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<div style="margin-top: 12pt; font-size: 10pt;" align="left"><b>10. Commitments and Contingencies</b> </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left"><b>Commitments</b> </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We lease real property and equipment in the normal course of business under varying operating lease agreements. These lease agreements, which include both non-cancelable and month-to-month terms, generally provide for fixed monthly rentals, and for certain of the leases, renewal options. Total rent expense for the years ended 2010, 2009, and 2008 was $40.0 million, $65.9 million, and $61.2 million, respectively. </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We have a long-term charter of the <b><i>Titan 2</i></b>, a 408-foot self-propelled twin-hulled DP derrick ship. The vessel charter payments are approximately $6.4 million annually. The charter term was extended in 2008 and will contractually expire in May 2018. This charter can be canceled by us at anytime, subject to a termination penalty consisting of the transfer to the vessel owner of title to our dynamic positioning ("DP") system used on the vessel. The DP system was purchased and installed on the <b><i>Titan 2</i></b>, at our expense, in the first quarter of 2002 for a total cost of $8.9 million, with a book value at December 31, 2010 of $1.1 million. In February 2011, we gave notice to the owner of the <b><i>Titan 2 </i></b>that we were terminating the charter, effective in the second quarter of 2011. Consequently, we recorded a $7.9 million impairment of the leasehold improvements and deferred dry-dock costs related thereto. </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">During the fourth quarter of 2005, we entered into a long-term charter for the <b><i>Normand Commander</i></b>. This charter, which has a five-year fixed term and five one-year renewal options, requires monthly payments denominated in Norwegian kroners at an annual rate of approximately 69.2 million kroners (or $11.7 million at December 31, 2010). As of December 31, 2010, we had entered into forward exchange agreements, which will enable us to fulfill 31.5 million of our remaining non-cancellable Norwegian kroner obligations under this charter at an average rate of 6.23 kroners per U.S. dollar. In February 2011, we gave notice of our intent to renew the charter of this vessel for one year ending June 2012. </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">During 2008, we entered into a long-term charter for a DP-2 class DSV, the <b><i>Olympic Challenger,</i></b> which was delivered in August 2008. The terms of the charter include a five-year fixed term with one two-year renewal option and three one-year renewal options. The vessel charter payments are approximately $16.8 million annually. </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">The following table sets forth, as of December 31, 2010, our minimum rental commitments under operating leases with an initial non-cancellable term of one year or more (in thousands). </div></div>
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<table style="font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="bottom"><td width="88%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td></tr>
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<div style="text-indent: -15px; margin-left: 15px;">2011</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">33,042</td>
<td> </td></tr>
<tr valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 15px;">2012</div></td>
<td> </td>
<td> </td>
<td align="right">26,075</td>
<td> </td></tr>
<tr style="background: #cceeff;" valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 15px;">2013</div></td>
<td> </td>
<td> </td>
<td align="right">12,120</td>
<td> </td></tr>
<tr valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 15px;">2014</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td></tr>
<tr style="background: #cceeff;" valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 15px;">2015</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td></tr>
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<div style="text-indent: -15px; margin-left: 15px;">Thereafter</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td></tr>
<tr style="font-size: 1px;"><td>
<div style="text-indent: -15px; margin-left: 15px;"> </div></td>
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<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
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<div style="text-indent: -15px; margin-left: 30px;">Total</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">71,237</td>
<td> </td></tr>
<tr style="font-size: 1px;"><td>
<div style="text-indent: -15px; margin-left: 15px;"> </div></td>
<td> </td>
<td style="border-top: #000000 3px double;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td></tr></table></div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left"><b><i>Construction and Purchases in Progress </i></b><b>— </b>The estimated cost to complete capital expenditure projects in progress at December 31, 2010 was $149.6 million, of which $75.5 million is obligated through contractual commitments. The total cost primarily represents expenditures for construction of the <b><i>Global 1201</i></b>. This amount includes aggregate commitments of 27.6 million Singapore dollars (or $21.4 million as of December 31, 2010) and 3.0 million Euros (or $3.9 million as of December 31, 2010). We have entered into forward contracts to purchase 7.5 million Singapore dollars to hedge certain of these purchase commitments. </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left"><b><i>Guarantees </i></b><b>— </b>In the normal course of our business activities, we provide guarantees and performance, bid, and payment bonds pursuant to agreements or obtaining such agreements to perform construction services. At December 31, 2010, the aggregate amount of these guarantees and bonds, which are scheduled to expire between January 2011 and October 2011, was $34.5 million. </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left"><b><i>Letters of Credit </i></b><b>— </b>In the normal course of our business activities, we are required to provide our customers with financial letters of credit to secure performance and payment of obligations, including the payment of workers' compensation claims. At December 31, 2010, we had approximately $45.3 million of letters of credit outstanding which are due to expire between January 2011 and March 2014. </div>
<div style="margin-top: 12pt; font-size: 10pt;" align="left"><b>Contingencies</b> </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">During the fourth quarter of 2007, we received a payroll tax assessment for the years 2005 through 2007 from the Nigerian Revenue Department valued at $18.4 million based on the exchange rate of the Nigerian naira as of December 31, 2010. The assessment alleges that certain expatriate employees, working on projects in Nigeria, were subject to personal income taxes, which were not paid to the government. We filed a formal objection to the assessment on November 12, 2007. We do not believe these employees are subject to the personal income tax assessed; however, based on past practices of the Nigerian Revenue Department, we believe this matter will ultimately have to be resolved by litigation. We do not expect the ultimate resolution to have a material adverse effect on our future financial position, operating results, or cash flows. The Nigerian Revenue Department has taken no action on the matter in 2010. </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">During 2008, we received an additional assessment from the Nigerian Revenue Department valued at $37.9 million based on the exchange rate of the Nigerian naira as of December 31, 2010, for tax withholding related to third party service providers. The assessment alleges that taxes were not withheld from third party service providers for the years 2002 through 2006 and remitted to the Nigerian government. We have filed an objection to the assessment. We do not expect the ultimate resolution to have a material adverse effect on our future financial position, operating results, or cash flows. The Nigerian Revenue Department has taken no action on the matter in 2010. </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">During the third quarter of 2009, we received a tax assessment from the Mexican Revenue Department in the amount of $5.9 million related to the 2003 tax year. The assessment alleges that chartered vessels should be treated as equipment leases and subject to tax at a rate of 10%. We have engaged outside counsel to assist us in this matter and have filed an appeal in the Mexican court system. We await disposition of that appeal. We do not expect the ultimate resolution to have a material adverse effect on our future financial position, operating results, or cash flows; however, if the Mexican Revenue Department prevails in its assessment, we could be exposed to similar liabilities for each of the tax years beginning with 2004. </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We have one unresolved issue related to an Algerian tax assessment that we received on February 21, 2007. The remaining amount in dispute is approximately $10.4 million of alleged value added tax for the years 2004 and 2005. We are contractually indemnified by our client for the full amount of the assessment that remains in dispute. We continue to engage outside tax counsel to assist us in resolving the tax assessment. The Algerian taxing authorities have taken no action on this matter in 2010. </div></div>
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<div style="margin-top: 12pt; font-size: 10pt;" align="left"><b>Litigation</b> </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">In June 2007, we commenced an internal investigation of our West Africa operations, focusing on the legality, under the U.S. Foreign Corrupt Practices Act ("FCPA") and local laws, of one of our subsidiary's reimbursement of certain expenses incurred by a customs agent in connection with shipments of materials and the temporary importation of vessels into West African waters. </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">On January 6, 2010, we met with representatives of the Securities and Exchange Commission ("SEC") and the Department of Justice ("DOJ"). At that meeting and in a confirmatory letter, the staff of the SEC informed us that it had completed its investigation and did not intend to recommend any enforcement action by the Commission or impose any fines or penalties against the Company. </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Also in the January 6, 2010 meeting, the staff of the DOJ explained that it had also concluded its investigation and would not be taking any further action or impose any fines or penalties against the Company. </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">While our and the government's investigations have concluded, we continue to remain committed to and focused on conducting our operations in compliance with the FCPA. </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We curtailed our operations in West Africa and have had no project activity in the area since mid-2009. We continue, however, to seek prospects in the area and could return in the future. </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Our services are provided in hazardous environments where accidents involving catastrophic damage or loss of life could result, and litigation arising from such an event may result in us being named a defendant in lawsuits asserting large claims. Although there can be no assurance that the amount of insurance we carry is sufficient to protect us fully in all events, we believe that our insurance protection is adequate for our business operations. However, a successful liability claim for which we are underinsured or uninsured could have a material adverse effect on the Company. </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We are involved in various legal proceedings and potential claims that arise in the ordinary course of business, primarily involving claims for personal injury under the General Maritime Laws of the United States and Jones Act as a result of alleged negligence. We believe that the outcome of all such proceedings, even if determined adversely, would not have a material adverse effect on our business or financial condition. </div></div> </div>10. Commitments and Contingencies
Commitments
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