidiaries as of just prior to the Closing, and (III) is in the possession of any of the Companies or their Subsidiaries as of just prior to the Closing, or is provided to the Companies or their Subsidiaries pursuant to this Agreement or the Ancillary Agreements, (B) “ Exploit ” means to (I) make, use, sell, offer for sale and import a machine, article of manufacture or composition of matter, or practice a method, (II) use, copy, create derivative works of and otherwise modify and, subject to the confidentiality obligations set forth in Section ‎4.14(d) , display, perform and transmit, and (III) otherwise exploit, and (C) “ Licensed Field ” means any and all industrial applications, which, for clarity, excludes generating electricity for sale or distribution to third parties (other than the sale or distribution of de minimis excess power generated from self-generated power for internal use); and
(ii)      to the Companies and their Subsidiaries, under the Licensed Patents, to make, use, sell and offer for sale, import and otherwise exploit in the Licensed Field (and, subject to the confidentiality obligations set forth in Section ‎4.14(d) with respect to unpublished patent applications and to export control Laws, to have any of the foregoing performed for them) (1) products and services of the Companies and their Subsidiaries (including those in research and development), and, for clarity, including any components of any of the foregoing (for use in the foregoing), existing as of just prior to the Closing, and any post-Closing evolutions, extensions and expansions of such products and services made or substantially designed by or on behalf of any of the Companies or their Subsidiaries (or of components thereof), so long as the fundamental nature and type of function of such products and services are not materially different than the nature and type of function of the applicable products or services existing as of just prior to Closing, and (2) methods used in the businesses of the Companies or their Subsidiaries, including methods used to Exploit the products and services of the Companies or their Subsidiaries (whether internally, in the supply or distribution/support chain, or by customers), as of just prior to the Closing, and any post-Closing evolutions, extensions and expansions of such methods used by or on behalf of the Companies and their Subsidiaries, so long as the fundamental nature and type of function of such methods are not materially different than the nature and type of function of the applicable methods used as of just prior to Closing, provided in each case that such methods are used in connection with the businesses of the Companies or their Subsidiaries as conducted as of just prior to the Closing and any post-Closing

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evolutions, extensions and expansions of such businesses, so long as the fundamental nature and type of function of such businesses are not materially different than the nature and type of function of the businesses of the Companies or their Subsidiaries as of just prior to Closing, where “ Licensed Patents ” means any Patent owned by the Sellers or any of their Affiliates as of just prior to the Closing, or applied for or issuing thereafter to the extent claiming priority to any such owned Patent, that claims (alone or in a combination) (A) any method used in the businesses of the Companies and their Subsidiaries, including methods used to Exploit the products and services of the Companies or their Subsidiaries (whether internally, in the supply or distribution/support chain, or by customers), as of just prior to the Closing, (B) any product or service of the Companies or their Subsidiaries (including those in research and development), and, for clarity, including any components of any of the foregoing, existing as of just prior to the Closing, or (C) the Exploitation of any of the foregoing in (A) or (B).
(iii)      The license grants in Section ‎4.14(c)(i) and ‎(ii) are:
(A)      sublicensable (through multiple tiers) (i) to customers, solely in connection with their use of the products and services of, and (ii) to suppliers, contractors and other service providers, vendors, distributors and other business partners, solely in connection with the conduct and support of the businesses of (and not for the benefit of such third parties independent of such businesses), (1) the Companies or their Affiliates, for purposes of Section ‎4.14(c)(i) , or (2) the Companies or their Subsidiaries, for purposes of Section ‎4.14(c)(ii) ;
(B)      sublicensable (through multiple tiers) and transferable, in whole or in part, with respect to any business, or any substantial portion thereof, divested by a Company or any of its Affiliates, for purposes of Section ‎4.14(c)(i) or by a Company or any of its Subsidiaries, for purposes of Section ‎4.14(c)(ii) ;
(C)      without limiting the representations, warranties and covenants otherwise made in this Agreement or in any other Ancillary Agreement, made on an “as is, where is” basis, with all faults and all representations and warranties, express or implied, disclaimed;
(D)      subject to the confidentiality obligations set forth in Section ‎4.14(d) and to export control Laws;

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(E)      (i) licenses of intellectual property under Section 365(n) of the U.S. Bankruptcy Code, which may be assumed, and assumed and assigned, by the licensees thereof and (ii) in the event Sellers or their Affiliates seek to sell or otherwise transfer any of the Intellectual Property subject to such licenses in any bankruptcy proceeding, such sale or other transfer (including any pursuant to the U.S. Bankruptcy Code) will be subject to the license rights under this Agreement and Section 365(n) of the U.S. Bankruptcy Code; and
(F)      for clarity, references to a “method” include methods, processes, recipes or other groups of steps protectable under Patents.
(d)      Confidentiality .
(i)      For purposes of this Section ‎4.14 Confidential Information ” means any Licensed IP and Licensed Patents comprising unpublished patent applications, that is, in each case, not known to the public or that Sellers or their Affiliates have not disclosed to third parties without a written obligation of confidentiality at least consistent with this Section ‎4.14(d) ; provided , however , that the term “Confidential Information,” will not be deemed to include information that (1) becomes generally available to the public without material fault of the Companies or their Affiliates or Subsidiaries, as applicable, or their sublicensees, (2) is disclosed to a Governmental Body pursuant to applicable Law and is publicly available as a result of such disclosure, (3) is independently developed without use or reference to such Confidential Information or breaching any duty of confidentiality, or (4) is lawfully received from a third party not subject to a duty of confidentiality.
(ii)      Without the prior written consent of a Seller, following the Closing, each Company agrees not to, and will cause its Affiliates or Subsidiaries, as applicable, and its sublicensees not to, and will cause such Affiliates, Subsidiaries and sublicensees to cause their sublicensees not to, (1) disclose Confidential Information to any third party, or (2) use any Confidential Information, except, in each case (1) and (2), for disclosures to and uses by Persons who reasonably need to know such Confidential Information in connection with the exercise of rights or performance of obligations under the license grants in Section ‎4.14(c) (subject to confidentiality restrictions consistent with this Section ‎4.14(d) ), or to the extent required by applicable Law, including subpoenas and court or other proceedings (provided that a Company, Affiliate or Subsidiary thereof, as applicable, or sublicensee of the foregoing (A) has provided a Seller with prompt written notice of such request or demand, unless restricted by applicable Law from doing so, so a

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Seller has an opportunity to seek an appropriate protective order or other appropriate remedy, with which such effort Buyer will reasonably cooperate, and (B) if restricted by applicable Law from providing such written notice contemplated by the immediately foregoing Section ‎4.14(d)(ii)(A) , takes reasonable steps to obtain confidential treatment for such Confidential Information to be furnished). Each Company shall use, and shall cause its Affiliates and Subsidiaries, as applicable, and sublicensees to use, and will cause such Affiliates and Subsidiaries and sublicensees to cause their sublicensees to use, the same degree of care it uses to protect its own confidential information in protecting any Confidential Information received, but in no event less than a reasonable degree of care.
(e)      Affiliates and Subsidiaries . For clarity, references to Affiliates and Subsidiaries in this Section ‎4.14 are, at any given time, to Affiliates and Subsidiaries as may exist at such time, and only for so long as they remain Affiliates and Subsidiaries, respectively.
4.15      Beloit Early Termination Option . Buyer will have the right, in its sole discretion, to use the Beloit Escrow Amount to exercise the Beloit Early Termination Option. If Buyer does not exercise the Beloit Early Termination Option by July 4, 2019, the Escrow Agent will promptly deliver the Beloit Escrow Amount to Sellers.
4.16      Interim Services . Prior to the Closing, Seller Parent will provide or will cause to be provided to Buyer or, at Buyer’s request, directly to any of its Affiliates, either Company or a Subsidiary, the services set forth on Schedule 4.16 . The fees for such services set forth on Schedule 4.16 will be paid by Buyer at or prior to the Closing, or in the event of the termination of this Agreement under Article ‎VI , within ten Business Days of such termination.
V.      CONDITIONS TO CLOSING
5.1      Conditions to the Obligations of the Parties . The obligations of each Party to effect the Closing are subject to the satisfaction (or waiver by Buyer (on behalf of Buyer and Parent) and Seller Parent (on behalf of Seller Parent, Sellers and the Companies)) prior to the Closing of the following conditions:
(a)      all Competition Law Approvals and CFIUS Clearance shall have been obtained and the waiting periods under the applicable Competition Laws with respect to such Competition Law Approvals shall have expired or been terminated; and
(b)      there shall not be in effect any injunction or any Law or Order restraining, enjoining or otherwise prohibiting the Transaction.

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5.2      Additional Conditions to the Obligations of Buyer . The obligations of Buyer to effect the Closing are also subject to the satisfaction (or waiver by Buyer) on or prior to the Closing of the following conditions:
(a)      each of the representations and warranties of Sellers and Seller Parent (i) set forth in Sections ‎2.1 - ‎2.5 , ‎2.18 , ‎2.19(a) and ‎2.24 shall be true and correct as of the Closing, as if made on the Closing Date (except for any such representations and warranties that are made as of a specific date, which representations and warranties shall have been true and correct as of such specific date) and (ii) otherwise contained in this Agreement (disregarding all “materiality” or “Material Adverse Effect” qualifications set forth therein) shall be true and correct in all material respects as of the Closing, as if made on the Closing Date (except for any such representations and warranties that are made as of a specific date, which representations and warranties shall have been true and correct in all material respects as of such specific date);
(b)      each of the covenants of Seller Parent, Sellers and the Companies contained in this Agreement that are to be performed on or prior to the Closing shall have been duly performed in all material respects;
(c)      Buyer shall have received a certificate, signed by a duly authorized officer of Seller Parent, dated the Closing Date and on behalf of Seller Parent and not personally, to the effect that the conditions set forth in Sections ‎5.2(a) and ‎5.2(b) have been satisfied and the actions contemplated by Section ‎4.10 have been taken; and
(d)      since the date hereof, there shall not have been any Material Adverse Effect.
5.3      Additional Conditions to Obligations of Seller Parent and Sellers . The obligations of Seller Parent and Sellers to effect the Closing are also subject to the satisfaction (or waiver by Seller Parent (on behalf of Seller Parent and Sellers)) on or prior to the Closing of the following conditions:
(a)      each of the representations and warranties of Buyer and Parent (i) set forth in Sections ‎3.1 and ‎3.2 shall be true and correct as of the Closing, as if made on the Closing Date (except for any such representations and warranties that are made as of a specific date, which representations and warranties shall have been true and correct as of such specific date) and (ii) otherwise contained in this Agreement (disregarding all “materiality” qualifications set forth therein) shall be true and correct in all material respects as of the Closing, as if made on the Closing Date (except for any such representations and warranties that are made as of a specific date, which representations and warranties shall have been true and correct in all material respects as of such specific date);

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(b)      each of the covenants of Buyer contained in this Agreement that are to be performed on or prior to the Closing shall have been duly performed in all material respects; and
(c)      Sellers shall have received a certificate, signed by a duly authorized officer of Buyer, dated the Closing Date and on behalf of Buyer and not personally, to the effect that the conditions set forth in Sections ‎5.3(a) and ‎5.3(b ) have been satisfied; and
(d)      Buyer shall have provided Sellers with evidence of a letter of credit to backstop any Business Guarantees that have not been replaced or under which Seller Parent or Sellers have not otherwise been released as of the Closing; and
(e)      Buyer shall have issued in writing to Seller Parent the Back-to-Back Guarantee issued in writing to Seller Parent.
5.4      Frustration of Closing Conditions . No Party may rely on the failure of any condition set forth in Article ‎V as a justification for not being obligated to consummate the Closing, if such failure was caused by, and resulted from, such Party’s material breach of any provision of this Agreement.
VI.      TERMINATION
6.1      Termination of Agreement . This Agreement may be terminated and the Transaction may be abandoned at any time prior to the Closing:
(a)      at the election of Seller Parent or Buyer on or after the 180 th calendar day following the date of this Agreement (the “ Outside Date ”), if the Transactions will not have been consummated by the close of business on such date; provided that the right to terminate this Agreement pursuant to this Section ‎6.1(a) will not be available to any Party whose breach of any provision of this Agreement has been the proximate cause of, or resulted in, the failure of the Closing to occur on or prior to such date;
(b)      by mutual written consent of Seller Parent and Buyer;
(c)      by Seller Parent or Buyer, if there shall be in effect a final non-appealable Law or Order permanently enjoining or otherwise prohibiting the consummation of the Transaction; provided that the right to terminate this Agreement pursuant to this Section ‎6.1(c) will not be available to any Party whose breach of any provision of this Agreement has been the cause of, or resulted in, the issuance of such a final non-appealable Law or Order;
(d)      by Buyer, if Seller Parent, Sellers or the Companies breach a representation, warranty or covenant contained in this Agreement, which breach (i) would result in the failure of the conditions set forth in Section ‎5.2(a) or ‎ 5.2(b ) to be satisfied and (ii) (A) is not capable of being cured by the Outside Date or (B) if capable of being cured, has not been cured within (x) 30 days following receipt of written notice from Buyer of such breach or (y) any shorter period of time that remains between the date such written notice is provided and the Outside Date; provided that the right to terminate this Agreement pursuant to this Section ‎6.1(d) will not be available to Buyer if Buyer or Parent is then in breach of any of its representations, warranties or covenants hereunder so as to cause the closing conditions set forth in Section ‎5.3 to not be satisfied;
(e)      by Seller Parent, if Buyer or Parent breach a representation, warranty or covenant contained in this Agreement, which breach (i) would result in the failure of the conditions set forth in Section ‎5.3(a) or ‎5.3(b) to be satisfied and (ii) (A) is not capable of being cured by the Outside Date or (B) if capable of being cured, has not been cured within (x) 30 days following receipt of written notice from Seller Parent of such breach or (y) any shorter period of time that remains between the date such written notice is provided and the Outside Date; provided that the right to terminate this Agreement pursuant to this Section ‎6.1(e) will not be available to Seller Parent if Seller Parent, any Seller or any Company is then in breach of any of its representations, warranties or covenants hereunder so as to cause the closing conditions set forth in Section ‎5.2 to not be satisfied; or
(f)      by Seller Parent, at any time on five Business Days’ notice to Buyer, if CFIUS Clearance has not been obtained on or prior to the 90th calendar day after the date hereof, unless within such five Business Day period Buyer irrevocably waives its rights under Section ‎5.1(a) insofar as Section ‎5.1(a) relates to CFIUS Clearance.
6.2      Effect of Termination . In the event that this Agreement is terminated in accordance with Section ‎6.1 , this Agreement will become null and void and each of the Parties will be relieved of its duties and obligations arising under this Agreement after the date of such termination and there will be no liability on the part of any Party; provided , however , that, subject to the terms of this Section ‎6.2 , the provisions of the last sentence of Section ‎4.3(c) ( Regulatory Approvals ), Section ‎4.5 ( Confidentiality ), Section ‎4.8 ( Publicity ), the provisions of the last sentence of each of Section ‎4.9(f) and Section ‎4.9(g) ( Employment and Employee Benefits ), the provisions of the last sentence of Section ‎4.16 ( Interim Services ), Article ‎VIII ( Miscellaneous ) and Article ‎IX ( Definitions and Construction ) (to the extent applicable to the foregoing provisions) will remain in full force and effect and (a) no such termination will relieve any Party from any Liability for any material and intentional breach prior to such termination and (b) survive such termination indefinitely.
VII.      INDEMNITY
7.1      Survival . Except as provided in Section ‎4.12 with respect to Taxes, the representations, warranties and covenants of each Party contained in this Agreement, in any exhibit, schedule or in any certificate delivered pursuant hereto, together with the associated rights of indemnification hereunder, will survive the Closing and continue in full force and effect (a) to the fullest extent permitted by applicable Law with respect to Sellers Fundamental Representations and Buyer Fundamental Representations, (b) until the date that is 18 months after the Closing Date with respect to all other representations and warranties and all covenants to be performed prior to the Closing, and (c) with respect to covenants to be performed after the Closing, without limitation as to time unless the covenant specifies a term, in which case such covenant will survive until the date that is 12 months after the date as of which the applicable covenant has been fully performed or breached, as the case may be; provided that any representation, warranty or covenant that would otherwise terminate in accordance with this Section ‎7.1 will continue to survive in respect of occurrences described in reasonable detail in a notice of a claim for indemnification or notice of a Third-Party Claim (as applicable) that has been timely given under this Article ‎VII on or prior to such termination date until the related claim for indemnification has been satisfied or otherwise resolved as provided in this Article ‎VII .
7.2      Indemnification .
(a)      Except as provided in Section ‎4.12 , which will control with respect to Taxes, and subject to this Article VII , Seller Parent and Sellers will, jointly and severally, indemnify and hold harmless Buyer and its Affiliates and each of their respective officers, directors, employees, partners, members, stockholders, agents and representatives (collectively, the “ Buyer Indemnitees ”) from and against, and compensate and reimburse the Buyer Indemnitees for:
(i)      any and all Losses resulting from or arising out of any breach of any representation or warranty of Seller Parent, Sellers or the Companies contained in Article II of this Agreement (in each case, other than Section ‎2.19(a) , without giving effect to any “Material Adverse Effect,” “materiality” or similar qualifications);
(ii)      any and all Losses resulting from or arising out of any breach by Seller Parent, or Sellers of any covenant of Seller Parent, Sellers or the Companies contained in this Agreement or any Ancillary Agreement;
(iii)      any and all Losses resulting from or arising out of any breach by the Companies of any pre-Closing covenant of the Companies contained in this Agreement; and
(iv)      any Transaction Expenses or Indebtedness of the Companies outstanding as of the Closing Date that were not applied to reduce the Purchase Price pursuant to Section ‎1.5 .
(b)      Subject to this Article VII and except as provided in Section ‎4.12 which will control with respect to Taxes, Buyer will indemnify and hold harmless Seller Parent, Sellers and their respective Affiliates (other than the Companies and their Subsidiaries) and each of their respective officers, directors, employees, partners, members, stockholders, agents and representatives (collectively, the “ Seller Indemnitees ”) from and against and compensate and reimburse the Seller Indemnitees for:
(i)      any and all Losses resulting from or arising out of any breach of any representation or warranty of Buyer or Parent contained in Article ‎III of this Agreement (in each case, without giving effect to any “Material Adverse Effect,” “materiality” or similar qualifications);
(ii)      any amounts required to be paid under or which are drawn on any Scheduled Guarantee after the Closing; and
(iii)      any and all Losses resulting from or arising out of any breach of any covenant of Buyer or Parent contained in this Agreement or any Ancillary Agreement.
7.3      Limitations on Liability .
(a)      Notwithstanding anything to the contrary contained in this Agreement, but subject to this Section ‎7.3 , (i) no claims may be made under Section ‎7.2(a)(i) with respect to any single Loss (or series of related Losses) of less than $50,000 (the “ De Minimis Claims Amount ”), (ii) none of Seller Parent or any Seller will be liable for indemnification under Section ‎7.2(a)(i) unless and until the aggregate amount of all Losses in respect of indemnification under Section ‎7.2(a)(i) (excluding Losses for which indemnification is not available as a result of clause (i) above) exceeds $500,000 (the “ Deductible ”), in which event Seller Parent and Sellers will be required to pay or be liable for all such Losses under Section ‎7.2(a)(i) in excess of the Deductible (subject to the Liability Cap), and (iii) the aggregate amount of all Losses for which Seller Parent and Sellers may be liable pursuant to Section ‎7.2(a)(i) will in no event exceed $2,000,000 (the “ Liability Cap ”); provided that this Section ‎7.3(a) will not apply to any Losses based upon, arising out of, with respect to or by reason of a breach of any Sellers Fundamental Representation.
(b)      Notwithstanding anything to the contrary contained in this Agreement, but subject to this Section ‎7.3 , (i) no claims may be made under Section ‎7.2(b)(i) with respect to any single Loss (or series of related Losses) of less than the De Minimis Claims Amount, (ii) Buyer will not be liable for indemnification under Section ‎7.2(b)(i) unless and until the aggregate amount of all Losses in respect of indemnification under Section ‎7.2(b)(i) (excluding Losses for which indemnification is not available as a result of clause (i) above) exceeds the Deductible, in which event Buyer will be required to pay or be liable for all such Losses under Section ‎7.2(b)(i) in excess of the Deductible (subject to the Liability Cap), and (iii) the aggregate amount of all Losses for which Buyer may be liable pursuant to Section ‎7.2(b)(i) will in no event exceed the Liability Cap; provided that this Section ‎7.3(b) will not apply to any Losses based upon, arising out of, with respect to or by reason of a breach of any Buyer Fundamental Representation.
(c)      Without limiting the effect of any other limitation contained in this Article VII , for purposes of computing the amount of any Losses incurred by any Indemnitee under this Article VII for which such Indemnitee would otherwise be entitled to receive indemnification payments under this Article VII , there will be deducted an amount equal to (i) any cash payments actually recovered (net of reasonable collection costs expended in recovering such amount) by such Indemnitee under or pursuant to any insurance policy, title insurance policy, indemnity, reimbursement arrangement or Contract pursuant to which or under which such Indemnitee is a party or has rights; provided that in the event any amounts recovered under insurance policies or other collateral sources are not received before any claim for indemnification is paid, the Indemnitor will pay the full amount of the Loss, and (ii) any net Tax benefit actually realized by such Indemnitee no later than the conclusion of the two taxable years immediately subsequent to the taxable year in which such indemnification payment was made with respect of such Losses. If the Indemnitor makes any payment on any claim pursuant to Section ‎7.2 and the Indemnitee subsequently recovers an amount from a third party in respect of the indemnifiable Losses underlying any such payment, then the Indemnitee will (solely to prevent duplicative recovery) remit to the Indemnitor the excess (if any) of (x) the amount paid by the Indemnitor in respect of such Losses plus the amount received by the Indemnitee in respect of such Losses over (y) the full amount of such Losses.
(d)      Without limiting the effect of any other limitation contained in this Article VII , any indemnification payments due to any Buyer Indemnitee as a result of indemnification pursuant to Section 7.2(a)(i) (other than indemnification as a result of Losses based upon, arising out of, with respect to or by reason of a breach of any Sellers Fundamental Representation) will be made solely from the Escrow Amount pursuant to the terms of this Agreement and the Escrow Agreement or, if available, the RWI Policy. The aggregate amount of all Losses for which Seller Parent and Sellers may be liable pursuant to this Article VII (other than indemnification as a result of Losses based upon, arising out of, with respect to or by reason of a breach of any Sellers Fundamental Representation or Tax Claim) will in no event exceed the Overall Cap; provided , however , that in no event will the aggregate amount of all Losses for which Seller Parent and Sellers may be liable pursuant to Article VII exceed the Purchase Price.
(e)      Each Indemnitee will (i) take reasonable steps to mitigate all Losses for which such Indemnitee is entitled or may be entitled to indemnification under this Article VII and (ii) use commercially reasonable efforts to submit claims and seek recovery from available insurance policies (including under the RWI Policy) or other third party indemnitors in respect of any Losses; provided that in no event will the Indemnitee be required to commence or threaten litigation against any third party in respect of such recovery.
(f)      No Indemnitee will be entitled to indemnification pursuant to this Article VII for any punitive damages; provided , however , that if the damages were reasonably foreseeable or an Indemnitee is held liable to a third party for any such damages and the applicable Indemnitor is obligated to indemnify such Indemnitee for the matter that gave rise to such damages, then such Indemnitor will be liable for, and obligated to reimburse such Indemnitee for, such damages.
(g)      No claim for indemnification made under this Article VII may be made for any Losses to the extent they were taken into account in the Purchase Price adjustments in Section ‎1.5 .
7.4      Indemnity Escrow Amount .
(a)      On the date that is 18 months after the Closing Date, an amount equal to the remaining balance of the Indemnity Escrow Amount minus the aggregate amount, if any, which any Buyer Indemnitee has timely and validly made a claim for indemnification under this ‎Article VII or Section ‎4.12 prior to such date (to the extent such claims for indemnification, if any, remain unresolved) will be released to Sellers, and Buyer will execute the necessary documents instructing the Escrow Agent to make the applicable payment to Sellers (the “ Escrow Release Date ”).
(b)      Following the Escrow Release Date and the resolution of any claims for indemnification asserted, but not resolved prior to the Escrow Release Date, Buyer and Sellers will, from time to time, execute the necessary documents instructing the Escrow Agent to make the applicable payment to the applicable Buyer Indemnitees and, to the extent the amount on deposit after such resolution and any payment to Buyer exceeds the amount of any remaining claims for indemnification, to Sellers. Following the resolution of all such claims for indemnification, Buyer and Sellers will execute the necessary documents instructing the Escrow Agent to pay to Sellers the amount of any remaining balance of the Indemnity Escrow Amount.
7.5      Exclusivity . Without limiting any other provision hereof, the Parties expressly agree that, if the Closing occurs, the indemnity provided in this Article ‎VII is the sole and exclusive remedy of the Buyer Indemnitees and the Seller Indemnitees (other than with respect to Section ‎4.6 and except as provided in Section ‎4.12 with respect to Taxes) in respect of the Transaction and for any breach or alleged breach of any provision hereof or of any Ancillary Agreement; provided , however , that nothing in this Section ‎7.5 will limit any Party’s right to seek and obtain any other remedies for claims based upon Fraud.
7.6      Indemnification Claims . A claim for indemnification for any matter that does not involve a Third-Party Claim may be asserted by written notice made by a Person entitled to indemnification under this Article ‎VII , acting through Buyer, in the case of any claim for indemnification made by a Buyer Indemnitee, or acting through Seller Parent, in the case of any claim for indemnification made by a Seller Indemnitee (the “ Indemnitee ”) to the Party from whom indemnification is sought (the “ Indemnitor ”), indicating the nature of such claim and the stated basis therefor, including reasonable supporting documentation, and the amount of Losses claimed (estimated, if necessary and to the extent feasible). The failure of the Indemnitee to give reasonably prompt notice of such claim will not release, waive or otherwise affect the Indemnitor’s obligations with respect thereto except to the extent that the Indemnitor is actually prejudiced as a result of such failure.
7.7      Defense of Third-Party Claims . In the event that any action is instituted or asserted by any third party in respect of which payment may be sought under Section ‎7.2 , regardless of the applicability of the limitations on the Indemnitor’s liability set forth in Section ‎7.3 (a “ Third-Party Claim ”), the Indemnitee will promptly, and in any event within 30 Business Days, cause written notice of the assertion of any Third-Party Claim of which it has knowledge, and which may be subject to indemnification hereunder, to be forwarded to the Indemnitor, indicating the nature of such Third-Party Claim and the stated basis therefor, including reasonable supporting documentation, and the amount of Losses claimed pursuant to such Third-Party Claim (to the extent known). The failure of the Indemnitee to give reasonably prompt notice of any Third-Party Claim will not release, waive or otherwise affect the Indemnitor’s obligations with respect thereto except to the extent that the Indemnitor is actually prejudiced as a result of such failure. The Indemnitor will have the right, at its sole option and expense, to select and be represented by counsel, assume control of the defense of and to defend against, negotiate, settle or otherwise deal with any Third-Party Claim which relates to any Losses indemnifiable by it hereunder; provided , however , that the Indemnitor may not assume control of the defense of a Third-Party Claim (a) involving criminal liability or in which equitable relief other than monetary damages is sought or (b) if the Indemnitor has not notified the Indemnitee in writing that it will be liable to indemnify the Indemnitee in respect of all Losses relating to such Third-Party Claim subject to the limitations of Section ‎7.3 . If the Indemnitor elects to defend against, negotiate, settle or otherwise deal with any Third-Party Claim which relates to any Losses indemnifiable by it hereunder, it will within 30 days (or sooner, if the nature of the Third-Party Claim so requires) notify the Indemnitee of its intent to do so. If the Indemnitor elects not to defend against, negotiate, settle or otherwise deal with any Third-Party Claim which relates to any Losses indemnified against hereunder, or is not permitted to assume the defense of a Third-Party Claim pursuant to the proviso to the third sentence of this Section ‎7.7 , the Indemnitee may defend against, negotiate, settle or otherwise deal with such Third-Party Claim subject to the provisions below, although the Indemnitor may still participate, at his, her or its own expense, in the defense of such Third-Party Claim. If the Indemnitor assumes the defense of any Third-Party Claim pursuant to the terms of this Agreement, the Indemnitee may participate, at his, her or its own expense, in the defense of such Third-Party Claim; provided , however , that such Indemnitee will be entitled to participate in any such defense with separate counsel at the expense of the Indemnitor if (i) so requested by the Indemnitor to participate, (ii) in the reasonable opinion of outside counsel to the Indemnitee a conflict or potential conflict exists between the Indemnitee and the Indemnitor that would make such separate representation advisable, or (iii) such Third-Party Claim seeks an injunction or other equitable relief against the Indemnitee. The Parties agree to reasonably cooperate with each other in connection with the defense, negotiation or settlement of any such Third-Party Claim. Notwithstanding anything in this Section ‎7.7 to the contrary, neither the Indemnitor nor the Indemnitee will, without the prior written consent of the other party (such consent not to be unreasonably withheld, conditioned or delayed), settle or compromise any Third-Party Claim or consent to the entry of a judgment with respect to such Third-Party Claim unless the claimant provides to such other Party an unqualified release of the Indemnitee and the Indemnitor from all liability in respect of such Third-Party Claim.
7.8      Treatment of Indemnity Payments . Any payment made pursuant to this Article ‎VII will be treated as an adjustment to the Purchase Price to the extent permitted by Law.
VIII.      MISCELLANEOUS
8.1      Disclosure Schedules . If a disclosure is made in one of or in any part of any of the Disclosure Schedules, such disclosure will be deemed to have also been made in each other section or subsection of the Disclosure Schedules to the extent the relevance or applicability of such disclosure to such other section or subsection of the Disclosure Schedules is reasonably apparent. The reference to or listing, description, disclosure or other inclusion of any item or other matter in the Disclosure Schedules will not be construed to be an admission, suggestion or indication that, if applicable, (a) such item or matter constitutes a possible violation of, breach of or default under any Contract or applicable Law, or (b) any possible breach or violation exists or has actually occurred. Notwithstanding the use of the terms “material” and “Material Adverse Effect” in this Agreement, the inclusion of any particular disclosure in the attached Disclosure Schedules will not, of itself, mean that the item or matter so disclosed is material, is required to be disclosed or would be likely to constitute a Material Adverse Effect. Such disclosure will not be used as a basis for interpreting the term “material,” “materially,” “materiality,” “Material Adverse Effect” or any similar qualification in this Agreement.
8.2      Remedies . The Parties agree that irreparable damage, for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that the Parties do not perform the provisions of this Agreement (including failing to take such actions as are required of them hereunder to consummate the Transaction) in accordance with its specified terms or otherwise breach such provisions. It is accordingly agreed that the Parties will be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they are entitled at Law or in equity. Each of the Parties agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that the Party seeking the injunction, specific performance and other equitable relief has an adequate remedy of Law.
8.3      Expenses . Except as expressly otherwise provided for in this Agreement, all costs and expenses incurred in connection with this Agreement and the consummation of the Transaction will be paid by the Party incurring such costs or expenses.
8.4      Jurisdiction; Consent to Service of Process . Each of the Parties hereto hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the federal courts sitting in Wilmington, Delaware for any litigation arising out of or relating to this Agreement or the Transaction (and agrees not to commence any litigation relating thereto except in such courts), and further agrees that service of any process, summons, notice or document to its respective address set forth in Section ‎8.7 by one of the means therein provided will be effective service of process for any litigation brought against it in any such court. Each of the Parties hereby irrevocably and unconditionally waives any objection to the laying of venue of any litigation arising out of this Agreement or the Transaction in such courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such litigation brought in any such court has been brought in an inconvenient forum.
8.5      Entire Agreement; Amendments and Waivers . This Agreement (including the Schedules and Annexes hereto), the Confidentiality Agreement and the Escrow Agreement represent the entire understanding and agreement among the Parties with respect to the subject matter hereof. This Agreement can be amended, supplemented or changed, and any provision hereof can be waived, only by written instrument making specific reference to this Agreement signed by the Party against whom enforcement of any such amendment, supplement, modification or waiver is sought. No action taken pursuant to this Agreement, including any investigation by or on behalf of any Party, will be deemed to constitute a waiver by the Party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any Party of a breach of any provision of this Agreement will not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any Party to exercise, and no delay in exercising, any right, power or remedy hereunder will operate as a waiver thereof, nor will any single or partial exercise of such right, power or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.
8.6      Governing Law . This Agreement, and all claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement), will be governed by and construed in accordance with the Laws of the State of Delaware without giving effect to principles or rules of conflict of Laws to the extent such principles or rules would require or permit the application of Laws of another jurisdiction.
8.7      Notices . All notices, waivers and other communications under this Agreement will be in writing and will be deemed given (i) when delivered personally, (ii) when sent by email (with confirmation), (iii) on the first Business Day following the date of dispatch if delivered by an overnight courier (with confirmation), or (iv) on the third Business Day following the date of mailing if delivered by registered or certified mail (return receipt requested), to the Parties at the following addresses (or at such other address as may be specified by like notice):
If to Seller Parent or any Seller, to:
Babcock & Wilcox Enterprises, Inc.
13024 Ballantyne Corporate Place
Charlotte, North Carolina (USA) 28277
Email: generalcounsel@babcock.com
Attention: General Counsel
With copies to:
Jones Day
250 Vesey Street
New York, New York 10281
Attention: Robert A. Profusek and Janet S. Coscino
Email: raprofusek@jonesday.com and jcoscino@jonesday.com
If to Parent or Buyer (or after the Closing, any Company), to:
Dürr Aktiengesellschaft
Carl-Benz-Str. 34
74321 Bietigheim-Bissingen, Germany
Attention: Dr. Sebastian Baumann and Andreas Birk
Email: Sebastian.baumann@durr.com and birk@schenck.net
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Taunusturm/Taunustor 1
Attention: Dr. Holger Hofmeister
Email: holger.hofmeister@skadden.com

8.8      Waiver of Jury Trial . To the fullest extent permitted by applicable Law, the Parties hereby waive their respective rights to a jury trial of any claim or cause of action based upon or arising out of this Agreement or any dealings between them relating to the subject matter of this Agreement and the Transaction. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this Agreement, including contract claims, tort claims, breach of duty claims, and all other common Law and statutory claims. The Parties acknowledge that this waiver is a material inducement to enter into a business relationship, that each has already relied on the waiver in entering into this Agreement and that each will continue to rely on the waiver in their related future dealings. The Parties further warrant and represent that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. This waiver is irrevocable, meaning that it may not be modified either orally or in writing, and the waiver will apply to any subsequent amendments, renewals, supplements or modifications to this Agreement or to any other documents or agreements relating to the Transaction. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.
8.9      Severability . If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other terms or provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the Transaction 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 Parties will negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the Transaction is consummated as originally contemplated to the greatest extent possible.
8.10      No Third-Party Beneficiaries; No Assignment . This Agreement will be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. No Party may assign any of its rights or delegate any of its obligations under this Agreement, by operation of Law or otherwise, without the prior written consent of Buyer and Seller Parent. Nothing in this Agreement, express or implied, is intended to confer upon any Person, other than Buyer and Sellers, the D&O Indemnitees, the legal advisors under Section ‎8.13 and their respective successors, legal representatives and permitted assigns (all of whom are intended third-party beneficiaries hereof), any rights or remedies under or by reason of this Agreement.
8.11      Non-Recourse . Notwithstanding any other provision of this Agreement or any rights of a Party at Law or in equity, this Agreement may only be enforced against, and any claim or cause of action based upon, arising out of or related to this Agreement or the Transaction may only be brought against, the Persons that are expressly Parties and then only with respect to the specific obligations set forth herein with respect to such Party.
8.12      Counterparts . This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. This Agreement and any signed agreement entered into in connection herewith or contemplated hereby, and any amendments hereto or thereto, to the extent signed and delivered by facsimile (or equivalent electronic transmission), will be treated in all manner and respects as an original contract and will be considered to have the same binding legal effects as if it were the original signed version thereof delivered in person.
8.13      Provision Respecting Legal Representation . It is acknowledged by each of the parties hereto that Seller Parent, Sellers and the Companies have retained Jones Day to act as their legal counsel in connection with the Transaction and that none of the other parties has the status of a client of Jones Day for conflict of interest or any other purposes as a result thereof. Buyer, Seller Parent and Sellers hereby agree that, in the event that a dispute arises after the Closing relating to this Agreement and the Transaction, Jones Day may represent Sellers and their Affiliates (including their direct and indirect owners or shareholders) (collectively, “ Seller Group ”) in such dispute even though the interests of Seller Group may be directly adverse to the Companies or any of their respective Affiliates.
8.14      Guarantee . Parent will take all action necessary to cause Buyer to perform its obligations under Section ‎1.3 of this Agreement. Seller Parent hereby unconditionally and irrevocably guarantees the full performance of all obligations of Sellers under this Agreement and the Ancillary Agreements.
IX.      DEFINITIONS AND CONSTRUCTION
9.1      Certain Definitions . (a) For purposes of this Agreement, the following terms will have the meanings specified below:
Accounting Principles ” means, in the following order of precedence, (a) the Companies’ accounting practices, policies, judgments and methodologies, to the extent each is in accordance with applicable Law and GAAP, and (b) applicable Law.
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 Person, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.
Ancillary Agreements ” means the Escrow Agreement, the Transition Services Agreement and any other agreement entered into by the Parties in connection with the Transaction.
Beloit Early Termination Option ” means the one-time option to terminate the Beloit Lease on December 31, 2019, upon 180 days’ prior written notice and payment of $2,750,000 (the “ Beloit Termination Fee ”), as set forth in Section 3.3 of the Beloit Lease.
Beloit Escrow Amount ” means an amount equal to $2,726,000.
Beloit Lease ” means the Lease, dated July 15, 2013, by and between Hendricks Commercial Properties, LLC and Universal Acoustic & Emission Technologies, Inc., as amended.
Business Day ” means any day of the year on which national banking institutions in New York City and Stuttgart, Germany, are open to the public for conducting business and are not required or authorized to close.
Business Guarantees ” means all guarantees, letters of credit, letters of comfort, bonds (including both bid and performance bonds), sureties and other credit support or assurances provided by financial institutions upon the request of any Seller or any Subsidiary of any Seller (other than the Companies and their Subsidiaries) in support of any obligation of the Companies or their Subsidiaries.
Buyer Fundamental Representations ” means the representations and warranties of Buyer in Sections ‎3.1 - ‎3.4 .
Buyer’s and Parent’s Knowledge ” means the actual knowledge after due inquiry of Andreas Birk and Mateusz Nowakowski.
Cash ” will have the meaning set forth in Schedule 9.1(a) .
CFIUS ” means the Committee on Foreign Investment in the United States or any successor body.
CFIUS Clearance ” means that any review or investigation by CFIUS of the Transaction will have been concluded and (a) CFIUS will have determined that the Transaction is not a covered transaction and not subject to review under applicable law; (b) the parties will have received written notice from CFIUS that review of the Transaction under Section 721 of the Defense Production Act of 1950 has been concluded and CFIUS will have determined that there are no unresolved national security concerns with respect to the Transaction and advised that action under Section 721, and any investigation related thereto, has been concluded with respect to the Transaction; or (c) CFIUS will have sent a report to the President of the United States requesting the President’s decision on the CFIUS notice submitted by the parties and either (i) the period under the Defense Production Act of 1950 during which the President may announce his decision to take action to suspend, prohibit or place any limitations on the Transaction will have expired without any such action being taken or (ii) the President will have announced a decision not to take any action to suspend, prohibit or place any limitations on the Transaction.
Code ” means the Internal Revenue Code of 1986, as amended from time to time.
Collective Bargaining Agreement ” means any Contract between the Companies or any of their Subsidiaries and any labor organization, works council or other representative body representing any Company Employee for purposes of collective bargaining under applicable Laws including, without limitation, any Contracts subject to enforcement under Section 301 of the Labor Management Relations Act, 29 U.S.C. § 185.
Competition Laws ” means the HSR Act (and any similar Law enforced by any Governmental Body regarding pre-acquisition notifications for the purpose of competition reviews), and any other federal, state, local or non-United States statutes, rules, regulations, orders, decrees, administrative or judicial doctrines or other Laws that are designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization, lessening of competition or restraint of trade or lessening of competition through mergers or acquisitions or effectuating foreign investment.
Contract ” means any contract, agreement, indenture, note, bond, lease, license, instrument, mortgage, purchase or sales order, undertaking, arrangement, evidence of indebtedness, binding commitment or instrument (whether written or oral and whether express or implied) (including amendments and supplements, modifications and side letters or agreements) to which a Company or any of its Subsidiaries is a party or that is or may be binding on a Company or any of its Subsidiaries, its business, or any of its assets.
Disclosure Schedules ” mean the disclosure schedules delivered to Buyer on the date hereof and attached to this Agreement and made an integral part hereof, and each reference to a “Schedule” is to a specific Section of the Disclosure Schedules.
Environmental Law ” means any applicable Law in effect on or prior to the date hereof relating to pollution or the protection of human health, safety or the environment, including any relating to the generation, handling, labeling, disposal, use, or release of Hazardous Materials.
ERISA Affiliate ” means, with respect to the Companies, any entity, trade or business that is treated as a single employer with any of the Companies under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA, or that is a member of the same “controlled group” as any of the Companies pursuant to Section 4001(a)(14) of ERISA.
Escrow Agent ” means PNC Bank, National Association.
Escrow Agreement ” means the escrow agreement by and among the Escrow Agent, Buyer and Sellers substantially in the form attached hereto as Exhibit A .
Escrow Amount ” means the Indemnity Escrow Amount, the NWC Escrow Amount and the Beloit Escrow Amount.
Estimated Closing Proceeds ” means (a) $130,000,000, plus (b) Estimated Closing Cash, plus or minus (c) the amount by which the Estimated Closing Working Capital exceeds the Target Working Capital or the amount by which the Target Working Capital exceeds the Estimated Closing Working Capital, minus (d) the Estimated Closing Indebtedness, minus (e) the Estimated Transaction Expenses.
Export/Import Control Laws ” means the Arms Export Control Act, the International Emergency Economic Powers Act, the International Traffic in Arms Regulations, the Export Administration Regulations, the Laws and judgments administered by the U.S. Department of Treasury’s Office of Foreign Assets Control, the Laws relating to anti-boycott requirements administered by the U.S. Department of Commerce and the U.S. Department of the Treasury, the Tariff Act of 1930 and other Laws and programs administered by U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement and their predecessor agencies, the Foreign Trade Regulations and any other Laws and judgments governing the export or import of items, materials, technology or data.
FINSA ” means section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment and National Security Act of 2007.
Foreign Plan ” means each Company Benefit Plan that is subject to any Law other than U.S., federal, state or local law.
Fraud ” means conduct constituting fraud under the laws of the State of Delaware.
GAAP ” means generally accepted U.S. accounting principles, consistently applied.
Governmental Body ” means any government or governmental or regulatory body thereof, or political subdivision thereof, whether foreign, multi-national or other supra-national, national, federal, state, local or regional, or any agency, department, commission, board or bureau, instrumentality or authority thereof, or any court, arbitrator, arbitration panel or similar judicial body.
Hazardous Material ” means any substance, material or waste which is regulated as hazardous, toxic, a pollutant or contaminant or words of similar meaning under Environmental Laws, including petroleum and its by-products, asbestos and polychlorinated biphenyls.
HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended from time to time.
Indebtedness ” will have the meaning set forth in Schedule 9.1(a) .
Indemnity Escrow Amount ” means an amount equal to $3,500,000.
Intellectual Property ” means all intellectual property in any jurisdiction, including (a) patents and patent applications, continuations, divisionals, continuations-in-part, reissues and reexaminations and any counterparts (“ Patents ”), (b) trademarks, service marks, trade dress, logos, corporate names, domain names and trade names, together with the goodwill associated with any of the foregoing, and all applications and registrations therefor (“ Trademarks ”), (c) copyrights, copyrightable works, rights in databases, data collections, copyright registrations and copyright applications and corresponding rights in works of authorship, (d) trade secrets, (e) Software in any form, including Internet websites, web content and links, source code, object code and mobile applications, and (f) rights of publicity and personality.
IRS ” will mean the United States Internal Revenue Service and, to the extent relevant, the United States Department of Treasury.
Knowledge of the Companies ” means the actual knowledge after due inquiry of the officers of the Companies and the Subsidiaries and the individuals listed on Schedule 9.1(b) .
Law ” means any federal, state, local or foreign law, statute, code, ordinance, rule or regulation.
Legal Proceeding ” means any judicial, administrative or arbitral actions, suits or proceedings (public or private) by or before a Governmental Body.
Liability ” means, without duplication, any and all debts, losses, expenses, liabilities, damages, fines, costs, royalties, proceedings, deficiencies or obligations of any nature (whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, due or to become due, whether direct, indirect or consequential and whether or not resulting from third-party claims) and any out-of-pocket costs and expenses.
Lien ” means any lien, charge, pledge, mortgage, deed of trust, security interest, easement, servitude or other similar encumbrance.
Losses ” means any claims, demands, suits, proceedings, judgments, losses, liabilities, damages, costs and expenses.
Material Adverse Effect ” means any event that, individually or in the aggregate, (a) has had or would reasonably be expected to have a material adverse effect on the business, results of operations or financial condition of the Companies and their Subsidiaries, taken as a whole, or (b) would reasonably be expected to prevent or materially delay the consummation of the transactions contemplated by this Agreement, except that in no event will any of the following, alone or in combination, be deemed to constitute, nor will any of the following (including the effect of any of the following) be taken into account in determining whether there has been or will be, a “Material Adverse Effect” on or in respect of the Companies and their Subsidiaries, taken as a whole: (i) any change in applicable Laws or GAAP or any interpretation thereof; (ii) any change in interest rates or economic, political, business commodities or financial market conditions generally; (iii) any change generally affecting any of the industries in which the Companies or their Subsidiaries operate or the economy as a whole; (iv) the announcement or the execution of this Agreement, the performance of this Agreement, compliance with the terms of this Agreement, the taking of any action required, or refraining from taking any action prohibited, by this Agreement; (v) any natural disaster or acts of terrorism or war or the outbreak or escalation of hostilities or change in geopolitical conditions; (vi) any action taken or omitted to be taken by or at the request of or with the consent of Buyer; or (vii) any failure of the Companies or their Subsidiaries to meet any projections or forecasts (it being understood that the facts or occurrences giving rise to or contributing to such failure may be deemed to constitute, or be taken into account in determining whether there has been or will be, a Material Adverse Effect), except that with respect to clauses (i)-(iii) and (v), such matter will only be excluded from consideration to the extent it does not disproportionately affect the Companies and their Subsidiaries as compared to similarly situated businesses operating in the same industry and geographic areas in which the Companies and their Subsidiaries operate.
MEGTEC Business ” means the business of supplying custom-engineered environmental solutions and engineered products and aftermarket parts and services for industrial applications.
Net Adjustment Amount ” means the amount by which the Closing Date Purchase Price exceeds the Estimated Closing Proceeds.
NWC Escrow Amount ” means an amount equal to $1,500,000.
Order ” means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award of a Governmental Body of competent jurisdiction.
Ordinary Course of Business ” means the ordinary course of business of the Companies and their Subsidiaries consistent with past practice.
Organizational Documents ” means, with respect to any Person that is: (a) a corporation, its articles or certificate of incorporation or memorandum and articles of association, as the case may be, and bylaws; (b) a partnership, its certificate of partnership and partnership agreement; (c) a limited liability company, its certificate of formation and limited liability company or operating agreement; (d) a trust or other entity, its declaration or agreement of trust or other constituent document; and (e) any other Person, its comparable organizational documents, in each case, as has been amended or restated.
Overall Cap ” means an amount equal to $26,000,000.
Parent Guarantees ” means all the guarantees listed on Schedule 4.11(b) .
Permitted Exceptions ” means (a) statutory Liens for Taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings, (b) mechanics’, carriers’, workers’, repairers’ and similar Liens arising or incurred in the Ordinary Course of Business, (c) zoning, entitlement and other land use regulations by any Governmental Body, (d) Liens securing debt as disclosed in the Financial Statements, (e) title of a lessor under a capital or operating lease, (f) statutory Liens in favor of lessors, (g) Liens created by Buyer or its Affiliates, (h) Liens resulting from applicable securities Laws; and (i) other imperfections of title or Liens which do not and would not reasonably be expected to, individually or in the aggregate, detract from the value of the Company Property or interfere with the Company’s and/or their Subsidiaries’ present uses or occupancy of such Company Property or with the MEGTEC Business or the Universal Business.
Person ” means any individual, corporation, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other entity.
Post-Closing Tax Period ” means any Tax period beginning after the Closing Date including the portion of any Straddle Period that begins immediately after the Closing Date.
Pre-Closing Tax Period ” means any Tax period ending on or before the Closing Date including the portion of any Straddle Period that ends on the Closing Date.
Remedial Action ” means all actions to clean up, remove, treat or address any Hazardous Materials that have been released into and are present in the environment at concentrations exceeding those allowed by Environmental Laws, including pre-remedial studies and investigations or post-remedial monitoring and care.
Restrictive Open Source License Agreement ” means any license of Software that (a) requires the licensing and distribution of source code to licensees, (b) prohibits the receipt of consideration in connection with sublicensing or distributing of Software (other than a fee for provision of a copy to the third party receiving the sublicensing or distribution rights), or (c) requires the licensing and distribution of Software to any other Person for the purpose of making derivative works.
RWI Policy ” means the representations and warranty insurance policy, policy number ET111-000-700, between Buyer and Euclid Transactional, LLC dated June 5, 2018.
Securities Act ” means the Securities Act of 1933.
Sellers Fundamental Representations ” means the representations and warranties of Sellers in Sections ‎2.1 -‎ 2.5 , Section ‎2.7(a) , Section ‎2.18 and Section ‎2.24 .
Software ” means all computer software and code, including assemblers, applets, compilers, source code, object code, development tools, design tools, user interfaces, databases and data, in any form or format, however fixed, including any related documentation.
Solvent ” means, with respect to Seller Parent, as of the relevant date of determination, that (i) the aggregate fair saleable value of the assets of Seller Parent and its consolidated Subsidiaries, taken as a whole, as of such date, exceeds the amount that will be required to pay the probable liabilities of Seller Parent and its consolidated Subsidiaries, taken as a whole, on their existing debts (including contingent liabilities), as such debts become absolute and matured, (ii) Seller Parent and its consolidated Subsidiaries, taken as a whole, do not have, as of such date, an unreasonably small amount of capital for the operation of their businesses, taken as a whole, in which they are engaged or in which they are about to engage, and (iii) Seller Parent and its consolidated Subsidiaries, taken as a whole, will be able to pay its liabilities, including contingent and other liabilities, as they become absolute and matured. The amount of contingent liabilities at any time will be determined in accordance with GAAP.
Subsidiary ” means, when used with respect to any Party, any Person of which a majority of the outstanding voting securities or other voting equity interests are owned, directly or indirectly, by such Party.
Straddle Period ” means any taxable period beginning on or before the Closing Date and ending after the Closing Date.
Target Working Capital ” means $17,000,000.
Tax Authority ” means any governmental or regulatory authority which has the jurisdiction, power or mandate to impose, collect or administer Taxes.
Tax Return ” means all returns, claims for refund, amended returns, declarations, reports, estimates, information returns and statements or other documents (including any related or supporting information) filed or required to be filed with any Tax Authority in respect of any Taxes.
Taxes ” means all income, profits, capital gains, payroll, unemployment, value added, customs duties, premium, compensation, franchise, gross receipts, capital, net worth, sales, use, withholding, social security, disability, real property, personal property (tangible and intangible), stamp, transfer (including real property transfer or gains), excise, duties, levies, imposts, estimated, ad valorem, any amount owed in respect of any Law relating to unclaimed property or escheat and any other taxes of any kind (including any and all fines, penalties and additions attributable to or otherwise imposed on or with respect to any such taxes and interest thereon) imposed by or on behalf of any Tax Authority, and (ii) any Liability for or in respect of any amounts described in clause (i) as a transferee or successor, by Contract, or as a result of having filed any Tax Return on a combined, consolidated, unitary, affiliated or similar basis with any other Person.
Transaction Expenses ” means the fees and expenses of the Companies or any of their Subsidiaries incurred through the Closing in connection with this Agreement and the consummation of the Transaction, including the fees and expenses of William Blair and Jones Day. For the avoidance of doubt, Transaction Expenses will not include any fees or expenses incurred by Buyer or any of its financial advisors, attorneys, accountants, advisors, consultants or other representatives or financing sources, regardless of whether any such fees or expenses may be paid after the Closing by the Companies or any of their Subsidiaries, or any fees and expenses Buyer expressly agrees to pay pursuant to this Agreement.
Transaction Tax Deduction ” means, without duplication, any item of loss or deduction resulting from (a) transaction bonuses, change in control payments, severance payments, retention payments, or similar payments made by the Companies or any of their Subsidiaries in connection with this Agreement, (b) the fees, expenses, and interest (including amounts treated as interest for income Tax purposes and any breakage fees or accelerated deferred financing fees), original issue discount, unamortized debt financing costs, tender premiums, consent fees, redemption, retirement or make-whole payments, defeasance in excess of par or similar payments incurred by the Companies or any of their Subsidiaries with respect to the payment of Indebtedness in connection with this Agreement, (c) the Transaction Expenses, (d) all fees, costs and expenses paid, or otherwise taken into account in determining the Purchase Price pursuant to Article I hereof, by the Companies or any of their Subsidiaries in connection with this Agreement and the transactions contemplated hereby, (e) the cancellation of employee or other compensatory arrangements pursuant to this Agreement, and (f) any employment Taxes paid, or otherwise taken into account in determining the Purchase Price pursuant to Article I hereof, with respect to the amounts set forth in the foregoing clauses (a) and (e); provided that, the Parties will apply the safe harbor election set forth in Internal Revenue Service Revenue Procedure 2011-29 to determine the amount of any deductible success based fees for purposes of clause (iv) above.
Transfer Taxes ” means any real property transfer, sales, use, value added, stamp, documentary, recording, registration, conveyance, stock transfer, intangible property transfer, personal property transfer, registration, duty, securities transactions or similar fees or Taxes or governmental charges (together with any interest or penalty, addition to Tax or additional amount imposed) as levied by any Tax Authority in connection with the Transaction, including any payments made in lieu of any such Taxes or governmental charges, which become payable in connection with the Transaction; provided , however , that Transfer Taxes will not include any Taxes determined by reference to income or gain realized with respect to the transfer.
Transition Services Agreement ” means the transition services agreement by and among Sellers, Buyer and their respective Affiliates substantially in the form attached hereto as Exhibit B .
Treasury Regulation ” means the regulations promulgated by the United States Department of the Treasury under the Code.
Universal Business ” means the business of providing custom-engineered acoustic, emission and filtration solutions.
U.S. Employees ” means individuals employed by the Companies or their respective Subsidiaries in the United States of America on the Closing Date.
Working Capital ” will have the meaning set forth in Schedule 9.1(a) .
(a)      The following terms will have the meaning specified in the indicated Sections of this Agreement.
Defined Term
 
Agreement
1

Back-to-Back Guarantee
36

Buyer
1

Buyer Indemnitees
54

Change of Control Payment
16

Closing
2

Closing Date Purchase Price
4

Closing Date.
2

Closing Schedule
3

Closing Statement
4

Companies
1

Company
1

Company Benefit Plan
17

Company Properties
13

Competing Business
44

Competition Law Approvals
29

Confidential Information
49

Confidentiality Agreement
32

Covered Person
44

D&O Indemnitees
32

De Minimis Claims Amount
54

Deductible
55

Draft Allocation Statement
40

Enforceability Exception
7

Equity Interests
1

ERISA
17

Escrow Account
3

Escrow Release Date
56

Estimated Closing Cash
3

Estimated Closing Indebtedness
3

Estimated Closing Working Capital
3

Estimated Transaction Expenses
3

Exploit
47

Final Allocation
40

Financial Advisor
21

Financial Statements
10

Holdings
1

Indemnified Persons
32

Indemnitee
57

Indemnitor
57

Independent Accountant
4

Known Legal Proceedings
10

Liability Cap
55

Licensed Field
47

Licensed IP
47

Licensed Patents
48

Management-Level Employee
44

Material Contracts
15

MEGTEC Seller
1

MEGTEC Shares
1

MEGTEC Units
1

MEGTEC US
1

New Benefits
35

Notice of Disagreement
4

Outside Date
52

Owned Property
13

Parent
1

Parties
1

Patents
66

Permit
10

Purchase Price
1

Real Property Lease
13

Related Person
21

Required Regulatory Approvals
9

Restricted Period
44

Review Period
4

Scheduled Guarantee
36

Section 338(h)(10) Elections
43

Seller
1

Seller Benefit Plan
17

Seller Group
62

Seller Indemnitees
54

Seller Marks
45

Seller Parent
1

Sellers
1

Tax Claim
38

Tax Dispute
42

Tax Referee
42

Third-Party Claim
57

Trademarks
66

Transaction
1

Universal
1

Universal Seller
1

Universal Shares
1

9.2      Construction . (a) Unless otherwise expressly provided herein, for purposes of this Agreement, the following rules of interpretation will apply:
(i)      Calculation of Time Period . When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period will be excluded. If the period in question is based on Business Days and the last day of such period is a non-Business Day, the period in question will end on the next succeeding Business Day.
(ii)      Days . Any reference in this Agreement to days will mean calendar days, unless expressly specified to refer to Business Days.
(iii)      Dollars . Any reference in this Agreement to $ will mean U.S. dollars.
(iv)      Exhibits/Annexes/Schedules . The Exhibits, Annexes and Schedules to this Agreement are hereby incorporated and made a part hereof and are an integral part of this Agreement. All Exhibits, Annexes and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein will be defined as set forth in this Agreement.
(v)      Gender and Number . Any reference in this Agreement to gender will include all genders, and words imparting the singular number only will include the plural and vice versa.
(vi)      Headings . The provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and will not affect or be utilized in construing or interpreting this Agreement. All references in this Agreement to any “Section” are to the corresponding Section of this Agreement unless otherwise specified.
(vii)      Herein . The words such as “herein,” “hereinafter,” “hereof” and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires.
(viii)      Including . The word “including” or any variation thereof means “including, without limitation” and will not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.
(ix)      Law . Each reference in this Agreement to any Law will be deemed to include such Law as it hereafter may be amended, supplemented or modified from time to time and any successor thereto, unless such treatment would be contrary to the express terms of this Agreement.
(b)      Made Available . Any reference to documents or other information being “made available” or “provided” to Buyer means that such documents or information were available to Buyer in the electronic dataroom hosted by Intralinks prior to the second Business Day preceding the date of this Agreement.
(c)      Joint Drafting . The Parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement will be construed as jointly drafted by the Parties hereto and no presumption or burden of proof will arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.
[Signature page follows]


58




In witness whereof, the Parties hereto have caused this agreement to be duly executed by their respective officers thereunto duly authorized, as of the date first written above.
SELLERS:
B&W EQUITY INVESTMENTS, LLC
By:     /s/ Mark A. Carano
    Name: Mark A. Carano
    Title:     Vice President
THE BABCOCK & WILCOX COMPANY
By:     /s/ Mark A. Carano
    Name:     Mark A. Carano
    Title:     Senior Vice President
SELLER PARENT:
BABCOCK & WILCOX ENTERPRISES, INC.
By:     /s/ Mark A. Carano
    Name:     Mark A. Carano
    Title:     Senior Vice President
COMPANIES:
BABCOCK & WILCOX MEGTEC HOLDINGS, INC.

[Signature Page to Stock Purchase Agreement]



By:     /s/ Kenneth Zak
    Name:     Kenneth Zak
    Title:     Senior Vice President - B&W MEGTEC
BABCOCK & WILCOX MEGTEC, LLC
By:     /s/ J. André Hall
    Name:    J. André Hall
    Title:    Secretary
BABCOCK & WILCOX UNIVERSAL, INC.
By:     /s/ J. André Hall
    Name:    J. André Hall
    Title:    Vice President and Secretary
[Signature page continues]






BUYER:

DURR INC.
By:     /s/ Andreas Birk
    Name:     Andreas Birk
    Title:     Primary Point of Contact
By:     /s/ Dr. Sebastian Baumann
    Name:     Dr. Sebastian Baumann
    Title:     Primary Point of Contact
Solely for the provisions noted on the Cover Page:
PARENT:

DÜRR AKTIENGESELLSCHAFT
By:     /s/ Andreas Birk
    Name:     Andreas Birk
    Title:     Senior Vice President and General Counsel
By:     /s/ Dr. Sebastian Baumann
    Name:     Dr. Sebastian Baumann
    Title:     Director of Corporate Development



[Signature Page to Stock Purchase Agreement]



Exhibit A
Escrow Agreement
See attached.







Exhibit B
Transition Services Agreement
See attached.



EXHIBIT 10.4


CONSENT AND AMENDMENT NO. 7 TO CREDIT AGREEMENT
This CONSENT AND AMENDMENT NO. 7 TO CREDIT AGREEMENT (this “ Amendment ”), dated as of May 31, 2018, is among BABCOCK & WILCOX ENTERPRISES, INC. , a Delaware corporation (the “ Borrower ”), BANK OF AMERICA, N.A. , in its capacity as administrative agent for the Lenders (as defined in the Credit Agreement described below) (in such capacity, the “ Administrative Agent ”), and each of the Lenders party hereto, and, for purposes of Sections 1, 2, 3, 4, 7 and 8 hereof, acknowledged and agreed by certain Subsidiaries of the Borrower, as Guarantors.
W I T N E S S E T H:
WHEREAS , the Borrower, the Administrative Agent and the Lenders have entered into that certain Credit Agreement, dated as of May 11, 2015 (as amended by Amendment No. 1 to Credit Agreement, dated as of June 10, 2016, Amendment No. 2 to Credit Agreement, dated as of February 24, 2017, Amendment No. 3 to Credit Agreement, dated as of August 9, 2017 (“ Amendment No. 3 ”), Amendment No. 4 to Credit Agreement, dated as of September 20, 2017, Amendment No. 5 to Credit Agreement, dated as of March 1, 2018 (“ Amendment No. 5 ”), and Amendment No. 6 to Credit Agreement, dated as of April 10, 2018, and from time to time further amended, supplemented, restated, amended and restated or otherwise modified, the “ Credit Agreement ”; capitalized terms used in this Amendment not otherwise defined herein shall have the respective meanings given thereto in the Credit Agreement), pursuant to which the Lenders have provided a revolving credit facility to the Borrower;

WHEREAS , the Borrower and the other Loan Parties have entered into that certain Pledge and Security Agreement, in favor of the Administrative Agent for the ratable benefit of the Secured Parties, dated as of June 30, 2015 (as amended by Amendment No. 3 and Amendment No. 5 and from time to time further amended, supplemented, restated, amended and restated or otherwise modified, the “ Collateral Agreement ”);

WHEREAS , the Borrower has requested that the Administrative Agent and the Required Lenders agree to consent to certain sales of assets (i) not otherwise permitted under Section 7.04 of the Credit Agreement or (ii) requiring that the terms and conditions of the documentation relating thereto shall be satisfactory to the Required Lenders and the Administrative Agent, and the Administrative Agent and the Lenders signatory hereto are willing to consent to such sales on the terms and conditions contained in this Amendment; and

WHEREAS , the Borrower has requested that the Administrative Agent and the Required Lenders agree to amend the Credit Agreement to extend the deadline for the CIO to present the strategic plan and the Plan to the Administrative Agent and the Lenders pursuant to Section 6.33 of the Credit Agreement and agree to amend the Collateral Agreement as set forth herein, and the Administrative Agent and the Lenders signatory hereto are willing to effect such amendment on the terms and conditions contained in this Amendment.


NOW, THEREFORE
, in consideration of the premises and further valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:



    
    

1.
Consent.

Effective upon the Amendment No. 7 Effective Date (as defined below), the Administrative Agent and the Lenders party hereto hereby consent to the following:

(a)
Notwithstanding Section 7.04 of the Credit Agreement, Babcock & Wilcox India Holdings, Inc. may consummate an Asset Sale of its Equity Interests in Thermax Babcock & Wilcock Energy Solutions, Ltd. to Thermax Limited, provided that (i) such Asset Sale is consummated, and the terms and conditions of the documentation relating to such Asset Sale are, in accordance with the materials delivered to the Administrative Agent on May 25, 2018 (the ” Lender Consent Request ”) and (ii) such documentation is substantially in the same form as the draft documentation delivered to the Administrative Agent on May 25, 2018, other than any changes thereto that are reasonably satisfactory to the Administrative Agent (the “ Indian JV Sale ”).

(b)
Pursuant to Section 7.04(o) of the Credit Agreement, the Administrative Agent and the Required Lenders deem the terms and conditions relating to the sale of the Selected Assets described in the Orion Plan, and the documentation relating to such Asset Sale, satisfactory, provided that (i) such Asset Sale is consummated, and the terms and conditions of the documentation relating to such Asset Sale are, in accordance with the Lender Consent Request and (ii) such documentation is substantially in the same form as the draft documentation delivered to the Administrative Agent on May 29, 2018, other than any changes thereto that are reasonably satisfactory to the Administrative Agent (the “ Orion Sale ”).
2.
Amendments to the Credit Agreement.
The Credit Agreement is, effective as of the Amendment No. 7 Effective Date, hereby amended as follows:

(a)
The definition of “Liquidity” in Section 1.01 ( Defined Terms ) of the Credit Agreement shall be amended by inserting the text underlined below to read in its entirety as follows:

Liquidity ” means at any time the sum of (a) unrestricted cash and Cash Equivalents of the Borrower and the other Loan Parties, subject to a Control Agreement in favor of the Administrative Agent (excluding any Cash Collateral), provided that such cash shall not be required to be subject to a Control Agreement until 30 days after the Amendment No. 3 Effective Date, (b) unrestricted cash and Cash Equivalents of the Non-Loan Parties in an amount not to exceed $50,000,000 and (c) (i) after the Amendment No. 3 Effective Date and during the Relief Period, the lesser of (x) the Relief Period Sublimit, less the aggregate outstanding principal amount of Revolving Credit Loans and (y) the Revolving Credit Facility, less the Total Outstandings (other than, after the consummation of the sale of Selected Assets in accordance with the Orion Plan, the aggregate amount available to be drawn under all outstanding Letters of Credit originally issued solely on account of the operations of MEGTEC, Universal and their respective Subsidiaries to the extent that such obligations are Cash Collateralized or backstopped by a letter of credit (other than a Letter of Credit issued hereunder), in form and substance reasonably satisfactory to the Administrative Agent and the applicable L/C Issuer) , and, (ii) other than during the Relief Period,



    
    

the Revolving Credit Facility, less the Total Outstandings (other than, after the consummation of the sale of Selected Assets in accordance with the Orion Plan, the aggregate amount available to be drawn under all outstanding Letters of Credit originally issued solely on account of the operations of MEGTEC, Universal and their respective Subsidiaries to the extent that such obligations are Cash Collateralized or backstopped by a letter of credit (other than a Letter of Credit issued hereunder), in form and substance reasonably satisfactory to the Administrative Agent and the applicable L/C Issuer) .

(b)
Section 6.33 (Chief Implementation Officer) of the Credit Agreement shall be amended by inserting the text underlined below and deleting the text stricken below to read in its entirety as follows:

6.33 Chief Implementation Officer . As soon as commercially reasonable and in no event later than 30 days after Amendment No. 5 Effective Date, the Borrower shall appoint on terms and having a scope of engagement satisfactory to the Administrative Agent and the Required Lenders (which appointment shall not be modified or terminated without the consent of the Administrative Agent and the Required Lenders) a chief implementation officer acceptable to the Administrative Agent and the Required Lenders (the “ CIO ”), which CIO shall (a) report to and be supervised by the board of directors of the Borrower and be vested with the power and authority to manage, direct and control the business, affairs and property of the Borrower and its Subsidiaries (including sales of the Selected Assets) and to perform any and all acts and activities customary or incident to the management of the Borrower and its Subsidiaries’ activities and such additional duties as the board of directors may from time to time determine, (b) develop in conjunction with the board of directors and the chief executive officer and present to the Administrative Agent and the Lenders (i) prior to July 25, 2018, an updated financial forecast for 2018, which addresses near-term (x) project risks for the Vølund Projects, including risks related to critical milestone and turnover dates, (y) cost savings measures and (z) asset divestitures, and (ii) prior to September 30, 2018, (x) the Plan, which shall also cover related timing of deleveraging and increasing profitability of the Borrower and its Subsidiaries, and (y) a strategic plan with detailed descriptions of performance improvement initiatives and cost reduction and cost saving measures within 90 days of the CIO’s date of retention, a strategic plan, including performance improvement initiatives, cost reduction and cost savings measures, and specific asset sales and related timing to deleverage the Borrower and its business and increase profitability, (c) present the Plan to the Administrative Agent and the Lenders prior to within 90 days of the CIO’s date of retention [Reserved] , (d) present the Orion Plan to the Administrative Agent and the Lenders within 60 days of the CIO’s date of retention and (e) be authorized by the Borrower to communicate directly with the Administrative Agent and the Lenders as to its duties described above.
3.
Amendment to the Collateral Agreement.

The Collateral Agreement is, effective as of the Amendment No. 7 Effective Date, hereby amended as follows:

Clause (a) of Section 7.13 ( Releases; Termination of this Agreement ) of the Collateral Agreement shall be amended by inserting the text underlined below to read in its entirety as follows:




    
    

(a)     At such time as the Loans and the other Obligations (other than (i) contingent indemnification obligations for which no claims have been asserted and (ii) Obligations in respect of Secured Cash Management Agreements and Secured Hedge Agreements either (A) as to which arrangements satisfactory to the applicable Cash Management Bank or Hedge Bank shall have been made or (B) notice has not been received by the Administrative Agent from the applicable Cash Management Bank or Hedge Bank that such amounts are then due and payable) shall have been paid in full, the Commitments under the Credit Agreement have been terminated or expired and each Letter of Credit issued under the Credit Agreement shall be Cash Collateralized or no longer outstanding (other than Letters of Credit as to which other arrangements satisfactory to the Administrative Agent and the applicable L/C Issuer shall have been made), the Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent and each Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors. At the request and sole expense of any Grantor following any such termination, the Administrative Agent shall deliver to such Grantor any Collateral held by the Administrative Agent hereunder, and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination.

4.
Additional Acknowledgement and Agreements.
(a)      The parties hereto agree to revisit covenants set forth in Sections 7.16(a) and (b) after the consummation of the Orion Sale, taking into account the EBITDA associated with the Selected Assets being sold and the application of the sale proceeds thereof.

(b)     The parties hereto agree that the specified milestone on the schedule set forth on Exhibit C to Amendment No. 5 with respect to the Templeborough project shall be extended to July 15, 2018.
5.
Effectiveness; Conditions Precedent.
The amendments contained herein shall only be effective upon the satisfaction or waiver of each of the following conditions precedent (the date of satisfaction or waiver, the “ Amendment No. 7 Effective Date ”):
(a)
the Administrative Agent shall have received each of the following documents or instruments in form and substance acceptable to the Administrative Agent:
(i)
counterparts of this Amendment executed by the Loan Parties and the Required Lenders;
(ii)
such documentation and other information as has been reasonably requested by the Administrative Agent with respect to Orion Sale and the Indian JV Sale;
(iii)
a certificate of the chief financial officer or treasurer of the Borrower certifying that as of the Amendment No. 7 Effective Date (A) all of the representations and warranties in this Amendment are true and correct in all material respects (or, to the extent any such representation and warranty is modified by a materiality or Material Adverse Effect standard, in all respects) as of such date (except to the extent that such representations and



    
    

warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects (or, to the extent any such representation and warranty is modified by a materiality or Material Adverse Effect standard, in all respects) as of such earlier date), (B) no Default shall exist, or would result from the occurrence of the Amendment No. 7 Effective Date and (C) that since December 31, 2017, there have not occurred any facts, circumstances, changes, developments or events which, individually or in the aggregate, have constituted or would reasonably be expected to result in, a Material Adverse Effect; and
(iv)
a solvency certificate, executed by a Responsible Officer of the Borrower in form and substance reasonably acceptable to the Administrative Agent, which, among other things, shall certify that the Borrower will be Solvent after giving effect to the consummation of the Orion Sale and the Indian JV Sale on a pro forma basis.

(b)
without prejudice to, or limiting the Borrower’s obligations under, Section 10.04 ( Expenses; Indemnity; Damage Waiver ) of the Credit Agreement, all outstanding fees, costs and expenses due to the Administrative Agent and the Lenders, including on account of Agent’s Legal Advisor and FTI, shall have been paid in full to the extent that the Borrower has received an invoice therefor (with reasonable and customary supporting documentation) at least two Business Days prior to the Amendment No. 7 Effective Date (without prejudice to any post-closing settlement of such fees, costs and expenses to the extent not so invoiced);
(c)
each of the representations and warranties made by the Borrower in Section 6 hereof shall be true and correct.
The Administrative Agent agrees that it will, upon the satisfaction or waiver of the conditions contained in this Section 5 , promptly provide written notice to the Borrower and the Lenders of the effectiveness of this Amendment.
6.
Representations and Warranties.
In order to induce the Administrative Agent and the Lenders to enter into this Amendment, the Borrower represents and warrants to the Administrative Agent and the Lenders, for itself and for each other Loan Party, as follows:
(a)
that both immediately prior to and immediately after giving effect to this Amendment,
no Default exists;
(b)
the representations and warranties contained in the Credit Agreement (as amended
hereby) are true and correct in all material respects on and as of the date hereof (except to the extent that such representations and warranties (i) specifically refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date and (ii) contain a materiality or Material Adverse Effect qualifier, in which case such representations and warranties shall be true and correct in all respects);



    
    

(c)
the execution, delivery and performance by the Borrower and the other Loan Parties
of this Amendment and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate, limited liability company or partnership action, including the consent of shareholders, partners and members where required, do not contravene any Loan Party or any of its Subsidiaries’ respective Constituent Documents, do not violate any Requirement of Law applicable to any Loan Party or any order or decree of any Governmental Authority or arbiter applicable to any Loan Party and do not require the consent of, authorization by, approval of, notice to, or filing or registration with, any Governmental Authority or any other Person in order to be effective and enforceable;
(d)
this Amendment has been duly executed and delivered on behalf of the Borrower and
the other Loan Parties;
(e)
this Amendment constitutes a legal, valid and binding obligation of the Borrower and
the other Loan Parties enforceable against the Borrower and the other Loan Parties in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, Debtor Relief Laws or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity; and
(f)
as of the date hereof, all Liens, security interests, assignments and pledges encumbering the Collateral, created pursuant to and/or referred to in the Credit Agreement or the other Loan Documents, are valid, enforceable, duly perfected to the extent required by the Loan Documents, non-avoidable, first priority liens, security interests, assignments and pledges (subject to Liens permitted by Section 7.02 of the Credit Agreement), continue unimpaired, are in full force and effect and secure and shall continue to secure all of the obligations purported to be secured in the respective Security Instruments pursuant to which such Liens were granted.
7.
Consent, Acknowledgement and Reaffirmation of Indebtedness and Liens.
By its execution hereof, each Loan Party, in its capacity under each of the Loan Documents to which it is a party (including the capacities of debtor, guarantor, grantor and pledgor, as applicable, and each other similar capacity, if any, in which such party has granted Liens on all or any part of its properties or assets, or otherwise acts as an accommodation party, guarantor, indemnitor or surety with respect to all or any part of the Obligations), hereby:
(a)
expressly consents to the amendments and modifications to the Credit Agreement and the Collateral Agreement effected hereby;
(b)
expressly confirms and agrees that, notwithstanding the effectiveness of this Amendment, each Loan Document to which it is a party is, and all of the obligations and liabilities of such Loan Party to the Administrative Agent, the Lenders and each other Secured Party contained in the Loan Documents to which it is a party (in each case, as amended and modified by this Amendment), are and shall continue to be, in full force and effect and are hereby reaffirmed, ratified and confirmed in all respects and, without limiting the foregoing, agrees to be bound by and abide by and operate and perform under and pursuant to and comply fully with all of the terms, conditions, provisions,



    
    

agreements, representations, undertakings, warranties, indemnities, guaranties, grants of security interests and covenants contained in the Loan Documents;
(c)
to the extent such party has granted Liens or security interests on any of its properties or assets pursuant to any of the Loan Documents to secure the prompt and complete payment, performance and/or observance of all or any part of its Obligations to the Administrative Agent, the Lenders, and/or any other Secured Party, acknowledges, ratifies, remakes, regrants, confirms and reaffirms without condition, all Liens and security interests granted by such Loan Party to the Administrative Agent for their benefit and the benefit of the Lenders, pursuant to the Credit Agreement and the other Loan Documents, and acknowledges and agrees that all of such Liens and security interests are intended and shall be deemed and construed to continue to secure the Obligations under the Loan Documents, as amended, restated, supplemented or otherwise modified and in effect from time to time, including but not limited to, the Loans made by, and Letters of Credit provided by, the Administrative Agent and the Lenders to the Borrower and/or the other Loan Parties under the Credit Agreement, and all extensions renewals, refinancings, amendments or modifications of any of the foregoing;
(d)
agrees that this Amendment shall in no manner impair or otherwise adversely affect any of the Liens and security interests granted in or pursuant to the Loan Documents; and
(e)
acknowledges and agrees that: (i) the Guaranty and any obligations incurred thereunder, have been provided in exchange for “reasonably equivalent value” (as such term is used under the Bankruptcy Code and applicable state fraudulent transfer laws) and “fair consideration” (as such term is used under applicable state fraudulent conveyance laws) and (ii) each grant or perfection of a Lien or security interest on any Collateral provided in connection with Loan Documents, this Amendment and/or any negotiations with the Administrative Agent and/or the Lenders in connection with a “workout” of the Obligations is intended to constitute, and does constitute, a “contemporaneous exchange for new value” (as such term is used in section 547 of the Bankruptcy Code).
8.
Releases; Waivers.
(a) By its execution hereof, each Loan Party (on behalf of itself and its Affiliates) and its successors-in-title, legal representatives and assignees and, to the extent the same is claimed by right of, through or under any Loan Party, for its past, present and future employees, agents, representatives, officers, directors, shareholders, and trustees (each, a “ Releasing Party ” and collectively, the “ Releasing Parties ”), does hereby remise, release and discharge, and shall be deemed to have forever remised, released and discharged, the Administrative Agent, the Lenders and each of the other Secured Parties, and the Administrative Agent’s, each Lenders’ and each other Secured Party’s respective successors-in-title, legal representatives and assignees, past, present and future officers, directors, affiliates, shareholders, trustees, agents, employees, consultants, experts, advisors, attorneys and other professionals and all other persons and entities to whom any of the foregoing would be liable if such persons or entities were found to be liable to any Releasing Party, or any of them (collectively hereinafter the “ Lender Parties ”), from any and all manner of action and actions, cause and causes of action, claims, charges, demands, counterclaims, suits, covenants, controversies, damages, judgments, expenses, liens, claims of liens, claims of costs, penalties, attorneys’ fees, or any other



    
    

compensation, recovery or relief on account of any liability, obligation, demand or cause of action of whatever nature, whether in law, equity or otherwise (including, without limitation, any so called “lender liability” claims, claims for subordination (whether equitable or otherwise), interest or other carrying costs, penalties, legal, accounting and other professional fees and expenses and incidental, consequential and punitive damages payable to third parties, or any claims arising under 11 U.S.C. §§ 541-550 or any claims for avoidance or recovery under any other federal, state or foreign law equivalent), whether known or unknown, fixed or contingent, joint and/or several, secured or unsecured, due or not due, primary or secondary, liquidated or unliquidated, contractual or tortious, direct, indirect, or derivative, asserted or unasserted, foreseen or unforeseen, suspected or unsuspected, now existing, heretofore existing or which may heretofore have accrued against any of the Lender Parties under the Credit Agreement or any of the other Loan Documents, whether held in a personal or representative capacity, and which are based on any act, fact, event or omission or other matter, cause or thing occurring at or from any time prior to and including the date hereof, in all cases of the foregoing in any way, directly or indirectly arising out of, connected with or relating to the Credit Agreement or any other Loan Document and the transactions contemplated thereby, and all other agreements, certificates, instruments and other documents and statements (whether written or oral) related to any of the foregoing (each, a “ Claim ” and collectively, the “ Claims ”), in each case, other than Claims arising from Lender Parties’ gross negligence, fraud, or willful misconduct. Each Releasing Party further stipulates and agrees with respect to all Claims, that it hereby waives, to the fullest extent permitted by applicable law, any and all provisions, rights, and benefits conferred by any applicable U.S. federal or state law, or any principle of common law, that would otherwise limit a release or discharge of any unknown Claims pursuant to this Section 8.
(b) By its execution hereof, each Loan Party hereby (i) acknowledges and confirms that there are no existing defenses, claims, subordinations (whether equitable or otherwise), counterclaims or rights of recoupment or setoff against the Administrative Agent, the Lenders or any other Secured Parties in connection with the Obligations or in connection with the negotiation, preparation, execution, performance or any other matters relating to the Credit Agreement, the other Loan Documents or this Amendment and (ii) expressly waives any setoff, counterclaim, recoupment, defense or other right that such Loan Party now has against the Administrative Agent, any Lender or any of their respective affiliates, whether in connection with this Amendment, the Credit Agreement and the other Loan Documents, the transactions contemplated by this Amendment or the Credit Agreement and the Loan Documents, or any agreement or instrument relating thereto.
9.
Entire Agreement.
This Amendment, the Credit Agreement (including giving effect to the consents and amendment set forth in Sections 1 and 2 above), the Collateral Agreement (including giving effect to the amendment set forth in Section 3 above) and the other Loan Documents (collectively, the “ Relevant Documents ”), set forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relating to such subject matter. No promise, condition, representation or warranty, express or implied, not set forth in the Relevant Documents shall bind any party hereto, and no such party has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as otherwise expressly stated in the Relevant Documents, no representations, warranties or commitments, express or implied, have been made by any



    
    

party to any other party in relation to the subject matter hereof or thereof. None of the terms or conditions of this Amendment may be changed, modified, waived or canceled orally or otherwise, except in writing and in accordance with Section 10.01 of the Credit Agreement.
10.
Full Force and Effect of Credit Agreement.
This Amendment is a Loan Document (and the Borrower and the other Loan Parties agree that the “Obligations” secured by the Collateral shall include any and all obligations of the Loan Parties under this Amendment). Except as expressly modified hereby, all terms and provisions of the Credit Agreement and all other Loan Documents remain in full force and effect and nothing contained in this Amendment shall in any way impair the validity or enforceability of the Credit Agreement or the Loan Documents, or alter, waive, annul, vary, affect, or impair any provisions, conditions, or covenants contained therein or any rights, powers, or remedies granted therein. This Amendment shall not constitute a modification of the Credit Agreement or any of the other Loan Documents or a course of dealing with Administrative Agent or the Lenders at variance with the Credit Agreement or the other Loan Documents such as to require further notice by Administrative Agent or any Lender to require strict compliance with the terms of the Credit Agreement and the other Loan Documents in the future, except in each case as expressly set forth herein. The Borrower acknowledges and expressly agrees that Administrative Agent and the Lenders reserve the right to, and do in fact, require strict compliance with all terms and provisions of the Credit Agreement and the other Loan Documents (subject to any qualifications set forth therein), as amended herein.
11.
Counterparts; Effectiveness.
This Amendment may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Except as provided in Section 5 above, this Amendment shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Amendment by facsimile, electronic email or other electronic imaging means ( e.g ., “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart of this Amendment.
12.
Governing Law; Jurisdiction; Waiver of Jury Trial.
THIS AMENDMENT AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AMENDMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Sections 10.04, 10.14 and 10.15 of the Credit Agreement are hereby incorporated by herein by this reference.
13.
Severability.
If any provision of this Amendment is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Amendment shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the



    
    

illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
14.
References.
All references in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement and each reference to the “Credit Agreement”, (or the defined term “Agreement”, “thereunder”, “thereof” of words of like import referring to the Credit Agreement) in the other Loan Documents shall mean and be a reference to the Credit Agreement as amended hereby and giving effect to the amendments contained in this Amendment. All references in the Collateral Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Collateral Agreement and each reference to the “Collateral Agreement”, (or the defined term “Agreement”, “thereunder”, “thereof” or words of like import referring to the Collateral Agreement) in the other Loan Documents shall mean and be referenced to the Collateral Agreement as amended hereby and giving effect to the amendments contained in this Amendment.
15.
Successors and Assigns.
This Amendment shall be binding upon the Borrower, the Lenders and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of the Borrower, the Lenders and the Administrative Agent and the respective successors and assigns of the Borrower, the Lenders and the Administrative Agent.
16.
Lender Acknowledgment.
Each Lender that has signed this Amendment shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required hereunder to be consented to or approved by or acceptable or satisfactory to a Lender, unless the Administrative Agent shall have received notice from such Lender prior to the proposed Amendment No. 6 Effective Date specifying its objection thereto.
17.
Amendments.   
 
This Amendment may be amended, supplemented or otherwise modified only by a written agreement signed by the Borrower, the other Loan Parties, the Administrative Agent and the Required Lenders and none of the provisions hereof may be waived without the prior written consent of the Administrative Agent and the Required Lenders.
[ Signature pages follow ]



    
    

IN WITNESS WHEREOF , the parties hereto have caused this instrument to be made, executed and delivered by their duly authorized officers as of the day and year first above written.

BABCOCK & WILCOX ENTERPRISES, INC.


/s/ Orville Lunking
__________________________________________
Name: Orville Lunking
Title:    Vice President & Treasurer

Acknowledged and Agreed for purposes of Sections 1, 2, 3, 4, 7 and 8 of the Amendment:

AMERICON EQUIPMENT SERVICES, INC.
AMERICON, LLC
BABCOCK & WILCOX CONSTRUCTION CO., LLC
BABCOCK & WILCOX EBENSBURG POWER, LLC
BABCOCK & WILCOX EQUITY INVESTMENTS, LLC
BABCOCK & WILCOX HOLDINGS, LLC
BABCOCK & WILCOX INDIA HOLDINGS, INC.
BABCOCK & WILCOX INTERNATIONAL SALES AND SERVICE CORPORATION
BABCOCK & WILCOX INTERNATIONAL, INC.
BABCOCK & WILCOX MEGTEC HOLDINGS, INC.
BABCOCK & WILCOX MEGTEC, LLC
BABCOCK & WILCOX POWER GENERATION GROUP CANADA CORP.
BABCOCK & WILCOX SPIG, INC.
BABCOCK & WILCOX TECHNOLOGY, LLC
BABCOCK & WILCOX UNIVERSAL, INC.
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, LLC
DPS ANSON, LLC

/s/ Robert P. McKinney
__________________________________________
Name: Robert P. McKinney
Title:    Assistant Secretary




    
    

DPS BERLIN, LLC
DPS CADILLAC, LLC
DPS FLORIDA, LLC
DPS GREGORY, LLC
DPS MECKLENBURG, LLC
DPS PIEDMONT, LLC
EBENSBURG ENERGY, LLC
MEGTEC ENERGY & ENVIRONMENTAL LLC
MEGTEC INDIA HOLDINGS, LLC
MEGTEC SYSTEMS AUSTRALIA INC.
MEGTEC TURBOSONIC INC.
MEGTEC TURBOSONIC TECHNOLOGIES, INC.
MTS ASIA, INC.
O&M HOLDING COMPANY
PALM BEACH RESOURCE RECOVERY CORPORATION
POWER SYSTEMS OPERATIONS, INC.
SOFCO EFS HOLDINGS LLC
THE BABCOCK & WILCOX COMPANY
UNIVERSAL AET HOLDINGS, LLC
UNIVERSAL SILENCER MEXICO II, LLC
UNIVERSAL SILENCER MEXICO, LLC

/s/ Robert P. McKinney
__________________________________________
Name: Robert P. McKinney
Title:    Assistant Secretary

EBENSBURG INVESTORS LIMITED PARTNERSHIP

By: BABCOCK & WILCOX EBENSBURG POWER,             LLC, as General Partner

/s/ Robert P. McKinney
__________________________________________
Name: Robert P. McKinney
Title:    Assistant Secretary




EXHIBIT 10.4



Administrative Agent:

BANK OF AMERICA, N.A., as Administrative Agent

/s/ Bridgett J. Manduk Mowry
__________________________________________
Name: Bridgett J. Manduk Mowry
Title: Vice President



    
    


Lenders:

BANK OF AMERICA, N.A., as Lender and Swing Line Lender

/s/ Stefanie Tanwar
______________________________________
Name: Stefanie Tanwar
Title: Director
















    
    


THE BANK OF NOVA SCOTIA , as Lender

/s/ Justin Mitges
______________________________________
Name: Justin Mitges
Title: Senior Manager

/s/ John Pagazani
_____________________________________
Name: John Pagazani
Title: Director




    
    

CREDIT AGRICOLE CORPORATE AND
INVESTMENT BANK, as Lender




/s/ Yurly A. Tsyganov
__________________________________________
Name: Yurly A. Tsyganov
Title: Director





/s/ Kathleen Sweeney
___________________ _____________________
Name: Kathleen Sweeney
Title: Managing Director






    
    

COMPASS BANK dba BBVA COMPASS, as Lender




/s/ Bruce Bingham
__________________________________________
Name: Bruce Bingham
Title: Vice President




    
    

BNP Paribas, as Lender




/s/ Joseph Mack
__________________________________________
Name: Joseph Mack
Title: Vice President




/s/ Mary-Ann Wong
__________________________________________
Name: Mary-Ann Wong
Title: Vice President




    
    

CITIZENS BANK OF PENNSYLVANIA, as Lender




/s/ David W. Stack
__________________________________________
Name: David W. Stack
Title: Senior Vice President





    
    

Hancock Whitney Bank, as Lender




/s/ Eric K. Sander
__________________________________________
Name: Eric K. Sander
Title: Vice President




    
    

JPMorgan Chase Bank, N.A., as Lender




/s/ Patricia S. Capen
__________________________________________
Name: Patricia S. Carpen
Title: Executive Director




    
    

The Northern Trust Co., as Lender




/s/ Robert P. Veltman
__________________________________________
Name: Robert P. Veltman
Title: Vice President





    
    

PNC Bank, National Association, as Lender




/s/ Mark Starnes
__________________________________________
Name: Mark Starnes
Title: Vice President





    
    

TD Bank, N.A., as Lender




/s/ Bethany H. Buitenhuys
__________________________________________
Name: Bethany H. Buitenhuys
Title: Vice President





    
    

UniCredit AG New York Branch, as Lender




/s/ Michael D. Novellino
__________________________________________
Name: Michael D. Novellino
Title: Director





/s/ Scott Obeck
__________________________________________
Name: Scott Obeck
Title: Director





    
    

Wells Fargo Bank, N.A., as Lender




/s/ Reginald T. Dawson
__________________________________________
Name: Reginald T. Dawson
Title: Senior Vice President




























Exhibit 10.5













BABCOCK & WILCOX
ENTERPRISES, INC.
EXECUTIVE SEVERANCE PLAN



Effective as of June 1, 2015

Revised Effective June 1, 2018












Table of Contents

Page
PREAMBLE    1
ARTICLE    1    -    PARTICIPATION OF OTHER EMPLOYERS    2
    
1.1    -    Designation of Participating Employers    2
1.2    -    Obligations of Participating Employers    2
1.3    -    Withdrawal of a Participating Employer    2
    
ARTICLE    2    -    ELIGIBILITY, PARTICIPATION AND BENEFITS    2
    
2.1    -    Eligibility    2
2.2    -    Participation    2
2.3    -    Severance Benefits    3
2.4    -    Termination of Benefits for Breach of General Release    4
    
ARTICLE    3    -    FUNDING THE PLAN    4
    
3.1    -    Funding Policy    4
3.2    -    Contributions    4
    
ARTICLE    4    -    PLAN ADMINISTRATION    4
    
4.1    -    Plan Administrator    4
4.2    -    Powers and Duties of the Plan Administrator    4
4.3    -    Allocation and Delegation of Responsibility    5
4.4    -    Reliance by Plan Sponsor    5
4.5    -    Indemnification    5
4.6    -    Claims Procedure    5

ARTICLE    5    -    AMENDMENT AND TERMINATION    6
    
5.1    -    Amendment    6
5.2    -    Termination    6
    
ARTICLE    6    -    GENERAL PROVISIONS    7
    
6.1    -    Action by Plan Sponsor    7
6.2    -    Recovery of Overpayments    7
6.3    -    Data    7
6.4    -    Headings    7
6.5    -    Construction and Controlling Law    7
6.6    -    No Waiver or Estoppel    7
6.7    -    Severability    8

APPENDIX A    -    PARTICIPATING EMPLOYERS    9






PREAMBLE


The Babcock & Wilcox Enterprises, Inc. Executive Severance Plan (the “Plan” ) has been established by The Babcock & Wilcox Company (the “Plan Sponsor” ) effective June 1, 2015 (the “Effective Date” ), and has been revised effective June 1, 2018.
The Plan is governed by the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”). It has been designed to qualify for certain exemptions under Title I of ERISA that apply to plans that are unfunded and maintained primarily for the purpose of providing benefits for a select group of management or highly compensated employees. The plan is intended to qualify for certain exemptions from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”) for short term deferrals and separation pay plans.
The first Plan Year shall be a short Plan Year beginning on the Effective Date and ending on December 31, 2015. Thereafter, the Plan Year shall be the twelve (12) month period beginning on January 1 and ending on December 31 of each calendar year.


1





ARTICLE 1

PARTICIPATION OF OTHER EMPLOYERS

1.1
Designation of Participating Employers

The Plan Sponsor may designate other participating subsidiary and/or affiliated companies from time to time to participate in the Plan (the “Participating Employers” ). Such designation may include a limitation as to the classes or groups of employees of such subsidiary or affiliated corporation that may participate in the Plan. The name of each Participating Employer that has adopted the Plan shall be recorded on Appendix A hereto, as may be revised from time to time.

1.2
Obligations of Participating Employers

The Plan Sponsor and any subsidiary or affiliated company which has been designated as a Participating Employer shall have the obligation to fund the benefits provided to its own employees, and no other Participating Employer shall have such obligation. Any failure by the Plan Sponsor or any Participating Employer to meet its obligation under the Plan in such respect shall have no effect on any other Participating Employer.

1.3
Withdrawal of a Participating Employer

Any Participating Employer may withdraw from the Plan at any time without affecting any other Participating Employer. The Plan Sponsor may in its absolute discretion terminate any Participating Employer’s participation in the Plan at any time.


ARTICLE 2

ELIGIBILITY, PARTICIPATION AND BENEFITS

2.1
Eligibility

Each employee of the Plan Sponsor or a Participating Employer who has been elected to the office of vice president or president of the Plan Sponsor or a Participating Employer shall be eligible to participate in the Plan (an “Eligible Employee” ).

2.2
Participation
    
Each Eligible Employee whose compensation is reviewed and approved by the Compensation Committee of the Board of Directors of the Plan Sponsor (the “Committee” ) shall be a “Participant”. Participation in the Plan shall begin on the date the Eligible Employee is notified in writing of his participation and shall continue until the earliest of the following:

(a)
The date he is notified, in writing, that he is no longer a Participant in the Plan;

(b)
The date he is no longer employed by the Plan Sponsor or any Participating Employer; or

(c)
The date the Plan terminates.

2








2.3
Severance Benefits

A Participant whose employment is terminated by the Plan Sponsor or a Participating Employer for reasons other than “Cause” shall be entitled to the benefits set forth below, provided he or she has signed an agreement that is no longer subject to revocation prepared by the Plan Sponsor which contains a general release of the Plan Sponsor, and its affiliates, directors, officers and other customary persons from any claim or liability arising out of or related to his employment with or termination of employment from the Plan Sponsor or a Participating Employer, as applicable, and shall include Participant non-compete, nondisclosure, non-disparagement and non-solicitation covenants.

(a)
Salary continuation, to begin as soon as administratively practicable after the Participant’s date of termination of employment and the revocation period described in the general release, equal to 52 weeks base salary as in effect on the date of termination, net of applicable tax withholding.

(b)
Payment of the employer share of the “Applicable Premium” for three months of “Continuation Coverage” in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended and regulations and rulings issued thereunder (“ COBRA ”) for the medical, dental and/or vision benefits in effect for the Participant and his Qualified Beneficiaries on the date of termination, provided that Participant is eligible for and elects Continuation Coverage in accordance with COBRA. (The Participant will be responsible for the balance of the Applicable Premium during the three month period, and will be responsible for the entire premium thereafter).

(c)
Access to employer-paid outplacement services for the twelve (12) month period beginning on the expiration of the general release agreement revocation period.

(d)
If the Participant is entitled to Continuation Coverage under an employer-sponsored group health plan as a result of his termination of employment, the “Maximum Required Period” for such continuation coverage for the Participant and his or her Qualified Beneficiaries shall be 18 months.

For purposes of this Section 2.3, “Applicable Premium”, “Continuation Coverage”, “Qualified Beneficiary” and “Maximum Coverage Period” shall have the meanings ascribed to such terms under COBRA, and “ Cause” shall mean (i) the willful and continued failure of the Participant to perform substantially his duties with the Company (occasioned by reason other than physical or mental illness or disability of Employee) after a written demand for substantial performance is delivered to him by the Compensation Committee of the Board of Directors of the Plan Sponsor or the Chief Executive Officer of the Plan Sponsor which specifically identifies the manner in which the Compensation Committee of the Board of Directors or the Chief Executive Officer believes that the Participant has not substantially performed his duties, after which the Participant shall have thirty days to defend or remedy such failure to substantially perform his duties; (ii) the willful engaging by Employee in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company; or (iii) the conviction of Employee with no further possibility of appeal, or plea of guilty or nolo contendere by Employee to any felony.

The termination of employment of the Participant under clause (i) and (ii) above shall not be deemed to be for “Cause” unless and until there shall have been delivered to the Participant a copy of a

3





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 of Directors of the Plan Sponsor at a meeting of such Committee called and held for such purpose (after reasonable notice is provided to the Participant and he is given an opportunity, together with his counsel, to be heard before such Committee), finding that, in the good faith opinion of such Committee, the Participant is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.

2.4 Termination of Benefits for Breach of General Release

If a Participant breaches his obligations pursuant to the General Release, including but not limited to restrictive covenants contained, incorporated or referenced within, the Plan Sponsor or Participating Employer reserves the right to terminate the payment of severance benefits.
  

ARTICLE 3

FUNDING THE PLAN

3.1
Funding Policy

The Plan Sponsor shall fund the Plan in a manner consistent with the provisions of ERISA and such other laws and regulations as may be applicable, to the end that benefits payable under this Plan shall be funded on a lawful and sound basis. However, to the extent permitted by governing law, the Plan Sponsor shall be free to determine the funding method of the Plan.

3.2
Contributions

The Plan is an unfunded plan. Benefits under the Plan shall be paid solely from the general assets of the Plan Sponsor and other Participating Employers. No contributions shall be made by employees.



ARTICLE 4

PLAN ADMINISTRATION

4.1
Plan Administrator

The Company is the Plan Administrator and a “named fiduciary” of the Plan for purposes of ERISA, and shall control and manage the operation and administration of the Plan.

4.2
Powers and Duties of the Plan Administrator

The Plan Administrator or its designee shall have the sole and exclusive discretionary authority to interpret the Plan and to make factual determinations regarding any and all matters arising hereunder, including but not limited to, the right to determine eligibility for benefits, to construe the terms of the Plan, to remedy possible ambiguities, inconsistencies or omissions and to establish rules for the administration of

4





the Plan and the transaction of its business. The Plan Administrator shall exercise such others powers and perform such other duties as it, in its discretion, may deem necessary, desirable, advisable or proper for the supervision and administration of the Plan. Any decision by the Plan Administrator shall be final and binding upon all parties.

4.3
Allocation and Delegation of Responsibility

The Plan Administrator shall have the authority to delegate to any person any fiduciary responsibility under the Plan. Any person may serve in more than one fiduciary capacity with respect to the Plan. The Plan Administrator may also appoint and delegate to one or more individuals the power and duty to handle the non-fiduciary administrative functions of the Plan. The Plan Administrator may employ counsel and agents as well as such clerical and accounting services as it may require in carrying out the provisions of the Plan or complying with the requirements of ERISA or other federal law. Any person or firm so employed may be a person or firm then, theretofore or thereafter serving the Plan Sponsor or any Participating Employer in any capacity.

4.4
Reliance by Plan Sponsor
    
To the extent permitted by law, the Plan Sponsor, the Plan Administrator and any person to whom the Plan Administrator may delegate any duty or power in connection with administering the Plan and the officers and directors of the Plan Sponsor shall be entitled to rely conclusively upon, and shall be fully protected in any action taken or suffered by them in good faith in the reliance upon, any benefit plan consultant, counsel, accountant, investment manager, other specialist or other person selected by the Plan Sponsor or the Plan Administrator, or in reliance upon any tables, valuations, certificates, opinions or reports which shall be furnished by any of them. Further, to the extent permitted by law, neither the Plan Sponsor and the officers or directors thereof, nor the Plan Administrator and any person referred to in Section 4.3 shall be liable for any neglect, omission or wrongdoing of any other person.

4.5
Indemnification
    
To the extent not covered by insurance, or if there is a failure to provide full insurance coverage for any reason, the Plan Sponsor agrees to indemnify and hold all directors, officers and employees of the Plan Sponsor and of any Participating Employer harmless against any and all claims and causes of action by or on behalf of any and all parties whomsoever, and all losses therefrom, including without limitation, costs of defense and attorneys’ fees, based upon or arising out of any act or omission relating to, or in connection with the Plan, including the negligent act or omission to act on the part of such directors, officers and employees, other than losses resulting from such persons’ fraud or willful misconduct.

4.6
Claims Procedure
    
     The Committee shall have sole discretionary authority with regard to the adjudication of any claims made under the Plan. All claims for benefits under the Plan shall be submitted in writing, shall be signed by the claimant and shall be considered filed on the date the claim is received by the Committee. In the event a claim is denied, in whole or in part, the claims procedures set forth below shall be applicable.

Upon the filing of a claim as above provided and in the event the claim is denied, in whole or in part, the Committee shall within ninety (90) days, (forty five (45) days for disability related claims,) provide the claimant with a written statement which shall be delivered or mailed to the claimant to his last known address, which statement shall contain the following:


5





(a)
the specific reason or reasons for the denial of benefits;

(b)
a specific reference to the pertinent provisions of the Plan upon which the denial is based;

(c)
a description of any additional material or information necessary for the claimant to perfect his claim for benefits and an explanation of why such material and information is necessary; and

(d)
an explanation of the review procedure provided below.

If special circumstances require additional time for processing the claim, the Committee shall advise the claimant prior to the end of the initial ninety (90) day or forty-five (45) day period, setting forth the reasons for the delay and the approximate date the Committee expects to render its decision. Any such extension shall not exceed ninety (90) days, or thirty (30) days for disability related claims.

Within ninety (90) days after receipt of the written notice of denial of a claim as provided above, a claimant or his authorized representative may request a review of the denial upon written application to the Committee, may review pertinent documents and may submit issues and comments in writing to the Committee. Within sixty (60) days (or forty-five days in the case of a disability related claim) after receipt of a written request for review, or within one hundred and twenty (120) days (or ninety days for disability related claims) in the event of special circumstances which require an extension of time for processing such application for review, the Committee shall notify the claimant of its decision by delivery or by Certified or Registered Mail to his last known address. The decision of the Committee shall be in writing and shall include the specific reasons for the decision and specific references to the pertinent provisions of the Plan on which such decision is based. The Committee shall advise the claimant prior to the end of the initial sixty (60) day or forty-five (45) day period, as applicable, if additional time is needed to process such application for review. The decision of the Committee shall be final and conclusive.


ARTICLE 5

AMENDMENT AND TERMINATION

5.1
Amendment

Notwithstanding any provision of any other communication, either oral or written, made by the Plan Sponsor, the Plan Administrator, a Participating Employer or any other individual or entity, the Plan Sponsor reserves the right at any time and from time to time, including retroactively if deemed necessary or appropriate, to modify or amend, in whole or in part, any or all of the provisions of the Plan.

The participation in the Plan of subsidiary or affiliated companies shall not limit the powers of the Plan Sponsor to amend the Plan, and any amendment to the Plan adopted by the Plan Sponsor shall be binding upon all Participating Employers.

5.2
Termination

Notwithstanding any provision of any other communication, either oral or written, made by the Plan Sponsor, the Plan Administrator, a Participating Employer or any other individual or entity, the Plan Sponsor reserves the right to terminate the Plan at any time. Any amendment or termination of the Plan shall be effective at such date as the Plan Sponsor shall determine. No amendment or termination shall, except as

6





required or permitted by law, affect benefits payable to Plan participants prior to the date of amendment or termination.


ARTICLE 6

GENERAL PROVISIONS

6.1
Action by the Plan Sponsor

Any action required to be taken by the Plan Sponsor shall be by resolution of the board of directors of the Plan Sponsor, and any action required to be taken by any Participating Employer shall be by resolution of its board of directors or other governing body, or by written instrument executed by persons or groups of persons empowered by its governing body to take such action.

6.2
Recovery of Overpayments

In the event that a Plan participant is erroneously paid a benefit to which he is not entitled under the Plan, the Plan Administrator reserves the right to collect any such overpayment from the Participant.

6.3
Data

Each person entitled to benefits under the Plan must furnish to the Plan Administrator or its designee such documents, evidence or other information as the Plan Administrator or its designee deems necessary or desirable for the purpose of administering the Plan or to protect the Plan. The Plan Administrator shall be entitled to rely on representations made by eligible employees with respect to personal facts unless it actually knows such representations are false.

6.4
Headings

The headings of the Plan are inserted for convenience and reference only and shall have no effect upon the meaning of the provisions of the Plan.

6.5
Construction and Controlling Law

For purposes of the Plan, the masculine shall include the feminine, the singular shall include the plural, and the plural shall include the singular, in all cases where such a construction would be appropriate. The Plan shall be construed, regulated and administered in accordance with ERISA and the Code, and to the extent not preempted by federal law, in accordance with the laws of the State of North Carolina. Any dispute or claim arising out of this Plan which is not settled under the Plan’s administrative claims procedure and which is pursued beyond such claims procedure, shall be brought in Federal District Court, in Mecklenburg County, North Carolina.

6.6
No Waiver or Estoppel

No term, condition or provision of the Plan shall be deemed to have been waived, and there shall be no estoppel against the enforcement of any provision of the Plan, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition

7





waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.

6.7
Severability

In case any provision of the Plan is held to be illegal, invalid, or unenforceable for any reason, such illegal, invalid, or unenforceable provision shall not affect the remaining provisions of the Plan, but the Plan shall be construed and enforced as if such illegal, invalid, or unenforceable provision had not been included herein.


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APPENDIX A

Participating Employers


Effective as of June 1, 2018, the following are the Participating Employers:

Babcock & Wilcox Construction Co., LLC

Diamond Power International, Inc.

Babcock & Wilcox MEGTEC, LLC

Babcock & Wilcox Power Generation Group Canada Corp.

Americon Equipment Services, Inc.

Americon, Inc.

Delta Power Services, LLC

Palm Beach Resource Recovery Corporation

Power Systems Operations, Inc.

Babcock & Wilcox Universal, Inc.

Babcock & Wilcox SPIG, Inc.

Babcock & Wilcox Enterprises, Inc.
.









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EXHIBIT 31.1
CERTIFICATION
I, Leslie C. Kass, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Babcock & Wilcox Enterprises, Inc.;
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;
4.
The registrant’s other certifying officer 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)) for the registrant and have:
a.
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;
b.
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;
c.
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
d.
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 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):
a.
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
b.
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, 2018
/s/ Leslie C. Kass
 
Leslie C. Kass
 
President and Chief Executive Officer




EXHIBIT 31.2
CERTIFICATION
I, Joel K. Mostrom, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Babcock & Wilcox Enterprises, Inc.;
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;
4.
The registrant’s other certifying officer 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)) for the registrant and have:
a.
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;
b.
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;
c.
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
d.
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 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):
a.
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
b.
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, 2018
/s/ Joel K. Mostrom

 
Joel K. Mostrom
 
Chief Financial Officer




EXHIBIT 32.1
BABCOCK & WILCOX ENTERPRISES, 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, Leslie C. Kass, President and Chief Executive Officer of Babcock & Wilcox Enterprises, Inc., a Delaware 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, 2018 (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 B&W as of the dates and for the periods expressed in the Report.
Dated: August 9, 2018
/s/ Leslie C. Kass
 
Leslie C. Kass
 
President and Chief Executive Officer





EXHIBIT 32.2
BABCOCK & WILCOX ENTERPRISES, 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, Joel K. Mostrom, Senior Vice President and Chief Financial Officer of Babcock & Wilcox Enterprises, Inc., a Delaware 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, 2018 (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 B&W as of the dates and for the periods expressed in the Report.
Dated: August 9, 2018
/s/ Joel K. Mostrom

 
Joel K. Mostrom
 
Chief Financial Officer