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Transition Services Agreement

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Sectors: Manufacturing
Governing Law: Texas, View Texas State Laws
Effective Date: July 02, 2010
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TRANSITION SERVICES AGREEMENT

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

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

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

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

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

ARTICLE I

DEFINITIONS

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

" Additional Services" has the meaning set forth in Section 2.3.

" Agreement" has the meaning set forth in the preamble.

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

" B&W" has the meaning set forth in the preamble.

" Distribution" has the meaning set forth in the recitals.

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


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" Master Separation Agreement" has the meaning set forth in the recitals.

" McDermott" has the meaning set forth in the preamble.

" Schedules" means the Schedules attached hereto.

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

" Service Coordinator" has the meaning set forth in Section 2.2.

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

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

" Tax" has the meaning set forth in Section 4.4.

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

ARTICLE II

SERVICES

Section 2.1 Services.

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

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


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

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

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

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


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

Section 2.5 Standard of Performance; Limitation of Liability.

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

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

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


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

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