SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1994
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 0-16572
Avondale Industries, Inc.
(Exact name of registrant as specified in its charter)
Louisiana 39-1097012
(State or other jurisdiction (I.R..S. Employer Identification No.)
of incorporation or organization)
5100 River Road, Avondale, Louisiana 70094
(Address of principal executive offices) (Zip Code)
(504) 436-2121
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value per share
(Title of Class)
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
(affiliates being directors, executive officers and holders of more than
5% of the Company's common stock) of the Registrant at March 6, 1995 was
approximately $36,268,549.
The number of shares of the Registrant's common stock, $1.00 par value
per share, outstanding at March 6, 1995 was 14,464,175.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for its 1995 Annual Meeting
have been incorporated by reference into Part III of this Form 10-K.
<PAGE>
PART I
Item 1. Business.
Overview
Avondale Industries, Inc. ("Avondale" or the "Company") has
been a major participant in the military and commercial
shipbuilding business in the U.S. since the 1950s. The Company
has built approximately 200 ocean-going vessels for a wide
variety of military and commercial uses, including tankers, LASH
(lighter aboard ship) vessels, dredges, Coast Guard cutters and
U.S. Navy surface combatant, fleet support and amphibious assault
vessels, and a much larger number of smaller craft. Avondale has
built approximately 80 ships for the U.S. Navy and U.S. Coast
Guard. Since the 1970s, when foreign shipyards began to dominate
commercial shipbuilding, almost all of the Company's shipbuilding
activity has been for the Navy.
During the 1990s, the Company's business has been affected
by, among other things, a significant decline in the annual
shipbuilding budgets of the U.S. Navy. During the 1980s, the
annual shipbuilding budget of the Navy was $12 - $14 billion, as
compared to a $6 - $8 billion annual budget projected for the
last half of the 1990s. Currently, the U.S. Navy's proposed
shipbuilding program for fiscal years 1995-1999 represents a
continued reduction in the amount of new shipbuilding work
available when compared with previous U.S. Navy programs. The
current proposed shipbuilding program, averaging less than eight
new ships per year, represents a 60 percent reduction in the
number of ships to be procured when compared with the 19 ships
per year average for the U.S. Navy programs during the 1980s.
Notwithstanding the overall sharp reduction in construction
programs for the Navy, the Company's backlog at December 31, 1994
was at an all-time high of approximately $1.42 billion (excluding
options). Included in the backlog is the Company's most
significant 1994 contract award which occurred in September when
the Navy exercised previously-awarded options to construct two
additional Strategic Sealift ships for $420 million. These
represent the second and third ships which the Company has been
awarded in the Sealift program, with options to construct an
additional three Sealift vessels remaining unexercised. The
Strategic Sealift ships, which are designed to assist in the
rapid transportation and deployment of military personnel,
equipment and supplies, are comparable to other vessels, such as
auxiliary and amphibious support ships, that have been
constructed previously by the Company. The first Sealift ship is
scheduled for delivery in 1997 with the final ship scheduled for
delivery in 2001.
<PAGE>
The exercise of the option to construct two additional
Sealift ships discussed above is one of a series of significant
contract awards received by the Company in the last two years.
In 1993, the Company was awarded the contract for the initial
Sealift ship at a value of $262 million, as well as a $232.5
million contract for the construction of an icebreaker vessel for
the U.S. Coast Guard (scheduled for delivery in 1997) and a
contract to build one LSD-CV at a contract price of $257.5
million. The 1994 LSD-CV award brought the total number of
LSD-CV ships awarded to the Company to four, one of which was
delivered in 1994.
Considering the sharp decline in projected fleet size and
U.S. Navy shipbuilding expenditures, competition among U.S.
shipyards for available vessel construction, conversion and
repair work will continue to be intense. In a report issued in
1994, the Department of Defense stated that the current Navy
shipbuilding plan would not sustain the U.S. Shipbuilding
industry at present levels. The report further stated that in
the near future some of the remaining major shipyards would be
forced into financial restructuring or closure. Nevertheless,
management of the Company believes that the recent contract
awards and the Company's current backlog, as well as the
Company's long-term experience in U.S. Navy new construction are
positive developments that will allow the Company to remain an
effective competitor for the Navy work that will be available.
In early 1994 Avondale was one of five U.S. shipyards that
received a contract to undertake a preliminary design study on
the Navy's LPD 17 (formerly LX) ship. Work on the $480,000
fixed-price contract is expected to last approximately one year.
Estimates are that this program will be a mainstay of the U.S.
Navy over the next two decades, replacing a number of vessels now
nearing the end of their planned length of service. Although
congressional approval for this program has not yet been
obtained, the number of LPD-17 ships currently conceived could
involve a multi-billion dollar spending program surpassing even
the Sealift program. The first contract award is currently
forecasted for 1997 or 1998. Based on Avondale's recent
successes in securing the Sealift and other U.S. Navy awards, in
large part because it was the most cost-effective, competitive
bidder, as well as Avondale's demonstrated experience in the
construction of vessels comparable to the LPD, management
believes that the Company is well-positioned to be a successful
bidder for such work.
The Oil Pollution Act of 1990 ("OPA'90"), which requires the
phased-in transition to double-hull oil tankers and product
carriers beginning January 1, 1995, has created commercial
shipbuilding opportunities for Avondale. By virtue of OPA'90,
there is a demand (which is expected to continue through the
remainder of the decade) for the retro-fitting of existing
tankers, as well as the construction of new double-hulled
tankers, as oil and energy companies and other ship operators
upgrade their fleets to comply with the law. In addition, the
Jones Act requires all vessels transporting oil or other products
between U.S. ports to be constructed by U.S. shipyards.
Avondale, which is the only domestic shipyard currently
constructing double-hull ships, is well-positioned to bid
<PAGE>
successfully for the OPA'90 work as it becomes available.
On February 7, 1995 the Company announced the execution of a
$143.9 million contract with a private bulk shipping company to
construct four double-hulled product carriers. These double-
hulled product carriers will be the first U.S.-flag product
carriers constructed in the U.S. in eight years. The contract,
which is supported by a U.S. Government guarantee under Title XI
of the Merchant Marine Act approved by the Department of
Transportation, Maritime Administration ("MARAD"), will become
effective upon finalizing the financing commitment by the owner.
Construction is scheduled to commence in mid-1995 with a
scheduled completion of mid-1997. The Company has also received
expressions of interest from several other ship owners seeking to
retro-fit their vessels to comply with OPA'90 requirements.
The international demand for large commercial ships is
expected to increase during the 1990's, presenting possible
construction opportunities for Avondale. Currently, statistics
show an unprecedented aging of the global tanker and product
carrier fleet with the average age of these vessels now in use
estimated to exceed 15 years. As these ships currently in use
approach the end of their useful lives, worldwide shipbuilding
opportunities should increase. However, for Avondale to
participate actively in the projected increase in replacement
demand, a more equitable environment must exist for the Company
to compete fairly with foreign shipyards. Although an
international trade agreement signed in 1994 offers some support
for this movement, the initial changes in subsidies in this
accord will not begin to occur until the end of this decade.
Unless the current legislative initiatives result in the
reduction or elimination of foreign subsidies, it will be
difficult for Avondale to compete effectively for available
international commercial shipbuilding work.
Other marketing opportunities may develop as a result of the
Jones Act. The four vessels discussed above are subject to these
requirements. The Company currently has sufficient capacity to
construct additional vessels that may be awarded.
In 1994 the Company undertook a series of measures to
improve its competitive position. First, in mid-1994 the main
shipyard received certification of its compliance with the
requirements of ISO 9001, a worldwide quality system.
Additionally, the Company benchmarked its manufacturing
procedures on a global scale, the results of which served to form
the basis for a series of steps which the Company believes will
significantly raise efficiency. One result was the development
of a modernization program in conjunction with a technology
sharing agreement signed in 1994 between Avondale and Astilleros
Espanoles S.A. ("ASEA") of Spain, regarded as an innovative and
successful world-class shipyard. The mutual agreement covers the
exchange of commercial ship designs, market analyses and
shipbuilding technology. Tangible evidence of this partnership
began in 1995 through a $20 million capital expenditure program,
$17,8 million of which is being financed with bonds issued in
February 1995 under a Title XI guarantee (as discussed above).
The project includes construction of a covered facility which
should yield productivity gains by eliminating weather-related
<PAGE>
problems, and the adoption of a more automated process for
building the various modules which are assembled into a completed
vessel.
Shipbuilding, Conversion and Repair
General. The Company's Shipyards Division is engaged in the
design, construction, repair and modernization of various types
of military and commercial vessels.
The main shipyard facility, which is located on the
Mississippi River near New Orleans, includes multiple building
ways, side launching facilities, a 900-foot floating dry
dock/launch platform that permits construction of vessels up to
1,000 feet in length, and a 650-foot floating dry dock
principally used for ship repair. The shipyard is equipped to
build virtually any type of vessel other than submarines and
surface vessels of the largest classes, such as aircraft carriers
and ultra-large crude carriers.
The Shipyards Division's business has been and continues to
be materially dependent on the U.S. Navy's ship construction,
repair and conversion programs. The following table sets forth
the distribution of marine construction and repair activities
during the last five years based on contract billings.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
U.S. MILITARY:
New construction 81% 88% 87% 72% 66%
Repair, overhaul and
conversion -- 2% 6% 13% 12%
COMMERCIAL:
New construction 11% 6% 2% 10% 18%
Repair, overhaul and
conversion 8% 4% 5% 5% 4%
--- --- --- --- ---
TOTAL 100% 100% 100% 100% 100%
=== === === === ===
</TABLE>
<PAGE>
The decrease in Navy new construction in 1994 as compared to 1993
primarily reflects the advancing stages of completion on several
of the Company's major shipbuilding programs while the Company's
recently awarded Navy contracts are in their initial stages. The
Company did not record any billings for Navy repair, overhaul and
conversion in 1994 as compared to 1993. This segment of work has
declined over the last four years reflecting a general decline in
Navy operation and maintenance expenditures in the last several
years (see "Other Operations - Repair Operations" below).
Commercial new construction in 1994 increased over the level in
1993 as the Company delivered two paddle wheel gaming vessels and
started work on a third gaming vessel in 1994. Commercial
repair, overhaul and conversion increased in 1994 over 1993 as
the Company continued work on several contracts with a private
contractor for the repair of T-AKR-Fast Sealift Ships.
Most U.S. Navy ship construction, repair and conversion
contracts are subject to strict competitive bidding requirements.
There is substantial over-capacity at U.S. shipyards and, as
discussed above under the heading "Overview," it is likely that
the level of U.S. Navy shipbuilding activity will decrease for
the foreseeable future. In addition, in view of the efforts of
the federal government to continue to reduce the level of
military expenditures, there can be no assurance that the
shipbuilding and conversion programs currently in progress will
be continued or that those planned by the U.S. Navy will be
implemented.
At December 31, 1994, essentially all of the Company's $1.42
billion (excluding options) backlog was attributable to new ship
construction for the U.S. Navy.
Government Contracting. Avondale's principal U.S.
government business is currently being performed under
fixed-price and fixed-price incentive contracts, both of which
generally provide for escalation of costs based on published
indices relating to the shipbuilding industry. Under fixed-price
contracts, the contractor retains all cost savings on completed
contracts but is also responsible for the full amount of all cost
overruns. Fixed-price incentive contracts, on the other hand,
provide for sharing between the government and the contractor of
cost savings and cost overruns based primarily on a specified
formula that compares the contract target cost with actual cost.
Although all cost savings are shared under fixed-price incentive
contracts, cost overruns in excess of a specified amount must be
borne entirely by the contractor. Recent contract awards for the
Strategic Sealift vessels, the fourth LSD-CV and the Icebreaker
are each fixed-price incentive contracts.
Under government regulations, certain costs, including
certain financing costs, portions of research and development
costs and certain marketing expenses, are not allowable costs
under fixed-price incentive contracts. The government also
regulates the methods by which overhead costs are allocated to
government contracts.
<PAGE>
U.S. government contracts are subject to termination by the
government either for its convenience or upon default by the
contractor. If the termination is for the government's
convenience, contracts provide for payment upon termination for
items delivered to and accepted by the government, payment of the
contractor's costs incurred plus the costs of settling and paying
claims by terminated subcontractors, other settlement expenses
and a reasonable profit. However, if a contract termination
results from the contractor's default, the contractor is paid
such amount as may be agreed upon for completed and
partially-completed products and services accepted by the
government, the government is not liable for the contractor's
costs with respect to unaccepted items and is entitled to
repayment of advance payments and progress payments, if any,
related to the terminated portions of the contract and the
contractor may be liable for excess costs incurred by the
government in procuring undelivered items from another source.
The continuation of any U.S. Navy shipbuilding program is
dependent upon the continuing availability of Congressional
appropriations for that program. It is customary for the U.S.
Navy to award contracts to build one or more vessels of a program
to a contractor together with options (exercisable by the U.S.
Navy) to purchase additional vessels in the program. Generally,
contracts to build vessels are not awarded until funds to pay the
full contract have been appropriated. However, because Congress
usually appropriates funds on a fiscal year basis, funds may
never be appropriated to permit the U.S. Navy to exercise options
that have been awarded. In addition, even if funds are
appropriated, the U.S. Navy is not required to exercise the
options.
Because its U.S. Navy contracts require the Company to have
access to classified information, Avondale must maintain a
security clearance for its facility. Among other things,
facilities with such clearances must restrict the access of
non-U.S. citizens to classified information. If in the future
the percentage of foreign ownership is increased to a level that
could result in foreign dominance or control of its activities,
Avondale would be required to implement additional measures to
insure that classified material would not be compromised or risk
the loss of its security clearance.
Due to the complexity of government contracts and applicable
regulations, contract disputes with the government occur in the
ordinary course of the Company's business. Based upon
management's analysis of each such dispute and advice of counsel,
the Company records, if appropriate, an estimate of the amount
recoverable upon resolution of such disputes. Although
management believes its estimates are based upon a reasonable
analysis of such disputes, no assurance can be given that its
estimates will be accurate and variances between such estimates
and actual results can be material. The Company believes that
adequate provision has been made in its financial statements for
these and other normal uncertainties incident to its government
business.
There is significant oversight of defense contractors to
prevent waste in the defense procurement process. Areas of
<PAGE>
contract dispute are reviewed by the government for evidence of
criminal misconduct such as mischarging, product substitution and
false certification of pricing and other data. In the event the
government alleges a violation of its procurement regulations, it
may seek compensatory, treble or punitive damages in substantial
amounts and indictments, fines, penalties and forfeitures.
Indictment can result in suspension or debarment of the
contractor from government contracting for a period of time.
In early March 1995, President Clinton announced that he had
adopted an Executive Order that prohibits the federal government
from entering into contracts with businesses that hired permanent
replacement workers to replace workers who were on strike. The
Company is unable to assess the potential impact of such an
action on the Company.
Vessel Deliveries and Backlog. At December 31, 1994, the
Company's Shipyards Division had a firm contract backlog of
approximately $1.42 billion (excluding options), of which
approximately $459 million is expected to be billed in 1995,
compared with backlogs of $1.23 billion and $450 million at
December 31, 1993 and 1992, respectively. The backlog at
December 31, 1994 included contracts to build seven T-AO Oilers
(four of which had been delivered by the end of 1994); four LSD-
CV (cargo variant) vessels (one of which was delivered in 1994),
with the most recent vessel contract being awarded in 1993; one
WAGB-20 Polar Icebreaker under a contract awarded in 1993; and
three T-AKR 300 Class Sealift Ships, under contracts awarded in
1993 and 1994. Also included in the Shipyards Division backlog
at December 31, 1994 are contracts to construct four MHC-51 Class
Minehunters ("MHC") for the U.S. Navy. Currently two MHCs are
scheduled for delivery in 1995 and two in 1996. By the end of
1994, all of the MHC hulls were transferred from the Company's
Avondale Enterprises, Inc. ("AEI") facility in Gulfport,
Mississippi to the Company's main shipyard for outfitting in
order to take advantage of the yard's efficiencies and skilled
labor. Although the AEI facility is currently idle, the Company
is currently evaluating the site for utilization in the
performance of other contracts.
All major U.S. Navy contracts in the backlog, except for the
contract to construct three LSD-CVs, contain cost escalation
clauses that are intended to compensate the Company for increases
in wage rates and material costs based on industry indices. The
contract to construct the three LSD-CVs, as originally awarded,
contained a cost escalation clause but as part of the REA
settlement (as discussed under "Management's Discussion and
Analysis of Financial Condition and Results of Operations") the
contract was converted to a firm fixed price.
Vessel deliveries in 1994 included one T-AO Oiler and one
LSD-CV. Vessel deliveries scheduled for 1995 include two T-AO
Oilers, one LSD-CV and two MHCs. The Company plans to continue
to actively pursue other Government shipbuilding and repair
opportunities when they become available.
<PAGE>
In anticipation of reductions in the U.S. Navy shipbuilding
programs, the Company has been actively pursuing commercial
shipbuilding and industrial fabrication projects (see "Other
Operations - Modular Construction" below). As discussed above,
international commercial shipbuilding opportunities are limited
because shipbuilders in foreign countries are often subsidized by
their governments, which allows them to sell their ships for
prices below their construction cost. Domestic shipbuilding
opportunities that are not affected by foreign subsidies offer
better possibilities for commercial shipbuilding opportunities.
The OPA'90, which requires the phased-in transition to double-
hull tankers and product carriers effective January 1, 1995, has
created commercial shipbuilding opportunities for Avondale.
Because of OPA'90, there is a demand (which is expected to
continue through the remainder of the decade) for the retro-
fitting of existing tankers, or the building of new double-hulled
tankers. In addition, federal law requires construction in a
U.S. Shipyard of any vessel that will transport cargo between
U.S. ports. The contract award discussed above represents the
Company's first commercial contract award for construction in
response to OPA'90.
In connection with the bids and proposals that the Company
has submitted or plans to submit to various commercial and
government customers, no assurance can be given that the vessels
will actually be built or that the Company will be the successful
bidder.
Other Operations
Overview. Although the Company has from time to time, on a
limited basis, pursued opportunities to diversify its business,
management strongly believes that the Company's resources are
most profitably employed in ship construction. Although the U.S.
Navy's shipbuilding budget has declined from the levels in the
mid-1980s, management believes that opportunities to participate
in substantial shipbuilding programs will continue to exist for
those companies that are the most competitive. The Company's
success in keeping its costs among the most competitive in the
industry has enabled it to secure backlog in 1994 and 1993 as
well as position itself for future work that will be available
from the Navy. As noted below, in order to focus on its core
shipbuilding business and improve liquidity, the Company has
sold, or has available for sale, certain of its non-core business
assets. Any such sales will only be made in an amount that is
not less than management's estimation of the fair value of the
assets. Additionally, as further discussed below, in 1994 the
Company closed its Avondale Technical Services, Inc. operation
and completed the existing contracts at its Genco Industries,
Inc. operation.
The Company will continue to evaluate suitable
diversification opportunities, principally those that would not
detract from Avondale's core business and that would utilize the
Company's existing facilities. Among possible diversification
opportunities are: (i) the construction of large industrial
facilities utilizing modular shipbuilding expertise and project
management experience; (ii) the repair and overhaul of U.S. Navy
and commercial vessels; (iii) the boat building and small vessel
<PAGE>
construction market; and (iv) steel fabrication and other
operations.
Modular Construction. The Company is able to apply its
modular construction methods to a variety of non-marine
industrial fabrication projects. In the past, the Company has
fabricated a sulphur recovery plant that was shipped to Saudi
Arabia for on-site assembly and installation, constructed two
cryogenic gas separation systems, two waste disposal units, six
turbine compressors and turbine generators, six condenser modules
for inclusion in a nuclear power plant and two sled and receiver
modules for sub-sea pipeline connections, fabricated steel
bridges and constructed a hydroelectric plant that was floated up
the Mississippi River and installed in Vidalia, Louisiana in
1990. In January 1992, the Company delivered to the City of New
York an 800-bed floating detention facility that is 625 feet
long, 125 feet wide, and five stories high. The facility is a
fully self-contained adult detention institution with 700 beds in
50-man dormitories and 100 single cells.
In January 1993, the Company announced its agreement to
participate with Westinghouse Electric Corporation in a long-term
development project involving first-of-a-kind engineering of
Westinghouse's AP600 advanced nuclear reactor. This reactor has
been selected by the Advanced Reactor Corporation, a group of 16
major U.S. utilities formed to support development of new
designs, to lead the revival of U.S. nuclear plant construction
in the 1990s. The Company's role in first-of-a-kind engineering
of the AP600 will be to design modules of the plant which can be
pre-fabricated at offsite facilities, such as the Company's, and
shipped by rail or truck to the construction site. Westinghouse
has projected that, if the Company's modular construction
techniques prove to be adaptable to nuclear plant construction,
it will achieve significant savings in construction time and
costs, thus ultimately making the cost of nuclear power
competitive with other power generation alternatives.
At present, there is a minimal level of production activity
in the Modular Construction Division of the Company. The
division has not added any significant projects to its backlog
since the floating detention center was awarded in May 1989.
Nevertheless, the Company continues to actively pursue non-
shipbuilding marine and industrial - commercial projects suitable
for modular construction. Modular Construction Division backlog
included in the backlog of the Company's Shipyards Division and
Service Foundry operations at December 31, 1994 was approximately
$916,000 as compared to $575,000 and $600,000 at December 31,
1993 and 1992, respectively.
Repair Operations. Through its Algiers Yard and at its main
plant, Avondale is engaged in the repair, overhaul and conversion
of U.S. Navy vessels. The Algiers yard is operated under a long-
term lease and is designed primarily for the repair and overhaul
of large ocean-going vessels. Due to the anticipated significant
reductions in the number of U.S. Navy ships discussed above under
the heading "Business - Overview," the Company believes that U.S.
Navy repair opportunities will decline and, as a consequence,
there will be increased competition for available U.S. Navy
repair business. Further, most of the U.S. Navy's ship repairs
<PAGE>
are currently being conducted at or near their vessels' home
ports, severely limiting the number of U.S. Navy repair
opportunities available to the Company. The Algiers yard is
currently engaged in topside commercial repair activity and is
also being utilized to lay-berth up to four military vessels.
In March 1993, the Company sold its Harvey Quick Repair
operation. Sales to unrelated parties by the Harvey Quick Repair
operation were approximately $2 million in 1993 and $14 million
in 1992.
Small Vessel Construction. The Company pursues available
opportunities for the construction of special purpose vessels
such as gaming vessels, and relatively small, special purpose
military vessels, commercial fishing boats, dredges, barges, and
ferries.
Boat Division. The Company has a facility equipped for boat
construction at its Westwego, Louisiana yard that is capable of
building vessels up to 450 feet in length. In 1994, the Boat
Division delivered two 19th century-style paddle wheel gaming
vessels of 266 and 210 feet in length. In early January 1994,
the Boat Division signed a contract for $27 million to construct
a 350-foot gaming vessel. Construction commenced during 1994
with delivery currently scheduled in mid-1995. The Boat Division
is actively pursuing other projects involving the construction of
additional gaming boats as well as passenger vessels and ferries,
towboats and other vessels. The Boat Division's backlog at
December 31, 1994 was approximately $18.3 million, as compared to
approximately $13 million and $2 million at December 31, 1993
and 1992, respectively.
Avondale Gulfport Marine, Inc. Avondale Gulfport Marine,
Inc. ("AGM") completed contracts to build 15 landing craft air
cushion vessels in 1993. Its remaining backlog at December 31,
1994 was approximately $373,000, all of which is expected to be
billed in 1995, as compared to backlogs of approximately $3 and
$14 million at December 31, 1993 and 1992, respectively. While
the 24.5 acre site, located on an industrial seaway six miles
northeast of Gulfport, Mississippi, is currently listed for sale,
the Company continues to explore opportunities for the facility.
The Company wrote down, at December 31, 1993, the AGM assets to
their estimated net realizable value.
Avondale Enterprises, Inc. As noted above under "Vessel
Deliveries and Backlog," in December 1994 AEI transferred the
last MHC hull to the Company's main shipyard for remaining
construction and outfitting and the facility is currently idle.
The Company anticipates delivery of the first MHC in March 1995
with the final vessel projected for delivery in 1996. The
Company is currently evaluating the site for utilization in the
performance of other contracts.
Steel Operations and Other Operations. Through its Steel
Sales operation, Avondale sells steel plate and shapes to the
marine and industrial markets of the southeastern and
southwestern United States. Net sales to other Avondale
divisions are not significant. Sales to unrelated parties were
<PAGE>
approximately $22.4 million in 1994 as compared to $19 million
and $18 million at December 31, 1993 and 1992, respectively.
The Service Foundry operation, which has been operating
since 1929, consists of a bronze and steel foundry specializing
in mid-sized castings, a complete machine shop with steel
fabricating facilities and a pattern shop. The foundry's sales
to the other divisions vary widely, being approximately 3% of its
annual volume in 1994 and approximately 3% and 14% of its annual
volume in 1993 and 1992, respectively. Sales to unrelated
parties were approximately $10.3 million in 1994 as compared to
$13 million and $11 million at December 31, 1993 and 1992,
respectively. The foundry's backlog was approximately $6.6
million at December 31, 1994, all of which is expected to be
billed in 1994, as compared to backlogs of $3.1 and $6.7 million
at December 31, 1993 and 1992, respectively. The Company has
received several inquiries regarding the possible sale of this
operation. However, any such sale would only be made for an
amount that is not less than management's estimate of the fair
value of the assets.
The Genco Industries Group ("Genco"), a Texas-based company
that fabricates and installs large steel structures and process
units for various industries, completed its remaining contracts
in 1994 and the facilities were closed. Sales to unrelated
parties were approximately $3.4 million in 1994 as compared to
$21 and $24.8 million at December 31, 1993 and 1992,
respectively. The Genco main facility, an 8.7 acre site in Bridge
City, Texas, approximately 20 miles southeast of Beaumont, is
currently idle and listed for sale. However, the Company
continues to explore other possible uses for this facility.
In the third quarter of 1994 the Company decided to
discontinue its Avondale Technical Services, Inc. ("ATS")
subsidiary which was engaged in contracts to provide operations
and maintenance services to government and commercial operations.
As such, the results of operations for ATS are classified as
discontinued operations. Refer to "Management's Discussion and
Analysis of Financial Condition and Results of Operations -
Results of Operations" and to Note 7 of the notes to the
consolidated financial statements, both contained elsewhere in
this Form 10-K, for further discussion of ATS. Sales to
unrelated parties by ATS and its subsidiary, Crawford Technical
Services, Inc. ("CTS"), were approximately $13.5 million at
December 31, 1994, $14.4 million in 1993 and $15.6 in 1992. At
December 31, 1994, ATS had a backlog of $72,000, all of which
will be billed in 1995, compared to backlogs of approximately $29
million and $42 at December 31, 1993 and 1992, respectively.
Competition
The U.S. shipbuilding industry is intensely competitive.
There are approximately 20 non-government U.S. shipyards that
have in place at least one shipbuilding position capable of
accommodating a vessel 400 feet in length. The industry is
divided into two distinct markets, U.S. government contracts,
which is dominated by contracts for the U.S. Navy, and commercial
ship construction for other customers.
<PAGE>
With respect to the government market, six of these
shipyards, including the Company, were engaged in the
construction and/or conversion of complex combatant, amphibious
and auxiliary ships for the U.S. government. One shipyard is
engaged exclusively in constructing submarines. Two of the
remaining shipyards are subsidiaries of much larger corporations
that have substantially greater financial resources than the
Company.
With respect to commercial construction, all twenty of the
existing shipyards are capable of performing on various sizes of
commercial new construction or conversion contracts. The Company
believes that approximately 10 of these shipyards are direct
competitors for commercial shipbuilding opportunities of the
sizes and classes of vessels the Company is capable of building.
The Company also competes with government-operated and
numerous other shipyards for government ship repair
opportunities. With the reduction of the U.S. Navy fleet and the
use of shipyards at or near the vessels' home ports, the
Company's participation is very limited in the U.S. Navy repair
market and it has not been awarded a U.S. Navy repair contract
since October 1992. For commercial repair work the Company
competes with a larger number of private shipyards, including
many smaller operations, and price competition is particularly
intense.
Because of the current overcapacity at U.S. shipyards, the
current small volume of commercial work available, and the fact
that most contracts are awarded on the basis of competitive
bidding, price competition is particularly intense. Intense
competition also exists in each of the other businesses in which
the Company is engaged. The Company has been successful recently
in securing competitively-bid contracts in large part because the
Company submitted the most cost-effective bids for the available
contracts. The Company believes that it will continue to be
competitive in bidding for selected U.S. Navy and commercial
shipbuilding contracts in the future. However, no assurance can
be given that the Company will be the successful bidder on any
future contracts or that, if successful, it will realize profits
on such contracts.
Marketing
The Company's marketing effort is decentralized and
conducted separately by each division. Generally, the Company and
its competitors are all aware of the shipbuilding, repair and
conversion plans of the U.S. Navy and most prospective commercial
customers, and are invited to bid on all major projects.
The Company's boatbuilding operations are marketed by the
sales and business development personnel of the appropriate
divisions primarily through direct, personal sales calls. The
services of the Steel Sales and Service Foundry operations are
marketed through industry advertising, personal sales calls and
prior business relationships.
<PAGE>
Materials and Supplies
The principal materials used by Avondale in its
shipbuilding, conversion and repair business are standard steel
shapes, steel plate and paint. Other materials used in large
quantities include aluminum, copper-nickel and steel pipe,
electrical cable and fittings. The Company also purchases
component parts such as propulsion systems, boilers, generators
and other equipment. All of these materials and parts are
currently available in adequate supply from domestic and foreign
sources.
In connection with its government contracts, the Company is
required to procure certain materials and component parts from
supply sources approved by the U.S. Government. Although certain
components and sub-assemblies are manufactured by subcontractors,
the Company's reliance on subcontractors has been and is expected
by management to continue to be limited. The Company is not
dependent upon any one supply source and believes that its supply
sources are adequate to meet its future needs.
Insurance
The Company maintains insurance against property damage
caused by fire, explosion and similar catastrophic events that
may result in physical damage or destruction to the Company's
premises and properties. The Company also maintains general
liability insurance in amounts it deems appropriate for its
business. The Company is self-insured for workers' compensation
liability and employees' health insurance except for losses in
excess of $1 million per occurrence, in which case the Company
maintains insurance in an amount it deems appropriate for its
business.
Environmental and Safety Matters
General. Avondale is subject to federal, state and local
environmental laws and regulations that impose limitations on the
discharge of pollutants into the environment and establish
standards for the treatment, storage and disposal of toxic and
hazardous wastes. The Company incurred expenses for
environmental, health and safety compliance of approximately $3.5
million during 1994 and $3 million in 1993. See also "Item 3.
Legal Proceedings - Environmental Proceedings."
The Company is also subject to the federal Occupational
Safety and Health Act ("OSHA") and similar state statutes. The
Company has an extensive health and safety program and employs a
staff of safety inspectors and industrial hygiene technicians,
whose primary functions are to develop Company policies that meet
or exceed the safety standards set by OSHA, train supervisors and
make daily inspections of safety procedures to insure their
compliance with Company policies on safety and industrial
hygiene. All supervisors are required to attend safety training
meetings at which the importance of full compliance with safety
procedures is emphasized.
<PAGE>
Over a period of approximately two months in 1994,
inspectors from OSHA conducted a series of safety inspections at
the Company's facilities. As a result of these inspections, OSHA
issued 71 citations alleging numerous safety violations. While
the vast majority of these alleged violations were corrected to
the inspectors' satisfaction during the course of the
inspections, in its citations OSHA is seeking penalties from the
Company of approximately $80,000. The Company is appealing these
penalties. The matter is currently before the OSHA Review
Commission. Additionally, in 1994 six of the Company's employees
filed complaints against Avondale under Section 11(c) of the
Occupational Safety and Health Act. The Company has issued a
position statement in response to each complaint and with the
exception of one complaint, the complaints have been investigated
by an OSHA inspector. The inspector has not decided whether to
recommend that OSHA issue a complaint based on any of these
charges.
Waste Disposal. Avondale's operations produce a limited
amount of industrial waste products and certain hazardous
materials. The Company's industrial waste products, which
consist principally of residual petroleum, other combustibles and
blasting abrasives, are shipped to third party disposal sites
that are licensed to handle such materials.
Employees
Since September 1985, when all of its outstanding common
stock was purchased by the ESOP from Ogden, Avondale has been
owned principally by its current and former employees. At
December 31, 1994, Avondale had approximately 6,200 employees,
many of whom have been employed by the Company for many years.
On June 25, 1993 an election was conducted to determine whether
certain of the main shipyard's employees desired to have union
representation. A total of 3,914 workers cast votes, of which
approximately 847 votes were challenged. A simple majority of
those votes which were not challenged was in favor of the union.
The National Labor Relations Board is in the process of reviewing
the challenged votes and determining the final outcome of the
election. Except for a number of employees of the Service
Foundry operation, Avondale's employees are not covered by a
collective bargaining agreement. Management believes that its
relationship with its employees is satisfactory.
Item 2. Properties.
The Company's corporate headquarters and main shipyard are
located on the west bank of the Mississippi River at Avondale,
Louisiana, approximately 15 miles from downtown New Orleans.
That facility includes approximately 226 acres of Company-owned
land and 132 buildings enclosing approximately 1.4 million square
feet of space, approximately 31 acres of leased land and several
leased buildings enclosing approximately 150,000 square feet of
space, a 900-foot floating dry dock/launch platform that permits
construction, conversion or repair of vessels up to approximately
1,000 feet in length, a 650-foot floating dry dock principally
used for ship repair and multiple building ways and side
launching facilities. The main shipyard includes approximately
<PAGE>
6,500 feet of wharves, 1,200 feet of launch ways and 2,900 feet
of unimproved waterfront along the Mississippi River. The
Company's shipyard facilities have the capacity to build
virtually any type of vessel other than submarines and surface
vessels of the largest classes, such as aircraft carriers and
ultra-large crude carriers.
The Company's 900-foot floating drydock was constructed in
1975 and financed pursuant to Title XI of the Merchant Marine
Act, 1936, as amended. The 900 foot drydock is currently subject
to a Title XI mortgage of approximately $4.7 million. As
discussed further in Note 6 of the notes to the consolidated
financial statements, these mortgage bonds were refinanced in
February 1995.
The Company's 650-foot floating drydock and support
facilities were constructed in 1982 and financed with $36.25
million of industrial revenue bonds. As discussed further at
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" and Note
6 of the notes to the consolidated financial statements, these
bonds were refunded in June of 1994.
As part of its program to significantly improve its
efficiency, the Company has begun a $20 million capital
expenditure program, financed principally through $17.8 million
of bonds issued in February 1995 utilizing a Title XI guarantee
(see "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources " and
Note 6 of the notes to the consolidated financial statements).
The modernization program includes construction of a covered
facility, which should provide productivity gains by eliminating
weather-related problems, and adoption of a more automated
process for building the various modules which are assembled into
a completed vessel. The modernization program is expected to be
completed by the third quarter of 1995.
During February 1995, the Company established two additional
entities for the purpose of owning certain parcels of Avondale's
real estate which underlie the building and improvements funded
with the proceeds of the debt guaranteed under Title XI (as
discussed above). The first entity is Avondale Properties, Inc.,
a Louisiana corporation, wholly owned by Avondale Industries,
Inc. The second entity is Avondale Land Management Company, a
Louisiana Partnership owned 99% by Avondale Properties, Inc. The
properties transferred represent approximately 143 of the 210
acres which comprise the Company's main facility. These parcels
are leased back to Avondale Industries, Inc. pursuant to certain
lease agreements with a term coincident with the Title XI debt.
The Company also operates several other facilities in the
vicinity of the main shipyard. The Westwego Yard is located five
miles down-river from the main shipyard on 16.6 acres of leased
land and includes facilities for the construction or repair of
boats and vessels up to 450 feet in length. The Algiers Yard is
located 19 miles down-river from the main shipyard on 22 acres of
leased land and includes construction facilities used
predominantly for the repair and overhaul of large ocean-going
<PAGE>
vessels. The Steel Sales operation is located on 4.4 acres of
property leased on a month-to-month basis in Harvey, Louisiana,
where a steel warehouse is located. The location has direct
access to the Mississippi River via the Harvey Canal. The
Service Foundry operation, located in an approximately 300,000
square foot facility on a 78-acre Company-owned site a few miles
up-river from the main shipyard, consists of a bronze and steel
foundry, a complete machine shop with steel fabricating
facilities and a pattern shop for the production of patterns used
in the foundry.
The Avondale Gulfport Marine, Inc. facility is located on
24.5 acres of Company-owned land located six miles northeast of
Gulfport, Mississippi on an industrial seaway. The site has a
98,800 square foot manufacturing facility and a 25,000 square
foot assembly building. The site also includes a test area, a
craft storage area and a waterway access ramp. As noted above,
this facility is currently idle and has been listed for sale.
However, the Company continues to seek alternative uses for this
facility.
The Avondale Enterprises, Inc. ("AEI") facility is located
on a Company-owned 121.5 acre site four miles north northeast of
Gulfport, Mississippi on the same industrial seaway as AGM. The
facility includes a 263,447 square foot manufacturing facility
and a 6,300 square foot administration building. This facility
was acquired in 1989 for construction of the U.S. Navy's MHC-51
Class of Coastal Minehunter. AEI has pledged a portion of the
facility to secure a $3 million loan it entered into in 1991 to
finance a portion of its 1989 acquisition debt. As discussed
above, with the transfer of the final MHC hull to the main
shipyard in December 1994, this facility was idle. The Company
is currently evaluating alternative uses for this facility.
The main facility operated by the Genco Industries Group
("Genco") is located on a Company-owned 8.7 acre site 20 miles
southeast of Beaumont, Texas. The facility includes five
buildings utilized for manufacturing and administration
comprising approximately 66,800 square feet. Genco has a smaller
facility that is located on a Company-owned 3.2 acre site
approximately 80 miles northwest of Beaumont. This facility
consists of three manufacturing-administration buildings totaling
approximately 26,500 square feet. As discussed above, Genco's
facilities were idle in 1994 after completion of their contracts.
The Company currently has these facilities listed for sale and is
exploring alternative uses.
Except as otherwise noted above, the above-described
facility leases are for various terms extending through at least
1999, including renewal options.
The Company believes that its core marine construction and
repair facilities provide it with sufficient capacity to handle
any business it reasonably expects to obtain in the foreseeable
future. In general, the Company's productive capacity is limited
less by physical facilities than by the number of employees the
Company can effectively supervise. Management believes that the
Company would be operating at full capacity with approximately
10,000 employees. The Company's core business currently operates
with more than 5,600 employees.
<PAGE>
Item 3. Legal Proceedings.
Environmental Proceedings. Various governmental and private
parties have from time to time alleged that the Company is a
potentially responsible party with respect to certain hazardous
waste sites, including, among others, the sites listed below.
Combustion, Inc. Site. In January 1986, the Louisiana
Department of Environmental Quality ("DEQ") advised the Company
that it may be a responsible party ("PRP") with respect to an oil
reclamation site operated by Combustion, Inc., an unaffiliated
company, in Walker, Louisiana. The Company sold to Combustion,
Inc. a substantial portion of the waste oil that Combustion, Inc.
processed during the period 1978 through 1982. The Company's
potential liability, if any, for cleanup of this site will be
based on the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA") or the Louisiana
Environmental Affairs Act. Under these statutes, such liability
is presumptively joint and several, but is typically apportioned
among the responsible parties based on the volume of material
sent by each to the waste site. The Company has cooperated with
other potentially responsible parties to study the potential
aggregate liability under these statutes. Moreover, the Company
believes it has substantial defenses against liability and
defenses that could mitigate the portion of liability, if any,
that would otherwise be attributable to it.
To date, the Company and certain of the other PRPs for the
Combustion site have funded the site's remediation under a
preliminary cost-sharing agreement. Pursuant to that agreement,
the Company agreed to contribute up to $3.5 million to the total
clean-up costs, such contributions to be made as clean-up costs
were incurred. As of December 31, 1994 the Company had
contributed its $3.5 million share to the total clean-up costs,
which at that date approximate $15 million in the aggregate.
Additional remedial work scheduled for the site includes
completion of a Remedial Investigation/Feasibility Study in 1995
to 1996, and, if required by the results of these studies,
subsequent post-closure activities (i.e., ground water monitoring
or remediation). Future costs will also include DEQ oversight
costs. Future expenses are estimated in the range of
approximately $1 million, exclusive of groundwater monitoring and
remediation, for which no estimate is currently available.
Following completion of the remediation, a final determination
will be made as to the proper allocation of the remediation
responsibility among the various parties. The Company's share of
the clean-up costs could be lower, or higher, than the $3.5
million that it has contributed, but the Company does not expect
its liability to vary materially from this amount.
Since July 1986, a number of "toxic tort" suits have been
filed against the Company and numerous other defendants alleging
claims for personal injury, property damage, and "fear of cancer"
in connection with Combustion, Inc.'s oil reclamation site. The
plaintiffs also seek substantial punitive damages. These cases
have been consolidated and certified as a class action. The
deadline set by the court for claimants to identify themselves
has expired, and approximately 12,000 claimants have been
identified. The deadline for joinder of new parties to the
<PAGE>
litigation has also expired. By court order dated December 29,
1994, all defendants and third-party defendants were deemed to
have filed cross-claims against the other defendants and third-
party defendants for tort contribution. Certain defendants,
including the Company, also were deemed to have filed cross-
claims for CERCLA cost recovery against the other defendants and
third-party defendants. Significant discovery activities are
scheduled to occur throughout 1995 and into 1996.
The case is currently pending in federal court in the
Western District of Louisiana. The plaintiffs have moved to
remand the state tort claims to Louisiana state court. This
motion has not been ruled on by the federal judge; however, a
magistrate's report to the federal judge has recommended that the
motion to remand be denied.
The court has ordered the group of plaintiffs and the group
of defendants to each select one "bellwether" plaintiff from each
of eight categories, which include cancer, leukemia, and property
damage. Pursuant to a Case Management Order ("CMO"), the court
has set a trial date for September 3, 1996. The CMO provides for
a multi-phase trial with Phase One including trial of
"bellwether" plaintiffs before a jury. Phase Two will address
CERCLA claims. Phase Three will involve settlement negotiations
and mediation, and Phase Four will include any additional
discovery and trials of multiple plaintiffs to resolve any
remaining claims.
Furthermore, the Company has initiated litigation against
its insurer for a declaration of coverage of the liability, if
any, that may arise in connection with the remediation of the
site or the related tort litigation. The court has ruled that
the insurer has the duty to defend the Company, but has not yet
ruled on whether the carrier has a duty to indemnify the Company
if any liability is ultimately assessed against it.
After consultation with counsel, the Company at this
preliminary stage is unable to predict the eventual outcome of
this litigation and cannot determine its actual liability, if
any, for these toxic tort claims at December 31, 1994, nor the
degree to which such potential liability would be indemnified by
its insurance carrier. The Company believes, based on the advice
of counsel, that it has substantial defenses to liability with
respect to the tort claims; however, if the claimants are
successful, the Company could become liable for substantial
amounts. The CERCLA cost recovery claims in the suit may
ultimately result in a requirement that additional parties
contribute to the clean-up costs of the Combustion site and will
not increase the Company's liability for clean-up costs
associated with the site.
Dutchtown Site. In July 1988, Avondale was notified by the
U.S. Environmental Protection Agency (the "EPA") that it may be a
potentially responsible party with respect to an oil reclamation
site operated by an unaffiliated company in Dutchtown, Louisiana.
The steering committee established by Avondale and certain other
potentially responsible parties is subject to an administrative
order issued by the EPA in August 1989 and a consent decree
<PAGE>
entered by the U.S. District Court for the Middle District of
Louisiana in May 1990. These orders provide for, among other
things, expedited site remediation, which was largely completed
during 1991. To date, the steering committee has paid $6.5
million in remediation expenses. In 1994 the U.S. Environmental
Protection Agency issued a decision for the final remedy at the
site, such remedy to include groundwater monitoring for thirty
years. Following completion of the remediation, a final
determination was made as to the proper allocation of the
remediation responsibility among the various parties at which
time the Company's share of the clean-up costs was allocated.
The Company's remaining unpaid portion of the total remediation
costs under the final allocation and its share of the cost of the
final remedy (including groundwater monitoring) is estimated at
less than $500,000. Avondale's ultimate responsibility for the
remediation costs will depend upon several factors, including the
results of litigation instituted in June 1990 by the steering
committee against several other potentially responsible parties
and the availability of recovery from Avondale's insurers.
Management believes that the eventual disposition of these
matters will not have a material effect on the Company's
financial statements.
Paint Operation Site. In response to federal and state
suits filed against Fina Oil and Chemical Company and its
affiliate ("Fina") by the owner of a contaminated site located in
Harvey, Louisiana, in 1991, Fina filed a third party demand
against several other potentially responsible parties, including
Avondale. The contaminants consist primarily of by-products
associated with a paint manufacturing business located for
several decades at the Harvey, Louisiana site. From 1967 through
1976, Avondale owned this paint manufacturing business and leased
the site from the owner. In 1976, Avondale sold this business to
Fina, which continued to operate the business and lease the site
through December 1991. In February 1994, the Company and Fina
settled Fina's third party demand wherein Fina agreed to dismiss
its claims against Avondale and agreed to defend, indemnify and
hold Avondale harmless against all CERCLA liability excluding
contamination associated with polychlorinated biphenyls ("PCBs").
However, there is no evidence which supports the existence of
PCBs at the site. In exchange, Avondale has agreed to waive its
claim for attorney fees and to provide an affidavit from the
site's owner that attests that at no time during Avondale's
operation of the paint manufacturing business were drums
containing toxic wastes buried at the site. Final execution of
the settlement occurred in the fourth quarter of 1994.
Other. The Company was advised in the fourth quarter of
1994 that it may be a PRP with respect to a second oil reclamation
site, operated by another unaffiliated company, because it may
have supplied a portion of the waste oil processed at the site.
The EPA has completed action at this site at a cost of
approximately $300,000. The list of PRPs includes almost 70
companies, and the Company believes that its liability, if any,
will be a small percentage of the overall costs at this site.
<PAGE>
In addition to the above, the Company is also named as a
defendant in numerous other lawsuits and proceedings arising in
the ordinary course of business, some of which involve
substantial claims. The Company has established accruals as
appropriate for certain of the matters discussed above. While
the ultimate outcome of lawsuits and proceedings against the
Company cannot be predicted with certainty, management believes,
based on current facts and circumstances and after review with
counsel, that, except for the toxic tort suits described above
for which no estimate can be made, the eventual resolution of
these matters is not expected to have a material adverse effect
on the Company's financial statements.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company did not submit any matters to a vote of security
holders during the fourth quarter of its fiscal year ended
December 31, 1994.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The Company's common stock has traded on The Nasdaq Stock
Market ("NASDAQ") under the symbol AVDL. The following table
sets forth the range of high and low per share sales prices, as
reported by NASDAQ, for the periods indicated.
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
1993
First Quarter $3 1/8 $2 1/8
Second Quarter $4 1/2 $2 7/16
Third Quarter $7 5/8 $4 1/4
Fourth Quarter $7 3/4 $6 1/4
1994
First Quarter $8 1/2 $6 5/8
Second Quarter $8 1/2 $6 1/4
Third Quarter $8 1/4 $6 1/8
Fourth Quarter $8 $6 5/8
</TABLE>
At March 6, 1995, there were 728 holders of record of the
Company's common stock.
No dividends were paid on the Company's common stock in the three
years ended December 31, 1994. As discussed in Note 5 to the
Company's consolidated financial statements, the terms of the
Company's revolving credit agreement limit or restrict, without
bank approval, the payment of cash dividends.
<PAGE>
<TABLE>
<CAPTION>
Item 6. Selected Consolidated Financial Data.
Years Ended December 31,
-------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA: (In thousands, except per share data)
Continuing operations:
Net sales $475,810 $456,724 $576,384 $768,887 $752,060
Gross profit (loss) 47,485 33,180 37,796 (30,090) 27,663
Income (loss) from
operations 16,949 3,400 7,281 (119,842) (3,543)
Net ESOP contribution --- --- 8,141 24,000 27,000
Income (loss) from
continuing operations 13,075 (5,233) (11,321) (139,173) (25,560)
Income (loss) from
discontinued operations (4,552) (3,561) 104 (1,705) (273)
Net income (loss) 8,523 ( 8,794) (11,217) (140,878) (25,833)
Income (loss) per share of
common stock:
Continuing operations 0.90 (0.36) (0.78) (9.64) (1.69)
Discontinued operations (0.31) (0.25) -- (0.12) (0.02)
Total 0.59 (0.61) (0.78) (9.76) (1.71)
Cash dividends per share of
common stock --- --- --- --- 0.92
BALANCE SHEET DATA:
Current assets $127,936 $151,597 $177,075 $199,815 $237,831
Current liabilities 93,100 127,032 113,917 127,522 154,776
Total assets 273,503 302,139 346,196 383,670 491,015
Long-term debt 45,875 43,848 90,469 110,009 61,094
Total liabilities 150,625 187,784 223,047 257,528 248,156
Shareholders' equity 122,878 114,355 123,149 126,142 242,859
____________________
(1) Income statement data for years 1990 through 1993 have been restated to
present Avondale Technical Services, Inc. as discontinued operations
(see Note 7).
(2) See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Notes to Consolidated
Financial Statements regarding the following:
Discontinued operations.
Settlement of Requests for Equitable Adjustments in December 1993.
Revisions of estimated profits on several previously-completed
shipbuilding contracts in 1994.
(3) During 1991 and 1990, the Company revised its estimated costs to
complete certain contracts which had the effect of decreasing net income
by approximately $69 million, or $4.78 per share, and approximately
$22 million, or $1.45 per share, respectively.
(4) During 1991, the Company revised its estimate of the continuing value
and future benefits of goodwill. Accordingly, the Company reduced the
carrying value of goodwill which had the effect of decreasing net income
for 1991 by $57.6 million, or $3.99 per share.
</TABLE>
<PAGE>
Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion should be read in conjunction with
Avondale Industries, Inc.'s (the "Company" or "Avondale")
consolidated financial statements and notes thereto included
elsewhere in this Form 10-K.
Overview
For the year ended December 31, 1994 the Company
substantially improved its results of continuing operations and
financial position as compared to the prior year. Income from
continuing operations increased over the prior year due to net
gains on several previously-completed shipbuilding contracts, a
reduction in interest expense and improvement in the Company's
marine repair, wholesale steel and boat building operations. As
discussed below, discontinued operations represent the operating
results of the Company's service contract subsidiary, Avondale
Technical Services, Inc.
The Company successfully completed two financing initiatives
in 1994 that strengthened its liquidity position. On May 10,
1994 the Company established a $35 million revolving credit
facility. In addition, $36.25 million of Series 1983 Industrial
Revenue Bonds ("Series 1983 IRBs") were refinanced on June 1,
1994 through the issuance of $36.25 million of Series 1994
Refunding Bonds which are due in 2004 and in 2014.
In addition to the foregoing measures, the Company
eliminated certain significant contingencies when it terminated
certain arrangements with Ogden Corporation ("Ogden"), its former
corporate parent which, among other things, could have required
the Company to reimburse Ogden for certain 1985 and prior years'
tax liabilities. This settlement is further discussed below and
in Note 12 of the notes to the consolidated financial statements.
The Company's backlog at December 31, 1994 was at an all-
time high of approximately $1.4 billion (excluding options).
Included in the backlog is work to be performed on five 1994
contract awards, the most significant of which occurred in
September 1994 when the U.S. Navy exercised a previously awarded
option to construct two additional Strategic Sealift ships for
$420 million. These represent the second and third ships which
the Company has been awarded in the Sealift program. The
remaining options for the other three ships are exercisable over
the next three years. Other 1994 contract awards include a $27
million contract for a third gaming vessel to be delivered in
mid-1995 and three contracts totaling $39.5 million for the
drydock and repair of six T-AKR-Fast Sealift Ships. Of these
drydock and repair contracts, one was completed in the fourth
quarter of 1994, one was completed in the first quarter of 1995
and the third is scheduled for completion in the third quarter of
1995. Additionally, Avondale was one of five shipyards that
received a contract to undertake a preliminary design study on
the U.S. Navy's LPD 17 (formerly LX) ship. Work on the $480,000
fixed-price contract is expected to last approximately one year.
The LPD 17 construction program is anticipated to be a multi-ship
<PAGE>
project with the first construction contract award forecasted for
1997 or 1998. The U.S. Navy may order up to twelve LPD 17 ships
that are intended to replace over 30 amphibious vessels scheduled
for decommissioning.
The Company has filed a Request for Equitable Adjustment
("Minehunter REA") with the U.S. Navy seeking substantial
increases in the contract prices for four MHC-51 Class
Minehunters ("MHC") currently being built by the Company. The
MHC-51 Class Minehunter is a highly sophisticated vessel designed
primarily to clear harbor and coastal waters of acoustic,
magnetic and pressure/contact mines. It is constructed using a
specially designed glass reinforced plastic ("GRP") technology
that was originally developed by a foreign shipyard engaged in
the construction of other MHC ships. The foreign shipyard also
was required to license the necessary technology and know-how for
the design and construction of the vessels to the Company. The
Company believes that the additional costs addressed by the
Minehunter REA resulted from defective ship specifications
provided to the Company that proved impossible to perform at the
original cost estimate developed by the Company. In connection
with developing the Minehunter REA, the Company realized during
the third quarter of 1994 that it would be necessary to increase
its cost to complete estimates for the MHC vessels. Prior to the
third quarter of 1994, the Company's work on the MHC program had
been performed on a break-even basis following the Company's
recording of a reserve for contract losses as part of the overall
resolution of the Company's Request for Equitable Adjustments
("REAs") which were settled in December 1993. The Company, in
consultation with outside counsel, has reviewed the Minehunter
REA to determine a minimum estimate of its probable recoverable
amount. The Company has received an opinion of outside counsel
that such contracts provide a legal basis for the Minehunter REA
and the evidence supporting the Minehunter REA is objective and
verifiable. Based on the Company's review in consultation with
outside counsel and supported by the view of outside counsel that
they have no reason to believe that the use of $16 million in
quantifying the minimum probable amount of recovery is
unreasonable, management concluded in the third quarter of 1994
that it was appropriate to offset the loss that it would have
otherwise had to recognize with respect to the MHC program by
such amount. In addition, the effects of the cost increase have
been partially offset also by certain contractual cost sharing
and cost escalation provisions which obligate the U.S. Navy to
bear a portion of the additional costs. To the extent that any
portion of the $16 million recognized is not recovered, then
losses in addition to those taken in 1993 will have to be
recorded.
With the exception of the contract to construct the four
Minehunters and the three LSDs, which are projected to be
completed on essentially a break-even basis (assuming the Company
collects the estimated $16 million minimum probable amount of
recovery on its Minehunter REA), the Company's committed backlog
is projected to be completed profitably. The operating profit
projected to be recognized in 1995 will be related principally to
the LSD-CV 52 and 7 T-AO contracts, while profits projected for
1996 and 1997 will reflect the LSD-CV 52 as well as the
Icebreaker and Sealift contracts after the Company has made
<PAGE>
sufficient progress on these contracts to begin recognizing
profits. The Company records profits under the percentage-of-
completion method of accounting based on direct labor charges,
and, although the Company generally does not begin to record
profits on its contracts until contract performance is sufficient
to estimate final results with reasonable accuracy, actual
profits taken with respect to such contracts may be delayed or
diminished if the Company is required in the future to revise its
estimate of the cost to complete one or more of such contracts.
In 1994, the Company closed its Avondale Gulfport Marine,
Inc. ("AGM") and Genco Industries, Inc. ("Genco") operations as
these subsidiaries completed their existing contracts. While the
AGM and Genco facilities are currently offered for sale, the
Company continues to seek alternative uses for these facilities.
The Company also determined in the third quarter of 1994 that it
will close its Avondale Technical Services, Inc. ("ATS")
operation when it completes its current contracts in 1995. The
operating results of ATS are disclosed herein as discontinued
operations in the Company's Consolidated Statements of
Operations. In addition, the Company completed the fourth and
final MHC glass reinforced plastic hull at the GRP Division
during the fourth quarter of 1994 and transferred this hull to
its main shipyard for final completion and outfitting. The
Company is considering using the GRP facility for several
potential contract opportunities.
As discussed further in Note 12 of the notes to the
consolidated financial statements, the Company has been informed
that it may be a potentially responsible party ("PRP") in
connection with two oil reclamation sites operated by
unaffiliated companies. With respect to one site, operated by
Combustion, Inc., an unaffiliated company, in Walker, Louisiana,
the Company and certain of the other PRPs for the Combustion site
have funded the site's remediation under a preliminary cost-
sharing agreement. As of December 31, 1994, clean-up costs
totalled $15 million, of which the Company has contributed $3.5
million. Additional remedial work scheduled for the site
includes the completion of a Remedial Investigation/Feasibility
Study in 1995 to 1996, and, if required by the results of these
studies, subsequent post-closure activities (e.g., groundwater
monitoring or remediation). Future costs will also include
Louisiana Department of Environmental Quality oversight costs.
Future aggregate expenses are expected to be approximately $1
million, exclusive of groundwater monitoring and remediation, to
which no estimate is currently available. The Company believes
that its proportionate share of expenditures for any additional
remedial work will not have a material effect on the Company's
financial statements. In addition, the Company believes that its
proportionate responsibility for the clean-up costs will not be
materially increased.
Since July 1986, a number of "toxic tort" suits have been
filed against the Company and numerous other defendants alleging
claims for personal injury, property damage, and "fear of cancer"
in connection with Combustion, Inc.'s oil reclamation site. The
plaintiffs also seek substantial punitive damages. These cases
have been consolidated and certified as a class action. The
deadline set by the court for claimants to identify themselves
<PAGE>
has expired, and approximately 12,000 claimants have been
identified. The deadline for joinder of new parties to the
litigation has also expired. By court order dated December 29,
1994, all defendants and third-party defendants were deemed to
have filed cross-claims against the other defendants and third-
party defendants for tort contribution. Certain defendants,
including the Company, also were deemed to have filed cross-
claims for Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA") cost recovery against the other
defendants and third-party defendants. Significant discovery
activities are scheduled to occur throughout 1995 and into 1996.
The case is currently pending in federal courts in the
Western District of Louisiana. The plaintiffs have moved to
remand the state tort claims to Louisiana state court. This
motion has not been ruled on by the federal judge; however, a
magistrate's report to the federal judge has recommended that the
motion to remand be denied.
The court has ordered the group of plaintiffs and the group
of defendants to each select one "bellwether" plaintiff from each
of eight categories, which include cancer, leukemia, and property
damage. Pursuant to a Case Management Order ("CMO"), the court
has set a trial date for September 3, 1996. The CMO provides for
a multi-phase trial with Phase One including trial of
"bellwether" plaintiffs before a jury. Phase Two will address
CERCLA claims. Phase Three will involve settlement negotiations
and mediation, and Phase Four will include any additional
discovery and trials of multiple plaintiffs to resolve any
remaining claims.
The Company has initiated litigation against its insurer for
a declaration of coverage of the liability, if any, that may
arise in connection with the remediation of the site or the
related tort litigation. The court has ruled that the insurer
has the duty to defend the Company, but has not yet ruled on
whether the carrier has a duty to indemnify the Company against
liability.
After consultation with counsel, the Company at this
preliminary stage is unable to predict the eventual outcome of
this litigation and cannot determine its actual liability, if
any, for these toxic tort claims at December 31, 1994, nor the
degree to which such potential liability would be indemnified by
its insurance carrier. The Company believes, based on the advice
of counsel, that it has substantial defenses to liability with
respect to the tort claims; however, if the claimants are
successful, the Company could become liable for substantial
amounts. The CERCLA cost recovery claims in the suit may
ultimately result in a requirement that additional parties
contribute to the clean-up costs of the Combustion site and will
not increase the Company's liability for clean-up costs
associated with the site.
With respect to the second oil reclamation site, as
discussed in Note 12, the Company was advised in the fourth
quarter of 1994 that it may be a PRP because it may have supplied
a portion of the waste oil processed at this site. The U.S.
<PAGE>
Environmental Protection Agency has completed action at this site
at a cost of approximately $300,000. The list of PRPs includes
almost 70 companies, and the Company believes that its
proportion, if it has any liability, will be limited to a small
percentage of the overall costs at the site.
As discussed above, certain of the Company's operations
closed in 1994 with the completion of their respective contracts.
Two of these facilities are currently offered for sale while the
Company continues to seek alternative uses for these facilities.
With respect to environmental matters, the Company currently is
not aware of any material liabilities to be incurred for site
restoration, post closure, monitoring commitments, or other exit
costs that may occur or result from the sale, disposal or
abandonment of any of these properties.
On February 7, 1995 the Company announced the execution of
a $143.9 million contract with a private bulk shipping company to
construct four double-hulled product carriers. These double-
hulled product carriers will be the first U.S. flag product
carriers constructed in the U.S. in eight years. The contract was
made possible when the shipping company's application for a U.S.
Government guarantee under Title XI of the Merchant Marine Act
was approved by the Department of Transportation, Maritime
Administration. The guarantee, for $139.4 million, will be used
as the basis for the financing of the project. The contract will
become effective upon finalizing the financing by the shipping
company. Construction is scheduled to commence in mid-1995 with
a scheduled completion of mid-1997.
Results of Operations
1994 vs. 1993. The Company recorded income from continuing
operations of approximately $13.1 million, or $0.90 per share,
for the year ended December 31, 1994 compared to a loss of
approximately $5.2 million, or $0.36 per share, for 1993. The
improvement in the Company's 1994 income from continuing
operations principally reflects net gains of approximately $3.5
million, or $0.24 per share, related to revisions of estimated
contract profits on several previously-completed shipbuilding
contracts, increases in operating income at the Company's marine
repair, wholesale steel and boat building operations and a
reduction in interest expense. The decrease in interest expense
is due primarily to the Company's repayment in early 1994 of
balances owed on its previously outstanding revolving credit
facilities and senior notes. The repayment of these debt
obligations was made possible by the successful resolution and
settlement of the Company's Requests for Equitable Adjustments
("REAs") in December 1993.
In the third quarter of 1994 the Company decided to
discontinue its service contracting subsidiary, Avondale
Technical Services, Inc. ("ATS"), formed in 1990 to pursue large-
scale service contracts with government and commercial
operations. The Company concluded that managerial and financial
resources devoted to ATS could be more productively invested in
the Company's core marine construction operations. As a result,
the operating results of ATS for the current and prior years are
reported as discontinued operations (see Note 7 of the notes to
<PAGE>
consolidated financial statements). The Company recorded a loss
from discontinued operations of approximately $4.6 million
(including estimated costs related to a contract termination), or
$0.31 per share, for the year ended December 31, 1994 and has
restated prior year results to reflect a loss from discontinued
operations of approximately $3.6 million, or $0.25 per share, for
the year ended December 31, 1993.
The Company's net sales from continuing operations in 1994
increased approximately $19.1 million, or 4.2%, as compared to
the prior year. The increase in 1994 net sales is due primarily
to increases in sales revenues recognized on the contracts to
construct the fourth Landing Ship Dock-Cargo Variant ("LSD-CV")
vessel, the contracts to construct the three paddlewheel gaming
vessels (two of which were delivered in 1994) and the start-up of
the first Sealift ship. These increases in net sales were
partially offset by reductions in sales revenues recognized on
the contracts to construct the three LSD-CV vessels (the first of
which was delivered in 1994), the seven T-AO Oiler contract (the
fourth of which was delivered in 1994) and the four MHC-51 Class
Coastal Minehunters ("MHCs") as these contracts approach
completion. Additionally, the Company experienced reduced sales
revenues in 1994 associated with the T-AGS 45 Oceanographic
Survey Ship contract, which was delivered in 1993, and at its
Avondale Gulfport Marine, Inc. ("AGM") and Genco Industries, Inc.
("Genco") operations. AGM delivered its last Landing Craft Air
Cushion ("LCAC") vessel in June 1993. Genco completed its
remaining construction contracts in August 1994. The contracts
to construct the four LSD-CVs, the four MHCs and the seven T-AOs
collectively accounted for approximately 69% of the Company's
1994 net sales revenue.
Gross profit for 1994 increased approximately $14.3 million,
or 43%, compared to 1993. The increase in 1994 gross profit is
primarily due to profits recognized on the contract to construct
the seven T-AOs and revisions of contract profits on several
previously-completed shipbuilding contracts. Also contributing
to the 1994 gross profit were profits recognized on the two
gaming vessels delivered in 1994 and profits recognized by the
Company's marine repair and wholesale steel operations.
Selling, general and administrative ("SG&A") expenses
increased by approximately $756,000, or 2.5%, for 1994 compared
to 1993. The overall increase in SG&A expenses primarily
resulted from increased operating activity at the Company's main
shipyard. This increase in SG&A expenses was partially offset by
a decrease in SG&A expenses resulting from the closing of the AGM
and Genco operations.
Interest expense decreased by approximately $4.4 million, or
50%, in 1994 as compared to 1993. The decrease is due to the
reduction in the Company's overall level of debt, which decreased
by approximately $37 million, or 41.7%, at December 31, 1994 as
compared to December 31, 1993 (see "Liquidity and Capital
Resources" below).
The Company recorded a $300,000 provision for income taxes
in 1994 while no provision was recorded in 1993 due to the loss
from operations (see Note 9 of the notes to the consolidated
<PAGE>
financial statements for further discussion).
1993 vs. 1992. The results of operations herein have been
restated to present Avondale Technical Services, Inc. ("ATS") as
discontinued operations.
The Company had a loss from continuing operations for the
year ended December 31, 1993 of $5.2 million, or $0.36 per share,
compared with a loss from continuing operations in 1992 of $11.3
million, or $0.78 per share. The Company recorded a loss from
discontinued operations of $3.6 million, or $0.25 per share, for
1993 compared with income from discontinued operations of
$104,000, or less than $0.01 per share, in 1992. The Company's
profitability in 1993 was affected by several factors, primarily
the allocation of the recovery to individual contracts and the
related timing of the recognition of the revenues associated with
the Company's settlement with the U.S. Navy on its Requests for
Equitable Adjustment ("REAs") and other charges and write downs,
all of which occurred in the fourth quarter of 1993.
Net sales from continuing operations for the year ended
December 31, 1993 decreased $119.7 million, or 20.8%, from the
same period in 1992. The decrease in net sales is consistent
with a declining level of activity in the Company's shipbuilding
operations, with most of the Company's net sales attributable to
shipbuilding contracts with the U.S. Navy to build seven T-AO
Oilers (four of which remain to be completed), three Landing Ship
Docks - Cargo Variant ("LSD-CV") and four MHC-51 Coastal
Minehunters ("MHC") (all of which remain to be completed).
Gross profit for 1993 decreased by $4.6 million, or 12%, to
$33.2 million compared to $37.8 million in 1992. The decrease in
gross profit partially reflects the impact of recording the
effects of the settlement with the U.S. Navy on the Company's
REAs, such settlement occurring in late December 1993 as
discussed in the "Overview". Gross profit was also affected in
the fourth quarter of 1993 by the write downs of assets currently
offered for sale and retroactive adjustments of insurance costs.
Selling, general and administrative ("SG&A") expenses
decreased approximately $735,000, or 2.4%, for the year ended
December 31, 1993, as compared to 1992. The decrease in SG&A
expenses reflects the general decline in activity. The decreases
were partially offset by increases in professional and other fees
associated with the further amendment of the Company's revolving
credit agreements with the Company's banks and the senior notes.
Additionally, increases were noted in bids and estimates, travel
and selling and product development expenses which reflect the
Company's ongoing efforts to secure additional contracts. As
noted above, these efforts yielded contracts which, if all
options are exercised, would result in sales in excess of $1.8
billion.
Interest expense decreased by $1.9 million for the year
ended December 31, 1993 as compared to the same period in 1992.
The decrease is due primarily to the reduction in the Company's
overall level of debt, which decreased by $28 million at December
31, 1993 as compared to 1992.
<PAGE>
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions" ("SFAS 106") and
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS 109"). Implementation of these
statements had no material impact on the Company's financial
position or results of operations.
Liquidity and Capital Resources
As discussed in the 1993 Form 10-K, the December 1993
settlement of the Company's Requests for Equitable Adjustments
("REAs") submitted during 1992 substantially improved the
Company's liquidity. At the end of 1993, the Company invoiced
approximately $90 million of the $145 million REA settlement
amount. The balance is being billed over the remaining period of
performance under the affected contracts. The cash received by
the Company enabled the Company to retire its approximately $6
million of senior notes and approximately $38 million balance of
outstanding loans under two previous credit facilities.
In 1994 the Company successfully completed two financing
initiatives which strengthened its liquidity position. On May
10, 1994, the Company established a $35 million revolving bank
credit facility secured principally by the Company's working
capital assets and its 900-foot floating drydock. Among other
things, under the credit facility the Company has the right to
require the bank group to post letters of credit on the Company's
behalf in support of its operations. At December 31, 1994
approximately $23.3 million of letters of credit were outstanding
under the new credit facility.
On June 1, 1994, the Company announced that it had completed
the issuance of $36.25 million of Series 1994 Refunding Bonds
resulting in the refinancing and redemption of the Series 1983
Industrial Revenue Bonds ("Series 1983 IRBs"). The Series 1994
Refunding Bonds call for principal amortization to begin on June
1, 1997, with $6.0 million of the Refunding Bonds to bear
interest at the rate of 8.25% and mature in 2004, and the
remaining $30.25 million to bear interest at 8.50% and mature in
2014.
In addition to the financing measures discussed above, the
Company eliminated certain significant contingencies when it
terminated certain arrangements with Ogden which have existed
since the Spin Off in 1985. Prior to their termination, these
arrangements could have required the Company to reimburse Ogden
for certain 1985 and prior years' tax liabilities or to issue
preferred stock or debentures to Ogden in the amount of its
reimbursement obligation. The termination of the 1985 agreements
also terminated certain obligations of Ogden to continue to
guarantee the Series 1983 IRBs as well as guarantee certain other
Avondale obligations.
The previous arrangements terminated (i) upon the payment by
the Company to Ogden of $5 million of cash on June 1, 1994, (ii)
the Company's delivery to Ogden of a two-year unsecured note in
the principal amount of $8 million bearing interest at 10% per
annum and payable in $5 million and $3 million installments in
<PAGE>
1995 and 1996, respectively, (iii) the refunding on June 1, 1994
of the $36.25 million Refunding Bonds (without an Ogden
guarantee) to replace an IRB issuance that Ogden had guaranteed,
and (iv) the Company's securing of Ogden's release from its other
guarantees of the Company's obligations. The $13 million
settlement with Ogden noted above was accounted for as an
adjustment to the purchase price incurred in connection with the
Spin Off from Ogden and resulted in a concurrent increase to the
Company's goodwill. The Company expects that funds from
operations, existing cash balances and funds available from the
Company's existing credit facilities will be sufficient to fund
the payments to Ogden as noted above.
As previously discussed in the Company's Form 10-Q for the
period ended September 30, 1994, the Company has from time to
time considered the advisability of certain capital expenditure
programs to, among other things, upgrade and modernize its plant
and equipment. In 1994 the Company decided to pursue an
approximately $20 million plant modernization program at the
Company's main shipyard. In addition to increasing production
efficiency, the modernization program is expected to enhance the
Company's ability to compete for domestic and international
shipbuilding opportunities.
On February 10, 1995 the Company announced that it completed
financing of $17.8 million of the plant modernization effort by
issuing mortgage bonds utilizing a Title XI guarantee. The bonds
bear interest at the rate of 8.16% and are repayable in equal
semi-annual principal payments of $593,000 over a 15 year period.
The Company expects the modernization of the plant facilities to
be completed by the third quarter of 1995.
In addition to the $17.8 million of mortgage bonds discussed
above, the Company also completed the refinancing of
approximately $4.3 million of existing Title XI bonds and the
reduction of the interest rate from 9.30% to 7.86%. These bonds
are repayable in equal semi-annual principal payments of $776,000
and mature in the year 2000.
As part of the Company's continuing efforts to focus on its
core activity, marine construction, the Company continues to
explore the possible sale of its non-core assets. While the
Company is in the process of marketing several of its facilities,
any such sales would only be made for amounts that are not less
than management's estimate of the fair value of the assets.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
See next consecutive page.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Avondale Industries, Inc.:
We have audited the accompanying consolidated balance sheets of
Avondale Industries, Inc. and subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Avondale Industries, Inc. and subsidiaries at December 31, 1994
and 1993, and the results of their operations and their cash
flows for each of the three years in the period ended December
31, 1994 in conformity with generally accepted accounting
principles.
\s\ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 1995
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1994 1993
---- ----
(In thousands)
<S> <C> <C>
ASSETS (Notes 5 and 6)
Current Assets:
Cash and cash equivalents $ 15,414 $ 3,195
Restricted short-term investments (Note 6) 1,811
Receivables (Note 3) 84,510 130,052
Inventories (Note 4) 16,109 13,609
Prepaid expenses and other current assets (Note 9) 10,092 4,741
------- -------
Total current assets 127,936 151,597
------- -------
Property, Plant and Equipment:
Land 9,324 9,324
Buildings and improvements 47,979 46,162
Machinery and equipment 174,694 173,456
------- -------
Total 231,997 228,942
Less accumulated depreciation (112,836) (103,400)
------- -------
Property, plant and equipment - net 119,161 125,542
------- -------
Goodwill - net 15,431 17,892
Deferred tax assets (Note 9) 7,000
Other assets 3,975 7,108
------- -------
TOTAL ASSETS $273,503 $302,139
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks (Note 5) $ $ 38,303
Current maturities of long-term debt (Note 6) 5,866 6,568
Accounts payable 60,917 56,797
Accrued employee compensation 12,948 12,352
Other 13,369 13,012
------- -------
Total current liabilities 93,100 127,032
Notes payable to banks (Note 5) 107
Long-term debt (Note 6 45,875 43,741
Other liabilities and deferred credits 11,650 16,904
------- -------
Total liabilities 150,625 187,784
------- -------
Commitments and Contingencies (Notes 6, 8 and 12)
SHAREHOLDERS' EQUITY (Note 11):
Common stock, $1.00 par value; authorized -
30,000,000 shares; issued - 15,927,191 shares
in 1994 and 1993 15,927 15,927
Additional paid-in capital 373,911 373,911
Accumulated deficit (255,104) (263,627)
------- -------
Total 134,734 126,211
Treasury stock (1,463,016 shares
in 1994 and 1993) at cost (11,856) (11,856)
------- -------
Total shareholders' equity 122,878 114,355
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $273,503 $302,139
======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1994 1993 1992
(In thousands, except per share data) ---- ---- ----
<S> <C> <C> <C>
CONTINUING OPERATIONS:
Net sales (Note 3) $ 475,810 $ 456,724 $ 576,384
Cost of sales 428,325 423,544 538,588
------- ------- -------
Gross profit 47,485 33,180 37,796
Selling, general
and administrative expenses 30,536 29,780 30,515
------- ------- -------
Income from operations 16,949 3,400 7,281
Interest expense (4,385) (8,769) (10,695)
Other - net 811 136 234
------- ------- -------
Income (Loss) from continuing operations
before ESOP contribution and income taxes 13,375 (5,233) (3,180)
Net ESOP contribution (Note 10) --- --- 8,141
------- ------- -------
Income (Loss) from continuing
operations before income taxes 13,375 (5,233) (11,321)
Income taxes (Note 9) 300
------- ------- -------
Income (Loss) from continuing operations 13,075 (5,233) (11,321)
------- ------- -------
DISCONTINUED OPERATIONS (NOTE 7):
Income (Loss) from discontinued operations (1,909) (3,561) 104
Disposal costs (2,643)
------- ------- -------
Income (Loss) from discontinued operations (4,552) (3,561) 104
------- ------- -------
NET INCOME (LOSS) $ 8,523 $ (8,794) $ (11,217)
======= ======= =======
Income (Loss) per share of common stock (Note 11):
Continuing operations $ 0.90 $ (0.36) $ (0.78)
Discontinued operations (0.31) (0.25) ---
------- ------- -------
INCOME (LOSS) PER SHARE OF COMMON STOCK $ 0.59 $ (0.61) $ (0.78)
======= ======= =======
Weighted average number
of shares outstanding 14,481 14,464 14,462
======= ======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 1992, 1993 and 1994
(In thousands)
Additional Note Total
Common Paid-In Accumulated Receivable Treasury Shareholders'
Stock Capital Deficit From ESOP Stock Equity
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1991 $ 15,906 $373,849 $(243,616) $(8,141) $(11,856) $126,142
Net (loss) (11,217) (11,217)
Repayment from ESOP 8,141 8,141
Other 21 62 83
-------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1992 15,927 373,911 (254,833) (11,856) 123,149
Net (loss) (8,794) (8,794)
-------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1993 15,927 373,911 (263,627) (11,856) 114,355
Net income 8,523 8,523
-------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 $ 15,927 $373,911 $(255,104) $ --- $(11,856) $122,878
=========================================================================
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1994 1993 1992
(In thousands) ---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 8,523 $(8,794) $(11,217)
Adjustments to reconcile net income (loss)
to net cash provided by (used for)
operating activities:
Depreciation and amortization 11,552 11,810 12,318
Change in operating assets and
liabilities, net of dispositions:
Receivables 45,542 16,634 22,256
Inventories (2,500) 189 2,701
Prepaid expenses and other
current assets (1,251) 653 (2,213)
Accounts payable 4,120 (4,476) (27,756)
Accrued employee compensation 596 (248) (2,568)
Other - net 2,546 1,098 3,586
------- ------- -------
Net cash provided by (used for)
operating activities 69,128 16,866 (2,893)
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,120) (2,863) (2,221)
Proceeds from sale of assets 9,467
Repayment of note receivable 2,250
Purchase of restricted short-term
investments - net (1,811)
Payment to former corporate parent (Note 12) (5,000)
------- ------- -------
Net cash provided by (used for)
investing activities (11,931) 6,604 29
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term borrowings (81,228) (27,888) (12,001)
Proceeds from issuance of long-term borrowings 36,250 6,728
Repayment of ESOP note receivable 8,141
------- ------- -------
Net cash provided by (used for)
financing activities (44,978) (27,888) 2,868
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 12,219 (4,418) 4
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 3,195 7,613 7,609
------- ------- -------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $15,414 $ 3,195 $ 7,613
======= ======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 4,537 $ 8,659 $10,481
======= ======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of
Avondale Industries, Inc. and its wholly-owned subsidiaries
("Avondale" or the "Company") which are primarily engaged in
marine construction and repair. All significant intercompany
transactions have been eliminated.
Revenue Recognition
Profits on long-term contracts are recorded on the basis of the
Company's estimates of the percentage of completion of individual
contracts, commencing when progress reaches a point where
contract performance is sufficient to estimate final results with
reasonable accuracy. Estimates of the percentage of completion
are based on direct labor charges. Revisions in cost and profit
estimates during the course of the work are reflected in the
accounting period in which the facts requiring the revisions
become known. Amounts in excess of agreed upon contract price
for customer caused delays, disruptions, unapproved change orders
or other causes of additional contract costs are recognized in
contract value if it is probable that the claim for such amounts
will result in additional revenue and the amount can be
reasonably estimated (see Note 3). Provisions for estimated
losses, if any, on uncompleted contracts are made in the period
in which such losses are determined.
Statements of Cash Flows
For purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Fair Value Disclosures
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments" ("SFAS 107"), requires
the disclosure of the fair value of all significant financial
instruments. The estimated fair value amounts have been
developed by the Company based on available market information
and appropriate valuation methodologies. However, considerable
judgment is required in developing the estimates of fair value.
Therefore, such estimates are not necessarily indicative of the
amounts that could be realized in a current market exchange.
After such analysis, management believes that the carrying value
of the Company's significant financial instruments approximates
fair value.
Inventories
Inventories are recorded principally at the lower of cost
(average or first-in, first-out) or market.
<PAGE>
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation of
property, plant and equipment is computed in the financial
statements on the straight-line method based on estimates of
useful lives as follows:
Type Period
Machinery and equipment 3-20 years
Buildings and improvements 15-40 years
Accelerated depreciation methods are generally used for income
tax purposes. Maintenance and repairs are charged directly to
expense as incurred. Additions, improvements and major renewals
are capitalized.
Goodwill
Goodwill represents the excess of the purchase price over the
underlying fair value of the net assets of acquired businesses
and is being amortized on a straight-line basis over its
estimated useful life of twenty years. Management evaluates the
continuing value and future benefits of goodwill, including the
appropriateness of related amortization periods, on a current
basis.
The recoverability of goodwill is assessed by determining whether
the unamortized balance can be recovered through projected cash
flows and operating results over its remaining life. Any
impairment of the asset is recognized when it is probable that
such future undiscounted cash flows will be less than the
carrying value of the asset.
Accumulated amortization at December 31, 1994 and 1993 amounted
to $73.7 million and $72.2 million, respectively.
Income Taxes
The Company and its subsidiaries file a consolidated Federal
income tax return. Deferred income taxes are provided in the
financial statements, where necessary, to account for the tax
effect of temporary differences resulting from reporting revenues
and expenses for income tax purposes in periods different from
those used for financial reporting purposes. The temporary
differences result principally from the use of different methods
of accounting for depreciation, long-term contracts and certain
employee benefits.
<PAGE>
2. REA Settlement
During 1992, the Company submitted Requests for Equitable
Adjustments ("REAs") to the U.S. Navy with respect to certain of
its significant shipbuilding contracts. In December 1993, the
Company and the U.S. Navy agreed to settle these REAs for
approximately $145 million. The settlement partially compensated
the Company for design changes and other factors that had led to
significant cost overruns on those contracts that were the
subject of the REAs.
In December 1993, the Company invoiced approximately $90 million
of the settlement amount, all of which it had received by the end
of April 1994. The balance is being billed over the remaining
period of performance under the affected contracts. The
Company's receipt of this cash enabled it to retire the
outstanding balances of its revolving credit facilities and the
senior notes totalling approximately $44 million at December 31,
1993 (see Notes 5 and 6).
3. Receivables
Receivables consisted of the following at December 31, 1994 and
1993 (in thousands):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Long-term contracts:
U.S. Government:
Amounts billed $ 13,754 $ 91,126
Unbilled costs, including retentions,
and estimated profits on contracts
in progress 48,254 16,554
------- -------
Total 62,008 107,680
Commercial:
Amounts billed 7,568 8,820
Unbilled costs, including retentions,
and estimated profits on contracts
in progress 10,914 10,219
------- -------
Total from long-term contracts 80,490 126,719
Trade and other current receivables 4,020 3,333
------- -------
Total $ 84,510 $130,052
======= =======
</TABLE>
<PAGE>
Unbilled costs, including retentions, and estimated profits on
contracts in progress were not billable to customers at the
balance sheet dates under terms of the respective contracts. Of
the unbilled costs and estimated profits, approximately $7.7
million is expected to be collected in 1995 with the balance to
be collected in subsequent years as contract deliveries are made
and warranty periods expire. Net sales to the United States
Government in 1994, 1993 and 1992 account for approximately 77%,
79% and 84% of the net sales, respectively.
Costs and estimated profits (losses) on contracts in progress at
December 31, 1994 and 1993 were as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Costs incurred on contracts in progress $ 2,177,750 $ 1,743,347
Estimated profits recognized 25,634 7,530
Reserve for anticipated contract losses (39,000) (39,000)
--------- ---------
Total 2,164,384 1,711,877
Less billings to date (2,108,384) (1,698,763)
--------- ---------
Net value of contracts in progress $ 56,000 $ 13,114
========= =========
Net value of contracts in progress was comprised of the following
amounts:
1994 1993
---- ----
Unbilled costs and estimated
profits on contracts in progress
(included in receivables) $ 59,168 $ 26,773
Billings in excess of costs and estimated
profits on contracts in progress
(included in accounts payable) (3,168) (13,659)
------- -------
Total $ 56,000 $ 13,114
======= =======
</TABLE>
The reserve for anticipated contract losses of $39.0 million
included in the net value of contracts in progress at December
31, 1994 and 1993 is related to certain U.S. Navy contracts which
are presently scheduled for delivery at varying dates into 1996.
The reserve was established when, as a result of revised
estimates based on representative experience, it was evident that
losses would be incurred on these contracts.
<PAGE>
The Company has filed a Request for Equitable Adjustment
("Minehunter REA") with the U.S. Navy seeking substantial
increases in the contract prices for four MHC-51 Class
Minehunters ("MHC") currently being built by the Company. The
MHC-51 Class Minehunter is a highly sophisticated vessel designed
primarily to clear harbor and coastal waters of acoustic,
magnetic and pressure/contact mines. It is constructed using a
specially designed glass reinforced plastic ("GRP") technology
that was originally developed by a foreign shipyard engaged in
the construction of other MHC ships. The foreign shipyard also
was required to license the necessary technology and know-how for
the design and construction of the vessels to the Company. The
Company believes that the additional costs addressed by the
Minehunter REA resulted from defective ship specifications
provided to the Company that proved impossible to perform at the
original cost estimate developed by the Company. In connection
with developing the Minehunter REA, the Company realized during
the third quarter of 1994 that it would be necessary to increase
its cost to complete estimates for the MHC vessels. Prior to the
third quarter of 1994, the Company's work on the MHC program had
been performed on a break-even basis following the Company's
recording of a reserve for contract losses as part of the overall
resolution of the Company's Request for Equitable Adjustments
("REAs") which were settled in December 1993. The Company, in
consultation with outside counsel, has reviewed the Minehunter
REA to determine a minimum estimate of its probable recoverable
amount. The Company has received an opinion of outside counsel
that such contracts provide a legal basis for the Minehunter REA
and the evidence supporting the Minehunter REA is objective and
verifiable. Based on the Company's review in consultation with
outside counsel and supported by the view of outside counsel that
they have no reason to believe that the use of $16 million in
quantifying the minimum probable amount of recovery is
unreasonable, management concluded in the third quarter of 1994
that it was appropriate to offset the loss that it would have
otherwise had to recognize with respect to the MHC program by
such amount. In addition, the effects of the cost increase have
been partially offset also by certain contractual cost sharing
and cost escalation provisions which obligate the U.S. Navy to
bear a portion of the additional costs. To the extent that any
portion of the $16 million recognized is not recovered, then
losses in addition to those taken in 1993 will have to be
recorded.
4. Inventories
Inventories consisted of the following at December 31, 1994 and
1993 (in thousands):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Goods held for sale $ 7,908 $ 4,604
Materials and supplies 8,201 9,005
------- -------
Total $ 16,109 $ 13,609
======= =======
</TABLE>
<PAGE>
5. Notes Payable to Banks
Notes payable to banks consisted of the following at December 31,
1993 (in thousands):
<TABLE>
<CAPTION>
1993
----
<S> <C>
Revolving credit agreement with
various financial institutions $ 29,909
Revolving bank credit agreement 8,378
Other 123
-------
Total 38,410
Less current maturities (38,303)
-------
Notes payable to banks, noncurrent $ 107
=======
</TABLE>
The terms of both revolving credit agreements required the unpaid
balances at December 31, 1993 to be due April 1, 1994 and
provided for interest at fluctuating annual rates based on base
rates as defined. The interest rate at December 31, 1993 was
7.5%. Both revolving credit agreements as well as the senior
notes (see Note 6) were secured by substantially all of the
Company's otherwise unencumbered assets and, among other things,
required the Company to meet certain financial and operating
covenants. As discussed in Note 2 and as required by both
revolving credit agreements, cash receipts from the settlement of
the REAs were used to retire the outstanding balances of these
credit agreements during January 1994.
During May 1994, the Company entered into a two-year revolving
credit agreement with various financial institutions which
establishes an available line of credit equal to the lesser of
$35 million or a specified borrowing base. The credit facility
provides the Company with the right to require the bank group to
post letters of credit on the Company's behalf in support of its
operations. At December 31, 1994, $23.3 million of letters of
credit were outstanding under the facility.
Borrowings under the facility bear interest at fluctuating rates.
There were no borrowings under the credit facility during 1994.
The credit facility is collateralized by substantially all of the
Company's working capital assets and its 900-foot floating
drydock and, among other things, (1) requires the Company to meet
certain financial covenants (relating to net worth, debt
coverage, interest coverage and backlog), (2) imposes limitations
and restrictions related to annual capital expenditures, the
incurrence of new indebtedness and the payment of dividends and
(3) requires compliance with the terms and conditions of all
other debt agreements.
<PAGE>
6. Long-term Debt
Long-term debt consisted of the following at December 31, 1994
and 1993 (in thousands):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Industrial revenue bonds $ 36,250 $ 36,250
Mortgage bonds, interest at 9.3%,
payable in semi-annual principal
installments to 2000 4,656 5,432
Senior notes 5,707
General obligation industrial bonds,
interest at 7%, payable in annual
installments to 2011 2,835 2,920
Other long-term debt 8,000
------- -------
Total 51,741 50,309
Less current maturities of long-term debt (5,866) (6,568)
------- -------
Long-term debt $ 45,875 $ 43,741
======= =======
</TABLE>
The industrial revenue bonds at December 31, 1993 represented
Series 1983 bonds bearing interest at 8.25% which were due June
2001. These bonds were subject to optional redemption by
bondholders effective June 1993 and were secured by a continuing
guarantee of Ogden Corporation ("Ogden"), the Company's former
corporate parent, and an irrevocable letter of credit. During
June 1994, the Company completed the issuance of $36.25 million
of Series 1994 refunding bonds ("Series 1994 bonds") resulting in
the refinancing and redemption of the Series 1983 bonds. The
Series 1994 bonds consist of (1) $6 million bearing interest at
8.25% and payable in annual principal installments ranging from
$550,000 in 1997 to final payment of $985,000 in 2004 and (2)
$30.25 million bearing interest at 8.50% and payable in annual
principal installments ranging from $340,000 in 1997 to final
payment of $3.8 million in 2014.
The Series 1994 bonds are secured by certain property and
equipment and a debt service reserve fund comprised of short-term
investments aggregating $1.8 million at December 31, 1994. Among
other things, the terms and conditions of the Series 1994 bonds
(1) require the Company to meet certain financial covenants
(relating to net worth, debt and debt service coverage and
liquidity), (2) impose limitations and restrictions related to
the incurrence of new indebtedness and the payment of dividends,
and (3) require compliance with the terms and conditions of other
specified debt agreements.
<PAGE>
The mortgage bonds are guaranteed by the United States Government
under Title XI of the Merchant Marine Act, 1936, as amended, and
include various restrictive covenants including provisions
relating to the maintenance of working capital, incurrence of
additional indebtedness and the maintenance of a minimum net
worth. Property, plant and equipment having a net book value of
approximately $13.8 million at December 31, 1994 has been pledged
as collateral for the mortgage bonds. In February 1995, the
Company completed the refinancing of the remaining balance of
these mortgage bonds (approximately $4.3 million in February
1995) which reduced the interest rate from 9.30% to 7.86%. The
refinancing agreement contains various restrictive covenants
similar to those discussed above. These bonds are repayable in
equal semi-annual principal installments of $776,000 and mature
in the year 2000.
The senior notes, bearing interest at the annual rate of 11.29%
at December 31, 1993, required principal payments of $2 million
on May 1, 1994 and 1995, with the remaining unpaid balance due on
May 1, 1996. The senior note agreements also required the
Company to comply with certain financial and operating covenants
similar to the revolving credit agreements discussed in Note 5.
As discussed in Note 2 and as required by the terms of the
related agreements, cash receipts from the settlement of the REAs
were used to retire the outstanding balances of the senior notes
during January 1994.
Other long-term debt of $8 million at December 31, 1994
represents a two-year unsecured note issued to Ogden as part of
the settlement in 1994 which terminated certain arrangements with
Ogden which had existed since the Spin Off in 1985 (see Notes 10
and 12). The note bears interest at 10% per annum and is payable
in $5 million and $3 million installments in 1995 and 1996,
respectively.
Annual maturities of long-term debt for each of the next five
years and in total thereafter follow (in thousands):
1995 $ 5,866
1996 3,876
1997 1,771
1998 1,861
1999 1,951
Thereafter 36,416
-------
Total $ 51,741
=======
In February 1995 the Company completed financing of $17.8 million
of its approximately $20 million plant modernization effort by
issuing mortgage bonds utilizing a U.S. Government guarantee
under Title XI of the Merchant Marine Act, 1936, as amended.
The bonds bear interest at the rate of 8.16% and are payable in
equal semi-annual principal payments over a 15 year period.
<PAGE>
7. Discontinued Operations
During the third quarter of 1994 the Company decided to
discontinue operation of its service contracting subsidiary,
Avondale Technical Services, Inc. ("ATS"), formed in 1990 to
pursue large-scale service contracts with government and
commercial operations. The Company concluded that managerial and
financial resources could be more productively invested in the
Company's core marine construction operations. The Company
expects ATS to complete its current contracts in the first
quarter of 1995.
The operating results of ATS for the current and prior-year
periods are reported as discontinued operations. Summarized
results of ATS are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net sales $ 13,520 $ 14,442 $ 15,627
Costs and expenses 15,429 18,003 15,523
------- ------- -------
Income (Loss) from discontinued operations (1,909) (3,561) 104
Loss on disposal of discontinued operations (2,643) --- ---
------- ------- -------
Income (Loss) from discontinued operations $ (4,552) $ (3,561) $ 104
======= ======= =======
</TABLE>
8. Leases
The Company leases equipment and real property in the normal
course of business under various operating leases, including non-
cancelable and month-to-month agreements. Certain of the leases
provide for renewal privileges with escalation of the lease
payments based on changes in selected economic indices.
Rental expense for operating leases was $5.8 million, $5.3
million and $7.3 million in 1994, 1993 and 1992, respectively.
Minimum rental commitments under leases having an initial or
remaining noncancelable term in excess of twelve months follow
(in thousands):
1995 $ 3,212
1996 3,025
1997 1,480
1998 380
1999 104
-------
Total $ 8,201
=======
<PAGE>
9. Income Taxes
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes." The statement requires the use of the asset and
liability approach for financial accounting and reporting for
income taxes. Financial statements for prior years have not been
restated and the cumulative effect of the accounting change was
not material.
The 1994 income tax provision of $300,000 consists of a current
income tax provision of $600,000 and a deferred income tax
benefit of $300,000. During 1993 and 1992 a provision for income
taxes was not recorded due to the loss from operations.
The provision for income taxes varied from the Federal statutory
income tax rate due to the following (dollars in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1994 1993 1992
----------- ----------- -----------
Amount % Amount % Amount %
------ -- ------ -- ------ --
<S> <C> <C> <C> <C> <C> <C>
Taxes at Federal statutory rate $ 3,088 35 $(3,078) (35) $(3,814) (34)
Amortization of goodwill
not deductible 511 6 357 4 347 3
Net operating loss and tax credit
carryforwards not utilized --- --- 2,595 30 3,579 32
Settlement of prior year
tax examinations (3,200) (36)
Other (99) (1) 126 1 (112) (1)
------ --- ------ --- ------ ---
Total $ 300 4 $ -- -- $ -- --
====== === ====== === ====== ===
</TABLE>
At December 31, 1994 the Company has available for Federal income
tax purposes net operating loss carryforwards and tax credit
carryforwards of $136 million and $5.2 million, respectively,
expiring in years 2000 through 2009. Additionally, the Company
has $600,000 of minimum tax credits which may be carried forward
indefinitely.
<PAGE>
Deferred income taxes represent the net tax effects of (a)
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and their tax bases,
and (b) operating loss and tax credit carryforwards. The tax
effects of significant items comprising the Company's net
deferred tax balances at December 31, 1994 and 1993 are as
follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Deferred Tax Liabilities:
Differences between book
and tax basis of property,
plant and equipment $ 27,018 $ 30,890
Other 1,511 2,544
------- -------
Total $ 28,529 $ 33,434
------- -------
Deferred Tax Assets:
Reserves not currently deductible 6,020 9,515
Long-term contracts 5,252 2,053
Other temporary differences 3,598 2,578
Operating loss carryforwards 47,600 40,250
Tax credit carryforwards 5,800 4,806
------- -------
68,270 59,202
Valuation Allowance (28,641) (25,768)
------- -------
Total 39,629 33,434
------- -------
Net deferred tax assets $ 11,100 $ --
======= =======
</TABLE>
At December 31, 1994, prepaid expenses and other current assets
includes net deferred tax assets of $4.1 million. Also, at
December 31, 1994 other current liabilities include $600,000 of
current income taxes payable.
During 1994, the deferred tax valuation allowance increased
approximately $16.6 million due to additional acquired tax
assets, primarily relating to operating loss carryforwards, which
will become available to the Company as a result of the
disallowance of certain income tax deductions in periods prior to
the Spin Off from its former corporate parent. The deferred tax
valuation allowance decreased approximately $14 million as a
result of the Company's current year operating results and a re-
evaluation of its expectations of the likelihood of future
operating income related to its existing backlog. This decrease
in the valuation allowance was recorded as a reduction in
goodwill in accordance with SFAS 109, which requires that the
realization of tax benefits first be attributed to any acquired
tax assets. In the event that additional tax benefits are
realized in future periods, the first $5 million of such benefits
will also be recorded as a reduction in goodwill, rather than as
a reduction of income tax expense.
<PAGE>
10. Retirement Plans
During 1985, the Avondale Industries, Inc., Employee Stock
Ownership Plan (the "ESOP") purchased the common stock of the
Company from its former corporate parent (the "Spin-Off") for
$282 million in cash, $190 million of which was borrowed from the
Company (the "ESOP Loan"). The ESOP Loan, which was
collateralized by common stock of the Company held by the ESOP,
was paid in full during January 1992.
ESOP
The ESOP is a qualified, defined contribution plan designed
primarily to invest in equity securities of the Company and is
specifically authorized to leverage its acquisition of these
securities. The ESOP is intended to cover all employees of the
Company upon completion of one year of service, except certain
employees who are covered by collective bargaining agreements,
unless, by the terms of such agreements, the employees are to
participate in the ESOP.
The ESOP owned approximately 7,096,000 and 7,348,000 shares of
the Company's common stock at December 31, 1994 and 1993,
respectively. The ESOP Loan was repaid with the funds derived
from contributions made by the Company, determined at the
discretion of management, to the ESOP for the benefit of its
eligible employees and for which the Company received a Federal
income tax deduction. The shares of common stock acquired by the
ESOP with the ESOP Loan were held in a suspense account, and each
year, as the ESOP made payments on the ESOP Loan, a proportional
number of shares were released from the suspense account and
prorated among the individual accounts maintained for ESOP
participants based on their compensation.
Pension Plan
The Company also sponsors a defined benefit pension plan, which
is coordinated with the benefits payable to participating
employees in the ESOP. At retirement, a person's benefit is
based upon the greater of (i) the market value of the shares of
common stock, allocated to his ESOP account or (ii) the benefit
calculated under the pension plan formula. The pension plan
formula benefits are based on a defined dollar amount times a
fraction related to a participant's credited service.
<PAGE>
The net periodic pension cost for the years ended December 31,
1994, 1993 and 1992 included the following components (in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service costs of the current period $ 3,400 $ 3,700 $ 2,600
Interest cost on the projected
benefit obligation 3,800 4,400 3,600
Actual return on plan assets (2,700) (7,000) (5,000)
Net amortization of transition liability and
deferred investment gain (loss) (200) 5,000 2,900
------ ------ ------
Net periodic pension cost $ 4,300 $ 6,100 $ 4,100
====== ====== ======
</TABLE>
The following table sets forth the pension plan's estimated
funded status as of December 31, 1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Projected benefit obligation:
Vested benefits $40,800 $43,000
Nonvested benefits 600 700
------ ------
Accumulated benefit obligation 41,400 43,700
Effect of projected future compensation levels 4,200 5,100
------ ------
Projected benefit obligation 45,600 48,800
Plan assets at market value 44,200 45,700
------ ------
Plan assets less than projected benefit obligation (1,400) (3,100)
Unrecognized net transition obligation 200 200
Unrecognized prior service costs (3,000) (3,000)
Unrecognized net loss 6,800 10,200
------ ------
Prepaid pension costs $ 2,600 $ 4,300
====== ======
</TABLE>
The Company's funding policy is to contribute each year an amount
equal to the minimum required contribution under the Employee
Retirement Income Security Act of 1974. However, the
contribution for any year will not be greater than the maximum
tax deductible contribution. Plan assets consist primarily of
United States Government and Agency securities, corporate bonds
and notes, corporate stocks, and an unallocated insurance
contract. The weighted-average discount rate used in determining
the actuarial present value of the projected benefit obligation
was 8.5% for 1994 and 7.5% for 1993. The rate of increase in
future compensation levels used was 3.5% for 1994 and thereafter,
and 1% for 1993. The expected long-term rate of return on the
assets was 9% for 1994 and 1993.
<PAGE>
11. Shareholders' Equity
Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred
stock, $1.00 par value, none of which was outstanding at December
31, 1994 and 1993.
Income (Loss) Per Share
The weighted average number of shares used in the computation of
income (loss) per share was 14,481,000, 14,464,000 and 14,462,000
for the years ended December 31, 1994, 1993 and 1992,
respectively. The assumed exercise of stock options would not
result in dilution in any of such periods.
Performance Share Plan
The Company's Performance Share Plan provided for the award of
shares of common stock to senior executives of the Company, as
designated by a committee of the Board of Directors, which were
earned upon the attainment of specified performance objectives.
These performance objectives have been attained and therefore no
further awards will be made. Transactions relating to the plan
during 1994, 1993 and 1992 were not material.
The plan provided for a cash distribution in an amount equal to
the Participant's income tax liability resulting from the
settlement of an award. To the extent that a Participant
received cash in lieu of common stock as payment of an award,
options were granted to the participant to purchase an equivalent
number of such shares. There were 279,155 stock options
outstanding at December 31, 1994 and 303,159 stock options
outstanding at December 31, 1993 and 1992. The stock options are
exercisable at prices of $3.875 to $19.00 per share, the majority
of which contain a stock appreciation right feature and expire on
various dates to February 2002.
<PAGE>
Stock Appreciation Plan
The Company maintains a Stock Appreciation Plan for key
management employees which contains a stock appreciation right
feature. There are 500,000 shares of common stock of the Company
reserved for award under the plan. Transactions of the Stock
Appreciation Plan during 1994, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
Number of Shares
-------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Outstanding, January 1 50,000 60,000 152,000
Canceled (10,000) (10,000) (92,000)
------- ------- -------
Outstanding, December 31 40,000 50,000 60,000
======= ======= =======
Exercisable at end of year --- 2,000 6,000
======= ======= =======
Available for grant at
end of year 397,000 387,000 377,000
======= ======= =======
</TABLE>
Options were outstanding at prices of $11.25 per share at
December 31, 1994 and ranging from $11.25 to $18.375 per share at
December 31, 1993 and 1992. Under the terms of the plan, options
expire on March 31, 1995.
12. Commitments and Contingencies
Litigation
In January 1986, the Louisiana Department of Environmental
Quality ("DEQ") advised the Company that it may be a potentially
responsible party ("PRP") with respect to an oil reclamation site
operated by an unaffiliated company in Walker, Louisiana. The
Company sold to the operator a substantial portion of the waste
oil that was processed at the reclamation site during the period
1978 through 1982. The Company's potential liability, if any,
for cleanup of this site will be based on the Comprehensive
Environmental Response, Compensation and Liability Act of 1980
("CERCLA") or the Louisiana Environmental Affairs Act. Under
these statutes, such liability is presumptively joint and
several, but is typically apportioned among the responsible
parties based on the volume of material sent by each to the waste
site. The Company has cooperated with other PRPs to study the
potential aggregate liability under these statutes. Moreover,
the Company believes it has substantial defenses against
liability and defenses that could mitigate the portion of
liability, if any, that would otherwise be attributable to it.
<PAGE>
To date, the Company and certain of the other PRPs for the site
have funded the site's remediation under a preliminary cost-
sharing agreement. As of December 31, 1994, clean-up costs
totalled $15 million, of which the Company has contributed $3.5
million. Additional remedial work scheduled for the site
includes the completion of a Remedial Investigation/Feasibility
Study in 1995 to 1996, and, if required by the results of these
studies, subsequent post-closure activities (e.g., groundwater
monitoring or remediation). Future costs will also include DEQ
oversight costs. Future aggregate expenses are expected to be
approximately $1 million, exclusive of groundwater monitoring and
remediation, to which no estimate is currently available. The
Company believes that its proportionate share of expenditures for
any additional remedial work will not have a material effect on
the Company's financial statements. In addition, the Company
believes that its proportionate responsibility for the clean-up
costs will not be materially increased.
Since July 1986, a number of "toxic tort" suits have been filed
against the Company and numerous other defendants alleging claims
for personal injury, property damage, and "fear of cancer" in
connection with the reclamation site discussed above. The
plaintiffs also seek substantial punitive damages. These cases
have been consolidated and certified as a class action. The
deadline set by the court for claimants to identify themselves
has expired, and approximately 12,000 claimants have been
identified. The deadline for joinder of new parties to the
litigation has also expired. By court order dated December 29,
1994, all defendants and third-party defendants were deemed to
have filed cross-claims against the other defendants and third-
party defendants for tort contribution. Certain defendants,
including the Company, also were deemed to have filed cross-
claims for CERCLA cost recovery against the other defendants and
third-party defendants. The court has set a trial date for
September 3, 1996 and significant discovery activities are
scheduled to occur throughout 1995 and into 1996.
Furthermore, the Company has initiated litigation against its
insurer for a declaration of coverage of the liability, if any,
that may arise in connection with the remediation of the site or
the related tort litigation referred to in the preceding
paragraphs. The court has ruled that the insurer has the duty to
defend the Company, but has not yet ruled on whether the carrier
has a duty to indemnify the Company if any liability is
ultimately assessed against it.
After consultation with counsel, the Company at this preliminary
stage is unable to predict the eventual outcome of this
litigation and cannot determine its actual liability, if any, for
these toxic tort claims at December 31, 1994, nor the degree to
which such potential liability would be indemnified by its
insurance carrier. The Company believes, based on advice of
counsel, that it has substantial defenses to liability with
respect to these claims; however, if the claimants are
successful, the Company could become liable for substantial
amounts.
<PAGE>
The Company was advised in the fourth quarter of 1994 that it may
be a PRP with respect to a second oil reclamation site, operated
by another unaffiliated company, because it may have supplied a
portion of the waste oil processed at the site. The EPA has
completed action at this site at a cost of approximately
$300,000. The list of PRPs includes almost 70 companies, and the
Company believes that its liability, if any, will be a small
percentage of the overall costs at this site.
In addition to the above, the Company is also named as a
defendant in numerous other lawsuits and proceedings arising in
the ordinary course of business, some of which involve
substantial claims.
The Company has established accruals as appropriate for certain
of the matters discussed above. While the ultimate outcome of
lawsuits and proceedings against the Company cannot be predicted
with certainty, management believes, based on current facts and
circumstances and after review with counsel, that, except for the
toxic tort suits described above for which no estimate can be
made, the eventual resolution of these matters is not expected to
have a material adverse effect on the Company's financial
statements.
Ogden
In 1994 the Company terminated certain arrangements with Ogden,
which have existed since the Spin Off in 1985 (see Note 10).
Under these arrangements, the Company could have been required to
issue preferred stock or subordinated debt to Ogden upon the
occurrence of specified events, such as judgments or settlements
in certain significant litigation or tax matters against the
Company or Ogden. These agreements also required Ogden to
continue to guarantee the Company's Series 1983 Industrial
Revenue Bonds ("Series 1983 bonds" - see Note 6) as well as
certain workers' compensation obligations.
The previous arrangements terminated upon (1) the payment by the
Company to Ogden of $5 million cash on June 1, 1994, (2) the
Company's delivery to Ogden of a two-year unsecured note in the
principal amount of $8 million (see Note 6) bearing interest at
10% per annum and payable in $5 million and $3 million
installments in 1995 and 1996, respectively, and (3) the
refunding on June 1, 1994 of the $36.25 million refunding bonds
(without an Ogden guarantee) to replace the $36.25 million Series
1983 bond issuance that Ogden had guaranteed (see Note 6), and
(4) the Company's securing of Ogden's release from its other
guarantees of the Company's obligations. The $13 million
settlement with Ogden noted above was accounted for as an
adjustment to the purchase price incurred in connection with the
Spin-off from Ogden and resulted in a concurrent increase to the
Company's goodwill (see Note 9).
<PAGE>
Letters of Credit
In the normal course of its business activities, the Company is
required to provide letters of credit to secure the payment of
workers' compensation obligations. Additionally, under certain
contracts, the Company may be required to provide letters of
credit which may be drawn down in the event of the Company's
failure to perform under the contracts. At December 31, 1994,
outstanding letters of credit relating to these business
activities amounted to approximately $23.3 million.
<PAGE>
13. Quarterly Results (Unaudited)
Consolidated operating results for the four quarters of 1994 and
1993 were as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
1994 1993 <FN1>
------------------------------------------- ------------------------------------------
<FN1> <FN1> <FN2> <FN3>
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $ 101,329 $ 118,437 $ 125,487 $ 130,557 $ 135,576 $ 118,827 $ 98,984 $ 103,337
Gross Profit 9,506 11,283 14,943 11,753 10,009 10,670 8,496 4,005
Income (Loss) from
Continuing Operations 1,918 2,470 6,323 2,364 469 596 598 (6,896)
Income (Loss) from
Discontinued Operations 116 (396) (4,272) --- (121) (197) (179) (3,064)
Net Income (Loss) 2,034 2,074 2,051 2,364 348 399 419 (9,960)
Net Income (Loss)
per Share:
Continuing Operations $0.13 $0.17 $0.44 $0.16 $0.03 $0.04 $0.04 $(0.48)
Discontinued Operations 0.01 (0.03) (0.30) --- (0.01) (0.01) (0.01) (0.21)
----- ----- ----- ----- ----- ----- ----- ------
Net Income (Loss) per Share $0.14 $0.14 $0.14 $0.16 $0.02 $0.03 $0.03 $(0.69)
===== ===== ===== ===== ===== ===== ===== ======
</TABLE>
<FN1> Income statement data for these periods have been restated to present
Avondale Technical Services, Inc. as discontinued operations
(See Note 7).
<FN2> During the third quarter of 1994, the Company revised its estimated
profits on several previously-completed shipbuilding contracts which
had the effect of increasing net income for the third quarter of 1994
by approximately $3.5 million, or $0.24 per share.
<FN3> During the fourth quarter of 1993, the Company recorded the effects
related to the settlement of the REAs which decreased net income by
$4.2 million, or $0.29 per share. Additionally, the Company recorded
$6.3 million, or $0.44 per share, of charges in the fourth quarter of
1993. Such charges consisted primarily of writedowns of assets
currently offered for sale and retroactive adjustments of insurance
costs.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information concerning the Company's directors and officers
called for by this item will be included in the Company's
definitive Proxy Statement prepared in connection with the 1995
Annual Meeting of shareholders and is incorporated herein by
reference.
Item 11. Executive Compensation.
Information concerning the executive compensation called for
by this item will be included in the Company's definitive Proxy
Statement prepared in connection with the 1995 Annual Meeting of
shareholders and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Information concerning security ownership of certain
beneficial owners and management called for by this item will be
included in the Company's definitive Proxy Statement prepared in
connection with the 1995 Annual Meeting of shareholders and is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
Information concerning certain relationships and related
transactions called for by this item will be included in the
Company's definitive Proxy Statement prepared in connection with
the 1995 Annual Meeting of shareholders and is incorporated
herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a)(1) Financial Statements
Independent Auditors' Report.
Consolidated Balance Sheets as of December 31, 1994 and
1993.
Consolidated Statements of Operations for the years ended
December 31, 1994, 1993 and 1992.
<PAGE>
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1994, 1993 and 1992.
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992.
Notes to Consolidated Financial Statements.
(a)(2) Financial Statement Schedules
Not applicable
(a)(3) Exhibits
3.1 Articles of Incorporation of the Company.(1)
3.2 By-laws of the Company(2), as amended on
December 5, 1994.
4.1 See Exhibits 3.1 and 3.2 for provisions of the
Company's Articles of Incorporation and By-laws
defining the rights of holders of Common Stock.
4.2 Specimen of Common Stock Certificate.(3)
4.3 Instruments Relating to Title XI Vessel Financing
(a) Trust Indenture dated October 21, 1975, by and
between the Company and Manufacturers Hanover
Trust Company, as Indenture Trustee, relating to
$19,012,000 of United States Government Guaranteed
Ship Financing Bonds, as amended by an Assumption
Agreement and Supplemental Indenture dated
September 16, 1985(4), as further amended by a
Master Assumption Agreement, Supplemental
Indenture No. 2 and Amendment to Title XI Finance
Agreements dated March 13, 1991 (the "Master
Assumption Agreement").(2)
(b) Title XI Reserve Fund and Financial Agreement
dated October 21, 1975, by and between the
Company and the United States of America, as
amended by Amendments Nos. 1 and 2(4), as
further amended by the Master Assumption
Agreement (filed as Exhibit 4.3(a) hereto).
(c) Form of 8.80% Sinking Fund Bond, Series A
(included in Exhibit 4.3(a)).
(d) Form of 9.30% Sinking Fund Bond, Series B
(included in Exhibit 4.3(a)).
4.4 Instruments relating to AEI's and the Company's
obligations arising in connection with the issuance
of General Obligation Bonds by Harrison County,
Mississippi
<PAGE>
(a) Loan Agreement dated April 1, 1991 between
Harrison County, Mississippi and AEI, pursuant
to which AEI is obligated to repay $3 million
in order to fund the County's bond payment
obligations.(3)
(b) Guaranty Agreement dated April 1, 1991 between
the Company, Harrison County, Mississippi and
the State of Mississippi.(3)
4.5 Instruments relating to the Company's $36.25 million
Industrial Revenue Refunding Bond Series 1994
Financing.
(a) Refunding Agreement dated April 1, 1994 between
the Company and the Board of Commissioners of
the Port of New Orleans, Exhibit A and First
Preferred Vessel Mortgage thereto.
(b) Trust Indenture dated April 1, 1994 between the
Board of Commissioners of the Port of New
Orleans and First National Bank of Commerce.
(c) Form of Industrial Revenue Refunding Bond
Series 1994.
10.1 Contracts With The United States Navy
(a) Agreement dated June 28, 1985, by and between the
Company and the United States of America
(Contract No. N00024-85-C-2131) for the
construction of T-AO 187 Class Oiler Ships and
various modifications thereto(4) including
modification P00005 thereto entered into on
June 16, 1988, and the related Acknowledgement of
Transfer and Transfer Agreement relating to the
Company's agreement to assume certain of the
rights and obligations to build two such vessels
under an Agreement dated May 6, 1985, by and
between Pennsylvania Shipbuilding Co. and the
United States of America.(5)
(b) Agreement dated June 20, 1988, by and between
the Company and the United States of America
(Contract No. N00024-88-C-2050) for the
construction of T-AO 187 Class Oiler Ships and
various modifications thereto(5) and modification
P00036 thereto.(2)
<PAGE>
(c) Agreement dated November 21, 1983, by and between
the Company and the United States of America
(Contract No. N00024-84-C-2027) for the
construction of LSD-41 Class Landing Ship Dock
vessels and various modifications thereto.(4)
(d) Agreement dated June 17, 1988, by and between the
Company and the United States of America
(Contract No. N00024-88-C-2048) for the
construction of LSD-41 Class Landing Ship Dock
vessels and modification nos. P00001 and
P00002(5), modification nos. P00008 and P00013
thereto(3) and modification P00029 thereto.(2)
(e) Agreement dated July 15, 1988, by and between the
Company and the United States of America
(Contract No. N00024-88-C-2221) for the
conversion of AO-177 Class Oilers to AO-177 Jumbo
Class and various modifications thereto.(5)
(f) Agreement dated December 13, 1988, by and between
AGM and the United States of America (Contract
No. N00024-89-C-2110) for the construction of
three LCACs.(5)
(g) Agreement dated July 1, 1987, by and between
Lockheed Shipbuilding Company and the United
States of America (Contract No. N00024-87-C-2089)
for the construction of seven LCACs (assumed by
AGM in 1988).(5)
(h) Agreement dated October 3, 1989, by and between
the Company and the United States of America
(Contract No. N00024-89-C-2162) for the
construction of one MHC Class 51 ship and various
modifications thereto(6) and modification P00020
thereto.(2)
(i) Agreement dated August 2, 1990, by and between
the Company and the United States of America
(Contract N00024-90-C-2304) for the construction
of one MHC Class 51 ship,(3) and modification
nos. P00002 and P00013 thereto.(2)
(j) Agreement dated November 30, 1990, by and between
the Company and the United States of America
(Contract No. N00024-90-C-2307) for the
construction of one T-AGS 45 ship and various
modifications thereto.(3)
(k) Agreement dated July 15, 1993, by and between the
Company and the United States of America
(Contract No. N00024-93-C-2300) for the
construction of one WAGB 20 Coast Guard Polar
Icebreaker ship, amendment 0001 and
modification nos. P0001 and P00013 thereto.(1)
<PAGE>
(l) Agreement dated September 3, 1993, by and between
the Company and the United States of America
(Contract No. N00024-93-C-2205) for the
construction of one T-AKR 300 Class Strategic
Sealift ship, various amendments and modification
nos. P00001, and P00003 and P00004 thereto(2) and
modification P00007 thereto.
(m) Agreement dated October 12, 1993, by and between
the Company and the United States of America
(Contract No., N00024-94-C-2200) for the
construction of one LSD 41 Class Landing Ship
Dock.(2)
10.2 Other Operating Contracts
(a) Agreement dated July 10, 1991 by and between
Crawford Technical Services, Inc. and the Dallas
Area Rapid Transit Authority, and the supplement
thereto, relating to providing operational and
maintenance services for paratransit van services
for the Dallas, Texas metropolitan area.(2)
(b) Agreement dated January 28, 1991, by and
between Crawford Technical Services, Inc. and the
United States of America and various modifications
thereto (Contract No. FO3602-91-C0007) relating to
providing maintenance services with respect to
family housing units located in a Little Rock,
Arkansas air force base.(2)
(c) Agreement dated January 12, 1994 by and between
the Company and Belle of Orleans, L.L.C. for the
construction of a 350-foot-long paddlewheel gaming
vessel, various exhibits and Amendment nos. 1, 2
and 3 thereto.
10.3 Employee Benefit Plans
(a) The Company's Amended and Restated Performance
Share Plan dated April 24, 1989(7), as amended by
Amendment No. 1 adopted December 5, 1994.
(b) The Company's Amended and Restated Stock
Appreciation Plan and attachments thereto dated
April 24, 1989(7), as amended by Amendment No. 1
adopted December 5, 1994.
(c) The Company's Amended and Restated Employee Stock
Ownership Plan and the Related Trust Agreement, as
amended and restated on December 5, 1994.
(d) The Company's Pension Plan and Amendment Nos. 1
and 2(4) as amended and restated.
(e) The Company's Restated Supplemental Pension
Plan(4), as amended by Amendment Nos. 1 and 2
thereto.(3)
<PAGE>
(f) The Company's Excess Retirement Plan.(3)
(g) Executive Group Insurance Benefits Plan
specifying the excess insurance benefits provided
to the Company's executive officers and certain
other key personnel, and a summary description of
health, accidental death and dismemberment,
disability and life insurance benefits made
available to employees of Avondale Services
Corporation(3), as amended on March 25, 1994.
(h) The Company's Directors' Deferred Compensation
Plan.(3)
10.4 Employment Agreements
(a) Employment Agreement dated September 27, 1985, by
and between the Company and Albert L. Bossier, Jr.
(4) the term of which has been extended such that
its current term extends through
December 31, 1997.
(b) Employment Agreement dated June 18, 1987, by and
between the Company and Thomas M. Kitchen(4) the
term of which has been extended such that its
current term extends through December 31, 1997.
(c) Employment Agreement dated June 18, 1987, by and
between the Company and Kenneth B. Dupont(4) the
term of which has been extended such that its
current term extends through December 31, 1997.
10.5 Avondale/Ogden Letter Agreement(8)
10.6 Acquisition and Disposition Agreements
(a) Asset Purchase Agreement dated January 27, 1987 by
and between the Company and Connell Industries,
L.P.(4)
(b) Purchase Agreement dated June 22, 1988, by and
between AGM, Lockheed Shipbuilding Company and
Lockheed Corporation.(5)
(c) Stock Purchase Agreement dated February 15, 1991,
by and between Avondale Technical Services, Inc.
and Oliver R. Crawford relating to the purchase of
Crawford Technical Services, Inc.(3)
(d) Asset Purchase Agreement dated November 20, 1992
between the Company and Bollinger Machine Shop &
Shipyard, Inc., a Louisiana corporation (without
exhibits).(2)
10.7 Lease Agreements
<PAGE>
(a) Lease Agreement dated June 24, 1988, by and
between the Company and the Board of Commissioners
of the Port of New Orleans.(5)
(b) Lease Agreement dated June 4, 1979, by and
between the Company and Marrero Land and
Improvement Association, Ltd.(5)
(c) Adoption Agreement dated July 22, 1988, by and
between the Company and Missouri Pacific Railroad
Company, as supplemented on the date thereof.(5)
(d) Lease of Commercial Property dated July 1, 1970
by and between the Company and Metal Building
Products Co., Inc.(3)
10.8 Other Material Agreements
(a) Registration Rights Agreement between the Company
and the ESOP as Annex I of the Common Stock
Purchase Agreement dated as of September 27, 1985,
by and between Ogden American Corporation and
the trustees of the Avondale Industries, Inc.,
Employee Stock Ownership Trust.(4)
(b) Registration Rights Agreement between the
Company and the participants in the Amended and
Restated Performance Share Plan (included in
Exhibit 10.3(a)).
(c) License dated October 13, 1989 by and between the
Company and Intermarine S.p.A. relating to the
license of molded, glass-reinforced polyester hull
construction technology.(3)
(d) Stockholder Protection Rights Agreement dated as
of September 26, 1994 between Avondale Industries,
Inc. and Boatmen's Trust Company, as Rights
Agent.(9)
10.9 Revolving Credit Agreement dated as of May 10, 1994
among Avondale Industries, Inc., various financial
institutions signatory thereto (the "Banks") and
Continental Bank N.A. as the Agent for the Banks, and
Amendment nos. 1 and 2 thereto.
22 List of subsidiaries of the Company
24 Consent of Deloitte & Touche
27 Financial Data Schedule
__________
(1)Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30, 1993.
(2)Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993.
<PAGE>
(3)Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991, as amended
by Form 10-K/A.
(4)Incorporated by reference from the Company's Registration
Statement on Form S-1 (Registration No. 33-20145) filed with the
Commission on February 16, 1988.
(5)Incorporated by reference from the Company's Registration
Statement on Form S-1 (Registration No. 33-27342) filed with the
Commission on March 6, 1989.
(6)Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990.
(7)Incorporated by reference from the Company's Registration
Statement on Form S-8 and Form S-3 (Registration No. 33-31984)
filed with the Commission on November 8, 1989.
(8)Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 1994.
(9)Incorporated by reference from the Company's Current Report on
Form 8-K filed with the Commission on September 30, 1994.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three
month period ended December 31, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 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, on March 30, 1995.
AVONDALE INDUSTRIES, INC.
By: /s/Albert L. Bossier, Jr.
-------------------------
Albert L. Bossier, Jr.
Chairman of the Board,
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed by the following persons on
behalf of the Registrant and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
-------------------------------------------------------------------
<S> <C> <C>
/s/Albert L. Bossier, Jr. Chairman of the Board, March 30, 1995
------------------------- President and Chief
Albert L. Bossier, Jr. Executive Officer
/s/Thomas M. Kitchen Vice President, Chief March 30, 1995
-------------------- Financial Officer,
Thomas M. Kitchen Corporate Secretary and
a Director
/s/Kenneth B. Dupont Vice President and a March 30, 1995
-------------------- Director
Kenneth B. Dupont
/s/Anthony J. Correro, III Director March 30, 1995
--------------------------
Anthony J. Correro, III
/s/Francis R. Donovan Director March 30, 1995
---------------------
Francis R. Donovan
/s/William A. Harmeyer Director March 30, 1995
----------------------
William A. Harmeyer
<PAGE>
/s/Hugh A. Thompson Director March 30, 1995
-------------------
Hugh A. Thompson
/s/Bruce L. Hicks Controller & Treasurer March 30, 1995
-----------------
Bruce L. Hicks
</TABLE>
BY-LAWS
OF
AVONDALE INDUSTRIES, INC.
(as adopted on March 20, 1990)
(Section 3.1 of which was amended on June 13, 1994
and Section 5.2 of which was amended and Section 5.4
of which was deleted on December 5, 1994)
SECTION I
OFFICES
1.1 Principal Office. The principal office of the
Corporation shall be located at 5100 River Road, Avondale,
Louisiana 70094.
1.2 Additional offices. The Corporation may have such
offices at such other places as the Board of Directors may from
time to time determine or the business of the Corporation may
require.
SECTION 2
SHAREHOLDERS MEETINGS
2.1 Place of Meetings. Unless otherwise required by law or
these By-laws, all meetings of the shareholders shall be held at
the principal office of the Corporation or at such other place,
within or without the State of Louisiana, as may be designated by
the Board of Directors.
2.2 Annual Meetings; Notice Thereof. An annual meeting of
the shareholders shall be held on the fourth Monday of April in
each year, at 10:00 a.m., or at such other date or at such other
time specified as the Board of Directors shall designate, for the
purpose of electing directors and for the transaction of such
other business as may be properly brought before the meeting. If
no annual shareholders' meeting is held for a period of eighteen
months, any shareholder may call such meeting to be held at the
registered office of the Corporation as shown on the records of
the Secretary of State of Louisiana.
2.3 Special Meetings. Special meetings of the share-
holders, for any purpose or purposes, may be called by the
Chairman of the Board, Chief Executive Officer and President or
the Board of Directors. At any time, upon the written request of
any shareholder or group of shareholders holding in the aggregate
at least 80% of the Total Voting Power (such term to have the
same meaning in these By-laws as is assigned in Article III of
the Articles of Incorporation), the Secretary shall call a
special meeting of shareholders to be held at the registered
office of the Corporation at such time as the Secretary may fix,
not less than fifteen nor more than sixty days after the receipt
of said request, and if the Secretary shall neglect or refuse to
fix such time or to give notice of the meeting, the shareholder
or shareholders making the request may do so. Such request must
state the specific purpose or purposes of the proposed special
meeting and the business to be conducted thereat shall be limited
to such purpose or purposes.
<PAGE>
2.4 Notice of Meetings. Except as otherwise provided by
law, the authorized person or persons calling a shareholders'
meeting shall cause written notice of the time, place and purpose
of the meeting to be given to all shareholders entitled to vote
at such meeting, at least ten days and not more than sixty days
prior to the day fixed for the meeting. Notice of the annual
meeting need not state the purpose or purposes thereof, unless
action is to be taken at the meeting as to which notice is
required by law or the By-laws. Notice of a special meeting shall
state the purpose or purposes thereof, and the business conducted
at any special meeting shall be limited to the purpose or
purposes stated in the notice.
2.5 List of Shareholders. At every meeting of
shareholders, a list of shareholders entitled to vote, arranged
alphabetically and certified by the Secretary or by the agent of
the Corporation having charge of transfers of shares, showing the
number and class of shares held by each such shareholder on the
record date for the meeting, shall be produced on the request of
any shareholder.
2.6 Quorum. At all meetings of shareholders, the holders
of a majority of the Total Voting Power shall constitute a quorum
provided that this subsection shall not have the effect of
reducing the vote required to approve or affirm any matter that
may be established by law, the Articles of Incorporation or these
By-laws.
2.7 Voting. When a quorum is present at any meeting, the
vote of the holders of a majority of the Voting Power (as defined
in Article III of the Articles of Incorporation) present in
person or represented by proxy shall decide each question brought
before such meeting, unless the question is one upon which, by
express provision of law or the Articles of Incorporation, a
different vote is required, in which case such express provision
shall govern and control the decision of such question. Directors
shall be elected by plurality vote.
2.8 Proxies. At any meeting of the shareholders, every
shareholder having the right to vote shall be entitled to vote in
person or by proxy appointed by an instrument in writing
subscribed by such shareholder and bearing a date not more than
eleven months prior to the meeting, unless the instrument
provides for a long period, but in no case will an outstanding
proxy be valid for longer than three years from the date of its
execution, provided that in no event may a proxy be voted at a
meeting called pursuant to La. R.S. 12:138 unless it is executed
and dated by the shareholder within 30 days of the date of such
meeting. The person appointed as proxy need not be a shareholder
of the Corporation.
2.9 Adjournments. Adjournments of any annual or special
meeting of shareholders may be taken without new notice being
given unless a new record date is fixed for the adjourned
meeting, but any meeting at which directors are to be elected
shall be adjourned only from day to day until such directors
shall have been elected.
<PAGE>
2.10 Withdrawal. If a quorum is present or represented at a
duly organized meeting, such meeting may continue to do business
until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum as fixed in Section 2.6
of these By-laws, or the refusal of any shareholders present to
vote.
2.11 Lack of Quorum. If a meeting cannot be organized
because a quorum has not attended, those present may adjourn the
meeting to such time and place as they may determine, subject,
however, to the provisions of Section 2.9 hereof. In the case of
any meeting called for the election of directors, those who
attend the second of such adjourned meetings, although less than
a quorum as fixed in Section 2.6 hereof, shall nevertheless
constitute a quorum for the purpose of electing directors.
2.12 Presiding officer. The Chairman of the Board, Chief
Executive Officer and President or in his absence, a chairman
designated by the Board of Directors, shall preside at all
shareholders' meetings.
2.13 Definition of Shareholder. As used in these By-laws,
and unless the context otherwise requires, the term shareholder
shall mean a person who is (i) the record holder of shares of the
Corporation's voting stock or (ii) a registered holder of any
bonds, debentures or similar obligations granted voting rights by
the Corporation pursuant to La. R.S. 12:75A.
SECTION 3
DIRECTORS
3.1 Number. All of the corporate powers shall be vested
in, and the business and affairs of the Corporation shall be
managed by, a Board of Directors. Except as otherwise fixed by
or pursuant to Article III of the Articles of Incorporation (as
it may be duly amended from time to time) relating to the rights
of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon
liquidation to elect, by class vote, additional directors under
particular circumstances, the Board of Directors shall consist of
not less than seven and not more than nine natural persons, as
established from time to time by a resolution of the Board of
Directors provided that, if after proxy materials for any meeting
of shareholders at which directors are to be elected are mailed
to shareholders any person or persons named therein to be
nominated at the direction of the Board of Directors becomes
unable or unwilling to serve, the foregoing number of authorized
directors as provided by the Board resolution then in effect
shall be automatically reduced by a number equal to the number of
such persons unless the Board of Directors, by a majority vote of
the entire Board, selects an additional nominee. The Board of
Directors may, by a two-thirds vote, amend this Section 3.1 to
increase or decrease the number of directors, provided that no
amendment to this Section to decrease the number of directors
shall shorten the term of any incumbent director. No director
need be a shareholder. The Secretary shall have the power to
certify at any time as to the number of directors authorized and
as to the class to which each director has been elected or
assigned.
<PAGE>
3.2 Powers. The Board may exercise all such powers of the
Corporation and do all such lawful acts and things which are not
by law, the Articles of Incorporation or these By-laws directed
or required to be done by the shareholders.
3.3 Classes. The Board of Directors, other than those
directors who may be elected by the holders of any class or
series of stock having preference over the Common Stock as to
dividends or upon liquidation, shall be divided into three
classes as nearly equal in number as may be, with the initial
term of office of Class I expiring at the first annual meeting of
shareholders occurring more than nine months after the
incorporation of the Corporation, of Class II expiring at the
first succeeding annual meeting of shareholders and of Class III
expiring at the second succeeding annual meeting of shareholders.
Any increase or decrease in the number of directors shall be
apportioned by the Board of Directors so that all classes of
directors shall be as nearly equal in number as can be.
3.4 General Election. At each annual meeting of share-
holders, directors shall be elected to succeed those directors
whose terms then expire. Such newly elected directors shall serve
until the third succeeding annual meeting of shareholders after
their election and until their successors are elected and
qualified. A director elected to fill a vacancy shall hold office
for a term expiring at the annual meeting at which the term of
the class to which he shall have been elected expires. No
decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
3.5 Vacancies. Except as otherwise provided in the
Articles of Incorporation or these By-laws (a) the office of a
director shall become vacant if he dies, resigns or is removed
from office and (b) the Board of Directors may declare vacant the
office of a director if he (i) is interdicted or adjudicated an
incompetent, (ii) is adjudicated a bankrupt, (iii) in the sole
opinion of the Board of Directors becomes incapacitated by
illness or other infirmity so that he is unable to perform his
duties for a period of six months or longer, or (iv) ceases at
any time to have the qualifications required by law, the Articles
of Incorporation or these By-laws.
3.6 Filling Vacancies. In the event of a vacancy (includ-
ing any vacancy resulting from an increase in the authorized
number of directors, or from failure of the shareholders to elect
the full number of authorized directors) the remaining directors,
even though not constituting a quorum, may fill any vacancy on
the Board for the unexpired term by a vote of at least two-thirds
of the directors remaining in office at any time that there is no
Related Person (as such term is defined in Article V.A.2 of the
Articles of Incorporation) and a two-thirds vote of all
Continuing Directors who remain in office at any time there is a
Related Person, provided that the shareholders shall have the
right, at any special meeting called for the purpose prior to
such action by the Board, to fill the vacancy.
3.7 Directors Elected by Preferred Shareholders. Notwith-
standing anything in the foregoing to the contrary, whenever the
holders of any one or more series of preferred stock of the
<PAGE>
Corporation shall have the right, voting separately as a class,
to elect one or more directors of the Corporation, the provisions
of Article III of the Articles of Incorporation (as it may be
duly amended from time to time) fixing the rights and preferences
of such preferred stock shall govern with respect to the
election, removal, vacancies or other related matters with
respect to such directors.
3.8 Notice of Shareholder Nominees. Only persons who are
nominated in accordance with the procedures set forth in this
Section 3.8 shall be eligible for election as directors. Nomina-
tions of persons for election to the Board of Directors of the
Corporation may be made at a meeting of shareholders by or at the
direction of the Board of Directors or by a shareholder of the
Corporation entitled to vote for the election of directors at the
meeting who complies with the notice procedures set forth in this
Section 3.8. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To
be timely, a shareholder's notice must be delivered or mailed and
received at the principal executive offices of the Corporation
not less than 45 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 55 days
notice or prior public disclosure of the date of the meeting is
given or made to shareholders, notice by the shareholder to be
timely must be received no later than the close of business on
the 10th day following the day on which such notice of the date
of the meeting was mailed or such public disclosure was made.
Such shareholder's notice shall set forth the following:
a. as to each person whom the shareholder proposes to
nominate for election or re-election as a director (i) the
name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the capital
stock of the Corporation of which such person is the
beneficial owner (determined in accordance with Article
V.A.2 of the Articles of Incorporation) and (iv) any other
information relating to such person that would be required
to be disclosed in solicitations of proxies for election of
directors, or would be otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended (including without limitation such
person's written consent to being named in the proxy
statement as a nominee and to serving as a director if
elected); and
b. as to the shareholder giving the notice (i) the
name and address of such shareholder and (b) the class and
number of shares of the capital stock of the Corporation of
which such shareholder is the beneficial owner (determined
in accordance with Article V.A.2 of the Articles of
Incorporation) . If requested in writing by the Secretary
the Corporation at least 15 days in advance of the meeting,
such shareholder shall disclose to the Secretary, within 10
days of such request, whether such person is the sole
beneficial owner of the shares held of record by him; and,
if not, the name and address of each other person known by
the shareholder of record to claim a beneficial interest in
such shares.
<PAGE>
At the request of the Board of Directors, any person nominated by
or at the direction of the Board of Directors for election as a
director shall furnish to the Secretary of the Corporation that
information required to be set forth in a shareholder's notice of
nomination which pertains to the nominee. If a shareholder seeks
to nominate one or more persons as directors, the Secretary shall
appoint two Inspectors, who shall not be affiliated with the
Corporation, to determine whether a shareholder has complied with
this Section 3.8. If the Inspectors shall determine that a
shareholder has not complied with this Section 3.8, the
Inspectors shall direct the Chairman of the meeting to declare to
the meeting that a nomination was not made in accordance with the
procedures prescribed by the Articles of Incorporation or these
By-laws; and the Chairman shall so declare to the meeting and the
defective nomination shall be disregarded.
The provisions of this Section 3.8 shall not apply to the
election of any directors which the holders of preferred stock of
the Corporation, voting separately as a class, may be entitled to
elect.
3.9 Compensation of Directors. Directors as such, shall
receive such compensation for their services as may be fixed by
resolution of the Board of Directors and shall receive their
actual expenses of attendance, if any, for each regular or
special meeting of the Board; provided that nothing herein
contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving
compensation therefor.
SECTION 4
MEETINGS OF THE BOARD
4.1 Place of Meetings. The meetings of the Board of
Directors may be held at such place within or without the State
of Louisiana as a majority of the directors may from time to time
appoint.
4.2 Initial Meetings. The first meeting of each newly
elected Board shall be held immediately following the share-
holders' meeting at which the Board is elected and at the same
place as such meeting, and no notice of such first meeting shall
be necessary for the newly elected directors in order legally to
constitute the meeting.
4.3 Regular Meetings; Notice. Regular meetings of the
Board may be held at such times as the Board may from time to
time determine. Notice of regular meetings of the Board of
Directors shall be required, but no special form of notice or
time of notice shall be necessary.
4.4 Special Meetings; Notice. Special meetings of the
Board may be called by the Chairman of the Board, Chief Executive
Officer and President on reasonable notice given to each
director, either personally or by telephone, mail or by telegram.
Special meetings shall be called by the Chairman of the Board,
Chief Executive Officer and President, or the Secretary in like
manner and on like notice on the written request of a majority of
<PAGE>
the directors and if such officers fail or refuse, or are unable
within 24 hours to call a meeting when requested, then the
directors making the request may call the meeting on two days'
written notice given to each director. The notice of a special
meeting of directors need not state its purpose or purposes, but
if the notice states a purpose or purposes and does not state a
further purpose to consider such other business as may properly
come before the meeting, the business to be conducted at the
special meeting shall be limited to the purposes stated in the
notice.
4.5 Waiver of Notice. Directors present at any regular or
special meeting shall be deemed to have received due, or to have
waived, notice thereof, provided that a director who participates
in a meeting by telephone (as permitted by Section 4.9 hereof)
shall not be deemed to have received or waived due notice if, at
the beginning of the meeting, he objects to the transaction of
any business because the meeting is not lawfully called.
4.6 Quorum. A majority of the Board shall be necessary to
constitute a quorum for the transaction of business, and except
as otherwise provided by law or the Articles of Incorporation or
these By-laws, the acts of a majority of the entire Board of
Directors at a meeting at which a quorum is present shall be the
acts of the Board. If a quorum is not present at any meeting of
the Board of Directors, the directors present may adjourn the
meeting from time to time without notice other than announcement
at the meeting, until a quorum is present.
4.7 Withdrawal. If a quorum is present when the meeting
convened, the directors present may continue to do business,
taking action by vote of a majority of a quorum as fixed in
Section 4.6 hereof, until adjournment, notwithstanding the
withdrawal of enough directors to leave less than a quorum as
fixed in Section 4.6 hereof or the refusal of any director
present to vote.
4.8 Action by Consent. Any action which may be taken at a
meeting of the Board or any committee thereof, may be taken by a
consent in writing signed by all of the directors or by all
members of the committee, as the case may be, and filed with the
records of proceedings of the Board or Committee.
4.9 Meetings by Telephone or Similar
Communication. Members of the Board may participate at and be
present at any meeting of the Board or any committee thereof by
means of conference telephone or similar communications equipment
if all persons participating in such meeting can hear and
communicate with each other.
SECTION 5
COMMITTEES OF THE BOARD
5.1 General. The Board may designate one or more
committees, each committee to consist of two or more of the
directors of the Corporation (and one or more directors may be
named as alternate members to replace any absent or disqualified
regular members), which, to the extent provided by resolution of
<PAGE>
the Board or the By-laws, shall have and may exercise the powers
of the Board in the management of the business and affairs of the
Corporation, and may have power to authorize the seal of the
Corporation to be affixed to documents, but no such committee
shall have power or authority in reference to amending the
Articles of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease
or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of dissolution,
removing or indemnifying directors or amending the By-laws; and
unless the resolution expressly so provides, no such committee
shall have the power or authority to declare a dividend or
authorize issuance of stock. Such committee or committees shall
have such name or names as may be stated in the By-laws, or as
may be determined, from time to time, by the Board. Any vacancy
occurring in any such committee shall be filled by the Board, but
the President may designate another director to serve on the
committee pending action by the Board. Each such member of a
committee shall hold office during the term of the Board
constituting it, unless otherwise ordered by the Board.
5.2 Compensation Committee. The Board shall establish a
Compensation Committee consisting of at least two directors. The
Compensation Committee shall administer the Performance Share
Plan, the Stock Appreciation Plan, any incentive compensation
plans involving securities of the Corporation adopted by the
Corporation in the future and employment contracts with any
employee. Each of the members of the Compensation Committee
shall be a "disinterested person" as defined in Rule 16b-3
promulgated under the Securities Exchange Act of 1934 and an
"outside director" as defined in the regulations promulgated
under 162(m) of the Internal Revenue Code. The Compensation
Committee shall determine the general compensation policies of
the Corporation and the compensation to be paid to executive
officers of the Corporation. If the Compensation Committee is
composed of an even number of persons, in the event of a
disagreement, which cannot in good faith be resolved, it will be
resolved by the affirmative vote of a majority of the entire
Board.
5.3 Audit Committee. The Board shall establish an Audit
Committee consisting of at least three directors who are not
officers or employees of the Corporation or any of its
affiliates. The Audit Committee shall (i) serve as a focal point
for communication between noncommittee directors, the independent
accountants, internal audit and management, as their duties
relate to financial accounting, reporting and controls, (ii)
assist the Board of Directors in fulfilling its fiduciary
responsibilities as to accounting policies and reporting
practices of the Corporation and all subsidiaries and the
sufficiency of auditing relative thereto and (iii) operate as the
Board's principal agent in ensuring the independence of the
Corporation's independent accountants, the integrity of
management and the adequacy of disclosure to shareholders.
<PAGE>
SECTION 6
REMOVAL OF BOARD MEMBER
Any director or the entire Board of Directors may be removed
at any time, but only for cause (as such term is defined in
Article IV.C of the Articles of Incorporation), by the affirma-
tive vote of not less than 80% of the Total Voting Power,
provided that the removal may only be effected at a meeting of
shareholders duly called for that purpose. The shareholders at
such meeting may proceed to elect a successor or successors for
the unexpired term of the director or directors removed. Except
as provided in the Articles of Incorporation and in this Section
6, directors shall not be subject to removal.
SECTION 7
NOTICES
7.1 Form of Delivery. Whenever under the provisions of law
the Articles of Incorporation or these By-laws notice is required
to be given to any shareholder or director, it shall not be
construed to mean personal notice unless otherwise specifically
provided in the Articles of Incorporation or these By-laws, but
said notice may be given by mail, addressed to such shareholder
or director at his address as it appears on the records of the
Corporation, with postage thereon prepaid. Such notices shall be
deemed to have been given at the time they are deposited in the
United States mail. Notice to a director pursuant to Section 4.4
hereof may also be given personally or by telephone or telegram
sent to his address as it appears on the records of the
Corporation.
7.2 Waiver. Whenever any notice is required to be given by
law, the Articles of Incorporation or these By-laws, a waiver
thereof in writing signed by the person or persons entitled to
said notice, whether before or after the time stated therein,
shall be deemed equivalent thereto. In addition, notice shall be
deemed to have been given to, or waived by, any shareholder or
director who attends a meeting of shareholders or directors in
person, or is represented at such meeting by proxy, without
protesting at the commencement of the meeting the transaction of
any business because the meeting is not lawfully called or
convened.
SECTION 8
OFFICERS
8.1 Designations. The officers of the corporation shall be
chosen by the directors and shall be the Chairman of the Board,
Chief Executive officer and President (with all such offices to
be held by one person), a Secretary and a Treasurer. The
directors may elect one or more Vice Presidents. Any two offices
may be held by one person, provided that no person holding more
than one office may sign, in more than one capacity, any
certificate or other instrument required by law to be signed by
two officers.
<PAGE>
8.2 Additional Designations. The Board of Directors may
appoint such other officers as it shall deem necessary, who shall
hold their offices for such terms and shall exercise such powers
and perform such duties as shall be determined from time to time
by the Board.
8.3 Term of Office. The officers of the Corporation shall
hold office at the pleasure of the Board of Directors. Except as
otherwise provided in the resolution of the Board of Directors
electing any officer, each officer shall hold office until the
first meeting of the Board of Directors after the annual meeting
of shareholders next succeeding his or her election, and until
his or her successor is elected and qualified or until his or her
earlier resignation or removal. Any officer may resign at any
time upon written notice to the Board, to the Chairman, Chief
Executive Officer and President, or to the Secretary of the
Corporation. Such resignation shall take effect at the time
specified therein as acceptance of such resignation shall be
necessary to make it effective. The Board may remove any officer
with or without cause at any time, except that the removal of the
Chairman of the Board, Chief Executive Officer and President
shall require the vote of at least three-fourths of the entire
Board. Any such removal shall be without prejudice to the
contractual rights of such offices, if any, with the Corporation,
but the election of an officer shall not in and of itself create
contractual rights. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise may be
filled for the unexpired portion of the term by the Board at any
regular or special meeting.
8.4 The Chairman, Chief Executive Officer, and President.
The Chairman, Chief Executive Officer and President shall have
general and active responsibility for the management of the
business of the Corporation, shall be responsible for implement-
ing all orders and resolutions of the Board of Directors, shall
be the chief operating officer of the Corporation, and shall
supervise the daily operations of the business of the
Corporation. The Chairman of the Board shall preside at meetings
of the Board of Directors and of the shareholders.
8.5 The Vice Presidents. The Vice Presidents (if any) in
the order specified by the Board or, if not so specified, in the
order of their seniority shall, in the absence or disability of
the President, perform the duties and exercise the powers of the
President, and shall perform such other duties as the President
or the Board of Directors shall prescribe.
8.6 The Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of the shareholders
and record all votes and the minutes of all proceedings in a book
to be kept for that purpose. He shall give, or cause to be
given, notice of all meetings of the shareholders and special
meetings of the Board, and shall perform such other duties as may
be prescribed by the Board or President, under whose supervision
he shall be. He shall keep in safe custody the seal of the
Corporation, if any, and affix the same to any instrument
requiring it.
<PAGE>
8.7 The Treasurer. The Treasurer shall have the custody of
the corporate funds and shall keep or cause to be kept full and
accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all monies and
other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the
Board of Directors. He shall keep a proper accounting of all
receipts and disbursements and shall disburse the funds of the
Corporation only for proper corporate purposes or as may be
ordered by the Board and shall render to the President and the
Board at the regular meetings of the Board, or whenever they may
require it, an account of all his transactions as Treasurer and
of the financial condition of the Corporation.
SECTION 9
STOCK
9.1 Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by the President
or a Vice President and the Secretary or an Assistant Secretary
evidencing the number and class (and series, if any) of shares
owned by him, containing such information as required by law and
bearing the seal of the Corporation. If any stock certificate is
manually signed by a transfer agent or registrar other than the
Corporation itself or an employee of the Corporation, the signa-
ture of any such officer may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to
be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with
the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
9.2 Missing Certificates. The President or any Vice
President may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore
issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen or
destroyed. As a condition precedent to the issuance of a new
certificate or certificates, the officers of the Corporation
shall, unless dispensed with by the President, require the owner
of such lost, stolen or destroyed certificate or certificates, or
his legal representative, (i) to advertise or give the
Corporation a bond or (ii) enter into a written indemnity
agreement, in each case in an amount appropriate to indemnify the
Corporation against any claim that may be made against the
Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
9.3 Transfers. Upon surrender to the Corporation or the
transfer agent of the Corporation, of a certificate for shares
duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction
upon its books.
<PAGE>
SECTION 10
DETERMINATION OF SHAREHOLDERS
10.1 Record Date. For the purpose of determining share-
holders entitled to notice of and to vote at a meeting, or to
receive a dividend, or to receive or exercise subscription or
other rights, or to participate in a reclassification of stock,
or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a
record date for determination of shareholders for such purpose,
such date to be not more than sixty days and, if fixed for the
purpose of determining shareholders entitled to notice of and to
vote at a meeting, not less than ten days, prior to the date on
which the action requiring the determination of shareholder is to
be taken.
10.2 Registered Shareholders. Except as otherwise provided
by law, the Corporation, and its directors, officers and agents
may recognize and treat a person registered on its records as the
owner of shares, as the owner in fact thereof for all purposes,
and as the person exclusively entitled to have and to exercise
all rights and privileges incident to the ownership of such
shares, and rights under this Section shall not be affected by
any actual constructive notice which the Corporation, or any of
its directors, officers or agents, may have to the contrary.
SECTION 11
MISCELLANEOUS
11.1 Dividends. Except as otherwise provided by law or the
Articles of Incorporation, dividends upon the stock of the
Corporation may be declared by the Board of Directors at any
regular or special meeting. Dividends may be paid in cash,
property, or in shares of stock.
11.2 Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or
such other person or persons as the Board of Directors may from
time to time designate. Signatures of the authorized signatories
may be by facsimile.
11.3 Fiscal Year. The fiscal year of this Corporation will
be a calendar year.
11.4 Seal. The Board of Directors may adopt a corporate
seal, which seal shall have inscribed thereon the name of the
Corporation. Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
Failure to affix the seal shall not, however, affect the validity
of any instrument.
11.5 Gender. All pronouns and variations thereof used in
these By-laws shall be deemed to refer to the masculine, feminine
or neuter gender, singular or plural, as the identity of the
person, persons, entity or entities referred to require.
<PAGE>
SECTION 12
INDEMNIFICATION
The Corporation shall indemnify to the full extent permitted
by law, which indemnification shall include, but shall not be
limited to, attorneys' fees, any person made or threatened to be
made a part to any action, suit or proceeding, whether criminal,
civil, administrative or investigative, by reason of the fact
that such person or such person's testator or intestate is or was
a director, officer or employee of the Corporation or serves or
served at the request of the Corporation any other enterprise as
a director, officer or employee. For purposes of this By-law,
the term "Corporation" shall include any predecessor of this
Corporation and any constituent corporation (including any
constituent of a constituent) absorbed by the Corporation in a
consolidation or merger; the term "other enterprises" shall
include any corporation, partnership, joint venture, trust or
employee benefit plan; service "at the request of the
Corporation" shall include service as a director, officer or
employee of the Corporation which imposes duties on, or involves
services by, such director, officer or employee with respect to
an employee benefit plan, its participants or beneficiaries; any
excise taxes assessed on a person with respect to an employee
benefit plan shall be deemed to be indemnifiable expenses; and
action by a person with respect to an employee benefit plan which
such person reasonably believes to be in the interest of the
participants and beneficiaries of such plan shall be deemed to be
action not opposed to the best interests of the Corporation.
SECTION 13
AMENDMENTS
13.1 Adoption of By-laws; Amendments Thereof. By-laws of
the Corporation may be adopted only by (i) a majority of the
entire Board of Directors at any time when there is no Related
Person (as defined in Article V.A.2 of the Articles of
Incorporation) or (ii) both a majority of the entire Board of
Directors and a majority of the Continuing Directors (as defined
in Article V.A.4 of the Articles of Incorporation) at any time
when there is a Related Person Article (as defined in Article
V.A.2 of the Articles of Incorporation). By-laws may be amended
or repealed only by (i) a majority of the entire Board of
Directors at any time when there is no Related Person (except
that any amendment to or repeal of Section 6 of these By-laws
shall require an affirmative vote of at least three-quarters of
the entire Board of Directors), (ii) both a majority of the
entire Board and a majority of the Continuing Directors at any
time when there is a Related Person (as defined in Article V.A.2
of the Articles of Incorporation), or (iii) the affirmative vote
of the holders of at least 80% of the Total Voting Power at any
regular or special meeting of shareholders, the notice of which
expressly states that the proposed amendment or repeal is to be
considered at the meeting.
13.2 Re-Amendment or Re-adoption by Board of Directors. Any
provision of these By-laws amended or repealed by the
shareholders may be re-amended or re-adopted in the manner
provided in Section 13.1.
<PAGE>
13.3 New By-laws; Amendments. Any purported amendment to
these By-laws which would add hereto a matter not covered herein
prior to such purported amendment shall be deemed to constitute
the adoption of a By-law provision and not an amendment to the
By-laws.
35.11/55478/007
Refunding Agreement
Between
Board of Commissioners of the Port of New Orleans
And
Avondale Industries, Inc.
Dated as of April 1, 1994
$36,250,000
Board of Commissioners of the Port of New Orleans
Industrial Revenue Refunding Bonds
(Avondale Industries, Inc. Project)
Series 1994
<PAGE>
Refunding Agreement
This Refunding Agreement, dated as of the 1st day of April,
1994, is between the Board of Commissioners of the Port of New
Orleans, a political subdivision of the State of Louisiana (the
"Issuer"), and Avondale Industries, Inc., a Louisiana corporation
(the "Company").
W i t n e s s e t h :
WHEREAS, the Issuer is a political subdivision of the State of
Louisiana, created and existing pursuant to the Constitution and laws
of such State and is authorized and empowered by law, including
particularly the provisions of Chapter 14-A of Title 39 of the
Louisiana Revised Statutes of 1950, as amended (La. R.S. 39:1444-
1455) (the "Refunding Act"), to issue refunding bonds for the purpose
of refunding, readjusting, restructuring, refinancing, extending, or
unifying the whole or any part of outstanding securities of the
Issuer in an amount sufficient to provide funds necessary to
effectuate the purpose for which the refunding bonds are being issued
and to pay all costs associated therewith; and
WHEREAS, pursuant to the provisions of Sections 991 to 1001,
inclusive, of Title 39 of the Louisiana Revised Statutes of 1950, as
amended (the "Act"), and a Trust Indenture dated as of July 1, 1981,
as supplemented by a First Supplemental Trust Indenture dated as of
June 1, 1983, by and between the Issuer and First National Bank of
Commerce, New Orleans, Louisiana, as trustee (the "Original
Indenture"), the Issuer issued its Industrial Revenue Bonds (Avondale
Shipyards, Inc. Project) Series 1983 (the "Series 1983 Bonds") in the
aggregate principal amount of $36,250,000, all of which are
outstanding as of the date hereof, for the purpose of providing funds
to refund the outstanding Industrial Revenue Bonds (Avondale
Shipyards, Inc. Project) Series 1981 of the Issuer (the "Series 1981
Bonds"), which Series 1981 Bonds were issued for the purpose of
providing funds to finance the cost of the acquisition, construction
and installation of a floating drydock and land-based support
facilities for the repair and maintenance of various types of vessels
(the "Project"), which drydock is located between mile markers 106
and 107 on the right descending bank of the Mississippi River at the
downriver end of the main shipyard of the Company located at 5100
River Road, Avondale, Louisiana, in Jefferson Parish, within the
jurisdiction of the Issuer as a part of the public port of the
Issuer. The initial owner and operator of the Project was Avondale
Shipyards, Inc., a Louisiana corporation, and the current owner and
operator of the Project is the Company, successor to Avondale
Shipyards, Inc.; and
WHEREAS, pursuant to and in accordance with the provisions of
the Act and an Installment Sales Agreement dated as of July 1, 1981,
as supplemented by a First Supplemental Installment Sales Agreement
dated as of June 1, 1983 (the "Original Agreement"), by and between
the Issuer and Avondale Shipyards, Inc., predecessor to the Company,
the Issuer acquired the Project from the Company and reconveyed the
Project to the Company for purchase price payments in an amount
<PAGE>
sufficient to pay the principal of, premium, if any, and interest on
the Series 1983 Bonds; and
WHEREAS, the Company has requested that the Issuer, pursuant to
and in accordance with the provisions of the Refunding Act, issue its
refunding bonds for the purpose of refunding the Series 1983 Bonds;
and
WHEREAS, in consideration of the issuance of said refunding
bonds by the Issuer, the Company will agree to make or cause to be
made payments in an amount sufficient to pay the principal of,
premium, if any, and interest on said refunding bonds pursuant to
this Refunding Agreement, said refunding bonds shall be paid solely
from the revenues derived by the Issuer from said payments by or on
behalf of the Company under this Refunding Agreement, and said
refunding bonds shall never constitute an indebtedness or pledge of
the general credit of the Issuer or the State of Louisiana, within
the meaning of any constitutional or statutory limitation of
indebtedness or otherwise; and
WHEREAS, said refunding bonds (the "Bonds") shall be designated
"Industrial Revenue Refunding Bonds (Avondale Industries, Inc.
Project) Series 1994"; and
WHEREAS, pursuant to an Escrow Agreement dated the date hereof
(the "Escrow Agreement") among the Issuer, the Company and First
National Bank of Commerce, the trustee under the Original Indenture
(the "Escrow Trustee"), the proceeds of the Bonds (other than the
proceeds which represent accrued interest), together with moneys from
the Company, are to be deposited with the Escrow Trustee in an escrow
fund (the "Escrow Fund") for the purpose of reimbursing Chemical
Bank, New York, New York (the "Series 1983 Letter of Credit Bank")
for its drawing in connection with the discharge of the Series 1983
Bonds; and
WHEREAS, the execution and delivery of the Indenture and this
Refunding Agreement, and the issuance and sale of the Bonds have been
and are in all respects duly and validly authorized by resolutions
duly adopted by the governing authority of the Issuer; and
NOW, THEREFORE, in consideration of the premises and of the
covenants and undertakings herein expressed, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS; REPRESENTATIONS AND WARRANTIES
SECTION 1.`.Definitions. The terms defined in the preamble
hereto, in this Article I or in Article I of the Indenture shall, for
all purposes of this Agreement, have the meanings herein or therein
specified, unless the context clearly otherwise requires:
"Administrative Expenses" means the direct, out-of-pocket
expenses reasonably incurred by the Issuer pursuant to this Agreement
or the Indenture and reasonable in amount, and the compensation
(agreed to by the Company) of the Trustee, the Paying Agent and the
Bond Registrar and the direct, out-of-pocket expenses of said parties
necessarily incurred under the Indenture and reasonable in amount.
<PAGE>
"Affiliate" means as to any Person, (a) any Person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with such Person or (b) any Person who is a
director or officer (i) of such Person or (ii) of any Person
described in clause (a) above. For purposes of this definition,
control of a Person shall mean the power, direct or indirect, to vote
10% or more of the securities having ordinary voting power for the
election of directors (or persons performing similar functions) of
such Person or direct or cause the direction of the management and
policies of such Person whether through ownership of voting
securities, by contract or otherwise.
"Agreement" or "Refunding Agreement" means this Agreement as
the same may from time to time be modified or amended as provided
herein.
"Agreement Term" means the term of this Agreement which shall
be the period from the date of delivery of the Bonds to the initial
purchasers thereof through the date on which payment of the principal
of, premium, if any, and interest on the Bonds (or provision
therefor) in accordance with the Indenture and performance of all the
Company's obligations under this Agreement shall have been made, upon
which payment and performance this Agreement shall terminate.
"Bonds" means the $36,250,000 aggregate principal amount of the
Issuer's Industrial Revenue Refunding Bonds (Avondale Industries,
Inc. Project) Series 1994 authorized to be issued under the
Indenture.
"Capitalized Lease" means any lease the obligations under which
have been, or in accordance with GAAP are required to be, recorded on
the books of a Person or any Subsidiary as a capital lease liability.
"Cash Equivalent Investments" means (i) securities issued,
guaranteed or insured by the United States or any of its agencies
with maturities of not more than one year from the date acquired;
(ii) certificates of deposit or other deposit arrangements with
maturities of not more than one year from the date acquired issued by
a U.S. federal or state chartered commercial bank of recognized
standing, which has capital and unimpaired surplus in excess of
$200,000,000 and which bank or its holding company has a short-term
commercial paper rating of at least A-1 or the equivalent by Standard
& Poor's Corporation and at least P-1 or the equivalent by Moody's
Investors Services, Inc.; (iii) reverse repurchase agreements with
terms of not more than seven days from the date acquired, for
securities of the type described in clause (i) above and entered into
only with commercial banks having the qualifications described in
clause (ii) above; (iv) commercial paper, master notes, or corporate
debt obligations other than those issued by the Company or any of its
Affiliates, issued by any Person incorporated under the laws of the
United States or any state thereof and rated at least A-1 or the
equivalent thereof by Standard & Poor's Corporation, at least P-1 or
the equivalent thereof by Moody's Investors Service, Inc., or at
least D-1 or the equivalent thereof by Duff & Phelps Credit Rating
Company, in each case with maturities of not more than one year from
the date acquired; and (v) investments in money market funds
registered under the Investment Company Act of 1940, as amended,
which have net assets of at least $200,000,000 and at least eighty-
<PAGE>
five percent (85%) of whose assets consist of securities and other
obligations of the type described in clauses (i) through (iv) above.
"Company" means Avondale Industries, Inc., a corporation
organized and existing under the laws of the State, and its
successors and permitted assigns, including any surviving, resulting
or transferee corporation, as provided in Section 6.1 or 6.7 hereof.
"Consolidated Debt Service Coverage Ratio" means the ratio of
(a) Consolidated EBITDA to (b) the sum of (i) Consolidated Interest
Expense plus (ii) principal payments of Indebtedness of the Person
and its Subsidiaries (excluding any balloon principal payments,
principal payments on revolving credit agreements, other working
capital financings or Indebtedness incurred with regard to a contract
for the sale of one or more ships).
"Consolidated EBITDA" means with respect to any Person for any
period, (a) Consolidated Net Income for such period before deduction
for income taxes and net interest expense, as set forth in financial
statements determined in accordance with GAAP, plus (b) all Unusual
Losses during such period to the extent deducted from Consolidated
Net Income for such period, minus (c) all extraordinary gains during
such period to the extent included in Consolidated Net Income for
such period and plus (d) depreciation and amortization to the extent
deducted in computing Consolidated Net Income for such period.
"Consolidated Interest Expense" means with respect to any
Person for any period, the aggregate cash interest expense of such
Person and its Subsidiaries for such period, as determined in
accordance with GAAP, and shall include, in any event, the interest
component of all rent and of other amounts payable under all
Capitalized Leases of such Person and its Subsidiaries and in
addition, all commissions, discounts and other fees and charges owed
with respect to letters of credit and banker's acceptances allocable
to or amortized over such period.
"Consolidated Net Income" means with respect to any Person from
any period, the consolidated net income (or loss) of such Person and
its Subsidiaries for such period, determined in accordance with GAAP.
"Consolidated Net Worth" means with respect to any Person for
any period all amounts which, in accordance with GAAP, would be
included under stockholders' equity on a consolidated balance sheet
of the Person and its Subsidiaries at such time.
"Consolidated Senior Debt Service Coverage Ratio" means the
ratio of (a) Consolidated EBITDA to (b) the sum of (i) Consolidated
Interest Expense plus (ii) principal payments of Senior Indebtedness
of the Person and its Subsidiaries (excluding any balloon principal
payments, principal payments on revolving credit agreements, other
working capital financings or Indebtedness incurred with regard to a
contract for the sale of one or more ships).
"Consolidated Senior Indebtedness" means Indebtedness of the
Person and its Subsidiaries whether outstanding on the date of this
Agreement or thereafter created, incurred, assumed or guaranteed
<PAGE>
(including, without limitation, interest that accrues on or after or
which would accrue but for the filing of a petition in bankruptcy or
for reorganization, whether or not a claim for post-petition interest
is allowed in such proceeding) except (a) any Indebtedness
outstanding after the date of this Agreement as to which, by the
express terms of the instrument creating or evidencing the same, it
is provided that such Indebtedness is subordinate or junior in right
of payment to any Senior Indebtedness, (b) any Indebtedness of the
Person or any Subsidiary to any Subsidiary or to any Affiliate of the
Person or any Subsidiary, (c) Indebtedness incurred in connection
with the purchase of goods, assets, materials or services in the
ordinary course of business or representing amounts recorded as
accounts payable, trade payables or other current liabilities of the
Person or any Subsidiary on the books of the Person or any Subsidiary
(other than the current portion of any Long Term Indebtedness of the
Company or any Subsidiary that but for this clause (c) would
constitute Senior Indebtedness), (d) any Indebtedness of or amount
owed by the Person or any Subsidiary to their respective employees
for services rendered to the Person or any Subsidiary, as the case
may be, and (e) any liability for federal, state, local or other
taxes owing or owed by the Person or any Subsidiary.
"Consolidated Senior Indebtedness Ratio" means with respect to
any Person and its Subsidiaries for any period the ratio of (a)
Consolidated Senior Indebtedness to (b) Total Capitalization.
"Consolidated Tangible Net Worth" means with respect to any
Person at a particular date, the total consolidated stockholders'
equity of such Person and its Subsidiaries less the amount of all
intangible assets of such Person and its Subsidiaries, all as
determined in accordance with GAAP.
"Costs of Issuance" means all fees, charges and expenses
incurred in connection with the authorization, preparation, sale,
issuance and delivery of the Bonds, including, without limitation,
financial, legal and accounting fees, expenses and disbursements,
rating agency fees, State Bond Commission fees, the Issuer's fees and
expenses attributable to the issuance of the Bonds, the cost of
printing, engraving and reproduction services and the fees and
expenses of the Trustee, the Paying Agent and the Bond Registrar.
"Event of Default" means an event of default specified and
defined in Section 7.1 hereof.
"First Preferred Vessel Mortgage" means the First Preferred
Vessel Mortgage on the 650 foot floating drydock constituting a
portion of the Project granted by the Company to the Trustee on
behalf of the Bondholders.
"GAAP" means generally accepted accounting principles in the
United States of America in effect from time to time.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or
<PAGE>
indirect, contingent or otherwise, of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for
the purpose of assuring in any other manner the obligee of such
Indebtedness or other obligation of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Indebtedness" means for any Person (i) all indebtedness or
other obligations of such Person for borrowed money and all
indebtedness of such Person with respect to any other items
(including, without limitation, obligations evidenced by bonds,
debentures, notes or other similar instruments but excluding accounts
payable in the ordinary course of business, income taxes payable,
deferred taxes and deferred credits) which would, in accordance with
GAAP, be classified as a liability on the balance sheet of such
Person, (ii) all obligations of such Person to pay the deferred
purchase price of property or services (including indebtedness
created under or arising out of any conditional sale or other title
retention agreement), (iii) all obligations of such Person
(contingent or otherwise) under reimbursement or similar agreements
with respect to the issuance of letters of credit, (iv) all
indebtedness or other obligations of such Person under or with
respect to any swap or other financial hedging arrangement, including
any Interest Rate Protection Agreement, (v) all obligations of such
Person under Capitalized Leases, (vi) all indebtedness or other
obligations of any other Person of the type specified in clause (i),
(ii), (iii), (iv) or (v) above, the payment or collection of which
such Person has Guaranteed and (vi) all indebtedness or other
obligations of any other Person of the type specified in clause (i),
(ii), (iii), (iv), (v) or (vi) above secured by (or for which the
holder of such indebtedness has an existing right contingent or
otherwise, to be secured by) any Lien, upon or in property
(including, without limitation, accounts and contract rights) owned
by such Person, whether or not such Person has assumed or becomes
liable for the payment of such indebtedness or obligations.
"Indemnified Person" means the Issuer, including its members,
officers, agents and employees individually, and the Trustee.
"Indenture" means the Trust Indenture dated as of the date
hereof between the Issuer and the Trustee, as the same may be amended
or supplemented from time to time in accordance with its terms.
"Interest Rate Protection Agreement" means an interest rate
swap, cap or collar agreement or similar arrangement between any
Person and a financial institution providing for the transfer or
mitigation of interest risks either generally or under specific
contingencies.
"Issuer" means the Board of Commissioners of the Port of New
Orleans, a political subdivision of the State, organized and existing
under the laws of the State, or its successors and assigns.
<PAGE>
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, security interest, lien (statutory
or other) or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention
agreement, any Capitalized Lease having substantially the same
economic effect as any of the foregoing, and the filing of any
financing statement under the Uniform Commercial Code or comparable
law of any jurisdiction in respect of any of the foregoing).
"Long Term Indebtedness" means any Indebtedness which shall
have a maturity greater than one year and which is classified as non-
current in accordance with GAAP.
"Ogden Note" means the $8.0 million senior unsecured note of
the Company for the benefit of Ogden Corporation ("Ogden") delivered
pursuant to a Letter Agreement dated April 29, 1994 between the
Company and Ogden.
"Original Agreement" means an Installment Sales Agreement dated
as of July 1, 1981, as supplemented by a First Supplemental
Installment Sales Agreement dated as of June 1, 1983, by and between
the Issuer and Avondale Shipyards, Inc., a Louisiana corporation and
a predecessor of the Company.
"Original Indenture" means a Trust Indenture dated as of July
1, 1981, as supplemented by a First Supplemental Trust Indenture
dated as of June 1, 1983, by and between the Issuer and First
National Bank of Commerce, New Orleans, Louisiana, as trustee.
"Permitted Encumbrances" means (a) Liens permitted by the
Revolving Credit Agreement, by and among the Company, Continental
Bank N.A. and the Banks as defined therein dated as of May 10, 1994;
(b) Liens arising out of the refinancing, extension, renewal or
refunding of any Indebtedness of the Company secured by Liens
permitted in clause (a) provided that such Indebtedness (i) does not
exceed $50,000,000, (ii) is not secured by any different classes of
assets and (iii) is on terms and conditions substantially similar to
the terms and conditions of the existing Revolving Credit Agreement
referred to in clause (a) above; (c) Liens granted by the Company in
its ordinary course of business for the purpose of meeting bonding
requirements provided that such Liens do not secure such Indebtedness
in an aggregate principal amount exceeding $25,000,000; (d) customer
Liens on work in progress incurred in the ordinary course of
business; (e) Liens on the Company's 900-foot floating drydock/launch
platform; (f) Liens on certain property located in Harrison County,
Mississippi granted pursuant to a Guaranty Agreement between the
Company and said Harrison County; (g) Liens granted by the Company in
its ordinary course of business on property acquired after May 27,
1994; (h) Liens for taxes, assessments, charges or other governmental
levies not delinquent or which are being contested in good faith by
appropriate proceedings and for which adequate reserves have been
established by the Company or the respective Subsidiary, as the case
may be, to the extent required by GAAP; (i) mechanics', worker's,
materialmen's, operators', carriers', or other like Liens arising in
the ordinary and normal course of business with respect to
<PAGE>
obligations which are not due or which are being contested in good
faith by appropriate proceedings; and (j) Liens not granted by the
Company or the respective Subsidiary, as the case may be, which are
promptly contested in good faith and by appropriate proceedings or
which are discharged or bonded within 30 days of notice thereof to
the Company or the respective Subsidiary, as the case may be.
"Person" or "person" means an individual, partnership,
corporation, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental authority or
other entity of whatever nature.
"Project" means the floating drydock and support facilities,
more particularly described in Exhibit A hereto, constructed,
acquired or installed with proceeds from the sale of the Series
1981Bonds.
"Refunding Act" means Chapter 14-A of Title 39 of the
Louisiana Revised Statutes of 1950, as supplemented and amended.
"Refunding Date" means, with respect to the Series 1983 Bonds,
June 1, 1994, or such other date or dates as may be agreed to by the
Issuer and the Company; provided, however, that the Refunding Date
shall not be later than ninety (90) days following the date of
delivery of the Bonds to the initial purchasers thereof.
"Regulations" means all final and proposed United States Income
Tax Regulations.
"Repayments" means the principal, premium, if any, and interest
amounts specified in Section 3.1 hereof and payable by the Company
thereunder.
"Senior Indebtedness" means all Indebtedness except any
Indebtedness which by its terms is subordinate or junior in any
respect to any other Indebtedness.
"State" means the State of Louisiana.
"Subsidiary" means as to any Person a corporation or other
business entity of which shares of stock or other ownership interests
having ordinary voting power to elect a majority of the board of
directors or other managers of such corporation or business entity
are at the time owned, directly or indirectly through one or more
intermediaries, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" shall refer to
Subsidiary or Subsidiaries of the Company.
"Tax Regulatory Agreement" means the Tax Regulatory Agreement
among the Issuer, the Company and the Trustee dated of even date
herewith relating to the Bonds.
"Total Capitalization" means with respect to any Person for any
period the sum of (a) Consolidated Senior Indebtedness plus (b)
Consolidated Net Worth.
<PAGE>
"Trustee" means First National Bank of Commerce, New Orleans,
Louisiana, as trustee under the Indenture, and its successors as
Trustee.
"Unusual Losses" means any loss considered extraordinary under
GAAP or such other loss resulting from the sale or write down of the
carrying value of any asset.
SECTION 2.`.Representations and Warranties of the Issuer. The
Issuer represents, warrants and finds that:
(a) The Issuer is a political subdivision of the State,
created by Act 70 of the Louisiana Legislature of 1896 and enjoying
powers pursuant to Article VI, Section 43 of the Louisiana
Constitution of 1974 and La. R.S. 34:1 through 34:47, inclusive, and
La. R.S. 9:1102.1, and is authorized by the provisions of the
Refunding Act, and other constitutional and statutory authority
supplemental thereto, to issue the Bonds.
(b) The Issuer has full power and authority to enter into this
Agreement and the Indenture and to carry out its obligations under
this Agreement and the Indenture and the transactions contemplated
hereby and thereby.
(c) The Issuer has duly authorized the execution and delivery
of this Agreement and the Indenture and the issuance and sale of the
Bonds.
(d) The Bonds are to be issued under and secured by the
Indenture pursuant to which the interest of the Issuer in this
Agreement and the amounts payable under this Agreement, (other than
indemnification and expense reimbursement rights) will be assigned to
the Trustee as security for the payment of the principal of, premium,
if any, and interest on the Bonds.
(e) Neither the execution and delivery of this Agreement or
the Indenture, nor the assignment of this Agreement to the Trustee,
nor the consummation of the transactions contemplated by this
Agreement or the Indenture, nor the fulfillment of or compliance with
the terms and conditions of this Agreement or the Indenture, results
or will result in the violation of any governmental order applicable
to the Issuer, or conflicts or will conflict with or results or will
result in a breach of any of the terms, conditions or provisions of
any agreement or instrument to which the Issuer is now a party or by
which it is bound, or constitutes or will constitute a default under
any of the foregoing.
SECTION 3.e.Representations, Covenants and Warranties of the
Company. The Company hereby makes the following representations,
covenants and warranties:
(a) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State, and is qualified to transact business in the State; has full
corporate power to own its properties and conduct its business; has
full legal right, power and authority to enter into this Agreement
and to carry out and consummate all transactions contemplated by this
<PAGE>
Agreement; and by proper corporate action has duly authorized the
execution and delivery of this Agreement.
(b) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated will not
conflict with or constitute on the part of the Company a breach of or
default under the Articles of Incorporation of the Company, its By-
Laws, or any statute, indenture, mortgage, deed of trust, lease, note
agreement or other agreement or instrument to which the Company is a
party or by which it or its properties are bound, or any order, rule
or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its activities or properties.
(c) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding
obligation of the Company enforceable in accordance with its terms,
subject to laws relating to bankruptcy, moratorium, insolvency or
reorganization and similar laws affecting creditors' rights
generally.
(d) No event has occurred and no condition exists with respect
to the Company that would constitute an Event of Default under this
Agreement or under the Original Agreement or which, with the lapse of
time or with the giving of notice or both, would become an "Event of
Default" hereunder or thereunder.
(e) The Company will (i) cause the Project to be operated as
dock and wharf facilities and storage facilities directly related
thereto, as defined in the Internal Revenue Code of 1954, as amended,
and the Regulations, and (ii) keep the Project within the
jurisdiction of the Issuer as a part of the public port at all times.
(f) Substantially all of the proceeds of the Series 1981 Bonds
have been used to provide dock or wharf or storage facilities
directly related thereto as those terms are defined in Section
103(b)(4)(D) of the Internal Revenue Code of 1954, as amended. All
of the proceeds of the Series 1981 Bonds have been expended to pay
the cost of acquisition, construction and installation of the Project
and the costs and expenses of issuance of the Series 1981 Bonds. All
of the proceeds of the Series 1983 Bonds have been expended to refund
and redeem the Series 1981 Bonds and to pay the costs and expenses of
issuance of the Series 1983 Bonds.
(g) The weighted average maturity of the Bonds does not exceed
120% of the remaining economic life of the Project financed with the
proceeds of the Series 1981 Bonds.
(h) The principal amount of the Bonds does not exceed the
outstanding principal amount of the Series 1983 Bonds.
(i) None of the proceeds of the Bonds will be used, and none
of the proceeds of the Series 1981 Bonds or the Series 1983 Bonds
were used, to provide any airplane, skybox or other private luxury
box, or health club facility; any facility primarily used for
gambling; or any store the principal business of which is the sale of
alcoholic beverages for consumption off premises.
<PAGE>
(j) None of the proceeds of the Bonds will be used to finance
Costs of Issuance of the Bonds.
ARTICLE II
ISSUANCE OF THE BONDS AND
DEPOSIT OF BOND PROCEEDS
SECTION 1.j.Agreement to Issue Bonds; Disbursement of Bond
Proceeds. In order to provide funds for the refunding of all of the
outstanding Series 1983 Bonds or to reimburse the Series 1983 Letter
of Credit Bank in connection therewith, the Issuer, immediately after
the execution and delivery of this Agreement, will proceed to issue,
sell and deliver the Bonds to the initial purchasers thereof and will
cause the proceeds thereof (other than the proceeds which represent
accrued interest, if any) to be deposited as provided in Section 4.1
of the Indenture.
SECTION 2.j.No Warranty as to Sufficiency of Bond Proceeds.
The Issuer does not make any warranty, either express or implied,
that the proceeds of the Bonds will be sufficient to pay all amounts
then due and owing on the Series 1983 Bonds. The Company shall
provide such additional moneys as are required to reimburse the
Series 1983 Letter of Credit Bank for its drawing in connection with
the redemption of the Series 1983 Bonds on the Refunding Date. The
Company agrees that it will pay out of its own money and not out of
proceeds of the Bonds all Costs of Issuance with respect to the
Bonds. The Company agrees that if it should pay any portion of the
Series 1983 Bonds in excess of moneys available therefor, it shall
not be entitled to any reimbursement therefor from the Issuer, the
Trustee or any Bondholder, nor shall it be entitled to any abatement
or diminution of the amounts payable under this Agreement.
SECTION 3.j.Use of Moneys Held Under the Indenture. Any moneys
held in the Bond Fund shall be invested, reinvested and applied by
the Trustee in accordance with the Indenture. The Company hereby
agrees that upon the occurrence of an Event of Default under this
Agreement or under the Indenture, all amounts at any time deposited
in the Bond Fund, including all investments and reinvestments made
with such amounts and the proceeds thereof, and all of its rights to
and interests in such amounts, investments, reinvestments and
proceeds shall be held by the Trustee for the holders of the Bonds.
The Company hereby authorizes and directs the Trustee to hold such
amounts, investments, reinvestments and proceeds as custodian for the
Issuer, and to invest and disburse such amounts and proceeds in
accordance with the Indenture and this Agreement.
ARTICLE III
DEPOSIT OF BOND PROCEEDS AND REPAYMENTS
SECTION 1.j.Repayments. (a) In consideration of the issuance,
sale and delivery of the Bonds by the Issuer, the Company hereby
agrees to pay, during the Agreement Term, to the Trustee for the
account of the Issuer on each date on which the principal of,
premium, if any, or interest on the Bonds is due, whether at the
maturity thereof or upon acceleration, redemption or otherwise in
accordance with the provisions of the Indenture, Repayments in an
<PAGE>
amount equal to the sum of (i) all interest which is due and payable
on the Bonds on such date, (ii) the principal amount of Bonds, if
any, which is due and payable on such date, and (iii) amounts, if
any, required to effect redemption of Bonds on such date pursuant to
the Indenture, including any applicable redemption premium. Pursuant
to the Indenture, the Issuer directs the Trustee to apply such
Repayments in the manner provided in the Indenture. Repayments shall
be paid to the Trustee in funds immediately available to the Trustee
on the payment date, and shall be immediately deposited by the
Trustee in accordance with the Indenture. In any event, the Company
agrees to make Repayments to the Trustee at such times and in such
amounts and manner so as to enable the Trustee to make payment of the
principal of, premium, if any, and accrued interest on the Bonds as
the same shall become due and payable whether by acceleration,
redemption or otherwise in accordance with the terms of the
Indenture.
(b) If the Company should fail to make any of the Repayments
required in Section 3.1.(a) above, the item or installment which the
Company has failed to make shall continue as an obligation of the
Company until the same shall have been fully paid, and the Company
agrees to pay the same with interest thereon (to the extent permitted
by law) at the rate per annum borne by the Bonds as provided in
Section 2.2 of the Indenture, until paid in full.
(c) In addition to the options of the Company under Article
VIII hereof to cause redemption, the Company shall have the right to
make from time to time partial prepayments of the amounts due
hereunder. The making of any prepayments by the Company shall not
require the Company to make any further prepayments. The Issuer
shall direct the Trustee to apply such prepayments in such manner,
consistent with the provisions of the Indenture, as may be directed
by the Company.
In the event that (i) such partial prepayments shall be applied
by the Trustee pursuant to the Indenture to the defeasance or
redemption of the Bonds or (ii) the Bonds are presented by the
Company or the Issuer to the Trustee for cancellation pursuant to the
Indenture, the Company shall be entitled to a credit for the Bonds so
defeased, redeemed or cancelled against payments required to be made
under the provisions of this Article.
(d) The obligation of the Company to make Repayments shall be
absolute and unconditional and shall not be subject to cancellation,
termination, abatement or diminution, or to any defense other than
payment or to any right of set-off, counterclaim, recoupment or
otherwise arising out of any breach under this Agreement, the
Indenture, or otherwise by the Issuer, the Trustee, or any other
party, or out of any obligation or liability at any time owing to the
Company by the Issuer, the Trustee, or any other party, and further,
the Repayments and the other payments due hereunder shall continue to
be payable at the times and in the amounts herein specified whether
or not the Project, or any portion thereof, shall have been destroyed
by fire or other casualty, or title thereto, or the use thereof,
shall have been taken by the exercise of the power of eminent domain.
During the Agreement Term, the Company (i) shall not suspend or
discontinue its payment of Repayments, (ii) shall perform and observe
all of its other obligations contained herein and (iii) except as
<PAGE>
explicitly permitted herein, shall not terminate this Agreement for
any cause including, without limiting the generality of the
foregoing, any acts or circumstances that may constitute failure of
consideration, commercial frustration of purpose, any change in tax
or other laws by the United States of America or the State or any
political subdivision of either, or any failure of the Issuer to
perform and observe any obligation or condition arising out of or
connected with this Agreement. This provision shall not be construed
to release the Issuer from the performance of any of its obligations
under this Agreement; and in the event the Issuer shall fail to
perform any such obligation, the Company may institute such action
against the Issuer as the Company may deem necessary to compel
performance; provided, however, that no such action shall claim or
attempt to establish or work a reduction of Repayments payable by the
Company hereunder. The Company may at its own cost and expense and
in its own name or in the name of the Issuer, prosecute or defend any
action or proceedings or take any other action involving third
persons which the Company deems reasonably necessary in order to
secure or protect its rights under this Agreement, and in such event
the Issuer shall cooperate fully with the Company.
SECTION 2.c.Additional Payments. The Company further agrees to
pay, during the Agreement Term, all amounts due to the Trustee or the
Issuer under this Agreement, the Indenture or any other agreements
entered into in connection with the issuance of the Bonds.
SECTION 3.3.Funding and Replenishment of Debt Service Reserve
Fund. In addition to Repayments required by Section 3.1, the Company
shall make deposits to the Debt Service Reserve Fund as follows: on
the date of delivery of the Bonds to the initial purchasers thereof,
the Company shall deposit $1,000,000 to the credit of the Debt
Service Reserve Fund and thereafter on each September 1, December 1,
March 1 and June 1, commencing September 1, 1994, the Company shall
deposit the sum of $300,000 to the Debt Service Reserve Fund until
the amount on deposit therein equals the Debt Service Reserve Fund
Requirement. In lieu of making such deposits in cash, the Company
may satisfy its obligation under this Section 3.3 by depositing with
the Trustee a Debt Service Reserve Fund Letter of Credit as defined
in Section 5.7 of the Indenture and hereby agrees to reinstate the
Debt Service Reserve Fund Letter of Credit or to deposit funds in the
Debt Service Reserve Fund as provided in Section 5.7 of the
Indenture.
If the amount on deposit in the Debt Service Reserve Fund on
any valuation date under Section 5.7 of the Indenture is less than
the Debt Service Reserve Fund Requirement because of a decrease in
the market value of the investments in the Debt Service Reserve Fund,
the Company shall make up such deficiency in six equal monthly
installments, commencing on the first Business Day of the month
following such valuation. If the amount on deposit in the Debt
Service Reserve Fund is less than the Debt Service Reserve
Requirement due to a withdrawal therefrom required by the Indenture
or a draw on the Debt Service Reserve Fund Letter of Credit, the
Company shall make up such deficiency in three equal monthly
installments commencing on the first Business Day of the month
following such withdrawal or draw.
<PAGE>
ARTICLE IV
REFUNDING OF SERIES 1983 BONDS
SECTION 1.c.Escrow Fund - Application of Bond Proceeds. The
Issuer will cause to be deposited with the Escrow Trustee for credit
to the Escrow Fund the proceeds from the initial sale of the Bonds
(other than the proceeds which represent accrued interest, if any),
which proceeds shall be held therein and applied in accordance with
the Indenture and the Escrow Agreement. At the time such proceeds
are deposited, the Company will pay the balance of moneys required to
pay the redemption price for the Series 1983 Bonds to the Escrow
Trustee and will pay all Costs of Issuance. The proceeds of the
Bonds together with the additional funds provided by the Company on
deposit with the Escrow Trustee are to be used by the Escrow Trustee
to reimburse the Series 1983 Letter of Credit Bank in connection with
the redemption of the Series 1983 Bonds, all as provided in the
Indenture and the Escrow Agreement. The Company will take no action
which would reduce the principal amount of the Series 1983 Bonds
prior to their redemption.
SECTION 2.c.Compliance with Original Indenture. The Issuer and
the Company shall take all steps as may be necessary to effect the
redemption of the Series 1983 Bonds on the Refunding Date as provided
in the Original Indenture and as contemplated herein.
ARTICLE V
EFFECTIVE DATE
SECTION 1.c.Effective Date of Refunding Agreement. This
Agreement shall become effective on the date of delivery of the Bonds
to the initial purchasers thereof and shall continue in full force
and effect during the Agreement Term.
ARTICLE VI
SPECIAL COVENANTS
SECTION 1.c.Maintenance of Corporate Existence. The Company
covenants that during the Agreement Term, it will be qualified to do
business in the State, will maintain its corporate existence, will
not dissolve, sell or otherwise dispose of all or substantially all
of its assets to, and will not consolidate with or merge into,
another corporation or entity unless such corporation or entity shall
be incorporated and existing under the laws of one of the states of
the United States and qualifies to do business in the State, assumes
all of the obligations of the Company hereunder and, after such
transaction is not in default under any provisions hereof.
If a consolidation, merger, sale or other transfer is made as
provided in this Section, the provisions of this Section shall
continue in full force and effect and no further consolidation,
merger, sale or other transfer shall be made except in compliance
with the provisions of this Section. If the Company is not to be the
surviving, resulting or transferee corporation, written notice of
such consolidation or merger shall be given to the Issuer and the
Trustee ninety (90) days prior to such event.
<PAGE>
SECTION 2.c.Limited Obligation Bonds. The Bonds shall be
limited obligations of the Issuer and shall be payable solely out of
the Dedicated Revenues of the Issuer as provided in the Indenture
(including all sums deposited in the Bond Fund from time to time
pursuant to this Agreement and the Indenture, and in certain events,
amounts attributable to Bond proceeds or amounts obtained through the
exercise of certain remedies provided in the Indenture). The Bonds
shall never constitute an indebtedness or general obligation of the
Issuer or the State within the meaning of any constitutional or
statutory provision or limitation of indebtedness and shall never
constitute or give rise to a pecuniary liability of the Issuer or the
State or a charge or pledge against the general credit or taxing
power of either.
SECTION 3.c.Tax Covenants.It is intended by the parties hereto
that this Agreement and all action taken hereunder be consistent with
and pursuant to the resolutions of the Issuer relating to the Bonds,
and that the interest on the Bonds be excluded from the gross income
of the recipients thereof, other than a person who is a "substantial
user" of the Project or a "related person" of a "substantial user"
within the meaning of the Code, for federal income tax purposes by
reason of the provisions of the Code. The Issuer and the Company
hereby covenant with each other that neither of them will, knowingly,
in the case of the Issuer, cause or permit the proceeds of the Bonds
or other moneys to be used in a manner, or take any action or fail to
take any action, which will cause the interest on the Bonds to be
includable in gross income of the recipients thereof other than a
person who is a "substantial user" of the Project or a "related
person" to such "substantial user" within the meaning of the Code for
federal income tax purposes. In addition, the Company covenants that
to the extent permitted by law, it shall take all actions necessary
to maintain such exclusion of the interest on the Bonds from gross
income for federal income tax purposes. In furtherance of the
foregoing, the Company also agrees on behalf of the Issuer to comply
with all rebate requirements and procedures as may become applicable
to the Bonds under the Code. The Company and the Issuer shall direct
the Trustee to make no use of the proceeds of the Bonds, or any funds
which may be deemed to be proceeds of the Bonds pursuant to Section
148 of the Code and the applicable Regulations thereunder, which
would cause the Bonds to be "arbitrage bonds" within the meaning of
such Section and such Regulations, and the Company shall comply with
and the Issuer shall take no action to violate the requirements of
such Section and such Regulations while any Bonds remain outstanding.
The Company will take no action which would cause any funds
constituting gross proceeds of the Bonds to be used in a manner as to
constitute a prohibited payment under the applicable regulations
pertaining to, or in any other fashion as would constitute failure of
compliance with, Section 148 of the Code.
The Company further agrees, throughout the Agreement Term, to
comply with or cause compliance with all representations or
requirements set forth in the Tax Regulatory Agreement. The Company
further agrees that in the event of a determination of taxability
pursuant to Section 7.1(b) of the Indenture, while the Company is not
required to complete the administrative proceeding or litigation
referred to within a specified period, it hereby covenants that it
will use its best efforts to obtain a prompt final determination,
<PAGE>
decision or settlement of any administrative proceeding or
litigation.
SECTION 4.c.Maintenance of Project; Insurance; Taxes. The
Company will maintain, preserve and keep the Project or cause the
Project to be maintained, preserved and kept, with the appurtenances
and every part and parcel thereof, in good repair, working order and
condition and it will from time to time make or cause to be made all
necessary and proper repairs, replacements and renewals; provided,
however, that the Company will have no obligation to maintain,
repair, replace or renew any element or unit of the Project the
maintenance, repair, replacement or renewal of which becomes (i)
unlawful or (ii) uneconomical to the Company because of obsolescence
or change in government standards or regulations.
The Company agrees that the Project will be insured for fire
and extended coverage risks and personal and property liability
coverage (including property, comprehensive general liability and
umbrella insurance) in such amounts and covering such risks as are
customarily insured against by businesses of like size and type with
respect to facilities similar in nature to the Project and the
Trustee shall be named as an additional insured in such insurance.
The Company shall maintain workmen's compensation coverage or cause
the same to be maintained in accordance with Louisiana law. Any
provisions of this Agreement to the contrary notwithstanding, the
Company shall be entitled to the proceeds of any insurance or
condemnation award or portion thereof with respect to the Project and
such shall be paid directly to the Company and the Trustee, as loss
payee.
It is understood and agreed that the Repayments under Section
3.1 and other charges payable hereunder shall continue to be payable
at the times and in the amounts herein specified, whether or not the
Project shall have been wholly or partially destroyed by fire or
other casualty or shall have been taken in condemnation, and that
there shall be no abatement of any such payments and other charges by
reason thereof.
The Company further agrees that it will pay or cause to be
paid, as the same respectively become due, all taxes and governmental
charges of any kind whatsoever that may at any time be lawfully
assessed or levied against the Company or the Issuer with respect to
the Project, any portion thereof, including, without limiting the
generality of the foregoing, any taxes levied against the Company or
the Issuer upon or with respect to the income or profits of the
Issuer under this Agreement or any charge on the Repayments, and
including all ad valorem taxes lawfully assessed upon the Project,
all utility and other charges incurred in the operation, maintenance,
use, occupancy and upkeep of the Project, all assessments and charges
lawfully made by any governmental body for or on account of the
Project and in addition any excise tax levied against the Company or
the Issuer on the Repayments; provided, however, that nothing herein
shall require the payment of any such tax or charge or the making of
provision for the payment thereof so long as the validity thereof
shall be contested in good faith by appropriate legal proceedings,
<PAGE>
unless thereby the lien of the Indenture on the Repayments will be
materially endangered or the Project or any material part thereof
shall be subject to loss or forfeiture, in which event such taxes,
assessments and charges shall be paid forthwith; and provided
further, that with respect to special assessments or other
governmental charges that may lawfully be paid in installments over a
period of years, the Company shall be obligated to pay or cause to be
paid only such installments as are required to be paid during the
Agreement Term.
SECTION 5.c.Permits. The Company shall, at its sole cost and
expense, procure or cause to be procured any and all necessary
building permits, other permits, licenses and other authorizations
required for the lawful and proper use, occupation, operation and
management of the Project. The Company also agrees to pay or cause
to be paid all lawful charges for gas, water, sewer, electricity,
light, heat, power, telephone and other utility services used,
rendered or supplied to, upon or in connection with the Project.
SECTION 6.c.Compliance with Law. The Company shall, throughout
the Agreement Term and at no expense to the Issuer, promptly comply
with or cause compliance with all laws, ordinances, orders, rules,
regulations and requirements of duly constituted public authorities
which may be applicable to the Project or to the repair and
alteration thereof, or to the use or manner of use of the Project.
Notwithstanding the foregoing, the Company shall have the right to
contest or cause to be contested the legality of any such law,
ordinance, order, rule, regulation or requirement as applied to the
Project provided that in the opinion of Counsel to the Company such
contest shall not in any way materially adversely affect or impair
the obligations of the Company under this Agreement or the ability of
the Company to discharge such obligations.
SECTION 7.c.First Preferred Vessel Mortgage and Prohibition
Against Sales. The Company will grant to the Trustee on behalf of
the Bondholders the First Preferred Vessel Mortgage. The Company
further covenants that it will not grant any lien, mortgage or
security interest in any other portion of the Project nor will it
sell, lease or otherwise dispose of its interest in the Project
except as provided in Section 6.1 hereof or in this Section. The
Company may from time to time sell or permit the sale of the
Company's interest in any machinery, fixtures, apparatus or
instruments constituting part of, or used in connection with, the
Project and remove or permit the removal thereof from the Project,
provided that such facilities are facilities which are not necessary
for the operation of the Project or for which a substitution is made
and provided further that such removal will not impair the exclusion
from gross income of interest on the Bonds for federal income tax
purposes. In addition, this Agreement may be assigned in whole or in
part and the Project may be sold or leased as a whole or in part (but
subject to this Agreement and the Issuer's rights hereunder) by the
Company without the necessity of obtaining the consent of the
Trustee, the Issuer or the holders of the Bonds, subject, however, to
the following conditions:
<PAGE>
(a) No sale, assignment or leasing (other than pursuant
to Section 6.1 hereof) shall relieve the Company from primary
liability for any of its obligations hereunder, and in the
event of any such sale, assignment or leasing, the Company
shall remain primarily liable for the Repayments specified in
Section 3.1 hereof and for the performance and observance of
the other agreements on its part herein provided; and
(b) The purchaser, assignee or lessee from the Company
shall assume the obligations of the Company hereunder to the
extent of the interest sold, assigned or leased.
(c) The Company shall, within 30 days after the delivery
thereof, furnish or cause to be furnished to the Issuer and the
Trustee a true and complete copy of such assignment, sale, or
lease.
SECTION 8.c.Issuer Assignment of Rights and Interest in
Refunding Agreement. The Issuer shall, pursuant to the Indenture,
assign its rights under and interest in this Agreement (other than
rights with respect to expense reimbursement and indemnification) and
pledge and assign all payments, receipts and revenues receivable
under or pursuant to this Agreement (other than payments for
indemnification and expense reimbursement), as provided herein and in
the Indenture, to the Trustee pursuant to the Indenture as security
for payment of the principal of, premium, if any, and interest on the
Bonds; provided, however, that the Issuer reserves the right to
enforce in its own name and for its own benefit the obligations of
the Company to indemnify the Issuer and to reimburse the expenses of
the Issuer. The Company hereby acknowledges notice of and consents
to such assignment and pledge. It is hereby recognized that the
assignment shall entitle the Trustee to enforce any covenant made by
the Company for the benefit of the holders of the Bonds or the
Trustee and to enforce all of the rights, powers and interest of the
Issuer under this Agreement. Except as provided in this Section 6.8,
the Issuer will not sell, assign, transfer, convey or otherwise
dispose of its interest in this Agreement during the Agreement Term.
The Issuer hereby grants the Company full authority for the account
of the Issuer to perform any covenant or obligation alleged in any
notice of default under the Indenture, in the name and stead of the
Issuer, with full power to do any and all such things and acts to the
same extent that the Issuer could do to correct such default and
perform any such things and acts and with power of substitution to
correct such default.
SECTION 9.c.Payment of Administrative Expenses. The Company
will promptly pay or cause to be paid all Administrative Expenses as
the same become due and payable. The Company agrees to pay or cause
to be paid the Administrative Expenses of the Issuer directly to the
Issuer. The Company further agrees to pay or cause to be paid the
Administrative Expenses of the Trustee, the Paying Agent and the Bond
Registrar under the Indenture directly to said parties, who shall
receive and disburse such payments as provided in the Indenture. In
the event the Company shall fail to pay or cause to be paid any
Administrative Expenses, the payment so in default shall continue as
an obligation of the Company until the amount in default shall have
been fully paid, and the Company agrees to pay or cause to be paid
<PAGE>
the same with interest thereon (to the extent legally enforceable) at
a rate which shall be the rate per annum borne by the then
outstanding Bonds or the maximum rate permitted by Louisiana law,
whichever is the lesser, until paid.
SECTION 10.c.Indemnification. The Company hereby agrees (i) to
protect, indemnify and hold harmless each Indemnified Person from
any and all financial responsibility or liability whatsoever with
respect to the financing or refinancing of the Project and the Bonds,
the Series 1981 Bonds or the Series 1983 Bonds issued with respect
thereto, provided that the Company will not be liable in any such
case to the extent that any such loss, claim, damage, liability and
expense arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in any
information furnished by the Issuer specifically for use in the
Limited Offering Memorandum for use under the caption "The Issuer";
(ii) to indemnify, defend and hold the Indemnified Person harmless
against any loss or damage to property or any injury or death of any
person or persons occurring in connection with the construction,
equipping or operation of the Project however caused; and (iii) to
indemnify, defend and hold the Indemnified Person harmless against
any claim, penalty, order, judgment, costs or reasonable Counsel fees
resulting from non-compliance of the Company or the Project with
federal, state or local health, safety or environmental laws,
ordinances or regulations with respect to the Project.
The Company also covenants and agrees, at its expense, to pay,
and to indemnify the Indemnified Person from and against, all costs,
expenses and charges lawfully incurred after an Event of Default in
enforcing any covenant or agreement of the Company contained in this
Agreement.
If any suit, action or proceeding is brought against any
Indemnified Person, that action or proceeding shall be defended by
Counsel to the Indemnified Person or the Company, as the Company
shall determine. The Indemnified Person shall notify the Company
promptly upon receiving notice of any such suit, action or
proceeding. If the defense is by Counsel to the Indemnified Person,
the Company shall indemnify the Indemnified Person for the reasonable
cost of that defense including reasonable Counsel fees. If the
Company determines that the Company shall defend the Indemnified
Person, the Company shall immediately assume the defense at its own
cost. The Company shall not be liable for any settlement of any
proceeding made without its written consent (which consent shall not
be unreasonably withheld).
The obligations of the Company under this Section shall survive
any assignment or termination of this Agreement.
SECTION 11.c.No Warranty. The Issuer makes no warranty, either
express or implied, as to the Project, including, without limitation,
title to the Project or the actual or designed capacity of the
Project, as to the suitability or operation of the Project for the
purposes specified in this Agreement, as to the condition of the
<PAGE>
Project or as to the suitability thereof for the Company's purposes
or needs or as to compliance of the Project with applicable laws and
regulations or the ability of the Company to discharge the Bonds.
SECTION 12.c.Financial Statements of Company. The Company will
furnish the Trustee, at least one nationally recognized municipal
securities information repository, any beneficial owner of the Bonds
upon request to the Company and any rating agency that may maintain a
rating on the Bonds with its annual audited financial statements and
notice of certain material events affecting the security of the
Bonds, including principal and interest payment delinquencies,
nonpayment related defaults, events affecting the tax exempt status
of the Bonds, modifications to rights of bond holders, bond calls and
rating changes. In addition, the Company will deliver to the Trustee
and any Beneficial Owner of the Bonds known to the Company copies of
all financial statements available to the general public, including
the Company's Annual Reports on Form 10-K and Quarterly Reports on
Form 10-Q within five Business Days of such reports becoming
available to the general public. If at any time, the Company ceases
to be a reporting company within the meaning of the Securities
Exchange Act of 1934, as amended, the Company will provide
substantially the same material within 95 days of the end of any
fiscal year, and within 50 days of the end of any fiscal quarter.
SECTION 13.c.Consolidated Tangible Net Worth. The Company will
not permit the Consolidated Tangible Net Worth at the end of any
fiscal year to be less than $60,000,000. If the Consolidated
Tangible Net Worth at the end of any fiscal year is less than this
requirement the Company will either, at its option, (a) be
prohibited, until such time as the Company is again in compliance
with this requirement (determined at the end of each fiscal year),
from (i) paying cash dividends on common stock, (ii) repurchasing
shares of common stock, or (iii) incurring additional Indebtedness
other than for the refunding, refinancing or replacement of any
existing line of credit or revolving credit agreement and drawings
under such line or agreement; or (b) deliver to the Trustee (i) an
independent appraisal of all Project assets, (ii) perfected security
interests in all Project assets, and (iii) to the extent the
appraised value of the Project assets is less than the outstanding
par amount of the Bonds, perfected security interests on additional
Company assets, with an independent appraised value equal to the
difference. Any amount pledged as collateral pursuant to clause (b)
of this Section shall remain so pledged for as long as any Bonds
remain outstanding.
SECTION 14.c.Consolidated Senior Indebtedness Ratio. The
Company will not permit the Consolidated Senior Indebtedness Ratio at
the end of any fiscal year to be greater than 0.6 to 1. If the
Consolidated Senior Indebtedness Ratio at the end of any fiscal year
is greater than this requirement the Company will either, at its
option, (a) be prohibited, until such time as the Company is again in
compliance with this requirement (as determined at the end of each
fiscal year), from (i) paying cash dividends on common stock, (ii)
repurchasing shares of common stock, or (iii) incurring additional
Indebtedness, other than for the refunding, refinancing or
replacement of any existing line of credit or revolving credit
agreement and drawings under such line or agreement; or (b) deliver
<PAGE>
to the Trustee (i) an independent appraisal of all Project assets,
(ii) perfected security interests in all Project assets, and (iii) to
the extent the appraised value of the Project assets is less than the
outstanding par amount of the Bonds, perfected security interests on
additional Company assets, with an independent appraised value equal
to the difference. Any amount pledged as collateral pursuant to
clause (b) of this Section shall remain so pledged for as long as any
Bonds remain outstanding.
SECTION 15.c.Consolidated Senior Debt Service Coverage Ratio.
Beginning with the fiscal year ending December 31, 1995, the Company
will not permit the Consolidated Senior Debt Service Coverage Ratio
(which will exclude repayment of the Ogden Note and its Subsidiaries
at the end of any fiscal year) to be less than 2.0 to 1; and the
Consolidated Debt Service Ratio (which will include all debt whether
senior or subordinate, except for the repayment of the Ogden Note)
and its Subsidiaries at the end of any fiscal year to be less than
1.1 to 1. If the Company shall fail to maintain either the
Consolidated Senior Debt Service Coverage Ratio or the Consolidated
Debt Service Coverage Ratio, then the Company will either, at its
option, (a) be prohibited, until such time as the Company is again in
compliance with this requirement (determined at the end of each
fiscal year), from (i) paying cash dividends on common stock, (ii)
repurchasing shares of common stock, or (iii) incurring additional
Indebtedness, other than for the refunding, refinancing or
replacement of any existing line of credit or revolving credit
agreement and drawings under such line or agreement; or (b) deliver
to the Trustee (i) an independent appraisal of all Project assets,
(ii) perfected security interests in all Project assets, and (iii) to
the extent the appraised value of the Project assets is less than the
outstanding par amount of the Bonds, perfected security interests on
additional Company assets, with an independent appraised value equal
to the difference. Any amount pledged as collateral pursuant to
clause (b) of this Section shall remain so pledged for as long as any
Bonds remain outstanding.
SECTION 16.c.Dividends of the Company. The Company will not
declare any dividend on, or make any payment on account of, or set
apart assets for a sinking or other analogous fund for the purchase,
redemption, defeasance, retirement or other acquisition of, any
shares of any class of stock of the Company or any Subsidiary, as the
case may be, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of the Company or any
Subsidiary, as the case may be, except that so long as no "Event of
Default" has occurred and is continuing or would result therefrom:
(a) the Company may declare and pay dividends payable solely in cash
on its shares of preferred stock, and (b) the Company may declare and
pay dividends payable solely in cash on its shares of common stock in
an amount not to exceed 75% of the difference between Consolidated
Net Income for the last four consecutive fiscal quarters ending with
the fiscal quarter immediately preceding the date the dividend is
declared and the amount of dividends paid on its shares of preferred
stock for the last four consecutive fiscal quarters ending with the
fiscal quarter immediately preceding the date the dividend is
declared. Notwithstanding the above, the Company will have the right
to pay a dividend on its common stock solely in the form of
additional shares of the Company's common stock.
<PAGE>
SECTION 17.c.Liens of the Company. The Company will not
create, incur, assume or permit to exist any Lien upon any of its
revenues, property (including, but not limited to, fixed assets,
inventory, real property, receivables, intangible rights and stock)
or other assets, whether now owned or hereafter acquired, other than
Permitted Encumbrances unless (a) (i) the Revolving Credit Agreement
dated as of May 10, 1994, by and among the Company, Continental Bank
N.A. and the Banks as defined therein, including extensions according
to its terms, is continuing in effect or (ii) the Consolidated Senior
Debt Service Coverage Ratio is greater than 2.5 to 1.0 or (b) the
Company delivers to the Trustee (i) an independent appraisal of all
Project Assets, (ii) perfected security interests in all Project
assets, and (iii) to the extent the appraised value of the Project
assets is less than the outstanding par amount of the Bonds,
perfected security interests on additional Company assets, with an
independent appraised value equal to the difference. Any amount
pledged as collateral pursuant to clause (b) of this Section shall
remain so pledged for as long as any Bonds remain outstanding.
SECTION 18.c.Debt Service Reserve Fund. The Company agrees to
fund in accordance with the Indenture the Debt Service Reserve Fund
at the Debt Service Reserve Fund Requirement.
SECTION 19.c.Long Term Indebtedness. The Company will not
incur additional Long Term Indebtedness if either (i) the incurrence
of such Long Term Indebtedness would constitute a violation of this
Agreement; or (ii) the Company is unable to obtain a certificate from
the firm of Deloitte & Touche or other nationally recognized
accounting firm to the effect that on a pro-forma basis (including
the additional Long Term Indebtedness but excluding any Indebtedness
incurred for the refunding, refinancing or replacement of any
existing line of credit or revolving credit agreement and drawings
under such line or agreement) for any four consecutive fiscal
quarters of the last six, it has satisfied all covenants contained in
this Agreement.
SECTION 20.c.Liquidity Maintenance. The Company will maintain
at all times a line of credit, revolving credit or similar liquidity
facility with a bank or banks in an amount which, together with the
sum of all cash and Cash Equivalent Investments of the Company,
equals at least $35,000,000. If the sum of the cash and Cash
Equivalent Investments of the Company plus the amount of the line of
credit, revolving credit or similar liquidity facility referred to in
the foregoing sentence fails to equal at least $35,000,000, then the
Company will be prohibited from (i) paying cash dividends on common
stock, (ii) repurchasing shares of common stock or (iii) incurring
additional Indebtedness, other than for the refunding, refinancing or
replacement of any existing line of credit or revolving credit
agreement and drawings under such line or agreement until such time
as such condition is met.
SECTION 21.c.Confirmation of Compliance by Company. Continued
compliance with the covenants set forth herein will be confirmed
annually in writing by the Company to the Trustee as of each December
31st, for so long as any portion of the Bonds remain outstanding,
such confirmation to be received by the Trustee within 120 days of
the close of the fiscal year of the Company.
<PAGE>
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
SECTION 1.c.Events of Default. The following shall be "Events
of Default" under this Agreement, and the term "Event of Default"
shall mean, whenever used in this Agreement, any one or more of the
following:
(a) Failure by the Company to pay when due the Repayments
required to be paid under Section 3.1 hereof, which, after
giving effect to any draws against the Debt Service Reserve
Fund, causes a default in the payment of principal, interest or
redemption premium, if any, on any Bond.
(b) Failure by the Company to observe and perform any
covenant, condition or agreement on its part to be observed or
performed hereunder, other than as referred to in Section
7.1.(a) for a period of 60 days after written notice specifying
such failure and requesting that it be remedied is given to the
Company by the Issuer or, so long as any Bonds are outstanding,
by the Trustee, unless the Trustee, as the assignee of the
Issuer, shall agree in writing to an extension of such time
prior to its expiration; provided, however, if the failure
stated in the notice can, in the opinion of the Company, be
corrected, but not within the applicable period, such failure
shall not constitute an Event of Default or default if
corrective action is instituted by the Company within the
applicable period and the Company notifies the Issuer and the
Trustee of such corrective action and undertakes to diligently
pursue and does pursue the corrective action until the failure
is corrected.
(c) The dissolution or liquidation of the Company or the
filing by the Company of a voluntary petition in bankruptcy, or
failure by the Company expeditiously to discharge any
execution, garnishment or attachment of such consequence as
will impair its ability to carry out its obligations under this
Agreement, or the commission by the Company of any act of
bankruptcy, or adjudication of the Company as a bankrupt, or an
assignment by the Company for the benefit of its creditors, or
the entry by the Company into an agreement of composition with
its creditors, or the approval by a court of competent
jurisdiction of a petition applicable to the Company pursuant
to the provisions of the federal bankruptcy laws or any other
similar applicable law or statute of the United States of
America or any state thereof, or under any similar laws which
may hereafter be enacted, and such adjudication or approval
shall not be vacated or set aside or stayed within 60 days from
the date of entry thereof. The term "dissolution or
liquidation of the Company", as used in this subsection, shall
not be construed to include the cessation of the corporate
existence of the Company resulting either from a merger or
consolidation of the Company into or with another corporation
or a dissolution or liquidation of the Company following a
transfer of all or substantially all of its assets as an
entirety under the conditions permitting such actions contained
in this Agreement.
<PAGE>
(d) Default with respect to other Indebtedness exceeding
10% of the Company's Consolidated Net Worth which results in
the acceleration of such Indebtedness.
(e) Any representation or warranty contained in the
Indenture or this Agreement is found to be false or misleading
when made and which has a material adverse impact on the Bonds.
(f) Any final judgment against the Company or its
Subsidiaries, not covered by insurance, which exceeds 10% of
the Company's Consolidated Net Worth.
(g) Failure to maintain the Debt Service Reserve Fund at
the Debt Service Reserve Fund Requirement according to the
terms of the Indenture and this Agreement.
(h) The invalidity or unenforceability of the Indenture,
this Agreement, the Bond Purchase Agreement or the First
Preferred Vessel Mortgage or of any material provisions of any
of such agreements.
(i) The occurrence and continuance of an "Event of
Default" under the Indenture.
The provisions of Section 7.1.(b) are subject to the following
limitations. If by reason of: acts of God; strikes, lockouts or
other industrial disturbances; acts of public enemies; orders of any
kind of the government of the United States or of the State or any of
their departments, agencies, political subdivisions or officials, or
any civil or military authority; insurrections; riots; epidemics;
landslides;lightning; earthquakes; fires; hurricanes; tornadoes;
storms; floods; washouts; droughts; arrests; restraining of
government and people; civil disturbances; explosions; breakage of or
accidents to machinery, transmission pipes or canals; partial or
entire failure of utilities; shortages of material, supplies or
transportation; or any other cause or event whether similar or
dissimilar to any of the foregoing not reasonably within the control
of the Company, the Company is unable in whole or in part to carry
out its agreements herein contained, other than the obligations on
the part of the Company contained in Sections 6.10 and 7.4 hereof,
the Company shall not be deemed in default during the continuance of
such inability.
SECTION 2.i.Remedies. Whenever any Event of Default referred
to in Section 7.1 hereof shall have happened and be continuing, any
one or more of the following remedial steps may be taken:
(a) The Issuer or the Trustee may at its option declare
immediately due and payable all outstanding unpaid Repayments
required to be paid under Section 3.1 hereof.
(b) The Issuer or the Trustee may take any action at law
or in equity to collect the payments hereunder then due and
thereafter to become due or to enforce performance and
observance of any obligation, agreement or covenant of the
Company under this Agreement.
<PAGE>
Any amounts collected pursuant to action taken under this
Section shall be applied in accordance with the Indenture.
SECTION 3.b.No Remedy Exclusive. No remedy conferred upon or
reserved to the Issuer by this Agreement is intended to be exclusive
of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other
remedy given under this Agreement or now or hereafter existing at law
or in equity or by statute. No delay or omission to exercise any
right or power accruing upon any Event of Default shall impair any
such right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to time and as
often as may be deemed expedient. In order to entitle the Issuer or
the Trustee to exercise any remedy reserved to it in this Article, it
shall not be necessary to give any notice, other than such notice as
may be herein expressly required, or as may be required by applicable
law.
SECTION 4.b.Payment of Counsel Fees and Other Expenses. If the
Company shall be in default under any of the provisions of this
Agreement, and the Issuer or the Trustee shall employ Counsel or
incur other expenses for the collection of the Repayments or other
sums due and payable under this Agreement, or for the enforcement of
performance or observance of any obligation or agreement on the part
of the Company contained in this Agreement, the Company agrees that
it will on demand therefor reimburse the reasonable fees of such
Counsel and such other reasonable expenses so incurred.
SECTION 5.b.No Waiver. If any agreement contained in this
Agreement shall be breached by either party and such breach shall
thereafter be waived by the other party, such waiver shall be limited
to the particular breach so waived and shall not be deemed a waiver
of any other breach hereunder. In view of the assignment of the
Issuer's rights in and under this Agreement to the Trustee under the
Indenture, the Issuer shall have no power to waive any default or
Event of Default hereunder by the Company without the consent of the
Trustee to such waiver or, if the payment of the principal of and
accrued interest on the Bonds outstanding under the Indenture shall
have been accelerated at the request of the holders of the Bonds by
reason of such Event of Default and such Event of Default shall not
have been cured and such acceleration rescinded pursuant to the
Indenture, without the consent of the holders of a majority in
principal amount of the Bonds.
ARTICLE VIII
REDEMPTION; PREPAYMENT AND ABATEMENT
SECTION 1.b.Redemption of Bonds. The Issuer, at the request of
the Company and if the Bonds are then redeemable under the provisions
of the Indenture, shall forthwith take all steps that may be
necessary under the applicable redemption provisions of the Indenture
to effect redemption of all or part of the then outstanding Bonds as
may be specified by the Company, on such redemption date as may be
specified by the Company. Such request for redemption shall be in
writing and given by the Company not less than 45 days prior to the
date fixed for redemption by mailing a notice by first class mail,
<PAGE>
postage prepaid to the Issuer and the Trustee. It is understood that
all expenses of such redemption shall be paid from money in the hands
of the Trustee or by the Company and not by the Issuer.
SECTION 2.b.Prepayment. There is expressly reserved to the
Company the right, and the Company is authorized and permitted, at
any time it may choose, to prepay all or any part of the amounts
payable under Section 3.1 hereof, and the Issuer agrees that the
Trustee will accept such prepayments when the same are tendered by
the Company. All amounts so prepaid shall be applied as provided in
the Indenture.
SECTION 3.b.Company Entitled to Certain Abatements if Bonds
Paid Prior to Maturity. If at any time the aggregate moneys held
under the Indenture shall be sufficient to retire in accordance with
the provisions of the Indenture all of the Bonds at the time
outstanding and to pay all fees, charges and expenses of the Trustee,
the Paying Agent, the Bond Registrar and the Issuer due or to become
due through the date on which the last of the Bonds is retired, the
Company shall be entitled to abate its Repayments pursuant to Section
3.1 hereof.
SECTION 4.b.References to Bonds Ineffective After Bonds Paid.
Upon payment in full of the Bonds (or provision for payment thereof
having been made in accordance with the provisions of the Indenture)
and all fees and charges of the Trustee, the Paying Agent, the Bond
Registrar and the Issuer, all references in this Agreement to the
Bonds shall be ineffective and neither the Trustee nor the holders of
any of the Bonds shall thereafter have any rights hereunder saving
and excepting those that shall have theretofore vested and be
unsatisfied.
ARTICLE IX
MISCELLANEOUS
SECTION 1.b.Termination of Refunding Agreement. Upon the
termination of this Agreement at the end of the Agreement Term, the
Issuer shall assign and transfer to the Company all money,
receivables, claims and other rights that are now or are to become
the property of the Company hereunder.
SECTION 2.b.Notices. Unless otherwise provided herein, all
notices, certificates, requests or other communications hereunder
shall be sufficiently given if given in accordance with Section 14.3
of the Indenture. The Company and the Issuer may, by notice given
hereunder, designate any further or different addresses to which
subsequent notices, certificates, requests or other communications
shall be delivered.
SECTION 3.b.Successors. This Agreement shall inure to the
benefit of the Issuer,the Company, the Trustee and the holders from
time to time of the Bonds, and shall be binding upon the Issuer, the
Company and their respective successors and assigns.
SECTION 4.b.Amendments to Refunding Agreement. Subsequent to
the initial issuance of the Bonds and prior to payment or provision
<PAGE>
for the payment of the Bonds in full including interest and premium,
if any, thereon in accordance with the provisions of the Indenture,
and prior to payment or provision for the payment of expenses
pursuant to Section 6.9 hereof, this Agreement may not be effectively
amended, changed, modified, altered or terminated without the prior
written consent of the Trustee given in accordance with the
provisions of the Indenture and no amendment to this Agreement shall
be binding upon either party hereto until such amendment is reduced
to writing and executed by both parties thereto.
SECTION 5.b.Counterparts. This Agreement may be executed in
any number of counterparts, each of which, when so executed and
delivered, shall be an original; but such counterparts shall together
constitute but one and the same Agreement.
SECTION 6.b.Severability. If any clause, provision or section
of this Agreement shall be held illegal or invalid by any court, the
invalidity of such clause, provision or section shall not affect any
of the remaining clauses, provisions or sections hereof and this
Agreement shall be construed and enforced as if such illegal or
invalid clause, provision or section had not been contained herein.
In case any agreement or obligation contained in this Agreement shall
be held to be in violation of law, then such agreement or obligation
shall be deemed to be the agreement or obligation of the Issuer or
the Company, as the case may be, to the full extent permitted by law.
SECTION 7.b.Applicable Law. The laws of the State shall govern
the construction of this Agreement.
SECTION 8.b.Legal Holiday on Payment Dates. In any case where
the date of maturity of interest on or principal of the Bonds or the
date fixed for redemption of any Bonds shall be a day other than a
Business Day, the payments hereunder need not be made on such day of
maturity of interest on or principal of the Bonds or date fixed for
redemption but may be made on the next succeeding Business Day, with
the same force and effect as if made on the date required hereunder,
and no interest shall accrue for such period.
SECTION 9.b.Amounts Remaining in Bond Fund. Any amounts
remaining in the Bond Fund upon expiration or earlier termination of
this Agreement as herein provided, after payment in full of the Bonds
(or provision therefor) in accordance with the Indenture, and all
other costs and expenses to be paid by the Company hereunder, and all
amounts owing the Trustee, the Bond Registrar and the Issuer under
this Agreement and the Indenture, shall belong to and be paid to the
Company as an overpayment of the Repayments.
SECTION 10.b.Company Approval of Indenture. The Indenture has
been submitted to the Company for examination, and the Company, by
execution of this Agreement, acknowledges and agrees that it has
participated in the drafting of the Indenture and agrees that it has
approved the Indenture and agrees that it is bound by the terms and
conditions thereof and covenants and agrees to perform all
obligations required of the Company pursuant to the terms of the
Indenture.
<PAGE>
SECTION 11.b.Binding Effect. This Agreement shall be binding
upon the parties hereto and upon their respective successors and
assigns, and the words "Issuer" and "Company" shall include the
parties hereto and their respective successors and assigns and
include any gender, singular and plural, and individuals,
partnerships or corporations.
SECTION 12.b.Captions and Headings. The captions or headings
in this Agreement are for convenience only and in no way define,
limit or describe the scope or intent of any provisions of this
Agreement.
SECTION 9.13.Exercise of Police Powers by Issuer. Neither the
terms of this Agreement nor the Indenture or the other instruments
contemplated hereby or thereby shall constitute a waiver by the
Issuer of the valid exercise of its police powers.
SECTION 13.b.Third Party Beneficiary. This Agreement shall
constitute a third party beneficiary contract for the benefit of the
Trustee, and the Trustee shall be entitled to enforce the performance
and observance by the Company of its agreements and covenants herein
contained as fully and completely as if the Trustee were a party
hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written in the presence of the undersigned competent witnesses.
BOARD OF COMMISSIONERS OF THE
PORT OF NEW ORLEANS
By:\s\ J. Ron Brinson
President and
Chief Executive Officer
ATTEST:
By: \s\ Signature Unreadable
Secretary
[SEAL]
WITNESSES:
\s\ Denise K. Pugh
\s\ Jane B. Pugh
AVONDALE INDUSTRIES, INC.
By:\s\ Albert L. Bossier, Jr.
Chairman, President and
Chief Executive Officer
ATTEST:
By: \s\ Thomas M. Kitchen
Vice President, Chief Financial
Officer and Secretary
[SEAL]
WITNESSES:
\s\ Denise K. Pugh
\s\ Jane B. Pugh
<PAGE>
Table of Contents
ARTICLE I
DEFINITIONS; REPRESENTATIONS AND WARRANTIES
SECTION 1.1. Definitions.......................................... 3
SECTION 1.2. Representations and Warranties of the Issuer......... 8
SECTION 1.3. Representations, Covenants and Warranties of the
Company.............................................. 9
ARTICLE II
ISSUANCE OF THE BONDS AND
DEPOSIT OF BOND PROCEEDS
SECTION 2.1. Agreement to Issue Bonds; Disbursement of Bond
Proceeds.............................................11
SECTION 2.2. No Warranty as to Sufficiency of Bond Proceeds.......11
SECTION 2.3. Use of Moneys Held Under the Indenture...............11
ARTICLE III
DEPOSIT OF BOND PROCEEDS AND REPAYMENTS
SECTION 3.1. Repayments...........................................12
SECTION 3.2. Additional Payments..................................13
SECTION 3.3. Funding and Replenishment of Debt Service Reserve
Fund.................................................13
ARTICLE IV
REFUNDING OF SERIES 1983 BONDS
SECTION 4.1. Escrow Fund - Application of Bond Proceeds...........14
SECTION 4.2. Compliance with Original Indenture...................14
ARTICLE V
EFFECTIVE DATE
SECTION 5.1. Effective Date of Refunding Agreement................15
ARTICLE VI
SPECIAL COVENANTS
SECTION 6.1. Maintenance of Corporate Existence...................16
SECTION 6.2. Limited Obligation Bonds.............................16
SECTION 6.3. Tax Covenants........................................16
SECTION 6.4. Maintenance of Project; Insurance; Taxes.............17
SECTION 6.5. Permits..............................................18
<PAGE>
SECTION 6.6. Compliance with Law..................................18
SECTION 6.7. First Preferred Vessel Mortgage and Prohibition
Against Sales........................................18
SECTION 6.8. Issuer Assignment of Rights and Interest in
Refunding Agreement..................................19
SECTION 6.9. Payment of Administrative Expenses...................19
SECTION 6.10. Indemnification......................................19
SECTION 6.11. No Warranty..........................................20
SECTION 6.12. Financial Statements of Company......................20
SECTION 6.13. Consolidated Tangible Net Worth......................20
SECTION 6.14. Consolidated Senior Indebtedness Ratio...............21
SECTION 6.15. Consolidated Senior Debt Service Coverage Ratio......21
SECTION 6.16. Dividends of the Company.............................21
SECTION 6.17. Liens of the Company.................................22
SECTION 6.18. Debt Service Reserve Fund............................22
SECTION 6.19. Long Term Indebtedness...............................22
SECTION 6.20. Liquidity Maintenance................................22
SECTION 6.21. Confirmation of Compliance by Company................22
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.1. Events of Default....................................23
SECTION 7.2. Remedies.............................................24
SECTION 7.3. No Remedy Exclusive..................................24
SECTION 7.4. Payment of Counsel Fees and Other Expenses...........25
SECTION 7.5. No Waiver............................................25
ARTICLE VIII
REDEMPTION; PREPAYMENT AND ABATEMENT
SECTION 8.1. Redemption of Bonds..................................26
SECTION 8.2. Prepayment...........................................26
SECTION 8.3. Company Entitled to Certain Abatements if Bonds Paid
Prior to Maturity....................................26
SECTION 8.4. References to Bonds Ineffective After Bonds Paid.....26
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Termination of Refunding Agreement...................27
SECTION 9.2. Notices..............................................27
SECTION 9.3. Successors...........................................27
SECTION 9.4. Amendments to Refunding Agreement....................27
SECTION 9.5. Counterparts.........................................27
SECTION 9.6. Severability.........................................27
SECTION 9.7. Applicable Law.......................................27
SECTION 9.8. Legal Holiday on Payment Dates.......................27
SECTION 9.9. Amounts Remaining in Bond Fund.......................28
SECTION 9.10. Company Approval of Indenture........................28
SECTION 9.11. Binding Effect.......................................28
SECTION 9.12. Captions and Headings................................28
SECTION 9.13. Exercise of Police Powers by Issuer..................28
SECTION 9.13. Third Party Beneficiary..............................28
EXHIBIT A Project Description
<PAGE>
EXHIBIT A
TO REFUNDING AGREEMENT
PROJECT DESCRIPTION
The project consists of a floating dry dock ("Floating Dry
Dock") constructed by M.A.N. Maschinenfabrik Augsburg - Nurnberg,
Aktiengesellschaft, Augsburg, West Germany, which Avondale Industries,
Inc., successor to Avondale Shipyards, Inc. ("Avondale"), has acquired
and moored at the down river end of its Main Plant and a 1700-foot wet
dock extension ("1700-Ft. Wet Dock") to Avondale's Wet Dock #3. The
project, including its various shoreside support facilities, is more
fully described below:
FLOATING DRY DOCK - GENERAL
The Floating Dry Dock consists of a continuous caisson,
forming the bearing body including two continuous, completely closed
sidewings which provide and insure stability and longitudinal strength.
The dimensions of the Dry Dock are as follows:
Overall length 215.00 m
Length over keel blocks 200.00 m
Width between inner side wing walls 36.20 m
Clear width between dock runways 35.00 m
Width between outer side wing walls 43.00 m
Moulded depth to upper deck 16.70 m
Height of caisson in dock centre 4.20 m
Water depth above top of keel blocks
when the dock is immersed 9.50 m
Height of keel blocks 1.50 m
Camber of pontoon deck 0.20 m
Freeboard of upper deck when the dock
is immersed 1.50 m
Freeboard of pontoon deck when the
dock is in service position 0.30 m
Frame spacing 0.625 m
The Floating Dry Dock includes the following principal items
of equipment:
161 Keel Blocks
12 pari Bilge Blocks
Rubbing Strakes and Protective Fenders
Platforms
Companionways, Access Pits, Hatchways, Steel Doors
Manholes
Skylights
Stairs, Ladders and Landings
Railings, Handrails
Connection Bridge
Draught Scales
<PAGE>
FIRST PREFERRED VESSEL MORTGAGE
This FIRST PREFERRED VESSEL MORTGAGE dated as of May 31, 1994 by
AVONDALE INDUSTRIES, INC., 5100 River Road, Avondale, LA 70094 (the "Owner") to
FIRST NATIONAL BANK OF COMMERCE, not in its individual capacity but solely as
trustee for the holders of the Bonds (as defined below), 210 Baronne Street, 3rd
Floor, New Orleans, LA 70112 (the "Mortgagee").
WITNESSETH
WHEREAS, the Board of Commissioners of the Port of New Orleans (the
"Issuer") issued its Industrial Revenue Bonds (Avondale Shipyards, Inc. Project)
Series 1983 (the "Series 1983 Bonds") in the aggregate principal amount of
Thirty-Six Million Two Hundred and Fifty Thousand Dollars ($36,250,000), all of
which are outstanding as of the date hereof, for the purpose of providing funds
to refund the outstanding Industrial Revenue Bonds (Avondale Shipyards, Inc.
Project) Series 1981 of the Issuer (the "Series 1981 Bonds"), which Series 1981
Bonds were issued for the purpose of providing funds to finance the cost of the
acquisition, construction and installation of a floating drydock with the
official name JO ANN and official number 982958 (the "Vessel") and land-based
support facilities for the repair and maintenance of various types of vessels
(collectively, the "Project");
WHEREAS, pursuant to and in accordance with the provisions of Title 39
of the Louisiana Revised Statutes of 1950, as amended, and an Installment Sales
Agreement dated as of July 1, 1981, as supplemented by a First Supplemental
Installment Sales Agreement dated as of June 1, 1983, by and between the Issuer
and Avondale Shipyards, Inc., as predecessor to the Owner, the Issuer acquired
the Project from the Owner and reconveyed the Project to the Owner for a
purchase payment in an amount sufficient to pay the principal of, premium if
any, and interest on the Series 1983 Bonds;
WHEREAS, the Owner is the sole owner of the whole of the Vessel, duly
documented in the name of the Owner under the laws and the flag of the United
States of America with its home port at New Orleans, Louisiana;
WHEREAS, the Owner has requested that the Issuer, pursuant and in
accordance with the provisions of Chapter 14-A of Title 39 of the Louisiana
Revised Statutes of 1950, as amended (La.R.S. 39:1444-1455), issue its refunding
bonds designated "Industrial Revenue Refunding Bonds" (Avondale Industries, Inc.
Project) Series 1994 (the "Bonds") for the purpose of refunding the Series 1983
Bonds;
WHEREAS, in consideration of the issuance of the Bonds by the Issuer
pursuant to a Trust Indenture dated as of April 1, 1994
USCG Vessel Documentation Office New Orleans
Recorded in Book 9405, Inst. 475
PROFFIE COOK
Proffie Cook
Documentation Officer
<PAGE>
between the Issuer and the Mortgagee (the "Indenture"), the Owner will agree to
make or cause to be made payments in an amount sufficient to pay the principal
of, premium, if any, and interest on any Bonds pursuant to the Refunding
Agreement of even date therewith (the "Refunding Agreement"), said Bonds shall
be paid solely from the revenues derived by the Issuer from said payments by or
on behalf of the Owner under the Refunding Agreement or from the Debt Service
Reserve Fund (as defined in the Indenture), and said Bonds shall never
constitute an indebtedness or pledge of general credit of the Issuer or the
State of Louisiana, within the meaning of any constitutional or statutory
limitation of indebtedness or otherwise;
WHEREAS, pursuant to the Indenture, the Issuer shall sell, assign,
transfer, set over and pledge to the Mortgagee, to the extent provided in the
Indenture, all of the right, title and interest of the Issuer in and to the
Refunding Agreement (except for the indemnification rights and expense
reimbursement rights contained in the Refunding Agreement);
WHEREAS, the Owner, in order to secure the payment of the principal
of, premium if any, and interest on the said Bonds pursuant to the Refunding
Agreement and the Indenture and to secure the performance and observance of and
compliance with all the agreements, covenants and conditions in this Mortgage,
and the performance and observance by the Owner of and compliance with all the
agreements, covenants and conditions in the Refunding Agreement, has therefore
duly authorized the execution and delivery of this First Preferred Vessel
Mortgage;
NOW, THEREFORE, THIS MORTGAGE WITNESSETH:
That in consideration of the premises and the sums as above recited
and of other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and in order to secure the payment of the
Repayments (as defined in the Refunding Agreement) specified in Section 3.1 of
the Refunding Agreement, the payment of the principal, premium, if any, and
interest amounts on the Bonds according to the terms of the Indenture, and the
payment of all other amounts due by the Owner under the Refunding Agreement and
this Mortgage (all such principal, premium, if any, and interest and other sums
being hereinafter called the "Indebtedness hereby secured"), and to secure the
performance and observance of and compliance with the covenants, terms and
conditions herein and in the Refunding Agreement the Owner does by these
presents grant, convey, mortgage, pledge, set over and confirm unto the
Mortgagee, its successors and assigns, the whole of the Vessel, together with
all of the engines, machinery, masts, cable, rigging, tools, pumps, covers,
anchors, chains, tackle, apparel, furniture, fittings and equipment and all
other appurtenances thereto appertaining or belonging, whether now owned or
hereafter acquired, whether on board or not, and all additions, improvements and
replacements hereafter made in or to the Vessel;
<PAGE>
TO HAVE AND TO HOLD the same unto the Mortgagee, its successors and
assigns, to their and their successors' and assigns' own use and behoof forever;
PROVIDED only, and the condition of these presents is such that if the
Owner, or its successors or assigns, shall pay or cause to be paid to the
Mortgagee the Indebtedness hereby secured as and when the same shall become due
and payable in accordance with the terms of this Mortgage, the Refunding
Agreement and the Indenture, and the Owner shall perform, observe and comply
with the covenants, terms and conditions in this Mortgage and the Refunding
Agreement contained, expressed or implied, to be performed, observed or complied
with, by and on the part of the Owner, then these presents and the rights
hereunder shall cease, terminate and be void; otherwise to be and remain in full
force and effect.
Nothing herein shall be deemed or construed to subject the lien hereof
on any property other than a vessel eligible for documentation as the term is
used in 46 U.S.C. section 12102, as amended.
IT IS HEREBY COVENANTED, DECLARED AND AGREED that the property above
described is to be held subject to the further covenants, conditions,
provisions, terms and uses hereinafter set forth.
ARTICLE I
COVENANTS OF THE OWNER
SECTION 1. The Owner shall pay or cause to be paid the Indebtedness
hereby secured in accordance with the terms of the Refunding Agreement, the
Indenture and this Mortgage and will observe, perform and comply with the
covenants, terms and conditions herein, expressed or implied, on its part to be
observed, performed or complied with.
SECTION 2. The Owner shall at all times be qualified to own and
operate the Vessel under the flag of the United States and engage in its lawful
trade under its certificate of documentation. The Mortgagee is, and at all times
shall remain, a citizen of the United States within the meaning of Section 2 of
the Shipping Act, 1916, as amended. The Indebtedness hereby secured is and will
be the valid and binding obligation of the Owner enforceable in accordance with
its terms.
SECTION 3. The Owner lawfully owns and is lawfully possessed of the
Vessel free from any security interest, lien, charge or encumbrance whatsoever
other than (a) this Mortgage and (b) liens for current crew's wages, tort,
general average and salvage. The Owner shall warrant and defend the title and
possession thereto and to every part thereof for the benefit of the Mortgagee
against the claims and demands of all persons whomsoever. Neither the Owner, any
charterer, the master of the Vessel nor any
<PAGE>
other person has or shall have any right, power or authority to create, incur or
permit to be placed or imposed upon the Vessel any liens other than the liens
permitted under this Section 3.
SECTION 4. The Owner shall comply with and satisfy all the provisions
of Chapter 313 of Title 46 of the United States Code, as at any time amended, in
order to establish and maintain this Mortgage as a first preferred ship mortgage
upon the Vessel and upon all renewals of this Mortgage and improvements and
replacements made in or to the Vessel.
SECTION 5. The Owner shall not cause or permit the Vessel to be
operated in any manner contrary to law, shall not abandon the Vessel in a
foreign port, shall not engage in any unlawful trade or violate any law or carry
any cargo that will expose the Vessel to penalty, forfeiture or capture, and
shall not do, or suffer or permit to be done, anything which can or may
injuriously affect the documentation or trade endorsement of the Vessel or the
Owner's qualification to engage in the United States coastwise trade under the
laws and regulations of the United States of America and will at all times keep
the Vessel duly documented thereunder for such purpose. Without the prior
written consent of the Mortgagee, the Owner covenants and agrees that the Vessel
shall not be removed from the inland waterways of the United States and that the
flag or port of documentation of the Vessel shall not be changed.
SECTION 6. The Owner shall pay and discharge or cause to be paid and
discharged when due and payable, from time to time, all taxes, assessments,
governmental charges, fines and penalties lawfully imposed on the Vessel or any
income therefrom, however the Owner may contest said amounts in accordance with
Section 6.4 of the Refunding Agreement.
SECTION 7. The Owner shall, within four (4) days of the date hereof,
place, and at all times and places will retain, a properly certified copy of
this Mortgage with the master of the Vessel or with her papers and will cause
such certified copy and such Vessel's certificate of documentation to be
exhibited to any and all persons having business therewith which might give rise
to any lien thereon other than liens for crew's wages, tort, general average and
salvage, and to any representative of the Mortgagee; and shall place with the
master of the Vessel a framed printed notice in plain type reading as follows:
<PAGE>
"NOTICE OF MORTGAGE
This Vessel is owned by AVONDALE INDUSTRIES, INC., and is covered
by a First Preferred Vessel Mortgage in favor of FIRST NATIONAL BANK
OF COMMERCE, as trustee, under authority of Chapter 313 of Title 46 of
the United States Code. Under the terms of said Mortgage, neither the
owner, any charterer, nor the master of this Vessel has any right,
power or authority to create, incur or permit to be imposed upon this
Vessel any lien whatsoever other than for current crew's wages, tort,
general average and salvage."
SECTION 8. The Owner shall at all times and without cost or expense to
the Mortgagee maintain and preserve, or cause to be maintained and preserved,
the Vessel and all its equipment, outfit and appurtenances, tight, staunch,
strong, in good condition, working order and repair and in all respects
seaworthy and fit for its intended service except ordinary wear and tear. The
Vessel shall, and the Owner covenants that it will, at all times comply with all
applicable laws, treaties and conventions to which the United States of America
is a party, and rules and regulations issued thereunder, and shall have on board
as and when required thereby valid certificates showing compliance therewith.
The Owner will not make, or permit to be made, any substantial change in the
structure, type or speed of the Vessel or change in her rig, without first
receiving the written approval thereof by the Mortgagee.
SECTION 9. The owner shall at all reasonable times afford the
Mortgagee or its authorized representative full and complete access to the
Vessel for the purpose of inspecting and valuing the Vessel and her cargo and
papers and, at the request of the Mortgagee, the Owner shall deliver for
inspection copies of any and all contracts and documents relating to the Vessel,
whether on board or not.
SECTION 10. The Owner shall not sell, mortgage, or transfer the Vessel
without the written consent of the Mortgagee first had and obtained. Any such
sale, mortgage or transfer of the Vessel which is not made in accordance with
the preceding sentence shall be subject to the provisions of this Mortgage and
the lien hereof.
SECTION 11.
(a) The Owner shall, not later than the day hereof, take out and
maintain insurance at the Owner's expense on and in respect of the Vessel and
shall, throughout the term of this Mortgage maintain the said insurance
effective with such insurer or insurers
<PAGE>
as the Mortgagee may, in its discretion, approve in writing, as follows:
(1) Hull and Machinery in the name of the Owner and with the
Mortgagee as an additional assured, in at least the amount of the
$25,000,000.00, and further provide that all losses shall be
payable to the Mortgagee and Owner as their interest appear.
(2) Protection and Indemnity insurance, including pollution
liability, in the name of the Owner, naming the Mortgagee as an
additional insured, in the amount of $25,000,000.00.
(b) All insurance maintained by the Owner pursuant to this Section 11
shall:
(1) Provide that any notice of cancellation or adverse change shall
not be effective as to the Mortgagee until at least thirty (30)
days after receipt by the Mortgagee of written notice thereof.
(2) Provide that the insurers waive any right of subrogation against
the Mortgagee and waive any right of set off or for payment of
premium against Mortgagee.
(3) Provide that with respect to the interest of the Mortgagee such
policy shall not be invalidated by any action or inaction of the
Owner or any other person and shall insure the rights and
interest of the Mortgagee regardless of any claims for losses and
shall be payable notwithstanding:
(i) Any acts of negligence, including any breach of
conditional warrantee in any policy of insurance by the
Owner or any other person;
(ii) The use of the Vessel for purposes more hazardous than
permitted by the terms of the policy;
(iii) Any foreclosure or other proceeding or notice of sale
relating to the Vessel; or
(iv) Any change in the title or ownership of the Vessel.
(c) If at anytime the Owner shall fail to provide the insurance
required in Clause (b) above, the Mortgagee shall notify the Owner and the Owner
shall promptly act to provide reassurance to the Mortgagee that the insurance
obligations of this Section 11 have been and such are fully satisfied. If the
Owner fails to provide the insurance required by Clause (b) above, the Mortgagee
<PAGE>
may effect, at the Owner's expense such additional insurance as is necessary to
comply with Clause (a) and the Owner shall, on demand, reimburse the Mortgagee
for all insurance premiums and other expenses so paid or incurred by the
Mortgagee. Nothing herein shall release the Owner of its obligations to take out
and keep in effect the insurance required by this Section 11.
(d) On request, the Owner shall provide the Mortgagee with
certificates of all insurance affected or maintained pursuant to this Section
11. The Owner also shall cause an independent insurance broker to provide a
certificate as of May 31, 1994, and annually thereafter certifying that the
insurance required by this Section 11 is in full force and effect.
(e) The Owner shall comply and satisfy all the provisions of
applicable law, conventions, regulations, proclamation, order, or otherwise
concerning financial responsibilities or liabilities imposed on the Vessel, or
the Owner or the Mortgagee, relating to the Vessel, with respect to pollution by
any state, nation or any political subdivision thereof, and will maintain all
evidence of financial responsibilities which may be required.
(f) The Owner shall, at its expense, renew all insurances required by
this Section 11 at least fourteen (14) days before the relevant policies,
contracts or certificates of entry expire, and the Owner shall cause the insurer
or P & I club promptly to confirm in writing to the Mortgagee that the renewal
has been in effect.
SECTION 12. The Owner shall fully perform any and all charter parties
or other contracts which it may enter into with respect to the Vessel.
SECTION 13. In the event that this Mortgage or any provision hereof
shall be deemed invalidated in whole or in part by reason of any present or
future law or any decision of any authoritative court, or if the documents at
any time held by the Mortgagee shall be deemed by the Mortgagee for any reason
insufficient to carry out the true intent and spirit of this Mortgage, then from
time to time, the Owner shall execute within ten (10) days after delivery of
such documents to the Owner, on its own behalf, such other and further
assurances and documents as in the reasonable opinion of the Mortgagee may be
required more effectively to subject the Vessel to the payment of the
Indebtedness hereby secured, as in this Mortgage provided, and the performance
of the terms and provisions of this Mortgage and the Refunding Agreement.
<PAGE>
ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
SECTION 1. Each of the following events, shall constitute an "Event of
Default" under this Mortgage:
(a) an Event of Default under the Refunding Agreement or the
Indenture; or
(b) any other payment in respect of the Mortgage has not been
received by the Mortgagee when due: or
(c) a default by the Owner in the observance or performance of any
other agreement under this Mortgage shall have occurred and shall remain
unremedied for sixty (60) days:
then, and in each and every such case, the Mortgagee shall have the right to:
(1) Declare all the then unpaid Indebtedness hereby secured to be due
and payable immediately as set forth in the Refunding Agreement, and upon such
declaration the same, including premium, if any, or interest to date of
declaration, shall become and be immediately due and payable: and
(2) Exercise all of the rights and remedies available to the Mortgagee
under the Refunding Agreement or the Indenture and exercise the following rights
and remedies:
(A) exercise all rights and remedies in foreclosure and otherwise
given to mortgagees by the provisions of Chapter 313 of Title 46 of
the United States Code, or other applicable law including the law of
any other jurisdiction where the Vessel may be found;
(B) bring suit at law, in equity or in admiralty, in any court of any
nation in the world, as it may be advised, to recover judgment for the
Indebtedness hereby secured and collect the same out of any and all
property of the Owner whether covered by this Mortgage or otherwise;
(C) Take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process and without being
responsible for loss or damage, and the Owner or other person in
possession forthwith upon demand of the Mortgagee shall surrender to
the Mortgagee possession of the Vessel, and the Mortgagee may, without
being responsible for loss or damage, hold, lay up, lease, charter,
operate or otherwise use the Vessel for such time and upon such terms
as it may deem to be for its best advantage, and demand, collect and
retain all hire, freights, earnings, issues, revenues, income,
profits, return premiums, salvage awards or recoveries,
<PAGE>
recoveries in general average, and all other sums due or to become due
in respect of the Vessel or in respect of any insurance thereon from
any person whomsoever, accounting only for the net profits, if any,
arising from such use of the Vessel and charging upon all receipts
from the use of the Vessel or from the sale thereof by court
proceedings or pursuant to Subsection (D) next following, all costs,
expenses, charges, damages, or losses by reason of such use; and if at
any time the Mortgagee shall avail itself of the right herein given it
to take the Vessel, the Mortgagee shall have the right to dock the
Vessel, for a reasonable time at any dock, pier or other premises of
the Owner without charge, or to dock her at any other place at the
cost and expense of the Owner; and
(D) Take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process, and if it seems
desirable to the Mortgagee and without being responsible for loss or
damage, sell the Vessel at any place and at such time as the Mortgagee
may specify and in such manner and upon such terms and conditions as
the Mortgagee may deem advisable, free from any claim by the Owner in
admiralty, in equity, at law or by statute, at public or private sale,
by sealed bids or otherwise, by mailing, by air or otherwise, notice
of such sale, whether public or private, addressed to the Owner at its
last known address, ten days prior to the date fixed for entering into
the contract of sale. In case of a public sale the Mortgagee shall
first publish notice of any such public sale for ten consecutive days,
in some newspaper published in New Orleans, Louisiana and, if the
place of sale should not be New Orleans, Louisiana, similar notice
shall also be published in some newspaper published in New Orleans,
Louisiana and in a daily newspaper, if any, published at the place of
sale. In the event that the Vessel shall be offered for sale by
private sale, no newspaper publication of notice shall be required,
nor notice of adjournment of sale. Any sale may be held at such place
and at such time as the Mortgagee by notice to the Owner may have
specified, or may be adjourned by the Mortgagee from time to time by
announcement at the time and place appointed for such sale or for such
adjourned sale, and without further notice or publication the
Mortgagee may make any such sale at the time and place to which the
same shall be so adjourned; and any sale may be conducted without
bringing the Vessel to the place designated for such sale and in such
manner as the Mortgagee may deem to be for its best advantage, and the
Mortgagee may become the purchaser at any sale.
SECTION 2. Any sale of the Vessel made in pursuance of this Mortgage,
whether under the power of sale hereby granted or any judicial proceedings,
shall operate to divest all right, title
<PAGE>
and interest of any nature whatsoever of the Owner therein and thereto, and
shall bar the Owner, its successors and assigns, and all persons claiming by,
through or under them. No purchaser shall be bound to inquire whether notice has
been given, or whether any default has occurred, or as to the propriety of the
sale, or as to the application of the proceeds thereof. In case of any such
sale, if the Mortgagee is the purchaser, the Mortgagee shall be entitled, for
the purpose of making settlement or payment for the property purchased, to use
and apply the Indebtedness hereby secured in order that there may be credited
against the amount remaining due and unpaid on the Indebtedness hereby secured
the sums payable out of the net proceeds of such sale to the Mortgagee after
allowing for the costs and expense of sale and other charges; and thereupon the
Mortgagee shall be credited, on account of such purchase price, with the net
proceeds that shall have been so credited against the amount of Indebtedness
hereby secured. At any such sale, the Mortgagee may bid for and purchase such
property and upon compliance with the terms of sale may hold, retain and dispose
of such property without further accountability therefor.
SECTION 3. The Mortgagee is hereby appointed attorney-in-fact of the
Owner to execute and deliver to any purchaser aforesaid, said attorney-in-fact
being hereby vested with full power and authority to make, in the name and on
behalf of the Owner, a good conveyance of the title to the Vessel so sold. In
the event of any sale of the Vessel under any power herein contained, the Owner
will, if and when required by the Mortgagee, execute such form of conveyance of
the Vessel as the Mortgagee may direct or approve.
SECTION 4. The Mortgagee is hereby appointed attorney-in-fact of the
Owner upon the happening of an Event of Default, in the name of the Owner to
demand, collect, receive, compromise and sue for, so far as may be permitted by
law, all freight, hire, earnings, issues, revenues, income and profits of the
Vessel and all amounts due from underwriters under any insurance thereon as
payment of losses or as return of premiums or otherwise, salvage awards and
recoveries, recoveries in general average or otherwise, and all other sums due
or to become due at the time of the happening of an Event of Default in respect
of the Vessel, or in respect of any insurance thereon, from any person
whomsoever, and to make, give and execute in the name of the Owner acquittances,
receipts, releases or other discharges for the same, whether under seal or
otherwise, and to endorse and accept in the name of the Owner all checks, note,
drafts, warrants, agreements and other instruments in writing with respect to
the foregoing.
SECTION 5. Whenever any right to enter and take possession of the
Vessel accrues to the Mortgagee, it may require the Owner to deliver, and the
Owner shall on demand, at its own cost and expense, deliver to the Mortgagee the
Vessel as demanded. If any legal proceedings shall be taken to enforce any right
under this Mortgage, the Mortgagee shall be entitled as a matter of right to the
appointment of a receiver of the Vessel and of the freights,
<PAGE>
hire, earnings, issues, revenues, income and profits due or to become due and
arising from the operation thereof.
SECTION 6. The Owner authorizes and empowers the Mortgagee, or its
appointees or any of them on behalf of the Mortgagee, to appear in the name of
the Owner, its successors and assigns, in any court of any country or nation of
the world where a suit is pending against the Vessel because of or on account of
any alleged lien against the Vessel from which the Vessel has not been released
and to take such proceedings as to them or any of them may seem proper towards
the defense of such suit and the purchase or discharge of such lien, and all
expenditures made or incurred by them or any of them for the purpose of such
defense or purchase or discharge shall be a debt due from the Owner, its
successors and assigns, to the Mortgagee, and shall be secured by the lien of
this Mortgage in like manner and extent as if the amount and description thereof
were written herein. The authority and power hereby conferred upon the Mortgagee
or its appointees does not preclude the right and power of the Owner to sue in
its own name or to enter into agreements with third parties with respect to the
Vessel, subject always to the restrictions imposed by this Mortgage.
SECTION 7. Each and every power and remedy herein given to the
Mortgagee shall be cumulative and shall be in addition to every other power and
remedy herein given or now or hereafter existing at law, in equity, in admiralty
or by statute, and each and every power and remedy whether herein given or
otherwise existing may be exercised from time to time and as often and in such
order as may be deemed expedient by the Mortgagee, and the exercise or the
beginning of the exercise of any power or remedy shall not be construed to be a
waiver of the right to exercise at the same time or thereafter any other power
or remedy. No delay or omission by the Mortgagee in the exercise of any right or
power or in the pursuance of any remedy accruing upon an Event of Default shall
impair any such right, power or remedy or be construed to be a waiver of such
Event of Default or to be an acquiescence therein; nor shall the acceptance by
the Mortgagee of any security or of any payment of or on account of the
Indebtedness hereby secured maturing after an Event of Default or of any payment
on account of any past default be construed to be a waiver of any right to take
advantage of any future Event of Default or of any past Event of Default not
completely cured thereby. No consent, waiver or approval of the Mortgagee shall
be deemed to be effective unless in writing and duly signed by an authorized
signatory of the Mortgagee.
SECTION 8. In case the Mortgagee shall have proceeded to enforce any
right, power or remedy under this Mortgage by fore-closure, entry or otherwise,
and such proceedings shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Mortgagee, then and in every such
case the Owner and the Mortgagee shall be restored to their former positions and
rights hereunder with respect to the property subject
<PAGE>
or intended to be subject to this Mortgage, and all rights, remedies and powers
of the Mortgagee shall continue as if no such proceedings had been taken.
SECTION 9. The proceeds of any sale of the Vessel received by the
Mortgagee, and the net earnings of any charter operation or other use of the
Vessel after acceleration of the Indebtedness hereby secured, or insurance,
received by the Mortgagee on behalf of the holders of the Bonds under any of the
rights, powers or remedies herein specified or any and all other moneys received
by the Mortgagee on behalf of the holders of the Bonds pursuant to or under the
terms of this Mortgage or in any proceedings hereunder, the application of which
has not elsewhere herein been specifically provided for, shall be deposited in
the Bond Fund (as defined in the Indenture) and applied as provided in the
Indenture.
SECTION 10. Until an Event of Default shall happen, the Owner (a)
shall be suffered and permitted to retain actual possession and use of the
Vessel and (b) shall have the right, from time to time, in its discretion, and
without application to the Mortgagee, and without obtaining a release thereof by
the Mortgagee, to dispose of, free from the lien hereof, any boilers, machinery,
rigging, anchors, chains, tackle, apparel, furniture, fittings, covers,
equipment or any other appurtenances of the Vessel that are no longer useful,
necessary, profitable or advantageous in the operation of the Vessel, first or
simultaneously replacing the same by new machinery, rigging, anchors, chains,
tackle, apparel, furniture, fittings, covers, equipment, or other appurtenances
of substantially equal value to the Owner, which shall forthwith become subject
to the lien of this Mortgage as a first preferred ship mortgage thereon.
SECTION 11.
(a) If any provision of the Refunding Agreement, the Indenture or this
Mortgage should be deemed invalid or shall be deemed to affect adversely the
preferred status of this Mortgage under any applicable law, such provision shall
cease to be a part of this Mortgage without affecting the remaining provisions,
which shall remain in full force and effect.
(b) Anything herein to the contrary notwithstanding, it is intended
that nothing herein shall waive the preferred status of this Mortgage and that,
if any provision in this Mortgage or portion thereof shall be construed to waive
the preferred status of this Mortgage, then such provision to such extent shall
be void and of no effect.
SECTION 12. The Owner hereby acknowledges and agrees that the
Mortgagee shall not be required to have the Vessel marshalled (upon any sale of
the Vessel pursuant to this Mortgage or otherwise) or be required to realize on
any other collateral prior to its realization on the Vessel.
<PAGE>
ARTICLE III
SUNDRY PROVISIONS
SECTION 1. All of the covenants, promises, stipulations and agreements
of the Owner in this Mortgage contained shall bind the Owner and its successors
and assigns and shall inure to the benefit of the Mortgagee and its successors
and assigns. In the event of any assignment or transfer of this Mortgage, the
term "Mortgagee", as used in this Mortgage, shall be deemed to mean and include
any such assignee or transferee. This Mortgage may not be amended or
supplemented orally but may be amended or supplemented from time to time by an
instrument in writing executed by the Owner and the Mortgagee.
SECTION 2. Wherever and whenever herein any right, power or authority
is granted or given to the Mortgagee, such right, power or authority may be
exercised in all cases by the Mortgagee or such agent or agents as it may
appoint, and the act or acts of such agent or agents when taken shall constitute
the act of the Mortgagee hereunder.
SECTION 3. This Mortgage may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
SECTION 4. All notices and other communications hereunder shall be in
writing and shall be delivered and deemed received in accordance with Section
9.2 of the Refunding Agreement and Section 14.3 of the Indenture. This Mortgage
shall be governed by, and construed and enforced in accordance with, the
maritime laws of the United States of America, when applicable, and otherwise
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Louisiana.
SECTION 5. For purposes of this Mortgage and for purposes of recording
this Mortgage as required by Chapter 313 of Title 46 of the United States Code,
the total amount of this Mortgage is THIRTY-SIX MILLION TWO HUNDRED FIFTY
THOUSAND DOLLARS ($36,250,000), premium, if any, and interest and performance of
mortgage covenants; there is no separate discharge amount.
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this First Preferred
Vessel Mortgage covering the Vessel to be duly executed and delivered the day
and year first above written.
AVONDALE INDUSTRIES, INC.
By: ALBERT BOSSIER, JR.
Name: Albert Bossier, Jr.
Title: President
<PAGE>
STATE OF LOUISIANA )
) SS.:
PARISH OF ORLEANS )
On the 31 day of May, 1994, before me personally came Albert Bossier, Jr.,
to me known, who, being by me duly sworn, did depose and say that he is the
President of Avondale Industries, Inc., the party described in and which
executed the foregoing Mortgage, and that he was duly authorized to sign his
name thereto on behalf thereof.
THOMAS Y. ROBERSON
Notary Public
[Notarial Seal]
My commission expires at death.
THOMAS Y. ROBERSON, JR.
NOTARY PUBLIC
Parish of Orleans, State of Louisiana
My Commission is issued for Life.
<PAGE>
In witness whereof, The Mortgagee has
accepted this First Preferred Vessel
Mortgage as of the day and year
written
FIRST NATIONAL BANK OF COMMERCE,
not in its individual capacity but
solely as Trustee
By: DENNIS MILLINER
Name: Dennis Milliner
Title: Vice President and
Trust Officer
<PAGE>
STATE OF LOUISIANA )
) SS.:
PARISH OF ORLEANS )
On the 31st day of May, 1994, before me personally came Denis L. Milliner,
to me known, who, being by me duly sworn, did depose and say that he is a Vice
President and Trust Officer of First National Bank of Commerce, the party
described in and which executed the foregoing Mortgage, and that he was duly
authorized to sign his name thereto on behalf thereof.
JOHN J. BRODERS
John J. Broders
Notary Public
[Notarial Seal]
My commission expires with life.
JOHN A. BRODERS
NOTARY PUBLIC
Orleans Parish
Louisiana
My Commission is for Life
<PAGE>
CERTIFICATE OF OWNERSHIP OF VESSEL
DEPARTMENT OF TRANSPORTATION OMB APPROVED
U.S. COAST GUARD CG-1330 (REV. 5-82) 2115-0110
1. VESSEL
A. NAME OF VESSEL B. OFFICIAL NUMBER C. HOME PORT
JO ANN 982958 NEW ORLEANS, LA.
2. OWNERSHIP CERTIFICATION
I HEREBY CERTIFY THAT THE ABOVE-NAMED VESSEL BEARING THE OFFICIAL NUMBER
INDICATED, IS OWNED AS FOLLOWS:
AVONDALE INDUSTRIES, INC., OF MGR PLANT ENGR & MAINT, 5100 RIVE ROAD,
AVONDALE, LA. 70094 - SOLE OWNER
3. ENCUMBRANCES
AND THAT THE FOLLOWING MORTGAGES, LIENS, OR OTHER ENCUMBRANCES ARE ON RECORD AT
THIS OFFICE:
A. KIND OF ENCUMBRANCE:
PREFERRED MORTGAGE
(1) GRANTOR (2) GRANTEE (3) DATE OF INSTRUMENT
31 MAY 1994
(4) AMOUNT
AVONDALE INDUSTRIES, INC. FIRST NATIONAL BANK OF $36,250,000.00
COMMERCE, TRUSTEE
(5) MATURITY DATE
------------------
6. (a) DATE (b) TIME (c) BOOK (d) PAGE
RECORDATION DATA 31 MAY 1994 N/A 9405 475
7. FILE TIME (a) DATE (b) TIME (c) PORT
DATA 31 MAY 1994 8:56A.M. NEW ORLEANS, LA.
8. KIND OF ENCUMBRANCE:
NONE
1. GRANTOR (2) GRANTEE (3) DATE OF INSTRUMENT
(4) AMOUNT
(5) MATURITY DATE
6. RECORDATION DATA (a) DATE (b) TIME (c) BOOK (d) PAGE
7. ENDORSEMENT DATA (a) DATE (b) TIME (c) PORT
C. KIND OF ENCUMBRANCE:
(1) GRANTOR (2) GRANTEE (3) DATE OF INSTRUMENT
(4) AMOUNT
(5) MATURITY DATE
6. RECORDATION DATA (a) DATE (b) TIME (c) BOOK (D) PAGE
7. ENDORSEMENT DATA (a) DATE (b) TIME (c) PORT
ISSUED: DATE TIME
31 MAY 1994 9:30 A.M.
SEAL ------------------------------------------
PROFFIE COOK
DOCUMENTATION OFFICER
<PAGE>
TRUST INDENTURE
This Trust Indenture, dated as of the 1st day of April,
1994, is between the Board of Commissioners of the Port of New
Orleans, a political subdivision of the State of Louisiana (the
"Issuer"), and First National Bank of Commerce, a national banking
association duly organized and existing under the laws of the
United States, as trustee (the "Trustee").
W i t n e s s e t h :
WHEREAS, the Issuer is a political subdivision of the State
of Louisiana, created and existing pursuant to the Constitution
and laws of such State and is authorized and empowered by law,
including particularly the provisions of Chapter 14-A of Title 39
of the Louisiana Revised Statutes of 1950, as amended (La. R.S.
39:1444-1455) (the "Refunding Act"), to issue refunding bonds for
the purpose of refunding, readjusting, restructuring, refinancing,
extending, or unifying the whole or any part of outstanding
securities of the Issuer in an amount sufficient to provide funds
necessary to effectuate the purpose for which the refunding bonds
are being issued and to pay all costs associated therewith; and
WHEREAS, pursuant to the provisions of Sections 991 to 1001,
inclusive, of Title 39 of the Louisiana Revised Statutes of 1950,
as amended (the "Act"), and a Trust Indenture dated as of July 1,
1981, as supplemented by a First Supplemental Trust Indenture
dated as of June 1, 1983, by and between the Issuer and First
National Bank of Commerce, New Orleans, Louisiana, as trustee (the
"Original Indenture"), the Issuer issued its Industrial Revenue
Bonds (Avondale Shipyards, Inc. Project) Series 1983 (the "Series
1983 Bonds") in the aggregate principal amount of $36,250,000, all
of which are outstanding as of the date hereof, for the purpose of
providing funds to refund the outstanding Industrial Revenue Bonds
(Avondale Shipyards, Inc. Project) Series 1981 of the Issuer (the
"Series 1981 Bonds"), which Series 1981 Bonds were issued for the
purpose of providing funds to finance the cost of the acquisition,
construction and installation of a floating drydock and land-based
support facilities for the repair and maintenance of various types
of vessels (the "Project"), which drydock is located between mile
markers 106 and 107 on the right descending bank of the
Mississippi River at the downriver end of the main shipyard of
Avondale Industries, Inc., a Louisiana corporation (the
"Company"), located at 5100 River Road, Avondale, Louisiana, in
Jefferson Parish, within the jurisdiction of the Issuer as a part
of the public port of the Issuer. The initial owner and operator
of the Project was Avondale Shipyards, Inc., a Louisiana
corporation, and the current owner and operator of the Project is
the Company, successor to Avondale Shipyards, Inc.; and
WHEREAS, pursuant to and in accordance with the provisions
of the Act and an Installment Sales Agreement dated as of July 1,
1981, as supplemented by a First Supplemental Installment Sales
Agreement dated as of June 1, 1983 (the "Original Agreement"), by
and between the Issuer and Avondale Shipyards, Inc., a predecessor
<PAGE>
to the Company, the Issuer acquired the Project from the Company
and reconveyed the Project to the Company for purchase price
payments in an amount sufficient to pay the principal of, premium,
if any, and interest on the Series 1983 Bonds; and
WHEREAS, the Company has requested that the Issuer, pursuant
to and in accordance with the provisions of the Refunding Act,
issue its refunding bonds to be designated "Industrial Revenue
Refunding Bonds (Avondale Industries, Inc. Project) Series 1994"
(the "Bonds") for the purpose of refunding the Series 1983 Bonds;
and
WHEREAS, in consideration of the issuance of the Bonds by
the Issuer, the Company will agree to make or cause to be made
payments in an amount sufficient to pay the principal of, premium,
if any, and interest on the Bonds pursuant to the Refunding
Agreement of even date herewith (the "Refunding Agreement"), such
Bonds shall be paid solely from the revenues derived by the Issuer
from said payments by or on behalf of the Company under the
Refunding Agreement, and the Bonds shall never constitute an
indebtedness or pledge of the general credit of the Issuer or the
State of Louisiana, within the meaning of any constitutional or
statutory limitation of indebtedness or otherwise; and
WHEREAS, the Bonds and the certificate of authentication are
to be in substantially the form attached hereto as Exhibit A, with
necessary or appropriate variations, omissions and insertions as
may be permitted or required by this Indenture (including without
limitation an opinion of bond counsel designated by the Issuer);
and
WHEREAS, pursuant to an Escrow Agreement dated the date
hereof (the "Escrow Agreement") among the Issuer, the Company and
First National Bank of Commerce, the trustee under the Original
Indenture (the "Escrow Trustee"), the proceeds of the Bonds (other
than the proceeds which represent accrued interest), together with
moneys from the Company, will be deposited with the Escrow Trustee
in an escrow fund (the "Escrow Fund") for the purpose of
reimbursing Chemical Bank, New York, New York (the "Series 1983
Letter of Credit Bank") for its drawing in connection with the
discharge of the Series 1983 Bonds; and
WHEREAS, the execution and delivery of this Indenture and
the Refunding Agreement, and the issuance and sale of the Bonds
have been and are in all respects duly and validly authorized by
resolutions duly adopted by the governing authority of the Issuer;
and
WHEREAS, all other things necessary to make the Bonds, when
issued, executed and delivered by the Issuer and authenticated
pursuant to this Indenture, the valid, legal and binding obliga-
tions of the Issuer, and to constitute this Indenture a valid
pledge of the Dedicated Revenues of the Issuer (as hereinafter
defined) and other amounts pledged hereunder as security for the
payment of the principal of, premium, if any, and interest on the
Bonds authenticated and delivered under this Indenture, have been
performed, and the creation, execution and delivery of this
<PAGE>
Indenture and the creation, execution and issuance of the Bonds,
subject to the terms hereof, have in all respects been duly
authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That the Issuer, in consideration of the premises, of the
acceptance by the Trustee of the trusts hereby created, of the
mutual covenants herein contained and of the purchase and
acceptance of the Bonds by the holders thereof, and for other
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and in order to secure the payment of the
principal of, interest and premium, if any, on the Bonds according
to their tenor and effect, and the performance and observance by
the Issuer of all the covenants and conditions herein and therein
contained, (a) has executed and delivered this Indenture and (b)
has agreed to sell, assign, transfer, set over and pledge, and by
these presents does hereby sell, assign, transfer, set over and
pledge unto the Trustee, and to its successors in trust and its
assigns forever, to the extent provided in this Indenture, all of
the right, title and interest of the Issuer in and to the
Refunding Agreement (except for the indemnification rights and
expense reimbursement rights contained in the Refunding
Agreement), all Dedicated Revenues of the Issuer (hereinafter
defined) and all amounts on deposit in the Bond Fund (hereinafter
defined) and the Debt Service Reserve Fund (hereinafter defined);
provided, however, that nothing in the Bonds or in this Indenture
shall be construed as pledging the general credit or taxing power
of the Issuer or the State of Louisiana, nor shall this Indenture
or the Bonds appertaining thereto give rise to a pecuniary
liability of the Issuer.
TO HAVE AND TO HOLD the same unto the Trustee and its
successors in trust forever:
IN TRUST, NEVERTHELESS, upon the terms and trusts herein set
forth for the benefit and security of those who shall hold or own
the Bonds issued hereunder, or any of them, without preference of
any of said Bonds over any others thereof by reason of priority in
the time of the issue or negotiation thereof or by reason of the
date or maturity thereof, for any other reason whatsoever, except
as otherwise provided herein.
IT IS HEREBY COVENANTED, declared and agreed by and between
the parties hereto, that all such Bonds are to be issued,
authenticated and delivered and that all property subject or to
become subject hereto, is to be held and applied upon and subject
to the further covenants, conditions, uses and trusts hereinafter
set forth; and the Issuer, for itself and its successors, does
hereby covenant and agree to and with the Trustee and its
successors in the trust, for the benefit of those who shall hold
all of said Bonds, or any of them, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.`.Definitions. All words and phrases defined in
Article I of the Refunding Agreement shall have the same meaning
<PAGE>
in this Indenture. In addition the following terms defined in
this Article I shall, for all purposes of this Indenture, have the
meanings herein specified, unless the context clearly otherwise
requires:
"Authorized Company Representative" shall mean the person or
persons at the time designated to act on behalf of the Company,
such designation in each case to be evidenced by a certificate
furnished to the Issuer and the Trustee containing the specimen
signature of such person or persons and signed on behalf of the
Company by its Chairman, President and Chief Executive Officer, or
Vice President, Chief Financial Officer and Secretary authorized
to act on behalf of the Company.
"Beneficial Owner" means, so long as a book-entry system of
registration is in effect pursuant to Section 2.12 hereof, the
actual purchaser of the Bonds.
"Bond Fund" means the fund created under Section 5.2 of this
Indenture.
"Bondholder" or "holder of the Bonds" or "holder" means the
registered owner of any Bond. Any reference to a majority or a
particular percentage or proportion of the Bondholders shall mean
the holders at the particular time of a majority or of the
specified percentage or proportion in aggregate principal amount
of all Bonds then outstanding under this Indenture, exclusive of
any such Bonds held by the Company or the Issuer or any affiliate
of either; provided, however, that for the purpose of determining
whether the Trustee shall be protected in relying upon any
direction or consent given or action taken by Bondholders, only
the Bonds which such Trustee knows are so held shall be so
excluded.
"Bond Purchase Agreement" means the Bond Purchase Agreement
dated May 27, 1994, among the Issuer, the Company and Chemical
Securities Inc., as purchaser.
"Bond Register" means the books for the registration of the
Bonds required pursuant to Section 2.3 of this Indenture.
"Bond Registrar" means the registrar appointed by the Issuer
hereunder, initially the Trustee, to keep the books and make the
registrations required pursuant to Article II hereof.
"Bond Year" means the period commencing June 1, and
terminating on May 31 of each calendar year during the term of the
Bonds, except that the first Bond Year shall commence on the Date
of Issuance and end on May 31, 1995 (unless a different period is
required by the Code as hereinafter defined).
"Bonds" means the $36,250,000 principal amount of Industrial
Revenue Refunding Bonds (Avondale Industries, Inc. Project) Series
1994, authenticated and delivered under Section 2.2 of this
Indenture.
<PAGE>
"Business Day" means any day other than (i) a Saturday or
Sunday or legal holiday or a day on which banking institutions in
the City of New York, New York or in the city or cities in which
the principal office of the Trustee or the Company are located are
authorized or required by law to close or (ii) a day on which the
New York Stock Exchange is closed.
"Certified Resolution" means a copy of a resolution or
resolutions certified by the Secretary of the Issuer under its
seal to have been duly adopted by the Issuer and to be in full
force and effect on the date of such certification.
"Code" means the United States Internal Revenue Code of
1986, as amended. References to the Code and to sections of the
Code shall include relevant final, temporary or proposed
regulations thereunder as in effect from time to time and as
applicable to obligations issued on the date of issuance of the
Bonds.
"Company" means Avondale Industries, Inc., a corporation
duly organized and existing under the laws of the State, and its
successors and permitted assigns, including any surviving,
resulting or transferee corporation as provided in Section 6.1 or
6.7 of the Refunding Agreement.
"Conversion" means the conversion of the interest rate on
the Bonds from the Variable Rate to the Fixed Rate on the Fixed
Rate Conversion Date.
"Counsel" means an attorney at law (who may be counsel to
the Issuer or the Company) satisfactory to the Trustee.
"Date of Issuance" means the date on which the Issuer
initially issues the Bonds.
"Debt Service Reserve Fund" means the fund created under
Section 5.6 of this Indenture.
"Debt Service Reserve Fund Requirement" means an amount
equal to the lesser of (i) the maximum principal and interest on
the Bonds in any Bond Year or (ii) 1.25 times the average annual
debt service on the Bonds or (iii) 10% of the proceeds of the
Bonds.
"Dedicated Revenues of the Issuer" means the properties,
rights and interests specified in Section 5.3 hereof which stand
as security for payment of the Bonds.
"DTC" means The Depository Trust Company, New York, New
York.
"Escrow Agreement" means the Escrow Agreement dated the date
of this Indenture among the Issuer, the Company and the Escrow
Trustee.
"Escrow Fund" means the account established pursuant to the
Escrow Agreement.
<PAGE>
"Escrow Trustee" means First National Bank of Commerce, New
Orleans, Louisiana.
"Event of Default" shall have the meaning set forth in
Section 9.1 hereof.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100th of 1%)
equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the
Wall Street Journal on the Business Day next succeeding such day,
provided that if such day is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding
Business Day.
"Fixed Rate" means the interest rate on each maturity of the
Bonds established in accordance with this Indenture.
"Fixed Rate Conversion" means the conversion of the interest
rate on the Bonds from the Variable Rate to the Fixed Rate.
"Fixed Rate Conversion Date" means the date on which the
Bonds shall commence to bear interest at the Fixed Rate as
provided in Section 2.2 of this Indenture.
"Fixed Rate Period" shall mean that period during which the
Bonds shall bear interest at the Fixed Rate.
"Government Obligations" means (a) direct general
obligations of the United States of America or (b) obligations,
the payment of the principal of, premium, if any, and interest on
which is fully and unconditionally guaranteed by the United States
of America.
"Indenture" means this Trust Indenture and any indenture
supplemental hereto and amendatory hereof to the extent permitted
hereby.
"Issuer" means the Board of Commissioners of the Port of New
Orleans, a political subdivision of the State of Louisiana,
organized and existing under the laws of the State of Louisiana,
or its successors and assigns.
"Notice Parties" means the Issuer, the Trustee, the Company
and Chemical Securities Inc.
"Officer's Certificate" means a certificate signed by the
Chairman or Vice Chairman of the Issuer.
"Paying Agent" or "paying agent" means the Trustee and any
paying agent for the Bonds appointed pursuant to this Indenture or
any Supplemental Indenture, or any successors therein named
pursuant to the provisions of this Indenture.
"Permitted Investments" means, to the extent permitted by
<PAGE>
the laws of the State, the following obligations or securities:
(i) direct obligations of, or obligations guaranteed by, the
United States of America, and any bonds or other obligations of
the Federal National Mortgage Association (including Participation
Certificates), Government National Mortgage Association, Federal
Farm Credit Banks, Federal Intermediate Credit Banks, Federal
Banks for Cooperatives, Federal Land Banks, Federal Home Loan
Mortgage Corporation and Federal Home Loan Banks, (ii)
interest-bearing certificates of deposit (secured by the
obligations described in the foregoing subparagraph (i)) in a
national or state bank or a trust company (which may be the
Trustee) which has a combined capital and surplus aggregating not
less than $25,000,000, (iii) any obligation secured by a pooling
of one or more of the foregoing, (iv) bankers' acceptances,
Eurodollar deposits or certificates of deposit of banks or trust
companies, including the Trustee, organized under the laws of the
United States or Canada or any state or province thereof, or
domestic branches of foreign banks, having capital and surplus of
$25,000,000 or more, (v) other unsubordinated securities issued or
guaranteed (including a guarantee in the form of a bank standby
letter of credit) by any domestic corporation (including a bank or
trust company) which has outstanding, at the time of investment,
debt securities rated in one of the two highest rating categories
(without regard to rating subcategories) by any nationally
recognized statistical rating agency, (vi) obligations of any
domestic corporation which are fully and continually secured by
any of the securities or obligations referred to in (i) through
(v), (vii) investments in a money market type fund which limits
its investments to the types of obligations described in (i)
through (v), and (viii) as otherwise permitted by State law for
the funds so invested.
"Principal Office" or "principal office" means the principal
corporate trust office of the Trustee, presently located in New
Orleans, Louisiana.
"Prior Bonds" means collectively the Series 1981 Bonds and
the Series 1983 Bonds.
"Project" means the facilities described in Exhibit A to the
Refunding Agreement financed with the proceeds of the Series 1981
Bonds, including any modifications thereof, substitutions therefor
and additions thereto and excluding deletions therefrom.
"Refunding Act" means Chapter 14-A of Title 39 of the
Louisiana Revised Statutes of 1950, as supplemented and amended.
"Refunding Agreement" means the Refunding Agreement between
the Issuer and the Company dated of even date herewith relating to
the Bonds, as the same may be amended in accordance with its terms
and this Indenture.
"Refunding Date" means, with respect to the Series 1983
Bonds, June 1, 1994, or such other date or dates as may be agreed
to by the Issuer and the Company; provided, however, that the
Refunding Date shall not be later than ninety (90) days following
the date of delivery of the Bonds to the initial purchasers
thereof.
<PAGE>
"Registered Owner" or "Owner" or "owner" or "registered
owner" means the person or persons in whose name or names the
particular registered Bond shall be registered as to principal and
interest on the books of the Issuer kept for that purpose in
accordance with the terms of this Indenture.
"Repayments" means the principal, premium, if any, and
interest amounts specified in Section 3.1 of the Refunding
Agreement and payable by the Company thereunder.
"Series 1981 Bonds" means the Issuer's $36,250,000 aggregate
principal amount of Industrial Revenue Bonds (Avondale Shipyards,
Inc. Project) Series 1981 dated July 1, 1981.
"Series 1983 Bonds" means the Issuer's $36,250,000 aggregate
principal amount of Industrial Revenue Bonds (Avondale Shipyards,
Inc. Project) Series 1983 dated May 1, 1983.
"Series 1983 Letter of Credit Bank" means Chemical Bank, New
York, New York.
"State" means the State of Louisiana.
"Supplemental Indenture" or "indenture supplemental hereto"
means any supplemental indenture now or hereafter duly authorized
and entered into in accordance with the provisions of this
Indenture.
"Trustee" means First National Bank of Commerce, New
Orleans, Louisiana, and its successor or successors as Trustee
hereunder.
"Variable Rate" means the lesser of (i) the Federal Funds
Rate plus 275 basis points; or (ii) 9.0% , as determined in
accordance with Section 2.2 of this Indenture, from and including
the Date of Issuance to but not including the Fixed Rate
Conversion Date.
"Variable Rate Period" means that period during which the
Bonds shall bear interest at the Variable Rate.
ARTICLE II
DESCRIPTION, AUTHORIZATION,
MANNER OF EXECUTION, AUTHENTICATION,
REGISTRATION AND TRANSFER OF BONDS
SECTION 1.`.Bonds as Limited Obligations of Issuer. The
Bonds and the interest thereon shall be limited obligations of the
Issuer payable solely from the Dedicated Revenues of the Issuer
and all amounts on deposit in the Bond Fund, all of which are
pledged for the payment thereof under this Indenture. The Bonds
shall never constitute an indebtedness or general obligation of
the Issuer or the State within the meaning of any constitutional
or statutory provision or limitation of indebtedness and shall
never constitute or give rise to a pecuniary liability of the
Issuer or the State or a charge or pledge against the general
credit or taxing power of either. All the Bonds issued and to be
issued hereunder shall be equally and ratably secured, to the
<PAGE>
extent provided in this Indenture, by the pledge of all the
Dedicated Revenues of the Issuer.
SECTION 2.`.Issuance and Payment Terms of Bonds. There is
hereby created for issuance under this Indenture a series of Bonds
designated "Industrial Revenue Refunding Bonds (Avondale
Industries, Inc. Project) Series 1994" in the aggregate principal
amount of Thirty-Six Million Two Hundred Fifty Thousand Dollars
($36,250,000). The Bonds delivered to the original purchasers
thereof shall be dated May 31, 1994. The Bonds shall be issued as
fully registered bonds in the denomination of $100,000 or an
integral multiple of $5,000 in excess thereof numbered from R-1
upwards; no Beneficial Owner may own an interest of less than
$100,000 in the Bonds. The Bonds shall bear interest from the
date thereof, payable semiannually on June 1 and December 1 of
each year, commencing December 1, 1994 and on the Fixed Rate
Conversion Date (each an "Interest Payment Date"), at the Variable
Rate to, but excluding, the Fixed Rate Conversion Date and from
the Fixed Rate Conversion Date at the Fixed Rate. The Bonds shall
mature on June 1 of the years and in the principal amounts as
follows:
Year Amount
2004 $ 6,000,000
2014 30,250,000
Bonds issued prior to the first Interest Payment Date
thereon shall be dated May 31, 1994 and Bonds issued on or
subsequent to the first Interest Payment Date thereon shall be
dated as of the Interest Payment Date immediately preceding the
date of authentication and delivery thereof, unless such date of
authentication and delivery shall be an Interest Payment Date, in
which case they shall be dated as of the date of authentication
and delivery; provided, however, that, notwithstanding the
foregoing, if, as shown by the records of the Trustee, interest on
the Bonds shall be in default, registered Bonds issued in exchange
for Bonds surrendered for transfer or exchange shall be dated as
of the date to which interest has been paid in full on the Bonds
surrendered or, if no interest has been paid on any of the Bonds,
as of the date of initial issuance of the Bonds. Interest on the
Bonds shall be computed upon the basis of (i) during the Variable
Rate Period, the actual number of days in such period divided by
365 and (ii) during the Fixed Rate Period a 360-day year,
consisting of twelve (12) thirty (30) day months.
The principal of, premium, if any, and interest on all of
the Bonds shall be paid in any coin or currency of the United
States of America which, at the time of payment, is legal tender
for the payment of public and private debts at the principal
corporate trust office of the Trustee, all upon presentation and
surrender of such Bonds as they respectively become due; provided,
however, that the interest on each Bond shall be paid by check or
draft mailed to the person who is listed as the Registered Owner
thereof as of the close of business on the fifteenth (15th) day of
the calendar month preceding each Interest Payment Date (the
"Regular Record Date") at his or her address as it appears on the
<PAGE>
Bond Register; and provided further, that a Bondholder of
$1,000,000 or more in aggregate principal amount of the Bonds may
request in writing payment of interest on such Bonds in
immediately available funds by wire transfer to the bank account
number of such owner furnished to the Trustee not less than seven
(7) days prior to such Interest Payment Date.
The interest rate on the Bonds shall be converted from the
Variable Rate to the Fixed Rate in the following manner:
(i) Upon the earlier of August 1, 1994 or upon an
election pursuant to clause (ii) below, the interest rate
borne by the Bonds shall be converted from the Variable Rate
to the Fixed Rate on the Fixed Rate Conversion Date, and the
Bonds shall thereafter bear interest at the Fixed Rate from
the Fixed Rate Conversion Date until the final maturity date
of the Bonds upon the conditions set forth in this Section.
(ii) On August 1, 1994, or on such earlier date
specified by a Bondholder, the rate of interest payable on
all or any portion of the Bonds shall be converted in
denominations of $100,000 or an integral multiple of $5,000
in excess thereof from the Variable Rate to the Fixed Rate.
In order to exercise this option a Bondholder shall deliver
one (1) day prior written notice, which notice shall be
irrevocable, to the Notice Parties directing such Fixed Rate
Conversion. The notice shall specify (1) the effective date
upon which the Fixed Rate Conversion is to occur (the "Fixed
Rate Conversion Date"), which shall be the next Business Day
following the receipt of the Conversion notice by such
Notice Parties and (2) the date on which Chemical Securities
Inc. is to establish the Fixed Rate, which date shall be the
Fixed Rate Conversion Date. Upon the earlier of August 1,
1994 or the date stated in the notice for the determination
of the Fixed Rate, Chemical Securities Inc. shall determine
the Fixed Rate at the lowest rate of interest that would, in
its opinion, based on then prevailing market conditions and
the yields at which comparable securities are then being
sold, be necessary to sell the Bonds in the secondary market
at par, plus accrued interest. In no event will the Fixed
Rate exceed 9.0% per annum.
(iii)The determination by Chemical Securities Inc. in
accordance with this Section of the Fixed Rate to be borne
by the Bonds shall be conclusive and binding on the holders
of the Bonds and the other Notice Parties.
(iv) On the Fixed Rate Conversion Date, Chemical
Securities Inc. will calculate the interest on such Bonds
being converted which has accrued while the Bonds were
Variable Rate Bonds. Chemical Securities Inc. shall advise
the Trustee and the Company of the interest accrued.
(v) On each Fixed Rate Conversion Date, holders of
such Bonds directing such Conversion to a Fixed Rate shall
deliver any Bonds so converted to the Trustee for notation
<PAGE>
of the date of the Fixed Rate Conversion and the Fixed Rate
on the face of the Bonds. In the event that all Bonds are
converted to the Fixed Rate, the holders of the Bonds shall
surrender the Bonds to the Trustee for submission to DTC for
registration in book-entry only form.
SECTION 3.`.Bond Register. The Issuer shall keep or cause
to be kept the Bond Register at the principal office of the
Trustee for the registration of Bonds as herein provided and
hereby appoints the Trustee as Bond Registrar to keep such books
and make such registrations under such reasonable regulations as
the Trustee may prescribe. The Company, from time to time, shall
be entitled to review such Bond Register at the principal office
of the Trustee.
The Trustee shall maintain a register of the Beneficial
Owners of the Bonds upon receipt of written certification from
such Beneficial Owner as to its beneficial ownership accompanied
by evidence thereof reasonably satisfactory to the Trustee and
setting forth its address. Upon the transfer of a Bond, the new
Registered Owner shall become the Beneficial Owner until another
Beneficial Owner is designated. A copy of any notice sent
hereunder to Registered Owners of Bonds shall also be sent to such
Beneficial Owners registered with the Trustee as herein provided,
and any consent, request, direction, approval, objection or other
instrument or action required or permitted by this Indenture to be
executed or taken by the Registered Owner of any Bond (other than
the transfer of a Bond) shall be fully effective if executed or
taken by the Beneficial Owner thereof provided that, in the event
of conflicting instruments executed by the Registered Owner and
the Beneficial Owner, the action by the Registered Owner shall
govern. The Trustee shall not be responsible for, nor have any
liability for, or with respect to, the accuracy of the register of
Beneficial Owners of the Bonds or for the failure to provide any
Beneficial Owner of any notice sent to Registered Owners.
SECTION 4.`.Recital. All Bonds shall contain a recital that
they are issued pursuant to the Refunding Act and may have printed
thereon such legend or legends as may be required to comply with
any law, rule or regulation or to conform to general usage or
practice as determined to be advisable by the Company, the Issuer
and the Trustee. By accepting a Bond, each Bondholder irrevocably
appoints the Trustee under this Indenture as the special
attorney-in-fact for the holder vested with full power on behalf
of the holder to effect and enforce the provisions of this
Indenture for the benefit of the holder.
SECTION 5.`.Transfer of Bonds. All Bonds shall be
transferable only on the Bond Register upon surrender of such
Bonds at the principal office of the Trustee with a written
instrument of transfer satisfactory to the Trustee duly executed
by the Registered Owner or his duly authorized attorney or legal
representative.
Bonds, upon surrender thereof at the principal office of the
Trustee with a written instrument of transfer satisfactory to the
Trustee duly executed by the Registered Owner or his duly
<PAGE>
authorized attorney or legal representative in writing may at the
option of the holder thereof be exchanged for an equal aggregate
principal amount of Bonds of the same maturity and interest rate
in any of the authorized denominations and registered in such name
or names as may be requested.
Registrations, transfers and exchanges of Bonds shall be
without charge to the holder of the Bonds but, for every
registration, exchange or transfer of Bonds, the Issuer or the
Trustee may make a charge sufficient to reimburse it for any tax,
fee or other governmental charge required to be paid with respect
to such registration, exchange or transfer, which sum or sums
shall be paid by the person requesting such registration, exchange
or transfer as a condition precedent to the exercise of the
privilege of making such registration, exchange or transfer.
Each Bond delivered pursuant to any provision of this
Indenture in exchange or substitution for, or upon the transfer of
the whole or any part of one or more other Bonds, shall carry all
of the rights to interest accrued and unpaid and to accrue which
were carried by the whole or such part, as the case may be, of
such one or more other Bonds, and notwithstanding anything
contained in this Indenture, such Bonds shall be so dated or bear
such notation that neither gain in nor loss in interest shall
result from any such exchange, substitution or transfer.
Every transfer of Bonds under the foregoing provisions shall
be effected in such manner as may be prescribed by the Trustee.
The Trustee shall not be required to exchange, register or
transfer Bonds after the mailing of notice of redemption, during
the period of 15 days next preceding the mailing of such notice of
redemption, nor during the period of 15 days next preceding an
Interest Payment Date.
SECTION 6.`.Registered Owners. The Issuer and the Trustee
may treat the person in whose name any Bond is registered as the
absolute owner of such Bond for the purpose of receiving payment
of principal of and interest on such Bond and for all other
purposes whether or not such Bond is overdue, and neither the
Issuer nor the Trustee shall be affected by notice to the
contrary.
SECTION 7.`.Temporary Bonds. Until Bonds in definitive form
are ready for delivery, the Issuer may execute, and upon its
request in writing, the Trustee shall authenticate and deliver in
lieu of any thereof and subject to the same provisions,
limitations and conditions, one or more printed, lithographed or
typewritten Bonds in temporary form, substantially of the tenor of
the Bonds hereinbefore described, with appropriate omissions,
variations and insertions. Such Bond or Bonds in temporary form
may be for the principal amount of $100,000 or an integral
multiple of $5,000 in excess thereof, as the Issuer may determine.
Until exchanged for Bonds in definitive form such Bonds in
temporary form shall be entitled to the lien and benefit of this
Indenture. The Issuer shall, without unreasonable delay, prepare,
execute and deliver to the Trustee, and thereupon, upon the
presentation and surrender of the Bond or Bonds in temporary form,
<PAGE>
the Trustee shall authenticate and deliver, in exchange therefor,
a Bond or Bonds in definitive form in authorized denominations of
the same maturity for the same aggregate principal amount as the
Bond or Bonds in temporary form surrendered. Such exchange shall
be made by the Issuer and without making any charge therefor
except that the Issuer may require payment by the Company of a sum
sufficient to cover any tax or other governmental charge that may
be imposed in relation thereto. When and as interest is paid upon
Bonds in temporary form, the fact of such payment shall be noted
thereon upon presentation to the Trustee.
SECTION 8.`.Facsimile Signatures. All the Bonds shall, from
time to time, be executed on behalf of the Issuer by the manual or
facsimile signature of the President and Chief Executive Officer
of the Issuer and its seal (which may be in facsimile) shall be
thereunto affixed (or printed or engraved or otherwise reproduced
thereon if in facsimile) and attested by the manual or facsimile
signature of the Secretary of the Issuer.
If any of the officers whose manual or facsimile signatures
shall be upon the Bonds shall cease to be such officers of the
Issuer before such Bonds shall have been actually authenticated by
the Trustee or delivered by the Issuer, such Bonds nevertheless
may be authenticated, issued and delivered with the same force and
effect as though the person or persons whose signature shall be
upon such Bonds had not ceased to be such officer or officers of
the Issuer; and also any such Bonds may be signed and sealed on
behalf of the Issuer by those persons who, at the actual date of
the execution of such Bond, shall be the proper officers of the
Issuer, although at the nominal date of such Bonds any such person
shall not have been such officer of the Issuer.
SECTION 9.`.Mutilated, Lost, Destroyed or Stolen Bonds. A
mutilated Bond may be surrendered to the Trustee and the Trustee
shall validate the same or, upon the request of the person
surrendering such Bond, the Issuer shall execute and the Trustee
shall authenticate and deliver in exchange therefor a new Bond of
like maturity, designation, interest rate, and principal amount.
All mutilated Bonds surrendered in any such exchange shall
forthwith be canceled.
If there be delivered to the Issuer and to the Trustee, (a)
an affidavit or any other form of evidence satisfactory to them to
establish proof of ownership and the circumstances of the
destruction, loss or theft of any Bond, and (b) such security or
indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Issuer or the
Trustee that such Bond has been acquired by a bona fide purchaser,
the Issuer shall execute and upon its request the Trustee shall
authenticate and deliver in lieu of any such destroyed, lost or
stolen Bond, a new Bond of like maturity, denomination, interest
rate and principal amount.
In case any such mutilated, destroyed, lost or stolen Bond
has become or is about to become due and payable, the Issuer in
its discretion may, instead of issuing a new Bond, cause the
Trustee to pay such Bond out of money held by the Trustee and
available for such purpose.
<PAGE>
SECTION 10.`.Authentication of Bonds by Trustee. No Bonds
shall be secured hereby or entitled to the benefit hereof or shall
be or become valid or obligatory for any purpose unless there
shall be endorsed on such Bond a certificate of authentication,
substantially in the form prescribed in this Indenture, executed
by the Trustee; and such certificate on any Bond issued by the
Issuer shall be conclusive evidence and the only competent
evidence that it has been duly authenticated and delivered
hereunder.
SECTION 11.`.Destruction of Bonds. Upon the surrender to
the Trustee of any temporary or mutilated Bonds, or Bonds acquired
or redeemed or paid at maturity by the Issuer, or Bonds acquired
by market purchase, the same shall be canceled and, in due course,
may be incinerated or otherwise destroyed by the Trustee, and if
so incinerated or destroyed the Trustee shall deliver its
certificate of such incineration or other destruction to the
Issuer and the Company.
SECTION 12.`.Book-Entry Registration of Bonds. Upon the
Conversion of all of the Bonds to a Fixed Rate, the Bonds shall be
issued in the name of Cede & Co., as nominee for DTC, as
registered owner of the Bonds, and held in the custody of DTC.
The Issuer and the Trustee acknowledge that they shall execute and
deliver a Letter of Representation with DTC and that the terms and
provisions of said Letter of Representation shall govern in the
event of any inconsistency between the provisions of this
Indenture and said Letter of Representation. A single certificate
will be issued and delivered to DTC for each maturity of the
Bonds. The Beneficial Owners will not receive physical delivery
of Bond certificates except as provided herein. Beneficial Owners
are expected to receive a written confirmation of their purchase
providing details of each Bond acquired. For so long as DTC shall
continue to serve as securities depository for the Bonds as
provided herein, all transfers of beneficial ownership interest
will be made by book-entry only, and no investor or other party
purchasing, selling or otherwise transferring beneficial ownership
of Bonds is to receive, hold or deliver any Bond certificate.
For every transfer and exchange of the Bonds, the Beneficial
Owner may be charged a sum sufficient to cover such Beneficial
Owner's allocable share of any tax, fee or other governmental
charge that may be imposed in relation thereto.
Bond certificates are required to be delivered to and
registered in the name of the Beneficial Owner under the following
circumstances:
(a) DTC determines to discontinue providing its
service with respect to the Bonds. Such a determination may
be made at any time by giving 30 days' notice to the Issuer
or the Trustee and discharging its responsibilities with
respect thereto under applicable law.
(b) The Issuer determines that continuation of the
system of book-entry transfer through DTC (or a successor
securities depository) is not in the best interests of the
Beneficial Owners.
<PAGE>
The Issuer, the Company and the Trustee will recognize DTC
or its nominee as the Bondholder for all purposes, including
notices and voting.
Neither the Issuer, the Trustee nor the Company are
responsible for the performance by DTC of any of its obligations,
including, without limitation, the payment of moneys received by
DTC, the forwarding of notices received by DTC or the giving of
any consent or proxy in lieu of consent.
Whenever during the term of the Bonds the beneficial
ownership thereof is determined by a book entry at DTC, the
requirements of this Indenture of holding, delivering or
transferring Bonds shall be deemed modified to require the
appropriate person to meet the requirements of DTC as to
registering or transferring the book entry to produce the same
effect.
If at any time DTC ceases to hold the Bonds, all references
herein to DTC shall be of no further force or effect.
ARTICLE III
AUTHENTICATION AND DELIVERY OF BONDS
SECTION 1.b.All Bonds Equally and Ratably Secured. This
Indenture creates and shall be and constitute a continuing,
irrevocable and exclusive pledge and assignment of the Dedicated
Revenues of the Issuer to the extent provided in this Indenture,
to secure the full and final payment of the principal of, and
interest (and redemption premium, if any) on, all Bonds
authenticated and delivered hereunder. All Bonds issued hereunder
are, to the extent provided in this Indenture, equally and ratably
secured by this Indenture without preference, priority or
distinction on account of the actual time or times of the
authentication or delivery or maturity of the Bonds or any of
them, so that, subject to aforesaid, all Bonds at any time
outstanding hereunder shall have the same right, lien and
preference under and by virtue of this Indenture and shall be
equally and ratably secured hereby with like effect as if they had
all been executed, authenticated and delivered simultaneously on
the date hereof whether the same, or any of them, shall be
disposed of at some future date, or whether they, or any of them,
shall be authorized to be authenticated and delivered after the
date hereof pursuant to Section 2.5 of this Indenture.
SECTION 2.b.Conditions of Authentication. The Bonds in the
aggregate principal amount of $36,250,000 shall be executed by the
Issuer and delivered to the Trustee for authentication, together
with a statement as to the amount and disposition of the proceeds
of the principal amount of said Bonds and any accrued interest
thereon; thereupon the Bonds shall be authenticated by the Trustee
and shall be delivered to or upon the order of the purchasers
thereof, but only upon the receipt by (i) the Escrow Trustee of
the aforesaid proceeds of the principal amount of the Bonds, which
shall be deposited with the Escrow Trustee for credit to the
Escrow Fund as provided in Article IV hereof, and (ii) the Trustee
of an amount equal to the accrued interest, if any, on said Bonds
to the date of their delivery, which shall be deposited into the
<PAGE>
Bond Fund. Prior to authentication of the Bonds the Trustee shall
also have received the following:
(1) A Certified Resolution authorizing the issuance of
the Bonds and the execution and delivery of the Refunding
Agreement and Indenture.
(2) An original executed counterpart of the Refunding
Agreement.
(3) An original executed counterpart of this
Indenture.
(4) An original executed counterpart of the Escrow
Agreement.
(5) A request and authorization to the Trustee on
behalf of the Issuer and signed by the Chairman or Vice
Chairman or President and Chief Executive Officer and the
Secretary of the Issuer to (i) authenticate and deliver the
Bonds to the purchaser or purchasers therein identified upon
payment to the Escrow Trustee of the proceeds of the Bonds
(other than accrued interest, which shall be deposited with
the Trustee for credit to the Bond Fund) as hereinafter
provided under Article IV hereof, and (ii) execute and
deliver any document to which the Trustee is a party.
(6) An original executed counterpart of the Tax
Regulatory Agreement dated as of April 1, 1994, by and among
the Issuer, the Trustee and the Company.
(7) The unqualified approving opinion and a
supplementary opinion of bond counsel of nationally
recognized standing dated the day the Bonds are issued.
ARTICLE IV
PROCEEDS OF BONDS
SECTION 1.a. Proceeds of Bonds. The proceeds from the
initial sale of the Bonds (other than the proceeds which represent
accrued interest) shall be deposited with the Escrow Trustee for
credit to the Escrow Fund and held therein and applied in
accordance with the Escrow Agreement. At the time such proceeds
are deposited, the Company will pay the balance of moneys required
to pay the redemption price for the Series 1983 Bonds to the
Escrow Trustee and will pay all Costs of Issuance. The proceeds
of the Bonds, together with the additional funds provided by the
Company on deposit with the Escrow Trustee, will be used by the
Escrow Trustee to reimburse the Series 1983 Letter of Credit Bank
in connection with the redemption of the Series 1983 Bonds, all as
provided in the Escrow Agreement.
ARTICLE V
PLEDGE AND ASSIGNMENT; BOND FUND;
DEBT SERVICE RESERVE FUND
SECTION 1.a. Pledge of Dedicated Revenues. All Dedicated
<PAGE>
Revenues of the Issuer are hereby pledged and assigned unto the
Trustee for the payment of the principal of, premium, if any, and
interest on the Bonds and the performance of the other obligations
of the Issuer contained in this Indenture. The Issuer hereby
assigns, sets over to and grants its right, title and interest in
and to the Refunding Agreement (other than its expense
reimbursement and indemnification rights) and all amounts on
deposit in the Bond Fund and the Debt Service Reserve Fund to the
Trustee for the benefit of the Bondholders.
SECTION 2.a. Bond Fund. There is hereby created "Board of
Commissioners of the Port of New Orleans Industrial Revenue
Refunding Bond Fund - Avondale Industries Project" (the "Bond
Fund"), which shall be held in trust by the Trustee for the
benefit of the holders of the Bonds and shall be subject to a lien
and charge in favor of the holders of all of the Bonds issued and
outstanding under this Indenture. The Issuer hereby directs
payment to the Trustee of all Dedicated Revenues of the Issuer.
Upon receipt of such payments and of such other money as may be
paid to the Trustee by the Issuer or otherwise for deposit in the
Bond Fund, the Trustee shall deposit the same in the Bond Fund.
SECTION 3.a. Deposits into Bond Fund. There shall be
deposited into the Bond Fund from the proceeds of the Bonds,
immediately upon the receipt thereof by the Trustee, an amount
equal to the accrued interest, if any, on said Bonds to the date
of their delivery. In addition, there shall be deposited into the
Bond Fund as Dedicated Revenues of the Issuer when received: (a)
all Repayments specified in Section 3.1 of the Refunding Agreement
and all prepayments under Article VIII of the Refunding Agreement
(other than payments for expense reimbursement and
indemnification);, (b) all moneys required to be deposited therein
pursuant to Sections 5.6 and 5.7 of this Indenture, and (c) all
other money received by the Trustee and required under or pursuant
to any of the provisions of the Refunding Agreement or this
Indenture or any refunding agreement, note or indenture
supplemental thereto, respectively, to be paid into the Bond Fund.
The Issuer hereby covenants and agrees that so long as any of the
Bonds issued hereunder are outstanding, it will deposit or cause
to be deposited in the Bond Fund sums (but only from Dedicated
Revenues of the Issuer) sufficient to meet and pay promptly the
principal of, premium, if any, and interest on the Bonds as the
same shall become due and payable.
SECTION 4.a. Use of Moneys in Bond Fund. Moneys in the Bond
Fund shall be used solely for the payment of the principal of and
interest on the Bonds, for the payment or redemption of the Bonds
at or prior to their maturity and for the payment of redemption
premium, if any, on redemption of the Bonds. The Trustee, without
further authorization than is in this Section 5.4 contained, shall
pay from the moneys in the Bond Fund (i) the interest on the Bonds
as and when the same shall become due, and (ii) the principal of
and premium, if any, on the Bonds as and when the same shall come
due, provided that such payment of principal and premium shall be
made only upon presentation and surrender of such Bonds as they
come due.
<PAGE>
SECTION 5.a. Bond Fund and Debt Service Reserve Fund
Sufficient to Pay All Bonds. If at any time the amount in the
Bond Fund and the Debt Service Reserve Fund shall be sufficient to
pay when due the principal of, premium, if any, and interest on
the Bonds remaining outstanding, the Trustee shall notify the
Issuer and the Company that no additional or further payments need
be made under this Indenture, and the Trustee shall apply the
money then in said Bond Fund and Debt Service Reserve Fund to the
payment of the principal of, premium, if any, and interest on the
Bonds when due.
SECTION 6.a. Creation of the Debt Service Reserve Fund;
Payments Into the Debt Service Reserve Fund. There is hereby
created "Board of Commissioners of the Port of New Orleans
Industrial Revenue Refunding Bond Debt Service Reserve Fund -
Avondale Industries Project" (the "Debt Service Reserve Fund"),
which shall be held in trust by the Trustee for the benefit of the
holders of the Bonds and shall be subject to a lien and charge in
favor of the holders of all of the Bonds issued and outstanding
under this Indenture. There shall be deposited into the Debt
Service Reserve Fund all payments by the Company pursuant to
Section 3.3 of the Refunding Agreement until the amount on deposit
in said Fund shall equal the Debt Service Reserve Fund
Requirement. All earnings on the Debt Service Reserve Fund shall
remain therein until there is an amount in the Debt Service
Reserve Fund equal to the Debt Service Reserve Requirement;
provided, however, in no event shall moneys on deposit in the Debt
Service Reserve Fund exceed the Debt Service Reserve Fund
Requirement and in such event such excess moneys shall be
transferred to the Bond Fund.
SECTION 7.a. Use of Moneys in the Debt Service Reserve
Fund; Investment of Debt Service Reserve Fund Moneys. Moneys in
the Debt Service Reserve Fund shall be used solely for the payment
of the principal of, premium, if any, and interest on the Bonds in
the event moneys in the Bond Fund are insufficient to make such
payments when due, whether on an Interest Payment Date, redemption
date, sinking fund redemption date, maturity date or otherwise.
The Trustee shall, on such payment date for principal of or
interest on the Bonds, determine if sufficient funds are available
in the Bond Fund to make such payments when due and, if sufficient
funds are not available in such Fund, shall make the required
transfer, if any, to the Bond Fund to cure such deficiency. In
addition, upon the occurrence of an Event of Default hereunder,
any moneys in the Debt Service Reserve Fund shall be transferred
by the Trustee to the Bond Fund. On the final maturity date of
the Bonds any moneys in the Debt Service Reserve Fund shall be
used to pay the principal of and interest on the Bonds on such
final maturity date. In the event of the redemption of the Bonds
in whole, any moneys in the Debt Service Reserve Fund shall be
transferred to the Bond Fund and applied to the payment of the
principal of and premium, if any, and interest on the Bonds.
Whenever the total amount on deposit in the Bond Fund and
the Debt Service Reserve Fund is sufficient to pay in full all
<PAGE>
outstanding Bonds in accordance with their respective terms
(including principal and interest thereon), the funds on deposit
in the Debt Service Reserve Fund shall be transferred to the Bond
Fund and applied to pay the principal of, premium, if any, and
interest on the Bonds.
All moneys in the Debt Service Reserve Fund shall be
invested in accordance with the directions of an Authorized
Company Representative in Government Obligations having a maturity
of not exceeding five (5) years, provided that not more than 50%
of the Government Obligations (valued as provided herein) shall
have a maturity not exceeding three (3) years. The value of
Government Obligations on deposit in the Debt Service Reserve Fund
shall be determined by the Trustee annually, on each June 1. If
any such valuation reveals that the value of the investments in
the Debt Service Reserve Fund is less than the Debt Service
Reserve Fund Requirement with respect to the Bonds then
outstanding, the Trustee shall immediately notify the Company and
the Issuer of the amount of the difference between the amount
derived by such valuation and the Debt Service Reserve Fund
Requirement, which difference shall be deposited by the Company in
the Debt Service Reserve Fund in the manner and at the time
required by Section 3.3 of the Refunding Agreement.
Notwithstanding the foregoing provisions, in lieu of the
required deposits into the Debt Service Reserve Fund, the Company
may cause to be deposited into the Debt Service Reserve Fund a
Debt Service Reserve Fund Letter of Credit for the benefit of the
Bondholders in an amount equal to the difference between the Debt
Service Reserve Fund Requirement and the sums then on deposit in
the Debt Service Reserve Fund, if any, which Debt Service Reserve
Fund Letter of Credit shall be available to be drawn upon (upon
the giving of notice as required thereunder) on any date, on which
payments are required to be made from the Bond Fund wherein a
deficiency exists which cannot be cured by funds in any other Fund
held pursuant to the Indenture and available for such purpose. If
a disbursement is made under the Debt Service Reserve Fund Letter
of Credit, the Company shall be obligated to reinstate the amount
disbursed by either depositing a replacement Debt Service Reserve
Fund Letter of Credit in the amount of the disbursement or to
deposit into the Debt Service Reserve Fund funds in the amount of
the disbursement made under such Debt Service Reserve Fund Letter
of Credit, or a combination of such alternatives as shall equal
the Debt Service Reserve Fund Requirement in six equal monthly
installments as provided in Section 3.3 of the Refunding
Agreement. As used herein, Debt Service Reserve Fund Letter of
Credit means the irrevocable letter of credit, if any, issued in
favor of the Trustee and deposited in the Debt Service Reserve
Fund in lieu of or in partial substitution for cash or securities
on deposit therein. The issuer providing such letter of credit
shall be a banking institution, bank or trust company or branch
thereof which has a senior debt rating of "A" or better from
either Moody's Investors Service, Inc. or Standard & Poor's
Corporation.
<PAGE>
ARTICLE VI
SECURITY FOR AND INVESTMENT OF MONEY
SECTION 1.a. Moneys Held in Trust. All money from time to
time received by the Trustee and held in any fund created under
this Indenture, or otherwise, shall be held in trust by the
Trustee for the benefit of the holders from time to time of the
Bonds entitled to be paid therefrom.
SECTION 2.a. Bond Fund Investments. Money on deposit to the
credit of the Bond Fund shall be invested by the Trustee in
accordance with the direction of an Authorized Company
Representative in Permitted Investments maturing or marketable
prior to the maturities thereof at such time or times as to enable
disbursements to be made from the Bond Fund in accordance with the
terms hereof. Neither the Issuer nor the Trustee shall be liable
or responsible for any loss resulting from any investments made in
accordance with such directions.
All such investments shall be held by or under the control
of the Trustee and shall be deemed at all times a part of the Bond
Fund and the interest and any gain received thereon or any profit
realized therefrom and any loss resulting therefrom, respectively,
shall be credited to and held in or charged to the Bond Fund. If
at any time it shall become necessary that some or all of the
securities purchased with the money in such fund be redeemed or
sold in order to raise money necessary to comply with the
provisions of this Indenture, the Trustee shall, without further
authorization than is hereby contained, effect such redemption or
sale, employing, in the case of a sale, any commercially
reasonable method of effecting the same.
SECTION 3.a. Arbitrage Bond Covenant. With respect to the
authority to invest funds granted in this Indenture, the Issuer
directs the Trustee and the Trustee hereby covenants with the
holders of the Bonds that it will make no use of the proceeds of
the Bonds, or any other funds which may be deemed to be proceeds
of the Bonds pursuant to Section 148 of the Code, which would
cause the Bonds to be "arbitrage bonds" within the meaning of such
Section.
The Company has agreed in the Refunding Agreement to comply
with rebate requirements of Section 148(f) of the Code. The
Trustee shall provide such information as the Company may request
to enable the Company to calculate the amount of gross earnings on
the Bond Fund and Refunding Fund.
SECTION 4.a. Balance in the Bond Fund and Debt Service
Reserve Fund After Payment of the Bonds. Any balance in the Bond
Fund and Debt Service Reserve Fund created under this Indenture or
otherwise held by the Trustee after all the Bonds issued hereunder
and secured hereby have been paid in full, or provision for
payment in full thereof have been made, and all amounts due to the
Trustee and the Issuer have been paid, shall be paid over to the
Company. Should the holders of any Bonds fail or neglect to
present their Bonds for payment within one year from the date such
<PAGE>
Bonds become due and payable, whether by redemption or at
maturity, the Trustee shall, at the end of such period, remit to
the Company in trust for the holders of the Bonds the money then
held for such Bonds; and the holders of such Bonds shall
thereafter have recourse only to the Company for payment thereof.
ARTICLE VII
REDEMPTION OF BONDS
SECTION 1.a.Redemption of the Bonds. Except as otherwise
provided herein, any redemption of all or any part of the Bonds
issued under the provisions of this Indenture which are subject to
redemption shall be made in the manner provided in this Article
VII. The Bonds may be redeemed prior to their respective
maturities, as follows:
(a) The Bonds maturing on June 1, 2014 are subject to
optional redemption prior to their maturity by the Issuer
beginning on June 1, 2004, in whole at any time and in part
on any Interest Payment Date at the following redemption
prices (stated as a percentage of principal amount) plus
accrued interest to the redemption date:
Redemption Period
(Both Inclusive) Redemption Price
June 1, 2004 through May 31, 2005 103%
June 1, 2005 through May 31, 2006 102%
June 1, 2006 through May 31, 2007 101%
June 1, 2007 and thereafter 100%
(b) The Bonds are subject to special mandatory
redemption prior to their maturity at any time, as a whole
or in part if such partial redemption will preserve the
exclusion from gross income for federal income tax purposes
of interest on the remaining Bonds outstanding (and if in
part, by lot or other customary means) at a redemption price
equal to 108% of the principal amount thereof, plus interest
accrued to the redemption date in the event that it is
finally determined by the Internal Revenue Service (or its
successor) or by a court of competent jurisdiction in a
proceeding in which the Company participates to the degree
it deems sufficient, that, as a result of the failure by the
Company to observe a covenant, agreement or representation
in the Refunding Agreement, the interest payable on the
Bonds has become includable for federal income tax purposes
in the gross income of any owner of a Bond, other than an
owner who is a "substantial user" of the Project or a
"related person" to such "substantial user" as provided in
the Code and applicable regulations thereunder. Any such
determination will not be considered final for this purpose
unless the Company has been given written notice and, if it
so desires, has been afforded the opportunity, at its
expense, to contest the same, either directly or in the name
of any owner of the Bonds, and until the conclusion of any
appellate review, if sought. The Company is not required to
complete the administrative proceeding or litigation
<PAGE>
referred to above within a specified period, but it
covenants in the Refunding Agreement that it will use its
best efforts to obtain a prompt final determination,
decision or settlement of any administrative proceeding or
litigation. The Trustee shall receive and coordinate
notices from holders of the Bonds and give notices to the
Company and the Issuer in connection with such events in
such manner as the Trustee in its discretion deems
reasonable.
(c) The Bonds are subject to redemption prior to their
maturity by the Issuer at the direction of the Company, in
whole, at any time, but not in part, at a redemption price
equal to 100% of the principal amount of the outstanding
Bonds, plus accrued interest thereon to the date of
redemption, without premium, upon prepayment of the payments
relating to the Bonds under the Refunding Agreement upon the
occurrence of any of the following events:
(i) if all or any substantial portion of the
Project is destroyed to such extent that, in the
opinion of the Board of Directors of the Company
expressed in a resolution filed with the Issuer and the
Trustee, it is uneconomical to rebuild, repair or
restore the Project to approximately its condition
prior to such destruction;
(ii) if all or any substantial portion of the
Project is taken by eminent domain which, in the
opinion of the Board of Directors of the Company
expressed in a resolution filed with the Issuer and the
Trustee, will, or is likely to result in the Company
being prevented from carrying on its normal operations
at the Project for a period of six (6) months; or
(iii) a determination by an independent consultant
that technological or regulatory changes make the
continued operation of the Project uneconomical.
The exercise of any such option shall be at the direction of
the Company which shall give written notice to the Issuer and the
Trustee within one hundred twenty (120) days of the occurrence of
an event described in Section 7.1.(c)(i), 7.1.(c)(ii) or
7.1.(c)(iii) above, which notice shall specify that, as determined
by the Company, one or more of such events has occurred or one or
more of such conditions is continuing and also shall specify a
date for redemption not less than 45 nor more than 120 days from
the date such notice is given.
<PAGE>
(d) The Bonds shall be subject to mandatory sinking
fund redemption on June 1 of the years and in the principal
amounts at a redemption price of 100% of the principal
amount of the Bonds to be redeemed, plus interest accrued to
the redemption date as follows:
Bonds maturing on June 1, 2004
Year Amount
1997 $550,000
1998 600,000
1999 650,000
2000 705,000
2001 770,000
2002 830,000
2003 910,000
2004 * 985,000
Bonds maturing on June 1, 2014
Year Amount
1997 $ 340,000
1998 370,000
1999 405,000
2000 440,000
2001 475,000
2002 525,000
2003 565,000
2004 620,000
2005 1,745,000
2006 1,900,000
2007 2,075,000
2008 2,260,000
2009 2,465,000
2010 2,685,000
2011 2,925,000
2012 3,190,000
2013 3,475,000
2014 * 3,790,000
*Final Maturity
SECTION 2.d.Partial Redemption. If less than all of the
Bonds shall be called for redemption, the particular Bonds or
portions of Bonds (in multiples of $100,000 or an integral
multiple of $5,000 in excess thereof) to be redeemed shall be
selected by lot or other customary means by the Trustee in such
manner as the Trustee in its discretion may deem proper in order
to assure to each holder of Bonds a fair opportunity to have his
Bond or Bonds or portions thereof drawn; provided, however, that
the portion of any Bond of a denomination more than $100,000 shall
be $100,000 or an integral multiple of $5,000 in excess thereof.
<PAGE>
Bonds registered in the name of the Company as of the 35th
day preceding the date set for redemption shall be selected first
and if canceled before redemption shall be deemed redeemed for
purposes of redemption of the required principal amount of Bonds.
If there shall be drawn for redemption less than the principal
amount of a Bond, the Issuer shall execute and the Trustee shall
authenticate and shall deliver, upon surrender of such Bond,
accompanied by instruments of transfer, where appropriate, without
charge to the owner thereof, fully registered Bonds of like
maturity and interest rate in any of the authorized denominations,
which shall correspond to the unredeemed balance of the
surrendered Bond.
SECTION 3.d.Notice of Redemption. Notice of a call for
redemption shall be given by the Trustee not less than 30 days
prior to the date fixed for redemption by mailing a notice by
first class mail, postage prepaid to the registered owners of the
Bonds to be redeemed at the registered addresses shown on the Bond
Register of the Trustee as of the 45th day preceding the
redemption date, but failure to mail any such notice and any
defect in any such notice or the mailing thereof, as it affects
any particular Bond, shall not affect the validity of the
proceedings for the redemption of any other Bond. Such notice
(other than a notice of redemption pursuant to Section 7.1(d)
above) may state that redemption is conditional upon the deposit
of the funds necessary to effectuate the redemption, and that the
notice will be of no effect if such deposit is not made. So long
as Cede & Co. is the registered owner of the Bonds, as nominee of
DTC, notice of any redemption will be given by the Trustee to Cede
& Co., not the Beneficial Owners of the Bonds. If funds are
deposited (as more fully described herein) with the Trustee
sufficient to pay the redemption price of any Bonds, either at
maturity or by call for redemption or otherwise, together with
interest accrued to the redemption date, as provided in and
limited by the terms of this Indenture, interest on such Bonds
will cease to accrue on the redemption date, and thereafter
payment to the registered owners will be restricted to the funds
so deposited.
SECTION 4.d.Effect of Redemption. On the date fixed for
redemption, proper notice having been given for the payment of the
principal of, redemption premium, if any, and any accrued interest
to the redemption date and such amounts being held in trust for
the registered owners of the Bonds or portions thereof to be
redeemed, the Bonds or portions of the Bonds so called for
redemption shall become and be due and payable at the redemption
price provided for redemption of such Bonds or portions of Bonds
so called for redemption. The interest on such Bonds or portions
of Bonds shall cease to accrue, and such Bonds shall cease to be
entitled to any benefit or security under the Indenture. The
registered owners of such Bonds or such portions of Bonds shall
have no rights in respect thereof except to receive payment of the
redemption price thereof and to receive Bonds for any unredeemed
portions of Bonds. If less than all of the Bonds of any one
maturity have been called for redemption, the particular Bonds or
portions of Bonds to be redeemed shall be selected by lot by the
Trustee in such manner as the Trustee shall determine.
<PAGE>
The Bonds and portions of Bonds which are subject to
redemption prior to maturity and which have been duly called for
redemption, or with respect to which irrevocable instructions to
call for redemption at a stated redemption date have been given to
the Trustee, and for which moneys sufficient (or Government
Obligations the principal of and the interest on which will
provide moneys sufficient) to pay the principal of, redemption
premium, if any, and interest on such Bonds to the applicable
redemption or payment dates, shall be held in a separate account
for the registered owners of the Bonds or portions thereof to be
redeemed or paid, all as provided herein, shall not thereafter be
deemed to be outstanding hereunder, and shall cease to be entitled
to any security or benefit under this Indenture, other than the
right to receive payment from such moneys or Government
Obligations.
ARTICLE VIII
PARTICULAR COVENANTS
SECTION 1.d. Payment of Principal, Premium and Interest. The
Issuer covenants that it will promptly pay the principal of,
premium, if any, and interest on every Bond issued under this
Indenture but only from the Dedicated Revenues of the Issuer as
provided herein at the place, on the dates, from the funds and in
the manner provided herein and in said Bonds according to the true
intent and meaning thereof.
SECTION 2.d. Trustee Authorized to Require Company to Make
Payments. So long as any of the Bonds are outstanding, the
Trustee as assignee of the rights of the Issuer under this
Indenture is authorized to require the Company to pay all of the
payments and other costs and charges payable by the Company under
the Refunding Agreement.
SECTION 3.d. Take Further Action. The Issuer covenants that
it shall from time to time execute and deliver such further
instruments and take such further action as may be reasonable and
as may be required to carry out the purpose of this Indenture;
provided, however, that no such instruments or actions shall
pledge the credit or taxing power of the Issuer.
SECTION 4.d. No Disposition of Revenues. Except as otherwise
permitted in this Indenture or the Refunding Agreement the Issuer
shall not sell, lease or otherwise dispose of the Refunding
Agreement or any of the revenues derived therefrom. Anything in
this Section to the contrary notwithstanding, the Issuer shall not
be precluded from taking such actions with respect to the Project
as shall be necessary in order for it to perform its governmental
functions.
SECTION 5.d. No Extensions. In order to prevent any claims
for interest after maturity, the Issuer will not directly or
indirectly extend or assent to the extension of the time of
payment of claims for interest on any of the Bonds and will not
directly or indirectly be a party to or approve any such
<PAGE>
arrangement by funding claims for interest or in any other manner.
In case any such claim for interest shall be extended or funded in
violation hereof, such claim for interest shall not be entitled,
in case of any default hereunder, to the benefit or security of
this Indenture except subject to the prior payment in full of the
principal of and premium, if any, on all Bonds issued and
outstanding hereunder, and of all claims for interest which shall
not have been so extended or funded.
SECTION 6.d. Faithful Performance. The Issuer covenants that
it will faithfully perform at all times any and all covenants,
undertakings, stipulations and provisions required to be performed
by it and contained in this Indenture, in any and every Bond
executed, and delivered hereunder and in all of its proceedings
pertaining hereto. The Issuer covenants that it is duly
authorized under the laws of the State, including particularly and
without limitation the Act, to issue the Bonds authorized hereby
and to execute this Indenture, to assign the Refunding Agreement
and amounts payable under the Refunding Agreement, and to assign
the payments and amounts hereby assigned in the manner and to the
extent herein set forth; that all action on its part for the
issuance of the Bonds and the execution and delivery of this
Indenture has been duly and effectively taken.
ARTICLE IX
DEFAULT PROVISIONS AND REMEDIES
OF TRUSTEE AND BONDHOLDERS
SECTION 1.d. Events of Default. If any of the following
events occur it is hereby defined as and declared to be and to
constitute an "Event of Default":
(a) Failure in the payment when due of the interest on
any Bond or failure in the payment when due of the principal
or premium, if any, on any Bond, whether at the stated
maturity thereof, or upon proceedings for redemption thereof,
or upon the maturity thereof, by declaration or otherwise;
(b) Default in the performance or observance of any
other of the covenants, agreements or conditions on the part
of the Issuer contained in this Indenture or in the Bonds,
and the continuance thereof for a period of 60 days after
written notice given by the Trustee or by the holders of not
less than 25% in aggregate principal amount of Bonds then
outstanding as provided in Section 9.12 hereof; or
(c) The occurrence or existence of any event, omission
or circumstance which is an "Event of Default" under the
Refunding Agreement.
The term "default" shall mean the events specified in
Sections 9.1.(a), 9.1.(b) and 9.1.(c) above, exclusive of any
period of grace and irrespective of the giving of any written
notice pursuant to this Indenture or the Refunding Agreement.
<PAGE>
SECTION 2.c. Acceleration. Upon the occurrence and
continuance of an Event of Default the Trustee may, and upon the
written request of the holders of not less than a majority in
aggregate principal amount of Bonds then outstanding shall, by
notice in writing delivered to the Issuer and the Company, declare
the principal of all Bonds then outstanding and the accrued
interest thereon to the date of declaration immediately due and
payable; provided, however, that the holders of Bonds then
outstanding may waive any such Event of Default and rescind such
declaration and its consequences as provided in Section 9.11
hereof. Upon any declaration of acceleration hereunder the Issuer
and the Trustee shall immediately declare all payments under the
Refunding Agreement to be immediately due and payable in
accordance with Section 7.2 of the Refunding Agreement.
SECTION 3.c. Trustee May Institute Suits; Proof of Claim.
Upon the occurrence and continuance of any Event of Default, the
Trustee shall have the power to, but unless requested in writing
by the holders of a majority in aggregate principal amount of the
Bonds then outstanding and furnished with satisfactory security
and indemnity as provided in Section 10.1.(i) hereof shall be
under no obligation to, institute and maintain such suits and
proceedings to prevent any impairment of the security under this
Indenture and such suits and proceedings as the Trustee may be
advised by Counsel shall be necessary or expedient to preserve or
protect its interests and the interests of the Bondholders.
The Trustee is authorized and directed, on behalf of the
Bondholders and without any further action by the Bondholders, to
file a proof or proofs of claim in any bankruptcy, receivership or
other insolvency proceeding involving the Company.
SECTION 4.c. Remedies on Events of Default. Upon the
occurrence and continuance of an Event of Default the Trustee may
proceed to pursue any available remedy to enforce the First
Preferred Vessel Mortgage and the payment of the principal of,
premium, if any, and interest on the Bonds then outstanding,
including, without limitation, mandamus.
If an Event of Default shall have occurred, and if requested
to do so by the holders of not less than a majority in aggregate
principal amount of the Bonds then outstanding and indemnified as
provided hereinafter in Section 10.1.(i) hereof, the Trustee shall
be obligated to exercise such one or more of the rights and powers
conferred by this Section and by Section 9.3 as the Trustee, being
advised by Counsel, shall deem most expedient in the interest of
the Bondholders.
No remedy by the terms of this Indenture conferred upon or
reserved to the Trustee (or to the Bondholders) is intended to be
exclusive of any other remedy, but each and every remedy shall be
cumulative and shall be in addition to any other remedy given to
the Trustee or to the Bondholders hereunder or now or hereafter
existing by law.
No delay or omission to exercise any right or power accruing
upon any default or Event of Default shall impair any such right
<PAGE>
or power or shall be construed to be a waiver of any such default
or Event of Default or acquiescence therein; and every such right
and power may be exercised from time to time and as often as may
be deemed expedient.
No waiver of any default or Event of Default hereunder,
whether by the Trustee or by the Bondholders, shall extend to or
shall affect any subsequent default or Event of Default or shall
impair any rights or remedies consequent thereon.
SECTION 5.c. Bondholders to Direct Trustee. Anything in this
Indenture to the contrary notwithstanding, the holders of a
majority in aggregate principal amount of Bonds then outstanding
shall have the right, at any time, by an instrument or instruments
in writing executed and delivered to the Trustee, to direct the
method and place of conducting all proceedings to be taken in
connection with the enforcement of the terms and conditions of
this Indenture or any other proceedings hereunder; provided,
however, that such direction shall not be otherwise than in
accordance with the provisions of law or of this Indenture and
shall not, in the opinion of the Trustee, unduly prejudice the
rights of Bondholders who are not in such majority. Without
limitation of the foregoing, any such remedial proceeding may
include, to the extent in accordance with law and as directed by
Bondholders in accordance with the provisions of this Indenture,
including providing reasonable indemnity for all costs or
liabilities arising therefrom, forbearance or non-action on the
part of the Trustee, the acceptance by the Trustee, as mortgagee
under the First Preferred Vessel Mortgage, of a deed in lieu of
foreclosure, the sale of the property covered by the First
Preferred Vessel Mortgage free of the lien thereof for an amount
less than the amounts due with respect to the Bonds and the waiver
of claims or the granting of a covenant not to sue.
SECTION 6.c.Enforcement of Bond Documents. Notwithstanding
Section 9.5 above, or any other provision of this Indenture, the
holders of at least 75% in aggregate principal amount of the then
outstanding Bonds shall have the right to take any and all actions
in their own name for the benefit of the holders of all
outstanding Bonds to enforce this Indenture in accordance with the
provisions of this Article IX, and to enforce the Refunding
Agreement and the First Preferred Vessel Mortgage, provided that
with respect to any such action such Bondholders shall act in
concert and not individually. In addition, upon providing
reasonable indemnity for costs or liabilities arising therefrom,
such Bondholders shall have the right to act in the name of the
Trustee. In the event that such Owners elect to take such action,
they shall notify the Trustee in writing of their election and any
costs incurred in connection with the taking of such action shall
be treated as costs of the Trustee and shall be subject to the
same repayment, lien and security rights.
SECTION 7.c. Application of Moneys. All money received by
the Trustee pursuant to any right given or action taken under the
provisions of this Article shall be applied first to the payment
of the costs and expenses of the proceedings resulting in the
collection of such money and of the Administrative Expenses,
<PAGE>
liabilities and advances incurred or made by the Trustee hereunder
except as a result of its gross negligence or bad faith. The
balance of such money, after providing for the foregoing, shall be
deposited by the Trustee in the Bond Fund and all money in the
Bond Fund shall be applied as follows:
(a) Unless the principal of all the Bonds shall have
become or shall have been declared due and payable, all such
money shall be applied:
First - To the payment to the persons entitled
thereto of all installments of interest then due on the
Bonds, in the order of maturity of the installments of
such interest and, if the amount available shall not be
sufficient to pay in full any particular installment,
then to the payment ratably, according to the amounts
due on such installment, to the persons entitled
thereto, without any discrimination or privilege; and
Second - To the payment to the persons entitled
thereto of the unpaid principal of and premium, if any,
on any of the Bonds which shall have become due (other
than Bonds called for redemption for the payment of
which money is held pursuant to the provisions of this
Indenture), in the order of their due dates, with
interest on such Bonds at the rate provided in Section
9.11 hereof from the respective dates upon which they
become due and, if the amount available shall not be
sufficient to pay in full Bonds due on any particular
date, together with such interest, then to the payment,
ratably, according to the amount of principal, and
premium, if any, due on such date, to the persons
entitled thereto without any discrimination or
privilege.
(b) If the principal of all the Bonds shall have
become due or shall have been declared due and payable, all
such money shall be applied to the payment of the principal,
premium, if any, and interest then due and unpaid upon the
Bonds, without preference or priority of principal over
interest or of interest over principal, or of any installment
of interest over any other installment of interest, or of any
Bond over any other Bond, ratably, according to the amounts
due respectively for principal, premium, if any, and interest
to the persons entitled thereto without any discrimination or
privilege.
(c) If the principal of all the Bonds shall have been
declared due and payable, and if such declaration shall
thereafter have been rescinded and annulled under the
provisions of Section 9.11 hereof, then subject to the
provisions of paragraph (b) of this Section in the event that
the principal of all the Bonds shall later become due or be
declared due and payable, the money shall be applied in
accordance with the provisions of paragraph (a) of this
Section.
<PAGE>
Whenever money is to be applied pursuant to the provisions of
this Section, such moneys shall be applied at such times, and from
time to time, as the Trustee shall determine, having due regard to
the amount of such money available for application and the
likelihood of additional money becoming available for such
application in the future. Whenever the Trustee shall apply such
funds, it shall fix the date (which shall be an Interest Payment
Date unless it shall deem another date more suitable) upon which
such application is to be made and upon such date interest on the
amounts of principal to be paid on such date shall cease to
accrue. The Trustee shall give such notice as it may deem
appropriate of the deposit with it of any such money and of the
fixing of any such date, and shall not be required to make payment
to the holder of any Bond until such Bond shall be presented to
the Trustee for appropriate endorsement or for cancellation if
fully paid.
Whenever all the Bonds and interest thereon have been paid
under the provisions of this Section 9.7 and all expenses and
charges of the Trustee and the Issuer have been paid, any balance
remaining in the Bond Fund shall be paid as provided in Section
6.4 hereof.
SECTION 8.c. Trustee as Representative of the Bondholders.
All rights of action (including the right to file proofs of claim
under this Indenture or under any of the Bonds) may be enforced by
the Trustee without the possession of any of the Bonds or the
production thereof in any trial or other proceedings relating
thereto and any such suit or proceedings instituted by the Trustee
shall be brought in its name as Trustee without the necessity of
joining as plaintiffs or defendants any holders of the Bonds, and
any recovery of judgment shall be for the equal and ratable
benefit of the holders of the outstanding Bonds.
SECTION 9.c. Enforcement by Bondholders. Except as provided
in Section 9.6 above, no holder of any Bond shall have any right
to institute any suit, action, or proceeding for the enforcement
of any covenant or provision of this Indenture or for the
appointment of a receiver or any other remedy hereunder, unless
(i) a default has occurred of which the Trustee has been notified
as provided in Section 10.1.(g), or of which by said subsection it
is deemed to have notice; (ii) such default shall have become an
Event of Default and such Event of Default is then continuing;
(iii) the holders of not less than a majority in aggregate
principal amount of Bonds then outstanding shall have made written
request to the Trustee and shall have offered reasonable
opportunity either to proceed to exercise the powers hereinbefore
granted or to institute such action, suit or proceeding in the
Trustee's name and shall have offered to the Trustee security or
indemnity as provided in Section 10.1.(i); and (iv) the Trustee
shall thereafter fail or refuse to exercise the powers
hereinbefore granted or to institute such action, suit or
proceeding in its own name. Such notification, request and offer
of security or indemnity are hereby declared in every case at the
option of the Trustee to be conditions precedent to the execution
<PAGE>
of the powers and trusts of this Indenture, and to any action or
cause of action for the enforcement of this Indenture, or for the
appointment of a receiver or for any other remedy hereunder, it
being understood and intended that no one or more holders of the
Bonds shall have any right in any manner whatsoever to enforce any
right hereunder except in the manner herein provided, and that all
proceedings shall be instituted, and maintained in the manner
herein provided and for the equal and ratable benefit of the
holders of all Bonds then outstanding.
Nothing in this Indenture contained shall, however, affect or
impair any right to enforcement conferred on any Bondholder by law
or right of any Bondholder to enforce the payment of the principal
of, premium, if any, and interest on any Bond at and after the
maturity thereof, or the obligation of Issuer to pay the principal
of, premium, if any, and interest on each of the Bonds issued
hereunder to the respective holders thereof at the time, place,
from the source and in the manner in said Bonds and this Indenture
expressed.
SECTION 10.c. Rights to Continue. In case the Trustee shall
have proceeded to enforce any right under this Indenture by the
appointment of a receiver or otherwise, and such proceedings shall
have been discontinued or abandoned for any reason, or shall have
been determined adversely, then and in every such case the Issuer,
the Trustee and the Bondholders shall be restored to their former
positions and rights hereunder and all rights, remedies and powers
of the Trustee shall continue as if no such proceedings had been
taken.
SECTION 11.c. Waivers of Default. To the extent not
precluded by law the Trustee may in its discretion waive any
default or Event of Default hereunder and its consequences and
rescind any declaration of maturity of principal, and shall do so
upon the written request of the holders of not less than a
majority in aggregate principal amount of all the Bonds then
outstanding; provided, however, that there shall not be waived (a)
any Event of Default in the payment of the principal or premium,
if any, of any outstanding Bonds at the date of maturity specified
therein or the date fixed for redemption thereof or (b) any Event
of Default in the payment when due of interest on any such Bonds,
unless prior to such waiver or rescission, all arrears of
interest, or all arrears of payment of principal then due, as the
case may be, together with interest (to the extent permitted by
law), at the rate per annum borne by any of the Bonds, on overdue
principal and interest, and all Administrative Expenses of the
Trustee in connection with such default shall have been paid or
provided for, and in case of any such waiver or rescission, or in
case any proceeding taken by the Trustee on account of any such
default shall have been discontinued or abandoned or determined
adversely, then and in every such case the Issuer, the Trustee and
the Bondholders shall be restored to their former positions and
rights hereunder, respectively, but no such waiver or rescission
shall extend to any subsequent or other default, or impair any
right consequent thereon.
<PAGE>
SECTION 12.c. Right to Cure Defaults. No default specified
in Section 9.1.(b) shall constitute an Event of Default until
notice of the default by registered or certified mail shall be
given by the Trustee, or by the holders of not less than a
majority of the aggregate principal amount of Bonds then
outstanding, to the Issuer and the Company and the Issuer and the
Company shall have had 60 days after receipt of such notice to
correct said default or cause the default to be corrected, and
shall not have corrected the default or caused the default to be
corrected within such period; provided, however, if the default be
such that it can, in the opinion of the Issuer and the Company, be
corrected but not within such period, it shall not constitute an
Event of Default if corrective action is instituted by the Issuer
or the Company within such period, and the Issuer and the Company
notifies the Trustee of such corrective action and undertakes to
diligently pursue and does diligently pursue such corrective
action until the default is corrected.
With regard to any alleged default concerning which notice is
given to the Issuer and the Company under the provisions of this
Section 9.12, the Issuer has in the Refunding Agreement granted to
the Company full authority for the account of the Issuer to
perform any covenant or obligation alleged in said notice to
constitute a default, in the name and stead of the Issuer, with
full power to do any and all such things and acts to the same
extent that the Issuer could do to correct such default and
perform any such things and acts and with power of substitution to
correct such default and the Trustee hereby agrees to accept such
performance.
ARTICLE X
THE TRUSTEE AND PAYING AGENT
SECTION 1.c.Acceptance of Trust and Conditions Thereof. The
Trustee hereby accepts the trusts imposed upon it by this
Indenture, and agrees to perform said trusts, but only upon and
subject to the following express terms and conditions:
(a) The Trustee may execute any of the trusts or
powers hereof and perform any of its duties by or through
Counsel, agents, receivers or employees but shall be
answerable for the conduct of the same in accordance with the
standard specified herein, and shall be entitled to advice of
Counsel concerning all matters of trust hereof and the duties
hereunder, and may in all cases pay such reasonable
compensation to all such Counsel, agents, receivers and
employees as may reasonably be employed in connection with
the trusts hereof. The Trustee may act upon the opinion or
advice of Counsel in the exercise of its reasonable judgment.
The Trustee shall not be responsible for any loss or damage
resulting from any action or nonaction in good faith in
reliance upon such opinion or advice.
(b) The Trustee shall not be responsible for, nor have
any liability with respect to, any recital herein or in the
Bonds (except in respect of the certificate of the Trustee
endorsed on the Bonds), insuring the Project or collecting
<PAGE>
any insurance proceeds, the maintenance, validity or
sufficiency of the security for the Bonds issued hereunder or
intended to be secured hereby, the value or title of the
Project or otherwise as to the maintenance of the security
hereof, but the Trustee may require of the Issuer or the
Company full information and advice as to the performance of
the covenants, conditions and agreements aforesaid as to the
condition of the Project.
(c) The Trustee shall not be accountable for, or have
any liability with respect to, the use of any Bonds
authenticated or delivered hereunder after such Bonds shall
have been delivered in accordance with instructions of the
Issuer. The Trustee may become the owner of Bonds secured
hereby with the same rights which it would have if it were
not the Trustee.
(d) The Trustee shall be fully protected in acting
upon any notice, request, consent, certificate, order,
affidavit, letter, telegram or other paper or document
believed to be genuine and correct and to have been signed or
sent by the proper person or persons. Any action taken by the
Trustee pursuant to this Indenture upon the request or
authority or consent of any person who at the time of making
such request or giving such authority or consent is the owner
of any Bond, shall be conclusive and binding upon all future
owners of the same Bond or portions thereof and upon Bonds
issued in exchange therefor or for portions thereof or in
place thereof.
(e) As to the existence or non-existence of any fact
or as to the sufficiency or validity of any instrument, paper
or proceeding, the Trustee shall be entitled to rely upon a
certificate of the Issuer signed by (i) the Chairman or the
Secretary of the Issuer, or (ii) any other duly authorized
person (such authority to be conclusively evidenced by an
appropriate Certified Resolution of the Issuer) or any
certificate signed by an Authorized Company Representative as
sufficient evidence of the facts therein contained, and prior
to the occurrence of a default of which the Trustee has been
notified as provided in Section 10.1.(g), or of which by said
subsection it is deemed to have notice, the Trustee shall
also be at liberty to accept a similar certificate to the
effect that any particular dealing, transaction or action is
necessary or expedient, but may at its discretion secure such
further evidence deemed necessary or advisable, but shall in
no case be bound to secure the same. The Trustee may accept
a certificate of the Secretary of the Issuer under its seal
to the effect that a resolution or ordinance in the form
therein set forth has been adopted by the Issuer as
conclusive evidence that such resolution or ordinance has
been duly adopted, and is in full force and effect.
(f) The permissive right of the Trustee to do things
enumerated in this Indenture shall not be construed as a duty
and the Trustee shall not be answerable for other than its
gross negligence, bad faith or willful misconduct.
<PAGE>
(g) Except for (i) a default under Section 9.1(a)
hereof, or (ii) a default specified in Section 7.1(a) of the
Refunding Agreement, or (iii) the failure of the Company to
file any financial statements, documents or certificates
specifically required to be filed with the Trustee or the
Issuer pursuant to the provisions of this Indenture, the
Refunding Agreement or the First Preferred Vessel Mortgage,
or (iv) any other event of which a "responsible trust
officer" has "actual knowledge" and which event, with the
giving of notice or lapse of time or both, would constitute
an Event of Default under this Indenture or the Refunding
Agreement, the Trustee shall not be deemed to have notice of
any default or event unless specifically notified in writing
of such event by the Company, the Issuer or the holders of
not less than a majority in aggregate principal amount of the
Bonds then outstanding. The Trustee pursuant to Section 10.3
hereof, shall give notice to the Registered Owners of the
Bonds of the occurrence of any default or event of which it
has, or is deemed to have, notice pursuant to the foregoing
provisions. As used above, the term "responsible trust
officer" means the trust officer of the Trustee assigned to
supervise this Indenture, and "actual knowledge" means the
actual fact or statement of knowing, without any duty to make
any investigation with regard thereto.
(h) The Trustee shall not be required to give any bond
or surety in respect of the execution of the said trusts and
powers or otherwise in respect of the premises.
(i) Before taking any action hereunder the Trustee may
require satisfactory security or indemnity for the
reimbursement of all expenses to which it may be put and to
protect it against all liability, except liability which is
adjudicated to have resulted from gross negligence, bad faith
or willful misconduct by reason of any action so taken.
Notwithstanding the foregoing, wherever in this Indenture
provision is made for indemnity by the Owners of the Bonds,
if the Owner providing such indemnity has an aggregate net
worth or net asset value of at least $50,000,000, as set
forth in its most recent audited financial statements or as
otherwise satisfactorily demonstrated to the Trustee, at its
sole option and discretion, the Trustee may not require any
indemnity bond or other security for such indemnity. In any
case, where more than one Owner is providing indemnity, such
indemnity shall be several and not joint and, as to each such
Owner, such indemnity obligation shall not exceed its
percentage interest of outstanding Bonds of Owners providing
such indemnity. If provided indemnity, the Trustee shall
utilize counsel or other advisors designated by a majority in
interest of the indemnifying Owners to whom the Trustee has
no reasonable objection and in the event the Trustee requires
independent counsel, the costs and expenses thereof shall be
for its own account and the Trustee shall not have any right
for reimbursement against the Trust Estate or the Owners.
<PAGE>
(j) All money received by the Trustee or any paying
agent shall, until used or applied or invested as herein
provided, be held in trust for the purposes for which it was
received but need not be segregated from other funds except
to the extent required by this Indenture or by law.
(k) The Trustee shall not be bound to make an
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture or other paper or document believed by it to be
genuine and to have been signed or presented by the proper
party or parties, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it
shall be entitled to examine during normal business hours the
books, records and premises of the Issuer, personally or by
agent or by Counsel.
(l) The Trustee, prior to the occurrence of an Event
of Default and after the curing of all Events of Default
which may have occurred, undertakes to perform such duties
and only such duties as are specifically set forth in this
Indenture and the Refunding Agreement. In case an Event of
Default has occurred (which has not been cured or waived)
Trustee shall exercise such of the rights and powers vested
in it by this Indenture and the Refunding Agreement, and use
the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in
the conduct of his own affairs.
SECTION 2.l.Reimbursement of Administrative Expenses. The
Trustee shall be entitled to payment and/or reimbursement for
Administrative Expenses, including reasonable fees for its
services rendered hereunder and all advances, Counsel fees and
other expenses reasonably and necessarily made or incurred by the
Trustee in connection with such services under this Indenture.
The Trustee and any paying agent shall be entitled to payment and
reimbursement for their reasonable fees and charges as paying
agents for the Bonds hereinabove provided. Upon the occurrence of
an Event of Default, but only upon an Event of Default, the
Trustee and any paying agent shall have a first lien with right of
prior payment on account of interest or principal of any Bond for
the foregoing advances, fees, costs and expenses incurred by them
respectively.
The Trustee shall be entitled to be indemnified for, and be
held harmless against, any loss, liability or expense incurred
without gross negligence or bad faith on the part of the Trustee,
arising out of or in connection with the acceptance or
administration of the trusts hereunder, including the costs and
expenses of defending itself against any claim or liability in the
premises. All fees, charges and other compensation to which the
Trustee and any paying agent may be entitled under the provisions
of this Indenture are required to be paid by the Company under the
terms of the Refunding Agreement and accordingly, the Issuer shall
<PAGE>
not be liable to indemnify the Trustee or any paying agent for
fees, charges and other compensation to which the Trustee and any
paying agent may be entitled, and by acceptance of the trusts
hereunder, the Trustee and any paying agent shall be deemed to
have agreed to the foregoing. The Company may, without creating a
default hereunder, contest in good faith the necessity for any
services and expenses of the Trustee and the reasonableness of any
of the fees, charges or expenses referred to in this Section 10.2.
SECTION 3.l.Notice to Bondholders of Event of Default. If a
default or Event of Default occurs of which the Trustee is by
reason of Section 10.1.(g) hereof required to take notice or if
notice of default is given as provided in said Section 10.1.(g),
then the Trustee shall give notice thereof within 60 days after
the occurrence thereof (unless such default shall have been cured
or waived) by mailing written notice thereof to all registered
holders of Bonds, as the names and addresses of such holders
appear in the Bond Register.
SECTION 4.l.Trustee's Right to Intervene. In any judicial
proceeding to which the Issuer is a party and which in the opinion
of the Trustee and its Counsel has a substantial bearing on the
interests of holders of the Bonds, the Trustee may intervene on
behalf of Bondholders and shall do so if requested in writing by
the holders of not less than a majority of the aggregate principal
amount of Bonds then outstanding. The rights and obligations of
the Trustee under this Section are subject to the approval of a
court of competent jurisdiction.
SECTION 5.l.Successor Trustee Upon Merger, Etc. Any
corporation or association into which the Trustee may be merged,
or with which it may be consolidated, or to which it may sell or
transfer its trust business and assets as a whole or substantially
as a whole, or any corporation or association resulting from any
such sale, merger, consolidation or transfer to which it is a
party, ipso facto, shall be and become successor Trustee hereunder
and vested with all the trusts, powers, discretions, immunities,
privileges and all other matters as was its predecessor, without
the execution or filing of any instrument or any further acts,
deed or conveyance on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
SECTION 6.l.Resignation of Trustee. A Trustee and any
successor Trustee may resign by giving 60 days' written notice to
the Issuer and the Company and by first class mail to each
registered owner of Bonds then outstanding as shown on the records
of the Trustee. Such resignation shall take effect only upon the
appointment of a successor Trustee by the Bondholders or by the
Issuer as hereinafter provided. Such notice to the Issuer and the
Company may be served personally or sent by registered mail or
telegram.
SECTION 7.l.Removal of Trustee. The Trustee may be removed
at any time by an instrument or concurrent instruments in writing
delivered to the Trustee, the Issuer and the Company by the owners
of a majority in aggregate principal amount of Bonds then
outstanding.
<PAGE>
SECTION 8.l.Appointment of Successor Trustee. In case the
Trustee hereunder shall resign or be removed, or be dissolved, or
shall be in the course of dissolution or liquidation, or otherwise
become incapable of acting hereunder, or in the case it shall be
taken under control of any public officer or officers, or of a
receiver appointed by a court, a successor may be appointed by the
owners of a majority in aggregate principal amount of Bonds then
outstanding, by an instrument or concurrent instruments in writing
signed by such owners, or by their attorneys-in-fact, duly
authorized; provided, however, that in case of such vacancy the
Issuer, at the direction of the Company by an instrument executed
and signed by the Chairman of the Issuer and under its seal
attested by its Secretary, shall forthwith appoint a temporary
Trustee to fill such vacancy until a successor Trustee shall be
appointed by the Bondholders in the manner above provided (subject
to the approval of the Company provided that the Company is not in
default under the Refunding Agreement), and any such temporary
Trustee as appointed by the Issuer shall immediately and without
further act be superseded by the successor Trustee so appointed by
such Bondholders. Every such Trustee and temporary Trustee
appointed pursuant to the provisions of this Section shall be a
corporation organized and doing business under the laws of the
United States of America or of any state, authorized under such
laws to exercise corporate trust powers having a reported capital
and surplus of not less than $50,000,000, subject to supervision
or examination by federal or state authority, if there be such an
institution willing, qualified and able to accept the trust upon
reasonable or customary terms.
SECTION 9.l.Acceptance by Successor Trustee. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver
to its predecessor and also to the Issuer and the Company an
instrument in writing accepting such appointment hereunder, and
thereupon such successor, without any further act, deed or
conveyance, shall become fully vested with all the estates,
properties, rights, powers, trusts, duties and obligations of its
predecessors; but such predecessor Trustee shall, nevertheless, on
the written request of the Issuer, or of its successor, execute
and deliver an instrument transferring to such successor Trustee
all the estates, properties, rights, powers and trusts, duties and
obligations of such predecessor hereunder, and every predecessor
Trustee shall deliver all securities and money held by it as
Trustee hereunder to its successor. Should any instrument in
writing from the Issuer be required by a successor Trustee for
more fully and certainly vesting in such successor the estate,
rights, powers and duties hereby vested or intended to be vested
in the predecessor, any and all such instruments in writing shall,
on request, be executed, acknowledged and delivered by the Issuer.
SECTION 10.l.Reliance Upon Instruments. The ordinances,
resolutions, opinions, certificates and other instruments provided
for in this Indenture may, in the absence of actual knowledge to
the contrary, be accepted by the Trustee as conclusive evidence of
the facts and conclusions stated therein and shall be full
warrant, protection and authority to the Trustee for the
withdrawal of cash hereunder, and the taking or omitting to take
of any other action under this Indenture.
<PAGE>
SECTION 11.l.Former Trustee No Longer Custodian or Paying
Agent. Any Trustee which has resigned or been removed shall cease
to be custodian of the funds, Bond Registrar and paying agent for
principal, premium, if any, and interest on the Bonds and the
successor Trustee shall become such custodian, Bond Registrar and
paying agent.
SECTION 12.l.Directions from Company; Company May Perform.
Whenever after a reasonable request by the Company the Issuer
shall fail, refuse or neglect to give any direction to the Trustee
or to require the Trustee to take any other action which the
Issuer is required to have the Trustee take pursuant to the
provisions of the Refunding Agreement or this Indenture, the
Company instead of the Issuer may give any such direction to the
Trustee or require the Trustee to take any such action, and the
Trustee is hereby irrevocably empowered and directed to accept
such direction from the Company as sufficient for all purposes of
this Indenture. The Company shall have the right to cause the
Trustee to comply with any of the Trustee's obligations under this
Indenture to the same extent that the Issuer is empowered so to
do.
The Issuer and the Trustee acknowledge that certain actions
or failures to act by the Issuer under this Indenture may create
or result in a default hereunder and the Issuer hereby agrees that
the Company may perform any and all acts or take such action as
may be necessary for and on behalf of the Issuer to prevent or
correct said default and the Trustee agrees that it shall take or
accept such performance by the Company as performance by the
Issuer in such event.
ARTICLE XI
SUPPLEMENTAL INDENTURES
SECTION 1.l.Supplemental Indentures Not Requiring Consent of
Bondholders. The Issuer and the Trustee may without the consent
of, or notice to, any of the Bondholders, enter into an indenture
or indentures supplemental to this Indenture as shall not be
inconsistent with the terms and provisions hereof for any one or
more of the following purposes:
(a) To add to the covenants and agreements of the
Issuer contained in this Indenture other covenants and
agreements thereafter to be observed, and to surrender any
right or power herein reserved to or conferred upon the
Issuer.
(b) To modify any of the provisions of this Indenture
or relieve the Issuer from any of the obligations,
conditions, or restrictions herein contained; provided, that
no such modification or release shall be or become operative
or effective which shall in any manner impair any of the
rights of the Bondholders or the Trustee; and provided
further, that the Trustee may in its sole discretion decline
to enter into any such supplemental indenture which in its
opinion may not afford adequate protection to the Trustee
when the same shall become operative.
<PAGE>
(c) To cure any ambiguity or to cure, correct, or
supplement any defect or inconsistent provision contained in
this Indenture or in any supplemental indenture in a manner
which, in the opinion of bond counsel of nationally
recognized standing, is not adverse to the interests of the
Bondholders.
(d) To make such provision in regard to matters or
questions arising under this Indenture as may be necessary or
desirable and not inconsistent with this Indenture and not,
in the opinion of bond counsel of nationally recognized
standing, adverse to the interests of the Bondholders.
(e) To make any other change which, in the opinion of
bond counsel of nationally recognized standing, does not
materially adversely affect the rights of the Issuer or any
Bondholder.
SECTION 2.e.Supplemental Indentures Requiring Consent of
Bondholders. Exclusive of Supplemental Indentures covered by
Section 11.1 hereof and subject to the terms and provisions
contained in this Section 11.2, and not otherwise, the holders of
not less than a majority in aggregate principal amount of the
Bonds then outstanding shall have the right, from time to time,
anything contained in this Indenture to the contrary
notwithstanding, to consent to and approve the execution by the
Issuer and the Trustee of such other indenture or indentures
supplemental hereto as shall be deemed necessary or desirable by
the Issuer for the purpose of modifying, altering, amending,
adding to or rescinding, in any particular, any of the terms or
provisions contained in this Indenture or in any Supplemental
Indenture; provided, however, that nothing in this Indenture
contained shall permit, or be construed as permitting without the
consent of the holders of all Bonds then outstanding and affected
thereby (a) an extension of the maturity of the principal of, or
the interest on, or redemption date of any Bond issued hereunder,
(b) a reduction in the principal amount of any Bond or the rate of
interest or redemption premium thereon, (c) a privilege or
priority of any Bond or Bonds over any other Bond or Bonds, (d) a
reduction in the aggregate principal amount of the Bonds required
for consent to such modification, amendment or Supplemental
Indenture, or (e) impairment of the exclusion from gross income
for federal income tax purposes of interest on any of the
outstanding Bonds.
If at any time the Issuer shall request the Trustee to enter
into such Supplemental Indenture for any of the purposes of this
Section 11.2, the Trustee shall, upon being satisfactorily
indemnified with respect to expenses, cause notice of proposed
execution of such Supplemental Indenture to be given by mailing a
notice by first class mail, postage prepaid to the registered
owners of the Bonds at the registered addresses shown on the Bond
Register of the Trustee. Such notice shall briefly set forth the
nature of the proposed Supplemental Indenture and shall state that
<PAGE>
copies thereof are on file at the principal office of the Trustee
for inspection by all Bondholders. If, within 60 days or such
longer period as shall be prescribed by the Issuer following the
giving of such notice, the holders of not less than a majority in
aggregate principal amount of the Bonds outstanding shall have
consented and approved the execution thereof as herein provided,
no holder of any Bond shall have any right to object to any of the
terms and provisions contained therein, or the operation thereof,
or in any manner to question the propriety of the adoption
thereof, or to enjoin or restrain the Trustee or the Issuer from
taking any action pursuant to the provisions thereof. Upon the
execution of any such Supplemental Indenture as in this Section
11.2 permitted and provided, this Indenture shall be and be deemed
to be modified and amended in accordance therewith.
SECTION 3.e.Consent of the Company and the Trustee. Anything
herein to the contrary notwithstanding, a Supplemental Indenture
under this Article XI shall not become effective unless and until
the Company shall have consented to execution of such Supplemental
Indenture, provided that the Company is not in default under the
terms of the Refunding Agreement. The Company shall be deemed to
have consented to the execution of any such Supplemental Indenture
if the Issuer does not receive a letter of protest or objection
thereto signed by or on behalf of the Company on or before 3:30
p.m. local time in the City of New York, New York, of the 30th day
after the delivery of a notice and a copy of the proposed
Supplemental Indenture to Company by registered or certified mail.
If the Company is so deemed to have consented to execution of any
such Supplemental Indenture, the Issuer shall furnish to the
Trustee a certificate that the Issuer has not received the
necessary letter of protest or objection within the required time
period, and in relying upon such certificate, the Trustee shall be
fully protected from liability.
Anything herein to the contrary notwithstanding, a
Supplemental Indenture under this Article XI which affects any
rights of the Trustee shall not become effective unless and until
the Trustee shall have consented in writing to the execution of
such Supplemental Indenture.
ARTICLE XII
AMENDMENT OF REFUNDING AGREEMENT
SECTION 1.e.Amendment to Refunding Agreement Not Requiring
Consent of Bondholders. The Issuer and the Trustee may without
the consent of or notice to the Bondholders consent to any
modification or amendment of the Refunding Agreement as may be
required (i) by the provisions of the Refunding Agreement or this
Indenture, (ii) for the purpose of curing any ambiguity or formal
defect or omission in a manner not adverse to the interest of the
Bondholders, or (iii) in connection with any other change therein
which, in the judgment of the Trustee, is not adverse to the
interests of the Trustee or the Bondholders.
SECTION 2.e.Amendment to Refunding Agreement Requiring
Consent of Bondholders. Except for the modifications or
<PAGE>
amendments as provided in Section 12.1 hereof, neither the Issuer
nor the Trustee shall consent to any other modification or
amendment of the Refunding Agreement without the giving of notice
and the written approval or consent of the holders of not less
than a majority in aggregate principal amount of the Bonds then
outstanding given and procured as in Section 11.2 provided. If at
any time the Issuer and the Company shall request the consent of
the Trustee to any such proposed modification or amendment of the
Refunding Agreement, the Trustee shall, upon being satisfactorily
indemnified with respect to expenses, cause notice of such
proposed modification or amendment to be given in the same manner
as provided by Section 11.2 hereof with respect to Supplemental
Indentures. Such notice shall briefly set forth the nature of
such proposed modification or amendment and shall state that
copies of the instrument embodying the same are on file at the
principal office of the Trustee for inspection by all Bondholders.
If within 60 days or such longer period as shall be prescribed by
the Issuer following the mailing of such notice, the holders of
not less than a majority in aggregate principal amount of the
Bonds outstanding at the time of the execution of any such
modification or amendment of the Refunding Agreement shall have
consented to and approved the execution thereof as herein
provided, no holder shall be entitled to object to the terms and
provisions contained therein, or the operation thereof, or to
question the propriety of the execution thereof, or to enjoin or
restrain the Company or the Issuer from executing the same or from
taking any action pursuant to the provisions thereof. Upon the
execution of any such modification or amendment of the Refunding
Agreement in this Section 12.2 permitted and provided, the
Refunding Agreement shall be deemed to be modified and amended in
accordance therewith. Nothing in this Section contained shall
permit, or be construed as permitting, any reduction in or
postponement or extension of the Repayments required to be paid
pursuant to Section 3.1 of the Refunding Agreement or any
reduction in the percentage of holders of outstanding Bonds whose
consent is required for any such change, modification or
alteration without the consent of the holders of all Bonds then
outstanding.
Anything herein to the contrary notwithstanding, any
modification or amendment of the Refunding Agreement under this
Article XII which affects any rights of the Trustee shall not
become effective unless and until the Trustee shall have consented
in writing to the execution of any such modification or amendment
of the Refunding Agreement.
ARTICLE XIII
DEFEASANCE
SECTION 1.e.Discharge of Bonds; Release of Security. If the
Issuer shall pay or cause to be paid to the holders of all
outstanding Bonds the principal, premium, if any, and interest due
or to become due thereon at the times and in the manner stipulated
therein and herein, and if the Issuer shall have kept, performed
and observed all and singular the covenants and promises in the
<PAGE>
Bonds and in this Indenture expressed as to be kept, performed and
observed by it or on its part, then the pledge of any of the
Dedicated Revenues of the Issuer under this Indenture and all
covenants, agreements and other obligations of the Issuer to the
holders shall cease, terminate and be void. In such event the
Trustee shall execute and deliver to the Issuer such instruments
in writing as shall be requisite to evidence the discharge and
satisfaction of the Issuer's obligations under this Indenture, and
assign and deliver to the Issuer any property at the time which
may then be in its possession, except amounts required to be paid
to the Company under Section 6.4 hereof, which shall be assigned
and delivered to the Company, and except cash or securities held
by the Trustee for the payment of principal (and premium, if any)
and of interest on the Bonds.
The principal of, premium, if any, and interest on the Bonds
shall, prior to the maturity or redemption date thereof, be deemed
to have been paid within the meaning and with the effect expressed
in this Article if (a) there shall have been deposited with the
Trustee either (i) money in an amount which shall be sufficient or
(ii) non-callable Government Obligations the principal of and
interest on which, when due, and without further reinvestment,
will provide money, which together with the money (if any)
deposited with the Trustee at the same time, shall be sufficient,
to pay when due the principal of, premium, if any, and interest
due and to become due on said Bonds on and prior to the redemption
date or maturity date thereof, as the case may be, and (b) in the
case of such redemption, notice of such redemption shall have been
duly given or, in the event Bonds are not by their terms subject
to redemption within the next succeeding 60 days, the Issuer shall
have given the Trustee in form satisfactory to it irrevocable
instructions to give a notice to the Bondholders that the deposit
required by (a) above has been made with the Trustee and that said
Bonds are deemed to have been paid in accordance with this Article
and stating such maturity or redemption date upon which money is
available for payment of the principal of, premium, if any, and
interest on said Bonds. Said notice shall be given in the manner
set forth in Section 7.3 hereof. Neither non-callable Government
Obligations nor money deposited with the Trustee pursuant hereto
shall be used for any purpose other than, and shall be held in
trust for, the payment of the principal of, premium, if any, and
interest on said Bonds; provided, however, that any cash received
from such principal or interest payments on such non-callable
Government Obligations deposited with the Trustee, not then needed
for such purpose, may, to the extent practicable, be reinvested in
Government Obligations and interest earned from such reinvestment
shall be paid over to the Company, after all such Bonds have been
fully paid as to principal, interest and redemption premium, if
any.
ARTICLE XIV
MISCELLANEOUS
SECTION 1.e.Beneficiaries. With the exception of rights
herein expressly conferred, nothing expressed or mentioned in or
to be implied from this Indenture or the Bonds is intended to or
<PAGE>
shall be construed to give any person other than the Issuer, the
Trustee, the Company and the holders of the Bonds, any legal or
equitable right, remedy or claim under or in respect to this
Indenture, or any covenants, conditions and provisions herein
contained; this Indenture and all of the covenants, conditions and
provisions hereof being intended to be and being for the sole and
exclusive benefit of such persons.
SECTION 2.e.Severability. If any of the provisions of this
Indenture shall be held or deemed to be or shall, in fact, be
inoperative or unenforceable as applied in any particular case in
any jurisdiction or jurisdictions or in all jurisdictions, or in
all cases, because it conflicts with any other provision or
provisions hereof or any constitution or statute or rule or public
policy, or for any other reason, such circumstances shall not have
the effect of rendering the provision in question inoperative or
unenforceable in any other case or circumstance, or of rendering
any other provision or provisions herein contained invalid,
inoperative, or unenforceable to any extent whatever.
The invalidity of any one or more phrases, sentences, clauses
or Sections in this Indenture shall not affect the remaining
portions thereof.
SECTION 3.e.Notices. All notices, certificates, requests,
complaints, demands, or other communications hereunder shall be
deemed sufficiently given when delivered in writing as follows:
If to the Issuer:Board of Commissioners of the
Port of New Orleans
P. O. Box 60046
New Orleans, LA 70160
Attention: President and Chief Executive
Officer
If to the Company:Avondale Industries, Inc.
5100 River Road
Avondale, LA 70094
Attention: Chief Financial Officer
If to the Trustee:First National Bank of Commerce
210 Baronne Street
New Orleans, LA 70112
Attention: Corporate Trust Department
The Issuer, the Company and the Trustee may by notice given
hereunder designate any further or different addresses to which
subsequent notices, certificates, requests, complaints, demands or
other communications hereunder shall be sent.
SECTION 4.e.Legal Holiday on Payment Dates. In any case
where the date of maturity of interest on or principal of the
Bonds or the date fixed for redemption of any Bonds shall not be a
<PAGE>
Business Day, the payment of interest or principal, and premium,
if any, need not be made on such day but may be made on the next
succeeding Business Day, with the same force and effect as if made
on the date of maturity or the date fixed for redemption, and no
interest shall accrue for the period after such date.
SECTION 5.e.No Recourse Against Issuer. No recourse under or
upon any obligations, covenants or agreements of this Indenture,
or of any Bond, or in any way based thereon or otherwise in
respect thereof, shall be had against any past, present or future
member or officer, as such, of the Issuer or any successor body
politic, either directly or through the Issuer, whether by virtue
of any constitution, statute or rule of law, or by the enforcement
of any assessment or penalty or otherwise, all such liability
being hereby expressly waived and released as a condition of and
as consideration for, the execution of this Indenture and the
issue of the Bonds.
SECTION 6.e.Counterparts. This Indenture may be executed in
any number of counterparts, each of which shall be an original,
but such counterparts shall together constitute but one and the
same instrument.
SECTION 7.e.Applicable Law. This Indenture and each Bond
shall be deemed to be a contract made under the laws of the State
and for all purposes shall be construed in accordance with the
laws of the State.
[BALANCE OF PAGE LEFT BLANK INTENTIONALLY]
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Indenture to
be executed by its President and Chief Executive Officer
thereunto duly authorized and its seal to be hereunto affixed and
attested by its Secretary, and the Trustee has caused this
Indenture to be executed by a Trust Officer thereunto duly
authorized and its corporate seal to be hereunto affixed and
attested by a Vice President and Trust Officer, all as of the day
and year first above written in the presence of the undersigned
competent witnesses.
BOARD OF COMMISSIONERS OF
PORT OF NEW ORLEANS
By: \s\ J. Ron Brinson
ATTEST: President & Chief Executive Officer
By: \s\Signature Unreadable
[SEAL]
Secretary
WITNESSES:
\s\ Denise K. Pugh
\s\ Jane B. Pugh
FIRST NATIONAL BANK OF
COMMERCE, as Trustee
ATTEST: By:\s\ Timothy C. Brennan
Trust Officer
By: \s\ Dennis Milliner
Vice President and
Trust Officer
[SEAL]
WITNESSES:
\s\ Denise K. Pugh
\s\ Jane B. Pugh
<PAGE>
Trust Indenture
Table of Contents
PREAMBLE............................................................ 1
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions.......................................... 4
ARTICLE II
DESCRIPTION, AUTHORIZATION,
MANNER OF EXECUTION, AUTHENTICATION,
REGISTRATION AND TRANSFER OF BONDS
SECTION 2.1. Bonds as Limited Obligations of Issuer............... 9
SECTION 2.2. Issuance and Payment Terms of Bonds.................. 9
SECTION 2.3. Bond Register........................................11
SECTION 2.4. Recital..............................................11
SECTION 2.5. Transfer of Bonds....................................11
SECTION 2.6. Registered Owners....................................12
SECTION 2.7. Temporary Bonds......................................12
SECTION 2.8. Facsimile Signatures.................................12
SECTION 2.9. Mutilated, Lost, Destroyed or Stolen Bonds...........13
SECTION 2.10. Authentication of Bonds by Trustee...................13
SECTION 2.11. Destruction of Bonds.................................13
SECTION 2.12. Book-Entry Registration of Bonds.....................13
ARTICLE III
AUTHENTICATION AND DELIVERY OF BONDS
SECTION 3.1. All Bonds Equally and Ratably Secured................15
SECTION 3.2. Conditions of Authentication.........................15
ARTICLE IV
PROCEEDS OF BONDS
SECTION 4.1. Proceeds of Bonds...................................17
ARTICLE V
PLEDGE AND ASSIGNMENT; BOND FUND;
DEBT SERVICE RESERVE FUND
SECTION 5.1. Pledge of Dedicated Revenues........................18
SECTION 5.2. Bond Fund...........................................18
SECTION 5.3. Deposits into Bond Fund.............................18
SECTION 5.4. Use of Moneys in Bond Fund..........................18
SECTION 5.5. Bond Fund and Debt Service Reserve Fund Sufficient to
Pay All Bonds.......................................18
SECTION 5.6. Creation of the Debt Service Reserve Fund; Payments
Into the Debt Service Reserve Fund..................19
<PAGE>
SECTION 5.7. Use of Moneys in the Debt Service Reserve Fund;
Investment of Debt Service Reserve Fund Moneys......19
ARTICLE VI
SECURITY FOR AND INVESTMENT OF MONEY
SECTION 6.1. Moneys Held in Trust................................21
SECTION 6.2. Bond Fund Investments...............................21
SECTION 6.3. Arbitrage Bond Covenant.............................21
SECTION 6.4. Balance in the Bond Fund and Debt Service Reserve Fund
After Payment of the Bonds......................21
ARTICLE VII
REDEMPTION OF BONDS
SECTION 7.1. Redemption of the Bonds..............................22
SECTION 7.2. Partial Redemption...................................24
SECTION 7.3. Notice of Redemption.................................24
SECTION 7.4. Effect of Redemption.................................25
ARTICLE VIII
PARTICULAR COVENANTS
SECTION 8.1. Payment of Principal, Premium and Interest..........26
SECTION 8.2. Trustee Authorized to Require Company to Make
Payments............................................26
SECTION 8.3. Take Further Action.................................26
SECTION 8.4. No Disposition of Revenues..........................26
SECTION 8.5. No Extensions.......................................26
SECTION 8.6. Faithful Performance................................26
ARTICLE IX
DEFAULT PROVISIONS AND REMEDIES
OF TRUSTEE AND BONDHOLDERS
SECTION 9.1. Events of Default...................................27
SECTION 9.2. Acceleration........................................27
SECTION 9.3. Trustee May Institute Suits; Proof of Claim.........27
SECTION 9.4. Remedies on Events of Default.......................28
SECTION 9.5. Bondholders to Direct Trustee.......................28
SECTION 9.6. Enforcement of Bond Documents.......................28
SECTION 9.7. Application of Moneys...............................29
SECTION 9.8. Trustee as Representative of the Bondholders........30
SECTION 9.9. Enforcement by Bondholders..........................30
SECTION 9.10. Rights to Continue..................................30
SECTION 9.11. Waivers of Default..................................31
SECTION 9.12. Right to Cure Defaults..............................31
ARTICLE X
THE TRUSTEE AND PAYING AGENT
SECTION 10.1. Acceptance of Trust and Conditions Thereof...........32
SECTION 10.2. Reimbursement of Administrative Expenses.............34
SECTION 10.3. Notice to Bondholders of Event of Default............34
SECTION 10.4. Trustee's Right to Intervene.........................35
SECTION 10.5. Successor Trustee Upon Merger, Etc...................35
SECTION 10.6. Resignation of Trustee...............................35
<PAGE>
SECTION 10.7. Removal of Trustee...................................35
SECTION 10.8. Appointment of Successor Trustee.....................35
SECTION 10.9. Acceptance by Successor Trustee......................36
SECTION 10.10. Reliance Upon Instruments............................36
SECTION 10.11. Former Trustee No Longer Custodian or Paying Agent...36
SECTION 10.12. Directions from Company; Company May Perform.........36
ARTICLE XI
SUPPLEMENTAL INDENTURES
SECTION 11.1. Supplemental Indentures Not Requiring Consent of
Bondholders..........................................37
SECTION 11.2. Supplemental Indentures Requiring Consent of
Bondholders..........................................37
SECTION 11.3. Consent of the Company and the Trustee...............38
ARTICLE XII
AMENDMENT OF REFUNDING AGREEMENT
SECTION 12.1. Amendment to Refunding Agreement Not Requiring Consent
of Bondholders.......................................39
SECTION 12.2. Amendment to Refunding Agreement Requiring Consent of
Bondholders..........................................39
ARTICLE XIII
DEFEASANCE
SECTION 13.1. Discharge of Bonds; Release of Security..............40
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1. Beneficiaries........................................41
SECTION 14.2. Severability.........................................41
SECTION 14.3. Notices..............................................41
SECTION 14.4. Legal Holiday on Payment Dates.......................42
SECTION 14.5. No Recourse Against Issuer...........................42
SECTION 14.6. Counterparts.........................................42
SECTION 14.7. Applicable Law.......................................42
EXHIBIT A Bond Form
EXHIBIT B Letter of Representations of The Depository Trust
Company
<PAGE>
EXHIBIT A
TO TRUST INDENTURE
[FORM OF FACE OF BOND]
No. R-__ CUSIP ____________
[Unless this Bond is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer
or its agent for registration of transfer, exchange, or payment, and
any Bond issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and
any payment is made to Cede & Co. or to such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the Registered Owner hereof, Cede & Co., has an
interest herein.]
United States of America
State of Louisiana
Board of Commissioners of the Port of New Orleans
Industrial Revenue Refunding Bond
(Avondale Industries, Inc. Project)
Series 1994
Maturity Date: Date of Conversion to Fixed Rate:
Registered Owner:
Date of this Bond: Fixed Rate:
Principal Amount:
The Board of Commissioners of the Port of New Orleans, a political
subdivision of the State of Louisiana (the "Issuer"), and its
successors and assigns, acknowledges itself indebted for value received
and hereby promises to pay, solely from the sources specified herein
and not otherwise, to the Registered Owner, or registered assigns, on
the Maturity Date stated above, unless paid earlier as provided below,
the Principal Amount shown above, unless redeemed prior thereto as
hereinafter provided, upon presentation and surrender hereof at the
principal corporate trust office of First National Bank of Commerce, of
New Orleans, Louisiana, as trustee (the "Trustee"), and to pay interest
on such Principal Amount from the date hereof, payable semiannually on
June 1 and December 1 (each an "Interest Payment Date"), commencing
December 1, 1994, until the date on which this Bond becomes due,
whether at maturity, by acceleration or redemption. Interest on this
Bond due on each Interest Payment Date is payable by check or draft
mailed to the person who is listed as the Registered Owner hereof as of
the close of business on the fifteenth (15th) day of the calendar month
preceding each Interest Payment Date (the "Regular Record Date") at his
or her address as it appears on the Bond Register; and provided
further, that a Bondholder of $1,000,000 or more in aggregate principal
<PAGE>
amount of the Bonds may request in writing payment of interest on such
Bonds in immediately available funds by wire transfer to the bank
account number of such owner furnished to the Trustee not less than
seven (7) days prior to such Interest Payment Date. The principal of,
redemption premium, if any, and interest on this Bond are payable in
any coin or currency of the United States of America which, at the time
of payment, is legal tender for the payment of public and private
debts.
The Bonds shall bear interest at a Variable Rate as defined in the
Indenture dated as of April 1, 1994, between the Issuer and the Trustee
(the "Indenture"), to but excluding the Fixed Rate Conversion Date (as
defined in the Indenture), and from the Fixed Rate Conversion Date at
the Fixed Rate (as defined in the Indenture) but in no event shall
either the Variable Rate or the Fixed Rate exceed 9% per annum. The
Trustee shall note on the face of the Bond the date of the Fixed Rate
Conversion Rate and the Fixed Rate.
This Bond shall not be valid or become obligatory for any other
purpose or be entitled to any security or benefit under the Indenture
until the Certificate of Authentication inscribed hereon shall have
been signed by the Trustee.
[FOR SO LONG AS THIS BOND IS HELD IN BOOK-ENTRY FORM REGISTERED IN
THE NAME OF CEDE & CO. ON THE REGISTRATION BOOKS OF THE ISSUER KEPT BY
THE TRUSTEE, AS BOND REGISTRAR, THIS BOND, IF CALLED FOR PARTIAL
REDEMPTION IN ACCORDANCE WITH THE INDENTURE, SHALL BECOME DUE AND
PAYABLE ON THE REDEMPTION DATE DESIGNATED IN THE NOTICE OF REDEMPTION
GIVEN IN ACCORDANCE WITH THE INDENTURE AT, AND ONLY TO THE EXTENT OF,
THE REDEMPTION PRICE, PLUS ACCRUED INTEREST TO THE SPECIFIED REDEMPTION
DATE; AND THIS BOND SHALL BE PAID, TO THE EXTENT SO REDEEMED, (i) UPON
PRESENTATION AND SURRENDER THEREOF AT THE OFFICE SPECIFIED IN SUCH
NOTICE OR (ii) AT THE WRITTEN REQUEST OF CEDE & CO., BY CHECK OR DRAFT
MAILED TO CEDE & CO. BY THE TRUSTEE OR BY WIRE TRANSFER TO CEDE & CO.
BY THE TRUSTEE IF CEDE & CO. AS BONDOWNER SO ELECTS. IF, ON THE
REDEMPTION DATE, MONEYS FOR THE REDEMPTION OF BONDS OF SUCH MATURITY TO
BE REDEEMED, TOGETHER WITH INTEREST TO THE REDEMPTION DATE, SHALL BE
HELD BY THE TRUSTEE SO AS TO BE AVAILABLE THEREFOR ON SUCH DATE, AND
AFTER NOTICE OF REDEMPTION SHALL HAVE BEEN GIVEN IN ACCORDANCE WITH THE
INDENTURE, THEN, FROM AND AFTER THE REDEMPTION DATE, THE AGGREGATE
PRINCIPAL AMOUNT OF THIS BOND SHALL BE IMMEDIATELY REDUCED BY AN AMOUNT
EQUAL TO THE AGGREGATE PRINCIPAL AMOUNT THEREOF SO REDEEMED,
NOTWITHSTANDING WHETHER THIS BOND HAS BEEN SURRENDERED TO THE TRUSTEE
FOR CANCELLATION.]
REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH
ON THE REVERSE SIDE HEREOF WHICH SHALL FOR ALL PURPOSES HAVE THE SAME
EFFECT AS THOUGH FULLY SET FORTH HEREIN.
IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions and
things required by the Constitution and statutes of the State of
Louisiana and the Indenture to exist, to have happened and to have been
performed precedent to and in the issuance of this Bond do exist, have
happened and have been performed in due form, time and manner as
required by law.
IN WITNESS WHEREOF, the BOARD OF COMMISSIONERS OF THE PORT OF NEW
ORLEANS has caused this Bond to be executed in its name and on its
behalf by the facsimile signature of its President and Chief Executive
<PAGE>
Officer, and a facsimile of its official seal to be imprinted hereon,
attested by the facsimile signature of its Secretary.
BOARD OF COMMISSIONERS OF THE
PORT OF NEW ORLEANS
By:
____________________________________
ATTEST: President and Chief Executive
Officer
By: ___________________________________ [SEAL]
Secretary
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the within mentioned
Indenture.
FIRST NATIONAL BANK OF COMMERCE,
as Trustee
By:
____________________________________
Authorized Officer
DATE OF AUTHENTICATION:
__________________________
[FORM OF REVERSE OF BOND]
This Bond is one of an authorized issue of bonds of the Issuer in
the aggregate principal amount of $36,250,000, designated as
"Industrial Revenue Refunding Bonds (Avondale Industries, Inc. Project)
Series 1994" (the "Bonds"), authorized by a resolution adopted by the
Issuer on March 31, 1994 and issued under and secured by the Indenture
in full conformity with the Constitution and laws of the State of
Louisiana, including particularly the provisions of Chapter 14-A of
Title 39 of the Louisiana Revised Statutes of 1950, as amended. The
Bonds are issued for the purpose of refunding the Issuer's Industrial
Revenue Bonds (Avondale Shipyards, Inc. Project) Series 1983 (the
"Series 1983 Bonds") in the aggregate principal amount of $36,250,000,
all of which are outstanding as of the date hereof. The Series 1983
Bonds were issued for the purpose of providing funds to refund the
Issuer's outstanding Industrial Revenue Bonds (Avondale Shipyards, Inc.
Project) Series 1981 (the "Series 1981 Bonds"), which Series 1981 Bonds
were issued for the purpose of providing funds to finance the cost of
the acquisition, construction and installation of a floating drydock
<PAGE>
and land-based support facilities for the repair and maintenance of
various types of vessels (the "Project"), which drydock is located
between mile markers 106 and 107 on the right descending bank of the
Mississippi River at the downriver end of the main shipyard of Avondale
Industries, Inc., a Louisiana corporation (the "Company"), located at
5100 River Road, Avondale, Louisiana, in Jefferson Parish, within the
jurisdiction of the Issuer as a part of the public port of the Issuer.
The initial owner and operator of the Project was Avondale Shipyards,
Inc., a Louisiana corporation, and the current owner and operator of
the Project is the Company, successor to Avondale Shipyards, Inc..
This Bond and the series of which it forms a part are limited
obligations of the Issuer and are payable solely from payments to be
made by the Company to the Trustee for the benefit of the Issuer
(except payments with respect to the indemnification or reimbursement
of certain expenses of the Issuer) under a Refunding Agreement dated as
of April 1, 1994, between the Issuer and the Company (the "Refunding
Agreement"), and including all money on deposit in the Debt Service
Reserve Fund (as defined in the Indenture) and all money received under
the Refunding Agreement to be paid into the Bond Fund (as defined in
the Indenture), including the income thereon and investment thereof, if
any, and, in certain events, amounts attributable to Bond proceeds or
amounts obtained through the exercise of certain remedies provided for
in the Indenture. The Bonds are further secured by a First Preferred
Vessel Mortgage on the 650 foot floating drydock constituting a portion
of the Project, granted by the Company to the Trustee. The Bonds shall
never constitute an indebtedness or general obligation of the Issuer or
the State of Louisiana within the meaning of any constitutional or
statutory provision or limitation of indebtedness and shall never
constitute or give rise to a pecuniary liability of the Issuer or the
State of Louisiana or a charge or pledge against the general credit or
taxing power of either. The holder of this Bond shall have no right to
enforce the provisions of the Indenture or to institute action to
enforce the covenants therein, or to take any action with respect to
any event of default under the Indenture, or to institute, appear in or
defend any suit or proceedings with respect thereto, except as provided
in the Indenture.
Reference is hereby made to the Indenture and to all indentures
supplemental thereto or amendatory thereof for a full and complete
statement of the provisions with respect to the custody and application
of the proceeds of the Bonds, the collection and disposition of the
Dedicated Revenues of the Issuer pledged as security for the payment of
the Bonds and the rights of the holders of the Bonds, the terms and
conditions on which, and the purposes for which, the Bonds are issued
and the rights, duties and obligations of the Issuer and the Trustee
thereunder, to all of which the holder hereof, by acceptance of this
Bond, assents. By acceptance of this Bond, the holder hereof
irrevocably appoints the Trustee under the Indenture as the special
attorney-in-fact for such holder vested with full power on behalf of
the holder hereof to effect and enforce the provisions of the Indenture
for the benefit of the holder hereof.
To the extent permitted by and as provided in the Indenture,
modifications or alterations of the Indenture, or of any indenture
supplemental thereto, and of the rights and obligations of the Issuer
and of the holders of the Bonds in any particular may be made with the
consent of the holders of not less than a majority in aggregate
principal amount of the Bonds then outstanding under the Indenture;
<PAGE>
provided, however, that no such modification or alteration shall be
made without the consent of the holders of all Bonds then outstanding
and affected thereby which will permit (a) an extension of the maturity
of the principal of, or the interest on, or redemption date of any Bond
issued under the Indenture, (b) a reduction in the principal amount of
any Bond or the rate of interest or redemption premium thereon, (c) a
privilege or priority of any Bond or Bonds over any other Bond or
Bonds, (d) a reduction in the aggregate principal amount of the Bonds
required for consent to such modification, amendment, or supplemental
indenture, or (e) impairment of the exclusion from gross income for
federal income tax purposes of interest on any of the outstanding
Bonds. Any such consent by the holder of this Bond shall be conclusive
and binding upon such holder and all future holders and owners of this
Bond whether or not any notation of such consent is made upon this
Bond.
In the manner and with the effect provided in the Indenture, the
Bonds may be redeemed prior to the maturity thereof, pursuant to
certain provisions of the Indenture, as provided hereinbelow.
The Bonds maturing on June 1, 2014 are subject to optional re-
demption prior to their maturity by the Issuer beginning on June 1,
2004, in whole at any time and in part on any Interest Payment Date at
the following redemption prices (stated as a percentage of principal
amount) plus accrued interest to the redemption date::
Redemption Period
(Both Inclusive) Redemption Price
June 1, 2004 through May 31, 2005 103%
June 1, 2005 through May 31, 2006 102%
June 1, 2006 through May 31, 2007 101%
June 1, 2007 and thereafter 100%
The Bonds are subject to special mandatory redemption prior to
their maturity at any time, as a whole or in part if such partial
redemption will preserve the exclusion from gross income for federal
income tax purposes of interest on the remaining Bonds outstanding (and
if in part, by lot or other customary means) at a redemption price
equal to 108% of the principal amount thereof, plus interest accrued to
the redemption date in the event that it is finally determined by the
Internal Revenue Service (or its successor) or by a court of competent
jurisdiction in a proceeding in which the Company participates to the
degree it deems sufficient, that, as a result of the failure by the
Company to observe a covenant, agreement or representation in the
Refunding Agreement, the interest payable on the Bonds has become
includable for federal income tax purposes in the gross income of any
owner of a Bond, other than an owner who is a "substantial user" of the
Project or a "related person" to such "substantial user" as provided in
the Internal Revenue Code of 1986, as amended, and applicable
regulations thereunder. Any such determination will not be considered
final for this purpose unless the Company has been given written notice
and, if it so desires, has been afforded the opportunity, at its
expense, to contest the same, either directly or in the name of any
owner of the Bonds, and until the conclusion of any appellate review,
if sought. The Company is not required to complete the administrative
proceeding or litigation referred to above within a specified period,
but it covenants in the Refunding Agreement that it will use its best
<PAGE>
efforts to obtain a prompt final determination, decision or settlement
of any administrative proceeding or litigation.
The Bonds are subject to redemption prior to their maturity by
the Issuer at the direction of the Company, in whole, at any time, but
not in part, at a redemption price equal to 100% of the principal
amount of the outstanding Bonds, plus accrued interest thereon to the
date of redemption, without premium, upon prepayment of the payments
relating to the Bonds under the Refunding Agreement upon the occurrence
of any of the following events:
(i) if all or any substantial portion of the Project is
destroyed to such extent that, in the opinion of the Board of
Directors of the Company expressed in a resolution filed with the
Issuer and the Trustee, it is uneconomical to rebuild, repair or
restore the Project to approximately its condition prior to such
destruction;
(ii) if all or any substantial portion of the Project is
taken by eminent domain which, in the opinion of the Board of
Directors of the Company expressed in a resolution filed with the
Issuer and the Trustee, will, or is likely to result in the
Company being prevented from carrying on its normal operations at
the Project for a period of six (6) months; or
(iii) a determination by an independent consultant that
technological or regulatory changes make the continued operation
of the Project uneconomical.
The exercise of any such option shall be at the direction of the
Company which shall give written notice to the Issuer and the Trustee
within one hundred twenty (120) days of the occurrence of an event
described in clause (i), (ii) or (iii) above, which notice shall
specify that, as determined by the Company, one or more of such events
has occurred or one or more of such conditions is continuing and also
shall specify a date for redemption not less than 45 nor more than 120
days from the date such notice is given.
The Bonds are subject to mandatory sinking fund redemption on
June 1 of the years and in the principal amounts at a redemption price
of 100% of the principal amount of the Bonds to be redeemed, plus
interest accrued to the redemption date as follows:
Bonds maturing on June 1, 2004
Year Amount
1997 $550,000
1998 600,000
1999 650,000
2000 705,000
2001 770,000
2002 830,000
2003 910,000
2004 * 985,000
<PAGE>
Bonds maturing on June 1, 2014
Year Amount
1997 $ 340,000
1998 370,000
1999 405,000
2000 440,000
2001 475,000
2002 525,000
2003 565,000
2004 620,000
2005 1,745,000
2006 1,900,000
2007 2,075,000
2008 2,260,000
2009 2,465,000
2010 2,685,000
2011 2,925,000
2012 3,190,000
2013 3,475,000
2014 * 3,790,000
*Final Maturity
Any such redemption, either in whole or in part, shall be made
upon at least 30 days' prior notice in the manner and upon the terms
and conditions provided in the Indenture. If this Bond shall have been
duly called for redemption and payment of the redemption price,
together with unpaid interest accrued to the date fixed for redemption,
shall have been made or provided for, all as more fully set forth in
the Indenture, interest on this Bond shall cease to accrue from the
date fixed for redemption and, from and after such date, this Bond
shall no longer be entitled to any lien, benefit or security under the
Indenture and the holder hereof shall have no rights in respect of this
Bond except to receive payment of such redemption price and unpaid
interest accrued to the date fixed for redemption.
The Bonds are issuable in the form of fully registered bonds in
the denomination of $100,000 or an integral multiple of $5,000 in
excess thereof; no Beneficial Owner (as defined in the Indenture) may
own an interest of less than $100,000 in the Bonds.
This Bond shall be transferable only on the Bond Register upon
surrender hereof at the principal office of the Trustee with a written
instrument of transfer satisfactory to the Trustee duly executed by the
Registered Owner or his duly authorized attorney. Such transfer shall
be without charge to the owner of this Bond except that any tax, fee or
other governmental charge required to be paid with respect to such
transfer shall be paid by the Registered Owner hereof as a condition
precedent to the exercise of such privilege. The Issuer and the
Trustee may deem and treat the registered holder hereof as the absolute
owner hereof for the purpose of receiving payment of principal hereof
and interest hereon and for all other purposes whether or not this Bond
is overdue, and neither the Issuer nor the Trustee shall be affected by
any notice to the contrary.
* * * * *
<PAGE>
[FORM OF ASSIGNMENT]
For value received the undersigned hereby sells, assigns and
transfers unto ________________ _______________________________ the
within-mentioned Bond and all rights thereunder, and hereby irrevocably
constitutes and appoints _____________________________________ to
transfer the within Bond on the books kept for registration thereof,
with full power of substitution in the premises.
Dated:
NOTICE: The signature to this assignment
must correspond with the name as it appears
upon the face of the within Bond in every
particular, without alteration or enlarge-
ment or any change whatever.
-------------------------
Please Insert Social
Security
or other Identifying
Number of Assignee
-------------------------
-------------------------
[FORM OF LEGAL OPINION CERTIFICATE]
I, the undersigned Secretary of the Board of Commissioners of the
Port of New Orleans, do hereby certify that the following is a true
copy of the complete legal opinion of Foley & Judell, the original of
which was manually executed, dated and issued as of the date of payment
for and delivery of this Bond and was delivered to Chemical Securities
Inc., the purchaser of the Bonds:
(LEGAL OPINION)
I further certify that an executed copy of the above legal opinion
is on file in my office and that an executed copy thereof has been
furnished to the Trustee for this Bond.
_________________________________________
Secretary
<TABLE>
<S> <C>
1. CONTRACT ID CODE PAGE OF PAGES
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT L 1 2
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REG. NO. 5. PROJ NO. (If applicable)
P00007 BLK 16C N00024-94-MR-91014 4-385P-91014
6. ISSUED BY CODE N00024 7. ADMINISTERED BY CODE N63124
NAVAL SEA SYSTEMS COMMAND
2531 NATIONAL CENTER BLDG. 3 SUPSHIP New Orleans
WASHINGTON, D.C. 20362-5160 New Orleans, LA 70142-5700
BUYER/SYMBOL: J. M. Clement SEA 02225
PHONE: Area Code 703/602-1926
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) 9A. AMENDMENT OF SOLICITATION NO.
Avondale Industries, Inc. 9b. DATED (SEE ITEM 11)
Shipyard Division
P.O. Box 50280 10A. MODIFICATION OF CONTRACT/ORDER
New Orleans, LA 70150-1967 X N00024-93-C-2205
10B. DATED (SEE ITEM 13)
CAGE CODE 96204 FACILITY CODE 70876 NOV 20 1992
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers
/ / is / / is not extended.
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation as amended, by one of the
following methods: (a) By completing Items 8 and 15, and returning 2 copies of the amendment; (b) By acknowledging receipt of this
amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation
and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE
HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already
submitted, such change may be made by telegram or letter; provided each telegram or letter makes reference to the solicitation and
this amendment, and is received prior to the opening hour and the date specified.
12. ACCOUNTING AND APPROPRIATION (If required)
See Atached Financial Accounting Data Sheet
13. THIS ITEM APPLIES TO MODIFICATIONS AND CONTRACTS/ORDERS.
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority). THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 10A.
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REPLACE THE ADMINISTRATIVE CHANGES
X such as changes in paying office, appropriation data, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR
43.103(B)
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
D. OTHER (Specify type of modification and authority)
E. IMPORTANT: Contractor (X) is not ( ) is required to sign this document and return copies to the issuing office
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organize by UCF section headings, including solicitation contract subject matter
where feasible)
See Attached.
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Jerry M. Clement
Contracting Officer
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
---------------------------------------- BY JERRY M. CLEMENT 27 SEP 1994
(Signature of person authorized to sign) (Signature of Contracting Officer)
NSN 7540-01-152-8070 30-105 STANDARD FORM 30 (REV 10-83)
PREVIOUS EDITION UNUSABLE Perscribed by GSA
FAR (48 CFR) 53-243
</TABLE>
<PAGE>
Contract N00024-93-C-2205 provides, in part, under Section B.3, Item(s) 0103
through 0411, that "the Government may require the contractor to furnish items
0103 through 0411 as specified in Section B, for delivery at the time(s) and
place(s) and at the applicable price(s) set forth herein. The Option(s) will be
exercised, if at all, by written or telegraphic notice from the Contracting
Officer sent within the time specified below:"
Pursuant to the above provisions the Government hereby exercises its option for
Item 0103 through 0111.
As a result of the above option exercise, this modification executes and fully
funds CLINS 0103AA, 0103AB, 0107AA, 0107AB, 0110AA and 0110AB.
Funding in the amount of $420,333,562.00 is hereby provided in Attachment A to
fully fund the effort in CLINS 0103AA, 0103AB, 0107AA, 0107AB, 0110AA and
0110AB. The Contract Value is increased from $266,378,284.00 by $420,333,562.00
to $686,711,846.00.
The total amount obligated on this modification is $480,391,562.00 which
consists of $420,333,562.00 for the target price/fixed price as appropriate of
Items: 0103AA, 0103AB, 0107AA, 0107AB, 0110AA and 0110AB plus $28,622,000.00 and
$31,436,000.00 for Items 0103AA and 0103AB, respectively, for payments of
compensation adjustments. See Attachment A (Financial Accounting Data Sheet)
attached hereto.
Except as modified above, all other terms, conditions, and prices of the
contract remain unchanged and in full force and effect.
<PAGE>
FINANCIAL ACCOUNTING DATA SHEET
<TABLE>
<S> <C>
1. DOCUMENT NUMBER (PHN) 2. SUPPL PHN 3. DATE EFFECTIVE 4. PROCUREMENT REQUEST NO. 5. PAYING OFC 6. TYPE OF MOD. 7 TAC
YR. MO. DA.
N0002493C2205 P00007 94 09 23 N0002494MR91014.00
8.|
A |
C |
T |
|
C | 9. 10. 11. 12. 13. 14. 15. ACCOUNTING DATA 16.
O | REFERENCE A. B. C. D. E. F. G. H. I. J. COST CODE
D | DOCUMENT REF APPRO- OBJ BCN PROJ
E | NUMBER ACRN CLIN SLIN QTY UNIT PRI- SUB- CLASS PARM RM SA AAA TT PAA UNIT MCC PDLI&S AMOUNT
| ACRN ATION HEAD K. OTHER THAN NAVY ACCOUNTING DATA
|
| N0002494AF689RY 0103 AA AE 1741611 89RY 000 SA 385 0 068342 2B 000000 22247 211 0000 $115,978,649.00
|
| N0002494AF389RZ 0103 AA $ 95,967,405.00
| N0002494AF389RZ 0107 AA $ 217,995.00
| N0002494AF389RZ 0110 AA $ 20,876.00
| ---------------
| AF 1741611 89RZ 000 SA 385 0 068342 2B 000000 22247 211 0000 $ 96,206,276.00
|
| N0002494AF389RZ 0103 AA AG 1741611 89RZ 000 SA 385 0 068342 2B 000000 22247 291 0000 $ 28,622,000.00
|
| N0002494AF389RZ 0103 AB $207,908,597.00
| N0002494AF389RZ 0107 AB $ 219,099.00
| N0002494AF389RZ 0110 AB $ 20,941.00
| ---------------
| AH 1741611 89RZ 000 SA 385 0 068342 2B 000000 22248 211 0000 $208,148,637.00
|
| N0002494AF389RZ 0103 AB AJ 1741611 89RZ 000 SA 385 0 068342 2B 000000 22248 291 0000 $ 31,436,000.00
__|
REH, 01233 TOTAL $480,391,562.00
17. FINANCIAL MANAGER 18. COMPTROLLER CLEARANCE
HENRY W. FITZPATRICK, JR.
SIGNATURE DATE OBLIGATION OF FUNDS IS AUTHORIZED SIGNATURE DATE
9/26/94 IN AMOUNTS SHOWN IN COLUMN 16 ABOVE T.K. PARKER SEP 26 1994
BY DIRECTION OF
NAVSEA 7300/17 (REV 7-90) SUPERSEDES NAVMAT 7300/10) CAPT M.C. FOOTE
DEPUTY COMMANDER/COMPTROLLER
</TABLE>
VESSEL CONSTRUCTION CONTRACT
BETWEEN
AVONDALE INDUSTRIES, INC.
AND
BELLE OF ORLEANS, L.L.C.
Page 1
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS 1
ARTICLE II - DESCRIPTION OF VESSEL 3
ARTICLE III - CONTRACT 4
ARTICLE IV - REGULATORY COMPLIANCE 5
ARTICLE V - PRICE AND PAYMENT 7
ARTICLE VI - TIME AND CONDITIONS OF DELIVERY 10
ARTICLE VII - BUILDER'S DUTIES AND STATUS 13
ARTICLE VIII - SUBCONTRACTS AND OTHER AGREEMENTS 15
ARTICLE IX - OWNER'S DUTIES AND STATUS 16
ARTICLE X - OWNER'S RIGHT TO STOP WORK 18
ARTICLE XI - INSPECTION BY OWNER'S REPRESENTATIVE 19
ARTICLE XII - CHANGES IN THE WORK 20
ARTICLE XIII - FORCE MAJEURE 22
ARTICLE XIV - WARRANTY 23
ARTICLE XV - INSURANCE 25
ARTICLE XVI - INDEMNITY 27
ARTICLE XVII - TAXES 28
ARTICLE XVIII - PATENTS 28
ARTICLE XIX - USE OF THE PLANS AND SPECIFICATIONS 29
ARTICLE XX - DEFAULT 29
ARTICLE XXI - NOTICES 31
ARTICLE XXII - MEDIATION 32
ARTICLE XXIII - FINANCING MATTERS 34
<PAGE>
ARTICLE XXIV - CONSTRUCTION 35
ARTICLE XXV - LAW APPLICABLE 35
ARTICLE XXVI - UNITED STATES APPROVAL 35
ARTICLE XXVII - ASSIGNMENT 35
ARTICLE XXVIII - AGREEMENT 36
<PAGE>
LIST OF EXHIBITS
Exhibit "A" - Specifications
Exhibit "B" - Drawings
Exhibit "C" - Labor Rates for Time and Material Changes
Exhibit "D" - Parent Guaranty
Exhibit "E" - Standard Provisions
<PAGE>
VESSEL CONSTRUCTION CONTRACT
THIS AGREEMENT is entered into as of this day of January, 1994 (the
"Agreement"), between Avondale Industries, Inc., a corporation organized and
existing under and by virtue of the laws of the State of Louisiana (the
"BUILDER"), appearing herein through its duly authorized officer, and Belle of
Orleans, L.L.C., (the "OWNER"), a Louisiana limited liability company, appearing
herein through Metro Riverboat Associates, Inc., its duly authorized member.
W I T N E S S E T H:
ARTICLE I - DEFINITIONS
1.1 Advancement Plan - as defined in Paragraph 7.9.
1.2 Agreement - as defined in the preamble.
1.3 Analysis - as defined in Paragraph 6.12.
1.4 Arrangements - as defined in Paragraph 2.4.
1.5 Builder - as defined in the preamble.
1.6 Change Order - as defined in Paragraph 12.4.
1.7 Claim - A "Claim" shall mean a demand or assertion by one of the parties
seeking, as a matter of right, adjustment or interpretation of Contract terms,
payment of money, extension of Contract time or other relief with respect to the
terms of the Contract. The term "Claim" also includes other disputes and matters
in question between OWNER and BUILDER arising out of or relating to the
Contract. Claims must be made by written notice. The responsibility of
substantiating Claims shall rest with the party making the Claim.
1.8 Commission - as defined in Paragraph 4.1.
1.9 Contract - as defined in Paragraph 3.1.
1.10 Contract Price - as defined in Paragraph 5.1.
1.11 Contract Time - "Contract Time" is the time elapsed between the
confirmation of the reconfiguration Arrangements by Change Order pursuant to
Paragraph 2.4 and the Scheduled Delivery Date, as adjusted hereunder.
1.12 Contract Documents - as defined in Paragraph 3.1.
<PAGE>
1.13 Construction Schedule - as defined in Paragraph 6.11.
1.14 Defect - as defined in Paragraph 14.2.
1.15 Division - as defined in Paragraph 4.2.
1.16 Drawings - The "Drawings" are the graphic and pictorial portions of the
Contract Documents showing the design, location and dimensions of the Work,
generally including the outboard profile and arrangement plans, elevations,
sections, details, schedules and diagrams.
1.17 Force Majeure - as defined in Article XIII.
1.18 Good Shipbuilding Practices - as defined in Paragraph 7.1.
1.19 Indemnitees - "Indemnitees" shall include the party indemnified, and its
subsidiaries, partners and principals and each of their respective directors,
officers, agents, servants and employees.
1.20 Invoice for Payment - as defined in Paragraph 5.4.
1.21 Lender - as defined in Paragraph 23.1.
1.22 Mediator - as defined in Paragraph 22.3.
1.23 Milestones - "Milestones" are the names given to the completion of
certain events of construction which are critical to the timely completion of
the Work except for milestone (#l) and the thirty (30) day milestone (#2). The
milestones are set forth in Paragraph 5.2.
1.24 Owner - as defined in the preamble.
1.25 Owner's Representative - as defined in Paragraph 9.5.
1.26 Payment Schedule - as defined in Paragraph 5.2.
1.27 Principal Portion of the Work - The term "Principal Portion of the Work"
shall mean that which exceeds $250,000.00.
1.28 Project - The "Project" is the total construction of the Vessel of which
the Work performed under the Contract Documents is a part and which includes
construction by OWNER or by other contractors.
1.29 Project Manager - as defined in Paragraph 7.8.
1.30 Project Materials - as defined in Paragraph 19.1.
<PAGE>
1.31 Scheduled Delivery Date - as defined in Paragraph 6.1.
1.32 Specifications - The "Specifications" are that portion of the Contract
Documents consisting of the written requirements for materials, equipment,
construction systems, standards and workmanship for the Work, and performance of
related services, which are attached hereto as Exhibit "A".
1.33 Work - The term "Work" means the work required by the Contract Documents,
whether completed or partially completed, and includes all other labor,
materials, equipment and services provided or to be provided by the BUILDER to
fulfill the BUILDER's obligations. The Work constitutes a part of the Project.
1.34 Vessel - as defined in Paragraph 2.3.
1.35 Unless otherwise stated in the Contract Documents, words which have well
known technical or shipbuilding industry meanings are used in the Contract
Documents in accordance with such recognized meanings.
ARTICLE II - DESCRIPTION OF VESSEL
2.1 BUILDER, for and in consideration of the sum to be paid it by OWNER as
hereinafter set forth agrees to build, equip, and deliver complete to OWNER,
afloat at BUILDER'S yard in Westwego, Louisiana free and clear from all liens,
and encumbrances, one (1) Paddlewheel Gaming Vessel, which shall be constructed
in accordance with the following documents, which have concurrently been
identified by the parties hereto and made a part hereof as if fully set forth
herein:
a. Specifications, dated 1/6/94, Revisions , attached
hereto as Exhibit "A".
b. Drawings numbered
93-049-001 - Outboard Profile (Revision 0)
93-049-002 - Hold Plan and Main Deck Arrangement
(Revision 0)
93-049-003 - 2nd and 3rd Deck Arrangements (Revision 0)
93-049-004 - 4th Deck and Pilothouse Arrangements,
(Revision 0) attached hereto as Exhibit "B".
2.2 The Vessel shall be assigned BUILDER'S Hull No. 114.
2.3 Except for such OWNER-furnished equipment and services as may be listed
in the Specifications, BUILDER agrees to furnish all professional design
services, drawing development, engineering services, submittals, procurement,
fabrication, assembly, construction, testing, inspection, management,
supervision, quality control, quality assurance, trials, delivery to the
specified
<PAGE>
location for delivery, plant, labor, tools, equipment and material, and
miscellaneous support services, either expressly or reasonably required to
produce a complete, ready-for-use Vessel, as contemplated by the Contract
Documents (the "Vessel").
2.4 OWNER and BUILDER acknowledge that the Drawings and Specifications will
require some reconfiguration of the Vessel's gaming and/or gaming related
area(s), limited to those areas which do not include the Vessel's structural,
stability, main vertical fire zones, stairway and egress routes and hull lines,
layout arrangements (the "Arrangements") in order to suit OWNER'S needs. BUILDER
agrees to make such reconfiguration to the Drawings and Specifications in
accordance with OWNER'S reasonable wishes, and OWNER agrees to cooperate with
BUILDER in determining the necessary reconfiguration of the Arrangements,
provided, however that the parties agree that the reconfiguration of the
Arrangements has been considered in negotiating this Agreement and such
reconfiguration shall not give rise to a change in the Contract Price or in the
Contract Time. Within thirty (30) days of the date hereof, the parties agree to
meet to finalize the reconfiguration of the Arrangements by no cost Change Order
and payment of Milestone Number 2 funds.
2.5 Title to all material furnished by BUILDER shall vest in OWNER when the
same is either (a) actually installed or incorporated in the Work, or (b)
delivered to the yard or other location specifically approved by OWNER and paid
for by OWNER prior to incorporation into the Work, whichever occurs sooner.
BUILDER shall comply with all requirements of the Louisiana Ship Mortgage Law,
LA R.S. 9:5521 et seq, in connection with this Paragraph. BUILDER shall return
to OWNER all OWNER supplied material not required for the completion of the
Work.
2.6 The Vessel shall be constructed in accordance with the Drawings and
Specifications furnished by BUILDER.
ARTICLE III - CONTRACT
3.1 The Contract Documents (the "Contract Documents") consist of this
Agreement, the Drawings, the Specifications, and all written modifications
issued after execution of this Agreement. These form the Contract (the
"Contract"), and all are as fully a part of the Contract as if attached to this
Agreement or repeated herein. An enumeration of the Contract Documents appears
in Article I. The Contract may be amended or modified only by a written
modification. The Contract Documents shall be signed by OWNER and BUILDER.
3.2 The intent of the parties as enumerated in the Contract
<PAGE>
Documents is for BUILDER to design and complete a fully functional Vessel for
the Contract Price and within the Contract Time. The Drawings and Specifications
are to be considered as cooperative and all work necessary for the execution of
the Work if shown on the Drawings and not described in the Specifications and
all work described in the Specifications and not shown on the Drawings, shall be
considered as a part of the Work and shall be executed by BUILDER in the same
manner and with the same character of material as other portions of the Contract
without extra compensation.
3.3 Unless expressly stipulated otherwise, BUILDER shall provide and pay
for all services, labor, overtime labor, standby labor, methods, materials,
equipment, transportation, fuel, taxes, permits and fees and all other
facilities and services necessary to complete the Vessel for the Contract Price
within the Contract Time.
3.4 All general language or requirements contained in the Specifications
and all other requirements inconsistent or in conflict with the provisions of
this Agreement are superseded by this Agreement, it being the intent of the
parties that the provisions of this Agreement shall prevail. If there is any
conflict or inconsistency between the Specifications and the Drawings, the
Specifications shall control.
ARTICLE IV - REGULATORY COMPLIANCE
4.1 The effective date of this Contract shall be the date of execution by
both parties and the receipt by BUILDER of the executed Parent Guaranty of
Exhibit "D". Notwithstanding anything herein to the contrary, the parties
acknowledge that pursuant to the rules and regulations of the Louisiana
Riverboat Gaming Commission (the "Commission"), OWNER must file a copy of this
Construction Contract with the Commission within five (5) days of execution by
all parties. Should the Commission reject the Contract or fail to approve the
Contract, both parties to this Contract hereby agree to cooperate in making such
changes to the Contract as may be required by the commission.
4.2 BUILDER represents and warrants that the Drawings and Specifications
will comply with the standards and requirements set forth in La. R.S. 4:504 et
seq., and the regulations promulgated by the Commission and the Louisiana
Riverboat Gaming Enforcement Division (the "Division") which are in effect as of
the date of execution of this Agreement. Should revisions to the Drawings or
Specifications be required by the Commission because said Drawings and
Specifications do not comply with the standards set forth in the law or the
regulations, BUILDER agrees to perform all such revisions at its sole cost. Any
revisions in the Drawings and Specifications required by changes in the law or
regulations subsequent to execution of this Agreement shall be for the account
<PAGE>
of OWNER. If such revisions are necessary because of any reason other than an
error or omission of BUILDER in failing to comply with the objective standards
set forth in the law and the regulations, the revisions shall be treated as a
Change Order hereunder. Any conflict between U.S. Coast Guard regulations and
any other Federal, State or Local laws or regulations, the U.S.
Coast Guard regulations shall prevail.
4.3 BUILDER shall provide access to the Work to any authorized
representative of the Commission and Division. Upon presentation of valid
identification, any member or employee of the Commission or Division shall have
the right at all times to inspect all portions or component parts of the Work.
BUILDER agrees to cooperate with representatives and/or members of the
Commission and the Division. Such cooperation shall include but not be limited
to providing any assistance required by these representatives during said
inspection.
4.4 The Vessel shall be constructed to meet the applicable requirements of
regulatory bodies including but not limited to U.S. Public Health Service
Certified; U.S. Coast Guard Certified per Sub-Chapter "H", A.B.S. (to the extent
required by the U.S. Coast Guard); and as set forth in the Contract Documents,
and interim and final certificates evidencing the required classifications shall
be furnished by BUILDER to OWNER. BUILDER shall pay all fees necessary to secure
such certificates. The Vessel shall meet all requirements of the Specifications
for the Americans with Disabilities Act.
4.5 In the event either party hereto becomes aware that any portion of the
Contract Documents violate any rule or regulation of the U.S. Coast Guard or
other regulatory authority, such party shall immediately notify the other of
said violation. In this event, BUILDER will stop work involving the area of such
violation until OWNER and BUILDER agree on the modification necessary to secure
compliance. BUILDER shall be responsible for any increase in cost or time delay
necessitated by a violation of U.S. Coast Guard rules or regulations in the
Contract Documents in effect at the time of execution of this Contract.
4.6 If any enforced changes in the U.S. Coast Guard or U.S. Public Health
Service rules or in the applicable rules of any governmental agency are made
subsequent to the date of this Contract, whereby the Contract Price is increased
and/or the Contract Time is extended, OWNER shall authorize and pay for, in
accordance with the terms of this Contract, as a change under this Contract,
such alterations, additional work items, outfit and/or equipment or additional
time as may be required to meet the enforced changes.
4.7 BUILDER shall submit Drawings and Specifications to any
<PAGE>
regulatory agencies or authorities required by law. BUILDER shall pay for all
fees and permits necessary to accomplish the Work.
4.8 BUILDER shall comply with and give notices required by laws,
ordinances, rules, regulations and lawful orders of public authorities bearing
on performance of the Work.
4.9 BUILDER shall keep OWNER informed of any changes in law, rules,
approvals or permit required by the U.S. Coast Guard or U.S. Public Health
Service for the Project. BUILDER will not be responsible for informing OWNER of
any changes in state law, including gaming laws, except to the extent BUILDER
become aware of said changes.
4.10 BUILDER shall ensure that the Drawings and Specifications are in
accordance with applicable laws, statutes, codes, and rules and regulations,
except as expressly provided herein.
4.11 If BUILDER performs Work which is contrary to laws, statutes, codes
and rules and regulations without such notice to OWNER, BUILDER shall assume
full responsibility for the repair, removal or remediation of such Work and
shall bear the attributable costs. If the laws, codes, statutes or rules change
during construction and such changes which affect the Work already performed or
to be performed, such changes shall be made by Change Order.
ARTICLE V - PRICE AND PAYMENT
5.1 OWNER, in consideration of the true and faithful performance on the
part of BUILDER, agrees to pay to BUILDER the sum of $27,881,000.00 for the
Vessel as adjusted by Change Orders issued hereunder (the "Contract Price").
5.2 OWNER agrees to pay BUILDER according to the following payment schedule
(the "Payment Schedule") for the Work:
MILESTONE
NUMBER* MILESTONE DEFINITION PERCENTAGE
(% of Contract Price)
1 Contract Signed Contract is signed for
construction of Vessel 1%
2 Sign-off on OWNER and BUILDER
Drawings and mutually sign-off on
Specifications Vessel Drawings and
<PAGE>
Specs (on or before 30
days) 19%
3 Lay Keel Complete structural
fabrication of lead
innerbottom module
including bottom plate,
tank top and transverse
structure. 10%
4 Complete Complete the joining of
Erection of both innerbottom modules
innerbottom on shipway. 10%
5 Hull Erected Hull modules, from main
deck down, are erected
on shipway. 10%
6 Superstructure Complete erection of 50%
Erection 50% of Superstructure units
complete (excluding pilot house). 15%
7 Start Joiner Commence joiner work
onboard Vessel 2%
8 Set Pilot House Pilot House is set onto
Vessel superstructure. 11%
9 Launch Vessel is launched from
launchway. 11%
10 Delivery OWNER takes delivery of
Vessel. 11%
(*Subject to adjustment in accordance with Paragraph 6.11.)
5.3 Retainage in the amount of ten percent (10%) of each payment shall be
withheld from each payment up to 50% of completion. Thereafter no additional
retainage will be withheld.
5.4 Milestones shall be completed sequentially and no payment for any
Milestones other than Numbers 1 and 2 shall be due until at least Twenty (20)
days has passed from notice to OWNER of completion of the previous Milestone.
Upon completion of each Milestone, BUILDER shall notify OWNER in writing by
submitting an Invoice for Payment (the "Invoice for Payment"). OWNER shall be
entitled to inspect the progress and confirm achievement of the Milestone.
BUILDER shall invoice OWNER for the percentage of Contract Price payable for
that Milestone. Within ten (10) days of receiving BUILDER'S Invoice for Payment
on any Milestone, OWNER
<PAGE>
will notify BUILDER if it determines that the Milestone has not in fact been
achieved along with OWNER'S reasons for said determination. OWNER'S failure to
notify BUILDER within ten (10) days of receipt of an Invoice for Payment shall
constitute OWNER'S acceptance of the Milestone as complete.
5.5 BUILDER shall submit, together with each Invoice for Payment, other
than Numbers 1 and 2, an affidavit including 1) BUILDER'S certification that the
Milestone has been reached, and 2) BUILDER'S statement that it is aware of no
liens filed against the Work by itself, any third party, supplier, vendor,
laborer or subcontractor of any tier, or a description of any lien(s) which have
been filed against the Work.
5.6 Providing OWNER has not rejected BUILDER'S invoice for payment pursuant
to Paragraph 5.4 (except in the case of reconfiguration of the Arrangements and
Delivery), OWNER shall pay such invoice not later than twenty (20) days after
said submittal. OWNER shall pay that portion of all Change Orders approved as of
the date of an Invoice for Payment representing the percentage of completion of
the Work associated with the Milestone for which payment is requested.
5.7 A payment shall in no way lessen the responsibility of BUILDER to
correct and/or replace work, if it shall be later discovered to have been
improperly done or not according to this Contract or the plans, drawings,
specifications or other Contract Documents. The payments requested under this
Article shall not in any respect be deemed to be an acceptance of work
theretofore done, nor shall they release BUILDER from any responsibility
whatsoever in connection therewith.
5.8 Invoices for Milestones 1 (Contract Signing), Confirmation of
Arrangements and 11 (Delivery) shall be paid upon receipt.
5.10 On the day of delivery of the Vessel, OWNER shall pay to BUILDER the
full amount of the Contract Price, as adjusted, including all holdbacks, except
for retainage, less any amounts previously paid.
5.11 Payment of the retainage accumulated hereunder shall be due sixty (60)
days after delivery of the Vessel except for the cost of completing any
unfinished Work or correcting any warranty Defects known on the sixtieth day
following delivery. Said cost of completion and correction may be retained by
OWNER until the correction of the warranty Defect is complete.
5.12 In the event that any party hereto becomes aware of any materialman's
or workmans liens or privileges which are filed or have arisen against the
Project or any portion thereof, or any
<PAGE>
property of OWNER in connection with this Project when such lien or privilege
results from the Work of BUILDER, any of its Subcontractors, Sub-subcontractors
or materialmen, BUILDER agrees to cause such liens or privileges to be removed,
or file a bond in lieu thereof, within ten (10) days of learning of such lien,
at its sole expense. If any such lien or privilege is filed and BUILDER does not
cause such lien or privilege to be removed or bonded, OWNER shall have the right
to pay all sums necessary to obtain removal of such lien or privilege and deduct
all sums to be paid from the Contract Price or from the next succeeding payment
until OWNER shall recoup the total amount of such lien or privilege.
ARTICLE VI - TIME AND CONDITIONS OF DELIVERY
6.1 Time is of the essence in this Contract. The Vessel, after required
trials set forth in the Specifications, completed in accordance with the
Specifications and the Drawings, shall be delivered to OWNER, subject to the
qualifications of this Contract, on or before 12 months and 15 days from the
date of the second payment required hereunder (Confirmation of Arrangements), or
on such later date or dates as may be required by reason of Change Orders agreed
to by BUILDER and OWNER, or by reason of specified delays resulting from "Force
Majeure", as that term is defined herein, (the "Scheduled Delivery Date").
6.2 BUILDER shall furnish OWNER upon delivery of the Vessel a BUILDER'S
certificate together with whatever other documents may be required by law or by
any regulatory agency of the United States having jurisdiction on the premises
in order for OWNER to document the Vessel in its name. Any expense in connection
with the furnishing of such documents and with the documentation of such Vessel
shall be paid by OWNER. In addition BUILDER shall furnish OWNER on delivery of
the Vessel with the following:
a. An affidavit by BUILDER that all bills, costs and expenses related to
the Vessel have been paid, or will be paid in the normal course of business,
including, without limitation, all subcontractors, suppliers and materialmen and
stating that the Vessel is free and clear of all liens and encumbrances.
b. A bill of sale warranting good and marketable title to the Vessel.
c. A Certificate of BUILDER that the Vessel has been constructed and
completed in accordance and conformity with the Specifications and the working
drawings.
d. A complete set of as-built drawings of the Vessel on mylar
transparencies and on Autocad 12 or such other format as shall be subsequently
in use by BUILDER.
<PAGE>
6.3 The Vessel shall be built and delivered by BUILDER and accepted at
BUILDER'S yard in Louisiana or such other location in the New Orleans area as
OWNER may designate at its additional cost. OWNER shall execute a delivery and
acceptance certificate at the time of delivery and acceptance of the Vessel.
6.4 In the event BUILDER shall deliver the Vessel before the Scheduled
Delivery Date, OWNER shall increase the Contract Price in the amount of
$5,000.00 per day for each and every day up to a maximum of thirty (30) days
that the actual vessel delivery precedes the Scheduled Delivery Date set forth
in Paragraph 6.1 hereof, as adjusted under the terms of this Agreement.
6.5 If completion and delivery of the Vessel shall be delayed beyond the
Scheduled Delivery Date, it is agreed that OWNER will suffer damages which are
difficult of ascertainment and the parties hereby agree that OWNER shall sustain
liquidated damages. The liquidated damages set forth hereinafter shall be
OWNER'S sole remedy for late delivery.
6.6 In the event BUILDER shall deliver the Vessel later than the seven (7)
days after the Scheduled Delivery Date, but on or before twenty (20) days after
the Scheduled Delivery Date, BUILDER shall pay to OWNER as liquidated damages in
the form of a reduction in the Contract Price, to the extent any amounts are
still owing, the amount of ($12,868.15) per day for each and every day that the
actual vessel delivery date exceeds the Scheduled Delivery Date, as adjusted.
6.7 In the event BUILDER shall deliver the Vessel later than twenty (20)
days after the Scheduled Delivery Date, but on or before forty (40) days after
the Scheduled Delivery Date, BUILDER shall pay to OWNER as liquidated damages in
the form of a reduction in the Contract Price, to the extent any amounts are
still owing, the amount of ($16,728.60) per day for each and every day that the
actual vessel delivery date exceeds twenty (20) days after the Scheduled
Delivery Date, as adjusted. Any amount payable as liquidated damages under this
paragraph shall be in addition to the reduction in price provided in the
preceding paragraph.
6.8 In the event BUILDER shall deliver the Vessel later than forty (40)
days after the Scheduled Delivery Date, but on or before sixty (60) days after
the Scheduled Delivery Date, BUILDER shall pay to OWNER as liquidated damages in
the form of a reduction in the Contract Price, to the extent any amounts are
still owing, the amount of ($25,092.90) per day for each and every day that the
actual vessel delivery date exceeds forty (40) days after the Scheduled Delivery
Date, as adjusted. Any amount payable as liquidated damages under this paragraph
shall be in addition to the reduction in price provided in the preceding
paragraph.
<PAGE>
6.9 In the event BUILDER shall deliver the Vessel later than sixty (60)
days after the Scheduled Delivery Date, but on or before seventy-seven (77) days
after the Scheduled Delivery Date, BUILDER shall pay to OWNER as liquidated
damages in the form of a reduction in the Contract Price, to the extent any
amounts are still owing, the amount of ($39,361.41) per day for each and every
day that the actual vessel delivery date exceeds sixty (60) days after the
Scheduled Delivery Date, as adjusted. Any amount payable as liquidated damages
under this paragraph shall be in addition to the reduction in price provided in
the preceding paragraph. OWNER and BUILDER agree that the aggregate maximum
amount of liquidated damages that BUILDER shall be responsible for is six
percent (6%) of the Contract Price. In the event of an increase in purchase
price pursuant to Change Order(s), liquidated damages shall be adjusted upward
to reflect a maximum of six percent (6%) of the total Contract Price. Such
adjustment shall be made by dividing six (6%) percent of the increase in the
purchase price by the number of sixteen (16) days and adding that number to the
amount stated in Paragraph 6.9 herein.
6.10 If BUILDER fails to deliver the Vessel on or before ninety (90) days
following the Scheduled Delivery Date, as adjusted, OWNER may terminate this
Contract and take possession of the Work, transport the Work in progress, at
BUILDER'S expense from BUILDER'S yard to another location, and complete the Work
by such means as OWNER reasonably deems fit. Upon notification of OWNER'S
termination of this Agreement, pursuant to this Article, BUILDER will promptly
undertake, at its sole cost, to place all Work in a suitable condition for
transportation to another location within Louisiana. BUILDER will assist OWNER
in the removal from the yard of any Work completed to the date when the work was
discontinued. In such event, BUILDER shall allow OWNER or OWNER'S
Representative(s), and other contractors continuing access to BUILDER'S yard for
a period of ninety (90) days following such termination in order to continue the
Work in progress. In such case, BUILDER shall not be entitled to receive any
further payment until the Work is completed. If the unpaid balance of the
Contract Price shall exceed the expense of completing the Work, including
reasonable compensation for additional managerial and administrative services,
such excess shall be paid to BUILDER. If such reprocurement expense, shall
exceed such unpaid balance, BUILDER shall pay the difference to OWNER promptly
on demand.
6.11 Within thirty (30) days after the award of the Contract, BUILDER shall
submit to OWNER a detailed Construction Schedule (the "Construction Schedule")
for completion of the Project within the Contract Time. Such schedule shall
indicate dates for commencement and completion of the various parts of the Work.
All points of interface between OWNER and BUILDER (i.e., all instances where
performance of BUILDER'S Work depends upon OWNER) and appropriate restraints
shall be included in the Construction Schedule. In
<PAGE>
particular, but not by way of limitation, the required delivery date of each
item of OWNER furnished material and equipment shall be included, provided
however BUILDER shall not be responsible for including on the Construction
Schedule items to be furnished by OWNER, or OWNER'S separate Work of which
BUILDER is unaware because OWNER has not furnished BUILDER with necessary
information. In addition to any and all other parts of the Work shown, said
Construction Schedule shall indicate the dates of completion of the Milestones
set forth in the Payment Schedule.
6.12 OWNER and BUILDER shall meet from time to time to review the
Construction Schedule. If it is determined at any periodic schedule-review
meeting with OWNER that BUILDER is not substantially on schedule and that
completing the Work within the Contract Time is in jeopardy, BUILDER shall,
within three (3) days thereafter, provide a plan to OWNER, which plan must set
forth a revised Construction Schedule with a resequencing and/or acceleration of
elements of the Work in order to complete the Project within the Contract Time
or the shortest possible time thereafter. If either the OWNER or the BUILDER
believe that a revision of the Construction Schedule is needed because of delays
to or changes in the BUILDER'S work, the BUILDER shall submit to the OWNER a
written analysis (the "Analysis"). The Analysis shall illustrate what the
BUILDER believes is the influence of each change or delay on the Construction
Schedule and demonstrate how the BUILDER proposes to incorporate the change or
delay into the Work. If (1) BUILDER is continually or habitually late in
reaching Milestones, or (2) the Construction Schedule shows that BUILDER will be
substantially late in reaching said Milestones so as to delay the Scheduled
Delivery Date more than ninety (90) days, or (3) it is reasonably apparent that
the Scheduled Delivery Date will be delayed beyond ninety (90) days, then the
OWNER may, upon payment of BUILDER'S actual accrued cost and contractual
commitments, remove the Vessel to another yard for completion. This will be
OWNER'S sole remedy and BUILDER'S sole liability under this paragraph.
ARTICLE VII - BUILDER'S DUTIES AND STATUS
7.1 The BUILDER and OWNER accept the relationship of cooperation
established between them by this Agreement. BUILDER acknowledges that the
subject Vessel is being constructed as a riverboat gaming vessel for the
carriage of passengers in the tourism/gaming industry. BUILDER agrees to
construct the Vessel in accordance with good shipbuilding practices in order to
meet the appropriate standards of construction and levels of finish for the
class and type of vessel required herein by the Drawings and Specifications. The
parties agree to cooperate and further their respective and mutual interest in
completing this Contract. BUILDER agrees to furnish efficient business
administration and
<PAGE>
superintendence and to make all efforts to furnish at all times an adequate
supply of workmen and materials with expedited promptness in order to preclude
delay in the orderly process of the Work. OWNER agrees to provide the financial
arrangements to fulfill its obligations under the Contract and furnish all
required information, services, reviews and equipment with expedited promptness
in order to preclude delay in the orderly progress of the Work. The parties will
perform the work in a manner consistent with the interests of the OWNER and
BUILDER and with good shipbuilding practices. "Good Shipbuilding Practices" for
this Article means the construction of a vessel to soundly conceived and
engineered detailed plans prepared by BUILDER with due consideration to a
standard of high quality, incorporating the specified components in order to
meet Specification requirements utilizing construction and testing methods that
ensure that the completed vessel will conform to the intended design required
for use in the tourist gaming industry consistent with the Specification
allowances.
7.2 BUILDER acknowledges that the Drawings and Specifications and other
portions of the Contract Documents relating to the design and construction of
the vessel have been or will be drawn and prepared by BUILDER, professionals,
and others selected, employed and paid by BUILDER. Design services shall be
performed by licensed, qualified and experienced architects, engineers,
professionals, and others selected and paid by BUILDER. However, nothing
contained herein shall create any contractual relationship between such persons
and OWNER.
7.3 BUILDER shall coordinate operations of Subcontractors and other persons
performing portions of the Work under a contract with BUILDER and shall see that
cooperation is obtained.
7.4 BUILDER shall be responsible to OWNER for acts and omissions of
BUILDER'S employees, Subcontractors and their agents and employees, and other
persons performing portions of the Work under a contract with BUILDER.
7.5 BUILDER shall not be relieved of obligations to perform the Work in
accordance with the Contract Documents either by activities or duties of OWNER
(except as expressly set forth in this Contract) or because of any tests,
inspections or approvals required or performed by persons other than BUILDER.
7.6 BUILDER shall be responsible for the cost of independent testing and
inspection and, when required, testing of portions of Work already performed
under this Contract to determine that such portions are in proper condition to
receive subsequent Work.
7.7 BUILDER will prepare Change Orders.
<PAGE>
7.8 BUILDER shall employ a competent, full time Project Manager (the
"Project Manager"), who shall initially be Barry Fassbender. The Project Manager
shall be in attendance at the Project site during the progress of the Work as
the Work requires. The Project Manager shall represent BUILDER, and all
communications given to the Project Manager shall be binding as if given to
BUILDER. All communications shall be confirmed on written request in each case.
BUILDER shall not replace the Project Manager without OWNER'S prior approval,
which shall not be unreasonably withheld.
7.9 BUILDER acknowledges that OWNER'S submissions to the Commission include
a commitment to develop a program regarding the recruitment, training, and
advancement of, and the awarding of contracts to, minorities, women and
Louisiana residents (the "Advancement Plan") in the construction, planning,
development and operation of the Project. BUILDER, in conjunction with the
requirements of the Advancement Plan, hereby agrees to make good faith efforts
to reach those goals contained in the Advancement Plan with regard to the hiring
of women and minorities as employees, with the selection and retention of
subcontractors, and for the procurement of goods from minority-owned and
women-owned firms. OWNER and BUILDER acknowledge that such goals are flexible
and are not designed to be quotas nor to discriminate against any individual and
that OWNER and BUILDER will make good faith efforts to meet these goals. It is
acknowledged, however, that BUILDER must hire skilled workers to construct the
Vessel according to Good Shipbuilding Practice, and that these goals will not
restrict BUILDER'S ultimate authority in the hiring of skilled workers.
7.10 OWNER shall have an option to request BUILDER to furnish within thirty
(30) days of payment of Milestone Number 2 a payment and performance bond
covering faithful performance of the Contract and payment of obligations arising
thereunder for the full value of the Contract Price. The cost of the bond will
be for the account of OWNER that is reimbursed to BUILDER by adding the bond
premium to the next milestone payment following the furnishing of the bond. The
bond provisions and underwriters will be reasonably acceptable to the OWNER and
BUILDER. The issue of the bond will be subject to the market and rates
applicable during the option period following payment of Milestone Number 2 and
the approval of the Agreement by the bonding company.
ARTICLE VIII - SUBCONTRACTS AND OTHER AGREEMENTS
8.1 All portions of the Work that BUILDER'S organization does not perform
shall be performed under Subcontracts or by other appropriate agreement with
BUILDER. Nothing contained in the Contract Documents shall create any
contractual relationship between OWNER and any Subcontractor.
<PAGE>
8.2 Unless otherwise stated in the Contract Documents or the bidding
requirements, BUILDER, as soon as practicable after award of the Contract, shall
furnish in writing to OWNER the names of persons or entities (including those
who are to furnish materials or equipment fabricated to a special design)
proposed for each Principal Portion of the Work.
8.3 BUILDER shall not change a Subcontractor, previously selected without
first notifying OWNER.
8.4 Each contract entered into by BUILDER (after execution of this
Agreement) with any Subcontractor or materialman shall provide that, if this
Contract is terminated for any reason, such contract with a Subcontractor or
materialman shall be, by its terms, at OWNER'S option, assigned to and assumed
by OWNER or a person designated by OWNER, without any need for action by BUILDER
or such Subcontractor or materialman, and such Subcontractor or materialman
shall continue to be bound by such contract. This provision shall survive the
termination of the Contract.
8.5 BUILDER shall use its best efforts to include in all Subcontracts for a
Principal Portion of the Work a provision permitting voluntary termination by
BUILDER without cancellation charge or penalty.
8.6 BUILDER shall furnish to OWNER a copy of each subcontract it enters
into for a Principal Portion of the Work in connection with the Project within
ten (10) days after execution of such subcontract.
ARTICLE IX - OWNER'S DUTIES AND STATUS
9.1 OWNER may be full time or may visit the site at intervals appropriate
to the stage of construction to become generally familiar with the progress and
quality of the completed Work and to determine in general if the Work is being
performed in a manner indicating that the Work, when completed, will be in
accordance with the Contract Documents. However, the OWNER will not be required
or waive any of its rights hereunder for failure to make on-site inspections to
check quality or quantity of the Work.
9.2 The OWNER will not have control over or charge of and will not be
responsible for design or construction means, methods, techniques, sequences or
procedures, or for safety precautions and programs in connection with the Work,
since these are solely the responsibility of BUILDER. OWNER shall not be
responsible for BUILDER'S failure to carry out the Work in accordance with the
Contract Documents. OWNER will not have control over or charge of and will not
be responsible for acts or omissions of BUILDER, Subcontractors, or their agents
or employees, or of any other
<PAGE>
persons performing portions of the Work.
9.3 OWNER will have authority to reject Work which does not conform to the
Contract Documents, provided that any notice of such rejection shall be in
writing to BUILDER and shall state the precise nature and reason for rejection.
Whenever the OWNER considers it necessary or advisable, OWNER will have
authority to require additional inspection or testing of the Work in accordance
with the Contract Documents, whether or not such Work is fabricated, installed
or completed. However, neither this authority of OWNER nor a decision made in
good faith either to exercise or not to exercise such authority shall give rise
to a duty or responsibility of OWNER to BUILDER, Subcontractors, material and
equipment suppliers, their agents or employees, or other persons performing
portions of the Work. If the OWNER determines that portions of the Work require
additional testing or inspection, the OWNER will instruct the BUILDER to make
arrangements for such additional testing or inspection by an entity acceptable
to OWNER, and BUILDER shall give timely notice to OWNER of when and where tests
and inspection are to be made so OWNER may observe such procedures. The OWNER
shall bear costs except as provided herein. If any testing or inspection
discloses that any methods or means of construction or material or workmanship
are not acceptable under the Contract Documents, the BUILDER shall reimburse the
OWNER for the costs of such tests and inspections, including the cost of related
labor and facilities.
9.4 OWNER shall be responsible to BUILDER for the acts and omissions of
OWNER'S employees, subcontractors and their agents and employees and other
persons performing portions of the Project under a contract with OWNER.
9.5 Within fifteen (15) days of award of the Contract, OWNER shall appoint
its interior design agent and OWNER'S Representative (the "OWNERs
Representative") and shall make them available to work with BUILDER to develop
the construction Schedule.
9.6 Within ninety (90) days of payment of Milestone Number 2, OWNER shall
make available to BUILDER all technical information necessary for incorporating
all OWNER furnished equipment into the Vessel design along with the list of
vendors selected to provide such equipment.
9.7 Within one hundred twenty (120) days of payment of Milestone Number 2,
OWNER shall present to BUILDER the finalized aspects of all interior design and
allowance items impacting the detailed engineering efforts of BUILDER and joiner
contractor, and shall have final selections of all equipment and materials
identified as "long lead items" by the Construction Schedule. Certain long lead
items shall be identified by BUILDER within thirty (30) days of execution
hereof. With respect to those items
<PAGE>
so identified, OWNER shall present information to BUILDER in such shorter time
period, as shall be reasonably required by BUILDER which shall be in no event
shorter than sixty (60) days.
9.8 OWNER will review and comment upon or take other appropriate action
upon BUILDER'S submittals such as Shop Drawings, product Data and Samples, but
only for the limited purpose of checking for conformance with OWNER'S wishes.
OWNER'S action will be taken with such reasonable promptness as to cause no
delay in the Work or in the activities of the BUILDER or separate contractors,
while allowing sufficient time to permit adequate review not to exceed ten (10)
days. Review of such submittals is not conducted for the purpose of determining
the accuracy and completeness of other details such as dimensions and
quantities, or for substantiating instructions for installation or performance
of equipment or systems, all of which remain the responsibility of BUILDER as
required by the Contract Documents. OWNER'S review of BUILDER'S submittals shall
not relieve BUILDER of the obligations under the Contract Documents. OWNER'S
review shall not constitute approval of safety precautions or of any
construction means, methods, techniques, sequences or procedures. The OWNER'S
approval of a specific item shall not indicate approval of an assembly of which
the item is a component.
9.9 OWNER may engage other contractor's or its own personnel to perform
work in connection with the Project, including installation of furniture,
fixtures or equipment, but only subject to this Agreement. More than one builder
may be engaged to perform work in a single trade. BUILDER shall cooperate with
and fully coordinate its Work with the work of OWNER and the other contractors.
BUILDER shall immediately report to OWNER, in writing, any apparent deficiencies
in the other contractors' work which would affect the Work hereunder.
ARTICLE X - OWNER'S RIGHT TO STOP WORK
10.1 If BUILDER fails to correct Work which is not in accordance with the
requirements of the Contract Documents or persistently fails to carry out Work
in accordance with the Contract Documents, and such failure continues for ten
(10) days after written notice from OWNER, OWNER, by written order or by the
OWNER'S Representative or an agent specifically so empowered by OWNER in
writing, may order BUILDER to stop the Work, or any portion thereof, until the
cause for such order has been eliminated; however, the right of OWNER to stop
the Work shall not give rise to a duty on the part of OWNER to exercise this
right for the benefit of BUILDER or any other person or entity.
10.2 OWNER'S right to stop the Work shall not relieve BUILDER of any of its
responsibilities or obligations under the Contract Documents and shall be in
addition to and not in restriction or
<PAGE>
derogation of OWNER'S right to terminate hereunder.
10.3 In the event that OWNER exercises its right to stop the Work pursuant
to Article X, BUILDER'S sole remedy shall be an extension of the Contract Time
for a period equal to the time during which the Work was stopped.
ARTICLE XI - INSPECTION BY OWNER'S REPRESENTATIVE
11.1 BUILDER will furnish reasonable space at its yard for the duly
authorized representative(s) of OWNER who shall have reasonable access to the
work of BUILDER whenever the yard is open for business and at all times when
Work is being done, wherever located. BUILDER shall furnish OWNER on a monthly
basis a schedule of the work to be performed on the Vessel and OWNER'S
Representative(s) may inspect all workmanship and material which is in
conformity with this Contract, the Specifications and the Drawings, and may
reject all workmanship and material which does not comply with this Contract,
the Specifications and the Drawings, provided that any inspection or failure to
inspect or failure to reject workmanship and material by OWNER'S Representative
shall not prejudice the rights of OWNER under the provisions of this Contract.
11.2 BUILDER shall promptly correct Work rejected by OWNER for failing to
conform to the requirements of the Contract Documents. BUILDER shall bear costs
of correcting such rejected Work, including additional testing and inspections
and expenses made necessary thereby.
11.3 In the most expeditious manner, however without delaying the
Construction Schedule, BUILDER shall promptly remove from the Vessel portions of
the Work which are not in accordance with the requirements of the Contract
Documents and have been neither corrected by BUILDER nor accepted by OWNER.
11.4 If BUILDER does not proceed with correction of such nonconforming Work
within a reasonable time fixed by written notice from OWNER (provided however,
that BUILDER shall not be required to remove work in a manner which would delay
the Construction Schedule), OWNER may remove it and store the salvable materials
or equipment at BUILDER'S expense.
11.5 If OWNER prefers to accept Work which is not in accordance with the
requirements of the Contract Documents, OWNER may do so instead of requiring its
removal or correction, in which case the Contract Price will be reduced as
agreed to and equitable. Such adjustment shall be effected whether or not final
payment has been made.
<PAGE>
ARTICLE XII-CHANGES IN THE WORK
12.1 Subject to the requirements of other work then pending in the yard,
the right is reserved by OWNER to make any deductions from or additions to the
Specifications and the Drawings on giving due notice in writing to BUILDER, the
amount of any such changes to be agreed upon in advance by OWNER and BUILDER,
and added to, or deducted from the total Contract Price. If any such change
shall delay the completion of the work, BUILDER shall be allowed reasonable
additional time sufficient to cover such delay. A statement of the increased or
reduced amount, and/or any additional time required, as aforesaid, shall be
submitted to OWNER by BUILDER, and shall be approved by OWNER in writing before
any such change is made.
12.2 Changes in the Work may be accomplished after execution of the
Contract, and without invalidating the Contract, by Change Order, subject to the
limitations herein.
12.3 Changes in the Work shall be performed under applicable provisions of
the Contract Documents, and BUILDER shall proceed promptly, unless otherwise
provided in the Change Order.
12.4 A Change Order ("Change Order") is a written instrument prepared by
BUILDER and signed by OWNER and BUILDER, stating their agreement upon a change
in the Work; the amount of the adjustment in the Contract Price, if any; and the
extent of the adjustment in the Contract Time, if any.
12.5 When OWNER and BUILDER agree on adjustments in the Contract Price and
Contract Time, or otherwise reach agreement upon the adjustments, such agreement
shall be effective immediately and shall be recorded by preparation and
execution of an appropriate Change Order.
12.6 If BUILDER wishes to make a Claim for an increase in the Contract
Price, he shall give OWNER written notice thereof as provided herein. This
notice shall be given by BUILDER before proceeding to execute the Work, except
in an emergency endangering life or property in which case BUILDER may proceed.
No such Claim shall be valid unless so made. If OWNER and BUILDER cannot agree
on the amount of the adjustment in the Contract Price, the parties may invoke
voluntary mediation as described herein or it shall be determined by Judicial
Proceeding. Any change in the Contract Price resulting from such Claim shall be
authorized by a Change Order.
12.7 BUILDER shall itemize each Claim for adjustment to Contract Price
brought about by changes to Work, as to labor, material and services involved.
BUILDER'S itemized estimate sheet showing changes or credits for additions to or
deductions from Work
<PAGE>
as shown on Drawings and described in Specifications shall at all
times be open to inspection by the OWNER.
12.8 Changed or extra work will be paid for at the unit prices or lump sum
stipulated in the Change Order authorizing the work, or alternatively OWNER may
compensate BUILDER for such work on a time and materials basis to be computed in
the following manner. The percentages in items b and c below shall also apply to
a lump sum Change Order:
a. LABOR. For all labor and foremen in direct charge of the specific
operations, BUILDER shall be paid at the rates generally charged by BUILDER
for such work, as provided in Exhibit "C" attached hereto. These rates are
fully burdened and include, by way of example and not limitation, all
fringe benefits (Health and Welfare, Pension Fund, etc.), Worker's
Compensation, or Longshoreman's Insurance, subsistence and travel or camp
costs when applicable, and a labor markup (to cover additional bond,
property damage, liability insurance, unemployment insurance contributions,
social security and other taxes, administrative overhead costs and profit).
b. MATERIALS. For materials accepted by OWNER and actually used in the
changed or extra work, BUILDER shall receive the actual cost of such
materials delivered to BUILDER, including transportation charges, plus 10%
(as overhead and profit). BUILDER shall furnish invoices to OWNER for all
materials used in the Work plus freight charges when applicable.
c. EQUIPMENT. For any machinery or special equipment (other than small
tools) which have been authorized by OWNER, BUILDER shall receive the
rental rates specified in the Change Order authorizing the work. No
additional compensation will be made for other costs such as, but not
limited to, fuels, lubricants, replacement parts or maintenance costs.
(1) Equipment which must be rented or leased specifically for changed
or extra work required under this Section shall be authorized in writing by
OWNER. BUILDER shall be paid invoice price plus 5%.
(2) Time will be recorded to the nearest one-quarter hour of actual
use and exclusive of stand-by time for purposes of computing compensation
to BUILDER for equipment utilized under these rates.
d. GENERAL SUPERINTENDENCE. No additional allowance
will be made for general superintendence, the use of small
tools, or other costs for which no specific allowance is
<PAGE>
herein provided.
e. RECORDS. BUILDER will maintain a daily record of
labor, equipment and materials utilized in the Work covered
under the Change Order and will present this record to OWNER
at the end of each day's work for verification and signature.
12.9 Unless specifically and expressly noted otherwise on its face, each
approved Change Order shall include all direct and indirect costs, including
delay, local disruption, cumulative disruption, acceleration and like costs
associated with resulting from, or incidental to the approved Change Order.
BUILDER hereby agrees that upon its acceptance of an approved Change Order,
BUILDER waives and releases all Claims for any and all additional costs or
delays in the Contract Time, including those based on cumulative disruption or
cumulative impact theories, resulting from an approved Change Order.
12.10 No change in the Work, whether by way of alteration or addition to
the Work, shall be the basis of an addition to the Contract Price or a change in
the Contract Time, unless and until such alteration or addition has been
authorized by a Change Order executed and issued in accordance with and in
strict compliance with the requirements of the Contract Documents.
ARTICLE XIII - FORCE MAJEURE
13.1 All obligations of the BUILDER contained in this Contract respecting
the Contract Time shall be subject to extension by reason of "Force Majeure",
which term is hereby declared to mean causes listed below that are beyond the
reasonable control of the BUILDER and only to the extent that such event
actually causes a delay. The parties agree that such events shall be limited to
the following: industrial or civil disturbances, riots or insurrections, arrests
and restraints of rulers and people; acts of God or acts of omissions of the
OWNER; war; preparation for war; blockade, sabotage, vandalism and malicious
mischief, landslides, floods, hurricanes, tornadoes, lightning, earthquakes or
other natural catastrophes; collisions and fires; non-delivery and/or late
delivery of any OWNER-furnished supplies, services, material or equipment (In
the event these OWNER items are late then it is agreed that OWNER shall pay the
reasonable additional costs of BUILDER because of such lateness.), which the
BUILDER by it best efforts cannot avoid; explosions, epidemics, unavoidable
casualties, or national emergencies; material interference in the orderly
prosecution by BUILDER of the Work by OWNER'S contractors or subcontractors;
Government or court orders, allocations or prohibitions. Rain shall not be
considered a "Force Majeure" event unless its occurrence requires a shutdown of
a substantial portion of all outside fabrication, assembly or painting work in
the
<PAGE>
BUILDER'S yard of the Work prior to 12:00 noon on a regularly scheduled work
day. For each day on which rain requires a shut down as aforesaid, BUILDER shall
be entitled to one (1) day's extension of the Contract Time. Force Majeure shall
not include (i) shortage of skilled labor, (ii) delays in receiving materials,
except as provided below, or (iii) delays of carriers by land, sea or air. Force
Majeure may include delays of subcontractors or delays in receiving material,
only if such delays are caused by a Force Majeure event.
13.2 Within three (3) working days of knowledge of any "Force Majeure"
event involving rain which may affect the Contract Time, the BUILDER shall
notify the OWNER in writing and shall furnish an estimate, if possible, of the
extent of the probable delay. Upon receipt of any such notice, the OWNER shall,
within five (5) working days, acknowledge the same in writing and indicate
agreement that such development is to be treated as a "Force Majeure" event, or
state any objections, and the reasons therefor, to acceptance of this
development as a "Force Majeure" event. If BUILDER fails to notify OWNER of a
"Force Majeure" event involving rain within three (3) working days after
knowledge of the event, BUILDER shall be estopped from thereafter claiming
"Force Majeure" for any period of delay more than three (3) working days prior
to said notice. If OWNER should fail to respond within five (5) working days,
the extension of time shall be considered approved.
13.3 Within five (5) working days of knowledge of any other "Force Majeure"
event not involving rain which may affect the Contract Time, the BUILDER shall
notify the OWNER in writing and shall furnish an estimate, if possible, of the
extent of the probable delay. Upon receipt of any such notice, the OWNER shall,
within ten (10) working days, acknowledge the same in writing and indicate
agreement that such development is to be treated as a "Force Majeure" event, or
state any objections, and the reasons therefor, to acceptance of this
development as a "Force Majeure" event. If BUILDER fails to notify OWNER of a
"Force Majeure" event within five (5) working days after knowledge of the event,
BUILDER shall be estopped from thereafter claiming "Force Majeure" for any
period of delay more than five (5) working days prior to said notice. If OWNER
should fail to respond within ten (10) working days, the extension of time shall
be considered approved.
ARTICLE XIV - WARRANTY
14.1 BUILDER warrants that all labor and installations made shall meet the
requirements and standards described in the Specifications and the Drawings, and
all materials and all equipment used by BUILDER shall be of the quality set
forth in the Specifications and Drawings. All component parts of the Vessel,
except those specified or furnished by OWNER, shall conform to the
<PAGE>
standards of first-class material for commercial vessels of this class. BUILDER,
however, does not warrant that any material or equipment purchased by it for
installation in the Vessel is free from manufacturer's defects, and specifically
disclaims any warranties, expressed or implied, with respect to such material or
equipment, but does hereby extend the manufacturer's warranty or guaranty, if
any, to OWNER. BUILDER will use its best efforts to secure a minimum of a one
year warranty on parts and labor from manufacturers equipment to be used in the
Vessel. BUILDER shall permit OWNER to inspect all component parts to be
installed in the Vessel and BUILDER shall advise and assist OWNER in said
inspection. BUILDER will use its best efforts and will cooperate with OWNER in
order to enforce any claims against manufacturer's defects that may occur.
14.2 Notwithstanding any inspection or failure to reject by OWNER or any
Regulatory Body pursuant to this Contract, if, at any time within 365 days after
delivery of the Vessel there shall appear or be discovered, any weakness, any
deficiency, and failure, any breaking down or deterioration in design, or
workmanship of BUILDER or its subcontractors in performing the contract work, or
any failure of the Vessel, so furnished by BUILDER to function as prescribed and
as intended by the Drawings and Specifications and this Contract ("Defect(s)"),
such Defect(s) shall be made good, at BUILDER'S expense, to the requirements of
the Drawings and Specifications and this Contract.
14.3 BUILDER'S warranty shall extend only to those Defects in workmanship
which are reported in writing to BUILDER within three hundred sixty-five (365)
days from the date of delivery of the Vessel. In the event OWNER notifies
BUILDER of any Defect covered under this warranty, BUILDER will make repairs
and/or replacement, if reasonably practicable, at the Vessel's berth location.
At BUILDER's option, provided repair at the Vessel's berth location is not
reasonably practicable, BUILDER may make such repair and/or replacement at one
of BUILDER'S yards without expense to OWNER for transporting the Vessel or any
component thereof to and from that yard; provided that if it is not practicable
to have the Vessel proceed to such yard, OWNER may, with the prior written
consent of BUILDER, have such repairs and/or replacement made elsewhere and in
such event, BUILDER will pay to OWNER a sum equivalent to the price BUILDER
would charge for remedying such Defect at its yard.
14.4 The sole and exclusive remedy of OWNER for any such Claim shall be the
obligation of BUILDER, under and pursuant to this Article, to repair and/or
replace, or cause to be repaired and/or replaced, any such defective workmanship
or installation of materials and equipment, provided such Defects have not been
caused by the negligent operation or maintenance of the Vessel, or its
equipment, after delivery, by those in charge of the Vessel's operations, or
other parties not in the employ of BUILDER.
<PAGE>
Anything to the contrary notwithstanding, the ABOVE WARRANTY IS EXCLUSIVE AND
IN LIEU OF ALL OTHER WARRANTIES, SAVE THAT OF TITLE, WHETHER WRITTEN, ORAL, OR
IMPLIED, IN FACT OR BY LAW, AND SPECIFICALLY, ANY WARRANTY OF MERCHANTABILITY OF
FITNESS FOR A PARTICULAR PURPOSE IS EXCLUDED. In no event under this Agreement
shall BUILDER be responsible for any sum in excess of the cost of the repairs
and/or replacement as specified herein, it being specifically understood that
BUILDER is not responsible for delay, demurrage, loss of profits, loss of use or
any other consequential damages.
14.5 BUILDER shall have no responsibility whatsoever with respect to any
Defects or faulty workmanship not reported in writing to BUILDER within said
three hundred sixty-five (365) day period regardless of any negligence of
BUILDER or its employees or subcontractor or their employees or of any furnisher
of materials in connection therewith and OWNER waives and releases BUILDER, its
employees, subcontractors and their employees and all furnishers of supplies and
materials from all such liability and all damages resulting therefrom whether
same be based on contract and/or tort, for any damages or loss to the Vessel
resulting from defective design, manufacture or installation of property or
materials or from unseaworthiness; it being specifically understood that any
such defects reported after such three hundred sixty-five (365) day period and
all damages to the Vessel therefrom, shall be the exclusive responsibility of
OWNER.
ARTICLE XV - INSURANCE
15.1 BUILDER shall bear all risk of loss regarding the Work, including
materials, equipment and furnishings awaiting use, until the Vessel is delivered
to OWNER.
15.2 Builder shall purchase, at its own expense, and maintain in force at
all times during the performance of services under this Contract, the policies
of insurance listed below in such form and with such underwriters as are
acceptable to Owner. They shall be the minimum acceptable limits.
15.3 Certificates of insurance must be furnished to the Owner within
fifteen (15) days of execution of the Contract and must provide for a thirty
(30) day prior notice of cancellation, non-renewal or material change.
Other requirements:
(i) EMPLOYER'S LIABILITY INSURANCE. Which shall include coverage
for up to statutory limits of the United Stated Longshoremen's
and Harbor Worker's Act, the statutory limits of the
applicable State Compensation Insurance and in the instance of
the Jones Act, employer's liability protection of not less
<PAGE>
than $5,000,000 per person.
(ii) COMPREHENSIVE (COMMERCIAL) GENERAL LIABILITY INSURANCE. Shall not be less
than $5,000,000 combined single limit per occurrence and annual aggregates.
Shall include premisesoperations, independent contractors, broad form
property damage, blanket contractual and personal injury endorsements. This
policy shall name Owner as an additional insured under the policy.
(iii) COMPREHENSIVE AUTOMOTIVE LIABILITY INSURANCE. With Coverage
limits not less than $1,000.000 combined single limit.
(iv) UMBRELLA LIABILITY. Shall have the Watercraft Exclusion B removed, excess
of the policies enumerated in (i), (ii) and (iii) above as well as excess
of the liability portion of the Builder's Risk Insurance in an amount
serving to increase primary limits to $10,000,000.00 for any one
occurrence. This policy shall name Owner as an additional insured under the
policy.
(v) BUILDER'S RISK. Including coverage for protection and
indemnity, including coverage for tests and trials, coverage
of period up to Delivery, covering the Vessel and work
hereunder including Joiner Work, including materials and
equipment to be furnished by Avondale's subcontractors in an
amount at least equal to the value of the Contract Price, plus
the value of Owner Furnished Equipment and materials received
by the Builder for use in or incorporated in the Vessel. This
policy shall name the Owner as an joint loss payee as their
interests may appear.
15.4 At OWNER'S option, BUILDER shall use its best efforts to provide, at
OWNER'S cost, a policy of professional liability insurance in the amount of
$1,000,000.00, insuring BUILDER and naming OWNER as additional insured against
design defects, errors or omissions arising out of the preparation or approval
of drawings, opinions, reports, surveys, Change Orders, designs or
Specifications, or the giving of or the failure to give directions or
instructions by any architect, engineer, marine surveyor or other professional
employed or retained by BUILDER, its agents or employees for a period of five
(5) years following expiration of the three hundred sixty-five (365) day
warranty of BUILDER'S design work pursuant to Article XIV.
15.5 Any endorsement naming OWNER as an additional insured shall contain
the following endorsement: (1) This policy shall not provide coverage to the
additional insured for the fault attributable to the additional insured arising
from the acts, omissions, negligence, strict liability and/or fault of the
additional insured, its parent, holding or affiliated companies,
<PAGE>
their employees, officers and agents and their subcontractors; (2) the coverage
provided of the additional insured under this policy shall be subject to all the
terms and conditions of this policy, including all extensions from coverage set
forth therein (except as otherwise provided in this endorsement or in any
certificate of insurance pertaining to this policy).
15.6 Everyone entering the premises of BUILDER for any reason whatsoever
will be required to comply with the standard insurance and indemnity
requirements of the BUILDER. (Attached hereto as Exhibit "E").
ARTICLE XVI - INDEMNITY
16.1 To the fullest extent permitted by law, BUILDER hereby agrees to and
shall indemnify and hold harmless the OWNER and other Indemnitees from and
against any and all claims, liabilities, losses, damages, costs or expenses, for
property damage, personal injury, or death, including but not limited to
reasonable attorneys' fees and court costs in whole or in part, caused by,
resulting from, arising out of, or occurring in connection with the negligent
acts, errors or omissions, gross negligence or willful and wanton acts of the
BUILDER, any Subcontractor, anyone directly or indirectly employed by BUILDER or
any Subcontractor, or anyone for whose acts any of them may be legally
responsible, which acts, errors, omissions, negligence has occurred prior to
delivery of the Vessel or during the conduct of any warranty Work performed in
BUILDER'S yard. The above indemnity includes but is not limited to any such
injury resulting from the use of scaffolding, hoists, cranes, and all such other
equipment used on this Project or from the BUILDER'S failure to properly provide
and maintain the protective measures required by the Contract Documents arising
prior to delivery and acceptance of the Vessel or while warranty work is in
progress at BUILDER'S yard; provided, however, this right to indemnification
shall not apply to the extent that any such claims, liabilities, losses, damages
or expenses result from the OWNER'S or the Indemnitees' negligence. The BUILDER
agrees to pay on behalf of the OWNER and its Indemnitees upon their demand, the
amount of any judgment that may be entered against them in any action brought
against the OWNER and other Indemnitees upon or by reason of claims arising out
of any such acts or omissions of BUILDER as well as all costs of defense
including attorney's fees and litigation and court costs incurred by OWNER and
other Indemnitees in connection with such claims.
16.2 To the fullest extent permitted by law, OWNER hereby agrees to and
shall indemnify and hold harmless the BUILDER and other Indemnitees from and
against any and all claims, liabilities, losses, damages, costs or expenses, for
property damage, personal injury, or death, including but not limited to
reasonable attorney's fees and court costs in whole or in part, caused by,
<PAGE>
resulting from, arising out of, or occurring in connection with the negligent
acts, errors or omissions, gross negligence or willful and wanton acts of the
OWNER, OWNER'S Subcontractors, anyone directly or indirectly employed by any of
them or anyone for whose acts any of them may be legally responsible, which
acts, errors, omissions, negligence or breach of contract has occurred prior to
delivery of the vessel. This right to indemnification shall not apply to the
extent that any such claims, liabilities, losses, damages or expenses result
from the BUILDER's or the Indemnitees' negligence. The OWNER agrees to pay on
behalf of the BUILDER and other Indemnitees upon their demand, the amount of any
judgment that may be entered against them in any action brought against the
BUILDER or other Indemnitees upon or by reason of claims arising out of any such
acts or omissions of OWNER as well as all costs of defense including attorney's
fees and litigation and court costs incurred by BUILDER and other Indemnitees in
connection with such claims.
ARTICLE XVII - TAXES
17.1 Any sales, use or similar tax on the sales or use of the Vessel which
may be levied upon or imposed in connection with the construction or delivery of
the Vessel hereunder shall be for the account of OWNER. BUILDER agrees that it
will not pay any such tax or concede any liability for same without prior notice
to OWNER. BUILDER acknowledges and accepts exclusive liability for the payment
of any transportation taxes, personal property taxes (only to the extent that
liability therefore attaches prior to the delivery and acceptance of the Vessel
by OWNER), payroll taxes, unemployment taxes or contributions, taxes based on
income or other taxes or contributions now or hereafter imposed by any
government or taxing authority have jurisdiction in the premises, and which are
measured or computed in accordance with salaries or other compensation or income
and which shall be due and payable by virtue of the performance of BUILDER'S
obligations hereunder.
ARTICLE XVIII - PATENTS
18.1 OWNER shall defend and indemnify BUILDER against and hold BUILDER
harmless from all damages and costs decreed against BUILDER as a result of
BUILDER complying with plans and/or specifications furnished by OWNER.
18.2 BUILDER shall defend any suit or proceeding brought against OWNER or
its customers that is based on a Claim resulting from complying with plans and
specifications furnished by BUILDER, that the equipment used or work performed
in the manufacture of any article constitutes an infringement of any patent, if
notified promptly in writing and given authority, information, and assistance
for defense of same, and BUILDER shall pay all damages
<PAGE>
and costs awarded therein.
ARTICLE XIX - USE OF THE PLANS AND SPECIFICATIONS
19.1 To the extent that BUILDER has any rights to the following items,
BUILDER hereby grants to OWNER upon delivery of the Vessel, or if the Contract
is terminated by OWNER pursuant to this Agreement, upon termination, the right
to use all Drawings, Specifications, calculations, sketches, test data, survey
results, photographs, and renderings, and any other materials related to this
Work and prepared in connection therewith by BUILDER or its Subcontractors or
furnished to BUILDER by OWNER (collectively referred to as "Project
Materials")for any purpose. OWNER shall indemnify and hold BUILDER harmless
from, for and against any and all liability which may arise as a result of said
use, including design liability. The provisions of this Article XIX shall
survive the completion or termination of this Agreement.
ARTICLE XX - DEFAULT
20.1 If (a) at any time there shall be filed by or against BUILDER in any
court a petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of all or a portion of BUILDER'S property,
and a discharge thereof; or, if BUILDER makes an assignment for the benefit of
creditors or petitions for or enters into an agreement or agreements with its
creditors, and by reason of any of these events BUILDER'S obligations under this
Contract may be assigned to or performed by a person other than BUILDER, or (b)
if BUILDER materially fails to execute the Work in accordance with this
Agreement, except failure to deliver timely the vessel, or (c) fails to cause
the removal or bonding of any liens or privileges filed against the Project
according to Paragraph 5.13, hereof or materially disregards laws, ordinances,
rules, regulations or orders of any public authority having jurisdiction; or
(d), without limitation, fails to perform any material provisions of this
Contract, then OWNER by giving fifteen (15) days' prior written notice of any
such default to BUILDER and may then terminate the services of BUILDER and take
possession of all or some of BUILDER'S Work, transport the Work in progress, at
BUILDER'S expense from BUILDER'S yard to another location, and complete the Work
by such means as OWNER deems fit; provided, however, BUILDER shall have the
fifteen (15) day period referred to above to cure any such default. Upon
notification of OWNER'S termination of this Agreement, pursuant to this Article,
BUILDER will promptly undertake, at its sole cost, to place all Work in a
suitable condition for transportation to another location. BUILDER will assist
OWNER in the removal from the yard of any Work completed to the date when the
work was discontinued. In such event, BUILDER shall allow OWNER or OWNER'S
Representative(s), and other contractors continuing access to
<PAGE>
BUILDER'S yard for a period of ninety (90) days following such termination in
order to continue the Work in progress. In such case, BUILDER shall not be
entitled to receive any further payment until the Work is completed. If the
unpaid balance of the Contract Price shall exceed the expense of completing the
Work, including reasonable compensation for additional managerial and
administrative services, such excess shall be paid to BUILDER. If such
reasonable expense, shall exceed such unpaid balance, BUILDER shall pay the
difference to OWNER promptly on demand.
20.2 OWNER may terminate this Contract without cause by giving seven (7)
days' prior written notice to BUILDER, and in such event OWNER will pay BUILDER
for that portion of the Contract Price, less the aggregate of previous payments,
allocable to the Work completed as of the date of termination. OWNER also will
reimburse BUILDER for all verified costs necessarily incurred for organizing and
carrying out the stoppage of the Work and paid directly by BUILDER, including
overhead, general expenses and profit incurred to date of termination. For
purposes of this paragraph, "profit" shall mean such reasonable amount not to
exceed 6% of BUILDER's verified costs referred to in the preceding sentence.
OWNER will pay for the cost of material, labor (including Subcontractor's
reasonable profit) and equipment of work in progress, as verified to its
satisfaction, until the date of said termination. OWNER shall also pay
reasonable cancellation charges actually incurred by BUILDER for subcontractors
or vendors affected by OWNER'S termination hereunder provided BUILDER has used
best efforts to contract with subcontractors and vendors without cancellation
charges. Except as specifically provided in this Paragraph, OWNER shall not
under any circumstances be responsible or liable to BUILDER, its contractors or
subcontractors of any tier, for any incidental, consequential or special losses,
damages or expenses including, but not limited to, loss of time, loss of profit
or earnings whether directly or indirectly arising out of this Contract.
20.3 In the event of termination by OWNER, OWNER may require BUILDER
promptly to assign to it all or any (i) bids or proposals, (ii) subcontracts,
(iii) construction plans, (iv) materials, tools and equipment (to the extent
paid for by OWNER), (v) appliances, (vi) rental agreements, and (vii) any other
commitments which OWNER, in its sole discretion, chooses to take by assignment,
and in such event BUILDER shall promptly execute and deliver to OWNER written
assignments of the same. This provision shall survive the termination of the
Contract.
20.4 If OWNER shall breach any payment provision hereof, and if such breach
shall not be corrected within (10) days after written notice thereof from
BUILDER to OWNER, BUILDER shall have the right to terminate OWNER'S right to
proceed with performance of this Contract, whereupon BUILDER or its nominee may,
but shall not
<PAGE>
be obligated to, take over and complete in a reasonable manner the performance
of this Contract, to market the Vessel for resale after completion thereof or at
any state of partial completion, and to deduct the costs thereof from any money
due or thereafter to become due to OWNER under this Contract. OWNER shall not be
entitled to any refunds or payments, if applicable, until performance is
complete and the Vessel is sold. If, after completion and sale of Vessel, the
balance of funds received by BUILDER from the sale of the Vessel shall exceed
the expense of finishing the work, including reasonable compensation for
additional managerial, production, marketing and administrative work entailed,
only such excess shall be paid to OWNER. If such compensation, costs and damages
shall exceed such funds received from the sale of the Vessel, OWNER shall be
liable for and shall pay the difference to BUILDER.
20.5 The failure of either party to exercise any rights conferred upon it
under any provision of this Contract with respect to any breach or default by
the other party shall not constitute a waiver of its rights under any other
provision of this Contract with respect to such breach or default, or a waiver
of its rights under the same or any other provision of this Contract with
respect to any other breach or default.
ARTICLE XXI - NOTICES
21.1 Copies of notices required by this Contract to be given by OWNER to
BUILDER or to be given to OWNER by BUILDER shall be in writing and will be
delivered in person, by facsimile, or by registered mail to BUILDER or OWNER, or
the designated representative of either, as the case may be.
Notices to BUILDER shall be addressed to:
Barry Heaps
Avondale Boat Division
P.O. Box 50280
New Orleans, LA 70150
with a copy to:
R.D. Church
Avondale Industries
P.O. Box 50280
New Orleans, LA 70150
with a copy to Surety
Notices to OWNER shall be addressed to:
Norbert A. Simmons
<PAGE>
400 Lafayette Street
Suite 100
New Orleans, LA 70130
with a copy to:
Carol S. DePaul
Bally Manufacturing Corporation
8700 W. Bryn Mawr
Chicago, IL 60631-3547
21.2 In all matters the parties will be represented by none other than the
following named persons for OWNER:
Thomas A. Gourguechon or ____________________________
and for BUILDER:
Barry Heaps or R.D. Church
21.3 Each party agrees that at least one of its named representatives will
be available for consultation during normal working hours. Both parties agree
that no one other than the named individuals shall be considered as an agent of
either party for making of admissions or giving of instructions. Except as
herein authorized, no change or modification in this Contract or the
Specifications shall be valid or binding on either party unless the same is in
writing and signed by one of the above designated representatives of each party.
Any change in the Contract Price resulting from change in Specifications shall
be agreed upon in writing in advance.
21.4 Any such address may be changed and any other person may be designated
to act for either party upon written notice of such designation accomplished in
accordance with the provisions of this paragraph.
ARTICLE XXII - MEDIATION
22.1 In the event a dispute arises hereunder, prior to the commencement of
any formal proceedings, the parties shall continue performance as set forth in
this Contract and shall attempt in good faith to reach a negotiated resolution
by designating an officer of appropriate authority to resolve the dispute. If
the parties have attempted in good faith to resolve the dispute and failed to do
so, if both BUILDER and OWNER agree, they may proceed to mediation, as set forth
herein.
22.2 In the event of any dispute or difference arising between OWNER and
BUILDER as to any matter or thing arising out of or relating to this Contract,
or any stipulation therein or in the Specifications or the Working Drawings
which cannot be settled by
<PAGE>
the parties themselves, the matter in dispute may be referred for
voluntary, non-binding mediation.
22.3 In the event BUILDER claims a Force Majeure day(s) and OWNER does not
agree and the result is a dispute over an amount owed, the OWNER agrees to
escrow the disputed amount with the Mediator; and the Mediator shall decide the
issue(s) and disburse money(s) pursuant to his decision.
22.3 BUILDER and OWNER agree that Matthew Kawasaki shall be Mediator and
__________________ shall be the alternate Mediator. If the Office of Mediator
is vacant, by the request of either BUILDER or OWNER a new Mediator shall be
appointed by using the following procedures:
22.4 OWNER and BUILDER shall each name a Marine Surveyor to represent them.
The two chosen Marine Surveyors shall then select a third Marine Surveyor, who
shall serve as the Mediator. The Mediator and any alternate Mediator shall both
have spent the past five (5) years regularly engaged in their profession.
22.5 The parties agree that the powers of the Mediator shall be limited as
follows:
1. He shall deal only with the disputes which are referred
for him to investigate and submit his findings and recommendations.
2. He shall have no power to decide any matter which is not
directly related to the dispute submitted to him.
3. He shall have no power to modify the working drawings or
any specifications, terms or conditions related thereto.
4. He shall have no power to add to, subtract from, or modify
any of the terms of this Agreement.
5. His decisions shall be advisory only and shall not bind the parties,
except as provided in Section 22.3 herein.
22.6 The party initiating the demand for mediation shall notify the other
party in writing, at the same time stating the matter or matters in dispute.
Within a reasonable time thereafter, not exceeding five (5) calendar days, the
second party shall acknowledge the notice in writing, either specifying any
additional issue or issues to be mediated or refusing the demand for mediation.
Providing the mediation has been agreed to, the mediation shall be conducted in
New Orleans, Louisiana under applicable Louisiana laws however, the decision of
the Mediator shall not bind the parties.
22.7 Should OWNER and BUILDER consent, the Mediator will review Claims and
take one or more of the following preliminary actions within ten (10) days of
receipt of Claim: (1) request additional supporting data from the claimant, (2)
submit a schedule to the parties indicating when the Mediator expects to take
action, (3) reject the Claim in whole or in part, stating reasons for
<PAGE>
rejection, (4) recommend approval of the Claim by the other party or (5) suggest
a compromise.
22.8 If a Claim has not been resolved, the party making the Claim, shall,
within ten (10) days after the Mediator's preliminary response, take one or more
of the following actions: (1) submit additional supporting data requested by the
Mediator (2) modify the initial Claim or (3) notify the Mediator that the
initial Claim stands.
22.9 If a Claim has not been resolved after consideration of the foregoing
and of further evidence presented by the parties or requested by the Mediator,
the Mediator will notify the parties or in writing that the Mediator's decision
will be made within seven (7) days. Either party aggrieved by the conduct or
decision of the Mediator may at any time seek a judicial determination of the
Claim. Upon expiration of such time period, the Mediator will render to the
parties the Mediator's written decision relative to the Claim, including any
change in the Price or Contract Time or both.
22.10 The Mediators so appointed shall determine which party or the proper
proportion which each party shall assume of the expenses of such mediation, and
the mediation expenses so allocated shall be paid directly by the party or
parties to which such expenses are directed to be paid.
22.11 A decision by the Mediators shall not be required as a condition
precedent to litigation of a dispute between BUILDER and OWNER.
ARTICLE XXIII - FINANCING MATTERS
23.1 BUILDER acknowledges that OWNER may secure financing of the Vessel
from a third party lender (the "Lender"). In consideration of the arrangements
made by Lender to lend funds to OWNER for the purpose of meeting its obligations
to BUILDER hereunder, BUILDER hereby agrees to cooperate with OWNER and Lender
and to execute such documents, take such actions, and make such amendments to
this Agreement as are reasonably required by Lender. These may include but are
not limited to a) providing additional copies of all Notices required to be
given to OWNER hereunder to Lender; b) providing Lender with notice of any OWNER
default hereunder; c) permitting Lender to assume OWNER'S position under this
Agreement following Lender's cure of an OWNER default; d) naming Lender on any
insurance policies required hereunder; e) indemnifying Lender to the extent
OWNER is indemnified hereunder; e) allowing Lender or its representative to
inspect the progress of construction of the Vessel; f) the execution of such
certificates regarding the progress of Vessel construction as Lender may require
in order to authorize payments.
<PAGE>
ARTICLE XXIV - CONSTRUCTION
24.1 The headings of the sections have been inserted as a convenience for
reference only, and are not to be considered in any construction or
interpretation of this Contract.
ARTICLE XXV - LAW APPLICABLE
25.1 This Contract shall be governed by the Laws of the State
of Louisiana, U.S.A.
ARTICLE XXVI - UNITED STATES APPROVAL
26.1 All obligations of BUILDER and OWNER herein are subject to compliance
with all applicable laws and regulations of the United States Government and
agencies thereof.
ARTICLE XXVII - ASSIGNMENT
27.1 This Contract shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
27.2 BUILDER may not assign this Contract, and any act of BUILDER
purporting to effect an assignment of this Contract shall be void and of no
effect. BUILDER shall not delegate any of its duties as BUILDER under this
Contract; provided, however, that BUILDER may subcontract portions of the Work
to qualified Subcontractors.
27.3 OWNER may, upon notice but without the consent of BUILDER, assign this
Contract to an affiliate or subsidiary of a principal of OWNER, a lender
providing financing for the Project or any person who succeeds to OWNER'S
interest in the Project. In the event of such assignment, this Contract shall
vest in OWNER'S assignee, who shall assume OWNER'S obligations hereunder, and
BUILDER shall continue to be bound by its terms. Should an assignment of this
Contract take place pursuant to this paragraph OWNER and BUILDER agree that the
Parent Guaranty shall remain in place and effective. Anything to the contrary
notwithstanding, this Contract shall not become effective until the Parent
Guaranty is executed and delivered satisfactory to BUILDER.
27.4 In the event any assignment is made under this Article XXVII, OWNER
shall guarantee the performance of its obligations hereunder by the assignee and
such assignment shall not in any way violate any law of the United States of
America or any rules or regulations issued or promulgated by any department,
agency, or instrumentality of the United States Government.
<PAGE>
ARTICLE XXVIII - AGREEMENT
28.1 This Agreement contains the entire agreement of the parties in respect
to this transaction and supersedes any and all prior agreements or
understandings. No modification, waiver or release of any provision will be
valid unless in writing signed by the party to be bound.
28.2 This Agreement may be executed simultaneously in two counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument. All specifications, drawings,
attachments and/or exhibits referred as part of this Agreement have been
initialed on each page thereof by the parties executing this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Contract as of
the day and year first above written.
WITNESSES:
JOY T. RINALDI AVONDALE INDUSTRIES, INC.
ALBERT L. BOSSIER, JR.
VERLIE B. LECOMPTE BY: Albert L. Bossier, Jr.
Its: President and CEO
?? Unreadable Name ?? BELLE OF ORLEANS, L.L.C.
BY: METRO RIVERBOAT
ASSOCIATES, INC., Member
NORBERT A. SIMMONS
THOMAS GOURGUECHON BY: Norbert A. Simmons
Its: President
<PAGE>
EXHIBIT "C"
LABOR RATES FOR TIME AND MATERIAL CHANGES
Straight Time Time and Double
One Half Time
Production Labor $28.00 p/hr $42.00 p/hr $56.00 p/hr
Engineering Services $40.00 p/hr $60.00 p/hr $80.00 p/hr
(in house)
<PAGE>
EXHIBIT "D"
GUARANTY AGREEMENT
WHEREAS this Guaranty Agreement ("Guaranty"), is executed and delivered
to AVONDALE INDUSTRIES, INC. ("BUILDER") in consideration of BUILDER'S
furnishing labor, material and plant facilities for Belle of Orleans, L.L.C.,
(hereinafter called "OWNER"), or its assigns, to construct one (1) Paddlewheel
Casino Vessel, Hull No. 114 (the "Vessel") pursuant to that certain Vessel
Construction Contract (the "Contract") executed between BUILDER and OWNER on
January 12, 1994.
NOW, THEREFORE, for the consideration above stated and other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
undersigned Bally Entertainment Corporation, a Delaware corporation, with a
business address of 8700 West Bryn Mawr, Chicago, Illinois, 60631 (hereinafter
called "GUARANTOR"), hereby unconditionally guarantees to BUILDER, the due and
punctual payment, at its office in Avondale, Louisiana, of the indebtedness of
OWNER to BUILDER in an amount equal to all sums due, pursuant to the Contract,
provided, however, that notwithstanding anything to the contrary herein
contained, the maximum amount that GUARANTOR shall be liable for hereunder shall
not exceed SIX MILLION AND NO/100 ($6,000,000.00) DOLLARS (the "Guaranty
Amount").
GUARANTOR expressly waives diligence on the part of BUILDER in the
collection of any and all of the sum or sums due hereunder, protest, notice and
all extensions that may be granted under any instrument evidencing any sum or
sums due hereunder, provided, however, notwithstanding anything to the contrary,
BUILDER shall first make written demand of payment of all indebtedness from
OWNER with a copy to GUARANTOR and shall not exercise its rights under this
Guaranty unless such demand is not satisfied within five (5) days from the date
of such written demand provided, however, that GUARANTOR may assert any claims
or defenses that OWNER may have in the Contract. BUILDER shall be under no
obligation to notify the undersigned of its acceptance hereof, nor of any credit
extended on the faith hereof, nor of any extensions of time or other adjustments
made in the Vessel construction contract, nor of the failure to pay any sum or
sums due hereunder, in accordance with the terms thereof, nor to use diligence
in preserving the liability of any person or any sum or sums due hereunder, or
in bringing suit to enforce collection of the debt due under this Guaranty.
This is an absolute guaranty of payment and not of collectibility.
This Guaranty shall continue until full, complete and faithful
performance of the Contract as it may be from time to time amended as authorized
by its terms. Upon receipt of the final payment or when the Guaranty Amount is
reduced to zero, whichever occurs earlier, this Guaranty will be terminated
except for the payment obligations indicated in the Contract to survive the
completion or termination of the contract for which the Guaranty shall remain
operative.
This Guaranty shall be governed by the laws of the Sate of Louisiana,
excluding any conflict-of-law rule or principle which might direct the
application of the laws of any other jurisdiction.
This continuing Guaranty is for the benefit of BUILDER, and shall be
binding upon GUARANTOR and its respective successors, by operation of law or
otherwise. This continuing Guaranty is not intended to and does not create any
rights in or benefits for any other third parties.
IN WITNESS WHEREOF, the undersigned, has executed this Guaranty as of the
respective date indicated, in several counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.
TWO WITNESSES: BALLY ENTERTAINMENT CORPORATION
"GUARANTOR"
MARY BUTLER ARTHUR M. GOLDBERG
--------------------------------- By: Arthur M. Goldberg
Title: President
[SIGNATURE NOT READABLE]
--------------------------------- -------------------------------
Date: July 8, 1994
I, CAROL S. DEPAUL, certify that I am the Secretary of Bally
Entertainment Corporation named as a GUARANTOR herein; that Arthur M. Goldberg
who signed this Guaranty on behalf of the Bally Entertainment Corporation was
then President of said corporation; that said Guaranty was duly signed for and
in behalf of said corporation by authority of its governing body, and is within
the scope of its corporate powers.
CAROL S. DEPAUL
Carol S. DePaul
Secretary, Bally Entertainment Corporation
<PAGE>
AVONDALE INDUSTRIES, INC.
Avondale SHIPYARDS DIVISION EXHIBIT "E"
Shipyards Division P.O. BOX 50280, NEW ORLEANS, LA 70150-0280
504-436-2121
Fax 436-5443
Fax 436-5374
ENCLOSURE I
INSURANCE & SAFETY REQUIREMENTS FOR VENDORS
4. LIABILITY AND INDEMNITY: Contractor shall be solely responsible for all
materials, equipment and work until the project is completed to Avondale's
satisfaction. Contractor shall pay Avondale the full amount ofall damage
to, or destruction of, any property of Avondale resulting from the work
performed by Contractor or any subcontractor hereunder. Contractor does
agree to indemnify and hold harmless Avondale Industries, Inc., its
employees, officers, agents, representatives and underwriters, from and
against any and all losses, expenses, liens, claims, demands and causes of
action of every kind and character for personal injury to or death of
Contractor's own employees, the employees of Avondale Industries, Inc.
and/or third persons and/or for damage to or loss of the property of
Contractor, Avondale Industries, Inc. and/or third parties, in any way
arising out of, resulting from or connected with the performance by
Contractor or work on or about the premises of Avondale Industries, Inc. or
elsewhere even though caused, occasioned or contributed to by the sole or
concurrent negligence of Avondale Industries, Inc., its employees,
officers, agents, representatives, subcontractors or invitees, including
any claim based upon the unseaworthiness of any vessel or upon any theory
of strict liability, vice or defect in the premises of equipment located
therein. Avondale Industries, Inc. shall have the right, at its option, to
participate in the defense of any such suit, without relieving the
Contractor of any obligation.
5. INSURANCE: Contractor shall provide at all times the following insurance
with insurers satisfactory to AvondaleIndustries, Inc.:
(a) WORKERS' COMPENSATION INSURANCE fully complying with the laws of the
state or states in which the work is to be done, including the
Longshoremen's and Harbor Workers' Compensation Act Endorsement in an
amount required by said Act and Employer's Liability Insurance in the
amount of $500,000 covering injuries to and death of Contractor's employees
in any state where Workers' Compensation laws are not in force. Contractor
agrees to obtain from its underwriters a Waiver of Subrogation in favor of
Avondale Industries.
(b) COMPREHENSIVE GENERAL LIABILITY INSURANCE in the amount of $500,000 per
person for bodily injury or death of persons and $1,000,000 for any one
occurrence, with deletion of the Watercraft Exclusion. INDEMNITOR agrees to
have Avondale Industries, Inc. named as an additional assured under its
policy of insurance and to obtain Contractual Liability Insurance to cover
this specific Hold Harmless and Indemnity Agreement. A Waiver of
Subrogation in favor of Avondale Industries, Inc. must be provided.
(c) AUTOMOBILE LIABILITY AND PROPERTY DAMAGE INSURANCE covering personal
injuries in the amount of $250,000 per person and $500,000 for any one
occurrence and property damage in the amount of $500,000 per accident. This
coverage applies to each and every unit of automotive equipment operated or
used by Contractor in the performance of their work. Contractor agrees to
have Avondale Industries, Inc. named as an additional assured under its
policy of insurance and a Waiver of Subrogation in favor of Avondale
Industries, Inc. must be provided.
(d) Regarding vessel owners and/or vessel brokers, the following wording is
required under the Vessel's HULL AND P&I policy:
"While the vessels named herein are performing work for Avondale
Industries, Inc. at any given time, then Avondale Industries, Inc. is
named as an additional assured during that particular time and all
rights of subrogation hereunder are waived with respect to Avondale
Industries, Inc."
"In the event of cancellation or material change by underwriters,
at least ten (10) days prior written notice will be given to Avondale
Industries, Inc."
Contractor agrees that the insurance requirements as set forth above shall
not limit or diminish in any way the rights and obligations of Contractor
under any of the indemnity provisions set forth in this agreement.
Furthermore, Contractor agrees that prior to its commencement of work, it
will furnish Avondale Industries, Inc. with a Certificate of Insurance
evidencing that such insurance is in force and effect and such Certificate
of Insurance shall provide that at least ten (10) days written notice be
given Avondale Industries, Inc. prior to the discontinuance of the
coverage.
<PAGE>
AGREEMENT
This agreement is made in conjunction with that certain Vessel Construction
Contract between Avondale Industries, Inc. and Belle of Orleans, L.L.C.,
executed on January 12, 1994.
The parties agree that during the first thirty (30) days after this date
the Builder, Avondale Industries, Inc., will not order either equipment or
materials pursuant to the contract and/or its plans or specifications without
the prior written consent of the Owner, Belle of New Orleans, L.L.C. in excess
of the First Milestone Payment.
This 12th day of January, 1994.
AVONDALE INDUSTRIES, INC. BELLE OF ORLEANS, L.L.C.,
BUILDER OWNER
BY: METRO RIVERBOAT
ASSOCIATES, INC.,
MEMBER
BARRY HEAPS NORBERT A. SIMMONS
BY: Barry Heaps BY: Norbert A. Simmons,
President
ALBERT BOSSIER
BY: Albert Bossier,
Chairman
jc/AGREE.LET
<PAGE>
VESSEL CONSTRUCTION CONTRACT
AMENDMENT NO. 1
This Agreement is entered into this 11th day of February, 1994. Both
parties hereby agree to extend Milestone No. 2, as defined in the Vessel
Construction Contract, for the construction of a Paddlewheel Gaming Vessel,
BUILDER'S hull No. 114, (the "Vessel") executed 12 January 1994, by seven (7)
days.
All other terms and conditions will remain the same.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
as of the day indicated.
WITNESSES:
______________________ AVONDALE INDUSTRIES, INC.
BARRY HEAPS
______________________ BY Barry Heaps
Vice President
Its:
2/11/94
Date
______________________ FOR BELLE OF ORLEANS, L.L.C.
BY: METRO RIVERBOAT ASSOCIATES, INC.
THOMAS GOURGUECHON
______________________ BY:
Its: Authorized Representative
2/11/94
Date:
(1380)824
<PAGE>
VESSEL CONSTRUCTION CONTRACT
AMENDMENT NO. 2
This Agreement is entered into this 18th day of February, 1994 (the
"Amendment" between Avondale Industries, Inc. (the "BUILDER") and Belle of
Orleans, L.L.C. (the "OWNER") for the purpose of amending the Vessel
Construction Contract (the "Contract") between the parties, executed 12
January 1994, for the construction of a Paddlewheel Gaming Vessel, BUILDER's
hull No. 114, (the "Vessel") as follows:
1) The last sentence of Paragraph 2.4 of the Contract is revised to
read:
"Within forty-five (45) days of the date hereof, the parties agree
to meet to finalize the reconfiguration of the Arrangements by no
cost Change Order and payment of Milestone Number 2 funds.
2) In Paragraph 5.2 add a new milestone as follows:
Milestone % of Contract
No. Milestone Definition Price
---------- --------- ---------- -------------
1a Amendment Time extension for 1/2%
No. 2 signed reconfiguration of
arrangements
3) In Paragraph 5.2 revise the "% of Contract Price" from "19%" to read
"18.5%" and under "Definition" revise the "30 days" to read "52
days".
4) In Paragraph 5.4, second line, revise the words "Numbers 1 and 2" to
read "Numbers 1, 1a and 2."
5) In Paragraph 5.5, second line, revise the words "Numbers 1 and 2" to
read "Numbers 1, 1a and 2."
6) Revise Paragraph 5.8 to read:
"Invoices for Milestone 1 (Contract Signing), Milestone 1a
(Amendment No. 1 signed), Milestone 2 (Sign off on Drawings and
Specifications) and Milestone 10 (Delivery) shall be paid upon
receipt.
7) In Paragraph 6.1, in lines 5 and 6, revise the words "the second" to
read "Milestone Number 2."
<PAGE>
8) In Paragraph 6.11 revise the "thirty (30) days" to read "fifty-two
(52) days" for the submittal of the Construction Schedule.
This Amendment No. 2 to the Contract shall be executed in two
counterparts, each of which shall be deemed an original but both of which
together shall constitute one and the same instrument. Except as specified
in this Amendment No. 1 the Contract remains unchanged in all of its
provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
No. 1 as of the day indicated.
WITNESSES:
______________________ AVONDALE INDUSTRIES, INC.
-------------------------
BARRY HEAPS
______________________ BY Barry Heaps
Vice President
Its:
2-18-94
Date
THOMAS GOURGUECHON FOR BELLE OF ORLEANS, L.L.C.
BY: BALLY'S LOUISIANA, INC.
(UNREADABLE SIGNATURE) CAROL S. DEPAUL
BY: Carol S. DePaul
Its: Authorized Representative
2/21/94
Date:
<PAGE>
AMENDMENT NO. 3 TO VESSEL CONSTRUCTION CONTRACT
THIS AMENDMENT NO.3 entered into on and as of the 17th day
of June, 1994, by and between BELLE OF ORLEANS, L.L.C. ("OWNER"),
and AVONDALE INDUSTRIES, INC. ("BUILDER").
W I T N E S S E T H:
WHEREAS, OWNER and BUILDER have heretofore entered into a Vessel
Construction Contract dated January 12, 1994 (the "Original Agreement") for the
construction of one (1) Paddlewheel Gaming Vessel designated by hull no. 114
(the "Vessel"), all as more fully set forth therein; and,
WHEREAS, OWNER and BUILDER desire to amend the Original Agreement to
facilitate the financing of the Vessel by Hibernia National Bank and for other
purposes.
NOW, THEREFORE, in consideration of the foregoing, OWNER and BUILDER agree
to amend and do hereby amend the Original Agreement in the following respects:
W
1. AMENDMENT TO ARTICLE I. Unless otherwise defined herein capitalized
terms used herein shall have the same meanings as set forth in the Original
Agreement. In addition, the following terms shall be added as defined terms in
Article I and shall have the following meanings:
"1.36 Components. 'Components' mean, in accordance with La. R.S.
9:5522(h), all present and future parts and components of the Vessel which
are fabricated by BUILDER for use in the construction of the Vessel, which will,
when so used, form a part of the Vessel, and the fabrication of which is
commenced at the Shipyard.
1.37 Materials. 'Materials' mean, in accordance with La. R.S.
9:5522(g), all present and future materials, all items of machinery and all all
items of equipment, which are purchased or acquired for use in the construction
of the Vessel, which will, when so used, form a part of the Vessel, and which
have been delivered to the Shipyard.
1.38 Shipyard. 'Shipyard' means, in accordance with La. R.S.
9:5522(j), BUILDER's construction facility located in Westwego, Louisiana.
1.39 Vessel Work. 'Vessel Work' means, in accordance with
La. R.S. 9:5522(c), the keel and all present and future Materials,
machinery, equipment, Components and fabrications forming a part of the
Vessel when permanently installed in place."
<PAGE>
2. AMENDMENT TO ARTICLE II. Section 2.5 is hereby deleted in its
entirety and replaced with the following:
"2.5 In accordance with La. R.S. 9:5524, OWNER shall be the owner
of the Vessel to be constructed pursuant hereto, title to the Vessel
Work shall vest in OWNER as and when performed, title to the Materials
shall vest in OWNER as and when delivered to the Shipyard and title to
the Components shall vest in OWNER as and when fabricated. In
furtherance of the foregoing, BUILDER does hereby sell, transfer and
assign to OWNER BUILDER's ownership interest in and to the Vessel, the
Vessel Work, the Materials and the Components. It is understood and
agreed and it is the intent of BUILDER and OWNER that OWNER shall have
all the rights and benefits of a "purchaser" as provided in the
Louisiana Ship Mortgage Law, La. R.S. 9:5521 ET SEQ. BUILDER shall
have the obligations imposed on a builder by said statute and agrees
to do the following:
(a) BUILDER shall affix a plaque, showing the name of BUILDER,
OWNER, the hull number of the Vessel, and the parish in which the
Vessel is to be constructed, to the keel of the Vessel so as to be
clearly visible at all times during the performance of the Work until
the decking is laid. At such time as the decking is laid, the
aforementioned plaque shall be removed and permanently affixed to the
weather deck of the Vessel so as to be clearly visible at all times
during continuance of the work and after completion.
(b) BUILDER shall mark or stamp on all Materials the hull number
of the Vessel upon delivery of such Materials to the Shipyard, or
alternatively, maintain records which will identify with certainty all
such Materials with the name of OWNER and the hull number of the
Vessel.
(c) BUILDER shall mark or stamp on all Components the hull number
of the Vessel upon
<PAGE>
commencement of the fabrication thereof, or alternatively, maintain
records which will identify with certainty all such Components with the
name of OWNER and the hull number of the Vessel.
(d) Notwithstanding the foregoing, except as may be otherwise
provided in this Agreement, the risk of loss or damage to the Vessel
Work, Materials, Components or the Vessel shall remain in BUILDER until
delivery and acceptance of the Vessel, and OWNER shall not be deemed to
have waived its rights to require BUILDER to replace, at BUILDER's
expense, defective, damaged or destroyed workmanship or material, and
to deliver the Vessel with the contract work completed, as provided in
this Agreement. BUILDER shall be subject to the risk of loss of all
contract workmanship and material in the undelivered and unaccepted
Vessel, as provided in this Agreement."
3. AMENDMENT TO ARTICLE XXII. Section 22.12 shall be added to Article
XXII as follows:
"22.12 The provisions of this Article XXII shall not be binding on
Lender (as hereinafter defined) with respect to the creation,
perfection or enforcement of Lender's Security (as hereinafter
defined); provided, that in the event that Lender assumes the
obligations of OWNER hereunder, then the provisions of this Article
XXII shall be binding on Lender."
4. AMENDMENT TO ARTICLE XXIII. The following shall be added to the end
of Section 23.1:
"BUILDER acknowledges that it is OWNER's intent to obtain interim
construction financing of the Vessel from Hibernia National Bank
("Lender"), and OWNER intends to grant to Lender such liens and
security interests (including a preferred ship mortgage, if and when
obtainable), as Lender may require ("Lender's Security")."
5. AMENDMENT TO ARTICLE XXVII. Section 27.5 shall be added to Article
XXVII as follows:
<PAGE>
"27.5 Notwithstanding the foregoing, OWNER shall have the right to
grant Lender a lien and security interest in this Agreement, the
Vessel, the Vessel Work, the Components and the Materials. With
Builder's prior written consent (which will not be unreasonably
withheld or delayed), Lender shall have the right to assign Lender's
Security and the rights of Lender thereunder and hereunder provided
that such assignee assume in writing all the obligations of Lender
under the Consent and Agreement dated as of June 17, 1994, among
BUILDER, OWNER and Lender."
6. RATIFICATION. BUILDER and OWNER agree that the Original Agreement shall
be deemed amended in each instance where appropriate to incorporate the
foregoing agreements. The parties hereto further ratify, reaffirm and adopt all
of the terms and provisions of the Original Agreement as amended herein, with
the same force and effect as though the Original Agreement as amended herein was
set forth at length in this instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to
be executed in their respective names and by their duly authorized officers.
AVONDALE INDUSTRIES, INC. BELLE OF ORLEANS, L.L.C.
By: Bally's Louisiana, Inc.,
Member
ALBERT L. BOSSIER, JR.
By: Albert L. Bossier, Jr.
Title: President LEE HILL
By Lee Hill
Title: Vice President
258992 TFGD
AMENDMENT NO. 1 TO THE
AMENDMENT AND RESTATEMENT OF THE
AVONDALE INDUSTRIES, INC.
PERFORMANCE SHARE PLAN
WHEREAS, the Board of Directors has authorized the amendment
of the Avondale Industries, Inc. Performance Share Plan (the
"Plan") to reflect that the duties of the Stock Awards Committee
have now been combined with the duties of the Compensation
Committee and that the Plan will henceforth be administered by
the Compensation Committee.
NOW THEREFORE, the definition of "Committee" in Section 2.
entitled "Definitions" is hereby amended to read as follows:
"Committee" means the Compensation Committee.
Adopted by the Board of Directors on December 5, 1994.
AVONDALE INDUSTRIES, INC.
By:\s\ Thomas M. Kitchen
Thomas M. Kitchen
Vice President & Chief
Financial Officer
& Secretary
Dated: December 28, 1994.
COR\24667.1
AMENDMENT NO. 1 TO THE
AMENDMENT AND RESTATEMENT OF THE
AVONDALE INDUSTRIES, INC.
STOCK APPRECIATION PLAN
WHEREAS, the Board of Directors has authorized the amendment
of the Avondale Industries, Inc. Stock Appreciation Plan (the
"Plan") to reflect that the duties of the Compensation Committee
and the Stock Awards Committee have been combined and that the
Compensation Committee will administer the Plan.
NOW THEREFORE, Section 3. of the Plan entitled
"Administration of the Plan" is hereby amended to read in its
entirety as follows:
3. Administration of the Plan. The Plan shall
be administered by the Compensation Committee (the
"Committee"). Subject to the provisions of the Plan,
the Committee shall have the authority to:
(a) determine and designate from time to
time those employees of the Corporation or of any
Subsidiary to whom options are to be granted and
the number of shares to be optioned to each such
employee; provided, however that no option shall
be granted after the expiration of the period of
ten years from the effective date of the plan
specified in Section 7;
(b) authorize the granting of options which
qualify as incentive stock options within the
meaning of Section 422A of the Code ("Incentive
Stock Options"), and options which do not qualify
as Incentive Stock Options, both of which are
referred to herein as options;
(c) determine the number of shares subject
to each option;
(d) determine the time or times and the
manner in which each option shall be exercisable
and the duration of the exercise period, which
period, in the case of an Incentive Stock Option,
shall in no event exceed ten years (or five years
as specified in Section 4(1) hereof) from the date
the option is granted;
(e) extend the term of any option (including
extension by reason of any optionee's death,
permanent disability or retirement) but, in the
case of an Incentive Stock Option, not beyond ten
years (or five years as specified in Section 4(1)
hereof) from the date of the grant; and
<PAGE>
(f) cancel all or any portion of any option
upon the optionee's exercise of any stock
appreciation rights provided pursuant to Section
4(k).
No director of the Corporation who is not also an
employee of the Corporation or of a Subsidiary shall be
entitled to receive any option under the Plan.
The Committee may interpret the Plan, prescribe,
amend and rescind any rules and regulations necessary
or appropriate for the administration of the Plan, and
make such other determinations and take such other
action as it deems necessary or advisable. Without
limiting the generality of the foregoing sentence, the
Committee may, in its discretion, treat all or any
portion of any period during which an optionee is on
military service or on an approved leave of absence
from the Corporation or a Subsidiary as a period of
employment of such optionee by the Corporation or such
Subsidiary, as the case may be, for purposes of accrual
of his rights under his option. Any interpretation,
determination or other action made or taken by the
Committee shall be final, binding and conclusive.
Adopted by the Board of Directors on December 5, 1994.
AVONDALE INDUSTRIES, INC.
By:\s\ Thomas M. Kitchen
Thomas M. Kitchen
Vice President & Chief
Financial Officer
Dated: December 28, 1994.
COR\24668.1
AVONDALE INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(As Amended and Restated Effective January 1,
1989)
<PAGE>
AVONDALE INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
Article Contents Section
I. DEFINITIONS
Accounts 1.1
Affiliated Company 1.2
Beneficiary 1.3
Board of Directors 1.4
Code 1.5
Committee 1.6
Company 1.7
Company Stock 1.8
Compensation 1.9
Disability 1.10
Disability Retirement Date 1.11
Early Retirement Date 1.12
Employee 1.13
Employer 1.14
Employer Contribution 1.15
Entry Date 1.16
ERISA 1.17
Exempt Loan 1.18
Highly Compensated Employee 1.19
Hour of Service 1.20
Investment Manager 1.21
Named Fiduciary 1.22
Non-Highly Compensated Employee 1.23
Non-Participating Employer 1.24
Normal Retirement Age 1.25
Normal Retirement Date 1.26
One Year Break In Service 1.27
Parental Absence 1.28
Participant 1.29
Plan 1.30
Plan Year 1.31
Post-1986 Company Stock 1.32
Service Termination Date 1.33
Suspense Account 1.34
Trust or Trust Agreement 1.35
Trustee 1.36
Trust Fund 1.37
Valuation Date 1.38
Vested Interest 1.39
Year of Service 1.40
II. PARTICIPATION
Commencement of Participation 2.1
Termination of Participation 2.2
Participation Following Reemployment 2.3
III. CONTRIBUTIONS
Employer Contributions 3.1
No Employee Contributions 3.2
Time of Payment of Contribution 3.3
<PAGE>
For Exclusive Benefit of Participants 3.4
and Beneficiaries
Reversion 3.5
IV. VESTING
Retirement, Death or Disability 4.1
Other Termination 4.2
Forfeitures 4.3
Reemployment 4.4
V. ALLOCATIONS AND ACCOUNTING
Participant Accounts 5.1
Special Definitions for Article V 5.2
Allocation of Employer Contributions 5.3
and Forfeitures
Allocation of Cash Dividends on 5.4
Company Stock
Stock Dividends, Splits, Recapitaliza- 5.5
tions, Etc.
Allocation of Earnings and Losses 5.6
Accounting Procedures 5.7
Valuation Procedures 5.8
Suspense Account 5.9
Release from Suspense Account 5.10
Limitations on Allocations to 5.11
Certain Participants
Limitations on Annual Additions 5.12
VI. BENEFITS
Normal Retirement Date 6.1
Early Retirement Date 6.2
Disability Retirement Date 6.3
Nonalienation of Benefits 6.4
Qualified Domestic Relations Order 6.5
VII. PAYMENT OF BENEFITS
Time of Payment 7.1
Optional Forms of Payment 7.2
Normal Form of Payment of Benefits 7.3
Waiver of Normal Form and Election 7.4
of Optional Form of Payment
Small Amounts 7.5
Temporary Non-Payment of Benefits 7.6
Manner of Payment 7.7
Direct Rollover Rules 7.8
Notice 7.9
VIII. TRUST FUND
Plan Assets 8.1
Investment of Trust Fund 8.2
Company Not Responsible For Adequacy Of 8.3
Trust Fund
Legal Limitation 8.4
Exempt Loans 8.5
<PAGE>
IX. ADMINISTRATION
Board of Directors 9.1
ESOP Administrative Committee 9.2
Committee's Duties and Responsibilities 9.3
Committee's Powers 9.4
Chairman of the Committee 9.5
Claims Review Procedure 9.6
Information from Participants 9.7
and Beneficiaries
Actions 9.8
Bond 9.9
Indemnification 9.10
X. RIGHTS AND OPTIONS CONCERNING
COMPANY STOCK
Restrictions on Company Stock 10.1
Right of First Refusal 10.2
Put Option 10.3
Exercise of Voting Rights 10.4
Tender Offer 10.5
Investment Diversification 10.6
XI. AMENDMENT OF THE PLAN
Right to Amend or Suspend Contributions 11.1
Amendment by Committee 11.2
Restriction on Amendment 11.3
Retroactivity 11.4
XII. TERMINATION OF THE PLAN
Events Constituting Termination 12.1
Partial Termination 12.2
Liquidation of the Trust Fund 12.3
Internal Revenue Service Approval for 12.4
Distribution
XIII. TOP HEAVY PROVISIONS
Top Heavy Plan 13.1
Definitions for Article XIII 13.2
Vesting 13.3
Minimum Contribution 13.4
Limitations on Contributions 13.5
Other Plans 13.6
<PAGE>
XIV. GENERAL PROVISIONS
Plan Voluntary 14.1
Payments to Minors and Incompetents 14.2
Missing Payee 14.3
Required Information 14.4
Subject to Trust Agreement 14.5
Subject to Contract 14.6
Communications to Committee 14.7
Communications from Employer 14.8
or Committee
Transfers and Rollovers 14.9
Action 14.10
Liability for Benefits 14.11
Named Fiduciary 14.12
Gender 14.13
Captions 14.14
Applicable Law 14.15
Expenses 14.16
TAX\3271.2
PREAMBLE
Avondale Industries, Inc. originally established the
Avondale Industries, Inc. Employee Stock Ownership Plan effective
September 1, 1985, which plan and the amendments thereto made
through December 31, 1988, shall hereinafter be referred to as
the "Prior Plan". The Avondale Industries, Inc. Employee Stock
Ownership Plan was amended and restated effective January 1,
1989, unless otherwise provided herein, as set forth in this
document and in the Trust adopted as part of this Plan, to comply
with the Tax Reform Act of 1986 and subsequent legislation
hereinafter referred to as the "Plan". The Plan is the
continuation of the Prior Plan and no gap in time or effect
exists, or shall ever be construed to exist, between them.
The purpose of the Plan, as revised and restated, is to
encourage employees to make and continue careers with Avondale
Industries, Inc. and certain related employers by allowing
employees to obtain beneficial interests in the common stock of
Avondale Industries, Inc., to provide an effective means for
employees to accumulate funds for their own retirement, and to
enable employees to share in the appreciation and depreciation of
the common stock of Avondale Industries, Inc. accumulated by the
Plan. The Plan is designed to invest primarily in common stock
of Avondale Industries, Inc.
The Plan and its related Trust are intended to qualify as an
employee stock ownership plan and trust under Sections 401(a),
501(a) and 4975(e)(7) of the Internal Revenue Code of 1986, as
amended.
TAX\3271.2
ARTICLE I
DEFINITIONS
All capitalized terms used in this Plan shall have the
meaning set forth in this Article I, unless a different meaning
is plainly required by the context:
<PAGE>
1.1 Accounts shall mean a Participant's Company Stock
Account and Investment Account (including any subaccounts
established from time to time under each such Account)
established and maintained to record the interest of a
Participant in the Trust Fund as more fully described in Section
5.1.
1.2 Affiliated Company shall mean any corporation which is
a member of a controlled group of corporations (as defined in
Section 414(b) of the Code) which includes the Company; any trade
or business (whether or not incorporated) which is under common
control (as defined in Section 414(c) of the Code) with the
Company; any organization (whether or not incorporated) which is
a member of an affiliated service group (as defined in Section
414(m) of the Code) which includes the Company; and any other
entity required to be aggregated with the Company pursuant to
regulations under Section 414(o) of the Code.
1.3 Beneficiary shall mean the person or persons designated
by a Participant to receive the amount, if any, payable under the
Plan in the event of the Participant's death. Each Beneficiary
designation shall be in the form prescribed by the Committee.
If the Participant is married and designates someone other
than his legal spouse, his Beneficiary designation must include
the written consent of his spouse at the time the designation is
made. Such written consent must approve the Beneficiary
designated and acknowledge the effect of such designation and
must be notarized by a notary public. If it is established to
the satisfaction of the Committee that the Participant has no
spouse or that the spouse's consent cannot be obtained because
the spouse cannot be located, or because of such other
circumstances as may be prescribed in regulations issued pursuant
to Section 417 of the Code, such written consent shall not be
required.
If no valid beneficiary designation is in effect at the time
of the Participant's death, then, to the extent, if any, benefits
are payable under the Plan after such death, Beneficiary shall
mean the Participant's legal spouse, if he is married at the time
of his death, or otherwise the Participant's estate.
1.4 Board of Directors shall mean the Board of Directors of
Avondale Industries, Inc.
1.5 Code shall mean the Internal Revenue Code of 1986, as
amended from time to time. Reference to any Section of the Code
shall include any successor provision thereto.
1.6 Committee shall mean the ESOP Administrative Committee
designated by the Company to administer the Plan in accordance
with Section 9.2.
1.7 Company shall mean Avondale Industries, Inc. and any
successor company that may continue the Plan.
1.8 Company Stock shall mean:
(a) shares of any class of stock issued by the Company
<PAGE>
(or by a corporation which is a member of the same
controlled group within the meaning of Section
409(l) of the Code which is readily tradeable on
an established securities market.
(b) If there is no Company Stock which meets the
requirements of Paragraph (a) above, the term
"Company Stock" means common stock issued by the
Company (or by a corporation which is a member of
the same controlled group within the meaning of
Section 409(l) of the Code having a combination of
voting power and dividend rights equal to or in
excess of:
(i) that class of company stock of the Company
(or of any other such corporation) having the
greatest voting power, and
(ii) that class of common stock of the Company (or
of any other such corporation) having the
greatest dividend rights.
1.9 Compensation shall mean the total annual salary, wages
and other cash compensation paid to an Employee by a
Participating Employer including any amount which such Employee
elects to have the Employer contribute to a qualified plan under
Section 401(k) or Section 125 of the Code, but does not include
imputed income or other non-cash compensation, severance pay,
compensation which arises through a payment to an Employee as
part of a relocation program or moving expense, reimbursed
expenses, any contribution to, or benefit from this Plan or any
other pension plan, profit-sharing plan or employee benefit plan
maintained by a Participating Employer, including any
contribution to, or benefit from, the Performance Share Plan or
the Stock Appreciation Plan. Only Compensation for the period of
time during which the Employee is a Participant shall be
considered.
Effective January 1, 1989, the Compensation of any Employee
for a Plan Year shall be limited to $200,000, as adjusted from
time to time in accordance with Section 401(a)(17) of the Code.
For years beginning on or after January 1, 1994, a Participant's
annual Compensation taken into account under the Plan for any
Plan Year shall not exceed $150,000, as adjusted from time to
time in accordance with Section 401(a)(17) of the Code. In
determining the Compensation of a Participant for purposes of
this limitation, the rules of Code Section 414(q)(6) shall apply,
except in applying these rules, "family" will include only the
Participant's spouse and any lineal descendants of the
Participant who have not attained age 19 before the close of the
year. If, as a result of the application of these rules the
adjusted $150,000 (prior to December 31, 1993, $200,000) limit is
exceeded then the limit will be prorated among the affected
individuals determined under this section before this limit is
applied.
1.10 Disability of a Participant shall mean the total and
permanent incapacity of a Participant to engage in any
substantial gainful employment, as determined by the Committee,
<PAGE>
and which qualifies him for commencement of benefits for
permanent and total disability under Federal Old Age and Survivor
Insurance.
1.11 Disability Retirement Date shall have the meaning set
forth in Section 6.3.
1.12 Early Retirement Date shall have the meaning set forth
in Section 6.2.
1.13 Employee shall mean a person employed by a
Participating Employer or Non-Participating Employer, excluding
any employee who is included in a unit of employees covered by a
negotiated collective bargaining agreement which does not provide
for his participation in the Plan. A director of the Company is
not eligible for participation in the Plan unless he is also an
Employee. A leased employee as described in Section 414(n)(2) of
the Code, shall be considered an Employee but shall not be
considered a Participant under this Plan; provided, however, that
any leased employee who subsequently becomes a Participant shall
have his previous service as a leased employee used in
calculating his Years of Service under the Plan.
1.14 Employer shall mean the Company, Avondale Services
Corporation, and any Affiliated Company, subsidiary or related
entity that adopts this Plan pursuant to authorization by the
Board of Directors of the Company and the board of directors of
the newly-adopting entity. The list of Employers and the date
such Employers adopted the Plan shall be contained in Appendix A.
A "Participating Employer" shall mean an entity, including the
Company, included in this definition of Employer.
By authorizing the adoption of this Plan, the governing body
of any Participating Employer expressly recognizes and delegates
to the Company and its Board of Directors the right to exercise
on the behalf of the Participating Employer all power and
authority conferred by the Plan to the Company or its Board of
Directors.
1.15 Employer Contribution shall mean a contribution by an
Employer to the Trust Fund as described in Section 3.1.
1.16 Entry Date shall mean the first day of each month.
1.17 ERISA shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time. References
to any section of ERISA include any successor provision thereto.
1.18 Exempt Loan means a loan (or other credit arrangement)
incurred for the purpose of acquiring Employer Stock which is
(a) extended to the Plan from a disqualified person, or
(b) extended to the Plan from a third party and is guaranteed or
collateralized by a disqualified person, provided such loan or
arrangement qualifies under the provisions of Code Section
4975(d)(3) of the Code and satisfies the conditions of Section
8.5.
<PAGE>
1.19 Highly Compensated Employee means any highly
compensated active employee and any highly compensated former
employee as described in this Section 1.19.
A highly compensated active employee includes any employee
who performs service for the employer during the determination
year and who, during the look-back year: (i) received
compensation from the employer in excess of $75,000 (as adjusted
pursuant to section 415(d) of the Code); (ii) received
compensation from the employer in excess of $50,000 (as adjusted
pursuant to section 415(d) of the Code) and was a member of the
top-paid group for such year; or (iii) was an officer of the
employer and received compensation during such year that is
greater than 50 percent of the dollar limitation in effect under
section 415(b)(1)(A) of the Code. The term highly compensated
employee also includes: (i) employees who are both described in
the preceding sentence if the term "determination year" is
substituted for the term "look-back year" and the employee is one
of the 100 employees who received the most compensation from the
employer during the determination year; and (ii) employees who
are 5 percent owners at any time during the look-back year or
determination year.
If no officer has satisfied the compensation requirement of
(iii) above during either a determination year or look-back year,
the highest paid officer for such year shall be treated as a
highly compensated employee.
For purposes of this Section 1.19, the determination year
shall be the Plan Year. The look-back year shall be the twelve-
month period immediately preceding the determination year.
A highly compensated former employee includes any employee
who separated from service (or was deemed to have separated)
prior to the determination year, performs no service for the
employer during the determination year, and was a highly
compensated active employee for either the separation year or any
determination year ending on or after the employee's 55th
birthday.
If an employee is, during a determination year or look-back
year, a family member of either a 5 percent owner who is an
active or former employee or a highly compensated employee who is
one of the 10 most highly compensated employees ranked on the
basis of compensation paid by the employer during such year, then
the family member and the 5 percent owner or top-ten highly
compensated employee shall be aggregated. In such case, the
family member and 5 percent owner or top-ten highly compensated
employee shall be treated as a single employee receiving
compensation and plan contributions or benefits equal to the sum
of such compensation and contributions or benefits of the family
member and 5 percent owner or top-ten highly compensated
employee. For purposes of this paragraph, family member includes
the spouse, lineal ascendants and descendants of the employee or
former employee and the spouses of such lineal ascendants and
descendants.
<PAGE>
The determination of who is a highly compensated employee,
including the determinations of the number and identity of
employees in the top-paid group, the top 100 employees, and
number of employees treated as officers and the compensation that
is considered, will be made in accordance with Section 414(q) of
the Code and the Regulations thereunder.
For purposes of this Section 1.19, the term "employer" means
the Company and any Affiliated Company.
1.20 Hour of Service shall mean:
(a) Each hour for which an Employee is directly or
indirectly paid or entitled to payment by a
Participating Employer or Non-Participating
Employer for the performance of duties, including
periods of vacation and holidays;
(b) Each hour for which an Employee is directly or
indirectly paid or entitled to payment by a
Participating Employer or Non-Participating
Employer (including payments made or due from a
trust fund or insurer to which the Participating
Employer or Non-Participating Employer contributes
or pays premiums) on account of a period of time
during which no duties are performed (irrespective
of whether the employment relationship has
terminated) due to illness, incapacity,
disability, layoff, jury duty, military duty, or
leave of absence, provided that:
(i) no more than 501 Hours of Service shall be
credited under this paragraph (b) to an
Employee on account of any single continuous
period during which the Employee performs no
duties; and
(ii) Hours of Service shall not be credited under
this paragraph (b) to an Employee for a
payment which solely reimburses the Employee
for medically related expenses incurred by
the Employee or which is made or due under a
plan maintained solely for the purpose of
complying with applicable worker's
compensation, unemployment compensation or
disability insurance laws;
(c) Each hour not already included under paragraph (a)
or (b) above for which back pay, irrespective of
mitigation of damages, is either awarded or agreed
to by such Employer, provided that crediting of
Hours of Service under this paragraph (c) with
respect to periods described in paragraph (b)
above shall be subject to the limitation therein
set forth; and
The number of Hours of Service to be credited under
paragraph (b) or (c) above on account of a period during which an
Employee performs no duties, and the Plan Years to which Hours of
<PAGE>
Service shall be credited under paragraphs (a), (b) or (c) above
shall be determined by the Committee in accordance with Sections
2530.200b-2(b) and (c) of the Regulations of the U.S. Department
of Labor.
To the extent not credited above, Hours of Service will also
be credited based on the customary work week of the Employee for
periods of military duty (as required by applicable law) and
approved leaves of absence.
1.21 Investment Manager shall mean the individual,
individuals or institution appointed by the Committee to direct
the investment of all or a part of the assets of the Trust Fund
other than Company Stock. Such Investment Manager must:
(a) be (i) registered in good standing under the
Investment Advisors Act of 1940; or (ii) a bank as
defined in such Act; or (iii) an insurance company
qualified to perform investment management
services under the laws of more than one State of
the United States; and
(b) acknowledge in writing its status as a Named
Fiduciary under the Plan.
1.22 Named Fiduciary under the Plan shall mean the Employer,
the Committee, the Trustee, the Investment Manager, if any, and
any other person or entity described in Section 3(21) of ERISA
with respect to the Plan.
1.23 Non-Highly Compensated Employee shall mean an Employee
who is not a Highly Compensated Employee.
1.24 Non-Participating Employer shall mean an Affiliated
Company, subsidiary or related entity which is not participating
in the Plan or which is no longer participating in the Plan by
reason of the recision of a prior designation of participation by
the Board of Directors or the board of directors of the Non-
Participating Employer.
1.25 Normal Retirement Age shall mean age 65 or, if later, a
Participant's fourth anniversary of commencement of participation
in the Plan.
1.26 Normal Retirement Date shall have the meaning set forth
in Section 6.1.
1.27 One Year Break In Service shall mean a 12-month
consecutive period following an Employee's Service Termination
Date, as defined in paragraph 1.33, during which the Employee
fails to be credited with an Hour of Service.
1.28 Parental Absence shall mean an Employee's absence from
work, on or after January 1, 1985, for any of the following
reasons: (i) the pregnancy of the Employee, (ii) the birth of
the Employee's child, (iii) the adoption of a child by the
Employee, or (iv) the need to care for the Employee's child
immediately following its birth or adoption. Provided, however,
<PAGE>
that the Committee, in its sole discretion, may require evidence
that any absence is on account of a reason enumerated herein and
evidence as to the duration of such absence.
1.29 Participant shall mean (i) any Employee who satisfies
the participation requirements set forth in Article II, and
(ii) any former Employee on whose behalf an Account continues to
be maintained in the Plan pursuant to Article II.
1.30 Plan shall mean the Avondale Industries, Inc. Employee
Stock Ownership Plan, as set forth in this document and as
amended from time to time. The Plan is intended to qualify as a
stock bonus under Section 401(a) of the Code, and as an employee
stock ownership plan within the meaning of Section 4975(e)(7) of
the Code.
1.31 Plan Year shall mean the calendar year; provided,
however, that the first Plan Year shall mean the period from
September 1, 1985 to August 31, 1986; the second Plan Year shall
mean the period from September 1, 1986 to August 31, 1987; the
third Plan Year shall mean the period from September 1, 1987 to
August 31, 1988; the fourth Plan Year shall mean the period from
September 1, 1988 to December 31, 1988; and each twelve month
period beginning January 1, 1989 or any anniversary thereof.
1.32 Post-1986 Company Stock shall mean Company Stock
acquired by the Plan after December 31, 1986. The portion of a
Participant's Company Stock Account attributable to Post-1986
Company Stock shall be determined by separately accounting for
such shares and by tracing such shares acquired after
December 31, 1986 to the Company Stock Accounts of the various
Participants receiving allocations. Forfeitures of shares of
Company Stock shall retain their character as either Post-1986
Company Stock or other than Post-1986 Company Stock in the
Company Stock Accounts of the Participant to whom allocated even
though the allocation of the forfeiture may take place after
December 31, 1986.
1.33 Service Termination Date shall mean the earliest of the
following:
(a) the date on which an Employee resigns, is
discharged, retires or dies;
(b) the first anniversary of the date on which an
Employee is laid off, starts an authorized leave
of absence, or is absent from work for any other
reason (other than those instances covered under
paragraphs (a) and (c)), including holidays, paid
vacations, sick leaves and absence on account of
disability;
(c) the second anniversary of the date on which an
Employee commenced a Parental Absence, if such
Employee has not yet returned to work with a
Participating or Non-Participating Employer.
1.34 Suspense Account shall mean the account established
<PAGE>
under Section 5.9 as part of the Trust Fund to hold Company Stock
purchased with the proceeds of an Exempt Loan pending the
allocation of such stock to the Company Stock Accounts of
Participants.
1.35 Trust or Trust Agreement shall mean the Avondale
Industries, Inc. Employee Stock Ownership Trust Agreement by and
between the Company and the Trustee as amended from time to time.
1.36 Trustee shall mean the individuals or institution
appointed by the Board of Directors to be Trustee under the Trust
Agreement.
1.37 Trust Fund shall mean all assets held by the Trustee in
accordance with this Plan and the Trust Agreement.
1.38 Valuation Date shall mean the last day of each calendar
quarter during the Plan Year or any other date during the Plan
Year specified by the Committee upon which the assets of the
Trust Fund are valued as described in Section 5.8. The Annual
Valuation Date shall mean the last day of the Plan Year.
1.39 Vested Interest shall mean the portion of a
Participant's Accounts which has become vested and
nonforfeitable.
1.40 Year of Service shall mean a 12-month period commencing
on the first day on which an Employee is credited with an Hour of
Service (or such Employee's date of rehire in the case of an
Employee who has not previously become a Participant and who has
incurred five or more consecutive One Year Breaks in Service) (or
such later date of participation as specified in Appendix A) or
anniversary thereof during which he is continuously employed by a
Participating Employer or Non-Participating Employer, provided
that:
(a) An Employee shall be credited with one Year of
Service for each 12 complete months of employment,
whether or not consecutive.
(b) An Employee shall cease accruing Years of Service
on his Service Termination Date; except that if
such Employee performs an Hour of Service within
the 12-month period commencing on his Service
Termination Date, his period of absence shall be
treated as employment.
(c) Years of Service shall include any one or more of
the following:
(i) any period of absence because of service in
the military forces of the United States,
provided the Employee returns to work within
90 days after first becoming eligible for
discharge from active duty;
<PAGE>
(ii) any period of layoff not in excess of one
year in duration;
(iii)any period while the Employee is on an
approved leave of absence with or without pay
(including any leave of absence for maternity
or paternity reasons);
(iv) any other period of absence approved by a
Participating Employer or Non-Participating
Employer including paid holidays, paid
vacations and sick leaves;
(v) any other period of absence during which the
Employee does not incur a One Year Break In
Service; provided the Employee returns to
work with a Participating Employer or Non-
Participating Employer within the one-year
period after his Service Termination Date;
(vi) to the extent not otherwise credited above,
the first 12 months of a Parental Absence if
the Employee provides the Committee with any
evidence it may reasonably require to
determine that the absence is on account of
such Parental Absence.
Except as otherwise specifically provided under this Section
1.40, a partial Year of Service shall be determined by dividing
the number of days of employment, whether or not consecutive, by
the number of days in the calendar year.
Notwithstanding anything in this Plan to the contrary, the
Years of Service of any Participant determined as of January 1,
1989 shall not be less than the number of years he would have had
on such date under the terms of the Prior Plan as in effect on
December 31, 1988.
TAX\3271.2
ARTICLE II
PARTICIPATION
2.1 Commencement of Participation. Each Employee of a
Participating Employer who was participating under the Prior Plan
on December 31, 1988, shall without further requirements,
continue as a Participant hereunder.
Each other Employee of a Participating Employer as of
January 1, 1989, and each person who becomes an Employee of a
Participating Employer after January 1, 1989, shall become a
Participant as of the Entry Date which coincides with or
immediately follows the date on which such Employee completes one
Year of Service, provided he is employed by the Employer on such
date. Notwithstanding the foregoing, no Employee shall become a
Participant prior to the effective date of the adoption of the
Plan by his Employer.
The Committee shall take any necessary or appropriate action
to ensure that each Employee eligible to become a Participant
under this Article II becomes a Participant and, if it is
<PAGE>
determined that an Employee has for any reason not been made a
Participant in the Plan or an administrative adjustment is
required, each Employee shall retroactively become a Participant
or such administrative adjustment shall be made.
2.2 Termination of Participation. A Participant who
(i) terminates employment with a Participating Employer
(ii) becomes a member of a group of employees covered by a
negotiated collective bargaining agreement which does not provide
for participation in the Plan or (iii) becomes an Employee of a
Non-Participating Employer shall no longer be considered an
Active Participant as defined in Section 5.2, but shall continue
as a Participant in the Plan entitled to share in the earnings
and losses of the Trust Fund and to exercise the rights of a
Participant hereunder as to elections, claims for benefits,
receipt of information and any other applicable rights until his
Vested Interest has been distributed and the non-vested portion
of his Accounts, if any, has been forfeited pursuant to Section
4.3.
The participation of any Participant shall end when (i) no
further benefits are payable to him or his Beneficiary under the
Plan and (ii) no further amounts are credited to his Accounts.
2.3 Participation Following Reemployment. If an Employee,
whether or not he was a Participant, terminates his employment
with a Participating Employer but is reemployed before a One Year
Break in Service occurs, he shall be treated for purposes of
eligibility to participate in the Plan as if the termination had
not occurred.
If an Employee who had not become a Participant in the Plan
terminates employment, experiences a One Year Break in Service,
and is later reemployed by a Participating Employer, he shall be
treated as a new Employee for purposes of determining eligibility
to participate in the Plan.
If a Participant terminates employment, experiences a One
Year Break in Service and is later reemployed by a Participating
Employer, he shall automatically become a Participant as of the
date he first performs an Hour of Service following reemployment.
TAX\3271.2
ARTICLE III
CONTRIBUTIONS
3.1 Employer Contributions.
(a) Subject to the provisions of any loan or
contribution agreement, the Employer shall
contribute to the Trust Fund for each Plan Year
such sum as the Board of Directors may, in its
sole discretion, determine, which amount may be
zero. The Company may contribute all or part of
the entire amount due on behalf of one or more
Participating Employers and charge the amount
thereof to the Participating Employer responsible
therefor.
<PAGE>
The contribution for any year shall not exceed the
maximum amount deductible from the Employer's
income for such year under Section 404 of the
Code, except to the extent necessary to provide
the top-heavy minimum allocations under Section
13.4.
Employer Contributions may be made in the form of
cash or Company Stock.
(b) All or part of the contributions made under
Section 3.1(a) hereof may be applied to repay any
outstanding Exempt Loan. The Committee may,
subject to any pledge or similar agreement, direct
or determine the proportions of such contributions
which are applied to repay each such Exempt Loan.
(c) All or part of the contributions made under
Section 3.1(a) hereof may be used to purchase
Shares allocated to the Account of any Participant
or Beneficiary in order to make a distribution
under Article VII hereof to such Participant or
Beneficiary.
3.2 No Employee Contributions. No Employee shall be
required or permitted to contribute to the Trust Fund.
3.3 Time of Payment of Contribution. The Employer
Contribution for each Plan Year shall be paid to the Trustee not
later than the time prescribed by law for filing the federal
corporate income tax return, including extensions, for the
taxable year ending with or within such Plan Year. At the time
such contribution is made to the Trust Fund, the Board of
Directors shall designate the Plan Year for which such
contribution is made, either by amount or by formula.
3.4 For Exclusive Benefit of Participants and
Beneficiaries. Subject to Section 3.5, all Employer
Contributions to the Trust Fund shall be irrevocable, and neither
such contributions nor any income therefrom shall be used for, or
diverted to, purposes other than for the exclusive benefit of
Participants or their Beneficiaries under the Plan.
3.5 Reversion. In no event shall the assets of the Plan
revert to the benefit of the Employer except as provided in this
Section 3.5. Notwithstanding any provision of the Plan to the
contrary, any contribution by the Employer is conditioned upon
the deductibility of such contribution under Section 404 of the
Code. In the event all or any portion of a contribution made by
the Employer is attributable to a good faith mistake in
determining the deductibility of the contribution, the Employer
may demand repayment of the affected contributions, and the
Trustee shall return such contributions. Any such demand shall
be made within one year following a final determination of the
disallowance by the Internal Revenue Service.
In the event all or any portion of a contribution made by
the Employer is attributable to a good faith mistake of fact, the
<PAGE>
Trustee shall return the affected portion of the contribution,
provided the Employer furnishes the Trustee evidence of the
mistake within one year of the contribution.
The maximum amount that may be returned to the Employer in
the case of a mistake of fact or the disallowance of a deduction
is the excess of (1) the amount contributed, over, as relevant,
(2) (A) the amount that would have been contributed had no
mistake of fact occurred, or (B) the amount that would have been
contributed had the contribution been limited to the amount that
is deductible after any disallowance by the Internal Revenue
Service. Earnings attributable to the excess contribution may
not be returned to the Employer, but losses attributable thereto
must reduce the amount to be so returned. Furthermore, if the
withdrawal of the amount attributable to the mistaken or
nondeductible contribution would cause the balance of the
individual account of any Participant to be reduced to less than
the balance which would have been in the account had the mistaken
or nondeductible amount not been contributed, then the amount to
be returned to the Employer must be limited so as to avoid such
reduction.
TAX\3271.2
ARTICLE IV
VESTING
4.1 Retirement, Death or Disability. A Participant shall
have a nonforfeitable and fully vested interest in his Accounts
upon the attainment, prior to termination of Employment, of
Normal Retirement Age, death or Disability prior to termination
of employment.
4.2 Other Termination. Except as otherwise provided in
this Section 4.2 and Section 13.3, a Participant who terminates
employment for reasons other than death, Disability or attainment
of Normal Retirement Age prior to termination of employment shall
have the Vested Interest in his Accounts determined by the
following schedule:
---------------------------------------------
YEARS OF SERVICE VESTED INTEREST
Less than 5 years 0%
5 years or more 100%
Notwithstanding the vesting schedule above, (i) a
Participant shall have a fully vested and nonforfeitable interest
in any amounts allocated to his Accounts which are attributable
to a plan-to-plan transfer to the Trust from a defined benefit
plan maintained by the Company as more fully described in Section
5.1 and (ii) any Employee who was a Participant in the Prior Plan
and had completed at least 3 Years of Service prior to January 1,
1989, shall be subject to the Prior Plan schedule to the extent
that such schedule is more liberal than the vesting schedule
<PAGE>
provided above. The following is the Prior Plan vesting
schedule:
---------------------------------------------
YEARS OF SERVICE VESTED INTEREST
Less than 4 years 0%
4 years 40%
5 years 100%
4.3 Forfeitures. The non-vested portion of a Participant's
Accounts shall be forfeited on the date on which he incurs 5
consecutive One Year Breaks in Service, and shall be reallocated
among the Accounts of Active Participants as provided in Section
5.3. For purposes of this Section 4.3, if the value of a
Participant's vested interest in his Accounts is zero, the
Participant shall be deemed to have received a distribution of
such vested Account (and therefore a forfeiture results) as of
the end of the Plan Year in which his or her employment
terminates, and the non-vested portion shall be allocated among
the Accounts of Active Participants as provided in Section 5.3.
Forfeitures shall be determined pursuant to Section 54.4975-
11(d)(4) of the Treasury Regulations.
If a portion of a Participant's Account is forfeited,
Company Stock, which represent the Participant's interest in
Company Stock released from the Suspense Account, must be
forfeited only after other assets. If interest in more than one
class of Company Stock have been allocated to the Participant's
Account, the Participant must be treated as forfeiting the same
proportion of each such class.
A Participant can have a forfeiture restored after re-
employment, but only under the circumstances described in Section
4.4
4.4 Reemployment. If a participant terminates his or her
employment with the Employer, incurs a Break in Service, and is
later reemployed by the Employer:
(a) His or her Years of Service prior to the Break in
Service shall be taken into account for purposes
of determining the vested portion of such
Participant's Account funded after reemployment
(i) if any portion of the Participant's Account is
vested at the time of the Break in Service, or
(ii) if the number of years in the Break in
Service is less than the five.
(b) His or her Years of Service which accrue after the
Break in Service shall be taken into account for
purposes of determining the vested portion of such
Participant's Account funded prior to the Break in
Service, provided such Participant is reemployed
by the Employer before he or she incurs five (5)
consecutive Breaks in Service.
<PAGE>
(c) Any Participant who terminates employment with
zero vesting in his or her Accounts shall be
credited with the full value of such Accounts
determined as of the date of the deemed
distribution under Section 4.3 if the Participant
is re-employed before he or she incurs five (5)
consecutive Breaks in Service. If any credit is
required under this Subparagraph (c), the credit
shall be made no later than the close of the Plan
Year in which occurs the later of the re-
employment or the repayment. The credit shall be
satisfied first from forfeitures and second from
Employer Contributions.
TAX\3271.2
ARTICLE V
ALLOCATIONS AND ACCOUNTING
5.1 Participant Accounts. The Committee shall maintain
(i) a Company Stock Account and (ii) an Investment Account for
each Participant. Each Participant's Company Stock Account shall
consist solely of shares of Company Stock. Each Participant's
Investment Account shall consist of the Participant's shares of
Trust Assets other than Company Stock.
For all Participants who were Participants in the Plan on
August 31, 1986, a subaccount of the Company Stock Account and
Investment Account shall be maintained to reflect the shares of
Company Stock and other assets attributable to the sale of
Company Stock allocated to the Participant's Company Stock
Account on August 31, 1986, as a result of Company Stock acquired
by the Trust in a plan-to-plan transfer from a defined benefit
plan maintained by the Company. The subaccounts established for
a Participant as a result of the plan-to-plan transfer from the
defined benefit plan maintained by the Company shall be 100%
vested at all times. Other subaccounts may be established and
maintained from time to time at the direction of the Committee.
Unless otherwise required by applicable law, the maintenance
of all accounts and subaccounts shall be for bookkeeping purposes
only and no segregation of Trust Fund assets shall be required.
5.2 Special Definitions for Article V. For purposes of
this Article V, the term Active Participant shall mean a
Participant (i) who is employed by a Participating Employer
through the last payroll period ending within the Plan Year,
(ii) who died prior to termination of employment, (iii) retired
from active employment with a Participating Employer on or after
his Early or Normal Retirement Date during the Plan Year, or
(iv) who received self-insured, short-term Disability payments
from the Employer during the Plan Year.
Dividends. For purposes of this Article V, the term
Dividends shall include distributions, which are dividends under
applicable state law accounted for as dividends under generally
accepted accounting principles, provided such dividends do not
constitute extraordinary dividends.
<PAGE>
5.3 Allocation of Employer Contributions and Forfeitures.
As of each Annual Valuation Date, the total number of shares
(including fractional shares) of Company Stock (i) contributed to
the Trust Fund by the Employer, (ii) purchased by the Trustee
with Employer Contributions made in cash, (iii) released from the
Suspense Account pursuant to Section 5.10 during the Plan Year or
(iv) forfeited during the Plan Year pursuant to Section 4.3 shall
be computed and allocated to the Company Stock Accounts of all
Active Participants in proportion that each such Active
Participant's Compensation bears to the total Compensation for
all Active Participants for such year.
As of each Annual Valuation Date, Employer Contributions
made in cash during the Plan Year which are not used to purchase
Company Stock or to repay an Exempt Loan, as well as any
forfeitures from Participant Investment Accounts pursuant to
Section 4.3, shall be computed and allocated to the Investment
Accounts of all Active Participants in proportion that each such
Active Participant's Compensation bears to the total Compensation
for all Active Participants for such year.
5.4 Allocation of Cash Dividends on Company Stock. All
Dividends payable with respect to Company Stock held by the Trust
Fund, whether or not allocated to the Company Stock Accounts of
Participants will be used for the purpose of repaying one or more
Exempt Loans. If Dividends on Company Stock allocated to a
Participant's Company Stock Account are used to pay an Exempt
Loan, Company Stock having a fair market value of not less than
the amount of any such Dividend shall be allocated to such
Participant's Employer Stock Account. Nevertheless, with respect
to cash Dividends attributable to Company Stock allocated to the
Company Stock Accounts of Participants, the Committee may, in its
sole discretion, determine for any Plan Year whether to either
(i) allocate such cash Dividends received by the Trust Fund to
the Investment Accounts of Participants in proportion to the
Company Stock allocated to each Participant's Company Stock
Account as of the record date established by the Company with
respect to such Dividends, or (ii) distribute such cash Dividends
to Participants in proportion to the shares of Company Stock
(including fractional shares) allocated to each Participant's
Company Stock Account as of the record date established by the
Company with respect to such Dividends.
Cash dividends which are paid to Participants may be paid
directly by the Company or may be paid by the Trustee and/or
Committee within 90 days after the end of the Plan Year of
receipt by the Trustee.
In the case of Dividends distributed to Participants,
Dividend checks that are returned to the Committee as
undeliverable to Participants at their last known address will be
restored to the accounts of such Participants and such cash
dividends will be 100 percent vested irrespective of whether the
shares to which the dividends are attributable were vested. The
Participant's entire vested account, including the dividends, are
subject to forfeiture under paragraph 14.3 of the ESOP if the
Participant still cannot be located after 5 years of consecutive
Breaks in Service.
<PAGE>
5.5 Stock Dividends, Splits, Recapitalizations, Etc. Any
shares (including fractional shares) of Company Stock received by
the Trust on shares allocated to Company Stock Account of
Participants as a result of a stock dividend, stock split,
conversion, or as a result of a reorganization or other
recapitalization of the Company, shall be allocated as of the
record date of such distribution in proportion to the shares
(including fractional shares) then allocated to each
Participant's Company Stock Account; provided, however, that any
stock dividends may, in the sole discretion of the Committee, be
used to repay an Exempt Loan.
5.6 Allocation of Earnings and Losses. As of each
Valuation Date, the Trustee shall determine the fair market value
of the Trust Fund and the net earnings and gains or losses of the
Trust Fund (other than unrealized appreciation or depreciation in
Company Stock) after deducting any expenses which have not been
paid by the Company.
After the Trustee has completed its calculations, the
Committee shall allocate the net earnings and gains or losses of
the Trust Fund since the immediately preceding Valuation Date to
the Investment Accounts of all Participants in proportion to the
balances of such Accounts as of the immediately preceding
Valuation Date. The Committee may also make such other
adjustments to the Participant Accounts as it deems necessary and
appropriate in order to achieve an equitable allocation of the
net earnings and gains or losses as long as it does so in a
uniform and nondiscriminatory manner and such adjustments are
consistent with the accounting procedures established by Section
5.7.
5.7 Accounting Procedures. The Committee shall establish
the accounting procedures for the purposes of making the
allocations to Participant Accounts in accordance with the
provisions of the Plan. From time to time the Committee may
modify its accounting procedures for the purpose of achieving
equitable and non-discriminatory allocations.
5.8 Valuation Procedures. In determining the fair market
value of the Trust Fund, the Committee and/or Trustee shall act
in accordance with generally accepted valuation methods and
practices and shall be entitled to retain such independent
appraisers as it deems necessary to determine the value of any
Trust Fund assets that are not traded freely on a recognized
market. All valuations of Company Stock made during a period
when Company Stock is not readily tradable on an established
securities market shall be made by an "independent appraiser" as
defined in the Regulations prescribed under Section 170(a)(1) of
the Code.
As soon as practicable after the close of each Plan Year,
the Committee shall mail to each Participant (at his last known
address) a valuation notice which includes the number of shares
(including fractional shares) allocated to his Company Stock
Account, the value of such shares determined at the end of the
Plan Year, the value of his Investment Account and the
Participant's Vested Interest.
<PAGE>
5.9 Suspense Account. Shares of Company Stock acquired by
the Trust Fund through an Exempt Loan shall be added to and
maintained in the Suspense Account on an unallocated basis until
released from the Suspense Account as provided in Section 5.10
and allocated to the Company Stock Accounts of Participants as
provided in Section 5.3.
5.10 Release from Suspense Account. Shares of Company Stock
acquired for the Trust Fund with the proceeds of an Exempt Loan
shall be released from the Suspense Account as the Exempt Loan is
repaid, in accordance with the following provisions of this
Section 5.10:
(a) For each Plan Year until the Exempt Loan is fully
repaid, the number of shares of Company Stock
released from the Suspense Account shall equal the
number of unreleased shares immediately before
such release for the current Plan Year multiplied
by the "Release Fraction." As used herein, the
term "Release Fraction" shall mean a fraction, the
numerator of which is the amount of principal and
interest paid on the Exempt Loan for such current
Plan Year and the denominator of which is the sum
of the numerator plus the principal and interest
to be paid on such Exempt Loan for all future
years during the term of such Exempt Loan
(determined without reference to any possible
extensions or renewals thereof). For purposes of
computing the denominator of the Release Fraction,
if the interest rate on the Exempt Loan is
variable, the interest to be paid in subsequent
Plan Years shall be calculated by assuming that
the interest rate in effect as of the end of the
applicable Plan Year will be the interest rate in
effect for the remainder of the term of the Exempt
Loan. Notwithstanding the foregoing, in the event
such Exempt Loan shall be repaid with the proceeds
of a subsequent Exempt Loan (the "Substitute
Loan"), such repayment shall not operate to
release all such shares in the Suspense Account,
but, rather, such release shall be effected
pursuant to the foregoing provisions of this
paragraph (a) on the basis of payments of
principal and interest on such Substitute Loan.
(b) If required by any pledge or similar agreement,
then in lieu of applying the provisions of
paragraph (a) with respect to an Exempt Loan,
shares of Company Stock shall be released from the
Suspense Account as the principal amount of such
Exempt Loan is repaid (without regard to interest
payments), provided the following three conditions
are satisfied:
(i) The Exempt Loan shall provide for annual
payments of principal and interest at a
cumulative rate that is not less rapid at any
time than level annual payments of such
amounts for 10 years;
<PAGE>
(ii) The interest portion of any payment shall be
disregarded only to the extent it would be
treated as interest under standard loan
amortization tables; and
(iii)If the Exempt Loan is renewed, extended or
refinanced, the sum of the expired duration
of the Exempt Loan and the renewal, extension
or new Exempt Loan period shall not exceed 10
years.
(c) If at any time there is more than one Exempt Loan
outstanding, then separate accounts may be
established under the Suspense Account for each
such Exempt Loan. Each Exempt Loan for which a
separate account is maintained may be treated
separately for purposes of the provisions
governing the release of shares of Company Stock
from the Suspense Account and for purposes of the
provisions governing the application of Employer
Contributions to repay an Exempt Loan.
(d) It is intended that the provisions of this Section
5.10 shall be applied and construed in a manner
consistent with the requirements and provisions of
Treasury Regulation Section 54.4975-7(b)(8), and
any successor Regulation thereto.
5.11 Limitations on Allocations to Certain Participants.
Notwithstanding the foregoing provisions of this Article V:
(a) If more than one-third of the total allocations to
Active Participants' Accounts with respect to a
Plan Year would be allocated pursuant to Section
5.3, in the aggregate, to the Accounts of Highly
Compensated Employees then the allocations to the
Accounts of Highly Compensated Employees shall be
reduced, pro rata, in an amount sufficient to
reduce the amounts allocated to the Accounts of
such Active Participants to an amount not in
excess of one-third of the total allocations to
Active Participants' Accounts with respect to such
Plan Year; and
(b) Any amounts which are prevented from being
allocated due to the restriction contained in
paragraph (a) shall be allocated pursuant to
Section 5.3 to the Accounts of Non-Highly
Compensated Employees as though the Highly
Compensated Employees did not participate in the
Plan.
5.12 Limitation on Annual Additions. The following
paragraphs of this Section 5.12 shall apply notwithstanding any
provision of the Plan to the contrary:
(a) The total "Annual Additions" to a Participant's
Accounts for any Plan Year under the provisions of
<PAGE>
this Article V shall not exceed the lesser of
(i) 25% of the Participant's compensation (as
defined in Section 415(c)(3) of the Code and the
Regulations promulgated thereunder) or
(ii) $30,000 or such larger amount equal to 1/4 of
the defined benefit dollar limitation as adjusted
or cost-of-living increases pursuant to Code
Sections 415(c)(1), 415(d)(1) and 415(d)(3);
provided, however, that for Plan Years ending
prior to January 1, 1990 if the restriction
contained in Section 5.11 remains in effect, such
dollar amount shall be increased by the lesser of
(i) 100% of the dollar amount otherwise applicable
for the Plan Year or (ii) the amount of Company
Stock contributed to the Plan or attributable to
cash contributed to the Plan.
(b) For purposes of paragraph (a), the term "Annual
Additions" shall mean for any Plan Year the
aggregate of amounts of Employer Contributions and
forfeitures credited to a Participant's Accounts,
such as Employer Contributions used to repay one
or more Exempt Loans or to purchase shares of
Company Stock which are deemed allocated to such
Participant's Accounts; provided, however, that
"Annual Additions" shall not include any amounts
credited to the Participant's Accounts (i) due to
Employer Contributions relating to an interest
payment on an Exempt Loan, (ii) received by the
Trust through a plan-to-plan transfer,
(iii) attributable to a forfeiture of Company
Stock acquired with the proceeds of an Exempt
Loan, or (iv) received by the Trust as a result of
a dividend, as defined in Section 5.2 (or a stock
split, recapitalization or other event described
in Section 5.5), declared by the Company and
allocated to such Participants' Accounts in
proportion to the shares (including fractional
shares) of Company Stock allocated to such
Accounts. For purposes of this paragraph (b), the
portion of an Employer Contribution used to repay
one or more Exempt Loans or to purchase shares of
Company Stock which is deemed allocated to an
Active Participant's Account shall be in the
proportion that each such Active Participant's
Compensation bears to the total Compensation for
all Active Participants for such year.
For purposes of this paragraph (b), all defined
contribution plans of the Employer, whether or not
terminated, are to be treated as one defined
contribution plan.
(c) The term "Annual Additions" also includes amounts
allocated to an individual medical account, as
defined in Code Section 415(l)(2), which is part
of a defined benefit plan maintained by the
Employer, and amounts derived from contributions
<PAGE>
which are attributable to post-retirement medical
benefits allocated to the separate account of a
key employee, as defined in Code Section
419(A)(d)(3), under a welfare benefit fund, as
defined in Code Section 419(e), maintained by the
Employer.
(d) For purposes of this Section 5.12, Participant's
compensation, as defined in Section 415(c)(3) of
the Code and Regulation, shall mean wages,
salaries and fees for professional services and
other amounts received (without regard to whether
or not an amount was paid in cash) for personal
services actually rendered in the course of
employment for the Employer maintaining the Plan
to the extent that the amounts are includible in
gross income (including but not limited to
commissions paid salesmen, compensation for
services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses,
fringe benefits, and reimbursements or other
expense allowances under a nonaccountable plan (as
described in section 1.62-2(c) of the
Regulations)), but excluding:
(i) Employer contributions to a plan of deferred
compensation which are not includible in the
Employee's gross income for the taxable year
in which contributed, or employer
contributions under a simplified employee
pension plan to the extent such contributions
are deductible by the Employee or any
distributions from a plan of deferred
compensation;
(ii) Amounts realized from the exercise of a non-
qualified stock option or when restricted
stock or property held by the Employee is no
longer subject to a substantial risk of
forfeiture or becomes freely transferable;
(iii)Amounts realized from the sale, exchange or
other disposition of stock acquired under an
incentive stock option; and
(iv) Other amounts which received special tax
benefits such as premiums for group-term life
insurance (but only to the extent that the
premiums are not includible in the gross
income of the employee).
(e) If for any reason the Annual Additions to a
Participant's Accounts would exceed the limitation
described in paragraph (a) above, the allocation
of the annual addition shall be reduced as
follows:
<PAGE>
(i) Excess amounts shall be allocated and
reallocated to the Accounts of other
Participants in accordance with Section 5.3
to the extent that such allocations would not
cause Annual Additions to each Participant's
Accounts to exceed the limitations of this
Section 5.12.
(ii) To the extent the reductions described in
Subparagraph (1) cannot be allocated to other
Participants' Accounts, such reduction shall
be allocated to a Section 415 Suspense
Account. All amounts in the Section 415
Suspense Account must be allocated and
reallocated to Participants' Accounts in the
same manner as other forfeitures before an
Employer Contribution which would constitute
Annual Additions may be made. No investment
gains and losses shall be allocated to the
Section 415 Suspense Account. The Committee
may, in its discretion, use any such
investment gains and losses to repay an
Exempt Loan or to be allocated to Participant
Accounts. Any amounts allocated to
Participants from the Section 415 Suspense
Account shall be considered Annual Additions.
In the event of termination of the Plan, the
balance of the Section 415 Suspense Account
shall revert to the Company to the extent it
may not then be allocated to any
Participants' Accounts.
(iii)Subparagraphs (1) and (2) notwithstanding,
any amounts held in an individual
Participant's Section 415 Suspense Account as
of December 31, 1988, under the terms of the
Prior Plan shall continue to be held for, and
allocated to, such Participant pursuant to
Section 11.3 of the Prior Plan.
(iv) The excess amounts shall not be deemed Annual
Additions in that limitation year if they are
treated in accordance with this Subparagraph
and if the excess amounts are a result of the
allocation of forfeitures, a reasonable error
in estimating a Participant's annual
Compensation, a reasonable error in
determining the amount of elective deferrals
(within the meaning of Section 402(g)(3))
that may be made with respect to any
individual under the limits of Section 415 or
under other limited facts and circumstances
that the Commissioner finds justify the
availability of the rules set forth in this
Paragraph.
<PAGE>
(f) Paragraph (a) notwithstanding, if a Participant is
included in both a defined benefit plan and a
defined contribution plan maintained by the
Employer, the sum of the "defined benefit plan
fraction" and the "defined contribution plan
fraction" as defined in Section 415(e) of the Code
for any Plan Year may not exceed 1.00. Reduction
of contributions to all benefits from all other
plans, where required, shall be accomplished by
first reducing benefits under such other defined
benefit plan or plans, then reducing contributions
or allocating excess in the manner and priority
set out in such other defined contribution plans,
and finally by allocating any remaining excess for
this Plan in the manner and priority set out above
with respect to this Plan.
The defined benefit plan fraction for any year is
a fraction (a) the numerator of which is the
projected "annual benefit" of the Participant
under the defined benefit plan (determined as of
the close of the Plan Year), and (b) the
denominator of which is the lesser of: (1) the
product of 1.25 multiplied by the maximum dollar
limitation in effect under Section 415(b)(1)(A) of
the Code for such year, or (2) the product of 1.4
multiplied by the amount which may be taken into
account under Section 415(b)(1)(B) of the Code for
such year. The defined contribution plan fraction
for any year is a fraction (1) the numerator of
which is the sum of the "annual additions" to the
Participant's Account as of the close of the
Limitation Year and (b) the denominator of which
is the sum of the lesser of the following amounts
determined for such year and each prior Year of
Service with the Employer: (1) the product of
1.25 multiplied by the dollar limitation in effect
under Section 415(c)(1)(A) of the Code for such
year (determined without regard to Section
415(c)(6) of the Code, or (2) the product of 1.4
multiplied by the amount which may be taken into
account under Section 415(c)(1)(B) of the Code for
such year.
(g) For purposes of this Section 5.12, the term
"Employer" includes any entity required to be
aggregated with the Company or any other
Participating Employer under Sections 414(b), (c),
(m) or (o) of the Code.
TAX\3271.2
ARTICLE VI
BENEFITS
6.1 Normal Retirement Date. The Normal Retirement Date
shall be the later of (a) the first day of any month coincident
with or next following the Participant's actual retirement (or
other termination of employment) after age 65, or (b) the first
day of the month coincident with or next following a
<PAGE>
Participant's fourth anniversary of commencement of participation
in the Plan. Any Participant who remains an Employee beyond age
65, or becomes a Participant after such date, shall participate
in the contributions and benefits of the Plan in the same manner
as any other Participant.
6.2 Early Retirement Date. Any Participant who has
attained age 55 and who has at least 10 Years of Service may
retire on an Early Retirement Date by making written application
to the Committee specifying an Early Retirement Date which is the
first day of a month not more than 90 days following the date of
the filing of the application.
6.3 Disability Retirement Date. Any Participant who has
incurred a Disability, as determined by the Committee, may retire
on a Disability Retirement Date by making written application to
the Committee specifying a Disability Retirement Date which is
the first day of a month not more than 90 days following the date
of the filing of the application. Former Employees shall not be
eligible for Disability Retirement unless the Disability was
determined to have occurred during the course of such former
Employee's employment with the Employer. Subject to Section 9.6,
the determination of the Committee as to whether a Participant
has a Disability and the date of such Disability shall be final,
binding and conclusive.
6.4 Nonalienation of Benefits. Except with respect to
federal income tax withholding and federal tax levies, benefits
payable under this Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution or levy of any kind,
either voluntary or involuntary, including any such liability
which is for alimony or other payments for the support of a
spouse or former spouse or for any other relative of the
Employee, prior to actually being received by the person entitled
to the benefit under the terms of the Plan; and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber,
charge or otherwise dispose of any right to benefits payable
hereunder, shall be void. The Trust Fund shall not in any manner
be liable for, or subject to, the debts, contracts, liabilities,
engagements or torts of any person entitled to benefits
hereunder.
Notwithstanding the above, the Committee shall direct the
Trustee to comply with a qualified domestic relations order
described in Section 6.5.
6.5 Qualified Domestic Relations Order. All rights and
benefits, including election rights, provided to Participants
pursuant to this Plan, are subject to the rights afforded to any
"alternate payee" pursuant to a "qualified domestic relations
order," as those terms are defined below.
Pursuant to the provisions of Section 414(p) of the Code, a
"qualified domestic relations order" shall mean a judgment,
decree or order (including approval of a property settlement
agreement) made pursuant to a state domestic relations law
(including a community property law) that relates to the
provision of child support, alimony payments, or marital property
<PAGE>
rights to a spouse, former spouse, child or other dependent of a
Participant ("alternate payee") and which:
(a) creates or recognizes the existence of an
alternate payee's right to, or assigns to an
alternate payee the right to, receive all or a
portion of the benefits payable to a Participant
under this Plan; and
(b) specifies (i) the name and last known mailing
address (if any) of the Participant and each
alternate payee covered by the order, (ii) the
amount or percentage of the Participant's benefits
under the Plan to be paid to each such alternate
payee, or the manner in which such amount or
percentage is to be determined and, (iii) the
number of payments or the period to which the
order applies; and
(c) does not require this Plan to:
(i) provide any type or form of benefit, or any
option, not otherwise provided hereunder;
(ii) pay any benefits to any alternate payee prior
to the earlier of:
(A) the earliest date benefits are payable
hereunder to a Participant, or
(B) the later of the date the Participant
attains age 50 or the earliest date on
which the Participant could obtain a
distribution under the Plan if the
Participant terminated employment;
(iii)pay any benefits which are not vested under
the Plan;
(iv) provide increased benefits, or
(v) pay benefits to an alternate payee which are
required to be paid to another alternate
payee under a prior qualified domestic
relations order.
For purposes of this Plan, an alternate payee who had been
married to the Participant for at least one year may be treated
as a spouse with respect to the portion of the Participant's
Accounts in which such alternate payee has an interest provided
that the qualified domestic relations order provides for such
treatment. However, under no circumstances may the spouse of an
alternate payee (who is not a Participant hereunder) be treated
as a spouse under the terms of the Plan.
Upon receipt of any judgment, decree or order (including
approval of a property settlement agreement) relating to the
<PAGE>
provision of payment by the Plan to an alternate payee pursuant
to a state domestic relations law, the Committee shall promptly
notify the affected Participant and any alternate payee of the
receipt of such judgment, decree order and shall notify the
affected Participant and any alternate payee of the Committee's
procedure for determining whether or not the judgment, decree or
order is a qualified domestic relations order.
The Committee shall establish procedures to determine the
status of a judgment, decree or order as a qualified domestic
relations order and to administer Plan distributions in
accordance with any such qualified domestic relations order. Such
procedures shall be in writing, shall include provisions
specifying the notification requirements enumerated in the
preceding paragraph, shall permit an alternate payee to designate
a representative for receipt of communications from the
Committee, and shall include such other provisions as the
Committee shall determine, including such provisions required
under Treasury Regulations.
During any period in which the issue of whether a judgment,
decree or order is a qualified domestic relations order is being
determined (by the Committee, a court of competent jurisdiction
or otherwise), the Committee shall account for separately the
amount, if any, which would have been payable to the alternate
payee during such period if the judgment, decree or order had
been determined to be a qualified domestic relations order.
If the judgment, decree or order is determined to be a
qualified domestic relations order within the 18-month period
following the receipt by the Committee of the qualified domestic
relations order, then payment of the amount shall be paid to the
appropriate alternate payee at the time and in the form specified
in such order. If such a determination is not made within the
18-month period, the amount shall be returned to the
Participant's Accounts under the Plan and shall be paid at the
time and in the manner provided under the Plan as if no order,
judgment or decree had been received by the Committee.
TAX\3271.2
ARTICLE VII
PAYMENT OF BENEFITS
7.1 Time of Payment. Subject to the temporary non-payment
provisions of Section 7.6, the payment of a Participant's Vested
Interest shall be made, or commence, as soon as administratively
practicable following the Participant's Normal Retirement Date or
death (but not later than 60 days after the end of the Plan Year
in which the Participant attains his Normal Retirement Date or
dies); provided, however, that no distribution shall commence
later than April 1 following the calendar year in which the
Participant attains age 70 1/2, even if still employed, whether
or not he is employed by a Participating Employer.
For a Participant electing an Early Retirement Date as
provided in Section 6.2 or a Disability Retirement Date as
provided in Section 6.3, the payment of his Vested Interest shall
<PAGE>
be made, or commence, as soon as administratively practicable
following his Early Retirement Date or Disability Retirement Date
(but not later than 60 days after the end of the Plan Year in
which the Early Retirement Date or Disability Retirement Date
occurs).
For a Participant who terminates employment (other than by
reason of death or Disability) prior to his Normal Retirement
Date or Early Retirement Date, the payment of his Vested Interest
shall be made, or begin to be made, within 60 days after the
close of the Plan Year in which the Participant attains his Early
Retirement Date or Normal Retirement Date or dies.
Notwithstanding the foregoing paragraphs of this Section
7.1, the payment of the Vested Interest of a Participant's
Company Stock Account attributable to Post-1986 Company Stock
shall be made, or shall commence, not later than the sixth Plan
Year following the Plan Year in which the Participant terminated
employment, provided that the Participant has not been reemployed
by the Employer before the date of the distribution.
7.2 Optional Forms of Payment. A Participant whose Vested
Interest is greater than $3,500 may elect to receive his Vested
Interest in the form of any one of the following optional forms
of benefit:
(a) Lump Sum Option, under which the Participant's
Vested Interest is paid to him in one lump sum.
(b) Installment Option, under which the Participant's
Vested Interest is paid to him in ten
substantially equal annual installments. Unless
the Participant elects otherwise, the Vested
Interest of a Participant's Company Stock Account
attributable to Post-1986 Company Stock is paid to
him in five substantially equal annual
installments.
(c) Combination Option, under which a portion of the
Participant's Vested Interest is paid as an
annuity pursuant to Section 7.3 and the remaining
portion of his Vested Interest is paid pursuant to
the Lump Sum Option or the Installment Option
described above.
(d) Transfer Benefit, under which all of the
Participant's Vested Interest is transferred to
the Company's Pension Plan. The Participant will
receive his Vested Interest in a form selected
under the Company's Pension Plan. This optional
form of benefit is available only to Participants
who are also participating in the Company's
Pension Plan (other than Participants whose
benefits are frozen under the Company's Pension
Plan) and who has requested and is eligible to
receive a retirement income under the Company's
Pension Plan. This provision does not apply to
<PAGE>
amounts allocated to a Participant's Account which
are not considered in computing the Participant's
retirement income under the Company's Pension
Plan.
Notwithstanding the above, a Participant whose Vested Interest
exceeds $3,500 must consent to a distribution of his Vested
Interest.
7.3 Normal Form of Payment of Benefits. Subject to
Sections 7.4 and 7.5, a Participant's Vested Interest under the
Plan shall be payable as follows:
(a) If a Participant is married on the date his
distribution of benefits commences, the normal
form of payment shall be a 50% Joint and Survivor
Spouse Annuity. The "50% Joint and Survivor
Spouse Annuity" means a benefit providing an
annuity for the life of the Participant, ending
with the payment due on the first day of the month
coincident with or preceding the date of his
death, and, if the Participant's legal spouse
(determined as of the commencement of the annuity)
survives him, a survivor annuity for the life of
the legal spouse equal to 50% of the annuity
payable for the life of the Participant,
commencing on the first day of the month following
the date of the Participant's death and ending
with the payment due on the first day of the month
coincident with or preceding the date of the legal
spouse's death. The 50% Joint and Survivor
Annuity shall be purchased with the value of the
Participant's Vested Interest determined as of the
Valuation Date coincident with or immediately
preceding the benefit commencement date; provided,
however, Company Stock shall be valued pursuant to
7.7(c).
(b) If a Participant is not married on the date his
distribution of benefits commences, or the
Participant has not been legally married for at
least one year ending on the date as of which
distribution of his Vested Interest Commences, the
normal form of payment shall be a Straight Life
Annuity. A "Straight Life Annuity" shall mean an
annuity for life ending with the payment due on
the last day of the month coincident with or
preceding the date of the Participant's death.
The Straight Life Annuity shall be purchased with
the value of the Participant's Vested Interest
determined as of the Valuation Date coincident
with or immediately preceding the benefit
commencement date; provided, however, Company
Stock shall be valued pursuant to 7.7(c).
<PAGE>
(c) A Preretirement Survivor Annuity shall be paid to
the surviving spouse of a Participant who, after
earning a nonforfeitable right to any portion of
his Account attributable to a plan-to-plan
transfer of assets from a defined benefit pension
plan maintained by the Company to the Plan, dies
before the commencement of the distribution of
that portion of his Account. The term
"Preretirement Survivor Annuity" means a benefit
providing for payment of a survivor annuity to a
Participant's surviving spouse equal to either
one-half or the full amount (as the Participant
shall elect) of the annuity which would have been
payable for the life of the Participant under a
50% Joint and Survivor Spouse Annuity described
above. In the case of a Participant who dies on
or after the first date which could have been his
Early Retirement Date but before distribution of
his Vested Interest has commenced, the
Preretirement Survivor Annuity shall be based on
the 50% Joint and Survivor Spouse Annuity which
would have been payable under the 50% Joint and
Survivor Spouse Annuity if it had commenced on the
first day of the month coincident with or
preceding the date of his death. In the case of a
Participant who dies before the first date which
could have been his Early Retirement Date, the
Preretirement Survivor Annuity shall be based on
the 50% Joint and Survivor Spouse Annuity which
would have been payable if the Participant had
terminated employment on the date of death,
survived until the first date which could have
been his Early Retirement Date, immediately began
receiving payments under the 50% Joint and
Survivor Annuity and died on the day following
such Early Retirement Date. Payment of a
Preretirement Survivor Annuity shall commence on
the first day of the month following the later of
(i) the first month in which the Participant could
have retired or an Early Retirement Date, or
(ii) the month in which the Participant dies.
7.4 Waiver of Normal Form and Election of Optional Form of
Payment. A Participant may waive the normal form of payment
described in Section 7.3 provided that concurrently with such
waiver he shall elect an optional form of payment of benefits
from those provided in Section 7.2. Such election shall be made
in writing and shall not take effect unless either: (i) the
Participant's legal spouse consents in writing to such election
and the spouse's consent acknowledges the effect of such election
and is witnessed by a notary public, or (ii) it is established to
the satisfaction of the Committee that the Participant has no
legal spouse, or that such spouse's consent cannot be obtained
because the spouse cannot be located, or because of such other
circumstances as may be prescribed in Regulations issued pursuant
to Section 417 of the Code.
<PAGE>
The Committee shall make an election form available to each
Participant not less than 9 months before the Participant attains
his earliest possible Early Retirement Date as described in
Section 6.2. Such form shall describe in plain language the
terms and conditions of the optional forms of benefit and shall
provide for election of optional forms of benefit and a benefit
commencement date. The completed form should be returned to the
Committee within the 90 day period ending on the designated
benefit commencement date. Any waiver may be revoked, or
election changed, at any time up to the due date for the
Participant's first benefit payment, on a form approved by the
Committee. If no election has been made at the time benefits
commence, benefits will be payable in accordance with Section
7.3.
The Committee shall, when necessary, mail the form to the
Participant via certified mail, at his last address on the
records of the Committee, or, if deemed appropriate, through any
facilities made available by the United States Social Security
Administration. Following receipt of the election form, the
Participant may request information with respect to the financial
effect of his waiver on the normal form of payment and the
election of any available optional form of payment.
7.5 Small Amounts. The distribution to any Participant
whose Vested Interest is $3,500 or less shall be made in the form
of a lump sum.
7.6 Temporary Non-Payment of Benefits. If a Participant or
Beneficiary fails to submit the form required under Section 7.4
or fails to furnish information reasonably requested by the
Committee which is necessary to determine whether such
Participant or Beneficiary has satisfied all requirements for
payment of benefits, the Committee shall delay payment of
benefits until the requested information is furnished and shall
make reasonable efforts to obtain such information. After the
requested information has been furnished and the Committee has
determined that the Participant or Beneficiary has met the
requirements for payment of benefits, such benefits shall be
payable.
7.7 Manner of Payment. The following rules shall govern
the payment of benefits pursuant to this Article VII:
(a) All lump sum and installment payments under this
Article VII from the Participant's Company Stock
Account shall be made in the form of Company
Stock, with the value of any fractional shares
paid in cash, unless the provision of Section
409(h)(2) of the Code becomes applicable. The
amount of cash to be distributed to a Participant
for fractional shares (or for whole shares in the
event the provisions of Section 409(h)(2) of the
Code are applicable) allocated to his Company
Stock Account shall be determined by the closing
price of Company Stock on the last trading day of
<PAGE>
the month preceding payment, or in the event
Company Stock is not currently traded on an
established securities market, the price
determined by an independent appraiser as of the
Annual Valuation coincident with or immediately
preceding the date of distribution.
(b) All lump sum and installment payments under this
Article VII from a Participant's Investment
Account shall be made in cash; provided, however,
that the Participant shall be entitled to receive
the value of his Investment Account (determined as
of the most recent Valuation Date) in shares of
Company Stock. The price of the shares shall be
determined as of the last trading day of the month
preceding payment, or in the event Company Stock
is not currently traded on an established
securities market, the price determined by an
independent appraiser as of the Annual Valuation
Date coincident with or immediately preceding the
date of distribution. To receive the value of his
Investment Account in shares of Company Stock, a
Participant must make a written request on forms
provided by the Committee for this purpose within
14 days after receipt of the Committee's intention
to distribute in cash.
(c) If an annuity is purchased, Company Stock
allocated to the Participant's Company Stock
Account shall be valued at the closing price of
Company Stock on the last trading day of the month
preceding payment or, if Company Stock is not
currently traded on an established securities
market, the price determined by an independent
appraiser as of the Annual Valuation Date
coincident with or immediately preceding the date
of distribution. The Participant's Investment
Account shall be valued as of the Valuation Date
coincident with or immediately preceding the date
of distribution; provided, however, that such
account shall be increased by any cash dividends
added thereto and decreased by cash dividends paid
therefrom since the prior Valuation Date.
(d) If the Participant elects to transfer his Vested
Interest to the Company's Pension Plan, the
transfer shall be made in cash.
(e) If the Participant has received a distribution
following his or her Normal Retirement Date, Early
Retirement Date, Disability Retirement Date or
death and he or she receives a second distribution
of 10 or fewer shares of Company Stock, such
Participant can elect to receive the second
distribution in the form of cash.
<PAGE>
7.8 Direct Rollover Rules. This Section applies to
distributions made on or after January 1, 1993. Notwithstanding
any provision of the Plan to the contrary that would otherwise
limit a Distributee's election under this Article, a Distributee
may elect, at the time and in the manner prescribed by the
Committee, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan
specified by the Distributee in a Direct Rollover. Definitions
are as follows:
(a) The term Eligible Rollover Distribution means any
distribution of all or any portion of the balance
to the credit of the Distributee, except that an
Eligible Rollover Distribution does not include:
any distribution that is one of a series of
substantially equal periodic payments (not less
frequently than annually) made for the life (or
life expectancy) of the Distributee or the joint
lives (or joint life expectancies) of the
Distributee and the Distributee's designated
beneficiary, or for a specified period of ten
years or more; any distribution to the extent such
distribution is required under Section 401(a)(9)
of the Code; and the portion of any distribution
that is not includible in gross income (determined
without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(b) An Eligible Retirement Plan includes an individual
retirement account described in Section 408(a) of
the Code, an individual retirement annuity
described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the
Code, or a qualified trust described in Section
401(a) of the Code, that accepts the Distributee's
Eligible Rollover Distribution. However, in the
case of an Eligible Rollover Distribution to the
surviving spouse, an eligible retirement plan is
an individual retirement account or individual
retirement annuity.
(c) The term Distributee includes an employee or
former employee. In addition, the employee's or
former employee's surviving spouse and the
employee's or former employee's spouse or former
spouse who is the alternate payee under a
qualified domestic relations order, as defined in
Section 414(p) of the Code, are Distributees with
regard to the interest of the spouse or former
spouse.
(d) The term Direct Rollover means a payment by the
plan to the eligible retirement plan specified by
the Distributee.
7.9 Notice. For Plan Years beginning after December 31,
1993, a Participant's Vested Interest may commence no less than
30 days after the notice required under section 1.411(a)-11(c) of
the Income Tax Regulations is given, unless:
<PAGE>
(a) The Plan Administrator clearly informs the
Participant that the Participant has a right to a
period of at least 30 days after receiving the
notice to consider the decision of whether or not
to elect a distribution (and, if applicable, a
particular distribution option), and
(b) the Participant, after receiving the notice,
affirmatively elects a distribution.
TAX\3271.2
ARTICLE VIII
TRUST FUND
8.1 Plan Assets. The Company has entered into the Trust
Agreement providing for the establishment of a trust to hold the
assets of the Plan. All contributions shall be paid over to the
Trustee and held pursuant to the provisions of the Plan and the
Trust Agreement.
8.2 Investment of Trust Fund. The Trust Fund shall be
invested primarily in Company Stock; provided that the Trustee
may also invest the Trust Fund in cash, cash equivalents,
certificates of deposit, money market funds, guaranteed
investment contracts, short term securities, bonds, and other
investments at the direction of, or in accordance with the
investment policy established by, the Committee or an authorized
Investment Manager.
Neither the Employer nor the Committee nor the Trustee shall
have any responsibility or duty to time any transaction involving
Company Stock in order to anticipate market conditions or changes
in stock value, nor shall the Employer, the Committee or the
Trustee have any responsibility or duty to sell shares of Company
Stock held in the Trust Fund (or otherwise to provide investment
management for Company Stock held in the Trust Fund) in order to
maximize return or minimize loss. Company contributions made in
cash, and other cash received by the Trustee, may be used to
acquire Shares from shareholders of the Company or directly from
the Company.
8.3 Company Not Responsible For Adequacy Of Trust Fund.
Except as required by applicable law, neither the Board of
Directors, the Company, the Participating Employers, the
Committee, nor the Trustee shall be responsible for the adequacy
of the Trust Fund to meet and discharge Plan liabilities. Each
Participant or Beneficiary shall assume all risk in connection
with any decrease in the value of the assets of the Trust Fund
and the Participants' Accounts and neither the Participating
Employers nor the Committee shall be liable or responsible
therefor.
8.4 Legal Limitation. The Committee shall not be required
to engage in any transaction, including, without limitation,
directing the purchase or sale of Company Stock which it
determines in its sole discretion might tend to subject itself,
its members, the Plan, the Employer, or any Participant to
liability under federal or state law.
<PAGE>
8.5 Exempt Loans. The Committee may direct the Trustee to
have the Plan enter into one or more Exempt Loans to finance the
acquisition of Company Stock. The terms of any Exempt Loan shall
comply with each of the following requirements:
(a) The terms shall be as favorable to the Plan as the
terms of a comparable loan from arms-length
negotiations between independent parties;
(b) The interest rate shall be no more than a
reasonable interest rate considering all relevant
factors including the amount and duration of the
Exempt Loan, the security and guarantee involved,
the credit standing of the Plan and the guarantor
of the Exempt Loan and the interest rate
prevailing for comparable loans;
(c) The Exempt Loan shall be without recourse against
the Plan;
(d) The Exempt Loan must be for a specific term;
(e) The Exempt Loan may not be payable at the demand
of any person except in the case of default;
(f) The only assets of the Plan that may be given as
collateral on the Exempt Loan are shares of
Company Stock acquired with the proceeds of the
same Exempt Loan or shares of Company Stock used
as collateral on a prior Exempt Loan and repaid
with the proceeds of the same Exempt Loan;
(g) No person entitled to payment under the Exempt
Loan shall have any right to assets of the Plan
other than collateral given for that Exempt Loan,
contributions made to the Plan to enable it to
meet its obligations under that Exempt Loan and
earnings attributable to such collateral and such
contributions;
(h) The value of Plan assets transferred in
satisfaction of the Exempt Loan upon an event of
default shall not exceed the amount of the
default;
(i) If the lender is a "disqualified person" (as such
term is defined in Section 4975(e) of the Code),
Plan assets may only be transferred upon default
only upon and to the extent of the failure of the
Plan to meet the payment schedule of the Exempt
Loan;
(j) Upon payment of any portion of the balance due on
the Exempt Loan, the assets pledged as collateral
for such portion shall be released from
encumbrance, in accordance with Section 5.10;
(k) The Exempt Loan shall be repaid only from (i)
amounts contributed to the Plan by the Employer in
<PAGE>
the form of cash to meet its obligations under the
loan and from amounts earned on Trust investments
and (ii) the proceeds of an Exempt Loan, and (iii)
from collateral given for the Exempt Loan,
including earnings on such collateral, such as
Dividends on Company Stock. Such contributions
and earnings shall be accounted for separately in
the books of accounts of the Plan maintained by
the Committee. The payments made with respect to
an Exempt Loan by the Plan during a Plan Year must
not exceed an amount equal to the sum of such
contributions and earnings received during or
prior to the year less any payments in prior
years.
Any Exempt Loan must be primarily for the benefit of
Participants and their Beneficiaries.
Notwithstanding any other provision of the Plan, all
proceeds of an Exempt Loan shall be used, within a reasonable
time after receipt by the Trust Fund, for the following purposes:
(a) To acquire Company Stock;
(b) To repay the same Exempt Loan; or
(c) To repay any previous Exempt Loan.
TAX\3271.2
ARTICLE IX
ADMINISTRATION
9.1 Board of Directors. The Board of Directors shall have
the following duties and responsibilities in connection with the
administration of the Plan:
(a) making decisions with respect to contributions to
the Plan;
(b) making decisions with respect to amending or
terminating the Plan;
(c) making decisions with respect to the selection,
retention and removal of the Trustee and the
members of the Committee;
(d) periodically reviewing the performance of the
Trustee and the members of the Committee; and
(e) performing such additional duties as are imposed
by law.
The Board of Directors will have all powers and authority
necessary or appropriate to carry out its duties and
responsibilities with respect to the administration of the Plan.
The Board of Directors may by written resolution allocate its
duties and responsibilities to one or more of its members or
delegate such duties and responsibilities to any other persons,
<PAGE>
provided, however, that any such allocation or delegation shall
be terminable upon such notice as the Board of Directors deems
reasonable and prudent under the circumstances.
9.2 ESOP Administrative Committee. The ESOP Administrative
Committee (the "Committee") shall administer the Plan and is
designated as the "administrator" within the meaning of Section
3(16) of ERISA. The members of the Committee shall be comprised
of not less than three persons who shall be appointed by the
Board of Directors and who may be removed by the Board of
Directors at any time with or without cause. A Committee member
may resign at any time by filing his written resignation with the
Board of Directors.
All members of the Committee are designated as agents of the
Plan for the service of legal process.
The Company will notify the Trustee in writing of each
Committee member's appointment, and the Trustee may assume such
appointment continues in effect until written notice to the
contrary is given by the Company.
9.3 Committee's Duties and Responsibilities. The Committee
shall have the following duties and responsibilities in
connection with the administration of the Plan:
(a) interpreting and construing the provisions of the
Plan;
(b) determining all questions of eligibility to
participate, eligibility for benefits, the
allocation of contributions, and the status and
rights of Participants and Beneficiaries;
(c) complying with the reporting and disclosure
requirements established by ERISA;
(d) determining and deciding any dispute arising under
the Plan and administering the Plan's claims
procedures;
(e) directing the Trustee concerning all payments to
be made out of the Trust in accordance with the
provisions of the Plan;
(f) establishing procedures for withholding of federal
income tax from distributions;
(g) establishing procedures to prevent the Plan from
engaging in transactions described in Section 406
of ERISA and transactions described in Section
4975(c) of the Code;
(h) establishing equitable accounting methods and
designating additional Valuation Dates;
(i) communicating with Participants and Beneficiaries;
(j) providing a procedure whereby the Participants may
<PAGE>
direct the manner in which the Company Stock
allocated to their Company Stock Accounts is to be
voted, and exercising the voting rights in
accordance with such directions;
(k) reviewing the investment performance of the
Trustee, or any designated Investment Manager;
(l) reviewing the performance of any advisors
appointed by the Committee;
(m) making recommendations to the Board of Directors
with respect to the amendment or termination of
the Plan; and
(n) keeping minutes to record its proceedings, acts
and decisions pertaining to the administration of
the Plan.
9.4 Committee's Powers. The Committee will have all powers
and authority necessary or appropriate to carry out its duties
and responsibilities with respect to the operation and
administration of the Plan. It will interpret and apply all
provisions of the Plan and may supply any omission or reconcile
any inconsistency or ambiguity in such manner as it deems
advisable, including the adoption of interpretative memoranda.
All determinations and any actions of the Committee will be
conclusive and binding upon all persons, except as otherwise
provided herein or by law; provided, however, that the Committee
may revoke or modify a determination or action previously made in
error. The Committee will exercise all powers and authority
given to it in a nondiscriminatory manner, and will apply uniform
administrative rules of general application in order to assure
similar treatment to persons in similar circumstances.
The Committee may delegate to any such agent or any sub-
committee or member of the Committee its authority to perform any
duty or responsibility specified in Section 9.3, including those
matters involving the exercise of discretion, provided that such
delegation shall be subject to revocation at any time at the
discretion of the Committee. Any member of the Committee, any
sub-committee or agent to whom the Committee delegates any
authority, and any other person or group of persons, may serve in
more than one fiduciary capacity (including service as both
Committee member and Trustee) with respect to the Plan.
Any action or decision concurred in by a majority of the
Committee members, either at a meeting or in writing without a
meeting, will constitute an action or decision of the Committee.
The Committee may adopt and amend such rules for the conduct of
its business and administration of the Plan as it deems
advisable.
9.5 Chairman of the Committee. The Committee shall elect
any Committee member to serve as Chairman, and may remove him at
any time. The Chairman, or a majority of the Committee members
then in office, will have the authority to execute all
<PAGE>
instruments or memoranda necessary or appropriate to carry out
the actions and decisions of the Committee; and any person may
rely upon any instrument or memoranda so executed as evidence of
the Committee's action or decision indicated thereby.
9.6 Claims Review Procedure. If a Participant (or
Beneficiary) believes a benefit or distribution is due under the
Plan, he or she may request the distribution of such benefit, in
writing, on forms acceptable to the Committee. At such time, the
Participant (or Beneficiary) will be given the information and
materials necessary to complete any request for the distribution
of a benefit.
If the request for distribution is disputed or denied, the
following action shall be taken:
(a) First, the Participant (or Beneficiary) will be
notified, in writing, of the dispute or denial as
soon as possible (but no later than 90 days) after
receipt of the request for a distribution. The
notice will set forth the specific reasons for the
denial, including any relevant provisions of the
Plan. The notice will also explain the claims
review procedure of the Plan.
(b) Second, the Participant (or Beneficiary) shall be
entitled to a full review of his or her request
for a distribution. A Participant (or
Beneficiary) desiring a review of the dispute or
denial must request such a review, in writing, no
later than 60 days after notification of the
dispute or denial is received. During the review,
the Participant (or Beneficiary) may be
represented and will have the right to inspect all
documents pertaining to the dispute or denial. Any
such review may include a hearing for the
Participant or his or her designated
representative.
(c) The Committee shall render its decision within 60
days after receipt of the request for the review.
In the event special circumstances require an
extension of time, the Committee shall notify the
Participant (or Beneficiary), and the decision
will be rendered no later than 120 days after the
receipt of the request. The decision of the
Committee shall be in writing. The decision shall
include specific reasons for the action taken and
specific references to the Plan provisions on
which the decision is based.
9.7 Information from Participants and Beneficiaries. Each
Participant and Beneficiary shall be required to furnish to the
Committee, in the form prescribed by it, such personal data,
affidavits, authorization to obtain information, and other
information as the Committee may deem appropriate for the proper
administration of the Plan.
<PAGE>
9.8 Actions. Any action taken by the Committee on matters
within its discretion shall be final and binding on the parties
and on all Participants, Beneficiaries or other persons claiming
any right or benefit under the Plan, in the Trust, or in the
administration of the Plan.
All decisions of the Committee shall be uniform and made in
a nondiscriminatory manner.
9.9 Bond. The Employer shall purchase a bond for the
Committee and any other fiduciaries of the Plan in accordance
with the requirements of the Code and ERISA.
9.10 Indemnification. The Employer shall defend and
indemnify to the full extent permitted by law (including ERISA),
which indemnification shall include, but not be limited to,
attorney's fees and any tax imposed as a result of a claim
asserted by any person, persons or entity (including a
governmental entity), any individual serving as a member of the
Committee made or threatened to be made a part to any action,
suit or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that such individual is or
was a member of the Committee.
TAX\3271.2
ARTICLE X
RIGHTS AND OPTIONS
CONCERNING COMPANY STOCK
10.1 Restrictions on Company Stock. Except as provided in
this Article X, no Company Stock acquired with the proceeds of an
Exempt Loan shall be subject to a put, call or other option or
buy-sell or similar agreement while held by the Trustee or when
distributed from the Plan, whether or not the Plan is then an
employee stock ownership plan within the meaning of Code Section
4975(e)(7).
10.2 Right of First Refusal. During any period when Company
Stock is not publicly traded, a Participant (or other recipient
of a distribution from the Plan) shall not sell Company Stock
without first offering such stock to the Trust (and then to the
Employer) at a price equal to the greater of (a) the fair market
value of Company Stock determined as of the most recent Valuation
Date, or (b) the purchase price (or other terms of payment)
offered by a bona fide third party purchaser. A legend shall be
placed on shares of Company Stock to reflect this right of first
refusal.
The Participant or other distributee shall notify the
Committee in writing, of any bona fide third party offer to
purchase and the terms of such offer. The Participant (or
distributee) shall be free to sell to such third party if the
Trust (or the Company) fails to notify the Participant or
distributee, in writing, of its intention to purchase all or any
portion of the Company Stock within 14 days after the Plan
Administrator receives written notification of the offer.
Neither the Company nor the Trustee shall be required to
exercise the right of first refusal provided for in this Section
10.2.
<PAGE>
10.3Put Option. If Company Stock is not readily tradable
on an established market (within the meaning of Code Section
409(h) of the Code) at the time of any distribution from the
Plan, a Participant (or other recipient of a distribution of
Company Stock) shall be entitled to put all or any portion of
such stock to the Company (or to the Trustee if the Trustee
elects to assume the obligations of the Company) by notifying the
Company (or Trustee), in writing. The following special rules
shall apply to the exercise of a put pursuant to this Section
10.3:
(a) The put may be exercised by the Participant or
Beneficiary (i) during the 60 day period following
the date on which the Company Stock is initially
distributed from the Plan, or (ii) in the Plan
Year immediately following the Plan Year in which
the initial distribution occurs during the 60 day
period which commences on the date following the
Participant's (or other distributee's) receipt of
a valuation notice in accordance with Section 5.8,
provided the put was not exercised during the 60
day period described in (i).
(b) The consideration paid on the exercise of the put
shall equal the fair market value of the Company
Stock determined as of the Annual Valuation Date
which immediately precedes or coincides with the
date on which the put is exercised.
(c) All or a portion of the consideration received by
a Participant or Beneficiary on the exercise of a
put may consist of a written installment obliga-
tion of the Company (or the Plan if the Trustee
elects to assume the obligations of the Company).
Such installment obligation shall consist of
substantially equal payments over a period not
exceeding 5 years and beginning not more than 30
days after the put option is exercised. The
installment obligation shall provide for the
payment of a reasonable rate of interest and shall
be adequately secured as required by Code Section
409(h)(5) of the Code. If distributions are made
in installments pursuant to Section 7.2(b) or
7.2(c), the amount to be paid for the Company
Stock will be paid no later than 30 days after the
exercise of the put option.
(d) If a Participant or Beneficiary fails to exercise
the put during the period described in paragraph
(a) by notifying the Committee, in writing,
neither the Trustee nor the Company shall have any
obligation to purchase Company Stock distributed
to such Participant or Beneficiary.
10.4 Exercise of Voting Rights. The Trustee shall vote all
Company Stock held in the Trust as directed by the Committee or,
in accordance with the following provisions, by the Participants:
If the Company has a registration-type class of securities
<PAGE>
(as defined in Section 409(e)(4) of the Code), then with respect
to all corporate matters, all shares of Company Stock allocated
to the Accounts of Participants shall be voted in accordance with
the directions of such Participants as given to the Committee and
communicated in turn by the Committee to the Trustee. Each
Participant shall be entitled to direct the voting only of the
shares of Company Stock allocated to his Company Stock Account.
If Company Stock is not a registration-type class of
securities (as defined in Section 409(e)(4) of the Code), each
Participant shall be entitled to direct the Trustee as to the
exercise of voting rights attributable to Company Stock allocated
to his or her Accounts concerning any corporate matter which
involves the voting of Company Stock with respect to the approval
or disapproval of any corporate merger or consolidation,
recapitalization, reclassification, liquidation, dissolution,
sale of substantially all the assets of a trade or business, or
such similar transaction as may be prescribed in Regulations.
Prior to any meeting of the stockholders of the Company, the
Committee shall determine the number of shares of Company Stock
(including fractional shares) allocated to each Participant which
the Participant shall be entitled to vote. Within a reasonable
time (not less than 30 days) before any shareholder meeting, the
Committee shall provide the Participant with a form necessary to
indicate his vote as to any specific or general matter to be
considered by the stockholders at such meeting. In addition, the
Committee shall provide the Participants with all information
distributed to shareholders by the Committee for the exercise of
such voting rights. The Committee shall not make any
recommendations regarding the manner of exercising any voting
rights. If a Participant shall fail, or refuse, to give the
Committee timely and adequate instructions as to how to vote any
Company Stock, the Committee shall not exercise its power to vote
those shares of Company Stock. The Committee shall be entitled
to hire an independent third party to tabulate votes in order to
ensure the confidentiality of such vote.
With respect to Company Stock not allocated to Participants'
Accounts, the Committee shall instruct the Trustee, in writing,
how to vote such shares.
Each Participant or, in the event of the Participant's
death, the Participant's Beneficiary is, for purposes of voting
the Company Stock allocated to his Company Stock Account, hereby
designated as "named fiduciary" within the meaning of Section
403(a)(1) of ERISA.
10.5 Tender Offer. The Trustee shall notify each
Participant of a tender or exchange offer and utilize its best
efforts to distribute to Participants in a timely manner all
information distributed to shareholders of the Company in
connection with any such tender or exchange offer. Each
Participant shall have the right from time to time to instruct
the Trustee in writing as to the manner in which to respond to
any tender or exchange offer with respect to Company Stock
allocated to his Company Stock Account which shall be pending or
which may be made in the future for all Shares or any portion
thereof. A Participant's instructions shall remain in force
<PAGE>
until superseded in writing by the Participant. The Participant
shall have the right to determine confidentially whether shares
allocated to a Participant's account are tendered or exchanged
and the Trustee and Committee shall establish procedures to
ensure such confidentiality.
Unless and until a Participant's Company Stock is tendered
or exchanged, the individual instructions received by the Trustee
from the Participant shall be held by the Trustee in strict
confidence and shall not be divulged or released to any person,
including officers of the Company; provided, however, that the
Trustee shall advise the Company, at any time, upon request, of
the total number of shares not subject to instructions to tender
or exchange.
With respect to (a) Company Stock not allocated to
Participants' Accounts or (b) Company Stock allocated to
Participants' Accounts for which proper directions have not been
received from Participants, such stock shall be tendered or
exchanged by the Trustee in accordance with directions received
from the Committee. The Committee shall instruct the Trustee in
response to the tender offer in accordance with ERISA's fiduciary
duties to act as a prudent person would act in a similar
situation and to act solely in the interests of the Participants
and their Beneficiaries. In exercising its fiduciary
responsibility, the Committee shall consider (to the extent
permitted by Department of Labor or Internal Revenue Service
Regulations or announcements) not only the potential increase in
value if any of the Participants' Accounts as a result of the
tender or exchange offer, but also the impact of any change in
the managerial control of the Company on the status of the
Participants as Employees in the long-run, including but not
limited to whether they will receive larger or smaller employee
benefits than at present under the Plan.
Each Participant or, in the event of the Participant's
death, the Participant's Beneficiary is, for purposes of
responding to any tender or exchange offer with respect to
Company Stock allocated to his Company Stock Account, hereby
designated as "named fiduciary" within the meaning of Section
403(a)(1) of ERISA.
10.6 Investment Diversification. A Participant who has both
attained age 55 and completed 10 years of participation in the
Plan shall have the right to elect to diversify up to 25% of any
Post-1986 Company Stock held in his Company Stock Account, less
any amount to which a prior election applies or which has been
previously diversified. The election must be made within the 90
day period after the close of the Plan Year to which the election
applies. The election shall apply to each Plan Year in the 6
year period beginning with the first Plan Year after the Plan
Year in which the Participant attains age 55 (or, if later, the
Plan Year after the Plan Year in which the Participant completes
10 years of participation under the Plan and has attained age
fifty-five (55)). For the last Plan Year in which the Participant
can make an election, the Participant shall be entitled to direct
the investment of 50% of the Post-1986 Company Stock, if any,
held in his Company Stock Account, less any amount to which a
prior election applies or which has been previously diversified.
<PAGE>
If a Participant elects to diversify the investment of his
Post-1986 Company Stock, the Committee shall direct the Trustee
to distribute, within 90 days after the election period, the
portion of the Participant's Post-1986 Company Stock covered by
the election. Alternatively, the Plan may offer, in the sole
discretion of the Committee, at least 3 investment options (not
inconsistent with applicable Treasury Department Regulations) to
Participants making an election to diversify their investment
under this Section 10.6.
TAX\3271.2
ARTICLE XI
AMENDMENT OF THE PLAN
11.1 Right to Amend or Suspend Contributions. Subject to
the provisions of Section 11.3 and any applicable contribution or
loan agreement, the Board of Directors reserves the right to
amend the Plan or Trust or suspend contributions to the Plan, in
whole or in part, at any time and for any reason without the
consent of any Participating Employer, Participant or
Beneficiary. Each amendment of the Plan shall be in writing, and
shall be effective on the date specified therein. Notice of any
amendment, executed by order of the Board of Directors,
modification or suspension of contributions to the Plan shall be
given by the Board of Directors to the Committee, the Trustee,
and to all Participating Employers.
11.2 Amendment by Committee. Notwithstanding Section 12.1,
the Committee may adopt any amendment which may be necessary or
appropriate to facilitate the administration, management and
interpretation of the Plan or to conform the Plan thereto, or to
qualify or maintain the Plan and Trust as a plan and trust
meeting the requirements of Sections 401(a), 501(a) and
4975(e)(7) of the Code or any other applicable section of law and
the Regulations issued thereunder, provided said amendment does
not have any material effect on the currently estimated cost to
the Employer maintaining the Plan. Such amendment shall be in
writing, executed by a majority of the Committee members and
shall be effective on the date specified therein. Notice of any
such amendment by the Committee shall be given to the Board of
Directors, the Trustee and to all Participating Employers.
11.3 Restriction on Amendment. No amendment of the Plan may
be made which shall either (i) deprive any Participant or
Beneficiary of any part of his Accounts as constituted at the
time of such amendment, or (ii) make it possible for any part of
the Plan assets (other than such part as is required to pay
taxes, if any, and administrative expenses as provided in Section
14.12) to be used for or diverted to any purposes other than for
the exclusive benefit of Participants and Beneficiaries under the
Plan prior to the satisfaction of all liabilities of the Plan.
11.4 Retroactivity. Any amendment or modification of any
provisions of the Plan may be made retroactively if necessary or
appropriate to qualify or maintain the Plan or the Trust as a
plan and trust meeting the requirements of Section 401(a), 501(a)
or 4975 of the Code or any other applicable section of law
(including ERISA) and the Regulations issued thereunder.
TAX\3271.2
<PAGE>
ARTICLE XII
TERMINATION OF THE PLAN
12.1 Events Constituting Termination. It is expressly
declared to be the desire and intention of each Participating
Employer to continue the Plan in existence for an indefinite
period of time. However, circumstances not now anticipated or
foreseeable may arise in the future, as a result of which a
Participating Employer may deem it impractical or unwise to
continue the Plan established hereunder, and each Participating
Employer therefore reserves the right to terminate the Plan at
any time insofar as it affects its Employees. Any Participating
Employer may terminate its participation in the Plan by action of
its board of directors. Such termination shall be evidenced by
an instrument of termination executed by an officer of the
Participating Employer pursuant to authorization by its board of
directors specifying a withdrawal date which shall be the last
day such notice is received by the Committee or the Trustee,
whichever receives such notice the latest. The notice shall also
be delivered to the Board of Directors and to each other
Participating Employer. To the maximum extent permitted by
ERISA, the termination of the Plan as to any Participating
Employer shall not in any way affect any other Participating
Employer's participation in the Plan.
With respect to any Participating Employer which has adopted
the Plan, its adjudication of bankruptcy or insolvency by any
court of competent jurisdiction, its making of a general
assignment for the benefit of creditors, its dissolution, merger,
consolidation, other reorganization or discontinuance of
business, unless coverage for its Employees under the Plan is
continued by a successor company, or its complete discontinuance
of contributions, shall operate to terminate the Plan with
respect to such Participating Employer.
The Committee may require any Participating Employer to
withdraw from the Plan for failure of the Participating Employer
to make proper contributions or to comply with any other
provision of the Plan. In the event of any such withdrawal, the
Committee shall promptly notify the Internal Revenue Service and
request such determination as counsel to the Plan may recommend
and as the Committee may deem desirable.
12.2 Partial Termination. Upon the withdrawal of one or
more Participating Employers or upon the termination of active
participation of a group of Employees, the Committee shall
determine, upon the advice of counsel to the Plan and under
applicable law, whether a partial termination has occurred with
respect to a group of Participants.
12.3 Liquidation of the Trust Fund. Upon termination or
partial termination of the Plan or upon complete discontinuance
of contributions, the Accounts of all affected Participants shall
become fully vested and nonforfeitable. Upon the termination or
partial termination, the Committee shall continue to administer
the Plan and the Trustee shall continue to administer the Trust
Fund and all payments to Participants shall continue in
accordance with the provisions of Article VII; provided, however,
that in the event of a partial termination the Committee may
<PAGE>
direct the Trustee to segregate the assets attributable to the
Accounts of the affected Participants and apply such segregated
assets for the benefit of such Participants.
Notwithstanding the foregoing paragraph, upon or after the
termination of the Plan, if the Board of Directors shall
determine that the continuance of the Trust is not in the best
interests of Participants and Beneficiaries, the Board of
Directors shall terminate the Trust.
To the extent that no discrimination results, any
distribution after termination of the Plan may be made, in whole
or in part, in cash, securities or other assets in kind (based on
their fair market value as of the date of distribution), as the
Committee in its sole discretion shall determine, subject to the
provision of any applicable law or regulations.
12.4 Internal Revenue Service Approval for Distribution. In
the event that the Committee applies to the Internal Revenue
Service for determination on the qualification of the Plan upon
termination, no person shall have any right or claim to any
assets of the Trust Fund before the Internal Revenue Service
shall determine that the proposed distribution of assets under
this Article XII does not result in a discrimination prohibited
by Section 401(a) of the Code.
TAX\3271.2
ARTICLE XIII
TOP HEAVY PROVISIONS
13.1 Top Heavy Plan. The Plan will be considered a Top
Heavy Plan for any Plan Year if it is determined to be a Top
Heavy Plan as of the last day of the preceding Plan Year.
Notwithstanding any other provisions in the Plan, the provisions
of this Article XIII shall apply and supersede all other
provisions in the Plan with respect to a Plan Year for which the
Plan is a Top Heavy Plan.
13.2 Definitions for Article XIII. For purposes of this
Article XIII and as otherwise used in this Plan, the following
terms shall have the meanings set forth below:
(a) "Aggregation Group" shall mean the group composed
of each qualified retirement plan of a
Participating Employer or an Affiliated Company in
which a Key Employee is a Participant and each
other qualified retirement plan of a Participating
Employer or an Affiliated Company which enables a
plan of a Participating Employer or an Affiliated
Company in which a Key Employee is a Participant
to satisfy Sections 401(a)(4) or 410 of the Code.
In addition, the Company may choose to treat any
other qualified retirement plan as a member of the
Aggregation Group if such Aggregation Group will
continue to satisfy Sections 401(a)(4) and 410 of
the Code with such plan being taken into account.
(b) "Key Employee" shall mean a "Key Employee" as
defined in Section 416(i)(1) and (5) of the Code
or Regulations. For purposes of determining which
employee is a Key Employee, compensation shall
<PAGE>
mean "compensation" as defined in Section 1.415-
2(d) of the Regulations but including employer
contributions made pursuant to a salary reduction
arrangement.
(c) This Plan shall be a "Top Heavy Plan" for any Plan
Year if, as of the Determination Date (as defined
in paragraph (d) below), the aggregate of the
Accounts under the Plan for Participants who are
Key Employees (as defined in paragraph (b), above)
exceeds 60% of the aggregate of the Accounts of
all Participants or if this Plan is required to be
in an Aggregation Group (as defined in paragraph
(a), above) which for such Plan Year is a top-
heavy group.
(d) "Determination Date" means for any Plan Year the
last day of the immediately preceding Plan Year.
13.3 Vesting. If the Plan is a Top Heavy Plan with respect
to any Plan Year, the Vested Interest of each Participant who has
performed one Hour of Service on or after the date the Plan
becomes a Top Heavy Plan shall not be less than the percentage
determined in accordance with the following vesting schedule:
---------------------------------------------
Years of Service Vested Interest
Less than 2 years 0%
2 years but less than 3 20%
3 years but less than 4 40%
4 years but less than 5 60%
5 years but less than 6 80%
6 years or more 100%
13.4 Minimum Contribution. For each Plan Year that the Plan
is a Top Heavy Plan, the Employer Contribution (including
forfeitures but excluding rollovers and transfers pursuant to
Section 14.9) allocable to the Accounts of each Participant who
has performed an Hour of Service at the end of the Plan Year and
who is not a Key Employee, shall not be less than the lesser of
(i) 3% of such Participant's compensation, within the meaning of
Section 415 of the Code, or (ii) the percentage at which
contributions and forfeitures for such Plan Year are made and
allocated on behalf of the Key Employee for whom such percentage
is the highest. Such allocation shall be made for each
Participant who is not a Key Employee and who is employed by the
Employer through the last payroll period ending within the Plan
Year. For the purpose of determining the appropriate percentage
under clause (i), all defined contribution plans required to be
included in an Aggregation Group shall be treated as one plan.
Clause (ii) shall not be applicable if the Plan is required to be
included in an Aggregation Group which enables a defined benefit
plan also required to be included in said Aggregation Group to
satisfy Sections 401(a)(4) or 410 of the Code. Compensation, for
<PAGE>
purposes of determining a minimum contribution, is defined in
Section 5.12(d).
13.5 Limitations on Contributions. For each Plan Year that
the Plan is a Top Heavy Plan, 1.0 shall be substituted for 1.25
as the multiplicand of the dollar limitation in determining the
denominator of the defined benefit plan fraction and of the
defined contribution plan fraction for purposes of Section 415(e)
of the Code. If, after substituting 90 percent for 60 percent
wherever the latter appears in Section 416(g) of the Code, the
Plan is not determined to be a Top Heavy Plan, the provisions of
this Section 13.5 shall not be applicable if the minimum Employer
Contribution (including forfeitures) allocable to the Accounts of
any Participant who is not a Key Employee is determined by
substituting "4" for "3". If the Participant is a participant in
both a defined contribution plan and a defined benefit plan, the
benefit from the defined contribution plan minimum shall be
comparable to a 3% defined benefit plan benefit.
13.6 Other Plans. The Committee shall, to the extent
permitted by the Code and in accordance with the Regulations,
apply the provisions of this Article XIII by taking into account
the benefits payable and the contributions made under any other
plans maintained by a Participating Employer or Affiliated
Company which are qualified under Section 401(a) of the Code to
prevent inappropriate omissions or required duplication of
minimum benefits or contributions by making a comparability
analysis to prove that the defined contribution plan is providing
a benefit at least equal to the minimum benefit under the defined
benefit plan.
TAX\3271.2
ARTICLE XIV
GENERAL PROVISIONS
14.1 Plan Voluntary. Although it is intended that the Plan
shall be continued and a contribution shall be made as provided
herein, this Plan is entirely voluntary on the part of the
Participating Employers and the continuance of this Plan and the
payment of contributions hereunder are not to be regarded as
contractual obligations of the Participating Employers. The Plan
shall not be deemed to constitute a contract between a
Participating Employer and any Employee or to be a consideration
for, or an inducement for, the employment of a Employee by a
Participating Employer. Nothing contained in the Plan shall be
deemed to give any Employee the right to be retained in the
service of a Participating Employer or to interfere with the
right of a Participating Employer to discharge or to terminate
the service of any Employee at any time without regard to the
effects such discharge or termination may have on any rights
under the Plan.
14.2 Payments to Minors and Incompetents. If a Participant
or Beneficiary entitled to receive any benefits hereunder is a
minor or is deemed by the Committee, or is adjudged, to be
legally incapable of giving valid receipt and discharge for such
benefits, such benefits will be paid to such person or
institution as the Committee may designate or to the duly
appointed guardian. Such payment shall, to the extent made, be
deemed a complete discharge of any liability for such payment
<PAGE>
under the Plan.
14.3 Missing Payee. If the Committee cannot ascertain the
whereabouts of any person to whom a payment is due under the
Plan, and if, after 1 year from the date such payment is due, a
notice of such payment due is mailed to the last known address of
such person, as shown on the records of the Committee or the
Company, and within 3 months after such mailing such person has
not made written claim therefore, the Committee, if it so elects,
may direct that such payment and all remaining payments otherwise
due to such person, be canceled on the records of the Plan and
the amount thereof treated as a forfeiture after 5 consecutive
One Year Breaks in Service. Upon such cancellation, the Plan and
the Trust shall have no further liability therefor, except that,
in the event such person later notifies the Committee of his
whereabouts and requests the payment or payments due to him under
the Plan and notifies the Committee of the desired form of
payment, the amount forfeited shall be paid to him as provided
herein.
The provisions of 14.3 shall not be instituted until a
Participant or Beneficiary has been provided with no less than
three written notices requesting the Participant or Beneficiary
to complete and return the application form. The final notice
will specifically advise the Participant or Beneficiary that his
benefit shall not be paid unless he provides the required
information concerning his benefit election and that his benefit
may be forfeited pursuant to Section 14.3.
14.4 Required Information. Each Participant shall file with
the Committee such pertinent information concerning himself, his
spouse and his Beneficiary as the Committee may specify, and no
Participant, or Beneficiary, or other person shall have any
rights or be entitled to any benefits under the Plan unless and
until such information is filed by or with respect to him.
The terms "pertinent information" includes a Participant's
or Beneficiary's selection of his desired form of benefit
following his termination of employment.
14.5 Subject to Trust Agreement. Any and all rights or
benefits accruing to any persons under the Plan shall be subject
to the terms of the Trust Agreement.
14.6 Subject to Contract. If the payment of any benefit
under the Plan is provided for by a contract with an insurance
company the payment of such benefit shall also be subject to all
the provisions of such contract.
14.7 Communications to Committee. All elections,
designations, requests, notices, instructions, and other
communications from a Participating Employer, a Participant,
Beneficiary, or other person to the Committee required or
permitted under the Plan (i) shall be in such form as is
prescribed from time to time by the Committee, (ii) shall be
mailed by first-class mail or delivered to such location as shall
be specified by the Committee, and (iii) shall be deemed to have
been given and delivered only upon actual receipt thereof by the
Committee at such location.
<PAGE>
14.8 Communications from Employer or Committee. All
notices, statements, reports and other communications from the
Company, a Participating Employer or the Committee to any
Employee, Participant or Beneficiary shall be deemed to have been
duly given when delivered to, or when mailed by first-class mail,
postage prepaid and addressed to, such Employee, Participant or
Beneficiary at his address last appearing on the records of the
Committee or Company, or when posted by the Company or the
Committee as permitted by law.
14.9 Transfers and Rollovers. Upon such terms and
conditions as the Committee may approve, and subject to any
required approval by the Internal Revenue Service, benefits may
be provided under the Plan to a Participant with respect to any
period of his prior employment by any organization, and such
benefits (and any Hours of Service credited with respect to such
period of employment under Section 1.20) may be provided for, in
whole or in part, by funds transferred, directly or indirectly
(including a rollover from a conduit individual retirement
account, an individual retirement annuity or a retirement bond as
described under the Code), to the Trust from an employee benefit
plan of such organization which qualified under Section 401(a) of
the Code. Such amounts shall be credited to the Participant's
"Rollover Contribution Account." A Participant shall be fully
vested in his Rollover Contribution Account.
14.10Action. Except as may be specifically provided herein,
any action required or permitted to be taken by the Employer may
be taken on behalf of the Employer by any authorized officer of
the Employer.
14.11Liability for Benefits. Neither the Trustee, the
Employer, the Committee nor the Plan Administrator guarantee the
Trust from loss or depreciation, nor do they guarantee any
payment to any person. The liability of the Trustee, the
Employer, the Committee and the Plan Administrator to make any
payment is limited to the available assets of the Trust.
14.12Named Fiduciary. The Participating Employer, the
Trustee, the Committee and any Investment Manager will be the
"Named Fiduciaries" under the Plan within the meaning of ERISA
Section 403.
14.13Gender. Whenever used in the Plan the masculine gender
includes the feminine.
14.14Captions. The captions preceding the sections of the
Plan have been inserted solely as a matter of convenience and in
no way define or limit the scope or intent of any provisions of
the Plan.
14.15Applicable Law. The Plan and all rights thereunder
shall be governed by and construed in accordance with ERISA and
the laws of the State of Louisiana.
14.16Expenses. The expenses of administering the Plan
including (i) the fees and expenses of the Trustee for the
performance of its duties under the Trust, (ii) the expenses
incurred by the members of the Committee in the performance of
<PAGE>
their duties under the Plan (including reasonable compensation
for services rendered in respect of the Plan by legal counsel,
certified public accountants, appraisers or other agents employed
by the Committee), and (iii) all other proper charges and
disbursements of the Company, Trustee or the members of the
Committee (including settlements of claims or legal actions
approved by counsel to the Plan) are to be paid out of the Trust
unless the Company pays such expenses directly. In estimating
costs under the Plan, administrative costs may be anticipated.
However, no person serving as a Trustee or member of the
Committee who already received full-time pay from the Employer
shall receive compensation from the Trust, except for
reimbursement of expenses properly and actually incurred.
EXECUTED in multiple originals in New Orleans, Louisiana,
effective as of the 28 day of December, 1994.
WITNESSES: AVONDALE INDUSTRIES, INC
\s\ B. L. Hicks BY: \s\ Thomas M. Kitchen
\s\ Jan T. White Vice President & Chief
Financial Officer
AVONDALE GULFPORT MARINE INC.
\s\ B. L. Hicks BY: \s\ Thomas M. Kitchen
\s\ Jan T. White Vice President & Chief
Financial Officer
AVONDALE INDUSTRIES OF
NEW YORK, INC.
\s\ B. L. Hicks BY: \s\ Thomas M. Kitchen
\s\ Jan T. White Vice President, Treasurer
& Secretary
AVONDALE SERVICES CORP.
\s\ B. L. Hicks BY: \s\ Thomas M. Kitchen
\s\ Jan T. White Vice President & Secretary
AVONDALE SHIPYARDS OF TEXAS, INC.
\s\ B. L. Hicks BY: \s\ Thomas M. Kitchen
\s\ Jan T. White Vice President & Secretary
AVONDALE TRANSPORTATION
COMPANY, INC.
\s\ B. L. Hicks BY: \s\ Thomas M. Kitchen
\s\ Jan T. White Vice President & Secretary
AVONDALE ENTERPRISES, INC.
\s\ B. L. Hicks BY: \s\ Thomas M. Kitchen
\s\ Jan T. White Vice President, Secretary &
Treasurer
<PAGE>
AVONDALE CONSTRUCTION MANAGEMENT,
INC.
\s\ B. L. Hicks BY: \s\ Thomas M. Kitchen
\s\ Jan T. White Vice President & Secretary
TAX\3271.2
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
depose and state that he signed the foregoing Avondale
Industries, Inc. Employee Stock Ownership Plan as a free act and
deed on behalf of Avondale Industries, Inc. for the purposes
therein set forth.
BY: \s\ Thomas M. Kitchen
Print Name: Thomas M. Kitchen
Title: Vice President & Chief
Financial Officer &
Secretary
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 28th DAY
OF December, 1994.
\s\ Rudolph R. Ramelli
NOTARY PUBLIC
TAX\3271.2
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
depose and state that he signed the foregoing Avondale
Industries, Inc. Employee Stock Ownership Plan as a free act and
deed on behalf of Avondale Gulfport Marine, Inc. for the purposes
therein set forth.
BY: \s\ Thomas M. Kitchen
Print Name: Thomas M. Kitchen
Title: Vice President, Secretary
& Treasurer
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 28th DAY
OF December, 1994.
\s\ Rudolph R. Ramelli
NOTARY PUBLIC
TAX\3271.2
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
depose and state that he signed the foregoing Avondale
Industries, Inc. Employee Stock Ownership Plan as a free act and
deed on behalf of Avondale Industries of New York, Inc. for the
purposes therein set forth.
BY:\s\ Thomas M. Kitchen
Print Name: Thomas M. Kitchen
Title: Vice President, Treasurer
& Secretary
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 28th DAY
OF December, 1994.
\s\ Rudolph R. Ramelli
NOTARY PUBLIC
TAX\3271.2
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
depose and state that he signed the foregoing Avondale
Industries, Inc. Employee Stock Ownership Plan as a free act and
deed on behalf of Avondale Services Corporation for the purposes
therein set forth.
BY: \s\ Thomas M. Kitchen
Print Name: Thomas M. Kitchen
Title: Vice President & Secretary
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 28th DAY
OF December, 1994.
\s\ Rudolph R. Ramelli
NOTARY PUBLIC
TAX\3271.2
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
depose and state that he signed the foregoing Avondale
Industries, Inc. Employee Stock Ownership Plan as a free act and
deed on behalf of Avondale Shipyards of Texas, Inc. for the
purposes therein set forth.
BY: \s\ Thomas M. Kitchen
Print Name: Thomas M. Kitchen
Title: Vice President & Secretary
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 28th DAY
OF December, 1994.
\s\ Rudolph R. Ramelli
NOTARY PUBLIC
TAX\3271.2
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
depose and state that he signed the foregoing Avondale
Industries, Inc. Employee Stock Ownership Plan as a free act and
deed on behalf of Avondale Transportation Company, Inc. for the
purposes therein set forth.
BY: \s\ Thomas M. Kitchen
Print Name: Thomas M. Kitchen
Title: Vice President & Secretary
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 28th DAY
OF December, 1994.
\s\ Rudolph R. Ramelli
NOTARY PUBLIC
TAX\3271.2
<PAGE>
ACKNOWLEDGEMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
depose and state that he signed the Foregoing Avondale
Industries, Inc. Employee Stock Ownership Plan as a free act and
deed on behalf of Avondale Enterprises, Inc. for the purposes
therein set forth.
BY: \s\ Thomas M. Kitchen
Print Name: Thomas M. Kitchen
Title: Vice President, Secretary
& Treasurer
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 28th DAY
OF DECEMBER. 1994.
\s\ Rudolph R. Ramelli
NOTARY PUBLIC
TAX\3271.2
<PAGE>
ACKNOWLEDGEMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
depose and state that he signed the Foregoing Avondale
Industries, Inc. Employee Stock Ownership Plan as a free act and
deed on behalf of Avondale Construction Management, Inc. for the
purpose therein set forth.
BY: \s\ Thomas M. Kitchen
Print Name: Thomas M. Kitchen
Title: Vice President & Secretary
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 28TH DAY
OF DECEMBER, 1994.
\s\ Rudolph R. Ramelli
NOTARY PUBLIC
TAX\3271.2
<PAGE>
APPENDIX "A"
Participating Employers
The following Participating Employers have entered under
this Plan as of the following dates. Such dates of participation
shall be used for purposes of determining such Participating
Employer's Employees' eligibility to participate under the Plan.
Such dates shall also be used for determining Years of Service
for both vesting and benefit accrual purposes under the Plan, if
later than the dates in Section 1.40 of the Plan.
-----------------------------------------------------------------
Participating Employer Date of Participation
Avondale Industries, Inc. September 1, 1985
Avondale Services, Corporation September 1, 1985
Avondale Gulfport Marine, Inc. July 2, 1988
Avondale Construction Management, Inc.* September 1, 1985
Avondale Industries of New York, Inc. October 11, 1988
Avondale Shipyards of Texas, Inc.* September 1, 1985
Avondale Transportation Company, Inc. September 1, 1985
Avondale Enterprises, Inc. November 21, 1989
*inactive companies
<PAGE>
AVONDALE INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP TRUST
(Amended and Restated January 1, 1994)
<PAGE>
AVONDALE INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP TRUST
Avondale Industries, Inc. (the "Company"), a corporation
organized and existing under the laws of the State of Louisiana,
originally adopted the Avondale Industries, Inc. Employee Stock
Ownership Trust (the "Trust") effective September 1, 1985. The
Trust as amended and restated effective January 1, 1994 is
entered into by and between the Company and Blanche S. Barlotta,
R. Dean Church and Rodney J. Duhon (collectively the Trustee).
WHEREAS, effective as of September 1, 1985 an employee stock
ownership plan called the Avondale Industries, Inc. Employee
Stock Ownership Plan, which plan, has been amended from time to
time, and most recently amended effective January 1, 1989 is
hereinafter referred to as the "Plan";
WHEREAS, the Plan was established by Avondale Industries,
Inc. to encourage Employees to make and continue careers with
Avondale Industries, Inc., and other Participating Companies, by
allowing Participants to obtain beneficial interests in the stock
of Avondale Industries, Inc., all as set forth in the Plan;
WHEREAS, the Plan provides for the establishment of a trust
to which contributions to the Plan are to be made by the Company
and Participating Companies, and under which such contributions
are to be held by the Trustee and invested primarily in the stock
of the Company, all in accordance with the provisions of the Plan
and such trust;
WHEREAS, the Plan and the Trust are intended to qualify as a
stock bonus plan and trust under Section 401(a) of the Code and
as an employee stock ownership plan, as defined by Section
4975(e)(7) of the Code, designed to invest primarily in the stock
of the Company, and the Trust is intended to be exempt from
taxation under Section 501(a) of the Code;
WHEREAS, the ESOP Administrative Committee (the
"Committee"), the members of which are "named fiduciaries" as
defined in the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") has general responsibility for the
administration and interpretation of the Plan and shall establish
investment standards and policies and communicate the same to the
Trustee;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the Company, the Trustee and the Committee
declare and agree as follows:
ARTICLE I
Title and Definitions
1.1 Title. The Trust shall be known as the Avondale
Industries, Inc. Employee Stock Ownership Trust
<PAGE>
1.2 Incorporation of Plan Definitions. Definitions set
forth in the Plan shall have the same meaning wherever used in
the Trust unless the context clearly indicates otherwise.
1.3 Named Fiduciary. The Committee shall be the named
fiduciary of the Trust for purposes of Section 402 of ERISA,
except that each Participant shall be a named fiduciary with
respect to the exercise of voting and tender offer rights for
Company Stock held as part of the Trust Fund to the extent that
such Participant exercises such rights pursuant to Sections 10.4
and 10.5 of the Plan and Article XI of the Trust. The Committee
shall, upon request of the Trustee, furnish the Trustee with
whatever information is reasonably necessary for the Trustee to
carry out their fiduciary responsibilities under ERISA.
1.4 Custodian. "Custodian" shall mean the entity, if any,
appointed from time to time by the Committee to hold, but not
invest or otherwise manage or control, some or all of the assets
of the Trust. The terms and provisions of any agreement with a
Custodian are hereby incorporated by reference.
ARTICLE II
Trust Fund
2.1 Contributions to and Investment of the Trust Fund. All
Participating Company contributions shall be paid to the Trustee
from time to time in accordance with the Plan. All such
contributions and all investments thereof, together with all
accumulations, accruals, earnings and income with respect
thereto, shall be held by the Trustee in Trust hereunder or by
one or more Custodians or both by the Trustee and by one or more
Custodians. Notwithstanding the foregoing, the Trust shall
constitute a single trust for purposes of investment and
administration. All Trust assets shall be invested, reinvested,
managed, administered and distributed by the Trustees upon the
written instructions of the Committee pursuant to the provisions
of the Plan and Trust. Except as may otherwise be required under
Sections 5.2 and 5.3, the Trustee shall not be responsible for
the administration of the Plan, for maintaining any records of
Participants' Accounts under the Plan, or for computation or
collection of Participating company contributions. The Trustee
shall hold, invest, reinvest, manage, administer and distribute
the Trust Assets, solely as directed by the Committee and as
provided herein, for the exclusive benefit of Participants and
their Beneficiaries.
2.2 Claims against the Trust Fund. Subject to the claims
procedure provided under the Plan (or the grievance procedure
provided in any applicable collective bargaining agreement), the
Committee shall have complete control and authority to determine
the existence, nonexistence, nature and amount of the rights and
interests of all persons in or to the Trust or under the Plan.
Except as otherwise required by ERISA, the Trustee shall have no
duty to question or to examine any determination made by the
Committee or direction given by the Committee to the Trustee in
respect of such matters.
<PAGE>
ARTICLE III
Investment of Trust Assets
3.1 General Powers. Upon the written instructions of the
Committee, the Trustee shall invest and reinvest the assets of
the Trust Fund primarily in Company Stock, except for cash or
cash equivalent investments held
a. for the limited purpose of making Plan
distributions to Participants,
b. pending the investment of contributions or other
cash receipts in Company Stock, or
c. pending use to repay an Exempt Loan.
Upon the direction of the Committee, the Trustee may cause the
Plan to enter into one or more Exempt Loans to finance the
acquisition of Company Stock.
3.2 Other Investments. Upon the written instructions of
the Committee, the Trustee may also invest and reinvest the
assets of the Trust Fund; in interest-bearing accounts or
certificates of deposit offered by any bank (including the
Trustee or the Custodian) or savings and loan association; real
estate, stocks, notes, debentures, shares or obligations of
corporations or of unincorporated associations or trusts or
investment companies; any kind of investment fund (including any
pooled investment fund maintained by the Trustee or the
Custodian); or in such other property, real, personal or mixed,
without regard to whether such investment is an authorized or
appropriate investment for trustees under any state laws; or the
assets of the Trust may be held in cash for a reasonable period
of time.
3.3 Restricted Securities. In the event the Trustee
invests any Trust assets in Company Stock, and the Trustee
thereafter disposes of such Company Stock or any part thereof,
under circumstances which require registration of the Company
Stock under the Securities Act of 1933 or qualification of the
securities under the Blue Sky laws of any state, or both, then
the Company at its own expense, will take or cause to be taken
any and all such action as may be necessary or appropriate to
effect such registration or qualification, or both.
3.4 Liability of Trustee. To the maximum extent permitted
by law, the Trustee shall not be liable for the acquisition,
retention or disposition of any assets of the Trust or for any
loss to or diminution of such assets unless due to their own
willful misconduct or failure to act in good faith.
ARTICLE IV
Trustee's Powers
4.1 Trustee's Powers. The Trustee shall have the authority
and power to:
<PAGE>
a. Contract or otherwise enter into transactions
between themselves as Trustee and the Company, its
subsidiaries and affiliates, or any shareholders
of the Company upon the written instructions of
the Committee for the acquisition or sale of
Company Stock, subject to paragraph (l) below;
b. Sell, transfer, mortgage, pledge, lease or
otherwise dispose of, or grant options with
respect to, any Trust assets, including Company
Stock, at public or private sale;
c. Borrow from any lender (including the Company or
any shareholder of the Company) pursuant to an
Exempt Loan (as defined in Section 4.2) to acquire
Company Stock as authorized by the Trust upon the
written instructions of the Committee by entering
into lending agreements upon any terms (including
reasonable interest and security for the loan) as
may be necessary or appropriate;
d. Borrow money from any lender other than pursuant
to an Exempt Loan upon the written instructions of
the Committee, to the extent and upon such terms
and conditions as the Committee deems advisable or
proper to carry out the purposes of the Trust and
as are permitted by the Regulations;
e. Vote any stocks, bonds or other securities held in
the Trust, including Company Stock which shall be
voted in accordance with Article XI of the Trust;
f. Purchase or offer to purchase any security,
including Company Stock, from any individual or
entity either on an established market or directly
from such individual or entity, without regard to
any prevailing market price upon the written
instruction of the Committee;
g. Give general or specific proxies or powers of
attorney with or without powers of substitution;
h. Except as provided in Article XI, participate in,
oppose, or consent to, reorganizations,
recapitalizations, consolidations, mergers,
liquidations and similar transactions with respect
to any corporation, company or association, or to
the sale or pledge of the property of any
corporation, company or association any of the
securities of which may at any time be held in the
Trust Fund, and to do any act with reference
thereto, including the exercise of options, the
making of agreements or subscriptions which may be
deemed necessary or advisable in connection
therewith, and to hold and retain any securities
or other property which it may so acquire;
provided, however, that the Trustee may exercise
<PAGE>
this power and authority only to the extent not
inconsistent with the provisions of the Plan and
Trust and further provided that the Trustee shall
make demand upon the Participating Companies, and
the Participating Companies shall pay its
proportionate share of any expenses or assessments
in connection with the exercise of such power by
the Trustee;
i. Deposit such Company Stock or other securities in
any voting trust, or with any protective,
reorganization or like committee, or with a
trustee or with depositories designated thereby
and delegate discretionary power to any such
committee upon the written instructions of the
Committee; provided, however, that the Trustee
shall make demand upon the Participating
Companies, and each Participating Company shall
pay its proportionate share of the expenses and
compensation of any such committee and any
assessments levied with respect to any property so
deposited;
j. Exercise any conversion privilege or subscription
right available in connection with any property
held by the Trust upon the written instructions of
the Committee;
k. Commence or defend suits or legal proceedings and
to represent the Trust in all suits or legal
proceedings; to settle, compromise or submit to
arbitration any claims, debts or damages due or
owing to or from the Trust; provided, however,
that the Trustee except in the case of a suit,
legal proceeding or claim involving solely the
Trustee's actions or omissions to act, shall
obtain the written consent of the Company before
settling, compromising or submitting to binding
arbitration any claim, suit or legal proceeding of
any nature whatsoever arising under ERISA;
l. Perform all acts which the Trustee deems necessary
or appropriate and exercise any and all powers and
authority of the Trustee under the Trust;
provided, however, that the Trustee shall not
engage in any "prohibited transaction," as that
term is used in ERISA, the Code or the
Regulations;
m. Exercise any of the powers of an owner, with
respect to such Company Stock and other securities
or other property comprising the Trust, pursuant
to the written instructions of the Committee and
to the extent consistent with the Plan and
paragraphs (a), (d) and (g) of this Article IV;
<PAGE>
n. Form or incorporate and own or maintain any entity
including but not limited to a partnership,
corporation or trust;
o. Transfer assets of the Trust Fund to a successor
trustee as provided for in Section 5.7;
p. Make, execute and deliver, as Trustee, any and all
notes, bonds, guarantees, conveyances, contracts,
waivers, releases or other instruments in writing
necessary or proper for the accomplishment of any
of the foregoing powers; and
q. Exercise, generally, any of the powers which an
individual owner might exercise in connection with
property either real, personal or mixed held by
the Trust Fund, and to do all other acts that the
Trustee may deem necessary or proper to carry out
any of the powers set forth in this Article IV or
otherwise in the best interests of the Trust.
4.2 Exempt Loans.
a. The terms of any Exempt Loan shall comply with
each of the following requirements:
i. The terms shall be as favorable to the Plan
as the terms of a comparable loan from arms-
length negotiations between independent
parties;
ii. The interest rate shall be no more than a
reasonable interest rate considering all
relevant factors including the amount and
duration of the Exempt Loan, the security and
guarantee involved, the credit standing of
the Plan and the guarantor of the Exempt Loan
and the interest rate prevailing for
comparable loans;
iii. The Exempt Loan shall be without recourse
against the Plan;
iv. The Exempt Loan must be for a specific term;
v. The Exempt Loan may not be payable at the
demand of any person except in the case of
default;
vi. The only assets of the Trust that may be
given as collateral on the Exempt Loan are
Company Stock acquired with the proceeds of
the same Exempt Loan or Company Stock used as
collateral on a prior Exempt Loan and repaid
with the proceeds of the same Exempt Loan;
<PAGE>
vii. No person entitled to payment under the
Exempt Loan shall have any right to assets of
the Trust other than collateral given for
that Exempt Loan, contributions made to the
Plan to enable it to meet its obligations
under that Exempt Loan and earnings
attributable to such collateral and such
contributions;
viii.The value of Trust assets transferred in
satisfaction of the Exempt Loan upon an event
of default shall not exceed the amount of the
default;
ix. If the lender is a "disqualified person" (as
such term is defined in Section 4975(e) of
the Code), Trust assets may be transferred
upon default only upon and to the extent of
the failure of the Plan to meet the payment
schedule of the Exempt Loan;
x. Upon payment of any portion of the balance
due on the Exempt Loan, the assets pledged as
collateral for such portion shall be released
from encumbrance;
xi. The Exempt Loan shall be repaid only from (i)
amounts contributed to the Plan by the
Employer in the form of cash to meet its
obligations under the loan and from amounts
earned on Trust investments and (ii) the
proceeds of an Exempt Loan, and (iii) from
collateral given for the Exempt Loan,
including earnings on such collateral, such
as Dividends on Company Stock. Such
contributions and earnings shall be accounted
for separately in the books of accounts of
the Plan maintained by the Committee. The
payments made with respect to an Exempt Loan
by the Plan during a Plan Year must not
exceed an amount equal to the sum of such
contributions and earnings received during or
prior to the year less any payments in prior
years.
b. Any Exempt Loan must be primarily for the benefit
of Participants and their beneficiaries.
c. Notwithstanding any other provision of the Plan,
all proceeds of an Exempt Loan shall be used,
within a reasonable time after receipt by the
Trust, for the following purposes:
i. To acquire Company Stock;
ii. To repay the same Exempt Loan; or
iii. To repay any previous Exempt Loan.
<PAGE>
ARTICLE V
The Trustee
5.1 Nominees. The Trustee may register any security or
other property held by them hereunder in their own name or in the
name of their nominees, including any Custodian and the nominee
of any system for the central handling of securities, with or
without the addition or words indicating that such securities are
held in a fiduciary capacity, and to deposit or arrange for the
deposit of any such securities with such a system. The Trustee,
if permitted by ERISA, may hold any securities in bearer form and
combine certificates representing investments with certificates
of the same issue held by the Trustee in other fiduciary
capacities, but the books and records of the Trustee shall at all
times show that all such investments are part of the Trust.
Notwithstanding the above, the Trustee shall at all times remain
responsible for the safe custody and disposition of the Trust.
5.2 Records. The Trustee shall keep accurate and detailed
accounts of all investments, receipts and disbursements and other
transactions hereunder, and all accounts, books and records
relating thereto shall be open to inspection by any person
designated by the Company at all reasonable times. The Trustee
shall maintain such records with respect to the Trust as may be
reasonably required in the administration of the Trust, but the
Trustee shall not be required to perform ministerial acts other
than those set forth in the Trust.
5.3 Reports. Within 60 days after each Valuation Date, or
the removal or resignation of the Trustee or the termination of
the Plan or the Trust, and as of any other date specified by the
Board of Directors or the Committee, the Trustee shall file a
report with the Board of Directors. This report shall show all
purchases, sales, receipts, disbursements, and other transactions
effected by the Trustee during the year or period for which the
report is filed, and shall contain an exact description, the cost
as shown on the Trustee's books, and the fair market value as of
the end of such period, of every item held in the Trust and the
amount and nature of every obligation owed by the Trust. For
purposes of this Section 5.3, the Trustee may rely on any
determination by the Committee of the fair market value of any
Trust assets, including the opinion of one or more independent
investment advisors or appraisers relied upon by the Committee.
Upon the expiration of 90 days from the date of filing such
annual or other account, the Trustee shall to the maximum extent
permitted by ERISA be forever released and discharged from all
liability and accountability with respect to the propriety of its
acts and transactions shown in such account except with respect
to any such acts or transactions as to which the Committee shall
within such 90-day period file with the Trustee written
objections.
5.4 Distributions. The Trustee shall make distributions of
a Participant's Vested Interest from the Trust to or for the
benefit of the person entitled thereto under the Plan and at such
times and in such form as may be required or permitted under the
Plan. Any undistributed part of a Participant's Vested Interest
<PAGE>
shall be retained in the Trust until distribution. Where
distribution is required to be made in Company Stock, or where
the Committee directs such distribution, the Trustee shall cause
the Company to issue an appropriate stock certificate for the
person entitled thereto, and the Trustee shall deliver such
certificate to such person; provided, however, that the Trustee
shall comply with the provisions of the Plan relating to
repurchase of such Company Stock by the Company. Any portion of
a Participant's Vested Interest to be distributed in cash or
property other than Company Stock shall be paid by the Trustee to
the Participant or Beneficiary entitled thereto. Company Stock
distributed by the Trustee may include such legend restrictions
on transferability as the Company may reasonably require in order
to insure compliance with the Plan and with applicable Federal or
state securities laws.
5.5 Instructions. All communications required hereunder
from the Company or the Committee to the Trustee shall be in
writing signed by an officer of the Company or by a member of the
Committee authorized to sign on its behalf. The Committee shall
authorize one or more of its members to sign on its behalf all
communications required hereunder between the Committee and the
Trustee. At all times during which communications between the
Committee and the Trustee are required hereunder, the Company and
the Committee shall keep the Trustee advised of the names and
specimen signatures of all members of the Committee and the
individuals authorized to sign on behalf of the Committee. The
Trustee shall be fully protected in relying on any such
communication and any letter, notice, certificate, report,
statement, instrument or document and upon any telephone,
telegraph, cable, wireless, radio or other message from any
party, if believed to be genuine, and shall not be required to
verify the accuracy or validity thereof unless they have
reasonable grounds to doubt the authenticity of any signature.
If after request the Trustee does not receive instructions from
the Committee on any matter for which instructions are required
hereunder, the Trustee shall act or refrain from acting as it may
determine.
5.6 Hiring of Agents and Related Expenses. The Trustee and
the Committee may employ suitable agents and counsel who may be
counsel for the Company or an Affiliate. The reasonable expenses
incurred by the Trustee, any individual who is a trustee, and the
Committee in the performance of their duties hereunder and all
other proper charges, expenses and disbursements of the Trustee,
any individual who is a trustee, or the Committee (including the
Trustee's compensation) shall be paid out of the Trust unless the
Company pays such expenses directly. However, no person serving
as a Trustee or individual serving as a member of the Committee
who already receives full-time pay from the Company shall receive
compensation from this Trust, except for reimbursement of
expenses properly and actually incurred.
5.7 Resignation and Removal of Trustee. The Trustee, or
any individual who is a trustee, may resign at any time by
delivering to the Committee a written notice of resignation, to
take effect at a date specified therein, which shall not take
<PAGE>
effect in less than 60 days after the delivery thereof, unless
such notice is be waived by the Committee.
The Board of Directors shall have the right to remove
the Trustee, or any individual who is a trustee, at any time with
or without cause, by delivering to the Trustee, or individual who
is a trustee, a written notice of removal, to take effect at a
date specified therein, which shall not take effect in less than
60 days after the delivery thereof, unless such notice is waived
by the Trustee.
In the event the Trustee, or any individual who is a
trustee, notifies the Committee of its intention to resign, or
the Committee removes the Trustee, or any individual who is a
trustee, in accordance with the foregoing provisions of this
Section 5.7, the Board of Directors shall appoint a successor
trustee, which successor trustee shall accept such appointment by
an instrument in writing delivered to the Committee and the
Trustee. The Trustee, or individual who is a trustee, resigning
or removed hereunder shall thereupon deliver to the successor
trustee all assets of the Trust held by such Trustee, or
individual who is a trustee, together with such records as may be
reasonably required to enable the successor trustee to properly
administer the Trust, and all rights and privileges under the
Plan and the Trust theretofore vested in the Trustee, or
individual who is a trustee, shall vest in the successor trustee
where applicable, and thereupon all future liability of such
Trustee, or individual who is a trustee, shall terminate;
provided, however, that the Trustee, or individual who is a
trustee, shall execute, acknowledge and deliver all documents and
written instruments which are necessary to transfer and convey
his right, title and interest in the Trust, and all rights and
privileges, to the successor trustee.
In the case of the resignation or removal of the
Trustee, or any individual who is a trustee, said Trustee, or
individual who is a trustee, shall duly file with the Committee a
written report as provided in Section 5.3 above for the period
since the last previous annual accounting, and if written
objections to such account are not filed as provided in Section
5.3, the Trustee's liability and accountability with respect to
the propriety of their acts and transactions shown in such
account shall be governed by the terms of this Trust.
5.8 Hold Harmless. The Company shall defend and indemnify
to the full extent permitted by law (including ERISA), which
indemnification shall include, but not be limited to, attorney's
fees and any tax imposed as a result of a claim asserted by any
person, persons or entity (including a governmental entity), the
Trustee, or any individual who is a trustee, made or threatened
to be made a part to any action, suit or proceeding, whether
criminal, civil, administrative or investigative, by reason of
the fact that such entity or individual is or was a Trustee. The
Trustee, or individual who is a trustee, shall be entitled to
collect on the Company's indemnity under this Section 5.8 only
from the Company and shall not be entitled to payment directly or
indirectly from the Trust.
<PAGE>
5.9 Acceptance. The Trustee hereby accepts the Trust and
agrees to hold the Trust, and all additions and accretions
thereto, except to the extent such assets, additions and
accretions are held by a Custodian, subject to all the terms and
conditions of the Trust, which shall be interpreted and construed
under the laws of the State of Louisiana to the extent such laws
are not superseded by laws of the United States. In the event
any provisions of the Trust are held illegal or invalid for any
reason, the illegality or invalidity shall not affect the
remaining provisions of the Trust, but shall be fully severable
and the Trust shall be construed and enforced as if the illegal
or invalid provision had never been inserted herein.
5.10 Third Parties. A third party dealing with the Trustee,
or any individual who is a trustee, shall not be required to make
inquiry as to the authority of the Trustee, or any individual who
is a trustee, to take any action nor be under any obligation to
follow the proper application by the Trustee, or any individual
who is a trustee, of the proceeds of sale of any property sold by
the Trustee, or any individual who is a trustee, or to inquire
into the validity or propriety of any act of the Trustee, or any
individual who is a trustee, except as may be required of such
third party under ERISA.
5.11 Tax Returns. In addition to any returns required of
the Trustee by law, the Trustee shall prepare and file such tax
reports and other returns as they may from time to time deem
appropriate.
5.12 Judicial Accounting. To the maximum extent consistent
with ERISA, nothing contained in the Trust or in the Plan shall
be construed as depriving the Trustee or the Company of the right
to have a judicial settlement of the Trustee's accounts, and upon
any proceeding for a judicial settlement of the Trustee's
accounts or for instructions the only necessary parties thereto
shall be the Trustee and the Committee.
5.13 Legal Proceeding. Subject to Section 5.12, in any
action or proceeding affecting the Trust the only necessary
parties shall be the Company and the Trustee and, except as
otherwise required by ERISA, no other person shall be entitled to
any notice or service of process. Any judgment entered in such
an action or proceeding shall to the maximum extent permitted by
ERISA be binding and conclusive on all persons having or claiming
to have any interest in the Trust.
ARTICLE VI
Relationship of Fiduciaries
It is the intent of all fiduciaries under the Plan and Trust
that each fiduciary be solely responsible for their own acts or
omissions. Except to the extent such an obligation is imposed by
ERISA or the Code, no fiduciary shall have the duty to question
whether any other fiduciary is fulfilling the responsibilities
imposed upon such other fiduciary by the Plan and Trust or by
ERISA or by any regulations or rulings issued thereunder. To the
maximum extent permitted by law, no fiduciary shall have any
<PAGE>
liability for a breach of fiduciary responsibility of another.
Except as provided in Article XIII, no fiduciary shall permit any
part of the Trust to be diverted for purposes other than for the
exclusive benefit of Participants and their Beneficiaries.
However, the Committee may, by written notice to the Trustee,
direct that all or part of the assets of the Trust be transferred
to a successor trustee under a trust instrument which is for the
exclusive benefit of such Participants and their beneficiaries,
and which satisfies the applicable requirements for qualification
and exemption from taxation under Sections 401(a) and 501(a) of
the Code, and thereupon the assets of the Trust or any part
thereof, subject to any outstanding debts of the Trust, shall be
paid over, transferred or assigned to said successor trustee free
from the Trust created hereunder.
ARTICLE VII
Termination
7.1 Procedures Upon Termination. The Trust shall continue
for such time as may be necessary to accomplish the purpose for
which it was created, but the Board of Directors may terminate
the Trust at any time upon 30 days' notice in writing to the
Trustee, subject to any applicable contribution or loan
agreement. Upon receipt by the Trustee of such notice of
termination of the Trust, the Trustee shall, with reasonable
promptness after receipt of any such notice, arrange for the
orderly distribution of the Trust property in accordance with the
written instructions of the Committee which shall be given in
conformity with the provisions of the Plan and ERISA. Such
instructions may, but need not, provide for the continued
payments from the Trust pursuant to Section 5.4 of this Trust to
provide the benefits under the Plan until the Trust is exhausted.
The Committee shall remain in existence and all of the provisions
of the Plan which in the opinion of the Committee are necessary
for the execution of the Plan and the administration,
distribution, transfer or other disposition of the assets of the
Trust shall remain in force. The Trust shall terminate when all
such payments are made.
7.2 Termination With Respect to Less Than All Participants.
If the Plan is terminated with respect to a group of persons
under the Plan, the portion of the Trust attributable to such
group shall be held and disposed of in accordance with the
written instructions of the Committee which shall be given in
conformity with the provisions of the Plan and ERISA.
ARTICLE VIII
Amendment
8.1 Right to Amend. The Board of Directors may any time
and from time to time amend or modify, in whole or in part and
without the consent of any Participating Company or any
Participant or beneficiary, any or all of the provisions of this
Trust by an instrument in writing delivered to the Trustee. No
such amendment shall be made which affects the duties or
responsibilities of the Trustee without their consent thereto in
writing.
<PAGE>
8.2 Execution. The Committee and the Trustee shall execute
such supplements to, or amendments of, this Trust as shall be
necessary to give effect to any such amendment or modification.
8.3 Retroactivity. Any such amendment or modification of
this Trust may be retroactive if necessary or appropriate to
qualify or maintain the Trust as a part of a plan and trust
exempt from Federal income taxation under Sections 401(a) and
501(a) of the Code, the provisions of ERISA, or any other
applicable provisions of Federal or state law, as now in effect
or hereafter amended or adopted, and any Regulations issued
thereunder.
ARTICLE IX
Communications
9.1 Company's and Committee's Address. Communications to
the Company or the Committee shall be addressed to or in care of
the Company, at 5100 River Road, Avondale, Louisiana 70094;
provided, however, that upon the Company's or the Committee's
written request, such communications shall be sent to such other
address as the Company or the Committee, as the case may be, may
specify.
9.2 Trustee's Address. Communications to the Trustee shall
be addressed to them at Avondale Industries, Inc., 5100 River
Road, Avondale, Louisiana 70094; provided, however, that upon
the written request of the Trustee, such communications shall be
sent to such other address or addresses as the Trustee may
specify.
9.3 Binding Upon Receipt. No communication shall be
binding on the Trustee, Company or Committee until it is received
by such party.
9.4 Communications in Writing. Any action of the Company
or the Committee pursuant to this Trust, including all orders,
requests, directions, instructions, approvals and objections of
the Company or the Committee to the Trustee, shall be in writing
signed on behalf of the Company or the Committee by any duly
authorized officer of the Company or member of the Committee,
respectively. The Trustee shall be governed by such action and,
to the maximum extent permitted by ERISA, be fully protected in
relying thereon.
ARTICLE X
Non-Alienation
Except insofar as applicable law may otherwise require or
pursuant to a Qualified Domestic Relations Order (as defined in
Section 6.5 of the Plan), no economic interest, expectancy,
benefit, payment, claim or right of any Participant or
Beneficiary under the Plan and the Trust shall be subject in any
manner to any claims of any creditor of any Participant or
Beneficiary, nor to alienation by anticipation, sale, transfer,
assignment, bankruptcy, pledge, attachment, charge or encumbrance
of any kind. If any person attempts to take any action contrary
<PAGE>
to this Article X, such action shall be null and void and of no
effect, and the Trustee shall disregard such action and shall not
in any manner be bound thereby and shall suffer no liability on
account of their disregard thereof.
ARTICLE XI
Voting Rights
9.5 Pass Through of Voting Rights. The Trustee shall vote
all Company Stock held in the Trust as directed by the Committee,
or, in accordance with the following provisions, by the
Participants:
a. If the Company has a registration-type class of
securities (as defined in Section 409(e)(4) of the
Code or any successor statute thereto), then with
respect to all corporate matters, all Company
Stock allocated to the Accounts of Participants
shall be voted in accordance with the directions
of such Participants as given to the Committee and
communicated in turn by the Committee to the
Trustee. Each Participant shall be entitled to
direct the voting only of the Company Stock
allocated to his Company Stock Account.
b. If Company Stock is not a registration-type class
of securities (as defined in Section 409(3)(4) of
the Code), each Participant shall be entitled to
direct Trustee as to the exercise of voting rights
attributable to Company Stock allocated to her or
her Accounts concerning any corporate matter which
involves the voting of Company Stock with respect
to the approval or disapproval of any corporate
merger or consolidation, recapitalization,
reclassification, liquidation, dissolution, sale
of substantially all the assets of a trade or
business, or such similar transactions as may be
prescribed in Regulations.
9.6 Instructions on Voting. Prior to any meeting of the
stockholders of the Company, the Committee shall determine the
number of shares of Company Stock (including fractional shares)
allocated to each Participant which the Participant shall be
entitled to vote. Within a reasonable time (not less than 30
days) before any shareholder meeting, the Committee shall provide
the Participant with a form necessary to indicate his vote as to
any specific or general matter to be considered by the
stockholders at such meeting. In addition, the Committee shall
provide the Participants with all information distributed to
shareholders by the Committee for the exercise of such voting
rights. The Committee shall not make any recommendations
regarding the manner of exercising any voting rights. If a
Participant shall fail, or refuse, to give the Committee timely
and adequate instructions as to how to vote any Company Stock,
the Committee shall not exercise its power to vote those shares
of Company Stock. The Committee shall be entitled to hire an
independent third party to tabulate votes in order to ensure the
confidentiality of such vote.
<PAGE>
Each Participant or, in the event of the Participant's
death, the Participant's Beneficiary is, for purposes of voting
the Company Stock allocated to his Company Stock Account, hereby
designated as "named fiduciary" within the meaning of Section
403(a)(1) of ERISA.
9.7 Voting of Unallocated Company Stock. With respect to
Company Stock not allocated to Participants' Accounts, the
Committee shall instruct the Trustee, in writing, how to vote
such shares.
9.8 Tender Offers. The Trustee shall notify each
Participant of a tender or exchange offer and utilize its best
efforts to distribute to Participants in a timely manner all
information distributed to shareholders of the Company in
connection with any such tender or exchange offer. Each
Participant shall have the right from time to time to instruct
the Trustee in writing as to the manner in which to respond to
any tender or exchange offer with respect to Company Stock
allocated to his Company Stock Account which shall be pending or
which may be made in the future for all Company Stock or any
portion thereof. A Participant's instructions shall remain in
force until superseded in writing by the Participant. The
Participant shall have the right to determine confidentially
whether shares allocated to a Participant's account are tendered
or exchanged and the Trustee and Committee shall establish
procedures to ensure such confidentiality.
Unless and until a Participant's Company Stock is
tendered or exchanged, the individual instructions received by
the Trustee from the Participant shall be held by the Trustee in
strict confidence and shall not be divulged or released to any
person, including officers of the Company; provided, however,
that the Trustee shall advise the Company, at any time, upon
request, of the total number of shares not subject to
instructions to tender or exchange.
With respect to (a) Company Stock not allocated to
Participants' Accounts or (b) Company Stock allocated to
Participants' Accounts for which proper directions have not been
received from Participants, such stock shall be tendered or
exchanged by the Trustee in accordance with directions received
from the Committee. The Committee shall instruct the Trustee in
response to the tender offer in accordance with ERISA's fiduciary
duties to act as a prudent person would act in a similar
situation and to act solely in the interests of the Participants
and their Beneficiaries. In exercising its fiduciary
responsibility, the Committee shall consider (to the extent
permitted by Department of Labor or Internal Revenue Service
Regulations or announcements) not only the potential increase in
value if any of the Participants' Accounts as a result of the
tender or exchange offer, but also the impact of any change in
the managerial control of the Company on the status of the
Participants as Employees in the long-run, including but not
limited to whether they will receive larger or smaller employee
benefits than at present under the Plan.
<PAGE>
Each Participant or, in the event of the Participant's
death, the Participant's Beneficiary is, for purposes of
responding to any tender or exchange offer with respect to
Company Stock allocated to his Company Stock Account, hereby
designated as "named fiduciary" within the meaning of Section
403(a)(1) of ERISA.
ARTICLE XII
Participating Companies
12.1 Other Participating Companies. With the consent of the
Company, any entity designated a Participating Company under the
Plan may at any time join in the Trust. The Participating
Company shall file with the Company and the Trustee a duly
executed instrument approved by the Committee and the Trustee.
Any such action shall become effective upon the delivery to the
Trustee of such instrument duly executed by the Participating
Company and the Company, and upon receipt of such instrument the
Trustee shall be deemed to accept such Participating Company as a
party to this Trust without further action by the Trustee. Each
such Participating Company may then contribute under the Plan to
the Trust. The contributions which may be made by the Company or
any other Participating Company, and the income therefrom, shall
be held by the Trustee as part of a single Trust without
allocation to the Company or any other Participating Company
until the Company shall notify the Trustee of the withdrawal of
any Participating Company from the Plan pursuant to Section 12.5
12.2Committee Appointed Exclusive Agent. Any Participating
Company which joins in the Trust as provided in Section 12.1
shall be deemed to thereby appoint the Board of Directors and the
Committee its exclusive agent to exercise on its behalf all of
the powers and authority conferred upon the Board of Directors
and the Committee by the terms of the Trust including, but not by
way of limitation, the power to amend the Trust and to terminate
the Trust. The authority of the Board of Directors and the
Committee to act as such agent shall continue with respect to all
funds contributed by each Participating Company and the income
therefrom until and unless the amount of such funds and income
has been distributed by the Trustee as hereinafter provided in
this Article XII.
12.3 Withdrawal of Participating Company. The Committee
shall notify the Trustee in writing of the withdrawal of any
Participating Company from the Plan, and the Trustee shall not
accept any further contributions under the Plan from such
Participating Company and shall set aside in a separate account
such part of the Trust as the Committee shall, pursuant to
Section 12.4, determine to be held for the benefit of eligible
employees of the Participating Company and their beneficiaries as
of the last day of the Plan Year during which such Participating
Company's withdraw from the Plan.
12.4 Establishment of Segregated Fund. The Committee shall
give written directions to the Trustee with respect to the part
of the Trust segregated in a separate account pursuant to Section
12.3. Such directions shall specify the amount to be segregated
<PAGE>
and shall be in accordance with generally accepted accounting
principles, the terms of the Plan and any applicable loan
agreement, and, to the maximum extent consistent with ERISA, the
determination of the fair market value of the assets in the Trust
in the manner provided in Section 5.3 shall be conclusive for the
purpose of such segregation. The Trustee shall follow such
directions of the Committee which shall constitute a conclusive
determination of the amounts which should be segregated for the
benefit of the eligible employees of such Participating Company
and their beneficiaries.
12.5 Distribution of Segregated Fund. The Trust shall
continue as to any Participating Company, despite receipt by the
Trustee of notice of withdrawal from the Plan as to such
Participating Company, for such time as may be necessary to
effect such withdrawal. Upon receipt by the Trustee from the
Committee of notice of withdrawal from the Plan as to such
Participating Company, the Trustee shall, with reasonable
promptness after receipt of such notice, arrange, in accordance
with the written instructions of the Committee which shall be
given in conformity with the provisions of the Plan and ERISA,
for the orderly distribution of the Trust properly segregated
with respect to such Participating Company pursuant to Sections
12.4 and 12.5.
ARTICLE XIII
Miscellaneous
13.1 Exclusive Benefit. In no event shall any part of the
funds of the Plan be used for or diverted to any purposes other
than for the exclusive benefit of Participants and their
Beneficiaries under the Plan except as permitted under Section
403(c) of ERISA. Upon the transfer by a Participating Company of
any money to the Trustee, all interest of the Participating
Company therein shall cease and terminate.
13.2 Mistake of Fact. Notwithstanding any other provisions
herein contained, if any contribution is made by a mistake of
fact, such contribution shall upon the direction of the Committee
be returned in conformity with Section 3.5 of the Plan,, without
liability to any person.
13.3 Qualification of Plan. Notwithstanding any other
provisions herein contained, the Trust is entered into on the
condition that the Plan and the Trust are by the IRS as a
qualified and exempt plan and trust under the provisions of the
Code and Regulations so that contributions to the Trust may be
deducted for Federal income tax purposes, within the limits of
the Code and Regulations, and to be non-taxable to Participants
when contributed. If such approval should be denied for any
reason (including failure to comply with any conditions for such
approval imposed by the IRS), contributions made after the
execution of the Trust and prior to such denial shall be returned
to the Company, without any liability to any person, within one
year after the date of denial of such approval and any assets
received by the Trust pursuant to a plan-to-plan transfer from a
qualified defined benefit plan maintained by the Company or
<PAGE>
Company Stock purchased with such assets shall be directly
returned to the qualified defined benefit plan, to the extent
permissible by law, or to the Company, without any liability,
within one year after denial of such approval. All remaining
assets in the Trust shall be returned to the Company.
13.4 Deductibility of Contributions. Notwithstanding any
other provisions herein contained, all contributions are hereby
expressly conditioned upon their deductibility under Section 404
of the Code and Regulations, as amended from time to time, and if
the deduction for any contribution is disallowed in whole or in
part, then such contribution (to the extent the deduction is
disallowed) shall be returned upon direction of the Committee,
which shall be given in conformity with the provisions of ERISA,
without liability to any person.
13.5 Expenses. The expenses of administering the Plan
including (i) the fees and expenses of the Trustee for the
performance of its duties under the Trust, (ii) the expenses
incurred by the members of the Committee in the performance of
their duties under the Plan (including reasonable compensation
for services rendered in respect of the Plan by legal counsel,
certified public accountants, appraisers or others employed by
the Committee), and (iii) all other proper charges and
disbursements of the Company, Trustee or the members of the
Committee (including settlements of claims or legal actions
approved by counsel to the Plan) are to be paid out of the Trust
unless the Company pays such expenses directly. In estimating
costs under the Plan, administrative costs may be anticipated.
13.6 Titles for Convenience Only. Titles to the Sections of
the Trust are included for convenience only and shall not control
the meaning or interpretation of any provision of the Trust.
13.7 Executed Counterparts. The Trust may be executed in
any number of counterparts, each of which shall be deemed to be
the original although the others shall not be produced.
<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused
the Trust to be executed this 28th day of December,
1994.
AVONDALE INDUSTRIES, INC
BY: \s\ Thomas M. Kitchen
Thomas M. Kitchen
Secretary
ATTEST
\s\ B. L. Hicks
(Corporate Seal) Assistant Secretary
ADMINISTRATIVE COMMITTEE OF TRUSTEES OF THE AVONDALE
THE AVONDALE INDUSTRIES, INC. INDUSTRIES, INC. EMPLOYEE
EMPLOYEE STOCK OWNERSHIP PLAN STOCK OWNERSHIP PLAN TRUST
\s\ Blanche S. Barlotta \s\ Blanche S. Barlotta
Blanche S. Barlotta, Member Blanche S. Barlotta, Trustee
\s\ Eugene E. Blanchard, Jr. \s\ R. D. Church
Eugene E. Blanchard, Member R. Dean Church, Trustee
\s\ R. D. Church \s\ Rodney J. Duhon
R. Dean Church, Member Rodney J. Duhon, Trustee
\s\ Rodney J. Duhon, Jr.
Rodney J. Duhon, Jr., Member
\s\ Ernest F. Griffin, Jr.
Ernest F. Griffin, Jr., Member
Sworn to and subscribed before me,
Notary Public, on this 28 day of
December, 1994.
\s\ Rudolph R. Ramelli
NOTARY PUBLIC
AVONDALE INDUSTRIES, INC. PENSION PLAN
As Amended and Restated
Effective January 1, 1989
<PAGE>
AVONDALE INDUSTRIES, INC.
PENSION PLAN
TABLE OF CONTENTS
Article Contents Section
I. DEFINITIONS
Accrued Benefit 1.1
Actuarial Equivalent 1.2
Actuary 1.3
Affiliated Company 1.4
Avondale ESOP 1.5
Beneficiary 1.6
Code 1.7
Committee 1.8
Company 1.9
Compensation 1.10
Compensation Year 1.11
Deferred Retirement Date 1.12
Disability Retirement Date 1.13
Early Retirement Date 1.14
Effective Date 1.15
Eligible Employee 1.16
Employee 1.17
Employer and Participating Employer 1.18
ERISA 1.19
Final Average Compensation 1.20
Hour of Service 1.21
Investment Manager 1.22
Non-Participating Employer 1.23
Normal Retirement Date 1.24
One Year Break In Service 1.25
Parental Absence 1.26
Participant 1.27
Plan 1.28
Plan Year 1.29
Prior Plan 1.30
Service Termination Date 1.31
Social Security Retirement Age 1.32
Straight Life Annuity 1.33
Ten Year Certain and Life annuity 1.34
Trustee 1.35
Trust Agreement 1.36
Trust Fund or Fund 1.37
Year of Service 1.38
<PAGE>
II. PARTICIPATION
Eligible Class 2.1
Commencement of Participation 2.2
Termination of Participation 2.3
Transfers 2.4
Reemployment of a Former Participant 2.5
III. ELIGIBILITY FOR RETIREMENT INCOME
Normal Retirement Date 3.1
Deferred Retirement Date 3.2
Early Retirement Date 3.3
Disability Retirement Date 3.4
Vesting Date 3.5
IV. AMOUNT OF RETIREMENT INCOME AND PAYMENTS
Normal Retirement Income 4.1
Deferred Retirement Income 4.2
Early Retirement Income 4.3
Disability Retirement Income 4.4
Deferred Vested Retirement Income 4.5
Maximum Retirement Income 4.6
Timing of Payments 4.7
Transfer Benefit 4.8
Direct Rollover Rules 4.9
Notice 4.10
V. PRE-RETIREMENT DEATH BENEFITS
Immediate Pre-Retirement Surviving Spouse's Benefit
5.1
Deferred Pre-Retirement Surviving Spouse's Benefit5.2
VI. NORMAL AND OPTIONAL PAYMENT FORMS
OF RETIREMENT INCOME
Normal Form of Payment 6.1
Waiver of Normal Form and Election of
Optional Form of Payment 6.2
Waiver Period 6.3
Temporary Non-Payment of Retirement Income 6.4
Optional Forms of Payment 6.5
General Limitations 6.6
Distribution Rules 6.7
Limitation in Case of Domestic Relations Order 6.8
VII. CONTRIBUTIONS
No Contributions by Participants 7.1
Employer Contributions 7.2
Expenses 7.3
Contingent Nature of Contributions 7.4
<PAGE>
VIII. ADMINISTRATION
Appointment of Committee 8.1
Notice to Trustee 8.2
Administration of Plan 8.3
Reporting and Disclosure 8.4
Records 8.5
Committee Compensation and Expenses 8.6
Rules and Regulations 8.7
Secretary of the Committee 8.8
Claims Review Procedure 8.9
Information from Participants and Beneficiaries 8.10
IX. NAMED FIDUCIARIES
Identity of Named Fiduciaries 9.1
Responsibilities and Authority of Committee 9.2
Responsibilities and Authority of Trustee 9.3
Responsibilities of the Company 9.4
Responsibilities Not Shared 9.5
Dual Fiduciary Capacity Permitted 9.6
Advice 9.7
Indemnification 9.8
X. PROVISIONS TO PREVENT DISCRIMINATION
Prevention of Discrimination 10.1
Highly Compensated Employees 10.2
Unrestricted Benefit 10.3
Restriction on Payment of Benefit 10.4
Repeal 10.5
XI. AMENDMENT OF THE PLAN
Right to Amend 11.1
Restrictions on Amendment 11.2
XII. TERMINATION OF THE PLAN
Events Constituting Termination 12.1
Partial Termination 12.2
Allocation of Assets 12.3
Manner of Distribution 12.4
Liquidation of Trust Fund 12.5
Internal Revenue Service Approval
for Distribution 12.6
<PAGE>
XIII. TOP-HEAVY PLAN REQUIREMENTS
General Rule 13.1
Vesting Provisions 13.2
Minimum Benefit Provisions 13.3
Limitation on Compensation 13.4
Limitation on Benefits 13.5
Coordination With Other Plans 13.6
Top-Heavy Plan Definition 13.7
Key Employee 13.8
Non-Key Employee 13.9
Change from Top-Heavy Status 13.10
XIV. GENERAL PROVISIONS
Plan Voluntary 14.1
Payments to Minors and Incompetents 14.2
Nonalienation of Benefits 14.3
Merger, Consolidation or Transfer 14.4
Return of Contributions to Participating
Employers 14.5
Payment of Small Benefits 14.6
Recovery of Payments Due to a Mistake of Fact 14.7
Internal Revenue Service Approval 14.8
Construction of Agreement 14.9
Headings 14.10
Use of Masculine and Feminine; Singular
and Plural 14.11
Return of Employer Contributions in Excess
of Amount Deductible 14.12
<PAGE>
PREAMBLE
The Avondale Industries, Inc. Pension Plan, originally
established effective July 1, 1967 as the Retirement Plan for
Employees of Avondale Shipyards, Inc. and amended from time to
time thereafter, has been adopted by Avondale Industries, Inc.
and was amended and restated in its entirety, effective January
1, 1988, unless stated otherwise. The Plan is amended and
restated effective January 1, 1989, unless otherwise provided
herein, to comply with the Tax Reform Act of 1986 and subsequent
legislation.
This Plan is the continuation of the original Avondale
Industries, Inc. Pension Plan after such Plan and its assets were
merged into the Danly Machine Corporation Pension Plan for
Salaried Employees on December 1, 1987 and then further merged
into the Danly Machine Corporation Hourly (Non-Union) Pension
Plan on December 2, 1987.
The purpose of this Plan is to provide a uniform program of
retirement benefits payable to employees of Avondale Industries,
Inc. and certain related companies upon their retirement, death,
or disability. It is intended that this plan be qualified and
exempt under Sections 401(a) and 501(a) of the Internal Revenue
Code of 1986, as amended from time to time.
If the Plan shall fail to qualify under these sections of
the Internal Revenue Code, it shall be null and void, and all
contributions which may have been made hereunder shall be treated
in accordance with Section 14.8.
<PAGE>
ARTICLE I
DEFINITIONS
The following words and phrases when used in the Plan shall
have the following meanings, unless a different meaning is
plainly required by the context:
1.1 Accrued Benefit as of any date shall mean the
Participant's accrued retirement benefit determined as of such
date in accordance with the Plan's benefit formulas described in
Section 4.1 and including any additional Accrued Benefit under
Section 4.8 and before application of any Actuarial Equivalent
factor or any other reduction factor in the Plan. The Accrued
Benefit of Participants who are Employees of Avondale Services
Corporation shall be payable as a Ten-Year Certain and Life
Annuity. These forms of payment shall be used in determining the
annuitized value of the Participant's account under the Avondale
ESOP for purposes of Section 4.1(a)(iv) and Section 4.1(b)(iii)
of the Plan.
For divisional employees or former divisional employees
as such terms are defined in the Asset Purchase Agreement between
Avondale Industries, Inc. and Connell Limited Partnership dated
January 27, 1987, and for participants under the Danly Machine
Corporation Pension Plan for Salaried Employees and the Danly
Machine Corporation Hourly (Non-Union) Pension Plan, Accrued
Benefit shall mean such employees' Accrued Benefit as of January
16, 1987 or as of March 31, 1987, as determined under the
applicable provisions of a Prior Plan.
1.2 Actuarial Equivalent shall mean a benefit of equivalent
current value to the benefit which otherwise would have been
provided to the Participant, determined on the basis of the UP-
1984 Mortality Table set forward one year for males, set back
four years for females and weighted 95% male and 5% female and
7.0% annual interest. Provided, however, the determination of a
lump sum benefit shall be based on the UP-1984 Mortality Table
set forward one year for males, set back four years for females
and weighted 95% male and 5% female and on the interest rates
used by the Pension Benefit Guaranty Corporation as in effect on
the January 1 of the calendar year in which the date of
determination occurs. Provided further, however, the
determination of the annuitized value of the Participant's
account under the Avondale ESOP for purposes of Section
4.1(a)(iv) and Section 4.1(b)(iii) of the Plan shall be based on
no mortality and 7% annual interest for the period, if any, from
(i) the date the Participant terminates employment with the
Participating Employer or Non-Participating Employer, retires or
becomes totally and permanently disabled, whichever is earlier,
to (ii) the Participant's Normal Retirement Date.
In the event this Section 1.2 is amended, the Actuarial
Equivalent of a Participant's Accrued Benefit on or after the
date of such amendment shall be the greater of (1) the Actuarial
Equivalent of the Participant's Accrued Benefit as of the
effective date of the amendment, computed on the old basis
without regard to the amendment, or (2) the Actuarial Equivalent
of the Participant's Accrued Benefit determined as of the date
the calculation is made and giving effect to the amendment.
<PAGE>
The above notwithstanding, for Participants whose
Accrued Benefits are frozen as described in Section 1.1,
Actuarial Equivalent of a benefit shall mean a benefit of
equivalent value to the benefit which would otherwise have been
provided determined under the terms of a Prior Plan.
1.3 Actuary shall mean an individual who is an "enrolled
actuary" in accordance with regulations issued by the Joint Board
for the Enrollment of Actuaries and who has been selected by the
Committee.
1.4 Affiliated Company shall mean any corporation which is
included with the Company in a controlled group of corporations,
as determined in accordance with Section 414(b) of the Code, or
any unincorporated trade or business which is under common
control with the Company in accordance with Section 414(c) of the
Code, or any organization (whether or not incorporated) which is
a member of an affiliated service group with the Company in
accordance with Section 414(m) of the Code, or any other entity
required to be aggregated with the Company pursuant to
regulations under Section 414(o) of the Code.
1.5 Avondale ESOP shall mean the Avondale Industries, Inc.
Employee Stock Ownership Plan, effective September 1, 1985, as
amended from time to time.
1.6 Beneficiary shall mean the person or persons designated
by the Participant or former Participant to receive benefits
under the Plan in the event of the Participant's death. Each
Beneficiary designation shall be in a form prescribed by the
Committee.
If the Participant is married and designates someone
other than his legal spouse, his Beneficiary designation must
include the written consent of his spouse at the time the
designation is made. Such written consent must approve the
Beneficiary designated and acknowledge the effect of such
designation and must be notarized by a notary public. If it is
established to the satisfaction of the Committee that the
Participant has no spouse, or that the spouse's consent cannot be
obtained because the spouse cannot be located, or because of such
other circumstances as may be prescribed in regulations issued
pursuant to Section 417 of the Code, such written consent shall
not be required.
If no valid Beneficiary designation is in effect at the
time of the Participant's death, then, to the extent, if any,
benefits are payable under the Plan after such death, Beneficiary
shall mean the Participant's legal spouse, if he is married at
the time of his death, or otherwise the Participant's estate.
1.7 Code shall mean the Internal Revenue Code of 1986, as
amended from time to time and any Regulations issued thereunder.
Reference to any Section of the Code will include any successor
provision thereto.
<PAGE>
1.8 Committee shall mean the Pension Plan Administrative
Committee designated by the Company to administer the Plan in
accordance with Section 8.1 hereof.
1.9 Company shall mean Avondale Industries, Inc. and any
successor company that may continue the Plan.
1.10 Compensation shall mean, for Employees who are not
Employees of Avondale Services Corporation the monthly base wages
or salary paid to such Employees by their Employer in effect on
July 1 of each year, excluding bonuses, overtime pay, shift
differentials, severance pay, imputed income or other non-cash
compensation, contributions or benefits under this Plan, the
Performance Share Plan, the Stock Appreciation Plan, or any other
employee benefit plan, or reimbursed expenses. Compensation
shall include, however, any pre-tax contributions Employees elect
to have their Employer contribute to a plan under Section 125 of
the Code or a qualified plan under Section 401(k) of the Code.
The monthly base wages for Employees who are paid on an hourly
basis shall be determined by multiplying the basic hourly rate of
pay in effect on July 1 by 2,080 and dividing the result by 12.
The monthly base salary for Employees who are paid on a salaried
basis shall be such Employees' base monthly salary in effect on
July 1 of each year. The monthly compensation for Employees who
are commission-based Employees or who are classified by their
Employer as temporary or part-time employees shall be the
Employees' Compensation for the previous calendar year divided by
12.
For Employees of Avondale Services Corporation,
Compensation shall mean the total annual salaries, wages, bonuses
and base car allowance paid to such Employees by their Employer,
but shall exclude severance pay, any contributions or benefits
under this Plan, the Performance Share Plan, the Stock
Appreciation Plan, or any other employee benefit plan, or
reimbursed expenses. Compensation shall include, however, any
pretax contributions Employees elect to have their Employer
contribute to a plan under Section 125 of the Code or a qualified
plan under Section 401(k) of the Code.
For years beginning prior to December 31, 1993, a
Participant's annual Compensation taken into account under the
Plan for any Plan Year shall not exceed $200,000, as adjusted
from time to time in accordance with Section 401(a)(17) of the
Code.
Unless otherwise provided under the Plan, each Section
401(a)(17) Employee's Accrued Benefit under this Plan will be the
greater of the Accrued Benefit determined for the Employee under
a. or b. below minus c. below:
a. the Employee's Accrued Benefit before subtracting
the annuitized value of the Participant's ESOP
account described in 3 below determined with
respect to the benefit formula as applied to the
Employee's total Years of Service taken into
account under the Plan for the purposes of benefit
accruals, or
<PAGE>
b. the sum of:
i. the Employees Accrued Benefit before
subtracting the annuitized value of the
Participant's ESOP account described in 3
below as of the last day of the last Plan
Year beginning before January 1, 1994, frozen
in accordance with Section 1.401(a)(4)-13 of
the treasury regulations and
ii. the Employee's Accrued Benefit before
subtracting the annuitized value of the
Participant's ESOP account described in 3
below determined under the benefit formula as
applied to the Employee's Years of Service
credited to the Employee for Plan Years
beginning on or after January 1, 1994, for
purposes of benefit accruals.
c. the annuitized value of the Participant's ESOP
account as described in Section 4.1(a)(iv).
A Section 401(a)(17) Employee means an Employee whose current
Accrued Benefit as of December 31, 1993 is based on Compensation
that exceeded $150,000.
<PAGE>
1.11 Compensation Year shall mean each calendar year in
which an Employee is employed by a Participating Employer or Non-
Participating Employer on December 31st of such year, or if not
employed on such date is reemployed by a Participating Employer
or Non-Participating Employer within 12 months of his termination
of employment; provided, however, an Employee must be employed on
or before July 1st to receive credit for his initial Compensation
Year.
1.12 Deferred Retirement Date shall mean the date on which a
Participant retires with a deferred retirement benefit under the
Plan, as determined in accordance with Section 3.2.
1.13 Disability Retirement Date shall mean the date on which
a Participant retires with a disability retirement benefit under
the Plan, as determined in accordance with Section 3.4.
1.14 Early Retirement Date shall mean the date on which a
Participant retires with an early retirement benefit under the
Plan, as determined in accordance with Section 3.3.
1.15 Effective Date shall mean January 1, 1988, unless
otherwise provided herein.
1.16 Eligible Employee shall mean an Employee who is
included in the eligible class described in Article II.
1.17 Employee shall mean any person employed by a
Participating Employer or Non-Participating Employer. A leased
employee as described in Section 414(n)(2) of the Code shall be
considered an Employee but shall not be considered a Participant
under this Plan; provided, however, that any leased employee who
subsequently becomes a Participant shall have his previous
service as a leased employee used in calculating his Years of
Service under the Plan.
1.18 Employer shall mean the Company, Avondale Services
Corporation, and any Affiliated Company, subsidiary or related
entity that adopts this Plan pursuant to authorization by the
Board of Directors of the Company. The list of Employers and the
date such Employers adopted this Plan shall be contained in
Appendix A. A Participating Employer shall mean an entity,
including the Company, included in this definition of Employer.
1.19 ERISA shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time. References
to any section of ERISA include any successor provision thereto.
1.20 Final Average Compensation shall mean for a Participant
who is not an Employee of Avondale Services Corporation, such
Participant's average monthly Compensation for the five
consecutive Compensation Years out of the ten (or fewer) calendar
<PAGE>
years immediately prior to his actual retirement date, or the
date of his earlier termination of employment, as the case may
be, during which his Compensation was highest. If a Participant
has less than five Compensation Years on the date of the
calculation of his Final Average Compensation, then those
Compensation Years which the Participant had accumulated on such
date shall be utilized.
For Participants who are Employees of Avondale Services
Corporation, Final Average Compensation shall mean the average
annual Compensation for the five consecutive Compensation Years
out of the ten (or fewer) calendar years immediately prior to his
actual retirement date, or the date of his earlier termination of
employment, as the case may be, during which his Compensation was
highest. If a Participant has less than five Compensation Years
on the date of the calculation of his Final Average Compensation,
then those Compensation Years which the Participant has
accumulated on such date shall be utilized.
1.21 Hour of Service shall mean:
a. Each hour for which an Employee is directly or
indirectly paid or entitled to payment by a
Participating Employer or Non-Participating
Employer for the performance of duties, including
periods of vacation and holidays;
b. Each hour for which an Employee is directly or
indirectly paid or entitled to payment by a
Participating Employer or Non-Participating
Employer (including payments made or due from a
trust fund or insurer to which the Participating
Employer or Non-Participating Employer contributes
or pays premiums) on account of a period of time
during which no duties are performed (irrespective
of whether the employment relationship has
terminated) due to illness, incapacity,
disability, layoff, jury duty, military duty, or
leave of absence, provided that:
i. no more than 501 Hours of Service shall be
credited under this Section 1.21(b) to an
Employee on account of any single continuous
period during which the Employee performs no
duties; and
ii. Hours of Service shall not be credited under
this Section 1.21(b) to an Employee for a
payment which solely reimburses the Employee
for medically related expenses incurred by
the Employee or which is made or due under a
plan maintained solely for the purpose of
complying with applicable workers'
compensation, unemployment compensation or
disability insurance laws;
c. Each hour not already included under Section
1.21(a) or (b) above for which back pay,
irrespective of mitigation of damages, is either
<PAGE>
awarded or agreed to by such Employer, provided
that crediting of Hours of Service under this
Section 1.21(c) with respect to periods described
in Section 1.21(b) above shall be subject to the
limitation therein set forth; and
The number of Hours of Service to be credited
under Section 1.21(b) or (c) above on account of a
period during which an Employee performs no
duties, and the Plan Years to which Hours of
Service shall be credited under Sections 1.21(a),
(b) or (c) above shall be determined by the
Committee in accordance with Sections 2530.200b-
2(b) and (c) of the Regulations of the U.S.
Department of Labor.
To the extent not credited above, Hours of Service
will also be credited based on the customary work
week of the Employee for periods of military duty
(as required by applicable law) and approved
leaves of absence.
1.22 Investment Manager shall mean the individual,
individuals or institution appointed by the Committee to direct
the investment of all or a part of the Trust Fund. Such
Investment Manager must:
a. be (i) registered in good standing under the
Investment Advisors Act of 1940; or (ii) a bank as
defined in such Act; or (iii) an insurance company
qualified to perform investment management
services under the laws of more than one State of
the United States; and
b. acknowledge in writing its status as a "Named
Fiduciary" under the Plan.
1.23 Non-Participating Employer shall mean an Affiliated
Company, subsidiary or related entity which is not participating
in the Plan or which is no longer participating in the Plan by
reason of the recision of a prior designation of participation by
the Board of Directors of the Company.
1.24 Normal Retirement Date shall mean the later of (a) a
Participant's 65th birthday, or (b) the first day of the month
coincident with or next following a Participant's fourth
anniversary of commencement of participation in the Plan.
1.25 One Year Break In Service shall mean a 12-month
consecutive period following an Employee's Service Termination
Date during which the Employee fails to be credited with an Hour
of Service.
1.26 Parental Absence shall mean an Employee's absence from
work, on or after January 1, 1985, which has commenced for any of
the following reasons:
a. the pregnancy of the Employee;
<PAGE>
b. the birth of the Employee's child;
c. the adoption of a child by the Employee; or
d. the need to care for the Employee's child
immediately following its birth or adoption.
Provided, however, that the Committee, in its sole
discretion, may require evidence that any absence is on account
of a reason enumerated herein and evidence as to the duration of
such absence.
1.27 Participant shall mean any Employee who is
participating in the Plan pursuant to Article II.
1.28 Plan shall mean the Avondale Industries, Inc. Pension
Plan as set forth in this document and appendices and as amended
from time to time.
1.29 Plan Year shall mean each 12-month period commencing on
January 1 and ending on the next following December 31.
1.30 Prior Plan shall mean the following plans that were
previously sponsored by the Company: (a) the Avondale
Industries, Inc. Pension Plan; (b) the Danly Machine Corporation
Pension Plan for Salaried Employees; and (c) the Danly Machine
Corporation Hourly (Non-Union) Pension Plan.
1.31 Service Termination Date shall mean the earliest of the
following:
a. the date on which an Employee resigns, is
discharged, retires or dies;
b. the first anniversary of the date on which an
Employee is laid off, starts an authorized leave
of absence, or is absent from work for any other
reason (other than those instances covered under
Sections 1.31(a) and (c)), including holidays,
paid vacations, sick leaves and absence on account
of disability;
c. the second anniversary of the date on which an
Employee commenced a Parental Absence, if such
Employee has not yet returned to work with a
Participating or Non-Participating Employer.
1.32 Social Security Retirement Age shall mean the age used
as the retirement age for the Participant under Section 216(1) of
the Social Security Act, except that such section shall be
applied without regard to the age increase factor, and as if the
early retirement age under Section 216(1)(2) of such Act were 62.
<PAGE>
1.33 Straight Life Annuity shall mean an annuity for life,
ending with the payment due on the last day of the month
coincident with or preceding the date of the Participant's death.
1.34 Ten Year Certain and Life Annuity shall mean a benefit
providing an annuity for the life of the Participant, ending with
the payment due on the first day of the month coincident with or
preceding the date of his death, with a guaranteed payment period
of 120 months, and as further described in Article VI.
1.35 Trustee shall mean the individual, individuals or
institution appointed by the Board of Directors of Avondale
Industries, Inc. to act in accordance with the applicable
provisions of the Plan.
1.36 Trust Agreement shall mean the agreement by and between
the Employer and the Trustee, as said Agreement may from time to
time be amended.
1.37 Trust Fund or Fund shall mean all assets held by the
Trustee in accordance with this Plan and the Trust Agreement.
1.38 Year of Service shall mean a 12-month period commencing
on the first day on which an Employee is credited with an Hour of
Service (or such Employee's date of rehire in the case of an
Employee who has not previously become a Participant and who has
incurred five or more consecutive One Year Breaks in Service) (or
such later date of participation as specified in Appendix A) or
anniversary thereof during which he is continuously employed by a
Participating Employer or Non-Participating Employer, provided
that:
a. An Employee shall be credited with one Year of
Service for each 12 complete months of employment,
whether or not consecutive.
b. An Employee who is not absent from work due to a
Parental Absence shall cease accruing Years of
Service on his Service Termination Date, except if
such Employee performs an Hour of Service within
the 12-month period commencing on his Service
Termination Date, his period of absence shall be
treated as employment.
c. Years of Service shall include any one or more of
the following:
i. any period of absence because of service in
the military forces of the United States,
provided the Employee returns to work within
90 days after first becoming eligible for
discharge from active duty;
ii. any period of layoff not in excess of one
year in duration;
<PAGE>
iii. any period while the Employee is on an
approved leave of absence with or without pay
(including any leave of absence for maternity
or paternity reasons);
iv. any other period of absence approved by a
Participating Employer or Non-Participating
Employer including paid holidays, paid
vacations and sick leaves;
v. any other period of absence during which the
Employee does not incur a One Year Break In
Service; provided the Employee returns to
work with a Participating Employer or Non-
Participating Employer within the one-year
period after his Service Termination Date;
vi. to the extent not otherwise credited above,
the first 12 months of a Parental Absence if
the Employee provides the Committee with any
evidence it may reasonably require to
determine that the absence is on account of
such Parental Absence.
Except as otherwise specifically provided under this
Section 1.38, a partial Year of Service shall be determined by
dividing the number of days of employment, whether or not
consecutive, by the number of days in the calendar year.
Notwithstanding anything in the Plan to the contrary,
the Years of Service of any Participant determined as of January
1, 1988 shall not be less than the number of years he would have
had on such date under the terms of a Prior Plan as in effect on
December 31, 1987.
ARTICLE II
PARTICIPATION
2.1 Eligible Class. Each Employee who meets the following
requirements shall be an Eligible Employee:
a. he is employed by a Participating Employer;
b. he has attained age 21;
c. he has completed one Year of Service; and
d. he is not covered by the terms of a collective
bargaining agreement to which there has been good-
faith bargaining relating to participation under
the Plan unless such agreement provides for
participation under the Plan.
<PAGE>
2.2 Commencement of Participation. Each Participant on the
Effective Date who is in the eligible class will continue as a
Participant in the Plan on the Effective Date. Every other
Employee shall become a Participant on the first day of the month
coincident with or next following the date on which he becomes an
Eligible Employee.
Employees or former employees whose Accrued Benefits
are frozen as described in Section 1.1 under the applicable
provisions of a Prior Plan shall not be entitled to a benefit in
excess of their frozen Accrued Benefit.
2.3 Termination of Participation. A Participant shall
terminate his active participation hereunder on the date he
retires, dies, becomes permanently disabled, or terminates
employment with his Participating Employer for any reason.
2.4 Transfers. The following provisions shall govern in
the case of Employees who change employment status:
a. In the event that a Participant transfers directly
from one Participating Employer to another
Participating Employer, he shall not be deemed to
have terminated his participation under the Plan
but shall thereafter be considered for all
purposes of the Plan as an Eligible Employee of
the succeeding Participating Employer from the
date of such transfer.
b. In the event that an Employee of a Participating
Employer either (i) transfers directly to a Non-
Participating Employer or (ii) becomes a member of
an ineligible class of Employees so that he is no
longer considered an Eligible Employee, he shall
be credited with Years of Service during such
period of employment with the Non-Participating
Employer for vesting purposes under this Plan, but
shall not be credited with Years of Service during
such period of employment for purposes of
determining the amount of his Accrued Benefit
under this Plan. Such Participant shall be
entitled only to benefits under the provisions of
the Plan as in effect on the date he ceased to be
an Eligible Employee.
c. In the event that an Employee of a Non-
Participating Employer either (i) transfers
directly to a Participating Employer or (ii)
otherwise becomes an Eligible Employee, he shall
be credited with Years of Service during his
employment with the Non-Participating Employer or
during a period in which he was not an Eligible
Employee for vesting purposes under this Plan, but
he shall not be credited with Years of Service
during such period of employment for purposes of
determining the amount of his Accrued Benefit
under this Plan. Such Employee shall become a
Participant on the date of such transfer, provided
he meets the requirements of Section 2.1 or if
later, the date on which he meets such
requirements.
<PAGE>
d. In the event that a Participant transfers from any
Participating Employer (other than Avondale
Services Corporation) or Avondale Services
Corporation (the "Transferor Employer") to any
Participating Employer (other than Avondale
Services Corporation) or Avondale Services
Corporation (the "Transferee Employer"), such
Participant's Accrued Benefit shall be equal to
the sum of (i) the Participant's Accrued Benefit
based on his years of Service earned while an
Employee of the Transferor Employer and his Final
Average Compensation as of the date of his
transfer, and (ii) the Participant's Accrued
Benefit based on his Years of Service earned while
an Employee of the Transferee Employer and his
Final Average Compensation as of the date of his
termination of employment with such Transferee
Employer. Notwithstanding the previous sentence,
in no event shall a Participant's Accrued Benefit
be less than the Accrued Benefit to which he would
have been entitled had he always been an Employee
of the Transferor Employer for the entire period
during which he earned Years of Service.
2.5 Reemployment of a Former Participant. Except as
provided for in Section 2.4, a Participant who terminates
employment and who is subsequently reemployed shall be reinstated
as a Participant on the day he first performs an Hour of Service
following reemployment, provided (a) he meets the requirements of
Section 2.1 on such date, or if later, the date on which he meets
such requirements and (b) he completes one Year of Service from
his date of rehire, if he had incurred a One Year Break In
Service prior to such reemployment. If such reemployed
Participant fails to complete one Year of Service from his date
of rehire, he shall not be reinstated as a Participant.
Reemployed Participants who do complete one Year of Service from
their date of rehire shall be treated as follows:
a. If the Participant was not vested in his Accrued
Benefit, such Participant shall automatically be
reinstated as a Participant and his Years of
Service accumulated before his termination shall
be added to any Years of Service which he may
subsequently accumulate, provided he is reemployed
before incurring the greater of five consecutive
One Year Breaks In Service or his Years of Service
earned prior to such Break; otherwise such former
Participant shall be treated as a new employee and
any Years of Service accumulated by him prior to
termination shall be disregarded.
b. If the Participant was vested in his Accrued
Benefit, but payment of such benefits has not yet
commenced, such Participant shall automatically be
reinstated as a participant and his Years of
Service accumulated before his termination shall
be added to any Years of Service which he may
subsequently accumulate.
<PAGE>
c. If the Participant was vested in his Accrued
Benefit and payment of such benefits had commenced
or if the Participant otherwise received a
distribution pursuant to Section 14.6,
i. his benefit payments shall be suspended
during the period of his resumed employment
for any month in which he is regularly
scheduled in "Section 203(a)(3)(B) service"
within the meaning of ERISA and, if
suspended, shall recommence on the first day
of the month next following cessation of his
employment;
ii. he shall be eligible for additional Years of
Service as a result of his resumed
participation in accordance with the
provisions of the Plan;
iii. if he shall die during the period of resumed
participation, benefits shall be payable in
accordance with the provisions of Article VI;
and
iv. any benefits subsequently payable under the
Plan shall be reduced on account of any
benefit payments previously made; but
notwithstanding any other provision of this
Section 2.5(c) to the contrary, any benefits
subsequently payable shall not be reduced
below the level of benefits (or Actuarial
Equivalent thereof) which would have been
payable in the absence of the Participant's
resumed participation.
ARTICLE III
ELIGIBILITY FOR RETIREMENT INCOME
3.1 Normal Retirement Date. A participant's Normal
Retirement Date shall be the later of (a) a Participant's 65th
birthday, or (b) the first day of the month coincident with or
next following a Participant's fourth anniversary of commencement
of participation in the Plan. Upon reaching his Normal
Retirement Date, a Participant's right to his Accrued Benefit
shall be fully vested and non-forfeitable. A Participant who
attains his Normal Retirement Date shall be entitled to a normal
retirement income determined pursuant to Section 4.1.
3.2 Deferred Retirement Date. A Participant may continue
his employment after his Normal Retirement Date and retire on the
first day of any month thereafter, such date being known as his
Deferred Retirement Date. An Employee continuing his employment
beyond his Normal Retirement Date shall be eligible for
participation in the Plan on the same basis as any other
Employee. A Participant retiring on a Deferred Retirement Date
shall be entitled to a deferred retirement income determined
pursuant to Section 4.2.
<PAGE>
Notwithstanding the foregoing, if required by the Board
of Directors of the Company, a high-ranking executive or other
policy-making individual with an aggregate anticipated annual
retirement benefit, including benefits not provided under the
Plan, of $44,000 or more, when expressed as a Straight Life
Annuity, shall not be allowed to continue his employment after
his Normal Retirement Date and shall retire on such Normal
Retirement Date, all as determined by the Board of Directors
under uniform rules and in accordance with applicable law and
Regulations.
3.3 Early Retirement Date. A Participant who has completed
at least ten Years of Service may retire on the first day of any
month following his 55th birthday, such date being known as his
Early Retirement Date; provided, however, that such Participant
provides the Committee with written notice at least 60 days prior
to his Early Retirement Date. A Participant retiring on an Early
Retirement Date shall be entitled to an early retirement income
determined pursuant to Section 4.3.
3.4 Disability Retirement Date. A Participant who has
completed at least ten Years of Service may retire on the first
day of any month following six months of total and permanent
disability, such date being known as his Disability Retirement
Date. Effective January 1, 1989, a Participant who has completed
at least five Years of Service may retire on the first day of any
month following six months of total and permanent disability,
such date being known as his Disability Retirement Date.
For purposes of the Plan, a Participant shall be
considered totally and permanently disabled if he suffers an
illness or injury which prevents him from performing duties of
any substantially gainful activities due to any medically
determinable cause, as determined by the Committee, and which
qualifies him for commencement of benefits for permanent and
total disability under Federal Old Age and Survivor Insurance. A
Participant retiring on a Disability Retirement Date shall be
entitled to a disability retirement income determined pursuant to
Section 4.4; provided, however, that such disability retirement
income shall not be payable during any period of time prior to
the Participant's Normal Retirement Date during which the
Participant receives disability income benefits under a long-term
disability program provided by the Participating Employer,
including any Worker's Compensation benefits, or under a
disability program made available to the Participant by the
Participating Employer through payroll deductions.
3.5 Vesting Date. A Participant who terminates his
employment with a Participating Employer or a Non-Participating
Employer before he is eligible to retire on a Normal, Early or
Disability Retirement Date but on or after completing at least
ten Years of Service, shall be vested in his Accrued Benefit and
entitled to a deferred vested retirement income determined
pursuant to Section 4.5. Effective January 1, 1989, a
Participant who has completed at least five Years of Service
shall be vested in his Accrued Benefit.
The above notwithstanding, an employee or former
employee whose Accrued Benefit is frozen as described in Section
1.1 under the applicable provisions of a Prior Plan shall be
fully vested in such Benefit.
<PAGE>
For purposes of this Section 3.5, if a Participant
terminates employment with zero vesting, the Participant will be
deemed to have received a distribution and the non-vested portion
shall be immediately forfeited. For a Participant first credited
with an Hour of Service after December 31, 1987 who terminates
employment with a zero benefit, such Participant will be deemed
to have received his full benefit, vested and nonvested. A
Participant can have a benefit restored after re-employment, but
only under the circumstances described in Section 2.5.
ARTICLE IV
AMOUNT OF RETIREMENT INCOME AND PAYMENTS
4.1 Normal Retirement Income. A Participant who retires in
accordance with Section 3.1 shall be entitled to receive a normal
retirement income equal to his Accrued Benefit computed as
follows:
a. For a Participant who is not an Employee of
Avondale Services Corporation, his monthly Accrued
Benefit shall equal the product of [(i) times
(ii)], minus (iii), minus (iv) plus (v) where:
i. Equals 25% of the Participant's Final Average
Compensation not in excess of $550 plus 40%
of such Participant's Final Average
Compensation in excess of $550;
ii. Equals a fraction the numerator of which is
the Participant's Years of Service up to a
maximum of 30 years and the denominator of
which is 30;
iii. Equals the amount, if any, of monthly annuity
purchased on behalf of the Participant in
1985 to be paid directly to the Participant,
commencing at retirement, from Massachusetts
Mutual Life Insurance Company; and
iv. Equals the monthly annuitized value of the
Participant's account under the Avondale
ESOP, which is the Actuarial Equivalent value
of the market value of the Participant's
Avondale ESOP account determined by using the
market price for the shares and other assets
held in such Account as of the close of
business on the last trading day of the month
which is coincident with or precedes the date
the Participant terminates employment with
the Participating Employer or Non-
Participating Employer, retires or becomes
totally and permanently disabled, whichever
<PAGE>
is earlier, excluding any shares or other
assets allocated to such Account on or after
the date the Participant terminates
employment with the Participating Employer or
Non-Participating Employer, retires or
becomes totally and permanently disabled,
whichever is earlier (other than allocations
for the preceding ESOP plan year occurring in
the first quarter of the Plan Year of such
termination).
Pursuant to the provisions of Sections 4.7
and 6.1, such retirement income determined
under this Section 4.1(a) shall be payable
monthly, beginning on the Participant's
Normal Retirement Date and ending upon the
Participant's death.
v. an additional Accrued Benefit pursuant to
Section 4.8, if applicable.
b. For a Participant who is an Employee of Avondale
Services Corporation, his annual Accrued Benefit
shall equal the greater of the benefit obtained in
(i) or (ii), minus (iii) plus (iv) where:
i. Equals 1.5% of the Participant's Final
Average Compensation multiplied by the
Participant's Years of Service accrued after
September 27, 1985;
ii. Equals 1.5% of the Participant's Final
Average Compensation multiplied by the
Participant's Years of Service (including
such service with Ogden American
Corporation), minus the benefit, if any,
which the Participant receives under the
Ogden American Corporation Pension Plan,
minus the amount, if any, of the annual
annuity purchased on behalf of the
Participant in 1985 to be paid directly to
the Participant, commencing at retirement,
from Massachusetts Mutual Life Insurance
Company; and
iii. Equals the monthly annuitized value of the
Participant's account under the Avondale
ESOP, which is the Actuarial Equivalent value
of the market value of the Participant's
Avondale ESOP account determined by using the
market price for the shares and other assets
held in such Account as of the close of
business on the last trading day of the month
which is coincident with or precedes the date
the Participant terminates employment with
the Participating Employer or Non-
Participating Employer, retires or becomes
totally and permanently disabled, whichever
<PAGE>
is earlier, excluding any shares or other
assets allocated to such Account on or after
the date the Participant terminates
employment with the Participating Employer or
Non-Participating Employer, retires or
becomes totally and permanently disabled,
whichever is earlier (other than allocations
for the preceding ESOP plan year occurring in
the first quarter of the Plan Year of such
termination).
Pursuant to the provisions of Sections 4.7
and 6.1, such retirement income determined
under this Section 4.1(b) shall be payable
monthly in equal amounts of 1/12 of such
annual Accrued Benefit, beginning on the
Participant's Normal Retirement Date for his
lifetime, with the provision that if the
Participant's death occurs before he has
received 120 monthly payments, the remaining
number of such payments shall be paid to the
person designated as his Beneficiary.
iv. an additional Accrued Benefit pursuant to
Section 4.8, if applicable.
For purposes of determining the amount by which a
Participant's Accrued Benefit shall be reduced as
determined under Section 4.1(a)(iv) and Section
4.1(b)(iii), the number of shares held in the
Participant's account in the Avondale ESOP shall
be increased by the number, including fractions,
of any shares which have been distributed to the
Participant prior to the date of the calculation
of the Participant's Accrued Benefit.
4.2 Deferred Retirement Income. A Participant who retires
on a Deferred Retirement Date in accordance with Section 3.2
shall be entitled to receive a deferred retirement income equal
to the normal retirement amount described in Section 4.1(a) or
(b), whichever is applicable, determined as of his actual
retirement date, based on his Years of Service and Final Average
Compensation at retirement. Pursuant to the provisions of
Sections 4.7 and 6.1, for Participants who are not Employees of
Avondale Services Corporation, such retirement income shall be
payable beginning on the Participant's Deferred Retirement Date
and ending upon the Participant's death. Pursuant to the
provisions of Sections 4.7 and 6.1, for Participants who are
Employees of Avondale Services Corporation, such retirement
income shall be payable monthly in equal amounts of 1/12 of such
Benefit, beginning on the Participant's Deferred Retirement Date
for his lifetime, with the provision that if the Participant's
death occurs before he has received 120 monthly payments, the
remaining number of such payments shall be paid to the person
designated as his Beneficiary.
<PAGE>
4.3 Early Retirement Income. A Participant who retires on
an Early Retirement Date in accordance with Section 3.3 shall be
entitled to receive a retirement income beginning at his Normal
Retirement Date determined as follows:
a. For a Participant who is not an Employee of
Avondale Services Corporation, his early
retirement income shall be equal to the product of
[(i) times (ii)] minus (iii) plus (iv) where:
i. Equals the product obtained by multiplying
the amount determined under Section 4.1(a)(i)
times the amount determined under Section
4.1(a)(ii), based on his Final Average
Compensation as of his actual retirement
date. For purposes of calculating the amount
described in Section 4.1(a)(ii), Years of
Service shall be calculated assuming the
Participant remained employed until his
Normal Retirement Date (up to a maximum of 30
years);
ii. Equals a fraction, the numerator of which is
the Participant's years of Service as of his
actual retirement date and the denominator of
which is the Participant's Years of Service
assuming the Participant remained employed
until his Normal Retirement Date; and
iii. Equals the sum of the amounts determined
under Section 4.1(a)(iii) and Section
4.1(a)(iv).
iv. an additional Accrued Benefit pursuant to
Section 4.8, if applicable.
If the Participant has completed ten or more Years
of Service and elects to begin receiving his early
retirement income on his Early Retirement Date,
such early retirement income shall be reduced by a
percentage amount specified in Appendix B for each
month that commencement upon his actual retirement
date of his early retirement income precedes his
Normal Retirement Date. Pursuant to the
provisions of Sections 4.7 and 6.1, such
retirement income determined under this Section
4.3(a) shall be payable monthly beginning on the
Participant's Early Retirement Date and ending
upon the Participant's death.
b. For a Participant who is an Employee of Avondale
Services Corporation, his early retirement income
shall be equal to the normal retirement amount
described in Section 4.1(b), determined as of his
actual retirement date based on his Years of
Service and Final Average Compensation at actual
retirement.
<PAGE>
If the Participant has completed ten or more Years
of Service and elects to begin receiving his early
retirement income on his Early Retirement Date,
such early retirement income shall be reduced by a
percentage amount specified in Appendix B for each
month that commencement upon his actual retirement
date of his early retirement income precedes his
Normal Retirement Date. Pursuant to the
provisions of Sections 4.7 and 6.1, such
retirement income determined under this Section
4.3(b) shall be payable monthly in equal amounts
of 1/12 of such annual Accrued Benefit beginning
on the Participant's Early Retirement Date for his
lifetime, with the provision that if the
Participant's death occurs before he has received
120 monthly payments, the remaining number of such
payments shall be paid to the person designated as
his Beneficiary.
4.4 Disability Retirement Income. A Participant who
retires on a Disability Retirement Date in accordance
with Section 3.4 shall be entitled to receive a
retirement income beginning at his Normal Retirement
Date determined as follows:
a. For a Participant who is not an Employee of
Avondale Services Corporation, his disability
retirement income shall be equal to the product of
[(i) times (ii)] minus (iii) plus (iv) where:
i. Equals the product obtained by multiplying
the amount determined under Section 4.1(a)(i)
times the amount determined under Section
4.1(a)(ii), based on his Final Average
Compensation as of his actual retirement
date. For purposes of calculating the amount
described in Section 4.1(a)(ii), Years of
Service shall be calculated assuming the
Participant remained employed until his
Normal Retirement Date (up to a maximum of 30
years);
ii. Equals a fraction, the numerator of which is
the Participant's Years of Service as of his
actual retirement date and the denominator of
which is the Participant's Years of Service
assuming the Participant remained employed
until his Normal Retirement Date; and
iii. Equals the sum of the amounts determined
under Section 4.1(a)(iii) and Section
4.1(a)(iv). For Participants who elect to
begin receiving disability retirement income
prior to the commencement of the annuity
amounts described in Section 4.1(a)(iii), the
retirement income payable under this Plan
shall be increased by the amount of such
<PAGE>
annuity (reduced as provided under this
paragraph for early commencement). Such
retirement income shall be subsequently
reduced by the same amount at such time the
Participant is eligible to receive the
annuity amounts described in Section
4.1(a)(iii).
iv. an additional Accrued Benefit pursuant to
Section 4.8, if applicable.
If the Participant has completed five or more
Years of Service (ten Years of Service prior to
January 1, 1989) and elects to begin receiving his
disability retirement income on his Disability
Retirement Date, such early retirement income
shall be reduced by a percentage amount specified
in Appendix B for each of the first 120 months,
and the Actuarial Equivalent of each additional
month thereafter that commencement, upon his
actual retirement date, of his disability
retirement income precedes his Normal Retirement
Date. Pursuant to the provisions of Sections 4.7
and 6.1, such retirement income determined under
this Section 4.4(a) shall be payable monthly
beginning on the Participant's Disability
Retirement Date and ending upon the Participant's
death.
b. For a Participant who is an Employee of Avondale
Services Corporation, his disability retirement
income shall be equal to the normal retirement
amount described in Section 4.1(b), determined as
of his actual retirement date, based on his Years
of Service and Final Average Compensation at
actual retirement.
If the Participant has completed five or more
Years of Service (ten Years of Service prior to
January 1, 1989) and elects to begin receiving his
disability retirement income on his Disability
Retirement Date (or the first of any month prior
to his Normal Retirement Date), such early
retirement income shall be reduced by a percentage
amount specified in Appendix B for each of the
first 120 months, and the Actuarial Equivalent of
each additional month thereafter that
commencement, upon his actual retirement date, of
his disability retirement income precedes his
Normal Retirement Date. Pursuant to the
provisions of Sections 4.7 and 6.1, such
retirement income determined under this Section
4.4(b) shall be payable monthly in equal amounts
of 1/12 of such Benefit beginning on the
Participant's Disability Retirement Date for his
lifetime, with the provision that if the
Participant's death occurs before he has received
<PAGE>
120 monthly payments, the remaining number of such
payments shall be paid to the person designated as
his Beneficiary.
c. Retirement Benefits payable under this Section 4.4
shall not be payable during any period of time
prior to the Participant's Normal Retirement Date
during which the Participant receives disability
income benefits under a long-term disability
program provided by the Participating Employer
including any Worker's Compensation benefits, or
under a disability program made available to the
Participant by the Participating Employer through
payroll deductions.
d. In the event a Participant covered by this Section
4.4 recovers from total and permanent disability
prior to his Normal Retirement Date and is
reemployed by the Employer, payment of his
disability retirement benefit shall cease and his
subsequent benefits under the Plan shall be based
on his Years of Service earned prior to his
Disability Retirement Date and Years of Service
accrued after he is reemployed in the same manner
as though all his Years of Service had been
continuous.
e. In the event a Participant covered by this Section
4.4 recovers from total and permanent disability
prior to his Normal Retirement Date and is not
reemployed by a Participating Employer, his
retirement benefit shall cease and he shall be
entitled to a retirement benefit pursuant to
Section 4.3 based on his Years of Service earned
prior to his Disability Retirement Date and Final
Average Compensation at his Disability Retirement
Date.
4.5 Deferred Vested Retirement Income. If a Participant is
entitled to a deferred vested retirement income pursuant to
Section 3.5, such retirement income shall be determined in
accordance with the following provisions:
a. If a Participant who is not an Employee of
Avondale Services Corporation does not make
written request for his retirement income to begin
before his Normal Retirement Date, his deferred
vested retirement income payable on his Normal
Retirement Date shall be equal to the product of
[(i) times (ii)] minus (iii) plus (iv) where:
i. Equals the product obtained by multiplying
the amount determined under Section 4.1(a)(i)
times the amount determined under Section
4.1(a)(ii), based on his Final Average
Compensation as of his actual termination
date. For purposes of calculating the amount
<PAGE>
described in Section 4.1(a)(ii), Years of
Service shall be calculated assuming the
Participant remained employed until his
Normal Retirement Date (up to a maximum of 30
years);
ii. Equals a fraction, the numerator of which is
the Participant's Years of Service as of his
actual termination date and the denominator
of which is the Participant's Years of
Service assuming the Participant remains
employed until his Normal Retirement Date;
iii. Equals the sum of the amounts determined
under Section 4.1(a)(iii) and Section
4.1(a)(iv); and
iv. An additional Accrued Benefit pursuant to
Section 4.8, if applicable.
If such Participant has completed ten or more
Years of Service and gives 60 days' written notice
for retirement income to begin on an Early
Retirement Date, such deferred vested retirement
income shall be reduced by a percentage amount
specified in Appendix B for each month that
commencement, upon his actual retirement date, of
his deferred vested retirement income precedes his
Normal Retirement Date. Pursuant to the
provisions of Sections 4.7 and 6.1, such
retirement income determined under this Section
4.5(a) shall be payable monthly beginning on the
Participant's Early Retirement Date and ending
upon the Participant's death.
b. If a Participant who is an Employee of Avondale
Services Corporation does not make written request
for his retirement income to begin before his
Normal Retirement Date, his deferred vested
retirement income payable on his Normal Retirement
Date shall be equal to the normal retirement
amount described in Section 4.1(b), determined as
of his date of termination, based on his Years of
Service and Final Average Compensation at
termination.
If such Participant has completed ten or more
Years of Service and gives 60 days' written notice
for retirement income to begin on an Early
Retirement Date, such deferred vested retirement
income shall be reduced by a percentage amount
specified in Appendix B for each month that
commencement, upon his actual retirement date, of
his deferred vested retirement income precedes his
Normal Retirement Date. Pursuant to the
provisions of Sections 4.7 and 6.1, such
retirement income determined under this Section
<PAGE>
4.5(b) shall be payable monthly in equal amounts
of 1/12 of such Benefit beginning on the
Participant's Early Retirement Date for his
lifetime, with the provision that if the
Participant's death occurs before he has received
120 monthly payments, the remaining number of such
payments shall be paid to the person designated as
his Beneficiary.
4.6 Maximum Retirement Income.
a. Any other provision of the Plan to the contrary
notwithstanding, in no event may a Participant's
annual retirement income payment under the Plan,
expressed as a benefit payable in the form of a
Straight Life Annuity with no ancillary benefits
(exclusive of any benefit not required to be
considered for purposes of applying the
limitations of Section 415 of the Code), together
with the annual benefit payable under any other
defined benefit plan of the Company or an
Affiliated Company, exceed the lesser of (i) or
(ii) below, but subject to (iii), (iv), (v) and
(vi) below:
i. 100% of the Participant's average
compensation (as defined under Section 415(b)
of the Code) in the three consecutive highest
paid calendar years.
ii. $94,023, as adjusted from time to time in
accordance with Section 415(d) of the Code.
iii. In the case where a benefit is payable prior
to the Social Security Retirement Age, or in
the case where a benefit is payable after age
65, the Actuarial Equivalent of the amount
described in (ii) payable at the Social
Security Retirement Age shall apply in lieu
of the amount described in (ii).
iv. In the case where a Participant has completed
less than ten Years of Service as a
Participant, the amount otherwise determined
under this Section 4.6(a)(ii) shall be
multiplied by a fraction with a numerator
equal to the number of whole Years of Service
as a Participant and a denominator equal to
ten.
v. Except in the case where a benefit is payable
in the form of a 50% Joint and Survivor
Annuity with the Participant's spouse
designated as the joint annuitant, where a
benefit is payable in a benefit form other
than a Straight Life Annuity the amount
otherwise determined under this Section
<PAGE>
4.6(a) shall be the Actuarial Equivalent of
the amount payable as a Straight Life
Annuity.
vi. Notwithstanding the foregoing, the benefit
payable to a Participant shall not be
considered to exceed the limitations imposed
under this Section 4.6(a) if the aggregate
retirement benefit payable to the Participant
under the Plan does not exceed $10,000 (and
has not exceeded $10,000 in any prior year);
provided, however, that this paragraph shall
not apply if the Participant has participated
in a defined contribution plan maintained by
the Company or an Affiliated Company.
For the purpose of determining the Actuarial
Equivalent amount described in (iii) above, the
interest assumption applied to determine the
Actuarial Equivalent value of a benefit payable
prior to the Social Security Retirement Age shall
be the greater of 5%, or the rate specified in
Section 1.2 of the Plan, and to determine the
Actuarial Equivalent value of a benefit payable
after the Social Security Retirement Age, an
interest assumption of the lesser of 5% or the
rate specified in Section 1.2 of the Plan shall be
used with no mortality.
b. In the case of a Participant who has participated
in a defined contribution plan maintained by the
Company or an Affiliated Company, the sum of a
Participant's "defined benefit plan fraction" and
"defined contribution plan fraction", determined
as of the close of any Plan Year, shall not exceed
one. For the purpose of this Section 4.6(b), a
Participant's defined benefit plan fraction and
defined contribution plan fraction shall have the
meanings described in (i) and (ii) below:
i. Defined benefit plan fraction shall mean a
fraction with a numerator equal to the
Participant's projected annual benefit (other
than any benefit attributable to employee
contributions) under the Plan (assuming the
Participant continues in employment to his
Normal Retirement Date at his current rate of
compensation), and a denominator equal to the
lesser of (1) 1.25 multiplied by the amount
described in Section 4.6(a)(ii) or (2) 1.4
multiplied by the amount described in Section
4.6(a)(i).
ii. Defined contribution plan fraction shall mean
a fraction with a numerator equal to (1)
below and a denominator equal to (2) below:
<PAGE>
(1) The sum of the annual additions made to
the Participant's account under any
defined contribution plan maintained by
the Company or an Affiliated Company,
where the annual additions are equal to
the sum of (a) any Participating
Employer contributions allocated to the
account (including any pre-tax
contributions), (b) any forfeitures
allocated to the account and (c) any
Participant after-tax contributions
allocated to the account.
(2) The sum for each calendar year of the
Participant's employment with the
Company or Affiliated Company of the
lesser of (a) 1.4 multiplied by 25% of
the Participant's earnings (as defined
under Section 415 of the Code) for the
calendar year, or (b) for each calendar
year after 1982, 1.25 multiplied by
$30,000 as adjusted for increases in the
cost-of-living as provided under rules
and regulations adopted by the Secretary
of the Treasury, and for each calendar
year prior to 1983, 1.25 multiplied by
the amount for such calendar year
determined in accordance with Section
415(e)(3)(B)(i) of the Code.
In the event that the aforesaid limitation would
otherwise be exceeded with respect to a Participant, it is
intended that the benefit accrual under this Plan shall be
limited as necessary, except that an Employee may elect to reduce
his contributions, whether pre-tax or after-tax, under any
defined contribution plan in which he participates if he
determines this method of compliance would be in his best
interest.
For purposes of this Section 4.6, an Affiliated Company
shall be determined by assuming the phrase "more than 50 percent"
is substituted for the phrase "at least 80 percent" wherever it
appears in Section 1563 of the Code.
4.7 Timing of Payments. Notwithstanding anything in the
Plan to the contrary the actual payment of a Participant's
retirement income under the Plan shall be deferred until the
March 1 of the calendar year immediately following the
Participant's actual retirement date. Upon such date, the
Participant (or his Beneficiary, if applicable) shall receive (a)
a lump sum payment representing the sum of the monthly retirement
income, determined pursuant to the provisions of Article IV,
deferred from his actual retirement date until such March 1 and
(b) monthly retirement income, determined pursuant to the
provisions of Article VI, thereafter.
<PAGE>
4.8 Transfer Benefit
a. With the consent of the Committee, amounts may be
transferred from the Avondale ESOP to the Trust
Fund by Participants who retire in accordance with
Article III and who are eligible to receive
benefits, subject to the following conditions:
i. The transfer will not jeopardize the tax
exempt status of this Plan or Trust Fund or
create adverse tax consequences to the
Employer.
ii. The amount transferred must be the entire
vested Avondale ESOP account balance of such
Participant.
iii. The transfer must be based upon a voluntary
election by the Participant and all notice
and consent requirements of the Avondale ESOP
must be met;
iv. The amounts transferred shall be considered
an additional Accrued Benefit (as provided in
Section 4.8(b)) and shall be so identified.
Such benefit shall be fully vested at all
times and shall not be subject to forfeiture
for any reason.
v. Pursuant to Section 414(l) of the Code, after
the transfer, the Participant is entitled to
receive a benefit, on a termination basis,
with respect to the transferred assets, which
is equal to or greater than the benefit he or
she would have been entitled to receive
immediately before the transfer.
vi. Prior to accepting the transfer to which this
Section applies, the Committee may require
the Participant to establish that the amounts
to be transferred to the Trust Fund meet the
requirements of this Section.
b. If a Participant elects to transfer his or her
Avondale ESOP account balance to the Trust Fund
pursuant to Section 4.8(a), such Participant shall
be entitled to an Accrued Benefit equal to the
amount determined under Section 4.1(a)(iv) or
Section 4.1(b)(iii), whichever is applicable.
c. The benefits provided under this Section 4.8 shall
be paid as part of and subject to the same terms
and provisions as the other benefits provided
under the Plan.
4.9 Direct Rollover Rules. This Section 4.9 applies to
distributions made on or after January 1, 1993. Notwithstanding
<PAGE>
any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Article, a distributee
may elect, at the time and in the manner prescribed by the plan
administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover.
a. The term Eligible rollover distribution means any
distribution of all or any portion of the balance
to the credit of the distributee, except that an
eligible rollover distribution does not include:
any distribution that is one of a series of
substantially equal periodic payments (not less
frequently than annually) made for the life (or
life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the
distributee and the distributee's designated
beneficiary, or for a specified period of ten
years or more; any distribution to the extent such
distribution is required under section 401(a)(9)
of the Code; and the portion of any distribution
that is not includible in gross income (determined
without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
b. An Eligible retirement plan includes an individual
retirement account described in section 408(a) of
the Code, an individual retirement annuity
described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the
Code, or a qualified trust described in section
401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, in the
case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is
an individual retirement account or individual
retirement annuity.
c. The term Distributee includes an employee or
former employee. In addition, the employee's or
former employee's surviving spouse and the
employee's or former employee's spouse or former
spouse who is the alternate payee under a
qualified domestic relations order, as defined in
section 414(p) of the Code, are distributees with
regard to the interest of the spouse or former
spouse.
d. The term Direct rollover means a payment by the
plan to the eligible retirement plan specified by
the distributee.
4.10 Notice. The notice required by Section 1.411(a)-11(c)
of the Income Tax Regulations must be provided to the Participant
no less than 30 days and no more than 90 days before the date of
distribution. The notice explains a Participant's right to defer
receipt of the distribution if the Actuarial Equivalent present
<PAGE>
value of monthly payments of retirement income exceeds $3,500. A
Participant will also receive an explanation of distribution
options no less than 30 days and no more than 90 days before the
date of distribution. Effective January 1, 1994, if a
distribution is one to which Sections 401(a)(11) and 417 of the
Internal Revenue Code do not apply, such distribution may
commence less than 30 days after the notice required under
Section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that:
a. the Committee clearly informs the Participant that
the Participant has a right to a period of at
least 30 days after receiving the notice to
consider the decision of whether or not to elect a
distribution (and, if applicable, a particular
distribution option), and
b. the Participant, after receiving the notice,
affirmatively elects a distribution.
ARTICLE V
PRE-RETIREMENT DEATH BENEFITS
5.1 Immediate Pre-Retirement Surviving Spouse's Benefit.
In the event of the death of an active or vested terminated
Participant after becoming eligible to retire on an Early
Retirement Date but before his actual retirement date, a monthly
retirement benefit shall be payable to his surviving legal
spouse. Such amount shall be determined as if:
a. the Participant had retired and elected retirement
income payments to begin on the first day of the
month coinciding with or next preceding his date
of death, and
b. his retirement income was payable in the form of a
50% Joint and Survivor Spouse Annuity with his
spouse entitled to receive 50% of the amount of
the Participant's retirement income.
Benefits shall be payable to the surviving spouse on
the first day of the month following the Participant's death.
Pursuant to the provisions of Section 4.7, payments shall
commence on the Participant's death and shall continue to be made
on the first day of the month thereafter during the surviving
spouse's lifetime. In lieu of the joint and survivor spouse
annuity payments described in this Section 5.1, such spouse may
elect to receive such payments in one lump sum; provided,
however, that the Actuarial Equivalent value of such retirement
payments is $5,000 or less.
Notwithstanding the foregoing, no benefit shall be
payable under this Section 5.1 if the Participant is not survived
by a legal spouse.
5.2 Deferred Pre-Retirement Surviving Spouse's Benefit. In
the event of the death of an active or vested terminated
<PAGE>
Participant on or after completing the vesting requirements under
Section 3.5, but prior to being eligible for early retirement
pursuant to Section 3.3, a monthly retirement benefit shall be
payable to his surviving legal spouse. Such amount shall be
determined as if:
a. the Participant separated from service as of his
date of death, then
b. survived until reaching the earliest retirement
age under the Plan, or if later, the age at death,
c. retired, electing immediate payment of benefits
under the 50% Joint and Survivor Spouse Annuity,
with his surviving spouse entitled to receive 50%
of the amount of the Participant's reduced
retirement income, and then
d. died on the day after the date in (b) above.
Benefits shall be payable to such surviving spouse on
the first day of the month coincident with or next following the
month in which the Participant would have reached the earliest
retirement age under the Plan or, if later, the age at death.
Pursuant to the provisions of Section 4.7, payments shall
commence on the first day of the month coincident with or next
following the month in which the Participant would have reached
age 55 or, if later, the Participant's death and shall continue
to be made on the first day of each month thereafter during such
surviving spouse's lifetime. In lieu of the joint and survivor
spouse annuity payments described in this Section 5.2, such
spouse may elect to receive such payments in one lump sum;
provided, however, that the Actuarial Equivalent value of
retirement payments is $5,000 or less.
If a benefit is payable under Section 5.1, no benefit
shall be payable under this Section 5.2.
Notwithstanding the foregoing, no benefit shall be
payable under this Section 5.2 if the Participant is not survived
by a legal spouse.
ARTICLE VI
NORMAL AND OPTIONAL PAYMENT FORMS OF RETIREMENT INCOME
6.1 Normal Form of Payment. Retirement income under the
Plan shall be payable as follows:
a. If a Participant is married on the date his
retirement income begins, the normal form of
payment shall be a 50% Joint and Survivor Spouse
Annuity with the legal spouse entitled to receive
50% of the Participant's reduced amount of
retirement income, which shall be the Actuarial
Equivalent of the amount determined pursuant to
Article IV.
<PAGE>
b. If a Participant who is not an Employee of
Avondale Services Corporation is not married on
the date his retirement income begins, the normal
form of payment shall be a Straight Life Annuity,
which shall be equal to the amount determined
pursuant to Article IV with no retirement income
payable after the Participant's death.
c. If a Participant who is an Employee of Avondale
Services Corporation is not married on the date
his retirement income begins, the normal form of
payment shall be a Ten Year Certain and Life
Annuity, which shall be equal to the amount
determined pursuant to Article IV with the
provision that if the Participant's death occurs
before he has received 120 monthly payments, the
remaining number of such payments shall be paid to
his Beneficiary.
6.2 Waiver of Normal Form and Election of Optional Form of
Payment. A Participant may waive his normal form of payment
described in Section 6.1 provided that concurrently with such
waiver he shall elect an optional form of payment from those
provided for in Section 6.5. Such waiver and election may be
made only during the waiver period specified in Section 6.3;
otherwise, payment shall be made to him in the normal form. The
Participant shall file such forms and provide such information as
the Committee may reasonably require to comply with all
applicable laws and to determine his eligibility, qualification
of his spouse and his amount of retirement income.
Such election shall be made in writing and shall not
take effect unless either:
a. the Participant's legal spouse consents in writing
to such election and the spouse's consent
acknowledges the effect of such election and is
witnessed by a notary public, or
b. it is established to the satisfaction of the
Committee that the Participant has no legal
spouse, or that such spouse's consent cannot be
obtained because the spouse cannot be located, or
because of such other circumstances as may be
prescribed in regulations issued pursuant to
Section 417 of the Code.
6.3 Waiver Period. The Committee shall make an election
form available to each Participant not less than nine months
before the Participant meets the requirements for early
retirement described in Section 3.3; provided, however, that such
election form shall not be distributed if the Committee
determines in a uniform and non-discriminatory manner that no
retirement income is payable under this Plan, as determined under
the provisions of Article IV. Such form shall describe in plain
language the terms and conditions of the optional forms of
benefit and shall provide for election of optional forms of
<PAGE>
benefit and a benefit commencement date. The completed election
form must be returned to the Committee within the 90 day period
ending on the designated benefit commencement date. If a
Participant files a subsequent election form, the prior form
shall be of no effect. If no election has been made at the
expiration of the election period, retirement benefits will be
payable in accordance with Section 6.1.
The Committee shall, when necessary, mail the form to
the Participant via certified mail, at his last address on the
records of the Committee or, if deemed appropriate, through any
facilities made available by the United States Social Security
Administration. During the waiver period, the Participant may
request information with respect to the financial effect of his
waiver on the normal form of payment and the election of any
available optional form of payment. Any waiver may be revoked,
or election changed, at any time up to the due date for the
Participant's first retirement income payment, on a form approved
by the Committee.
6.4 Temporary Non-Payment of Retirement Income. If a
Participant or Beneficiary fails to submit the form required
under Section 6.2 or fails to furnish information reasonably
requested by the Committee which is necessary to determine
whether such Participant or Beneficiary has satisfied all
requirements for payment of benefits, the Committee shall delay
payment of benefits until the requested information is furnished
and shall make reasonable efforts to obtain such information.
After the requested information has been furnished and the
Committee has determined that the Participant or Beneficiary has
met the requirements for payment of benefits, such benefits shall
be payable as if the Participant or Beneficiary had furnished the
requested information in a timely manner.
6.5 Optional Forms of Payment. The forms of benefit
payment available to each Participant shall be the Actuarial
Equivalent of his normal form of retirement income pursuant to
Section 6.1. A Participant may elect to receive that portion of
his Accrued Benefit which accrued prior to January 1, 1988 in the
form of any one of the options which he could have elected under
the terms of the Plan on December 31, 1987. A Participant may
also elect to receive that portion of his Accrued Benefit
accruing on or after January 1, 1988, or his entire Accrued
Benefit, in the form of any one of the following optional forms
of benefit:
a. Straight Life Annuity, under which retirement
income payments are made to the Participant during
his lifetime, with no further payments from the
Plan on his behalf after his death.
b. 50% Joint and Survivor Spouse Annuity, under which
reduced retirement income payments are made to the
Participant during his lifetime, based on
Actuarial Equivalent factors, with payments from
the Plan upon his death equal to 50% of the
payment previously payable to the Participant to
be continued to and for the lifetime of his legal
spouse.
<PAGE>
i. If a Participant elects the 50% Joint and
Survivor Spouse Annuity and his legal spouse
dies before benefit payments commence, his
election of the 50% Joint and Survivor Spouse
Annuity shall be null and void.
ii. If a Participant elects the 50% Joint and
Survivor Spouse Annuity and benefit payments
have commenced, his retirement income
payments thereafter shall not be changed by
reason of the death of his legal spouse
during his own lifetime.
c. Ten Year Certain and Life Annuity, under which
reduced retirement income payments are made to the
Participant during his lifetime, based on
Actuarial Equivalent factors, with the provision
that if the Participant's death occurs before he
has received 120 monthly payments, the value of
the remaining number of such payments shall be
paid to the person designated as his Beneficiary.
d. Lump Sum Option, under which the present value of
retirement income payments are paid to a
Participant in one lump sum. This option is
available to Participants whose Actuarial
Equivalent value of retirement income payments is
$5,000 or less.
6.6 General Limitations. Anything in this Article VI to
the contrary notwithstanding, no method of distribution shall be
made under a normal or optional payment form of retirement income
which would result in the actuarial value of a Beneficiary's
interest exceeding 50% of the actuarial value of the
Participant's own interest on a life annuity basis, both being
determined as of the Participant's Normal Retirement Date or the
earlier date on which he becomes entitled to first payment of his
retirement income. This limitation shall not apply where the
Beneficiary is the Participant's legal spouse.
An election under this Article VI of a Beneficiary
other than the Participant's legal spouse is effective only if
the Participant's spouse consents to the beneficiary designated,
the consent is witnessed by a notary public, and the spouse's
consent acknowledges the effect of such designation. Such
spousal consent is not required, however, if the Participant
establishes to the satisfaction of the Committee that the consent
cannot be obtained because the spouse cannot be located, or
because of such other circumstances as may be prescribed in
regulations issued pursuant to Section 417 of the Code. Any
consent by a spouse (or establishment that consent cannot be
obtained) is effective only with respect to that spouse.
6.7 Distribution Rules. Unless the Participant elects
otherwise, retirement income payments shall commence no later
than the 60th day after the close of the Plan Year in which the
latest of the following occurs:
a. the Participant attains age 65, or
<PAGE>
b. the 10th anniversary of the date the Participant
commenced participation, or
c. the Participant terminates employment.
Further, distribution of benefits shall not be deferred
beyond the April 1 following the calendar year in which the
Participant attains age 70-1/2, or if later (but only in the case
of a Participant other than a 5% owner of the Company or
Affiliated Company for the Plan Year ending in the calendar year
in which such Participant attains age 70-1/2), the April 1
following the calendar year in which the Participant terminates
employment, and payments after the initial payment shall be made
monthly, except in the case of a lump sum payment where no
additional payments are due. Effective January 1, 1989,
distribution of benefits to a Participant shall commence no later
than the April 1 following the calendar year in which he attains
age 70-1/2, whether or not he is employed by a Participating
Employer.
Upon the death of a Participant after payment of
retirement income has commenced, any remaining payments shall be
made no less rapidly than under the form of payment in effect at
the Participant's death. Upon the death of a Participant prior
to the date payment of retirement income has commenced, payment
of a death benefit, if any, to the Participant's spouse shall
commence no later than the April 1 following the calendar year in
which the Participant would have attained age 70-1/2, or if
later, within one year following the date of the Participant's
death; and payment of a death benefit to a person other than the
Participant's spouse shall commence no later than one year
following the Participant's death.
Notwithstanding the foregoing, an earlier distribution
shall be made where provided by the applicable provisions of the
Plan. However, in the case of a Participant who is a 5% owner of
the Company or an Affiliated Company, no distribution of any
amounts attributable to Employer contributions while he was a 5%
owner shall be made before the earlier of the date such
Participant dies, becomes disabled within the meaning of Section
72(m)(7) of the Code or attains age 59-1/2, unless such
Participant acknowledges in writing that he understands that such
premature distribution will be subject to the penalties imposed
by Section 72(m)(5)(B) of the Code.
6.8 Limitation in Case of Domestic Relations Order. All
rights and benefits including election rights, provided to
Participants pursuant to this Plan, are subject to the rights
afforded to any "alternate payee" pursuant to a "qualified
domestic relations order," as those terms are defined below.
Pursuant to the provisions of Section 414(p) of the
Code, a "qualified domestic relations order" shall mean a
judgment, decree or order (including approval of a property
settlement agreement) made pursuant to a State domestic relations
law (including a community property law) that relates to the
provision of child support, alimony payments, or marital property
rights to a spouse, former spouse, child or other dependent of a
Participant ("alternate payee") and which:
<PAGE>
a. creates or recognizes the existence of an
alternate payee's right to, or assigns to an
alternate payee the right to, receive all or a
portion of the benefits payable to a Participant
under this Plan; and
b. specifies (i) the name and last known mailing
address (if any) of the Participant and each
alternate payee covered by the order (ii) the
amount or percentage of the Participant's benefits
under the Plan to be paid to each such alternate
payee, or the manner in which such amount or
percentage is to be determined and, (iii) the
number of payments or the period to which the
order applies; and
c. does not require this Plan to:
i. provide any type or form of benefit, or any
option, not otherwise provided hereunder;
ii. pay any benefits to any alternate payee prior
to the earlier of:
(1) the earliest date benefits are payable
hereunder to a Participant, or
(2) the later of the date the Participant
attains age 50 or the earliest date on
which the Participant could obtain a
distribution under the Plan if the
Participant terminated employment;
iii. pay any benefits which are not vested under
the Plan;
iv. provide increased benefits (as actuarially
determined using such assumptions for
Actuarial Equivalence as are required under
Section 414(p) of the Code), or
v. pay benefits to an alternate payee which are
required to be paid to another alternate
payee under a prior qualified domestic
relations order.
For purposes of this Plan, an alternate payee who had
been married to the Participant for at least one year may be
treated as a spouse with respect to the portion of the
Participant's Accrued Benefit in which such alternate payee has
an interest provided that the qualified domestic relations order
provides for such treatment. However, under no circumstances may
the spouse of an alternate payee (who is not a Participant
hereunder) be treated as a spouse under the terms of the Plan.
Upon receipt of any judgment, decree or order
(including approval of a property settlement agreement) relating
<PAGE>
to the provision of payment by the Plan to an alternate payee
pursuant to a State domestic relations law, the Committee shall
promptly notify the affected Participant and any alternate payee
of the receipt of such judgment decree order and shall notify the
affected Participant and any alternate payee of the Committee's
procedure for determining whether or not the judgment, decree or
order is a qualified domestic relations order.
The Committee shall establish procedures to determine
the status of a judgment, decree or order as a qualified domestic
relations order and to administer Plan distributions in
accordance with any such qualified domestic relations order.
Such procedures shall be in writing, shall include provisions
specifying the notification requirements enumerated in the
preceding paragraph, shall permit an alternate payee to designate
a representative for receipt of communications from the
Committee, and shall include such other provisions as the
Committee shall determine, including such provisions required
under Regulations promulgated by the Secretary of the Treasury.
During any period in which the issue of whether a
judgment, decree or order is a qualified domestic relations order
is being determined (by the Committee, a court of competent
jurisdiction or otherwise), the Committee shall separately
account for the portion of the Participant's Accrued Benefit, if
any, which would have been payable to the alternate payee during
such period if the judgment, decree or order were determined to
be a qualified domestic relations order.
If the judgment, decree or order is determined to be a
qualified domestic relations order within the 18-month period
following the receipt by the Committee of the qualified domestic
relations order, then payment of the portion of the Participant's
Accrued Benefit shall be paid to the appropriate alternate payee
at the time and in the form specified in such order. If such a
determination is not made within the 18-month period, the
Participant's Accrued Benefit under the Plan shall be paid at the
time and in the manner provided under the Plan as if no order,
judgment or decree had been received by the Committee.
ARTICLE VII
CONTRIBUTIONS
7.1 No Contributions by Participants. No Participant shall
be required or permitted to make a contribution under the Plan.
7.2 Employer Contributions. All contributions to provide
benefits under the Plan shall be made by each Participating
Employer or the Company on behalf of Participating Employers from
time to time, any forfeiture of the interest of any Participant
in the Trust Fund being applied to reduce the amount of such
contributions. The Committee, on the basis of actuarial
estimates made by the Actuary, will recommend the amount of
contributions which will accomplish the purposes of the Plan and
be in compliance with ERISA and the Code. Such contributions for
each Plan Year shall be remitted to the Trustee no later than the
<PAGE>
date prescribed by law for filing the Participating Employer's
federal income tax return, including extensions, for such
Employer's taxable year ending with or within such Plan Year.
7.3 Expenses. The reasonable expenses incident to the
operation of the Plan, including premiums for termination
insurance payable to the Pension Benefit Guaranty Corporation,
fees for professional services and the costs of such other
technical or clerical assistance as may be required, shall be
paid out of the Fund, to the extent not paid by all Participating
Employers.
7.4 Contingent Nature of Contributions. Unless the
Employer notifies the Committee and the Trustee in writing to the
contrary, all contributions made to this Plan are conditioned
upon their deductibility under Section 404 of the Code.
ARTICLE VIII
ADMINISTRATION
8.1 Appointment of Committee. The Board of Directors of
the Company will appoint a Committee which may, but need not,
consist of Plan Participants or Employees of an Employer. Such
Committee shall be known as the Pension Plan Administrative
Committee. The Committee shall consist of three or more members,
each of whom shall be appointed by and shall remain in office at
the will of the Board of Directors of the Company. The Board of
Directors may also remove any Committee member at any time, with
or without cause. A Committee member may resign at any time by
filing his written resignation with the Board of Directors of the
Company.
8.2 Notice to Trustee. The Company will notify the Trustee
in writing of each Committee member's appointment, and the
Trustee may assume such appointment continues in effect until
written notice to the contrary is given by the Company.
8.3 Administration of Plan. The Committee will have all
powers and authority necessary or appropriate to carry out its
responsibilities with respect to the operation and administration
of the Plan. It will interpret and apply all Plan provisions and
may supply any omission, or reconcile any inconsistency or
ambiguity in such manner as it deems advisable. It will make all
final determinations concerning eligibility, benefits and rights
hereunder, and all other matters concerning Plan administration
and interpretation. All determinations and actions of the
Committee will be conclusive and binding upon all persons, except
as otherwise provided herein or by law, except that the Committee
may revoke or modify a determination or action previously made in
error. The Committee will exercise all powers and authority
given to it in a nondiscriminatory manner, and will apply uniform
administrative rules of general application in order to assure
similar treatment to persons in similar circumstances.
8.4 Reporting and Disclosure. The Committee will prepare,
file, submit, distribute, or make available any Plan
descriptions, reports, statements, forms or other information to
<PAGE>
any government agency, Employee, Participant, or Beneficiary as
may be required by law.
8.5 Records. The Committee will record its proceedings,
acts and decisions, and will keep all data, records, books of
account and instruments pertaining to Plan administration, which
will be subject to inspection or audit by the Company at any
time. The Company will supply all information required by the
Committee to administer the Plan, and the Committee may rely upon
the accuracy of such information.
8.6 Committee Compensation and Expenses. The Committee,
and each Committee member, will serve without compensation unless
otherwise determined by the Company; provided that in no event
will an Employee receive extra compensation for his services as a
Committee member. All reasonable expenses incurred by the
Committee in administering the Plan will be paid by the
Participating Employers.
8.7 Rules and Regulations. Any action or decision
concurred in by a majority of the Committee members, either at a
meeting or in writing without a meeting, will constitute an
action or decision of the Committee. The Committee may adopt and
amend such rules for the conduct of its business and
administration of the Plan as it deems advisable.
8.8 Secretary of the Committee. The Committee at its
option may elect any Committee member or other person to serve as
Secretary, and may remove him at any time. The Committee will
notify the Trustee in writing of such election, and the Trustee
may assume the Secretary's authority to act as Secretary
continues until written notice to the contrary is given the
Committee. The Secretary, or a majority of the Committee members
then in office, will have the authority to execute all
instruments or memoranda necessary or appropriate to carry out
the actions and decisions of the whole Committee; and any person
may rely upon any instrument or memoranda so executed as evidence
of the Committee action or decision indicated thereby.
8.9 Claims Review Procedure. Any request for benefits (the
"claim") by a Participant or his Beneficiary (the "claimant")
will be filed in writing with the Committee. Within 90 days
after receipt of a claim or, 180 days if the Committee determines
that special circumstances exist which require extension of the
time for processing a claim, the Committee will provide written
notice to any claimant whose claim has been wholly or partly
denied, including:
a. the reasons for the denial,
b. the Plan provisions on which the denial is based,
c. any additional material or information necessary
to perfect the claim and the reasons it is
necessary, and
d. the Plan's claims review procedure.
<PAGE>
A claimant will be given a full and fair review by the
Committee of the denial of his claim if he requests a review in
writing within 60 days after notification of the denial. The
claimant may review pertinent documents and may submit issues and
comments orally, in writing, or both. The Committee will render
its decision on review in writing within 60 days after receipt by
the Committee of the application for review, or within 120 days
if the Committee determines that special circumstances exist
which require extension of the time for processing the
application for review, and will include specific reasons for the
decision and references to the Plan provisions on which the
decision is based.
8.10 Information from Participants and Beneficiaries. Each
Participant and Beneficiary shall be required to furnish to the
Committee, in the form prescribed by it, such personal data,
affidavits, authorization to obtain information, and other
information as the Committee may deem appropriate for the proper
administration of the Plan.
ARTICLE IX
NAMED FIDUCIARIES
9.1 Identity of Named Fiduciaries. The Company, the
Trustee, the Committee, and any Investment Manager will be the
"Named Fiduciaries" under the Plan and will control and manage
the Plan and its assets to the extent and in the manner indicated
in this Plan. Any responsibility assigned to a "Named Fiduciary"
will not be deemed to be a duty of a "Fiduciary" (as that term is
defined in ERISA) solely by reason of such an assignment.
9.2 Responsibilities and Authority of Committee. The
Committee will control and manage the operation and
administration of the Plan. The Committee will also
(a) recommend candidates for Trustee to the Company, (b) appoint
any Investment Manager to the Plan, and (c) monitor the
performance of such Trustee and Investment Manager. The
Committee will recommend Plan amendments to the Company as
necessary and will communicate such information to the Trustee
and Investment Manager as they may need for the proper
performance of their duties.
9.3 Responsibilities and Authority of Trustee. The Trustee
will manage and control the assets of the Plan, except to the
extent that such responsibilities are specifically vested in the
Company or the Committee under the terms of the Plan, or are
delegated to one or more Investment Managers appointed by the
Committee.
9.4 Responsibilities of the Company. The Company will have
the following responsibilities and authority with respect to
control and management of the Plan and its assets:
a. to amend the Plan;
b. to merge or consolidate the Plan with, or transfer
<PAGE>
all or part of the assets or liabilities to, any
other plan or to accept the transfer of assets
from another qualified plan;
c. to establish a funding policy;
d. to appoint, remove, and replace Trustee(s) and
Committee members; and
e. to perform such additional duties as are imposed
by law.
9.5 Responsibilities Not Shared. Except as otherwise
specified herein or required by law, each "Named Fiduciary" will
have only those responsibilities that are specifically assigned
to it hereunder, and no "Named Fiduciary" will incur liability
because of improper performance or nonperformance of
responsibilities specifically assigned to another "Named
Fiduciary".
9.6 Dual Fiduciary Capacity Permitted. Any person or group
of persons may serve in more than one fiduciary capacity,
including service both as Trustee and Committee member.
9.7 Advice. A "Named Fiduciary" may employ or retain such
attorneys, accountants, investment advisors, consultants,
specialists, and other persons or firms, including such persons
or firms that may also perform services for the Company, as he
deems necessary or desirable to advise or assist him in the
performance of his duties. Unless otherwise provided by law, the
"Fiduciary" will be fully protected with respect to any action
taken or omitted by him in reliance upon any such person or firm.
9.8 Indemnification. The Company to the extent permitted
by law, will indemnify and hold harmless every person serving as
a "Fiduciary" (whether a "Named Fiduciary" or otherwise) from and
against all loss, damages, liability, and reasonable costs and
expenses, incurred in carrying out his fiduciary
responsibilities, unless due to the bad faith or willful
misconduct of such person, provided that a "Fiduciary's" counsel
fees and amount paid in settlement must be approved by the
Company. The preceding sentence will not apply to a corporate
Trustee or to an investment manager as defined in ERISA, except
as the Company and such corporate Trustee or investment manager
may otherwise agree in writing.
ARTICLE X
PROVISIONS TO PREVENT DISCRIMINATION
10.1 Prevention of Discrimination. With a view of
preventing any discrimination in favor of highly compensated
Employees and notwithstanding anything in the Plan to the
contrary, the use of the assets of the Fund is subject to the
limitations specified in this Article.
<PAGE>
10.2 Highly Compensated Employees. For the purpose of this
Article, "Highly Compensated Employees" means the twenty-five
highest paid Employees of any Employer as of the Effective Date
or the date the Plan was most recently amended in a manner
substantially affecting benefits for such Employees, but
excluding any Employee to whom, on the basis of his annual rate
of compensation on such date, an annual retirement benefit to
which he may be entitled upon retirement on or after his Normal
Retirement Date will not exceed $1,500.
10.3 Unrestricted Benefit. For the purpose of this Article,
the term unrestricted benefit means the amount of any highly
compensated Employee's retirement benefit which is not in excess
of that provided by the greater of:
a. $20,000, or
b. 20% of his average annual compensation over a
period of at least five consecutive years, or
$10,000, whichever is less, multiplied by the
number of years from the date determined pursuant
to Section 10.2 and prior to any date on which
benefits are restricted under Section 10.4(a)(ii),
or
c. a dollar amount which equals the present value of
the maximum benefit described in Section
4022(b)(3)(B) of ERISA (determined on the earlier
of the date the Plan terminates or the date
benefits commence, and determined in accordance
with regulations of the PBGC) without regard to
any other limitations in Section 4022 of ERISA.
10.4 Restriction on Payment of Benefit
a. During the ten years after the date determined
pursuant to Section 10.2, the retirement benefits
payable on account of highly compensated Employees
shall be subject to the following conditions,
notwithstanding any other provisions in the Plan
to the contrary:
i. Any highly compensated Employee who is
retired may receive his full benefit while
the Plan is in full effect.
ii. If, during the aforesaid ten years,
contributions are terminated or the Plan is
terminated or an Employer is dissolved or
liquidated, no highly compensated Employee
shall receive any benefit which is in excess
of his unrestricted benefit.
b. The conditions of Section 10.4(a) shall not
restrict the full payment of benefit payments to
the Beneficiary of any highly compensated Employee
who dies while the Plan is in full effect.
<PAGE>
10.5 Repeal. If the provisions of this Article X are no
longer required by the Code or ERISA, such provisions shall have
no further force or effect.
ARTICLE XI
AMENDMENT OF THE PLAN
11.1 Right to Amend. The Company, through its Board of
Directors, reserves the right, subject to the limitation
hereinafter provided, to amend the Plan from time to time without
the consent of any Participating Employer, Participant,
Beneficiary, or other eligible survivor. Each amendment of the
Plan shall be in writing, and shall become effective on the date
specified therein. Each Participating Employer by its adoption
of the Plan shall be deemed to have delegated this authority to
the Company.
11.2 Restrictions on Amendment. No amendment of the Plan
may be made which shall either:
a. deprive any Participant or Beneficiary of any part
of his Accrued Benefit as constituted at the time
of such amendment; or
b. result in the reversion to any Participating
Employer of any part of the Fund prior to the
satisfaction of all liabilities of the Plan.
ARTICLE XII
TERMINATION OF THE PLAN
12.1 Events Constituting Termination.
a. It is expressly declared to be the desire and
intention of each Participating Employer to
continue the Plan and Fund in existence for an
indefinite period of time. However, circumstances
not now anticipated or foreseeable may arise in
the future, as a result of which each
Participating Employer may deem it to be
impracticable or unwise to continue the Plan
established hereunder, and each Participating
Employer therefore reserves the right to terminate
the Plan insofar as it affects its Employees at
any time. Any Participating Employer may
terminate its participation in the Plan by action
of its Board of Directors. Such termination shall
be evidenced by a written instrument of
termination executed by an officer of the
Participating Employer pursuant to authorization
by its Board of Directors and shall be delivered
to the Company, the Committee, the Trustee and to
each other Participating Employer. To the maximum
extent permitted by ERISA, the termination of the
Plan as to any Participating Employer shall not in
any way affect any other Participating Employer's
participation in the Plan.
<PAGE>
b. With respect to any Participating Employer which
has adopted the Plan, its adjudication of
bankruptcy or insolvency by any court of competent
jurisdiction, its making of a general assignment
for the benefit of creditors, its dissolution,
merger, consolidation, other reorganization or
discontinuance of business, unless coverage for
its Employees under the Plan is continued by a
successor company, or its complete discontinuance
of contributions, shall operate to terminate the
Plan with respect to such Employer.
c. Subject to applicable requirements of ERISA
governing termination of employee pension benefit
plans, the Committee shall direct the Trustee to
segregate the assets of the appropriate Fund
allocable to a terminating Participating Employer
for payment of benefits in accordance with the
provisions of this Article.
12.2 Partial Termination. Upon a partial termination of the
Plan as determined by the Committee under applicable law with
respect to a group of Participants, the Committee shall direct
the Actuary to determine the proportionate interests of the
Participants affected by such partial termination. After such
proportionate interests have been determined, the Committee shall
direct the Trustee to segregate the assets of the appropriate
Fund allocable to such group of Participants for payment of
benefits in accordance with the provisions of this Article,
subject to applicable requirements of ERISA.
12.3 Allocation of Assets. Upon termination or partial
termination under Sections 12.1 and 12.2, the Accrued Benefits of
Participants affected thereby shall become fully vested and non-
forfeitable. The assets of the Fund shall be allocated by the
Committee (after payment or provision for expenses) to such
Participants in the following manner and order:
a. There shall first be set aside an amount which
will provide for a return of the Participant's
account balance attributable to voluntary
contributions.
b. There shall next be set aside an amount which will
provide retirement income for Participants and
Beneficiaries who were receiving benefits or who
were eligible to receive benefits at least three
years prior to termination of the Plan based on
the lowest benefit under Plan provisions in effect
during the five years preceding the date of the
Plan's termination.
c. There shall next be set aside an amount which will
provide all other guaranteed benefits as provided
under ERISA, but determined without regard to
Sections 4022(b)(5) and 4022(b)(6).
<PAGE>
d. There shall next be set aside an amount which will
provide all other non-forfeitable benefits, under
the provisions of the Plan at its termination, but
which are not guaranteed under ERISA.
e. Finally, there shall be set aside an amount which
will provide all other Accrued Benefits as of the
date of Plan termination.
If the appropriate assets of the Fund by the Trustee
for retirement income for Participants of the Plan, as of the
date the Plan is terminated, are not sufficient to provide in
whole the amounts required within the classes described above,
such assets will be allocated pro rata within the class in which
the amounts first cannot be provided in full. Allocation in any
of the above listed categories is to be adjusted for any
allocation already made to the same Participant under a prior
category so as to avoid any duplication of benefits payable under
a prior category.
12.4 Manner of Distribution. Subject to the foregoing
provisions of this Article XII, any distribution after
termination of the Plan may be made, in whole or in part, to the
extent that no discrimination results, in cash, securities or
other assets in kind (based on their fair market value as of the
date of distribution), or in nontransferable annuity contracts,
as the Committee in its sole discretion shall determine. Any
amounts remaining in the Fund after the satisfaction of all
liabilities of the Plan shall be returned to the Company and the
respective Participating Employer who made contributions
hereunder.
12.5 Liquidation of Trust Fund. The Fund shall continue in
existence after the termination of the Plan for such period of
time as may be required to complete the liquidation thereof in
accordance with the terms of this Article XII.
12.6 Internal Revenue Service Approval for Distribution. In
the event that the Committee applies to the Internal Revenue
Service for a determination on the qualification of the Plan upon
termination, no person shall have any right or claim to any
assets of the Fund before the Internal Revenue Service shall
determine that the proposed distribution of assets under this
Article does not result in the discrimination prohibited by
Section 401(a) of the Code.
ARTICLE XIII
TOP-HEAVY PLAN REQUIREMENTS
13.1 General Rule. For any Plan Year for which this Plan is
a Top-Heavy Plan (as defined in Section 13.7), any other
provisions of the Plan to the contrary notwithstanding, the Plan
shall be subject to the following provisions:
a. The vesting provisions of Section 13.2;
b. The minimum benefit provisions of Section 13.3;
<PAGE>
c. The limitation on compensation set by Section
13.4; and
d. The limitation on benefits set by Section 13.5.
13.2 Vesting Provisions. Each Participant who has completed
an Hour of Service during any Plan Year in which the Plan is Top-
Heavy shall have a non-forfeitable right to his Accrued Benefit
under this Plan determined by the following schedule to the
extent that such schedule is more liberal than the vesting
provided in Section 3.5:
------------------------------------------------------------------
| Years of Service | Vesting Percentage |
------------------------------------------------------------------
|less than 2 | 0% |
|2 but less than 3 | 20 |
|3 but less than 4 | 40 |
|4 but less than 5 | 60 |
|5 but less than 6 | 80 |
|6 or more | 100 |
------------------------------------------------------------------
13.3 Minimum Benefit Provisions. Each Participant who is a
Non-Key Employee (as defined in Section 13.9) shall be entitled
to an Accrued Benefit attributable to Company or Affiliated
Company contributions in the form of an annual retirement benefit
(as defined in Section 13.3(a)) that shall not be less than the
applicable percentage (as defined in Section 13.3(b)) of the
Participant's average annual earnings (as determined under
Section 415 of the Code) for years in the testing period (as
defined in Section 13.3(c)):
a. Annual retirement benefit means a benefit payable
annually in the form of a Straight Life Annuity
(with no ancillary benefits) beginning at a
Participant's Normal Retirement Date.
b. Applicable percentage means the lesser of 2%
multiplied by the number of Years of Service in
which the Plan is Top-Heavy or 20%.
c. Testing Period means, with respect to a
Participant, the period of consecutive Years of
Service (not exceeding five) during which the
Participant had the greatest aggregate earnings
from his Employer. The testing period shall not
include any Year of Service that ends in a Plan
Year beginning before January 1, 1984 or during
which the Plan was not a Top-Heavy Plan.
Benefits taken into account under this Section 13.3
shall not include any benefits payable under the Social Security
Act or any other Federal or State law.
13.4 Limitation on Compensation. Annual compensation taken
into account under this Article XIII for purposes of computing
<PAGE>
benefits under this Plan shall not exceed the first $200,000,
provided that such limit shall be adjusted automatically for each
Plan Year to the amount prescribed by the Secretary of the
Treasury pursuant to regulations for the calendar year in which
such Plan Year commences.
13.5 Limitation on Benefits. In the event that the Company
or an Affiliated Company also maintains a defined contribution
plan providing benefits on behalf of Participants in this Plan,
one of the two following provisions shall apply:
a. If for the Plan Year this Plan would not be a Top-
Heavy Plan if "90%" were substituted for "60%,"
then Section 13.3 shall apply for such Plan Year
as if amended so that the "applicable percentage"
means the lesser of 3% multiplied by the number of
Years of Service during which the Plan would be
Top-Heavy and the overall applicable percentage
does not exceed the lesser of 30% or 20% plus 1%
for each Year the Plan is taken into account under
this Section 13.5(a).
b. If for the Plan Year (1) if this Plan is subject
to Section 13.5(a) but does not provide the
required additional minimum benefit as required
therein or (2) this Plan would continue to be a
Top-Heavy Plan if "90%" were substituted for
"60%," then the denominator of both the defined
contribution plan fraction and the defined benefit
plan fraction shall be calculated as set forth in
Section 4.6 for the limitation year ending in such
Plan Year by substituting "1.0" for "1.25" in each
place such figure appears, except with respect to
any individual for whom there are no employer
contributions, forfeitures or voluntary
nondeductible contributions allocated or any
accruals for such individual under the defined
benefit plan.
13.6 Coordination With Other Plans. In the event that
another defined contribution or defined benefit plan maintained
by the Company or an Affiliated Company provides contributions or
benefits on behalf of Participants in this Plan, such other plan
shall be treated as a part of this Plan pursuant to the
applicable principles set forth in Revenue Ruling 81-202 in
determining whether the plans are providing benefits at least
equal to the minimum benefit required under this Plan. If the
Plan is subject to Section 13.5(b) but the Company or an
Affiliated Company does not substitute "1.0" for "1.25" as
required, the applicable percentage provided in Section 13.3
shall be increased by one percentage point (up to a maximum of 10
percentage points). Such determination shall be made by the
Committee.
13.7 Top-Heavy Plan Definition. This Plan shall be a Top-
Heavy Plan for any Plan Year if, as of the Determination Date,
the present value of the cumulative Accrued Benefits under the
<PAGE>
Plan for Participants (including former Participants) who are Key
Employees exceeds 60% of the present value of the cumulative
Accrued Benefits under the Plan for all Participants, or if this
Plan is required to be in an Aggregation Group which for such
Plan Year is a Top-Heavy Group. For purposes of making this
determination, the present value of Accrued Benefits for a
Participant (i) who is not a Key Employee, but who was a Key
Employee in a prior year, or (ii) for Plan Years beginning after
December 31, 1984, who has not performed any service for the
Employer at any time during the five-year period ending on the
Determination Date, shall be disregarded.
a. Determination Date means for any Plan Year the
last day of the immediately preceding Plan Year
(except that for the first Plan Year the
Determination Date means the last day of such Plan
Year).
b. The present value shall be determined as of the
most recent valuation date that is within the 12-
month period ending on the Determination Date and
as described in the regulations under the Code
using the assumptions for determining an Actuarial
Equivalent under the Plan, except the interest
assumption shall be an annual rate of 5%.
c. Aggregation Group means the group of plans, if
any, that includes both the group of plans that
are required to be aggregated and, if the
Committee so elects, the group of plans that are
permitted to be aggregated.
i. The group of plans that are required to be
aggregated (the "Required Aggregation Group")
includes: (a) each plan of the Employer in
which a Key Employee is a Participant,
including collectively-bargained plans, and
(b) each other plan of the Company or an
Affiliated Company including collectively-
bargained plans, which enables a plan in
which a Key Employee is a Participant to meet
the requirements of the Code prohibiting
discrimination as to contributions or
benefits in favor of employees who are
officers, shareholders or the highly-
compensated or prescribing the minimum
participation standards.
ii. The group of plans that are permitted to be
aggregated (the "Permissive Aggregation
Group") includes the Required Aggregation
Group plus one or more plans of the Company
or an Affiliated Company that is not part of
the Required Aggregation Group and that the
Committee certifies as constituting a plan
within the Permissive Aggregation Group.
Such plan or plans may be added to the
Permissive Aggregation Group only if, after
<PAGE>
the addition, the Aggregation Group as a
whole continues not to discriminate as to
contributions or benefits in favor of
officers, shareholders or the highly-
compensated and to meet the minimum
participation standards under the Code.
d. Top-Heavy Group means the Aggregation Group, if as
of the applicable Determination Date, the sum of
the present value of the cumulative accrued
benefits for Key Employees under all defined
benefit plans included in the Aggregation Group
plus the aggregate of the accounts of Key
Employees under all defined contribution plans
included in the Aggregation Group exceeds 60% of
the sum of the present value of the cumulative
accrued benefits for all Employees under all such
defined benefit plans plus the aggregate accounts
for all Employees under such defined contribution
plans. For purposes of making this determination,
the present value of the accrued benefits for a
Participant (i) who is not a Key Employee, but who
was a Key Employee in a prior year or (ii) who has
not performed services for the Company or an
Affiliated Company at any time during the five-
year period ending on the Determination Date,
shall be disregarded.
If the Aggregation Group that is a Top-Heavy Group
is a Required Aggregation Group, each plan in the
Group will be Top-Heavy. If the Aggregation Group
that is a Top-Heavy Group is a Permissive
Aggregation Group, only those plans that are part
of the Required Aggregation Group will be treated
as Top-Heavy. If the Aggregation Group is not a
Top-Heavy Group, no plan within such Group will be
Top-Heavy.
e. In determining whether this Plan constitutes a
Top-Heavy Plan, the Committee shall make the
following adjustments in connection therewith:
i. When more than one plan is aggregated, the
Committee shall determine separately for each
plan as of each plan's determination date the
present value of the accrued benefits or
account balance. The results shall then be
aggregated by adding the results of each plan
as of the determination dates for such plans
that fall within the same calendar year.
ii. In determining the present value of the
cumulative accrued benefit or the amount of
the account of any Employee, such present
value or account shall include the dollar
value of the aggregate distributions made to
such Employee under the applicable plan
<PAGE>
during the five-year period ending on the
determination date, unless reflected in the
value of the accrued benefit or account
balance as of the most recent valuation date.
Such amounts shall include distributions to
Employees which represented the entire amount
credited to their accounts under the
applicable plan, and distributions made on
account of the death of a Participant to the
extent such death benefits do not exceed the
present value of the accrued benefit or
account.
iii. Further, in making such determination, such
present value or such account shall include
any rollover contribution (or similar
transfer), as follows:
(1) If the rollover contribution (or similar
transfer) is initiated by the Employee
and made to or from a plan maintained by
another employer, the plan providing the
distribution shall include such
distribution in the value of such
account; the plan accepting the
distribution shall not include such
distribution in the value of such
account unless the plan accepted it
before December 31, 1983.
(2) If the rollover contribution (or similar
transfer) is not initiated by the
Employee or made from a plan maintained
by another employer, the plan accepting
the distribution shall include such
distribution in the present value of
such account, whether the plan accepted
the distribution before or after
December 31, 1983; the plan making the
distribution shall not include the
distribution in the present value of
such account.
13.8 Key Employee. The term Key Employee means any Employee
or former Employee under this Plan who, at any time during the
Plan Year containing the Determination Date or during any of the
four preceding Plan Years, is or was one of the following:
a. An officer of the Company having annual
compensation from the Employer of 150% of the Code
Section 415 dollar limitation for the calendar
year in which the Plan Year ends. Whether an
individual is an officer shall be determined by
the Committee on the basis of all the facts and
circumstances, such as an individual's authority,
duties and term of office, and not on the mere
fact that the individual has the title of an
<PAGE>
officer. For any such Plan Year, there shall be
treated as officers no more than the lesser of:
i. 50 Employees, or
ii. the greater of three Employees or 10% of the
Employees of the Company during the Plan Year
containing the Determination Date or any of
the preceding four Plan Years.
For this purpose, the highest-paid officers shall
be selected.
b. One of the ten Employees owning (or considered as
owning, within the meaning of the constructive
ownership rules of the Code) both more than a .50%
interest in value and the largest interests in the
Company. An Employee who has more than a .50%
ownership interest is considered to be one of the
top ten owners unless at least ten other Employees
own a greater interest than that Employee.
However, an Employee will not be considered a top
ten owner for a Plan Year if the Employee earns
less than the maximum dollar limitation under
Section 415 of the Code on contributions and other
annual additions to a Participant's account in a
defined contribution plan for the calendar year in
which the Determination Date falls.
c. Any person who owns (or is considered as owning
within the meaning of the constructive ownership
rules of the Code) more than 5% of the outstanding
stock of the Company or stock possessing more than
5% of the combined total voting power of all stock
of the Company.
d. Any person having annual compensation from the
Company of more than $150,000 who owns (or is
considered as owning within the constructive
ownership rules of the Code) more than 1% of the
outstanding stock of the Company or stock
possessing more than 1% of the combined total
voting power of all stock of the Company.
For purposes of this Section 13.8, "Compensation" means
all items includable as compensation for purposes of applying the
limitations on contributions and other annual additions to a
Participant's account in a defined contribution plan under the
Code, and a Beneficiary of a Key Employee shall be treated as a
Key Employee.
13.9 Non-Key Employee. The term "Non-Key Employee" means
any Employee (and any Beneficiary of an Employee) who is not a
Key Employee.
13.10Change from Top-Heavy Status. In the event the Plan
should become a Top-Heavy Plan for a Plan Year and subsequently
reverts to a Plan which is not Top-Heavy, (a) and (b) below shall
apply:
<PAGE>
a. The change from a Top-Heavy Plan to a plan which
is not Top-Heavy shall not reduce a Participant's
non-forfeitable right to any benefit he has
accrued under the Plan, and any Participant who
has completed five or more Years of Service at the
time the Plan reverts to a plan which is not Top-
Heavy shall have his non-forfeitable right to
benefits under the Plan determined in accordance
with Section 13.2.
b. The change from a Top-Heavy Plan to a Plan which
is not Top-Heavy shall not reduce a Participant's
Accrued Benefit.
ARTICLE XIV
GENERAL PROVISIONS
14.1 Plan Voluntary. Although it is intended that the Plan
shall be continued and that contributions shall be made as herein
provided, this Plan is entirely voluntary on the part of the
Participating Employer and the continuance of this Plan and the
payment of contributions hereunder are not to be regarded as
contractual obligations of such Participating Employer. The
Participating Employers do not guarantee or promise to pay or to
cause to be paid any of the benefits provided by this Plan. Each
person who shall claim the right to any payment or benefit under
this Plan, shall be entitled to look only to the Trust Fund for
any such payment or benefit and shall not have any right, claim,
or demand therefore against the Participating Employer, except as
provided by law. The Plan shall not be deemed to constitute a
contract between the Participating Employer and any Employee or
to be a consideration for, or an inducement for, the employment
of any Employee by the Participating Employer. Nothing contained
in the Plan shall be deemed to give any Employee the right to be
retained in the service of the Participating Employer or to
interfere with the right of the Participating Employer to
discharge or to terminate the service of any Employee at any time
without regard to the effect such discharge or termination may
have on any rights under the Plan.
14.2 Payments to Minors and Incompetents. If a Participant
or Beneficiary entitled to receive any benefits hereunder is a
minor or is deemed by the Committee, or is adjudged, to be
legally incapable of giving valid receipt and discharge for such
benefits, such benefits will be paid to such person or
institution as the Committee may designate or to the duly
appointed guardian. Such payment shall, to the extent made, be
deemed a complete discharge of any liability for such payment
under the Plan.
14.3 Nonalienation of Benefits. Except as provided under a
qualified domestic relations order, as defined in Section 414(p)
of the Code, no amount payable to, or held under the Plan for the
account of, any Participant or Beneficiary shall be subject in
any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt to so
<PAGE>
anticipate, alienate, sell, transfer, assign, pledge, encumber or
charge the same shall be void. Nor shall any amount payable to,
or held under the Plan for the account of, any Participant of
Beneficiary be in any manner liable for his debts, contracts,
liabilities, engagements or torts, or be subject to any legal
process to levy upon or attach the same.
14.4 Merger, Consolidation or Transfer. In the event that
the Plan is merged or consolidated with any other plan, or should
the assets or liabilities of the Plan be transferred to any other
plan, each Participant shall be entitled to a benefit immediately
after such merger, consolidation or transfer if the Plan should
then terminate equal to or greater than the benefit he would have
been entitled to receive immediately before such merger,
consolidation or transfer if the Plan had then terminated.
14.5 Return of Contributions to Participating Employers.
The Plan is created for the exclusive benefit of Participants and
their Beneficiaries. Except as specifically otherwise provided
in Sections 12.4, 14.8 and 14.12, at no time shall any
contributions to the Plan by a Participating Employer or any
assets of the Trust Fund ever revert to or be used by a
Participating Employer.
14.6 Payment of Small Benefits. If the Actuarial Equivalent
present value of monthly payments of retirement income to any
person would amount to less than $3,500 before such payments have
commenced, the Committee shall direct the Trustee to pay such
person the then present value of such retirement income in one
lump sum payment.
14.7 Recovery of Payments Made Due to a Mistake of Fact. If
it is determined that the retirement income under the Plan
actually being paid to a Participant due to a mistake of fact,
including, but not limited to, the calculation of the offset to a
Participant's Accrued Benefit for the value of the Participant's
account under the Avondale ESOP, is greater than the income such
Participant is entitled to receive pursuant to Articles IV, V and
VI, the Committee may elect to alter subsequent payments to such
Participant in order to recover the value of such overpayments.
14.8 Internal Revenue Service Approval. If the Plan shall
not be initially approved and qualified by the Internal Revenue
Service so as to permit the Employer to deduct its contributions
to the Trust Fund for income tax purposes, or shall not remain so
approved and qualified, all Participating Employer contributions
shall be returned to the applicable Participating Employer.
This Section 14.8 shall apply only if contributions are
returned within one year from the date on which the Internal
Revenue Service issues a notice that the Plan is not qualified.
14.9 Construction of Agreement. The Plan shall be
administered, construed and enforced according to the laws of the
State of Louisiana; provided, however, wherever applicable the
provisions of ERISA shall govern, and in such event the laws of
the United States of America shall be applied and to the extent
necessary, its courts shall have competent jurisdiction.
<PAGE>
14.10Headings. The headings of Articles and Sections of
this Plan are for convenience of reference only, and in the case
of any conflict between any such headings and the text of this
Plan, the text shall govern.
14.11Use of Masculine and Feminine; Singular and Plural.
Wherever used in this Plan, the masculine gender will include the
feminine gender and the singular will include the plural, unless
the context indicates otherwise.
14.12Return of Employer Contributions in Excess of Amount
Deductible. A contribution conditioned upon its deductibility
under Section 404 of the Code, may be returned, to the extent the
deduction is disallowed, to the Employer within one (1) year
after the disallowance.
<PAGE>
IN WITNESS WHEREOF, Avondale Industries, Inc. has caused
this instrument to be executed by its officers thereunto duly
authorized and its corporate seal to be hereunto affixed, as of
the 28th day of December, 1994.
AVONDALE INDUSTRIES, INC.
BY:\s\ Thomas M. Kitchen
Thomas M. Kitchen
Vice President & Chief Financial
Officer & Secretary
AVONDALE SERVICES CORPORATION
BY:\s\ Thomas M. Kitchen
Thomas M. Kitchen
Vice President & Secretary
AVONDALE GULFPORT MARINE, INC.
BY:\s\ Thomas M. Kitchen
Thomas M. Kitchen
Vice President, Secretary
& Treasurer
AVONDALE INDUSTRIES OF NEW YORK,
INC.
BY: \s\ Thomas M. Kitchen
Thomas M. Kitchen
Vice President, Treasurer
& Secretary
AVONDALE TRANSPORTATION COMPANY,
INC.
BY: \s\ Thomas M. Kitchen
Thomas M. Kitchen
Vice President & Secretary
AVONDALE ENTERPRISES, INC.
BY: \s\ Thomas M. Kitchen
Thomas M. Kitchen
Vice President. Secretary
& Treasurer
ATTEST:
\s\ Thomas M. Kitchen
Secretary
(CORPORATE SEAL)
<PAGE>
AVONDALE INDUSTRIES, INC. PENSION PLAN
APPENDIX A
PARTICIPATING EMPLOYERS
The following Participating Employers have entered under this
Plan as of the following dates. Such dates of participation
shall be used for purposes of determining such Participating
Employers' Employees' eligibility to participate under the Plan.
Such dates shall also be used for determining Years of Service
for both vesting and benefit accrual purposes under the Plan, if
later than the dates specified in Section 1.38 of this Plan.
------------------------------------------------------------------
Participating Employer Date of Participation
------------------------------------------------------------------
Avondale Industries, Inc. October 1, 1985
------------------------------------------------------------------
Avondale Services Corporation October 1, 1985
------------------------------------------------------------------
Avondale Gulfport Marine, Inc. July 2, 1988
Avondale Industries of New York, July 1, 1989
Inc.
July 1, 1989
Avondale Transportation Co.,
Inc. January 1, 1990
Avondale Enterprises, Inc.
------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. PENSION PLAN
APPENDIX B
REDUCTION FACTORS FOR EARLY RETIREMENT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------
|Age | MONTHS |
------------------------------------------------------------------------------------------------------------------
| |0 |1 |2 |3 |4 |5 |6 |7 |8 |9 |10 |11 |
------------------------------------------------------------------------------------------------------------------
|55 |0.4960 |0.4988 |0.5016 |0.5044 |0.5072 |0.5100 |0.5128 |0.5156 |0.5184 |0.5212 |0.5240 |0.5268 |
------------------------------------------------------------------------------------------------------------------
|56 |0.5296 |0.5324 |0.5352 |0.5380 |0.5408 |0.5436 |0.5464 |0.5492 |0.5520 |0.5548 |0.5576 |0.5604 |
------------------------------------------------------------------------------------------------------------------
|57 |0.5632 |0.5660 |0.5688 |0.5716 |0.5744 |0.5772 |0.5800 |0.5828 |0.5856 |0.5884 |0.5912 |0.5940 |
------------------------------------------------------------------------------------------------------------------
|58 |0.5968 |0.5996 |0.6024 |0.6052 |0.6080 |0.6108 |0.6136 |0.6164 |0.6192 |0.6220 |0.6248 |0.6276 |
------------------------------------------------------------------------------------------------------------------
|59 |0.6304 |0.6332 |0.6360 |0.6388 |0.6416 |0.6444 |0.6472 |0.6500 |0.6528 |0.6556 |0.6584 |0.6612 |
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
|60 |0.6640 |0.6696 |0.6752 |0.6808 |0.6864 |0.6920 |0.6976 |0.7032 |0.7088 |0.7144 |0.7200 |0.7256 |
------------------------------------------------------------------------------------------------------------------
|61 |0.7312 |0.7368 |0.7424 |0.7480 |0.7536 |0.7592 |0.7648 |0.7704 |0.7760 |0.7816 |0.7872 |0.7928 |
------------------------------------------------------------------------------------------------------------------
|62 |0.7984 |0.8040 |0.8096 |0.8152 |0.8208 |0.8264 |0.8320 |0.8376 |0.8432 |0.8488 |0.8544 |0.8600 |
------------------------------------------------------------------------------------------------------------------
|63 |0.8656 |0.8712 |0.8768 |0.8824 |0.8880 |0.8936 |0.8992 |0.9048 |0.9104 |0.9160 |0.9216 |0.9272 |
------------------------------------------------------------------------------------------------------------------
|64 |0.9328 |0.9384 |0.9440 |0.9496 |0.9552 |0.9608 |0.9664 |0.9720 |0.9776 |0.9832 |0.9888 |0.9944 |
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
|65 |1.000 | | | | | | | | | | | |
------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES:
- Factors determined as follows:
----------------------------------------------------------------------------
Age Factor
----------------------------------------------------------------------------
65 1.000
At least 60 but under 65 1.000 minus .56% for each month prior
At least 55 but under 60 to age 65
.6640 minus .28% for each month prior
to age 60
----------------------------------------------------------------------------
- Multiply benefit payable at age 65 by factor above to determine a benefit
payable at an earlier retirement date.
AVONDALE SERVICES CORPORATION
EXECUTIVE GROUP INSURANCE BENEFITS PLAN
AND SUMMARY PLAN DESCRIPTION
PREAMBLE
Avondale Services Corporation (the "Company"), a corporation
organized and existing under the laws of the State of Delaware,
adopted the Avondale Services Corporation Executive Group
Insurance Benefits Plan on February 20, 1990, pursuant to its
desire to continue and maintain its policy to provide increased
insurance benefits (in addition to the group insurance benefits
provided to all eligible employees of Avondale Services
Corporation) to certain employees designated by the Board of
Directors of Avondale Industries, Inc., which plan and the
amendments thereto made through December 31, 1993, shall
hereinafter be referred to as the "Prior Plan."
Effective January 1, 1994, the Avondale Services Corporation
Executive Group Insurance Benefits Plan is amended and restated
as set forth in this document and any amendments hereto and shall
hereinafter be referred to as the "Plan." The Plan is the
continuation of the Prior Plan and no gap in time or effect
exists, or shall ever be construed to exist, between them.
ARTICLE I
Participation
Participation in the Plan shall be limited to those
employees of Avondale Services Corporation designated by the
Board of Directors of Avondale Industries, Inc. as Participants
in the Plan. The names of all Participants designated by the
Board of Directors shall be listed on the attached Exhibit A.
ARTICLE II
Benefits
The benefits payable under the Plan shall be identical to
the Group Life, Accidental Death and Dismemberment, Salary
Continuation, Business Travel, and Comprehensive Medical Benefits
paid to employees of Avondale Services Corporation under its
Group Insurance Benefits Plan as set forth in applicable plan
documents (dated January 1, 1991), insurance contracts and the
Avondale Services Corporation Employee Benefit Plan booklet and
summary plan description dated January 1, 1994 (as may be
modified from time to time), which documents are incorporated
herein by reference. All capitalized terms not otherwise defined
herein shall have the meaning ascribed to them in the Avondale
Industries, Inc. Avondale Services Corporation Plan.
In addition to the benefits paid pursuant to Avondale
Services Corporation Group Insurance Benefits Plan, the following
additional benefits and/or modifications shall apply to
Participants in the Plan during their employment with Avondale
Services Corporation and, where indicated, after retirement or
<PAGE>
Total Disability provided such Participant is employed by
Avondale Services Corporation at the time of retirement or Total
Disability:
-----------------------------------------------------------------
Coverage Description
-----------------------------------------------------------------
Employee Life 2 times base salary
Optional Coverage-additional
one or two times base salary,
plus previous year bonus
Maximum Coverage-Two million
dollars
-----------------------------------------------------------------
Dependent Life Optional - $100,000.00
-----------------------------------------------------------------
Retiree Life One half of life insurance in
force at time of retirement
-----------------------------------------------------------------
Total Disability (Totally Employee Life (as set forth
Disabled) prior to Normal above) in force prior to Total
Retirement Date Disability continues until
Normal Retirement Date;
thereafter Retiree Life
-----------------------------------------------------------------
Long Term Disability 60% of monthly base salary,
after 180 day waiting period.
Maximum $5,000.00 per month
coordinated with Disability
Social Security Benefit
-----------------------------------------------------------------
Retiree Health Comprehensive Medical Benefits
(as provided under the
Avondale Services Corporation
Group Insurance Benefits Plan)
shall continue beyond a
Participant's retirement for
his life without any premium
payment during the
Participant's life. The
Participant's surviving spouse
may continue coverage
thereafter without any premium
payment for her life.
Provided, however, that upon a
Retiree's eligibility for
Medicare, this Retiree Health
benefit shall be paid only as
a supplement to Medicare and a
<PAGE>
Participant must establish his
entitlement to Medicare
benefits to be eligible for
the supplemental Retiree
Health benefits provided
herein.
-----------------------------------------------------------------
Total Disability (Totally An Employee who is Totally
Disabled) Disabled will be treated as an
"Active Employee" for twelve
(12) months following the
commencement of the Disability
so long as he remains Totally
Disabled. When a Totally
Disabled Participant is no
longer an "Active Employee"
such Participant will be
treated as a Retiree eligible
for the supplemental Retiree
Health benefits provided
herein.
Provided, however, that when
such Participant becomes
eligible for Medicare, this
Retiree Health benefit shall
be paid only as a supplement
to Medicare and a Participant
must establish his entitlement
to Medicare benefits to be
eligible for the supplemental
Retiree Health benefits
provided herein.
ARTICLE III
Administration
The Board of Directors of Avondale Services Corporation has
primary responsibility for the administration of the Plan,
including interpretation of all Plan provisions and determination
of benefit entitlement; provided, however, that the Participant
shall be entitled to utilize the claim review procedure set forth
in the Avondale Industries, Inc. Corporate Services Avondale
Health Plan booklet.
The Board of Directors of Avondale Services Corporation may
delegate its responsibilities, other than its powers to amend or
terminate the Plan, to a Committee appointed by it. The Board of
Directors of Avondale Services Corporation can override any
decision of the Committee.
The Company agrees to indemnify and hold harmless each
person serving as a member of the Committee from all liabilities
and claims arising from the good faith performance of his duties
in accordance with the terms of the Plan.
<PAGE>
ARTICLE IV
Termination or Amendment
Although Avondale Services Corporation expects and intends
to continue this Plan indefinitely, it reserves the right to
modify, amend, suspend or terminate the Plan at any time by
resolution of the Board of Directors of Avondale Services
Corporation; provided, however, that no such amendment or
termination shall be effective without the concurrence of the
Board of Directors of Avondale Industries, Inc.
ARTICLE V
Plan Identification and Administration
-----------------------------------------------------------------
Name of Plan Avondale Services Corporation
Executive Group Insurance
Benefits Plan
-----------------------------------------------------------------
Type of Plan Welfare Benefit Plan which
provides health care benefits
-----------------------------------------------------------------
Sponsoring Employer and Plan Avondale Industries, Inc.
Administrator P.O. Box 50280
New Orleans, LA 70150
5100 River Road
Avondale, LA 70094
-----------------------------------------------------------------
Plan No. 501
-----------------------------------------------------------------
Plan Year January 1 through December 31
-----------------------------------------------------------------
Employer Identification No. 39-1097012
-----------------------------------------------------------------
Plan Fiduciary Avondale ERISA Review
Committee
P.O. Box 50280
New Orleans, LA 70150
5100 River Road
Avondale, LA 70094
-----------------------------------------------------------------
Agent for Service of Legal R. Dean Church
Process P.O. Box 50280
New Orleans, LA 70150
Service may also be made on
the Plan Administrator
-----------------------------------------------------------------
Benefits Provided By and DBL Services, Inc.
Disbursements From the Plan 515 Olive, Suite 700
Made By St. Louis, MO 63101
<PAGE>
Mental Health Associates, Inc.
Two Lakeway Center
3850 N. Causeway Blvd., Suite
1140
Metairie, Louisiana 70002
-----------------------------------------------------------------
Contributions to the Plan The Health Care Benefits under
the Plan are paid for
partially by Avondale
Industries, Inc. and partially
by Employees. The costs of
dependent care coverage are
paid for partially by Avondale
Industries, Inc. and partially
by those Employees eligible to
elect dependent care coverage.
The contributions are
determined by Avondale
Industries, Inc. based on the
actual cost of benefits.
ARTICLE VI
Your Rights Under ERISA
As a Participant in the Avondale Services Corporation
Executive Group Insurance Benefits Plan, you are entitled to
certain rights and protections under the Employee Retirement
Income Security Act of 1974 ("ERISA"). ERISA provides that all
Plan Participants shall be entitled to:
Examine without charge, at the Employee Benefits Department
where you work, all Plan documents, including those filed by the
Plan with U.S. Department of Labor, such as annual reports and
Plan descriptions.
Obtain, upon written request to the Plan Administrator,
copies of all Plan documents, for which a reasonable charge will
be made.
Receive a summary of the Plan's annual financial report.
File suit in a federal court if any materials requested by you
are not received within 30 days of your request. The court may
require the Company to pay you up to $100 for each day beyond 30
days until you receive the materials, unless the materials were
not sent because of reasons beyond the control of the Plan
Administrator.
In addition to creating rights for Plan Participants, ERISA
imposes duties upon the Company and upon "fiduciaries" that are
responsible for the operation of the Plan. The Company may not
discharge you or otherwise discriminate against you to prevent
you from obtaining a benefit or exercising your rights under
ERISA.
If you have a claim for benefits which is denied in whole or
in part, you must receive a written explanation stating the facts
upon which the denial is based and the Plan provisions upon which
the denial was based.
<PAGE>
All decisions of the Avondale ERISA Review Committee shall
be final and binding on all employees, participants and their
beneficiaries. No claimant may file suit in a court to obtain
benefits under the Plan without first completely exhausting all
stages of the claims review process.
If Plan fiduciaries misuse the Plan's money, or if you are
discriminated against for asserting your rights, you may seek
assistance from the U.S. Department of Labor, or you may file a
suit in a federal court. If you are successful, the court may
order the other party to pay your court costs and legal fees. If
you lose, the court may order you to pay these costs and fees-for
example, if it finds your claim frivolous.
If you have any questions about this statement or your
rights under ERISA, you should contact the Plan Administrator at
the nearest Area Office of the U.S. Department of Labor-
Management Services Administrator, Department of Labor.
Executed in Avondale, Louisiana, this 25th day of
March, 1994.
WITNESSES: AVONDALE SERVICES CORPORATION
\s\ Jackie H. Walker BY: \s\ Thomas M. Kitchen
\s\ Robin L. Dempsey
<PAGE>
EXHIBIT A
The following individuals have been designated by the Board of
Directors of Avondale Industries, Inc. as Participants in the
Avondale Services Corporation Executive Group Insurance Benefits
Plan:
Harris F. Arnold (Retired)
Albert L. Bossier, Jr.
Richard F. Brunner (Deceased)
Vivian
Ronald D. Church
Melvin Colen (Deceased) June
James H. Cottrell (Retired)
Rodney J. Duhon, Jr.
Kenneth B. Dupont
Ernest F. Griffin, Jr.
William A. Harmeyer (Retired)
Bruce L. Hicks
Thomas M. Kitchen
Rene P. Meric
Joseph W. Oberfell (Retired)
REVOLVING CREDIT AGREEMENT
dated as of May 10, 1994
among
AVONDALE INDUSTRIES, INC.,
as the Company
VARIOUS FINANCIAL INSTITUTIONS,
as the Banks
and
CONTINENTAL BANK N.A.
as the Agent for the Banks
<PAGE>
This REVOLVING CREDIT AGREEMENT dated as of May 10,
1994, by and among AVONDALE INDUSTRIES, INC., a Louisiana
corporation (the "Company"), the various financial institutions
signatory hereto (collectively, the "Banks," and, individually, a
"Bank"), and CONTINENTAL BANK N.A. as agent for the Banks (the
"Agent").
W I T N E S S E T H:
WHEREAS, the Company wishes to repay certain of its
existing Indebtedness, obtain a revolving credit facility to
provide financing for the Company's reimbursement obligations
under Letters of Credit and for general corporate purposes,
including the Company's ongoing working capital requirements;
WHEREAS, the Company wishes to obtain a letter of
credit facility (i) to refinance and replace certain existing
letters of credit issued for the account of the Company and
(ii) for the Company's ongoing letter of credit requirements; and
WHEREAS, upon the terms and subject to the conditions
set forth herein, the Agent is willing to cause the LC Issuer to
issue letters of credit for the account of the Company and the
Banks are willing to (i) make loans and advances to the Company
and (ii) purchase participations in letters of credit issued by
the LC Issuer for the account of the Company.
NOW, THEREFORE, the Company, the Banks and the Agent
hereby agree as follows:
SECTION I
DEFINITIONS
Section 1.1 Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such
definitions, and the definitions of all other terms defined
herein, to be equally applicable to both their singular and
plural forms):
"Account Debtor" shall mean, with respect to any
Account, the Person who is obligated on such Account.
"Accounts" shall mean (i) any right to payment for
goods sold, delivered or leased or for services rendered which is
not evidenced by an instrument or chattel paper, whether or not
it has been earned by performance and (ii) any right to payment
due under any and all contracts for the construction of ships or
other vessels.
"Acquisition" shall mean any transaction or series of
transactions by which the Company acquires, either directly or
through an Affiliate or Subsidiary or otherwise, (x) any or all
of the stock or other securities of any class of any Person or
(y) a substantial portion of the assets, or a division or line of
business of any Person.
<PAGE>
"Adjusted Consolidated Net Income - Cash Flow Coverage"
shall mean, for any period, the sum of:
(a) Consolidated Net Income for such period;
plus
(b) depreciation and amortization of the Company and
its Subsidiaries for such period;
plus
(c) extraordinary losses (or minus extraordinary
gains) on the sale or other transfer of assets or adjustment
of the carrying value of any assets, in each case, of the
Company or its Subsidiaries for such period;
less
(d) Capital Expenditures of the Company or its
Subsidiaries for such period; and
less
(e) cash dividends paid with respect to the capital
stock of the Company for such period.
"Adjusted Consolidated Net Income - Interest Coverage"
shall mean, for any period the sum of:
(a) Consolidated Net Income for such period;
plus
(b) depreciation and amortization of the Company and
its Subsidiaries for such period;
plus
(c) extraordinary losses (or minus extraordinary
gains) on the sale or other transfer of assets or adjustment
of the carrying value of any assets, in each case, of the
Company or its Subsidiaries for such period;
plus
(d) Consolidated Cash Interest Expense of the Company
and its Subsidiaries for such period; and
plus
(e) income tax expense of the Company and its
Subsidiaries during such period.
"Affiliate" of any Person shall mean any other Person
who, directly or indirectly, controls or is controlled by or is
under common control with such Person. A Person shall be deemed
<PAGE>
to be "controlled by" any other Person who possesses, directly or
indirectly, power: (a) to vote 10% or more of the securities
having ordinary voting power for the election of directors of
such Person, or (b) to direct or cause the direction of the
management and policies of such Person, whether by contract or
otherwise.
"Agent" shall mean Continental Bank N.A. and its
successors, or such other Bank or financial institution as shall
have been subsequently appointed as successor Agent pursuant to
Section 9.3 of this Agreement.
"Agreement" shall mean this Revolving Credit Agreement,
as amended, amended and restated, supplemented or otherwise
modified from time to time.
"Alternate Base Rate" shall mean, for any day, a
fluctuating rate of interest per annum equal to the greater of
(i) the Base Rate in effect on such day or (ii) the Federal Funds
Effective Rate in effect on such day plus .50%. For purposes of
this Agreement, any change in the Alternate Base Rate due to a
change in the Base Rate shall be effective on the date such
change in the Base Rate is announced, any change in the Alternate
Base Rate due to a change in the Federal Funds Effective Rate
shall be effective on the effective date of such change in the
Federal Funds Effective Rate. If for any reason the Agent shall
have determined (which determination shall be conclusive in the
absence of manifest error) that it is unable to ascertain the
Federal Funds Effective Rate for any reason, including the
inability or failure of the Agent to obtain sufficient bids or
publications in accordance with the terms hereof, the Alternate
Base Rate shall be a fluctuating rate per annum equal to the Base
Rate in effect from time to time until the circumstances giving
rise to such inability no longer exist.
"Applicable Margin" shall mean in respect of any
Eurodollar Rate Loan, two and one-half (2.5%) percent.
"Articles of Incorporation" shall mean the Articles of
Incorporation of the Company dated March 16, 1990 and March 20,
1990, as filed with the Louisiana Secretary of State as the same
may be amended or supplemented from time to time.
"Assessed Value" shall mean the fair market value as
determined from time to time by an independent appraiser
acceptable to the Agent, of a piece of property or equipment,
less the amount of any Indebtedness secured by the property or
equipment.
Assignment and Assumption Agreement shall mean an
assignment and assumption agreement entered into by an assigning
Bank and an assignee Bank, and accepted by the Agent, in
accordance with Section 10.7, substantially in the form of
Exhibit A.
"Assignment of Claims Notice (Company)" shall mean,
collectively, the Notices of Assignment with respect to the Navy
Contracts of the Company sent to the United States government by
<PAGE>
the Agent, pursuant to the Assignment of Claims Act of 1940 as
amended (31 U.S.C. 3727, 41 U.S.C. 15) and acknowledged by the
appropriate administrative contracting officer, and disbursing
officer, and if applicable, any surety on any bond applicable to
the Navy Contracts.
"Available Commitment" shall mean, at any particular
time, for each Bank, an amount equal to the excess, if any, of
(a) the amount of such Bank's Commitment at such time over (b)
the sum of the aggregate unpaid principal amount at such time of
all Loans made by such Bank pursuant to this Agreement plus the
amount of such Bank's Percentage of the Letter of Credit
Outstandings at such time.
"Avondale Cash Debit" shall have the meaning assigned
to such term in the Preferred Stock Purchase Agreement.
"Avondale Drydock" shall mean that certain floating
drydock named AVONDALE DRYDOCK, Official Number 568190.
"Bank Party" shall have the meaning given to said term
in Section 10.5.
"Base Rate" shall mean, at any time and from time to
time, the rate per annum then most recently announced by the
Agent at its head office as its base or reference rate. The Base
Rate is not necessarily intended to be the lowest rate of
interest determined by the Agent in connection with extensions of
credit. The Agent shall give notice promptly to the Company and
the Banks of changes in the Base Rate.
"Base Rate Loans" shall mean a Loan bearing interest at
a fluctuating rate of interest determined by reference to the
Alternate Base Rate.
"Borrowing Base" shall have the meaning given to said
term in Section 2.3(a).
"Borrowing Base Certificate" shall mean a certificate
substantially in form of Exhibit B executed by a Responsible
Officer of the Company and delivered to the Agent.
"Borrowing Date" shall mean any Business Day specified
in a notice pursuant to Sections 2.4 or 3.1 as a date on which
the Company requests the Banks to make Loans hereunder or the LC
Issuer to issue a Letter of Credit.
"Borrowing Request" means a loan request and
certificate duly executed by a Responsible Officer of the Company
on behalf of the Company and substantially in the form of Exhibit
C.
"Business Day" shall mean:
(a) a day other than a Saturday, Sunday or other
day on which commercial banks in Chicago, Illinois, are
authorized or required by law to close; and
<PAGE>
(b) relative to the date of:
(i) making or continuing any Loans as, or
converting any Loans from or into, Eurodollar Rate
Loans,
(ii) making any payment or prepayment of
principal of or payment of interest on any portion
of the principal amount of any Loans being
maintained as Eurodollar Rate Loans, or
(iii) the Company's giving notice (or the
number of Business Days to elapse prior to the
effectiveness thereof) in connection with any
matter referred to in clause (b)(i) or (b)(ii),
any day on which dealings in Dollars are carried on in
the interbank market of the Agent's Eurodollar Office.
"Capital Expenditures" shall mean, as to any Person,
without duplication and for any period, the cost attributed in
accordance with GAAP consistent with those applied in preparation
of the financial statements referred to in Section 4.1 to
acquisitions during such period by such Person of any asset,
tangible or intangible, or replacements or substitutes therefor
or additions thereto which such Person treated as a noncurrent
asset on such Person's financial statements, including, without
limitation, the acquisition or construction of assets having a
useful life of more than one year.
"Cash Equivalent Investments" shall mean (i) securities
issued, guaranteed or insured by the United States or any of its
agencies with maturities of not more than one year from the date
acquired; (ii) certificates of deposit or other deposit
arrangements with maturities of not more than one year from the
date acquired issued by a U.S. federal or state chartered
commercial bank of recognized standing, which has capital and
unimpaired surplus in excess of $200,000,000 and which bank or
its holding company has a short-term commercial paper rating of
at least A-1 or the equivalent by Standard & Poor's Corporation
and at least P-1 or the equivalent by Moody's Investors Services,
Inc.; (iii) reverse repurchase agreements with terms of not more
than seven days from the date acquired, for securities of the
type described in clause (i) above and entered into only with
commercial banks having the qualifications described in clause
(ii) above; (iv) commercial paper, master notes, or corporate
debt obligations other than those issued by the Company or any of
its Affiliates, issued by any Person incorporated under the laws
of the United States or any state thereof and rated at least A-1
or the equivalent thereof by Standard & Poor's Corporation, at
least P-1 or the equivalent thereof by Moody's Investors Service,
Inc., or at least D-1 or the equivalent thereof by Duff & Phelps
Credit Rating Company, in each case with maturities of not more
<PAGE>
than one year from the date acquired; and (v) investments in
money market funds registered under the Investment Company Act of
1940, as amended, which have net assets of at least $200,000,000
and at least eighty-five percent (85%) of whose assets consist of
securities and other obligations of the type described in clauses
(i) through (iv) above.
"Cash Flow Coverage Ratio" shall mean, for any period,
the ratio of (i) Adjusted Consolidated Net Income - Cash Flow
Coverage during such period to (ii) Total Funded Debt as of the
last day of such period (subject to adjustment as provided
below). The Cash Flow Coverage Ratio shall be calculated as of
the last day of each fiscal quarter of the Company as follows:
(i) for the Company's fiscal quarters ending on June 30 and
September 30, 1994 Adjusted Consolidated Net Income - Cash Flow
shall be calculated for the period beginning on January 1, 1994
and ending on such date and shall be multiplied by 2 and 1- 1/3,
respectively, and (ii) for the Company's fiscal quarters ending
on and after December 31, 1994, Adjusted Consolidated Net Income
- Cash Flow shall be calculated for the four quarter period
ending on such date and no adjustment shall be made thereto.
"Cash Management Letter" shall mean a letter
substantially in the form of Exhibit D.
"CERCLA" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended.
"CERCLIS" shall mean the Comprehensive Environmental
Compensation Liability Information System List.
"Change of Control" shall mean any of the following
events:
(i) less than a majority of the members of the
Company's Board of Directors shall be persons who
either (A) were serving as directors on the date
of this Agreement or (B) were nominated as
directors and approved by the vote of the majority
of the directors who are directors referred to in
clause (A) above or this clause (B);
(ii) the failure of the Company to own 100% of the
capital stock of any Subsidiary Guarantor; or
(iii) the stockholders of the Company shall approve
any plan or proposal for the liquidation or
dissolution of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Code Affiliate" shall mean each trade or business
(whether or not incorporated) which together with the Company is
treated as a "single employer" under subsection (b), (c), (m) or
(o) of Section 414 of the Code.
<PAGE>
"Collateral" shall mean all of the property in respect
of which a Lien has been granted by the Company or any Subsidiary
Guarantor in favor of the Agent for the benefit of the Banks and
the LC Issuer under the terms of the Collateral Documents.
"Collateral Access Agreement" shall mean any landlord
waivers, mortgagee waivers, bailee letters or similar
acknowledgment agreements of any warehouseman or processor in
possession of any Inventory, in each case, in form and substance
acceptable to the Agent.
"Collateral Documents" shall mean all of the contracts,
instruments and other documents now or hereafter executed and
delivered in connection with this Agreement, pursuant to which
Liens are granted to the Agent in the Collateral for the benefit
of the Banks and the LC Issuer, including, without limitation the
900 Foot Floating Drydock Mortgage, Security Agreement (Company),
Subsidiary Guarantees, Stock Pledge Agreement (Company),
Subsidiary Security Agreements, each Assignment of Claims Notice
(Company) and Stock Pledge Agreement (ATS).
"Commitment" shall mean, for each Bank, for the period
from and including the Effective Date to but excluding the
Expiration Date the amount set forth in Schedule I under the
heading "Commitment" as such amount may be adjusted pursuant to
Section 2.5, Section VIII or Section 10.7.
"Consent Notice" shall have the meaning given to said
term in Section 2.17.
"Consolidated Net Income" shall mean, for any period,
the consolidated net income (or net loss) of the Company and its
Subsidiaries for such period, determined in accordance with GAAP.
"Consolidated Net Worth" shall mean, at a particular
date, all amounts which would be included under shareholders'
equity (except amounts relating to the then outstanding principal
balance of any Preferred Stock) on a consolidated balance sheet
of the Company and its Subsidiaries determined in accordance with
GAAP as at such date.
"Consolidated Cash Interest Expense" shall mean, for
any period, the amount of any cash interest paid by the Company
and it Subsidiaries during such period, determined in accordance
with GAAP.
"Contingent Obligation" shall mean, as to any Person,
any obligation of such Person guaranteeing or in effect
guaranteeing any Indebtedness, lease, dividend or other
obligation (the "primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person,
whether or not contingent (a) to purchase any such primary
obligation or any property constituting direct or indirect
security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor
<PAGE>
or otherwise to maintain the net worth or solvency of the primary
obligor or to permit the primary obligor to meet financial
covenants, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (d) otherwise to assure or
hold harmless the owner of any such primary obligation against
loss in respect thereof, including, without limitation contingent
obligations with respect to performance and other similar bonds
and instruments whether secured or unsecured; provided, however,
that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in
respect thereof as determined by the Company in good faith.
"Continental" shall mean Continental Bank N.A. and its
successors.
"Continuation/Conversion Notice" means a notice of
continuation or conversion and certificate duly executed by a
Responsible Officer of the Company and substantially in the form
of Exhibit E.
"Contractual Obligation" shall mean, as to any Person,
any provision of any security issued by such Person or of any
agreement, instrument or undertaking to which such Person is a
party or by which it or any of its property is bound.
"Credit Extension" shall mean (i) the making of any
Loan hereunder; or (ii) the issuance, renewal, modification or
extension of any Letter of Credit.
"Credits" shall have the meaning set forth in the
Preferred Stock Purchase Agreement.
"Customary Permitted Liens" shall mean (i) Liens for
taxes not yet due or which are being contested in good faith and
by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Company or the
appropriate Subsidiary, as the case may be, in accordance with
GAAP, (ii) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, vendor's, lessor's, workmen's, refurbisher's,
bunkerer's, employee's, crew's, stevedore's or other like Liens
or Liens for salvage, in each case, arising in the ordinary
course of business by operation of law which are not overdue for
a period of more than ninety days or which are being contested in
good faith and by appropriate proceedings and for which adequate
reserves have been made and (iii) Liens for salvage and general
average which are either unclaimed or fully covered by insurance.
"Debits" shall have the meaning set forth in the
Preferred Stock Purchase Agreement.
<PAGE>
"Default" shall mean any of the events specified in
Section VIII of this Agreement, whether or not any requirement
for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Disbursement Date" shall have the meaning given to
said term in Section 3.5.
"Dividend Calculation Period" shall have the meaning
given to said term in Section 7.6.
"Dollars" and "$" shall mean dollars in lawful currency
of the United States of America.
"Domestic Office" means, relative to any Bank, the
office of such Bank designated as such below its signature hereto
(or such other office of such Bank (or any successor or permitted
assign of such Bank) within the United States as may be
designated from time to time by notice from such Bank to the
Agent and the Company.
"Effective Date" shall have the meaning given to said
term in Section 5.1.
"Eligible Billed Commercial Receivables" shall mean at
any date, except as hereinafter provided in this definition, the
aggregate face amount of all trade Accounts of the Company and
the Subsidiary Guarantors, reduced (without duplication for the
amounts referred to in clauses (a) through (n) below) by the
amount of all returns, discounts, claims, credits, charges, or
other allowances and by the aggregate amount of all reserves and
limits (including limits on credit exposure to any Account
Debtor) required by the Agent pursuant to Section 2.3(b). Unless
otherwise approved in writing by the Agent, no Account shall be
deemed to be an Eligible Billed Commercial Receivable unless it
satisfies each of the following requirements to the satisfaction
of the Agent:
(a) the Company or the applicable Subsidiary Guarantor
has title to such Account;
(b) such Account is a valid, binding and legally
enforceable obligation of the applicable Account Debtor;
(c) such Account is not the subject of any dispute,
setoff, counterclaim or other claim or defense on the part
of the Account Debtor denying liability under such Account,
in each case, in whole or in part; provided that if only a
portion of any such Account is the subject of any such
dispute, setoff, counterclaim, or other claim or defense on
the part of the Account Debtor denying liability under such
Account, only the portion of such Account which is subject
to such dispute, setoff, counterclaim or defense shall be
excluded as an Eligible Billed Commercial Receivable as a
result of the requirements specified in this clause (c);
<PAGE>
(d) the Company or a Subsidiary Guarantor has the
right to assign and grant Liens in such Account to the Agent
as security for the Obligations (or, in the case of a
Subsidiary Guarantor, as security for its obligations under
the Subsidiary Guarantee executed by it);
(e) such Account is subject to a fully perfected Lien
in favor of the Agent for its benefit and the ratable
benefit of the Banks, which Lien is fully perfected and,
subject only to Customary Permitted Liens, prior to the
rights of, and enforceable as such against, all other
Persons;
(f) such Account is not subject to any Lien in favor
of any Person other than the Liens created by the applicable
Collateral Documents and Customary Permitted Liens;
(g) such Account is a bona fide Account arising from
the delivery, charge or sale (on an absolute basis and not
on a consignment, approval, or sale-and-return basis) of
goods or the rendering of services by the Company or a
Subsidiary Guarantor in the ordinary course of its business,
which goods have been shipped, delivered or charged and made
available to, or which services have been performed for, the
Account Debtor for such Account; provided that, subject to
the other terms and conditions of this Agreement, up to
$3,000,000 of the aggregate face amount of Accounts of the
Company and the Subsidiary Guarantors may constitute
Eligible Billed Commercial Receivables regardless of whether
the goods or services with respect to which such Account
relates have been delivered or fully performed;
(i) with respect to such Account, no Account Debtor is
(i) incorporated in or primarily conducting
business in any jurisdiction located outside the United
States unless (A) such sale is either on an irrevocable
letter of credit acceptable to the Agent or acceptance
terms acceptable to the Agent or (B) such Account and
the related Account Debtor is otherwise approved by the
Agent in writing; provided that, the provisions of this
clause (i) shall not apply to the extent that such
Account Debtor is British Petroleum or any of its
Subsidiaries to the extent such Account is guaranteed
by British Petroleum, or Holland America or any of its
Subsidiaries to the extent such Account is guaranteed
by Holland America,
(ii) an Affiliate of the Company or any of its
Subsidiaries,
(iii) a foreign government or any agency,
department or instrumentality thereof unless such sale
is on an irrevocable letter of credit acceptable to the
Agent or acceptance terms acceptable to the Agent,
<PAGE>
(iv) the subject of any reorganization,
bankruptcy, debt arrangement, receivership,
custodianship, insolvency or other case or proceeding
under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding (and
such Account Debtor has not become insolvent or
generally failed to pay, or admitted in writing its
inability or unwillingness to pay, debts as they become
due), or
(v) an agency, department or instrumentality of
the United States or any state or local governmental
authority in the United States;
(j) such Account is not outstanding more than 90 days
after the date of the original applicable invoice related
thereto;
(k) such Account is not an Account owing by an Account
Debtor as to which, at the time of any determination of
Eligible Billed Commercial Receivables, more than 50% of the
aggregate amount owing by such Account Debtor to the Company
or any Subsidiary Guarantor under Accounts has been
outstanding more than 90 days after the date of the original
applicable invoice related thereto;
(l) no warranty or representation contained in this
Agreement or any Loan Document applicable either to Accounts
in general or to such Account has been breached in any
material respect with respect to such Account;
(m) such Account is denominated in Dollars and is
payable within the United States; and
(n) the sale represented by such Account is not on
terms longer than 60 days (or in the case of sales to Lykes
Lines Incorporated, on terms longer than 90 days).
"Eligible Billed U.S. Government Receivables" shall
mean at any date, except as hereinafter provided in this
definition, the aggregate face amount of all trade Accounts of
the Company and the Subsidiary Guarantors, reduced (without
duplication for the amounts referred to in clauses (a) through
(m) below) by the amount of all returns, discounts, claims,
credits, charges, or other allowances and by the aggregate amount
of all reserves and limits required by the Agent pursuant to
Section 2.3(b). Unless otherwise approved in writing by the
Agent, no Account shall be deemed to be an Eligible Billed U.S.
Government Receivable unless it satisfies each of the following
requirements to the satisfaction of the Agent:
(a) the Company or the applicable Subsidiary Guarantor
has title to such Account;
(b) such Account is a valid, binding and legally
enforceable obligation of the applicable Account Debtor;
<PAGE>
(c) such Account is not the subject of any dispute,
setoff, counterclaim or other claim or defense on the part
of the Account Debtor denying liability under such Account,
in each case, in whole or in part; provided that if only a
portion of any such Account is the subject of any such
dispute, setoff, counterclaim, or other claim or defense on
the part of the Account Debtor denying liability under such
Account, only the portion of such Account which is subject
to such dispute, setoff, counterclaim or defense shall be
excluded as an Eligible Billed Commercial Receivable as a
result of the requirements specified in this clause (c);
(d) the Company or a Subsidiary Guarantor has the
right to assign and grant Liens in such Account to the Agent
as security for the Obligations (or, in the case of a
Subsidiary Guarantor, as security for its obligations under
the Subsidiary Guarantee executed by it);
(e) such Account is subject to a fully perfected Lien
in favor of the Agent for its benefit and the ratable
benefit of the Banks, which Lien is fully perfected and,
subject only to Customary Permitted Liens, prior to the
rights of, and enforceable as such against, all other
Persons;
(f) such Account is not subject to any Lien in favor
of any Person other than the Liens created by the applicable
Collateral Documents and Customary Permitted Liens;
(g) such Account is a bona fide Account arising from
the delivery, charge or sale (on an absolute basis and not
on a consignment, approval, or sale-and-return basis) of
goods or the rendering of services by the Company or a
Subsidiary Guarantor in the ordinary course of its business,
which goods have been shipped, delivered or charged and made
available to, or which services have been performed for, the
Account Debtor for such Account;
(h) such Account arises under a Government Contract
with, and the Account Debtor with respect to such Account
is, the United States or any agency or instrumentality
thereof, including, without limitation, the United States
Navy;
(i) such Account is not outstanding more than 30 days
after the date of the original applicable invoice related
thereto;
(j) no warranty or representation contained in this
Agreement or any Loan Document applicable either to Accounts
in general or to such Account has been breached in any
material respect with respect to such Account;
(k) the Company or the applicable Subsidiary Guarantor
has assigned its rights to payment of such Account to the
Agent pursuant to the Assignment of Claims Act of 1940, as
amended (31 U.S.C. 3727, 41 U.S.C. 15), to the satisfaction
of the Agent;
<PAGE>
(l) such Account is denominated in Dollars and is
payable within the United States; and
(m) the sale represented by such Account is payable
upon presentation of the applicable invoice related thereto
to the contracting officer specified in the related
Government Contract.
"Eligible Commercial Inventory" shall mean, at any
date, except as hereinafter provided in this definition, the
value of Inventory of the Company and the Subsidiary Guarantors
that consists of raw materials or finished goods. In determining
such value such Inventory shall be valued at the lower of cost
(determined on an average cost basis) or market, less any goods
in transit to third parties (other than to the Company's or a
Subsidiary Guarantor's agents and warehouses for which the
Company has obtained the documentation referred to in clause (b)
below). The Borrowing Base shall also be reduced by the amount
of any reserves required by the Agent pursuant to Section 2.3(b).
Unless otherwise approved in writing by the Agent, no Inventory
shall be deemed Eligible Commercial Inventory unless it satisfies
each of the following requirements to the satisfaction of the
Agent:
(a) the Company or the applicable Subsidiary Guarantor
has title to such Inventory;
(b) with respect to any Inventory located on property
(i) owned by the Company or any Subsidiary Guarantor which
is subject to a mortgage, deed of trust or similar Lien in
favor of a Person other than the Agent, or (ii) which is not
owned by the Company or any Subsidiary Guarantor, if
requested by the Agent, the Company shall have delivered to
the Agent a Collateral Access Agreement executed, as
applicable, by the mortgagee, landlord, warehouseman or
processor with respect thereto;
(c) the Company or its applicable Subsidiary Guarantor
has the right to assign and grant a Lien in such Inventory
to the Agent as security for the Obligations;
(d) all of such Inventory is subject to a Lien in
favor of the Agent for its benefit and the ratable benefit
of the Banks, which Lien is fully perfected and, subject
only to Customary Permitted Liens, prior to the rights of,
and enforceable as such against, all other Persons;
(e) none of such Inventory is subject to any Lien in
favor of any Person other than the Liens created by the
applicable Collateral Documents and Customary Permitted
Liens;
(f) none of such Inventory is supplies and packaging;
<PAGE>
(g) none of such Inventory is subject to any
consignment with any Person;
(h) such Inventory meets in all material respects all
material standards imposed by any Person having regulatory
authority over such goods or their use and/or sale;
(i) such Inventory is located in one of the plants or
shipyards operated by the Company or a Subsidiary Guarantor;
(j) such Inventory has not been charged to a contract;
and
(k) none of such Inventory has given rise to any
Account
"Environmental Laws" means:
(a) CERCLA;
(b) the Resource Conservation and Recovery Act, as
amended by the Hazardous and Solid Waste Amendment Act of 1984,
42 U.S.C.A. Section 6901 et seq.;
(c) the Clean Air Act, 42 U.S.C.A. Section 7401 et
seq.;
(d) the Clean Water Act of 1977, 33 U.S.C.A. Section
1251 et seq.;
(e) the Toxic Substances Control Act, 15 U.S.C.A.
Section 2601 et seq.; and
(f) all other Federal, state and local laws, rules and
regulations relating to air pollution, water pollution, noise
control and/or the handling, discharge, existence, disposal or
recovery of on-site or off-site hazardous, toxic or dangerous
waste, substances or materials, as each of the foregoing may be
amended from time to time.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
"ERISA Affiliate" shall mean each trade or business
(whether or not incorporated) which together with the Company
would be deemed to be a "single employer" within the meaning of
Section 4001 of ERISA.
"ESOP" shall have the meaning given to said term in
Section 4.12.
<PAGE>
"Eurodollar Office" shall mean, relative to any Bank,
the office of such Bank designated as such below its signature
hereto (or, in the case of an assignee pursuant to Section 10.7,
in the assignment executed by it) or such other office of such
Bank as designated from time to time by notice from such Bank to
the Company and the Agent, whether or not outside the United
States, which shall be making or maintaining Eurodollar Rate
Loans of such Bank hereunder.
"Eurodollar Rate" shall mean, relative to the Interest
Period for each Eurodollar Rate Loan comprising all or any part
of the same borrowing, the rate of interest equal to the average
(rounded upwards, if necessary, to the nearest 1/16 of 1%) of the
rates per annum at which Dollar deposits in immediately available
funds are offered to each Reference Bank's Eurodollar Office in
the interbank eurodollar market as at or about 10:00 a.m.,
Chicago time, two Business Days prior to the beginning of such
Interest Period, for delivery on the first day of such Interest
Period, in an amount approximately equal or comparable to the
amount of such Reference Bank's Eurodollar Rate Loan comprising
part of such borrowing and for a period equal to such Interest
Period.
"Eurodollar Rate (Adjusted)" means, relative to any
portion of a Loan to be made, continued or maintained as, or
converted into, a Eurodollar Rate Loan for any Interest Period, a
rate per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) determined pursuant to the following formula:
Eurodollar Rate = Eurodollar Rate
(Adjusted) 1 - the Eurodollar
Reserve Percentage
"Eurodollar Rate Loan" shall mean a Loan bearing
interest, at all times during the Interest Period applicable to
such Loan, at a rate of interest determined by reference to the
Eurodollar Rate (Adjusted).
"Eurodollar Reserve Percentage" shall mean, relative to
any Interest Period, the reserve percentage (expressed as a
decimal) equal to the maximum aggregate reserve requirements
(including all basic, emergency, supplemental, marginal and other
reserves and taking into account any transitional adjustments or
other scheduled changes in reserve requirements) specified under
regulations issued from time to time by the F.R.S. Board and then
applicable to assets or liabilities consisting of and including
"Eurocurrency Liabilities", as currently defined in Regulation D
of the F.R.S. Board, having a term approximately equal or
comparable to such Interest Period.
"Event of Default" shall mean any of the events
specified in Section VIII of this Agreement, provided that any
requirement for the giving of notice, the lapse of time, or both,
or any other condition has been satisfied.
<PAGE>
"Excess Subsidiary Borrowing Base Amount" shall mean,
with respect to any Subsidiary Guarantor the excess, if any, of
(i)(A) seventy-five percent (75%) of such Subsidiary Guarantor's
Eligible Billed Commercial Receivables, plus (B) sixty percent
(60%) of such Subsidiary Guarantor's Eligible Billed U.S.
Government Receivables, plus (C) forty percent (40%) of such
Subsidiary Guarantor's Eligible Commercial Inventory over (ii)
the maximum liability of such Subsidiary Guarantor under, and
determined pursuant to the provisions of, the Subsidiary Guaranty
executed by it.
"Existing Credit Facility" shall mean the loans and
other financial accommodations made to the Company pursuant to
that certain Amended and Restated Credit Agreement dated as of
April 16, 1992, as amended, among the Company, various financial
institutions party thereto and Canadian Imperial Bank of
Commerce, New York Agency, as agent.
"Expiration Date" shall mean the earlier to occur of
(i) May 10, 1996; provided, however that in the event the
"Expiration Date" is extended pursuant to Section 2.17 the date
in this clause (i) shall be extended to such extended Expiration
Date, or (ii) the earliest date on which all of the following
shall have occurred: (x) the Letter of Credit Outstandings is
zero, (y) all Obligations (including, without limitation, all
Reimbursement Obligations) have been indefeasibly paid in full in
cash and have otherwise been satisfied and discharged in full and
(z) all Commitments have been reduced to zero.
"Extension Date" shall mean the date which is one year
prior to the then current Expiration Date.
"Extension Notice" shall mean a notice to the Agent
from the Company substantially in the form of Exhibit F.
"Federal Funds Effective Rate" means, for any day, an
interest rate per annum equal to the weighted average of the
rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as
published for such day by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds
brokers of recognized standing selected by it. In the case of a
day which is not a Business Day, the Federal Funds Effective Rate
for such day shall be the Federal Funds Effective Rate for the
next preceding Business Day.
"Fee Letter" shall mean that certain letter dated March
22, 1994 between Continental and the Company providing for, among
other things, the payment of certain fees in connection with this
Agreement.
<PAGE>
"Financing Lease" shall mean any lease obligation which
is capitalized on a balance sheet of a Person prepared in
accordance with GAAP.
First Preferred Ship Mortgage shall mean that certain
First Preferred Ship Mortgage dated October 21, 1975, granted on
the Avondale Drydock by Avondale Shipyards, Inc., a Louisiana
corporation and predecessor-in-interest to the Company, in favor
of the United States of America, represented by the Secretary of
Transportation, acting by and through the Maritime Administrator,
and recorded in the office of the Vessel Documentation Officer,
U.S. Coast Guard (the "Documentation Officer") in New Orleans,
Louisiana, in Preferred Mortgage Book No. 100, Instrument No. 1,
on October 21, 1975, at 10:30 a.m., as amended and supplemented
by that certain Assumption Agreement and Supplement No. 1 to
First Preferred Ship Mortgage dated September 27, 1985, made and
executed by Avondale Industries, Inc., a Delaware corporation and
predecessor-in-interest to Mortgagor, and recorded in the office
of the Documentation Officer in New Orleans, Louisiana, in
Preferred Mortgage Book 177, Instrument 71, on September 27,
1985, at 10:50 a.m., and as further assumed and supplemented by
that certain Assumption Agreement and Supplement No. 2 to First
Preferred Ship Mortgage dated March 13, 1991, made and executed
by Company, and recorded in the office of the Documentation
Officer in New Orleans, Louisiana, in Preferred Mortgage Book No.
228, Instrument No. 116, on March 13, 1991, at 10:39 a.m.
"Fixed Asset Property" shall mean property, plant and
equipment listed on the Company's consolidated balance sheet at
any time and which does not constitute Collateral.
"F.R.S. Board" shall mean the Board of Governors of the
Federal Reserve System.
"GAAP" shall mean generally accepted accounting
principles in the United States of America in effect from time to
time.
"Government Contract" shall have the meaning given to
said term in Section 4.18.
Governmental Authority" shall mean any sovereign state
or nation or government, any state or other political subdivision
thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining
to government, including, without limitation, the United States
Department of Defense and the United States Navy.
"Gulfport" means Avondale Gulfport Marine, Inc., a
Delaware corporation.
<PAGE>
"Hazardous Material" shall mean and includes (a) any
asbestos, PCBs, or dioxins, or insulation or other material
composed of or containing asbestos, PCBs or dioxins, (b) any
petroleum product, and (c) any hazardous, toxic, or dangerous
waste, substance, or material defined as such in (or for purposes
of) CERCLA, any so-called "Superfund" or "Superlien" law, or any
other applicable federal, state, local, or other statute, law,
ordinance, code, rule, regulation, order or decree regulating,
relating to, or imposing liability or standards of conduct
concerning, any hazardous, toxic, or dangerous waste, substance,
or material, as now or at any time hereafter in effect.
"Impermissible Qualification" shall mean, relative to
the opinion or certification of any independent public accountant
as to any financial statement of any Person, any qualification or
exception to such opinion or certification which:
(a) is of a "going concern" or similar nature;
(b) relates to the limited scope of examination or
matters relevant to such financial statement.
"Indebtedness" of a Person, shall mean, at a particular
date, the sum (without duplication and in conformity with GAAP)
at such date of (a) all indebtedness of such Person for borrowed
money or for the deferred purchase price of property or services
(including, without limitation, all notes payable and all
obligations evidenced by bonds, debentures, notes or other
similar instruments but excluding trade payables incurred in the
ordinary course of business), (b) obligations with respect to any
installment sale or conditional sale agreement or title retention
agreement, (c) indebtedness arising under acceptance facilities,
(d) unpaid reimbursement obligations arising in connection with
surety, performance or other similar bonds and in connection with
standby letters of credit issued in lieu of such bonds, (e) the
outstanding amount of all other letters of credit (other than
those referred to in clause (d)) issued for the account of such
Person and, without duplication, all unpaid reimbursement
obligations thereunder, (f) Financing Leases, (g) payment
obligations with respect to interest rate swap, cap, collar,
floating rate or similar agreements, (h) any withdrawal liability
obligation of such Person or an ERISA Affiliate to a
Multiemployer Plan, (i) any Preferred Stock of such Person to the
extent that such Preferred Stock is convertible at the option of
such Person or the holder thereof into Indebtedness of a type
described in another clause of this definition, and (j)
Contingent Obligations of such Person, including, without
limitation Contingent Obligations with respect to performance and
other similar bonds and instruments whether secured or unsecured,
but excluding any Contingent Obligations of the Company under the
Preferred Stock Purchase Agreement.
"Indemnified Liabilities" shall have the meaning given
to such term in Section 10.5.
<PAGE>
"Initial Credit Event" shall mean the initial Credit
Extension hereunder.
"Interest Coverage Ratio" shall mean, for any period,
the ratio of (i) Adjusted Consolidated Net Income - Interest
Coverage during such period to (ii) Consolidated Cash Interest
Expense during such period. The Interest Coverage Ratio shall be
calculated as of the last day of each fiscal quarter of the
Company as follows: (i) for the Company's fiscal quarters ending
on June 30 and September 30, 1994 Adjusted Consolidated Net
Income - Interest Coverage and Consolidated Cash Interest Expense
shall be calculated for the period beginning on January 1, 1994
and ending on such date and (ii) for the Company's fiscal
quarters ending on or after December 31, 1994, Adjusted
Consolidated Net Income - Interest Coverage Ratio and
Consolidated Cash Interest shall be calculated for the four
quarter period ending on such date.
"Interest Period" shall mean the period from the date
on which such Eurodollar Rate Loan is made or continued as, or
converted into, a Eurodollar Rate Loan pursuant to Section 2.4 or
2.7, and, unless the maturity of such Eurodollar Rate Loan is
accelerated, the day which numerically corresponds to such date
one, two or three months thereafter as the Company may select in
its irrevocable notice of borrowing to the Agent as provided in
Section 2.4 or in its notice of conversion as provided in Section
2.7 of this Agreement as the case may be; provided that, the
foregoing provisions relating to Interest Periods are subject to
the following:
(a) the Company shall not be permitted to select
Interest Periods to be in effect at any one time which have
expiration dates occurring on more than 4 different dates;
(b) if there exists no numerically corresponding
day in such month, such Interest Period shall end on the
last Business Day of such month;
(c) if such Interest Period would otherwise end
on a day which is not a Business Day, such Interest Period
shall end on the next following Business Day (unless such
next following Business Day is a Business Day falling in a
new calendar month, in which case such Interest Period shall
end on the Business Day next preceding such numerically
corresponding day); and
(d) the Company shall not be permitted to select,
and there shall not be applicable, any Interest Period that
would end later than the Expiration Date.
<PAGE>
"Inventory" shall mean all of the Company's "inventory"
as that term is defined in Section 9-109(4) of the UCC, and shall
include, without limitation: (i) all raw materials, work in
process, parts, components, assemblies, supplies and materials
used or consumed in the Company's business; (ii) all goods, wares
and merchandise, finished or unfinished, held for sale or lease
or leased or furnished or to be furnished under contracts of
service; and (iii) all goods returned or repossessed by the
Company.
"Investment" means, relative to any Person:
(a) any loan or advance made by such Person to
any other Person (excluding commission, travel and similar
advances to officers and employees made in the ordinary
course of business);
(b) any Contingent Obligation of such Person; and
(c) any ownership or similar interest held by
such Person in any other Person.
"Issuance Fee" shall have the meaning given to said
term in Section 3.3.
"Issuance Request" shall mean a certificate duly
executed by a Responsible Officer of the Company in substantially
the form of Exhibit G, and delivered to the LC Issuer (with a
copy to the Agent) requesting its issuance of the Letter of
Credit described therein.
"Jo Ann Agreements" shall mean, collectively, (i) the
Trust Indenture dated July 1, 1981, between Board of
Commissioners of the Port of New Orleans (the "Port") and First
National Bank of Commerce as Trustee (the "Bond Trustee"), as
supplemented by that certain First Supplemental Indenture dated
June 1, 1983 (the "First Supplemental Indenture"), and the Series
1983 Industrial Revenue Bonds outstanding and issued pursuant to
the terms thereof (the "Jo Ann Bonds"), (ii) the Installment
Sales Agreement dated July 1, 1981, between the Port and the
Company, as supplemented by that certain First Supplemental
Installment Sales Agreement dated June 1, 1983 (as so
supplemented, the "Installment Sales Agreement"), (iii) the
Reimbursement Agreement dated as of March 18, 1993 (the "Ogden
Reimbursement Agreement"), between Chemical Bank as successor by
merger to Manufacturers Hanover Trust Company ("Chemical Bank")
and Ogden, (iv) the Irrevocable Letter of Credit No. SC016860
(prior to any amendment, the "Original Letter of Credit"), as
amended by an Amendment to Irrevocable Letter of Credit No.
SC016860 issued by Chemical Bank for the account of Ogden in the
original face amount of $37,994,532 in favor of First National
<PAGE>
Bank of Commerce, as Bond Trustee (as so amended, the "Ogden
Letter of Credit"), (v) the Guaranty Agreement dated as of July
1, 1981, made by Ogden Management Corporation in favor of the
Bond Trustee, as supplemented by that certain First Supplemental
Guaranty Agreement dated as of June 1, 1983, and (vi) the
Guaranty and Indemnity Agreement dated July 1, 1981, made by
Ogden in favor of the Port, as supplemented by that certain First
Supplemental Guaranty and Indemnity Agreement dated June 1, 1983,
in the case of each of the agreements and documents referenced in
the foregoing clauses, as the same may be amended, supplemented
or otherwise modified from time to time.
"Jo Ann Drydock" shall mean that certain floating
drydock named JO ANN DRYDOCK, Official Number 982958.
"Jo Ann Drydock Assets" shall mean the Jo Ann Drydock
and the other property and assets of the Company which were
purchased and/or constructed with the proceeds of the Jo Ann
Bonds.
"Jo Ann Refinancing Indebtedness" shall mean the
Indebtedness of the Company incurred to refinance the Jo Ann
Bonds as contemplated by the first sentence of Section 7.17.
"LC Issuer" shall mean Continental in its individual
capacity and not as Agent and, with the consent of the Agent, the
Company and such Bank, any other Bank. With respect to Letters
of Credit issued by the LC Issuer, the LC Issuer shall have the
benefits of each provision of this Agreement as if it were a
Bank, and provisions of this Agreement and the other Loan
Documents which are for "the benefit of the Banks" shall also be
for the benefit of the LC Issuer. If there shall be more than
one LC Issuer at any time, to the extent relevant, the term "LC
Issuer" shall mean both LC Issuers.
"Letter of Credit" shall have the meaning given to said
term in Section 3.1.
"Letter of Credit Availability" shall mean, at any
time, the lesser of (a) $25,000,000 minus any Letter of Credit
Outstanding(s) and (b) the aggregate amount of then Available
Commitments.
"Letter of Credit Commission" shall mean one and seven-
eighths percent (1.875%) per annum.
"Letter of Credit Fee" shall have the meaning given to
said term in Section 3.3.
"Letter of Credit Outstandings" shall mean, at any
time, an amount equal to the sum of (a) the aggregate undrawn,
available amount at such time of all Letters of Credit then
outstanding plus (b) the then aggregate amount of all unpaid and
outstanding Reimbursement Obligations.
<PAGE>
"Lien" shall mean any security interest, mortgage,
pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), or preference, priority
or other security agreement or preferential arrangement of any
kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any
Financing Lease, and the filing of any financing statement (but
only to the extent any such financing statement purports to
record the grant of a security interest and not including any
financing statements filed for notice purposes only) under the
UCC or comparable law of any jurisdiction in respect of any of
the foregoing).
"Line of Credit" shall mean the aggregate revolving
credit line extended by the Banks to the Company for Loans and
Letters of Credit pursuant to and in accordance with the terms of
this Agreement, in the amount of $35,000,000.00 as such amount
may be reduced from time to time in accordance with Section 2.5
or Section VIII.
"Loan Documents" shall mean this Agreement, the
Revolving Notes, the Letters of Credit, the Collateral Documents,
and all instruments, agreements and documents now or hereafter
executed and delivered in connection herewith or therewith.
"Loans" shall have the meaning given to said term in
Section 2.1.
"Material Adverse Effect" shall mean, a material
adverse effect on the business, operations, property or financial
or other condition of the Company or the Company and its
Subsidiaries, taken as a whole, or on the ability of the Company
or any Subsidiary to perform its obligations under this
Agreement, the Revolving Notes or the other Loan Documents.
"Maximum Cash Debit Amount": means the difference
between $1,000,000 and any cash amount(s) previously paid by the
Company in satisfaction of Debits under the Preferred Stock
Purchase Agreement.
"Multiemployer Plan" shall mean any multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
"Navy Contracts" shall mean any and all contracts
between the Company and/or any Subsidiary Guarantor and the
United States Navy, including, but not limited to those listed on
Schedule II, which Schedule lists each Navy Contract in excess of
$5,000,000 in effect as of the date of this Agreement, and all
contracts entered into after the date hereof between the Company
(and/or any Subsidiary Guarantor) and the United States Navy.
"900 Foot Floating Drydock Mortgage" shall mean the
Second Preferred Ship Mortgage dated as of the date hereof made
by the Company in favor of the Agent for the benefit of the Agent
and the Banks, covering the Avondale Drydock, as the same may be
amended, supplemented or otherwise modified from time to time.
<PAGE>
"Non-United States Person" shall mean a Person who is
not a citizen or resident of the United States, a corporation,
partnership or other entity created or organized under the laws
of the United States, or an estate or trust the income of which
is subject to United States Federal income taxation regardless of
its source.
"Obligations" shall mean all obligations (monetary or
otherwise) of the Company to the Agent and/or the Banks arising
under or in connection with this Agreement, the Revolving Notes
(including, without limitation, the Reimbursement Obligations and
the Letters of Credit) and the other Loan Documents, whether
direct or indirect, absolute or contingent, due or to become due
or now existing or hereafter incurred.
"Ogden" shall mean Ogden Corporation, a Delaware
corporation, in its own right and as successor by merger to Ogden
American Corporation.
"Ogden Cash Credit" shall have the meaning assigned to
such term in the Preferred Stock Purchase Agreement.
"Ogden Letter of Intent " shall mean that certain
letter agreement dated as of April 29, 1994, between the Company
and Ogden, pursuant to which, and subject to the terms and
conditions set forth therein, the Preferred Stock Purchase
Agreement and the Tax Sharing Agreement will be terminated in
certain circumstances, and shall include any definitive agreement
embodying the terms of such letter of intent.
"Payment Office" shall have the meaning given to said
term in Section 2.11.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of
ERISA, and any successor to PBGC.
"Percentage" of any Bank shall mean, at any time, the
percentage set forth opposite such Bank's name on Schedule I as
the same may be adjusted pursuant to Section 10.7.
"Permitted Liens" shall have the meaning given to said
term in Section 7.2.
"Person" shall mean an individual, partnership,
corporation, limited liability company, business trust, joint
stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan" shall mean any employee benefit plan which is
covered by ERISA and in respect of which the Company or an ERISA
Affiliate is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer"
as defined in Section 3(5) of ERISA.
"Preferred Stock" shall mean any shares of stock of the
Company designated as Preferred Stock in the Articles of
Incorporation of the Company.
<PAGE>
"Preferred Stock Purchase Agreement" shall mean that
certain Amended and Restated Preferred Stock Purchase Agreement
dated as of March 18, 1993 (the "Amended and Restated Preferred
Stock Purchase Agreement"), as amended, supplemented or modified
from time to time with the prior written consent of the Agent.
"PSPA Guaranteed Obligations" shall mean, at any time
prior to the termination of the Preferred Stock Purchase
Agreement pursuant to the Ogden Letter of Intent or otherwise
with the prior written consent of the Agent, the obligations of
the Company or any Subsidiary which are guaranteed by Ogden and
are referenced in Section 5(a) or 5(b) of the Preferred Stock
Purchase Agreement.
"Quarterly Payment Date" shall mean the last Business
Day of each March, June, September and December.
"Reference Bank" shall mean Continental.
"Register" shall have the meaning given to said term in
Section 10.7(e).
"Reimbursement Obligation" shall have the meaning given
to said term in Section 3.6.
"Related Parties" shall have the meaning given to said
term in Section 9.2.
"Release" means a "release" as such term is defined in
CERCLA.
"Reportable Event" shall mean any of the events set
forth in Section 4043(b) of ERISA or the regulations thereunder.
"Required Banks" shall mean Banks holding 51% of the
aggregate Commitments, if no Loans are outstanding and there are
no Letter of Credit Outstandings, and, otherwise, Banks holding
51% of outstanding Loans and Letter of Credit Outstandings.
"Requirement of Law" shall mean as to any Person, the
certificate or articles of incorporation and bylaws or other
organizational or governing documents of such Person, and any
law, treaty, rule or regulation or determination of an arbitrator
or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property
or to which such Person or any of its property is subject.
"Responsible Officer" shall mean the chief executive
officer or the chief financial officer of the Company and/or any
Subsidiary Guarantor, or any other officer of any such Person
designated as a "Responsible Officer" for purposes of this
Agreement and the other Loan Documents and for whom the Agent has
received a certificate of incumbency in form satisfactory to the
Agent.
"Revolving Note" shall have the meaning given to said
term in Section 2.2.
<PAGE>
"Security Agreement (Company)" shall mean the Security
Agreement dated as of the date hereof made by the Company in
favor of the Agent, for the benefit of the Banks, covering
certain of the personal property of the Company, as amended,
supplemented or otherwise modified from time to time.
"Single Employer Plan" shall mean any Plan which is
covered by Title IV of ERISA, but which is not a Multiemployer
Plan.
"Solvent" means, with respect to any Person at any
time, a condition under which:
(a) the fair saleable value of such Person's assets on
the date of determination is greater than the present value of
the total amount of such Person's liabilities (including
contingent and unliquidated liabilities) at such time;
(b) such Person is able to pay all of its liabilities
as such liabilities mature; and
(c) such Person does not have unreasonably small
capital with which to conduct its business.
For purposes of this definition:
(d) the amount of a Person's contingent or
unliquidated liabilities at any time shall be that amount which,
in light of all the facts and circumstances then existing,
represents the amount which can reasonably be expected to become
an actual or matured liability;
(e) the "fair saleable value" of an asset shall be the
amount which may be realized within a reasonable time either
through collection or sale of such asset at its regular market
value; and
(f) the "regular market value" of an asset shall be
the amount which a capable and diligent business person could
obtain for such asset from an interested buyer who is willing to
purchase such asset under ordinary selling conditions.
"Stated Expiry Date" shall have the meaning given to
said term in Section 3.1(b).
"Stock Pledge Agreement (ATS)" shall mean the Stock
Pledge Agreement dated as of the date hereof made by Avondale
Technical Services, Inc., a Louisiana corporation, in favor of
the Agent for the benefit of the Banks, as the same may be
amended, supplemented or modified from time to time.
"Stock Pledge Agreement (Company)" shall mean the Stock
Pledge Agreement dated as of the date hereof made by the Company
in favor of the Agent for the benefit of the Banks, as the same
may be amended, supplemented or modified from time to time.
<PAGE>
"Subordinated Debentures" has the meaning given such
term in the Preferred Stock Purchase Agreement. As set forth in
the Preferred Stock Purchase Agreement, the Subordinated
Debentures shall contain subordination provisions acceptable to
the Agent.
"Subsidiary" shall mean any Person (including each
Subsidiary Guarantor) as to which the Company shall at the time,
directly or indirectly through a Subsidiary, (i) have sufficient
voting power to entitle it to elect immediately or to have had
elected a majority of the board of directors or similar governing
body of such Person, or (ii) own 50% or more of the equity
interests issued by such Person.
"Subsidiary Guarantee" shall mean a Guarantee
substantially in the form of Exhibit H executed by each
Subsidiary Guarantor of the Company and each Subsidiary of the
Company created or acquired after the date of this Agreement in
favor of the Agent for the benefit of the Banks, as the same may
be amended, supplemented or otherwise modified from time to time.
"Subsidiary Guarantor" shall mean the following
Subsidiaries of the Company: (i) Gulfport, (ii) Avondale
Technical Services, Inc., a Louisiana corporation, (iii) Crawford
Technical Services, Inc., a Louisiana corporation, and (iv) Genco
Industries, Inc., a Texas corporation.
"Subsidiary Security Agreement" shall mean a Security
Agreement substantially in the form of Exhibit I executed by each
Subsidiary Guarantor in favor of the Agent for the benefit of the
Banks, covering certain of the personal property of the
Subsidiary Guarantor party thereto, as amended, supplemented or
otherwise modified from time to time.
"Taxes" shall have the meaning given to said term in
Section 2.14.
"Tax Sharing Agreement" shall mean the Tax Sharing
Agreement dated as of September 24, 1985, by and between Ogden
and the Company, as amended by the Preferred Stock Purchase
Agreement, and as further amended, restated, supplemented or
otherwise modified from time to time with the prior written
consent of the Agent.
"Total Funded Debt" shall mean, at any time, the sum of
(i) all Indebtedness of the Company and each of its Subsidiaries
(including any reimbursement obligations with respect to any
letters of credit, including the Letters of Credit, but exclusive
of the undrawn face amount of any such letters of credit) at such
time plus (ii) the greater of (A) $0 or (B) the difference
between (1) the aggregate undrawn face amount of all letters of
credit issued for the account of or guaranteed by the Company or
any or its Subsidiaries and (2) cash balances of the Company and
its Subsidiaries in excess of $5,000,000, in each case at such
time.
<PAGE>
"UCC" shall mean the Uniform Commercial Code as in
effect from time to time in the State of Illinois.
"Unbilled Accounts" shall mean at any time all accounts
receivable arising out of or in connection with the sale of goods
or the rendering of services which have been performed by the
Company under contracts between the Company and the United States
Navy or another agency, department or instrumentality of the
United States, but which have not, at such time, been billed or
invoiced to (and accepted by) the United States Navy or such
other agency, department or instrumentality pursuant to the terms
of such contracts.
Section 1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms
defined in this Agreement shall have the defined meanings given
to said terms in Section 1.1 or the preamble of this Agreement
when used in the Loan Documents or any certificate or other
documents made or delivered pursuant hereto.
(b) Terms not otherwise defined herein which are
defined in the UCC shall have the meanings given them in the UCC.
The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision of this Agreement,
and references to Section, Schedule, Exhibit and like references
are references to this Agreement, and references in any Section
or definition to any clause means such clause of such Section or
definition, in each case, unless otherwise specified. An Event
of Default shall "continue" or be "continuing" until such Event
of Default has been waived in accordance with Section 10.2.
References in this Agreement to any Person shall include such
Person's successors and permitted assigns.
Section 1.3 Accounting Terms and Determinations.
Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations
hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with GAAP,
applied on a basis consistent (except for changes concurred in by
the Company's auditors and except that unaudited interim
financial statements are subject to audit and normal year-end
adjustments (including absence of footnote disclosure)) with the
most recent audited financial statements of the Company delivered
to the Banks; provided that, if the Company notifies the Agent
and the Banks that the Company wishes to amend any covenant in
Section VII or any related definition to eliminate the effect of
any change in GAAP on the operation of such covenant (or if the
Agent notifies the Company that the Agent or the Required Banks
wish to amend Section VII or any related definition for such
purpose), then the Company's compliance with such covenant shall
be determined on the basis of GAAP in effect immediately before
the relevant change in GAAP became effective (and without giving
effect to any previous change in GAAP subject to a notice
contemplated by this sentence), until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to
the Company and the Required Banks.
<PAGE>
SECTION II
REVOLVING LOANS
Section 2.1 Revolving Loan Commitment.
Subject to the terms and conditions set forth in this
Agreement, on and after the Effective Date and to and excluding
the Expiration Date, each of the Banks severally agrees to make
revolving loans and advances to the Company (the "Loans").
Section 2.2 Revolving Note.
(a) The Loans made by each Bank pursuant hereto shall
be evidenced by a promissory note of the Company substantially in
the form of Exhibit J (each a "Revolving Note" and collectively
the "Revolving Notes"), made payable to the order of such Bank in
a principal amount equal to such Bank's Commitment as of the
Effective Date (or such other amount as may otherwise be relevant
as a result of any assignments permitted by this Agreement).
(b) The Company hereby irrevocably authorizes each
Bank to make (or cause to be made) appropriate notations on such
Bank's books and records (including its computer records), which
notations, if made, shall evidence, inter alia, the date of, the
outstanding principal of, the interest rate on and Interest
Period, if any, applicable from time to time to, the Loans
evidenced thereby. Any such notations indicating the outstanding
principal amount of such Bank's Loans shall (absent manifest
error) be rebuttably presumptive evidence of the principal amount
thereof owing and unpaid, but the failure to record any such
amount shall not, however, limit or otherwise affect the
obligations of the Company hereunder or under such Revolving Note
to make payments of principal of or interest on such Loans when
due.
Section 2.3 Determination of Borrowing Base.
(a) Subject to Section 2.3(b), the principal amount of
Revolving Loans shall not in the aggregate at any time exceed the
lesser of:
(i) the Line of Credit then in effect minus the Letter
of Credit Outstandings; and
(ii) the amount then equal to:
(A) seventy-five percent (75%) of the Eligible
Billed Commercial Receivables, plus
(B) sixty percent (60%) of Eligible Billed U.S.
Government Receivables, plus
(C) forty percent (40%) of Eligible Commercial
Inventory, plus
<PAGE>
(D) sixty-five percent (65%) of the Assessed
Value of the Avondale Drydock, minus
(E) the aggregate Excess Subsidiary Borrowing
Base Amount with respect to each of the Subsidiary
Guarantors, and minus
(F) the Letter of Credit Outstandings.
The sum of the amounts calculated in accordance with clauses
(ii)(A) through (E) is hereinafter referred to as the "Borrowing
Base".
(b) The Agent at any time shall be entitled to
(i) establish and increase or decrease reserves against Eligible
Billed Commercial Receivables, Eligible Billed U.S. Government
Receivables and Eligible Commercial Inventory, to reflect any
Liens or claims on or with respect to any of the foregoing,
including, without limitation Customary Permitted Liens, and any
other costs and expenses which the Agent could reasonably be
expected to expend or incur in connection with a liquidation of,
or foreclosure on, the Collateral and (ii) impose limits on
credit exposure to any Account Debtor, in each case, in its
discretion. The Agent may, but shall not be required to, rely on
each Borrowing Base Certificate and any other schedules or
reports delivered to the Agent in connection herewith in
determining the then eligibility of Accounts and Inventory.
Section 2.4 Procedure for Borrowing.
(a) A Loan may be made on any Business Day; provided
that the Company shall give the Agent an irrevocable Borrowing
Request (i) at or before 10:00 a.m. Chicago time at least three
Business Days prior to the requested Borrowing Date, in the case
of Eurodollar Rate Loans, and (ii) at or before 10:00 a.m.
Chicago time at least one Business Day prior to the requested
Borrowing Date, in the case of Base Rate Loans, specifying (A)
the amount to be borrowed, (B) the requested Borrowing Date, (C)
whether the borrowing is to be a Eurodollar Rate Loan or a Base
Rate Loan, (D) in the case of Eurodollar Rate Loans, the
requested Interest Period applicable thereto and (E) the bank and
account number of the Company to which the Agent should wire the
proceeds of such Loan. The Agent shall promptly notify the Banks
of its receipt of any such irrevocable notice of borrowing from
the Company. Each Loan shall be in an aggregate principal amount
equal to (i) if a Base Rate Loan, the lesser of (A) $1,000,000 or
an integral multiple of $250,000 in excess thereof or (B) the sum
of the then Available Commitments and (ii) in the case of
Eurodollar Rate Loans, $1,000,000 or an integral multiple of
$250,000 in excess thereof.
(b) On or before 12:00 p.m. Chicago time on the
Business Day specified in the Company's Borrowing Request, each
Bank shall provide the Agent with funds at the Payment Office in
an amount equal to such Bank's Percentage of the requested
borrowing. The proceeds of each borrowing shall be made
available by the Agent to the Company by wire transferring such
funds to such account as shall be designated by the Company to
<PAGE>
the Agent in the notice of borrowing. No Bank's obligation to
make any Loan shall be affected by any other Bank's failure to
make any Loan. Neither the Agent nor any Bank shall have any
liability for the failure of any Bank (other than itself) to fund
a Loan.
(c) With respect to any Loan, unless the Agent shall
have been notified in writing by any Bank prior to the date of
making such Loan that such Bank does not intend to make available
to the Agent such Bank's portion of the Loan to be made on such
date, the Agent may (but shall not be obligated to) assume that
such Bank has made such amount available to the Agent on that
date and, in reliance on such assumption, the Agent may make
available to the Company a corresponding amount. If such amount
is not made available by such Bank to the Agent on the date of
making such Loan, such Bank shall be obligated to pay such amount
to the Agent and shall pay to the Agent on demand interest on
such amount at the Federal Funds Effective Rate for the number of
days from and including the date of making such Loan to the date
on which such Bank's portion of the Loan becomes immediately
available to the Agent, together with such other compensatory
amounts (including, but not limited to, administrative fees) as
may be required to be paid by such Bank to the Agent pursuant to
the Rules for Interbank Compensation of the Council of
International Banking or of the New York Clearing House
Compensation Committee, as the case may be, as in effect from
time to time. The Agent (but not the defaulting Bank) shall also
be entitled to recover such amount, with interest thereon at the
rate per annum then applicable to the Loans comprising such
borrowing, upon demand, from the Company. A statement of the
Agent submitted to any Bank with respect to any amounts owing
under this Section 2.4(c) shall be conclusive and binding in the
absence of manifest error. Nothing in this Section 2.4(c) shall
be deemed to relieve any Bank from its obligation to fulfill its
Commitments hereunder. If any Loan shall not be funded on the
applicable borrowing date because any condition precedent herein
specified shall not have been met, the Agent shall return the
amounts so received to the respective Bank as soon as
practicable.
Section 2.5 Reduction of Commitments.
(a) The Company shall have the right from time to
time, upon not less than five Business Days' irrevocable notice
to the Agent, to reduce the amount of the Commitments, provided
that at no time may the Commitments be reduced by the Company to
an amount less than the sum of the outstanding principal amount
of Loans and the Letter of Credit Outstandings. Any such
voluntary reduction shall be in an amount of $1,000,000, or an
integral multiple thereof.
(b) Each reduction in the Commitments shall be
permanent and irrevocable. All reductions in Commitments shall be
made pro rata to the Commitments of the Banks. The Agent shall
promptly notify each Bank of the amount of any reduction of its
Commitment.
<PAGE>
Section 2.6 Optional Prepayments.
(a) Base Rate Loans. The Company may, from time to
time, on any Business Day, prepay the Base Rate Loans, in whole
or in part, without premium or penalty, upon irrevocable notice
to the Agent by the Company of at least two Business Days,
specifying the date and amount of prepayment. If such notice is
given, the Company shall make such prepayment to the Agent at the
Payment Office for the account of and pro rata disbursement to
the Banks, and the principal payment amount specified in such
notice shall be due and payable on the date specified therein
with accrued interest to such date on such amount being due on
the next succeeding Quarterly Payment Date. Partial prepayments
of the Base Rate Loans shall be in an aggregate principal amount
of $250,000 or integral multiples thereof.
(b) Eurodollar Rate Loans. The Company may, from time
to time, on the last Business Day of the relevant Interest
Period, prepay the Eurodollar Rate Loans, in whole or in part,
without premium or penalty, upon irrevocable notice to the Agent
by the Company of at least three Business Days, specifying the
date and amount of prepayment. The Company may, from time to
time, on any Business Day prior to the last Business Day of the
relevant Interest Period, prepay the entire amount (and not less
than the entire amount) of a Eurodollar Rate Loan, upon
irrevocable notice to the Agent by the Company of at least three
Business Days, specifying the date and amount of prepayment;
provided, however, that the Company shall pay to the Agent for
the account of the Banks in addition to the prepayment amount the
sum of the amounts required to be paid in accordance with Section
2.15. If either such notice is given, the Company shall make
such prepayment and payment of such other amounts to the Agent at
the Payment Office for the account of and disbursement to the
Banks, and the payment amount specified in such notice shall be
due and payable on the date specified therein together with
accrued interest to such date on the amount prepaid. With
respect only to the prepayment of Eurodollar Rate Loans on the
last Business Day of the relevant Interest Period, partial
prepayments shall be in an aggregate principal amount of
$250,000, or integral multiples thereof.
Section 2.7 Continuation and Conversion Elections. At
the election of the Company pursuant to a Continuation/Conversion
Notice delivered by telephone and confirmed by either delivering
or faxing to the Agent a duly completed and executed
Continuation/Conversion Notice, at or before 10:00 a.m., Chicago
time, on any Business Day, the Company may elect from time to
time on not less than three Business Days' prior notice:
(a) that all, or any portion in a minimum aggregate
principal amount of $1,000,000 and an integral multiple of
$250,000 in excess thereof, of any Base Rate Loans be
converted into Eurodollar Rate Loans or, all or any portion
in a minimum aggregate amount of $1,000,000 and an integral
multiple of $250,000 in excess thereof, of any Eurodollar
Rate Loan be converted into Base Rate Loans;
<PAGE>
(b) on the expiration of the Interest Period applicable
to any Eurodollar Rate Loans, that all, or any portion in an
aggregate minimum principal amount of $1,000,000 and an
integral multiple of $250,000 in excess thereof, of such
Eurodollar Rate Loans be continued as Eurodollar Rate Loans
(in the absence of delivery of such notice under this clause
prior to the expiration if any Interest Period, the Company
will be deemed to have elected that such Eurodollar Rate
Loans be converted to Base Rate Loans),
provided that:
(x) no portion of the outstanding principal amount of
any Loans may be continued as, or be converted into,
Eurodollar Rate Loans when any Default or Event of Default
has occurred and is continuing; and
(y) no portion of the outstanding principal amount of
any Loans may be made or continued as, or converted into,
Eurodollar Rate Loans if, after giving effect to such
action, the aggregate principal amount of any Eurodollar
Rate Loans having a particular Interest Period is less than
$1,000,000 or an integral multiple of $250,000 in excess
thereof.
Section 2.8 Interest Rate and Payment Dates. Interest
on Loans shall be payable in accordance with this Section 2.8.
(a) From the date any Loan is made to the date the
principal amount of such Loan is repaid in full, interest shall
accrue on the outstanding principal amount of such Loan at a rate
per annum:
(i) on that portion of the outstanding principal
amount thereof maintained from time to time as a Base Rate
Loan, equal to the Alternate Base Rate; and
(ii) on that portion of the outstanding principal
amount thereof maintained from time to time as a Eurodollar
Rate Loan, during each Interest Period applicable thereto,
equal to the Eurodollar Rate (Adjusted) for such Interest
Period plus the Applicable Margin.
(b) Notwithstanding the provisions of Section 2.8(a),
after the occurrence of any Event of Default until such time when
such Event of Default shall have been waived, the Company shall
pay interest on the principal amount of all Loans outstanding, to
the fullest extent permitted by applicable law, at a per annum
rate equal to the rates set forth in Section 2.8(a) plus 2% per
annum.
(c) Interest accrued on each Loan shall be payable,
without duplication:
(i) on the maturity date of such Loan (including the
maturity date resulting from a reduction of the Commitments
hereunder or the acceleration of the Loans in accordance
with Section VIII),
<PAGE>
(ii) with respect to any portion of any Loan prepaid
pursuant to Section 2.6, on the date specified in Section
2.6,
(iii)(A) on that portion of the outstanding principal
amount thereof maintained as a Base Rate Loan, on each
Quarterly Payment Date, commencing with the first such
Quarterly Payment Date following the date of the initial
Loan hereunder, and (B) on that portion of the outstanding
principal amount thereof maintained as a Eurodollar Rate
Loan, on the last day of each applicable Interest Period.
Section 2.9 Fees.
(a) Commitment Fee. The Company agrees to pay to the
Agent for the account of and disbursement to the Banks a
commitment fee from and including the Effective Date to but
excluding the Expiration Date, equal to one-half of one percent
(0.50%) per annum (based on a year of 360 days for the actual
number of days elapsed) on the average daily amount of the
aggregate Available Commitments of the Banks during the period
for which payment is made, payable in arrears on each Quarterly
Payment Date, commencing on the first Quarterly Payment Date to
occur after the date of this Agreement and on the Expiration Date
or such earlier date as the Commitments shall terminate as
provided herein.
(b) Other Fees. The Company agrees to pay to
Continental, for its own account, such other fees in the amounts
and at the times specified in the Fee Letter.
Section 2.10 Computation of Interest.
(a) Interest in respect of all Loans shall be
calculated on the basis of a 360 day year for the actual number
of days elapsed. Any change in the interest rate on a Base Rate
Loan resulting from a change in the Alternate Base Rate shall
become effective as of the opening of business on the day on
which such change in the Alternate Base Rate is established. The
Agent shall notify the Company and the Banks as soon as
practicable of the effective date and the amount of each such
change.
(b) Each determination of an interest rate by the
Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Company and the Banks in the
absence of manifest error.
(c) It is the intention of the parties hereto to
comply strictly with applicable usury laws; accordingly,
notwithstanding any provision to the contrary in this Agreement,
any of the Revolving Notes or any other Loan Document, in no
event shall this Agreement, any Revolving Note or any other Loan
Document require or permit the payment, charging, taking,
reserving, or receiving of any sums constituting interest under
applicable laws which exceed the maximum amount permitted by such
<PAGE>
laws. If any such excess interest is contracted for, charged,
taken, reserved, or received in documents securing the payment of
the Obligations or otherwise relating hereto, or in any
communication by the Agent, any Bank or any other Person to the
Company or any other Person, or in the event all or part of the
principal or interest hereunder shall be prepaid or accelerated,
so that under any of such circumstances or under any other
circumstance whatsoever the amount of interest contracted for,
charged, taken, reserved, or received on the amount of principal
actually outstanding from time to time under this Agreement, the
Revolving Notes or any Loan Document shall exceed the maximum
amount of interest permitted by applicable usury laws, then in
any such event it is agreed as follows: (i) the provisions of
this Section shall govern and control, (ii) any such excess shall
be deemed an accidental and bona fide error and canceled
automatically to the extent of such excess, and shall not be
collected or collectible, (iii) any such excess which is or has
been paid or received notwithstanding this paragraph shall be
credited against the then unpaid principal balance of the
Obligations and (iv) the effective rate of interest shall be
automatically reduced to the maximum lawful rate allowed under
applicable laws as construed by courts having jurisdiction hereof
or thereof. Without limiting the foregoing, all calculations of
the rate of interest contracted for, charged, taken, reserved, or
received in connection herewith which are made for the purpose of
determining whether such rate exceeds the maximum lawful rate
shall be made to the extent permitted by applicable laws by
amortizing, prorating, allocating and spreading during the period
of the full term of the Loans, including all prior and subsequent
renewals and extensions, all interest at any time contracted for,
charged, taken, reserved, or received. The terms of this Section
shall be deemed to be incorporated in every Loan Document and
every communication relating thereto. The term "applicable usury
law" shall mean such laws of the State of Illinois or the laws of
the United States, whichever laws allow the higher rate of
interest, as such laws now exist; provided, however, that if such
laws shall hereafter allow higher rates of interest, then the
applicable usury laws shall be the laws allowing the higher
rates, to be effective as of the effective date of such laws.
Section 2.11 Payments. All payments (including
prepayments) to be made by the Company on account of principal,
Reimbursement Obligations, interest and fees, or by the Banks,
shall be made without set off or counterclaim in Dollars and in
immediately available funds on the date due hereunder and shall
be made to the Agent to its account at such address as the Agent
shall give notice to the Company and the Banks (the "Payment
Office"). If any payment hereunder (other than payments on the
Eurodollar Rate Loans) becomes due and payable on a day other
than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of
principal, interest thereon shall be payable at the then
applicable rate during such extension. Except as otherwise
provided in this Agreement, payments due hereunder with respect
to Eurodollar Rate Loans shall be made on the final Business Day
of an Interest Period as determined by reference to the
<PAGE>
definition of "Interest Period". Except for payments received by
the Agent for the account of the Agent in its capacity as such,
or for the account of a specific Bank in accordance with the
provisions of this Agreement, the Agent shall forthwith
distribute like funds relating to the payment of principal,
interest or fees or Reimbursement Obligations pro rata to the
Banks (based on their Percentages) to which such payment is due
and payable for their accounts and at the addresses as each such
Bank shall specify in its notice to the Agent made in accordance
with Section 10.1 of this Agreement.
Unless the Agent shall have received notice from the
Company prior to the date on which any payment is due to the
Banks hereunder that the Company will not make such payment in
full, the Agent may (but shall not be obligated to) assume that
the Company has made such payment in full to the Agent on such
date, and the Agent may, in reliance upon such assumption, cause
to be distributed to each Bank on such due date an amount equal
to the amount then due such Bank. If and to the extent the
Company shall not have so made such payment in full to the Agent,
each Bank shall repay to the Agent forthwith on demand the amount
distributed to such Bank together with interest thereon, at the
rate equal to the Federal Funds Effective Rate, for each day from
the date such amount is distributed to such Bank until the date
such Bank repays such amount to the Agent.
Section 2.12 Inability to Determine Interest Rate. In
the event that the Agent shall have determined (which
determination shall be conclusive and binding upon the Company
and the Banks) that, (i) Dollar deposits are not available to the
Reference Bank in the interbank eurodollar market or (ii) by
reason of circumstances affecting the interbank eurodollar
market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for any requested Interest
Period, in either case, with respect to (a) proposed Loans that
the Company has requested be made as Eurodollar Rate Loans, (b)
Eurodollar Rate Loans that will result from the requested
conversion of Base Rate Loans into Eurodollar Rate Loans or (c)
the continuation of Eurodollar Rate Loans beyond the expiration
of the then current Interest Period with respect thereto, the
Agent shall forthwith give notice of such determination to the
Company and the Banks at least one Business Day prior to, as the
case may be, the requested Borrowing Date for such Eurodollar
Rate Loans, the conversion date of such Base Rate Loans or the
last day of such Interest Period. If such notice is given (x)
any requested Eurodollar Rate Loans shall be made as Base Rate
Loans, unless the Company has provided notice to the Agent that,
based upon such unavailability, the Company elects not to make
the borrowing, (y) any Base Rate Loans that were to have been
converted to Eurodollar Rate Loans shall be continued as Base
Rate Loans and (z) any outstanding Eurodollar Rate Loans shall be
converted, on the last day of the then current Interest Period
with respect thereto, to Base Rate Loans. Until such notice has
been withdrawn by the Agent, no further Eurodollar Rate Loans
shall be made or continued as such nor shall the Company have the
right to convert Base Rate Loans to Eurodollar Rate Loans.
<PAGE>
Section 2.13 Illegality. Notwithstanding any other
provisions herein, if any Requirement of Law or any change
therein or in the interpretation or application thereof shall
make it unlawful for any Bank to make or maintain Eurodollar Rate
Loans as contemplated by this Agreement, (a) the obligation of
such Bank hereunder to make Eurodollar Rate Loans or convert Base
Rate Loans to Eurodollar Rate Loans shall forthwith be cancelled,
(b) all requests to make or continue Eurodollar Rate Loans shall
in the case of such Bank, be deemed to be requests to make Base
Rate Loans and (c) the Loans made by such Bank then outstanding
as Eurodollar Rate Loans, if any, shall be converted
automatically to Base Rate Loans on the respective next
succeeding date(s) on which interest is due with respect to such
Loans or within such earlier period as is required by law. If
any such prepayment of a Eurodollar Rate Loan is made on a day
which is not the last day of the Interest Period therefor, the
Company shall pay to the Agent for the account of and
disbursement to such Bank such amounts as may be required
pursuant to Section 2.15.
Section 2.14 Requirements of Law.
(a) In the event that by reason of any change in any
Requirement of Law (including, without limitation, the lapse or
termination of any treaty) or in the interpretation thereof, or
the adoption of any new law, regulation or requirement by any
Governmental Authority, or the imposition of any requirement of
any central bank whether or not having the force of law, (i) the
Agent or any Bank shall, with respect to this Agreement, the
Loans, the Letters of Credit (or risk participations therein),
the Reimbursement Obligations (or risk participations therein),
the Revolving Notes or its obligation to make Loans or issue
and/or own risk participations in Letters of Credit under this
Agreement, be subjected to any withholding or other tax, levy,
impost, charge, fee, duty or deduction of any kind whatsoever
(other than franchise taxes imposed by the jurisdiction in which
the Agent or such Bank is domiciled and other than any tax
generally imposed or based upon the net income or branch profits
of the Agent or such Bank) (collectively, "Taxes") or (ii) any
change shall occur in the taxation of the Agent or such Bank with
respect to any Loan, any Reimbursement Obligation (or any risk
participation therein), the interest payable thereon or any fees
payable hereunder or referred to herein (other than franchise
taxes imposed by the jurisdiction in which the Agent or such Bank
is domiciled and other than any change which affects, and to the
extent that it affects, the taxation of the net income or branch
profits of the Agent or such Bank), and if any such measures or
any other similar measure shall result in an increase in the cost
to the Agent or such Bank of making or maintaining any Loan or
any Letter of Credit or a reduction in the amount of principal,
interest or fees receivable by the Agent or such Bank in respect
thereof, the Agent or such Bank promptly after learning of the
imposition of such cost or reduction in any amount shall notify
the Company and the Agent (if applicable) stating the reasons
therefor. The Company shall thereafter pay to the Agent or such
Bank, upon demand from time to time, as additional consideration
hereunder, such additional amounts as will fully compensate the
<PAGE>
Agent or such Bank for such increased costs or reduced amounts
and shall promptly provide the Agent or such Bank, as the case
may be, with official tax receipts or other evidence of the
payment of any taxes paid by the Company. A certificate as to
the increased costs or reduced amounts setting forth the
calculations therefor, shall be submitted promptly by the Agent
or such Bank to the Company and the Agent (if applicable) and, in
the absence of manifest error, shall be conclusive and binding as
to the amount thereof. If the Agent or Bank receives any
additional amounts from the Company pursuant to this subsection
(a) the Agent or such Bank shall use its best efforts to obtain a
refund, reduction, deduction or credit for any Taxes with respect
to the additional amounts paid under this subsection (a). If the
Agent or such Bank actually receives or enjoys the benefit of any
such refund, reduction, deduction or credit for any such Taxes,
the Agent or such Bank shall reimburse the Company if and to the
extent, but only the extent, that the Agent or such Bank
determines that it has actually received (i) a refund of taxes or
other amounts (together with any interest actually received
thereon from the respective Governmental Authority) which refund
is attributable to the Taxes with respect to which such
additional amounts were paid; or (ii) an effective net reduction
(through a reduction, deduction, credit or otherwise) in any
taxes or other amounts otherwise payable by the Agent or such
Bank (including any taxes imposed on or measured by the net
income of the Agent or such Bank), which reduction is
attributable to the Taxes with respect to such additional amounts
were paid. If, at any time after the Agent or such Bank makes a
payment to the Company pursuant to the preceding sentence, the
Agent or such Bank determines that it was not entitled to the
full amount of any refund (together with the interest thereon)
reimbursed to the Company as aforesaid or that its taxes are not
reduced by a credit or deduction for the full amount of Taxes
reimbursed to the Company as aforesaid, the Company upon the
demand of the Agent or such Bank will promptly pay to the Agent
or such Bank the amounts so refunded to which the Agent or such
Bank was not so entitled, or the amount by which the taxes of the
Agent or such Bank were not so reduced, as the case may be.
(b) In the event that any Bank (including any Bank in
its capacity as LC Issuer) shall have determined that any
Requirement of Law regarding capital adequacy, or any change
therein or in the interpretation or application thereof or
compliance by such Bank or any parent of such Bank with any
request or directive regarding capital adequacy (whether or not
having the force of law, so long as such Bank reasonably believes
that compliance therewith is necessary) from any central bank or
Governmental Authority, does or shall have the effect of reducing
the rate of return on such Bank's capital or the capital of its
parent as a consequence of its obligations hereunder to a level
below that which such Bank or any parent of such Bank could have
achieved but for such law or change or compliance (taking into
consideration such Bank's policies or the policies of any parent
of such Bank, as the case may be, with respect to capital
adequacy) by an amount deemed by such Bank or any parent of such
Bank to be material, then from time to time, upon submission by
<PAGE>
such Bank to the Agent and the Company of a written request
therefor, the Company shall pay to such Bank such additional
amount or amounts as will compensate such Bank or any parent of
such Bank for such reduction.
(c) To the extent any reserve and/or special deposit
requirement imposed by the adoption of any new law, treaty or
regulation or any change therein or in any existing law, treaty
or regulation (including, without limitation, Regulation D of the
F.R.S. Board) or the interpretation thereof by any Governmental
Authority charged with the administration thereof, or by any
central bank or other fiscal, monetary or other authority against
assets held by, or deposits in or for the amount of any Loans by,
any Bank, imposes a cost (whether by incurring a cost or adding
to a cost) on a Bank in making or maintaining hereunder a
Eurodollar Rate Loan or reduces the amount of principal or
interest received by such Bank with respect to such Loans, then
upon demand by such Bank to the Company, which demand shall be
made promptly after the Bank learns of the imposition of such
cost or reduction in amount, the Company shall (to the extent
compensation is not made therefor pursuant to the calculation of
the Eurodollar Rate) pay to the Bank from time to time at the end
of each Interest Period with respect to such Eurodollar Rate
Loans, as additional consideration hereunder, additional amounts
sufficient to fully compensate such Bank for such increased cost
or reduced amount. A certificate as to the increased cost or
reduced amount setting forth the calculations therefor shall be
promptly submitted by such Bank to the Company and the Agent and,
in the absence of manifest error, shall be conclusive and binding
as to the amount thereof.
(d) In the event that a Bank makes a demand for
additional compensation pursuant to this Section 2.14, such Bank
agrees to designate a different lending office of said Bank if
such designation will avoid the need for, or reduce the amount
of, such additional consideration and will not, (i) in the
judgment of the Agent and such Bank, be otherwise disadvantageous
to the Agent and the Banks or such Bank, as the case may be, and
(ii) in the judgment of the Company, be otherwise disadvantageous
to the Company.
Section 2.15 Funding Losses. In the event any Bank
shall incur any loss or expense (including any loss or expense
incurred by reason of the liquidation or reemployment of deposits
or other funds acquired by such Bank to make, continue or
maintain any portion of the principal amount of any Loan as, or
to convert any portion of the principal amount of any Loan into,
a Eurodollar Rate Loan) as a result of:
(a) repayment or prepayment of the principal amount of
any Eurodollar Rate Loans on a date other than the scheduled
last day of the Interest Period applicable thereto;
(b) any conversion of all or any portion of the
outstanding principal amount of any Eurodollar Rate Loans to
Base Rate Loans pursuant to Section 2.7 prior to the
expiration of the Interest Period applicable thereto;
<PAGE>
(c) any Loans not being made as Eurodollar Rate Loans
in accordance with a request therefor; or
(d) any Loans not being continued as, or converted
into, Eurodollar Rate Loans in accordance with a notice
applicable thereto,
then, upon the request of such Bank to the Company (with a copy
to the Agent), the Company shall pay directly to such Bank such
amount as will (in the reasonable determination of such Bank)
reimburse such Bank for such loss or expense. A statement as to
any such loss or expense (including calculations thereof in
reasonable detail) shall be submitted by such Bank to the Agent
and the Company and shall, in the absence of manifest error, be
binding on the Company as to the matters set forth therein.
Section 2.16 Use of Proceeds. The Company shall apply
the proceeds of each Loan to general corporate purposes
including, without limitation, payment of any unpaid
Reimbursement Obligations; provided, however, that no proceeds of
any Loan shall be applied directly or indirectly to, or used as
collateral for, (i) any of the obligations of the Company or any
of its Subsidiaries with respect to the Jo Ann Bonds other than
with respect to the payment of interest on such bonds and fees
and expenses incurred in connection with the refunding of the Jo
Ann Bonds pursuant to Section 7.17; provided that the proceeds of
Loans used to pay such fees and expenses shall not exceed
$2,000,000, (ii) except for the payments to Ogden which are
permitted by Section 6.10 (other than Section 6.10(c)(iii)) and
Section 7.15, any of the obligations of the Company or any of its
Subsidiaries to Ogden or any of its subsidiaries or (iii) any
Indebtedness incurred by the Company or any of its Subsidiaries
in violation of this Agreement or any other Loan Document.
Section 2.17 Extensions of Expiration Date. The
Company may, by giving the Agent an Extension Notice not more
than 90 days, but not less than 60 days, prior to the then
current Extension Date, request that the Banks consent to an
extension of the then current Expiration Date for a period of one
year. Each Bank may, by an irrevocable notice (a "Consent
Notice") to the Company and the Agent given within 30 days after
receipt of such request by the Agent, consent to such request of
the Company, which consent may be given or withheld by each Bank
in its absolute and sole discretion. Failure by any Bank to give
its consent in writing within such 30 day period shall be deemed
a refusal by such Bank of such request. If less than all of the
Banks consent to the request for extension, the Company's request
shall be denied and the Expiration Date shall remain unchanged.
However, if a Consent Notice is subsequently obtained from all of
the Banks party to this Agreement prior to the then current
Extension Date (even if not within the time period specified
above), the Expiration Date shall be so extended and all
references in the Loan Documents to "Expiration Date" shall refer
to the Expiration Date, as so extended.
<PAGE>
SECTION III
LETTERS OF CREDIT
Section 3.1 Requests.
(a) By delivering to the Agent and the LC Issuer an
Issuance Request on a Business Day prior to the Expiration Date
and not less than three Business Days prior to the requested date
of issuance, the Company may request that the LC Issuer issue an
irrevocable standby letter of credit or a documentary letter of
credit each in such form as may be approved by the LC Issuer and
the Agent (each, a "Letter of Credit"), in support of financial
obligations of the Company incurred in the ordinary course of
business and which are described in such Issuance Request. Upon
receipt of each Issuance Request, the Agent shall promptly notify
the Banks thereof. The stated amount of any Letter of Credit
requested to be issued pursuant to an Issuance Request shall be
denominated in Dollars.
(b) Each Letter of Credit shall by its terms: (i) be
issued in a stated amount which (A) is at least $100,000, (B)
when added to the Letter of Credit Outstandings does not exceed
(or would not exceed) the then Letter of Credit Availability, (C)
does not exceed the aggregate amount of the then Available
Commitments, and (D) when added to all Loans and Letter of Credit
Outstandings does not exceed the Borrowing Base; (ii) initially
be stated to expire on a date (its "Stated Expiry Date") no later
than the earlier of 12 months from its date of issuance or the
Expiration Date, whichever occurs first; and (iii) prior to its
Stated Expiry Date (A) terminate immediately upon notice to the
LC Issuer thereof from the beneficiary thereunder that all
obligations covered thereby have been terminated, paid, or
otherwise satisfied in full and delivery of the original Letter
of Credit to the LC Issuer or (B) reduce in part immediately and
to the extent the beneficiary thereunder has notified the LC
Issuer thereof that the obligations covered thereby have been
paid or otherwise satisfied in part.
Section 3.2 Issuance. Subject to the terms and
conditions of this Agreement, the LC Issuer shall issue Letters
of Credit in accordance with the Issuance Requests made therefor.
Prior to the issuance of any Letter of Credit, the Company shall
have properly completed all of the LC Issuer's required standard
letter of credit documentation. The LC Issuer will make available
the original of each Letter of Credit which it issues in
accordance with the Issuance Request therefor to the beneficiary
thereof (and will promptly provide each of the Banks and the
Agent with a copy of such Letter of Credit).
Section 3.3 Fees and Expenses. (a) Letter of Credit
Fee. The Company agrees to pay to the Agent for the account of
the Banks, with respect to each Letter of Credit a per annum fee
(the "Letter of Credit Fee") equal to the product of (i) the
average daily undrawn amount of the Letters of Credit and (ii)
the Letter of Credit Commission. Such Letter of Credit Fee shall
be payable in arrears with respect to each Letter of Credit on
each Quarterly Payment Date during the term of each respective
<PAGE>
Letter of Credit and on the termination thereof (whether at its
Stated Expiry Date or earlier). The Company further agrees to
pay to the Agent for the account of the LC Issuer all reasonable
administrative expenses of the LC Issuer in connection with the
issuance, maintenance, modification (if any) and administration
of each Letter of Credit and standard negotiation charges upon
demand from time to time. After the occurrence of an Event of
Default until such time as such Event of Default shall be waived,
the Letter of Credit Fee described in this Section 3.3 shall be
calculated by increasing the Letter of Credit Commission by two
percent (2%).
(b) Issuance Fee. The Company agrees to pay to the
Agent for the account of the LC Issuer with respect to each
Letter of Credit a per annum "Issuance Fee" equal to the product
of (i) the average daily undrawn amount of the Letters of Credit
and (ii) one-eighth of one percent (0.125%). Such Issuance Fee
shall be payable in arrears with respect to each Letter of Credit
on each Quarterly Payment Date during the term of each respective
Letter of Credit and on the termination thereof (whether at its
Stated Expiry Date or earlier).
Section 3.4 Banks' Participation.
(a) To the extent of its Percentage, each Bank agrees
to and shall be deemed to have irrevocably purchased a
participation in each Letter of Credit on the date of issuance
thereof and shall be entitled to receive from the Agent a ratable
portion of the Letter of Credit Fees received by the Agent
pursuant to Section 3.3(a) hereof. Each Bank shall make
available to the LC Issuer, regardless of whether any Default or
Event of Default shall have occurred and is continuing, an amount
equal to its respective Percentage of each drawing on each Letter
of Credit in same day or immediately available funds not later
than 11:00 a.m. Chicago time on each Disbursement Date (as
hereinafter defined) for each such drawing. In the event that any
Bank fails to make available to the LC Issuer the amount of such
Bank's Percentage of any drawing on a Letter of Credit as
provided herein, the LC Issuer shall be entitled to recover such
amount on demand from such Bank together with interest at the
daily average Federal Funds Effective Rate for the first three
Business Days after the Disbursement Date (together with such
other compensatory amounts, including, but not limited to,
administrative fees, as may be required to be paid by such Bank
to the Agent pursuant to the Rules for Interbank Compensation of
the Council on International Banking or of the New York Clearing
House Compensation Committee, as the case may be, as in effect
from time to time) and thereafter at the Base Rate.
(b) The Agent shall distribute to each Bank that has
paid all amounts payable by it under this Section 3.4(a) with
respect to any Letter of Credit issued by the LC Issuer such
Bank's Percentage of all payments received by the Agent from the
Company in reimbursement of drawings honored by the LC Issuer
under such Letter of Credit when such payments are received.
<PAGE>
Section 3.5 Disbursements. The LC Issuer will notify
the Company and the Agent promptly of the presentment for payment
of any Letter of Credit (on the date of presentment, if possible,
and otherwise on the next Business Day, it being agreed that such
notice may be made by phone), together with notice of the date
(the "Disbursement Date") such payment shall be made, and the
Agent promptly will notify the Banks of such matters. Subject to
the terms and provisions of such Letter of Credit, the LC Issuer
shall make such payment to the beneficiary (or its designee) of
such Letter of Credit. Prior to 11:00 a.m. Chicago time on the
Disbursement Date the Company shall (by payment to the Payment
Office for distribution by the Agent) reimburse the LC Issuer and
the Banks for all amounts which have been disbursed under such
Letter of Credit. To the extent the LC Issuer and the Banks are
not reimbursed in full in accordance with this Section 3.5, the
Reimbursement Obligation shall accrue interest at the Alternate
Base Rate plus a margin of 2% per annum, payable on demand.
Section 3.6 Reimbursement. The Company's obligation
(a "Reimbursement Obligation") under Section 3.5 to reimburse the
LC Issuer and the Banks with respect to each drawing under each
Letter of Credit (including interest thereon), and each Bank's b*
bobligation to fund each drawing shall be absolute and
unconditional under any and all circumstances and irrespective of
any set off, counterclaim, or defense to payment which the
Company or any Bank may have or have had against any Bank, the LC
Issuer, the Company or any beneficiary of a Letter of Credit,
including, without limitation, any defense based upon the
occurrence of any Default or Event of Default, any draft, demand
or certificate or other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient,
or any failure to apply or misapplication by the beneficiary of
the proceeds of any disbursement, or the legality, validity,
form, regularity, or enforceability of such Letter of Credit.
Section 3.7 Deemed Disbursements; Other Cash
Collateral Requirements. (a) Upon the occurrence and during the
continuation of an Event of Default, then:
(i) automatically in the case of any Event of Default
described in Section VIII(h), and at the election of the
Required Banks in the case of any other Event of Default, an
amount equal to that portion of the Letter of Credit
Outstandings attributable to the then aggregate amount which
is undrawn and available under all outstanding Letters of
Credit shall, without demand upon or notice to the Company,
be deemed to have been paid or disbursed by the LC Issuer
(notwithstanding that such amount may not in fact have been
so paid or disbursed); and
(ii) upon notification by the Agent to the Company of
its obligations under this Section, the Company shall be
immediately obligated to reimburse the LC Issuer for the
amount deemed to have been so paid or disbursed by the LC
Issuer; provided, that to the extent the LC Issuer is not
reimbursed for the amounts deemed to have been paid or
<PAGE>
disbursed by the LC Issuer under this Section 3.7, such
Reimbursement Obligation shall not accrue interest until
such time as the LC Issuer makes actual payment to the
beneficiary (or its designee) of the Letter of Credit and
until the Letter of Credit is actually drawn, the fees
payable under Section 3.3 with respect thereto shall
continue to accrue.
Any amounts so payable by the Company pursuant to this Section
shall be deposited in cash with the Agent (or, upon the direction
of the Agent, with the LC Issuer) and held as collateral security
for the Obligations in connection with any Letter of Credit and
shall be invested by the Agent (or, if applicable, the LC Issuer)
in Cash Equivalent Investments the interest on which shall be
held as collateral security for such Obligations and applied to
pay such Obligations then due and unpaid. At such time when all
Events of Default shall have been waived, the Agent (or, if
applicable, the LC Issuer) shall return to the Company all
amounts then on deposit with the Agent (or, if applicable, the LC
Issuer) pursuant to this Section (including any income from Cash
Equivalent Investments), net of any amounts applied to the
payment of any such Obligations and net of any account set-up
expenses.
(b) In addition to the other requirements of this
Section, in the event after giving effect to any payments of the
outstanding Loans required pursuant to Section 2.3(a), the Letter
of Credit Outstandings shall exceed the Borrowing Base, the
Company shall promptly deposit with the Agent as cash collateral
for such Letter of Credit Outstandings an amount equal to the
difference between the Borrowing Base and the Letter of Credit
Outstandings. The Agent shall release such cash collateral when
and if the Loans plus Letter of Credit Outstandings shall equal
or be less than the Borrowing Base and no Default or Event of
Default shall have occurred and be continuing.
Section 3.8 Nature of Reimbursement Obligations. The
Company shall assume all risks of the acts, omissions, or misuse
of any Letter of Credit by the beneficiary thereof. Except to
the extent of its own gross negligence or willful misconduct, the
LC Issuer shall not be responsible for:
(a) the form, validity, sufficiency, accuracy,
genuineness, or legal effect of any Letter of Credit or any
document submitted by any party in connection with the
application for and issuance of a Letter of Credit, even if it
should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent, or forged;
(b) the form, validity, sufficiency, accuracy,
genuineness, or legal effect of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit
or the rights or benefits thereunder or proceeds thereof in whole
or in part;
<PAGE>
(c) failure of the beneficiary to comply fully with
conditions required in order to demand payment under a Letter of
Credit;
(d) errors, omissions, interruptions, or delays in
transmission or delivery of any information or messages, by mail,
cable, facsimile, telegraph, telex, or otherwise;
(e) any loss or delay in the transmission or otherwise
of any document or draft required in order to make a disbursement
under a Letter of Credit or of the proceeds thereof;
(f) errors in interpretation of technical terms;
(g) any misapplication by a beneficiary of the
proceeds of any disbursement under any Letter of Credit; or
(h) any consequences arising from causes beyond the
control of the LC Issuer including, without limitation, acts of
any Governmental Authority.
None of the foregoing shall affect, impair, or prevent
the vesting of any of the rights or powers granted to the LC
Issuer hereunder.
Section 3.9 Indemnity. In addition to amounts payable
as elsewhere provided in this Section III, the Company hereby
agrees to protect, indemnify, pay and save LC Issuer harmless
from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including
reasonable attorneys' fees) which LC Issuer may incur or be
subject to as a consequence, direct or indirect, of the issuance
of the Letters of Credit, other than as a result of the gross
negligence or willful misconduct of the LC Issuer as determined
by a court of proper jurisdiction.
SECTION IV
REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Banks to enter into this
Agreement and to make each Loan and the LC Issuer to issue the
Letters of Credit herein provided for, the Company hereby
represents and warrants to the Agent, the Banks and the LC Issuer
that:
Section 4.1 Financial Condition. The consolidated
balance sheet of the Company and its consolidated Subsidiaries as
of December 31, 1993, and the related consolidated statements of
operations and the related consolidated statement of
shareholders' equity for the fiscal year ended on such date
(certified by Deloitte & Touche), and the unaudited consolidated
balance sheet of the Company and its consolidated Subsidiaries as
of March 31, 1994, and the related consolidated statements of
operations and statement of stockholders' equity for the period
ended on such date, copies of which have heretofore been
furnished to the Agent, present fairly the consolidated financial
<PAGE>
condition of the Company and its consolidated Subsidiaries as at
such dates, and the consolidated results of their operations for
the fiscal year and the interim period then ended. All such
audited financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved
by such accountants and as disclosed therein). All unaudited
financial statements, including the related schedules and notes
thereto, have been prepared on a basis consistent with those
financial statements prepared as of December 31, 1993. Neither
the Company nor any of its consolidated Subsidiaries had, at the
date of the balance sheet for the period ended March 31, 1994,
referred to above, any material Contingent Obligation, contingent
liability or liability for taxes, long term lease or unusual
forward or long term commitment, which is not reflected in the
foregoing statements or in the notes thereto.
Section 4.2 No Change. Since December 31, 1993, there
has been no material adverse change in the business, operations,
business prospects, property or financial or other condition of
the Company and its Subsidiaries, taken as a whole, as such
business, operations, property, or financial or other condition
of the Company and its Subsidiaries existed on such date.
Section 4.3 Corporate Existence: Compliance with Law.
Each of the Company and its Subsidiaries (a) is duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (b) has the corporate power
and authority to own and operate its property, to lease the
property it operates as lessee and to conduct the business in
which it is currently engaged, (c) is duly qualified as a foreign
corporation and is in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property
or the conduct of its business requires such qualification,
except to the extent that the failure to so qualify could not
reasonably be expected to have a Material Adverse Effect and (d)
is in material compliance with all Requirements of Law, except to
the extent that the failure to so qualify could not reasonably be
expected to have a Material Adverse Effect.
Section 4.4 Corporate Power: Authorization:
Enforceable Obligations. The Company has the corporate power and
authority to make, deliver and perform this Agreement and the
other Loan Documents, to borrow and cause the issuance of Letters
of Credit hereunder and to grant the Liens or make the pledges
provided in the Collateral Documents and has taken all necessary
corporate action to authorize the borrowings on the terms and
conditions of this Agreement and the other Loan Documents and to
authorize the execution, delivery and performance of this
Agreement and the other Loan Documents and to authorize the grant
of the Liens or the pledge of stock provided in the Collateral
Documents. No shareholder vote is necessary to authorize the
execution, delivery and performance of this Agreement and the
other Loan Documents. No consent or authorization of, filing
with or other act by or in respect of any Governmental Authority
is required in connection with the borrowings hereunder or with
<PAGE>
the execution, delivery, performance, validity or enforceability
of this Agreement and the other Loan Documents or to authorize
the grant of the Liens or the pledge of stock provided in the
Collateral Documents, except for (i) the filing of the UCC
financing statements, (ii) notices or filings required with
respect to the Eligible Billed U.S. Government Receivables
(including, without limitation, the Navy Contracts) and (iii)
certain consents, notices or filings in connection with the 900
Foot Floating Drydock Mortgage, all of which filings, notices and
consents referred to in the foregoing clauses have been made,
obtained or given, as appropriate, and all of which are in full
force and effect. Each of the Loan Documents has been duly
executed and delivered on behalf of the Company. This Agreement
constitutes, and each of the other Loan Documents constitutes, a
legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by
proceedings in equity or at law).
Section 4.5 No Bar. The execution, delivery and
performance of this Agreement and the other Loan Documents, the
borrowings and issuance of Letters of Credit hereunder and the
use of the proceeds thereof, will not violate any Requirement of
Law or any Contractual Obligation of the Company or of any of its
Subsidiaries, and will not result in, or require, the creation or
imposition of any Lien on any of its or their respective
properties or assets pursuant to any Requirement of Law or
Contractual Obligation except for the Liens granted pursuant to
the Collateral Documents.
Section 4.6 No Material Litigation. Except as set
forth on Schedule 4.6, no litigation, investigation, or
proceeding of or before any arbitrator or Governmental Authority
is pending or, to the knowledge of the Company, threatened by or
against the Company or any of its Subsidiaries or against any of
its or their respective properties or revenues (a) with respect
to this Agreement or the other Loan Documents or any of the
transactions contemplated hereby, or (b) which could reasonably
be expected to have a Material Adverse Effect.
Section 4.7 No Default. Neither the Company nor any
of its Subsidiaries is in default under or with respect to any
Contractual Obligation in any respect which could reasonably be
expected to have a Material Adverse Effect.
<PAGE>
Section 4.8 Ownership of Property: Liens. Each of the
Company and its Subsidiaries has good recordable and marketable
title in fee simple to or valid leasehold interests in all its
real property, and good title to or valid leasehold interests in
all its other property (other than property held under Financing
Leases) material to its business, and none of such property is
subject to any Lien, except as permitted in Section 7.2 of this
Agreement.
Section 4.9 No Burdensome Restrictions. No
Contractual Obligation of the Company or any of its Subsidiaries
and no Requirement of Law to which the Company or any of its
Subsidiaries is subject could reasonably be expected to have a
Material Adverse Effect.
Section 4.10 Taxes. Each of the Company and its
Subsidiaries has filed or caused to be filed all tax returns
which to the knowledge of the Company are required to be filed
and has paid all taxes shown to be due and payable on said
returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it
and any of its property by any Governmental Authority (other than
those the amount or validity of which is currently being
contested in good faith by appropriate proceedings and, if
applicable, with respect to which reserves in conformity with
GAAP have been provided on the books of the Company or its
Subsidiaries, as the case may be); and no tax Liens have been
filed and, to the knowledge of the Company, no claims are being
asserted with respect to any such taxes, fees or other charges
other than with respect to Customary Permitted Liens.
Section 4.11 Regulations G, T, U and X. Neither the
Company nor any of its Subsidiaries is engaged principally, or as
one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock,
and less than 25% of the assets of the Company, individually and
on a consolidated basis with its Subsidiaries, consists of margin
stock. The proceeds of any Loans made hereunder will not be used
for a purpose which violates, or would be inconsistent with,
F.R.S. Board Regulations G, T, U or X. Terms for which meanings
are provided in F.R.S. Board Regulations G, T, U and X have such
meanings when such terms are used in this Section 4.11.
Section 4.12 ERISA.
(a) Prohibited Transactions. Neither the Company nor
any Subsidiary has engaged in a transaction in connection with
which the Company or any Subsidiary could be subject to a
material liability for either a civil penalty assessed pursuant
to Section 502(i) of ERISA or a tax imposed by Section 4975 of
the Code.
(b) Plan Termination; Material Liabilities. There has
been no termination of a Plan or trust created under any Plan
that would give rise to a material liability to the PBGC on the
part of the Company or an ERISA Affiliate. No material liability
to the PBGC has been or is expected to be incurred with respect
<PAGE>
to any Plan by the Company or an ERISA Affiliate. The PBGC has
not instituted proceedings to terminate any Plan which is
maintained or is to be maintained by the Company or an ERISA
Affiliate. There exists no condition or set of circumstances
which presents a material risk of termination or partial
termination of any Plan by the PBGC. The Company and each Code
Affiliate have paid all premiums to the PBGC when due.
(c) Accumulated Funding Deficiency. Full payment has
been made of all amounts which are required under the terms of
each Plan to have been paid as contributions to such Plan as of
the last day of the most recent fiscal year of such Plan ended on
or before the date of this Agreement, and no accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of
the Code), whether or not waived, exists with respect to any Plan
or any employee pension benefit plan (as defined in ERISA)
maintained by a Code Affiliate. The aggregate contributions the
Company must pay to the Plans under the minimum funding rules of
Section 412 of the Code will not exceed $4,000,000 in 1994 and
$1,000,000 in 1995. Neither the Company nor any Code Affiliate
has failed to make a required installment under Section 412(m) of
the Code or any other payment required under Section 412 of the
Code on or before the due date.
(d) Relationship of Benefits to Pension Plan Assets.
As of January 1, 1994, the current value of the benefit
liabilities of each Single Employer Plan does not exceed the fair
market value of the assets of such Plan based on valuing the
liabilities using a 7.5% discount rate. Neither the Company nor
a Code Affiliate is required to provide security to a Plan or an
employee pension benefit plan (as defined in ERISA) maintained by
a Code Affiliate under Section 401(a)(29) of the Code.
(e) Withdrawal Liability. Neither the Company nor any
ERISA Affiliate has incurred withdrawal liability with respect to
any Multiemployer Plan. To the best knowledge of the Company,
the liability to which the Company and any ERISA Affiliate would
become subject under ERISA if the Company and any ERISA Affiliate
were to withdraw completely from all Plans which are
Multiemployer Plans as of the most recent valuation date,
together with any secondary liability for withdrawal liability
the Company and any ERISA Affiliate may have as of the date
hereof with respect to any Multiemployer Plan, could not
reasonably be expected to have a Material Adverse Effect. To the
best knowledge of the Company, no such Multiemployer Plan is in
reorganization (as such term is defined in Section 4241 of ERISA)
or is insolvent (as such term is defined in Section 4245 of
ERISA). Neither the Company nor any ERISA Affiliate contributes
to or has any liability with respect to any Multiemployer Plan.
(f) Retiree Welfare Benefits. The excess of the
present value of the projected liability in respect of
post-retirement health, medical and other welfare benefits for
retired employees of the Company and its Subsidiaries determined
using assumptions which are reasonable in the aggregate over the
fair market value of any fund, reserve or other asset segregated
for the purpose of satisfying such liability, does not exceed
$2,500,000 as of December 31, 1993 based on the valuation
performed as of January 1, 1993.
<PAGE>
(g) ESOP. The stock of the Company held in the
Avondale Industries, Inc. Employee Stock Ownership Plan (the
"ESOP") is "readily tradeable on an established market" within
the meaning of Section 409(h) of the Code: therefore,
participants in the ESOP do not have the right to require that
the Company repurchase such shares when distributed from the
ESOP.
Section 4.13 Subsidiaries. At the date of this
Agreement the Company has no Subsidiaries except those listed on
Schedule 4.13, and the Company owns the percentage of outstanding
voting shares of each such Subsidiary indicated on such Schedule.
Section 4.14 Government Regulation. Neither the
Company nor any of its Subsidiaries is an "investment company"
within the meaning of the Investment Company Act of 1940, as
amended, or a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company", or
of a "subsidiary company" or a "holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as
amended.
Section 4.15 Environmental Matters. Except as set
forth in Schedule 4.15:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Company or any of its
Subsidiaries are in material compliance with all Environmental
Laws the non-compliance with which could reasonably be expected
to have a Material Adverse Effect;
(b) there have been no Releases of Hazardous Materials
at, on or under any property now or previously owned or leased by
the Company or any of its Subsidiaries that, singly or in the
aggregate, have, or could reasonably be expected to have, a
Material Adverse Effect;
(c) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any
property now or previously owned or leased by the Company or any
of its Subsidiaries that, singly or in the aggregate, have, or
could reasonably be expected to have, a Material Adverse Effect;
(d) there are no polychlorinated biphenyls or friable
asbestos present at any property now owned or leased by the
Company or any of its Subsidiaries that, singly or in the
aggregate, have, or could reasonably be expected to have, a
Material Adverse Effect; and
(e) as of the date of this Agreement, to the knowledge
of the Company, no conditions exist at, on or under any property
now of previously owned or leased by the Company or any of its
Subsidiaries which, with the passage of time or the giving of
notice or both, would give rise to liability under any
Environmental Law which could reasonably be expected to have a
Material Adverse Effect.
<PAGE>
Section 4.16 Preferred Stock Purchase Agreement.
Either (i) the Preferred Stock Purchase Agreement is in full
force and effect, and has not been amended, supplemented or
otherwise modified without the prior written consent of the
Agent, and no right, power, privilege or remedy of the Company
under the Preferred Stock Purchase Agreement has been waived,
released or otherwise impaired without the prior written consent
of the Agent, or (ii) the Preferred Stock Purchase Agreement has
been terminated pursuant to the Ogden Letter of Intent (without
the Agent's consent) or otherwise with the prior written consent
of the Agent.
Section 4.17 Judgments or Litigation. No judgments,
orders, writs or decrees are outstanding against the Company or
any of the Subsidiaries nor is there now pending or, to the best
of the Company's knowledge, threatened any litigation, contested
claim, investigation, arbitration, or governmental proceeding by
or against the Company or any of the Subsidiaries in which there
is a reasonable possibility of an adverse decision which (taking
into account insurance coverage) could reasonably be expected to
have a Material Adverse Effect.
Section 4.18 Government Contracts. Neither the
Company nor any Subsidiary has ever been debarred or suspended
from contracting (as a first tier or any other level of
subcontractor) for or bidding on any Governmental Contract (as
such term is defined below) or had a Government Contract
cancelled or terminated for default by the Company or a
Subsidiary, as the case may be. Neither the Company nor any of
its Subsidiaries is currently debarred or suspended from (or has
received notice that it is under investigation with respect to a
possible debarment or suspension from) bidding on or entering
into any contract with or for any Governmental Authority
(together with each Navy Contract, a "Government Contract").
Neither the Company nor any of its Subsidiaries has been given
notice (i) that any Government Contract may be or will be
terminated for the convenience of a Governmental Authority or by
virtue of a default by the Company or any of its Subsidiaries, as
the case may be, (ii) that a major program or Contract of the
Company or any Subsidiary will be eliminated or substantially
reduced or suspended, (iii) requiring or resulting in, loss of
use or substantial impairment or interference of use by the
Company or any of its Subsidiaries, as the case may be, of any
facilities owned by a Governmental Authority, or (iv) that any
relevant budget authority or contract authority has been exceeded
with respect to any Government Contract which in any such case
could reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries anticipates
incurring cost overruns on any Government Contracts which could
reasonably be expected to have a Material Adverse Effect.
Section 4.19 Modular Construction. The Company has
full right to use the modular construction technology used (or
needed to be used) in the completion of its Government Contracts
subject to no patent, technology or other license from any
Person. No Person has made a written claim against the Company
that such use is in violation of any patent rights or proprietary
<PAGE>
inflation and there is no pending or, to the best knowledge of
the Company, threatened litigation, or arbitration in which it is
alleged that the Company's use of such technology violates any
patent or proprietary right.
Section 4.20 Licenses, Permits. The Company and each
of its Subsidiaries have all permits, certificates, licenses
(including patent and copyright licenses), approvals and other
authorizations required in connection with the operation of their
businesses, except those which could not reasonably be expected
to have a Material Adverse Effect.
Section 4.21 Navy Contracts. Except as set forth on
Schedule 4.21, the Company has the right under the Navy Contracts
to assign the Company's right, title and interest to the proceeds
thereof to the Agent for the benefit of the Banks, in each case,
free of any contractual right of set-off. The Company has not
released any Governmental Authority from any liability or claim
of entitlement under any Navy Contract except in the ordinary
course of business in respect of change orders. There are no
offsets, and there are not currently threatened or pending any
claims or offsets against the Company or any of its Subsidiaries
by any Governmental Authority which claim or offsets may be used
to reduce amounts owing by any Governmental Authority under the
Navy Contracts, which claims or offsets could reasonably be
expected to have a Material Adverse Effect.
Section 4.22 Loan Documents. etc. All of the
representations and warranties made by the Company in the other
Loan Documents are true and correct.
Section 4.23 No Federal Tax or ERISA Liens. No notice
of or any other document or instrument creating any federal tax
Lien or Lien under Section 412 of the Code or Section 4068 of
ERISA has been issued, recorded or filed with respect to the
assets of the Company of any of its Subsidiaries.
Section 4.24 No Bonds. There are no payment or
performance bonds applicable to the Navy Contracts.
Section 4.25 Labor Controversies. (a) Except as
disclosed on Schedule 4.25, there are no controversies pending
or, to the best of the Company's knowledge after diligent
inquiry, threatened between the Company or any of the
Subsidiaries and any of their respective employees which could
reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any of the Subsidiaries is
engaged in any unfair labor practice. Except as set forth on
Schedule 4.25, there is (i) no unfair labor practice complaint
pending against the Company or any of the Subsidiaries or, to the
best knowledge of the Company, threatened against any of them,
before the National Labor Relations Board, and no grievance or
significant arbitration proceeding arising out of or under
collective bargaining agreements is so pending against the
Company or any of the Subsidiaries or, to the best knowledge of
the Company, threatened against any of them, (ii) no strike,
<PAGE>
labor dispute, slowdown or stoppage pending against either of the
Company or any of the Subsidiaries or, to the best knowledge of
the Company, threatened against any of them and (iii) no union
representation question with respect to the employees of the
Company or any Subsidiaries and no union organizing activities.
Section 4.26 Capitalization; Existing Indebtedness.
Schedule 4.26 ("Ownership of the Company") sets forth, as of the
Effective Date, each record and, to the knowledge of the Company,
beneficial owner of 5% or more of the outstanding shares of each
class of outstanding equity securities of the Company. As of the
Effective Date, Schedule 7.13 sets forth all outstanding
Indebtedness of the Company and its Subsidiaries.
Section 4.27 Patents, Trademarks, etc. Each of the
Company and each of its Subsidiaries owns and possesses all such
patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, service marks, service mark rights and
copyrights required in connection with the conduct of their
business as now conducted without, to the best of its knowledge,
any material infringement upon rights of other Persons.
Section 4.28 Collateral Documents. The provisions of
the Collateral Documents executed or to be executed by the
Company and its Subsidiaries in favor of the Agent will be, on
and after the due execution and delivery thereof in accordance
herewith (and after giving effect to the Initial Credit Event),
effective to create, in favor of the Agent for the benefit of the
Agent and the Banks, legal, valid and enforceable Liens in all
right, title and interest of the Company and its Subsidiaries in
any and all of the Collateral described therein, securing the
Revolving Notes, Reimbursement Obligations and all other
Obligations from time to time outstanding, and upon all filings
and recordings being duly made in the locations referred to in
the applicable Collateral Documents or the taking of possession
of the Collateral by the Agent in accordance with the provisions
of such Collateral Documents or the taking of such other action
by the Agent as is contemplated by the Collateral Documents, each
of such Collateral Documents shall constitute, as of and after
the Effective Date (and after giving effect to the Initial Credit
Event), a fully perfected first priority Lien in all right, title
and interest of the Company and its Subsidiaries in such
Collateral superior in right to any Liens, existing or future,
which the Company or any creditors thereof or purchasers
therefrom, or any other Person, may have against such Collateral
or interests therein, other than interests of Persons with
respect to Customary Permitted Liens.
Section 4.29 Accuracy of Information. All factual
information heretofore or contemporaneously furnished by or on
behalf of the Company in writing to the Agent or any Bank for
purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all other such factual
information hereafter furnished by or on behalf of the Company to
the Agent or any Bank in connection with this Agreement or any
<PAGE>
transaction contemplated hereby will be, true and accurate in
every material respect on the date as of which such information
is dated or certified and such information is not, or shall not
be, as the case may be, incomplete by omitting to state any
material fact necessary to make such information not misleading;
provided that in the case of any projections hereafter so
furnished by or on behalf of the Company, such projections shall
represent the reasonable expectations of the management of the
Company or future performance, based upon historical financial
information and reasonable assumptions.
Section 4.30 Solvency. Each of the Company and each
Subsidiary with assets included in the calculation of the
Borrowing Base is Solvent.
SECTION V
CONDITIONS PRECEDENT TO
EFFECTIVE DATE AND EACH
EXTENSION OF CREDIT
Section 5.1 Initial Credit Extensions.
Notwithstanding any other provision of this Agreement, the
obligations of the Banks to make the initial Credit Extension
hereunder shall be subject to the prior or concurrent
satisfaction of each of the following conditions precedent set
forth in this Section 5.1 (the date on which all of the following
conditions are satisfied by the Company or waived by the Required
Banks is referred to as the "Effective Date");
(a) Documents.
(i) Each of the Banks shall have executed
and delivered a counterpart of this Agreement to the
Agent and the Agent shall have received a counterpart
of this Agreement conforming to the requirements hereof
and executed by a Responsible Officer of the Company.
(ii) The Agent shall have received the Loan
Documents to be executed by the Company (and all
documents related thereto) duly executed by a
Responsible Officer of the Company except as otherwise
specifically provided herein and for the 900 Foot
Floating Drydock Mortgage which shall be executed and
delivered by the Company on or prior to June 15, 1994.
(iii) Each of the Banks shall have
received a Revolving Note and a counterpart of this
Agreement conforming to the requirements hereof and
executed by a Responsible Officer of the Company.
(iv) The Agent shall have received a Borrowing
Base Certificate of the Company and the Subsidiary
<PAGE>
Guarantors, with appropriate insertions and attachments,
reasonably satisfactory in form and substance to the Agent,
and executed by a Responsible Officer of the Company.
(v) The Agent shall have received an Assignment
of Claims Notice (Company) acknowledged by the appropriate
administrative contracting officer, disbursing officer and,
if applicable, any surety or bonding company applicable to
the Government Contracts providing for aggregate payments to
the Company and the Subsidiary Guarantors of $1,000,000 or
more (other than the contract specified in the last sentence
of Section 6.14), including, without limitation, the Navy
Contracts listed on Schedule II hereto.
(vi) The Agent shall have received the Subsidiary
Guarantees executed by each of the Subsidiary Guarantors
executed by a Responsible Officer of the Subsidiary party
thereto.
(vii) The Agent shall have received Subsidiary
Security Agreements executed by each of the Subsidiary
Guarantors executed by a Responsible Officer of the
Subsidiary party thereto.
(viii) The Agent shall have received confirmation
satisfactory to the Agent that proper financing statements
(Form UCC-1) have been duly filed under the Uniform
Commercial Code of all jurisdictions as may be necessary or,
in the opinion of the Agent, desirable to perfect the Liens
and security interests created by the Collateral Documents.
(ix) Certified copies of Requests for Information
or Copies (Form UCC-11) or equivalent reports, which
certified copies or reports shall list all effective
financing statements which name each grantor under the
Collateral Documents as debtor and which are filed in the
jurisdictions referred to in clause (viii) above, together
with copies of such financing statements (none of which
shall cover the Collateral purported to be covered by any of
the Collateral Documents, except with respect to Liens with
respect to which the Company shall have delivered to the
Agent a duly executed Uniform Commercial Code termination
statement).
(x) The Agent shall have received all stock
certificates (together with stock powers duly executed in
blank) which are required to be delivered to the Agent
pursuant to the terms of the Stock Pledge Agreement
(Company) and the Stock Pledge Agreement (ATS).
(xi) Evidence that all other actions that, in the
opinion of the Agent, are advisable to perfect and protect
the Liens in the Collateral created or purported to be
created by the Collateral Documents have been taken.
<PAGE>
(xii) The Agent shall have received evidence that
all insurance policies, coverages and riders (including loss
payable endorsements in favor of and in form and substance
satisfactory to the Agent) required pursuant to the
requirements of this Agreement and the other Loan Documents
are in full force and effect.
(b) Fees and Expenses. The Agent and each of the
Banks shall have received payment in full of those fees and
expenses referred to in the Fee Letter which are due on or prior
to the Effective Date (or an irrevocable authorization to pay
such fees or expenses out of the proceeds of the Loans).
(c) Initial Credit Event. The Initial Credit Event
shall have occurred on or before June 1, 1994.
(d) Corporate Action of the Company. The Agent shall
have received (i) certified copies of all corporate action taken
by the Company to authorize the execution, delivery and
performance, in accordance with their respective terms, of this
Agreement and the other Loan Documents and any other documents
required or contemplated hereunder or thereunder; (ii) a
certificate of incumbency with respect to the officers of the
Company authorized and directed to execute and deliver this
Agreement and the other Loan Documents, and other documents
required or contemplated thereunder; (iii) certified copies of
the Articles of Incorporation and by-laws of the Company, amended
to the date hereof; and (iv) certificate(s) of good standing for
the Company from the appropriate authority in its jurisdiction of
incorporation and in each other jurisdiction in which it is
required to qualify to do business.
(e) Corporate Action of the Subsidiary Guarantors.
The Agent shall have received in respect of each of the
Subsidiary Guarantors party to any Loan Documents (i) certified
copies of all corporate action taken by such Subsidiary Guarantor
to authorize the execution, delivery and performance, in
accordance with their respective terms, of the Loan Documents to
which it is a party and any other documents required or
contemplated thereunder; (ii) a certificate of incumbency with
respect to the officers of such Subsidiary Guarantor authorized
and directed to execute and deliver the Loan Documents to which
it is a party, and other documents required or contemplated
thereunder; (iii) certified copies of the articles of
incorporation and by-laws of such Subsidiary Guarantor, amended
to the date hereof; and (iv) certificate(s) of good standing for
such Subsidiary Guarantor from the appropriate authority in its
jurisdiction of incorporation and in each other jurisdiction in
which it is required to qualify to do business.
(f) Consents. The Agent shall have received all of
the consents necessary, in the opinion of the Agent, to
accomplish the transactions contemplated hereby.
<PAGE>
(g) Officer's Certificate. The Agent shall have
received, as an inducement to the Agent and the Banks to enter
into this Agreement, a certificate of the Company executed by a
Responsible Officer of the Company and dated the Effective Date
certifying that as of such date:
(i) no Default or Event of Default has
occurred and is continuing; and
(ii) the representations and warranties of
the Company contained in this Agreement and the other
Loan Documents and in any certificate, document or
financial or other statement furnished by the Company
are true and correct.
(h) Documentation and Proceedings. All corporate and
legal proceedings and all instruments in connection with the
transactions contemplated by this Agreement shall be satisfactory
in form and substance to the Agent and its counsel and the Agent
shall have received all information and copies of all documents,
including records of corporate proceedings, governmental
approvals and incumbency certificates which it may have
reasonably requested in connection with the transactions
contemplated by this Agreement such documents where appropriate
to be certified by proper officers.
(i) Opinions. Each of the Banks shall have received
the favorable opinions of (i) Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, Louisiana counsel to the Company, (ii)
Sonnenschein, Nath & Rosenthal, Government Contracts counsel to
the Company, and (iii) Latham & Watkins, special counsel to the
Agent, in each case, addressed to the Agent, the LC Issuer and
the Banks, and such other opinions of counsel as the Agent may
reasonably request, in each case in form and substance
satisfactory to the Agent and its counsel.
(j) No Material Adverse Effect. No event or events
which, individually or in the aggregate has had, or could
reasonably be expected to have, a Material Adverse Effect shall
have occurred since December 31, 1993.
(k) Solvency. The Agent shall have received for the
benefit of each Bank and the LC Issuer a certificate of the
Company executed on its behalf by the chief financial officer of
the Company, in form and substance satisfactory to the Agent,
relying upon such projections and financial information as may be
referred to therein and containing such other information as may
be required by, and be acceptable to, the Agent, to the effect
that the Company is and will be Solvent after giving effect to
the transactions contemplated hereby.
(l) Due Diligence. The Agent shall be satisfied with
the results of its review and investigations with respect to:
(i) The current financial condition of the
Company and its Subsidiaries;
(ii) the Navy Contracts;
<PAGE>
(iii) the three year financial projections of the
Company and its Subsidiaries;
(iv) the Collateral and other property of the
Company and its Subsidiaries pursuant to a field examination
of such Collateral and property to be conducted by the Agent
or its representative;
(v) the terms and conditions of all Indebtedness
of the Company or any of the Subsidiary Guarantors that is
to remain outstanding after the Effective Date; and
(vi) the prepayment and termination of the
Existing Credit Facility and the release or termination of
all Liens with respect to the Existing Credit Facility.
(m) Syndication. The Agent shall have received firm
Commitments totalling at least $25,000,000 from financial
institutions (including Continental) reasonably acceptable to the
Company.
(n) Ogden Matters. Execution and delivery by the
Company and Ogden of the Ogden Letter of Intent (in form and
substance reasonably acceptable to the Agent) relating to the
Preferred Stock Purchase Agreement and the Tax Sharing Agreement.
(o) Additional Matters. All other documents, and
legal matters in connection with the transactions contemplated by
this Agreement shall be reasonably satisfactory in form and
substance to the Agent.
Section 5.2 Conditions to Initial Letter of Credit
Issuance. In the event that the first Loan has not been made,
the obligation of the LC Issuer to issue the initial Letter of
Credit shall be subject to its receipt of an Issuance Request and
the satisfaction of the conditions precedent set forth in Section
5.1.
Section 5.3 Conditions to Each Extension of Credit.
The obligation of the Banks to make any Loan and of the LC Issuer
to issue any Letter of Credit is subject to the satisfaction of
the following conditions precedent on the relevant Borrowing
Date:
(a) Representations and Warranties. The
representations and warranties made by the Company herein or
which are contained in any certificate, document or financial or
other statement furnished by the Company at any time under or in
connection herewith shall be correct in all material respects on
and as of such Borrowing Date as if made on and as of such date,
except to the extent that such representations and warranties
expressly relate solely to an earlier date (in which case such
representations and warranties shall have been true and accurate
on and as of such earlier date).
<PAGE>
(b) No Default or Event of Default. No Default or
Event of Default shall have occurred and be continuing on such
Borrowing Date or after giving effect to the Loan to be made or
issuance of the Letter of Credit to be issued on such Borrowing
Date.
(c) Borrowing Certificate. The Agent shall have
received Borrowing Request in accordance with Section 2.4 or an
Issuance Request in accordance with Section 3.2, as the case may
be.
(d) Fees. The Agent and the Banks shall have received
all fees due and owing pursuant to Section 2.9 and Section 3.3.
(e) No Federal Tax or ERISA Liens. No notice of or
any other document or instrument creating any federal tax Lien or
Lien under Section 412 of the Code or Section 4068 of ERISA shall
have been issued, recorded or filed with respect to the assets of
the Company or any of its Subsidiaries and no Bank shall have
informed the Agent or the Company that such Bank has processed
any such Lien or has notice thereof.
Each Credit Extension hereunder shall constitute a
representation and warranty by the Company as of the date of such
Credit Extension that the conditions set forth in this Section
5.3 have been satisfied.
SECTION VI
AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as the
Commitments remain in effect, any Revolving Note remains unpaid,
Letter of Credit Outstandings exist, or any other amount is owing
to the Agent, the Banks or the LC Issuer hereunder, the Company
shall and shall cause each of its Subsidiaries to:
Section 6.1 Financial Statements. Furnish to the Agent
with sufficient copies for each of the Banks:
(a) as soon as available, but in any event within 95
days after the end of each fiscal year of the Company a copy of
the audited consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of such year and the
related consolidated statement of operations, statement of cash
flows and statement of stockholders' equity reported on by
Deloitte & Touche, or other independent certified public
accountants of nationally recognized standing;
(b) as soon as available, but in any event not later
than 50 days after the end of each of the first three quarterly
periods of each fiscal year of the Company the unaudited
consolidated balance sheet of the Company and its consolidated
Subsidiaries as at the end of each such quarter and the related
unaudited consolidated statement of operations and statement of
shareholders' equity and its consolidated Subsidiaries for such
quarter and the portion of the fiscal year through such date,
each certified by a Responsible Officer as fairly presenting the
financial condition of the Company and its consolidated
Subsidiaries as at such date;
<PAGE>
(c) as soon as available, but in any event within the
time periods specified on Schedule 6.1 after the end of each
fiscal month of the Company, the information described on
Schedule 6.1 with respect to the Company and the Subsidiary
Guarantors, prepared in a form acceptable to the Agent; and
(d) as soon as available, but in any event within 30
days after the end of each fiscal year of the Company, the
Company's profit plan for the then current fiscal year, including
without limitation, projections of the Company's financial
performance for such year on a quarterly basis, and the
assumptions underlying such projections.
All such financial statements required by this Section
6.1 are to be prepared in reasonable detail and in accordance
with GAAP applied consistently throughout the periods reflected
therein (except as approved by such accountants or Responsible
Officer, as the case may be, and disclosed therein).
Section 6.2 Certificates: Other Information. Furnish
to the Agent (with sufficient copies for the Banks):
(a) concurrently with the delivery of the financial
statements referred to in Section 6.1(a) above, a certificate of
the independent certified public accountants reporting on such
financial statements stating that in making the examination
necessary therefor no knowledge was obtained of any Default or
Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial
statements referred to in Sections 6.1(a) and 6.1(b) above, a
certificate of a Responsible Officer stating that such Officer
has obtained no knowledge of any Default or Event of Default
except as specified in such certificate, and showing in detail
the calculations supporting such statement in respect of Sections
7.1, 7.2, 7.3, 7.5, 7.6, 7.7, 7.8, 7.9 and 7.13;
(c) within 10 Business Days after the same are sent,
copies of all financial statements and reports which the Company
sends to its public stockholders, if any, and within 10 Business
Days after the same are filed, copies of all financial statements
and reports which the Company may make to, or file with, the
Securities and Exchange Commission or any successor or analogous
Governmental Authority;
(d) as promptly as practicable, and in any event
within 10 Business Days after the end of each month (or more
frequently as requested by the Agent), a completed Borrowing Base
Certificate setting forth the Borrowing Base as of the last day
of such month (such day being the "Borrowing Base Calculation
Date"), accompanied by supporting calculations in reasonable
detail and such new information as the Responsible Officer
executing such Borrowing Base Certificate, after making due
inquiries, has obtained or is otherwise aware of, certifying:
(i) that the information contained in such Borrowing
Base Certificate is true and complete in all material
respects as of the Borrowing Base Calculation Date or the
relevant date of any such new information, as appropriate,
<PAGE>
(ii) that, except as disclosed therein, there has been
no material adverse change in the Company's Eligible Billed
Commercial Receivables, Eligible Billed U.S. Government
Receivables, Eligible Commercial Inventory or the Avondale
Drydock, since the end of the immediately preceding month,
(iii) that, as of the date of such Borrowing Base
Certificate, the sum of (x) the outstanding principal amount
of all Loans and (y) the outstanding amount of all Letter of
Credit Outstandings does not exceed the then Borrowing Base,
and
(iv) a statement as to the agings of Accounts on a
consolidated basis.
(e) as promptly as practicable and in any event within
90 days after the end of each year, a report as of the end of
such year signed by the chief accounting or chief financial
officer of the Company and setting forth in reasonable detail:
(i) any material changes in the reserves made for bad
Accounts and the amount of Accounts written off during the
immediately preceding year, and
(ii) any material Inventory write-offs or write-downs
during such immediately preceding year.
(f) within 10 days after the end of each calendar
year, a certificate of insurance that evidences the existence of
each policy of insurance required to be maintained by the Company
and its Subsidiaries in accordance with the requirements of this
Agreement or any other Loan Document, and the payment of all
premiums therefor.
(g) promptly upon learning thereof notice of (i) the
occurrence of any event causing loss or depreciation in the value
of any of the Company's Inventory in excess of $500,000 and (ii)
the amount of such loss or depreciation.
(h) promptly upon receipt thereof notice of any
proposed suspension or debarment of the Company or any Subsidiary
Guarantor from contracting (as a first tier or any other level of
subcontractor) for, bidding on, or entering into any Government
Contract.
(i) promptly, such additional financial and other
information as the Agent or any Bank may from time to time
reasonably request; the Agent and the Banks severally agreeing to
take appropriate measures to protect any proprietary information
of the Company and its Subsidiaries.
Section 6.3 Payment of Obligations. Pay, discharge or
otherwise satisfy at or, to the extent permitted by this
Agreement, before maturity or before they become delinquent, as
the case may be, all its material obligations of whatever nature,
except when the amount or validity thereof is currently being
contested in good faith and reserves in conformity with GAAP with
respect thereto have been provided on the books of the Company or
its Subsidiaries.
<PAGE>
Section 6.4 Maintenance of Property: Insurance. Keep
all property useful and necessary in its business in good working
order and condition and maintain insurance on all its material
property in at least such amounts and against at least such risks
as are currently insured against by the Company and Subsidiaries.
All policies covering the Collateral are to name the Agent as an
additional insured and the loss payee (pursuant to an endorsement
in form and substance satisfactory to the Agent) in case of loss,
and are to contain such other provisions as the Agent may
reasonably require to fully protect the Agent's interest in the
Collateral and to any payments to be made under such policies.
The Company will furnish to the Agent, upon written request, full
information as to the insurance carried by it.
Section 6.5 Conduct of Business and Maintenance of
Existence. Continue to engage principally in the businesses of
the same general type now conducted by it and preserve, renew and
keep in full force and effect its corporate existence and take
all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its
business and comply in all material respects with all Contractual
Obligations and Requirements of Law (including, without
limitation, the Federal Acquisition Regulations (48 CFR Chapters
1 through 63)) except where the failure to comply with this
Section 6.5 could not reasonably be expected to have a Material
Adverse Effect.
Section 6.6 Inspection of Property: Books and Records;
Discussions. Keep proper books of records and account in which
full, true and correct entries in conformity in all material
respects with GAAP and all Requirements of Law shall be made of
all dealings and transactions in relation to its business and
activities; and permit representatives of the Agent or the Banks,
including, without limitation, any consulting/accounting firm,
auditors, appraisers or other professionals engaged by the Agent
or any of the Banks to visit and inspect any of its properties
and examine and make abstracts from any of its books and records
at any reasonable time during normal business hours and as often
as may reasonably be desired, and to discuss the business,
operations, properties and financial and other condition of the
Company and its Subsidiaries with officers and employees of the
Company and its Subsidiaries and with its independent certified
public accountants; it being understood that the Company will not
be obligated to reveal the details of its final bid decisions.
The Agent and the Banks severally agree to take appropriate
measures to protect any proprietary information of the Company
and its Subsidiaries. The Agent and the Banks may, from time to
time, engage a consulting/accounting firm, auditors, appraisers
and/or other professionals to conduct a review of the operations
of the Company and Subsidiaries or to assist the Agent and/or the
Banks in connection with the exercise or enforcement of any
right, power, privilege or remedy under this Agreement, the Loan
Documents and/or applicable law. The reasonable costs of any
such reviews shall be paid by the Company upon demand.
Section 6.7 Notices. Promptly give notice to the
Agent of:
(a) the occurrence of any Default or Event of Default;
<PAGE>
(b) any (i) default or event of default under any
other Contractual Obligation of the Company or any of its
Subsidiaries, (ii) litigation, investigation or proceeding which
may exist at any time between the Company or any of its
Subsidiaries and any Governmental Authority (including, without
limitation, the Board of Contract Appeals and the General
Accounting Office), and (iii) any other litigation or proceeding
affecting the Company or any of its Subsidiaries, in which, in
the case of clauses (i), (ii) or (iii), the amount(s) claimed
from the Company or any Subsidiary exceeds or is likely to exceed
$1,000,000, singularly or $3,000,000 in the aggregate, or where
the Company or any Subsidiary is likely to be debarred or
suspended from bidding on or entering into Government Contracts
generally, or any Government Contracts of the Company or any
Subsidiary may be forfeited or cancelled for cause or the
convenience of a Governmental Authority, and in addition, will
furnish to the Agent within ninety days after the end of each
fiscal year of the Company, a summary of all such litigation,
investigations or proceedings;
(c) the following events, as soon as possible and in
any event within thirty days after the Company knows or has
reason to know thereof: (1) the occurrence of any Reportable
Event with respect to any Plan; (ii) the occurrence of a
prohibited transaction (as defined in Section 406 of ERISA or
Section 4975 of the Code) with respect to any Plan, (iii) the
institution of proceedings or the taking or expected taking of
any other action by PBGC or the Company or any ERISA Affiliate to
terminate or withdraw or partially withdraw from any Plan and,
with respect to a Multiemployer Plan, the "Reorganization" or
"Insolvency" of such Plan (as such terms are defined in ERISA),
(iv) the failure of the Company or a Code Affiliate to make a
required installment under Section 412(m) of the Code or any
other payment required under Section 412 of the Code on or before
the due date or (v) the adoption of an amendment with respect to
a Plan so that the Company or a Code Affiliate is required to
provide security to the Plan under Section 401(a)(29) of the
Code, and in addition to such notice, delivery to the Agent of a
certificate of a Responsible Officer setting forth details
relating thereto, and the action that the Company, ERISA
Affiliate or Code Affiliate proposes to take with respect thereto
and when known, any action taken or threatened by the Internal
Revenue Service or the PBGC, together with a copy of any notice
to the PBGC or IRS or any notice delivered by the PBGC or IRS;
and
(d) a material adverse change in the business,
operations, property or financial or other condition of the
Company and Subsidiaries as such business, operations, property
or financial or other condition of the Company and Subsidiaries
existed on December 31, 1993. Each notice pursuant to this
Section shall be accompanied by a statement of a Responsible
Officer setting forth details of the occurrence referred to
therein and stating what action the Company and/or Subsidiary
proposes to take with respect thereto.
<PAGE>
Section 6.8 ERISA. Fulfill its, and cause each
Subsidiary to fulfill its, obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan, and
neither the Company nor any Subsidiary shall take any action that
would result in the termination of a Plan by the PBGC.
Section 6.9 Additional Title Opinions and Appraisals
for the Avondale Drydock. In connection with any appraisal of
the Avondale Drydock, whether pursuant to the requirements of
Section 2.17 or otherwise, the Company shall deliver to the Agent
an opinion of counsel satisfactory to the Agent, in form and
substance satisfactory to the Agent, as to the Company's title in
and to the Avondale Drydock and as to the perfection, priority
and validity of the 900 Foot Floating Drydock Mortgage.
Section 6.10 Preferred Stock Purchase Agreement. (a)
To the extent the Preferred Stock Purchase Agreement has not been
terminated pursuant to the Ogden Letter of Intent (without the
prior consent of the Agent) or otherwise terminated with the
prior written consent of the Agent, the Company shall (i) give
notice to Ogden, within the time period specified in Section 1 of
the Preferred Stock Purchase Agreement, of any event or
circumstance which constitutes, or may reasonably be expected in
the future to constitute, a Debit thereunder, and (ii) take all
action required by the Preferred Stock Purchase Agreement
(including, without limitation, the delivery of a written demand
to Ogden pursuant to Section 3(a) of the Preferred Stock Purchase
Agreement, in the case of any Avondale Cash Debit, as defined
therein) to ensure that any such Debit is satisfied through the
issuance of Preferred Stock (as defined in the Preferred Stock
Purchase Agreement) or (with the prior written consent of the
Agent) Subordinated Debentures (as defined in the Preferred Stock
Purchase Agreement) pursuant to the Preferred Stock Purchase
Agreement, except the Company may elect to pay cash or issue
Subordinated Debentures to Ogden in lieu of issuing Preferred
Stock without the consent of the Agent up to the Maximum Cash
Debit Amount, and that, in the case of any Avondale Cash Debit,
Ogden pays in cash the applicable purchase price for the
Preferred Stock and/or Subordinated Debentures issued in
satisfaction of such Debit.
(b) To the extent the Preferred Stock Agreement has
not been terminated pursuant to the Ogden Letter of Intent or
otherwise terminated with the prior written consent of the Agent,
the Company shall (i) give notice to Ogden, within the period
specified in Section 1 of the Preferred Stock Purchase Agreement,
of any event or circumstance which constitutes, or may reasonably
be expected to constitute, an Ogden Cash Credit (as defined in
the Preferred Stock Purchase Agreement), and (ii) take all other
action required by the Preferred Stock Purchase Agreement to
effectuate the payment of the Ogden Cash Credit pursuant to
Section 3(f) and other applicable provisions of the Preferred
Stock Purchase Agreement.
(c) To the extent the Preferred Stock Agreement has
not been terminated pursuant to the Ogden Letter of Intent or
otherwise terminated with the prior written consent of the Agent,
<PAGE>
the Company shall (i) issue Preferred Stock, (ii) if permitted
under the terms of the Preferred Stock Purchase Agreement and if
the Agent has given its prior written consent, issue Subordinated
Debentures to Ogden or (iii) pay cash to Ogden to settle and
discharge all Debits arising under the Preferred Stock Purchase
Agreement except that in the event any Loan has been advanced
hereunder and any portion thereof remains outstanding or there
exists any unpaid Reimbursement Obligation, then the Company may
only elect to pay cash to Ogden in satisfaction of any Avondale
Cash Debit instead of issuing Preferred Stock or Subordinated
Debentures if (i) (x) no Default or Event of Default has occurred
and is continuing and (y) such cash payment, together with all
prior cash payments made pursuant to this subsection (and
excluding any cash payments authorized under clauses (ii) or
(iii)), do not exceed in the aggregate the Maximum Cash Debit
Amount, (ii) the Agent has given its prior written consent to
such cash payment, or (iii) such cash payment is used solely to
reimburse Ogden for any payment made by Ogden under the Ogden
Reimbursement Agreement to reimburse Chemical Bank to the extent
of any draw on the Ogden Letter of Credit for payment of interest
on the Jo Ann Bonds.
Anything in this Section 6.10 to the contrary
notwithstanding, to the extent no Loans or Reimbursement
Obligations are outstanding, there shall be no restriction on the
right of the Company to pay cash to Ogden pursuant to the terms
of the Letter of Intent.
Section 6.11 Delivery; Further Assurances. The
Company will, and will cause each of the Subsidiary Guarantors
to, at their joint and several expense:
(a)execute and deliver any and all instruments
necessary or as the Agent may request to grant and perfect a
first priority Lien on all of its Accounts and Inventory,
subject to no other Liens other than Customary Permitted
Liens, and, without any request by the Agent, immediately
deliver or cause to be delivered to the Agent, in due form
for transfer (duly endorsed in blank or, if appropriate,
accompanied by duly executed blank stock or bond powers),
all securities, chattel paper, instruments and documents of
title, if any, at any time representing all or any of the
Collateral
(b) upon the reasonable request of the Agent, furnish
or cause to be furnished to the Agent such opinions of
counsel in connection with the execution and document
delivery contemplated by this Section 6.11;
(c) upon request of the Agent, forthwith execute and
deliver or cause to be executed and delivered to the Agent,
in due form for filing or recording (and pay the cost of
filing or recording the same in all public offices deemed
necessary by the Agent), such assignments, security
agreements, pledge agreements, consents, waivers, financing
statements, stock or bond powers, and other documents, and
do such other acts and things, all as the Agent may from
<PAGE>
time to time reasonably request, to establish and maintain
to the satisfaction of the Agent valid perfected Liens in
all Collateral (free of all other Liens, claims, and rights
of third parties other than Customary Permitted Liens); and
(d) such other agreements, instruments and documents
which the Agent may request from time to time in connection
with the foregoing.
Section 6.12 Cash Management Letters. On or prior to
the Effective Date, the Company will obtain for the benefit of
the Agent Cash Management Letters with respect to each of its
collection accounts set forth on Schedule 6.12 (or with respect
to the account set forth on Schedule 6.12 maintained at Riggs
National Bank, an irrevocable letter of direction directing Riggs
National Bank to transfers funds contained therein solely to one
of the accounts maintained at Whitney National Bank for which a
Cash Management Letter has been obtained). From and after such
date, the Company will not open any new depositary account into
which proceeds of any Accounts or Inventory are deposited in any
month, unless it causes to be delivered to the Agent a Cash
Management Letter, with such changes as shall be reasonably
acceptable to the Agent. In the event a Cash Management Letter
is not forthcoming or giving for each account, at the option and
discretion of the Agent, the account shall be closed, with the
balance or proceeds transferred to an existing or new depository
account with respect to which a Cash Management Letter has been
obtained. All proceeds of the Collateral shall be deposited
solely into accounts with respect to which a Cash Management
Letter in favor of the Agent has been obtained.
Section 6.13 Updated Appraisal of Avondale Drydock.
Whether or not the Company shall deliver any Extension Notice to
the Agent, no later than 75 days prior to the then current
Extension Date, the Company shall provide the Agent with an
updated appraisal of the Assessed Value of the Avondale Drydock
from an appraiser reasonably acceptable to the Agent. Upon the
Agent's review and approval of such appraisal, the Assessed Value
of the Avondale Drydock for purposes of this Agreement shall be
adjusted to reflect the results of such appraisal.
Section 6.14 Delivery of Assignment of Claims Notices.
Within 30 days after executing any contract with any Governmental
Authority of the United States, including, without limitation the
Department of Navy, providing for aggregate payments to the
Company or any Subsidiary Guarantor of $1,000,000 or more, the
Company shall, and shall cause each Subsidiary Guarantor party
thereto, to assign such contract to the Agent and deliver a
Notice of Assignment with respect to such contract which has been
sent to the United States government pursuant to the Assignment
of Claims Act of 1940 as amended (31 U.S.C. 3727, 41 U.S.C. 15)
and acknowledged by the appropriate administrative contracting
officer, and disbursing officer, and if applicable, any surety on
any bond applicable to such contract. Within 30 days after the
request of the Agent, the Company shall deliver Assignment of
Claims Notices (Company) with respect to the Navy Contract
<PAGE>
executed by the Company with respect to the lay berthing of two
vessels for the Military Sealift Command which the Company
represents and warrants, as of the date of this Agreement, are
the only two contracts with any Governmental Authority of the
United States to which the Company or any of its Subsidiaries is
a party providing for aggregate payments in excess of $1,000,000
for which the Company or any Subsidiary Guarantor has not
delivered an Assignment of Claims Notice prior to the date
hereof.
SECTION VII
NEGATIVE COVENANTS
The Company hereby agrees that, so long as the
Commitments remain in effect, any Loan, Revolving Note or
Reimbursement Obligation remains unpaid, or any other amount is
owing to the Agent, the Banks or the LC Issuer hereunder, the
Company shall not, nor shall it permit any of its Subsidiaries
(and in the case of Section 7.11, any ERISA Affiliate (or with
respect to clauses (c) and (e) of Section 7.11, any Code
Affiliate)) to, directly or indirectly:
Section 7.1 Financial Condition Covenants.
(a) Maintenance of Consolidated Net Worth. Permit
Consolidated Net Worth at any time to be less than the sum of (i)
$108,000,000 plus (ii) 50% of the cumulative Consolidated Net
Income of the Company and its Subsidiaries for all quarters
ending after the date of this Agreement in which Consolidated Net
Income for such quarter was positive.
(b) Maintenance of Debt to Equity Ratio. Permit at
any time the ratio of (i) Total Funded Debt at such time to (ii)
Total Funded Debt plus Consolidated Net Worth at such time to be
greater than .45 to 1.
(c) Maintenance of Minimum Government Contract
Backlog. Permit the backlog of firm Government Contracts of the
Company and Gulfport to be less than $600 million at any time.
(d) Maintenance of Debt Coverage Ratio. Permit the
Cash Flow Coverage Ratio as of the last day of any of its fiscal
quarters to be less than (i) .10 to 1 for any such fiscal quarter
ending on or prior to December 31, 1994 or (ii) .20 to 1 for any
such fiscal quarter ending thereafter.
(e) Maintenance of Interest Coverage Ratio. Permit
the Interest Coverage Ratio as of the last day of any of its
fiscal quarters to be less than (i) 3.0 to 1 for any such fiscal
quarter ending on or prior to December 31, 1994 or (ii) 3.5 to 1
for any such fiscal quarter ending thereafter.
Section 7.2 Limitation on Liens. Create, incur, assume
or suffer to exist any Lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, except:
(a) Customary Permitted Liens;
<PAGE>
(b) pledges or deposits in connection with worker's
compensation, unemployment insurance and other social security
legislation;
(c) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(d) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount, and which
do not in any case materially detract from the value of the
property subject thereto or interfere with the ordinary course of
the business of the Company or any of its Subsidiaries;
(e) Liens on the assets of Subsidiaries securing
Indebtedness owing to the Company so long as such Indebtedness
and Liens are assigned to the Agent for the benefit of the Banks
pursuant to the Security Agreement (Company);
(f) Liens granted with respect to real and/or tangible
or intangible personal property, which property is acquired after
the date hereof (by purchase, construction or otherwise) by the
Company or any Subsidiary, each of which Liens were incurred to
finance, refinance or refund, the cost (including the cost of
construction) of the respective property; provided that no such
Lien shall extend to or cover any other property of the Company
or any such Subsidiary other than the respective property so
acquired and improvements thereon or extend to or cover any
Collateral;
(g) customer's Liens on work in progress incurred in
the ordinary course of business;
(h) Liens granted pursuant to the terms of the
Collateral Documents;
(i) Liens evidenced by the First Preferred Ship
Mortgage;
(j) in addition to and without duplication of the
Liens permitted under clause (g) above, Liens securing
Indebtedness and other obligations of the Company or any of its
Subsidiaries permitted by this Agreement which encumber Fixed
Asset Property having a net book value (or if greater, a fair
market value) which, in the aggregate, is less than or equal to
$12,500,000;
(k) to the extent required at the time of the issuance
of the Jo Ann Refinancing Indebtedness, Liens granted on the Jo
Ann Drydock to secure such Indebtedness; and
(l) to the extent not otherwise covered in clauses (a)
through (k) above, those Liens which are described on Schedule
<PAGE>
7.2 and any extension, renewal or substitution thereof or
therefor; provided that (i) the Indebtedness or other obligation
or liability secured by the applicable Lien shall not exceed the
Indebtedness or other obligation or liability existing
immediately prior to such extension, renewal or substitution and
(ii) the Lien securing such Indebtedness or other obligation or
liability shall be limited to the property which, immediately
prior to such extension, renewal or substitution, secured such
Indebtedness or other obligation or liability.
Clauses (a) through (l) of this Section 7.2 are referred to as
the "Permitted Liens."
Section 7.3 Limitation on Investments and Intercompany
Activity. (a) Make, incur, assume or suffer to exist any
Investment in any other Person, except: (i) Investments in any
Person existing on the date hereof and set forth on Schedule 7.3,
(ii) Cash Equivalent Investments, (iii) loans to (w) employees of
the Company not in excess of $1,500,000 in the aggregate, and (x)
participants in the Company's Performance Share Plan in an amount
not in excess of the tax liabilities of such participants in
connection with the distribution of shares pursuant to such plan,
the calculation of such amount to be made available in writing to
the Agent in reasonable detail and in form and substance
satisfactory to the Agent, (iv) contributions to the Avondale
Industries, Inc. Employee Stock Ownership Plan in accordance with
the terms thereof, (v) contributions to the Avondale Pension Plan
in accordance with the terms of such plan, and (vi) intercompany
accounts between the Company and the Subsidiary Guarantors
arising as a result of and in connection with the cash management
systems of such Persons operated in accordance with their past
practice.
(b) Sell, lease, assign, transfer or otherwise dispose
of any of its assets to any Subsidiary or Affiliate, or lease any
assets, render or receive services or purchase assets from any
Subsidiaries or Affiliates, provided that the Company may enter
into any such transaction with any Subsidiary or Affiliate in the
ordinary course of business consistent with past practices.
Section 7.4 Limitation on Fundamental Changes. Enter
into any transaction of merger or consolidation or amalgamation;
or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution).
Section 7.5 Limitation on Sale of Assets. Other than
the sale of those assets set forth on Schedule 7.5 for their
respective fair market value and the sale of Inventory in the
ordinary course of business, sell, lease, assign, transfer or
otherwise dispose of, or give options to purchase (x) any stock
or other equity interests in any of the Subsidiaries or (y) any
of its other assets (including, without limitation, receivables
and leasehold interests but excluding obsolete or worn out
property) whether now owned or hereafter acquired, and whether or
not leased back in the case of this clause (y) in an amount in
excess of $1,000,000 in any fiscal year of the Company.
<PAGE>
Section 7.6 Limitation on Dividends. Declare any
dividends (other than dividends payable solely in stock of the
Company) on, or make any payment on account of, any shares of any
class of stock of the Company, whether now or hereafter
outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in
obligations of the Company, or make any payment on account of, or
purchase, redeem or otherwise acquire, any securities of the
Company from any Person, except (i) Subsidiaries may pay
dividends and make other distributions to the Company and (ii) so
long as no Default or Event of Default shall have occurred and be
continuing, the Company may pay cash dividends on its capital
stock during any Dividend Calculation Period in an amount not to
exceed (A) 40% of Consolidated Net Income for such Dividend
Calculation Period (but, in the event the Company shall receive
net cash proceeds in an amount at least equal to $35,000,000 from
the issuance of new Preferred Stock of the Company convertible
into common stock of the Company, an amount equal to the greater
of (1) $2,650,000 and (2) 40% of Consolidated Net Income, in each
case for each such Dividend Calculation Period) minus (B) the
amount of all cash dividends paid by the Company pursuant to this
clause (ii) during such Dividend Calculation Period. "Dividend
Calculation Period" shall mean, for each of the Company's fiscal
quarters ending June 30, 1994 and September 30, 1994 the two and
three fiscal quarter periods ending on such dates, respectively,
and as of the last day of each of the Company's fiscal quarters
ending thereafter, the four fiscal quarter period ending on such
day.
Section 7.7 Limitation on Capital Expenditures. Incur
Capital Expenditures which, in the aggregate for the Company and
its Subsidiaries taken as a whole, exceed $7,500,000 for the
Company's fiscal year ending December 31, 1994 and $9,000,000 for
any fiscal year thereafter.
Section 7.8 Sale and Leaseback. Enter into any
agreement, directly or indirectly, for the sale or transfer of
any of its property now owned, or hereafter acquired, with a
concurrent or subsequent acquisition by lease or rental of such
property or like property if the aggregate rentals paid by the
Company and its Subsidiaries, taken as a whole, with respect
thereto in any fiscal year would exceed $3,000,000.
Section 7.9 Acquisitions. Make any Acquisition unless
the following conditions are met at or prior to the time such
Acquisition is made: (i) both prior to and after giving effect
thereto (and any Loans incurred in connection therewith) no
Default or Event of Default shall have occurred and be
continuing, (ii) after giving effect thereto the Company would be
able to obtain Credit Extensions under, and in accordance with
the terms and conditions of, this Agreement in an amount equal to
at least $5,000,000 and (iii) the amount of consideration paid
(including assumed liabilities) by the Company and its
Subsidiaries is less than or equal to $5,000,000 in the aggregate
for all such Acquisitions.
<PAGE>
Section 7.10 Environmental Liabilities. Violate any
requirement of law, rule or regulation regarding Hazardous
Material; and, without limiting the foregoing, dispose of (or
permit any Person to dispose of) any Hazardous Material into or
onto, or (except in accordance with applicable law) from, any
real property owned or operated by the Company or any of its
Subsidiaries, nor allow any Lien imposed pursuant to any
Requirement of Law relating to Hazardous Materials or the
disposal thereof to be imposed or to remain on such real
property, which violation or Lien could reasonably be expected
to have a Material Adverse Effect.
Section 7.11 Compliance with ERISA.
(a) Knowingly engage in any transaction in connection
with which the Company or a Subsidiary could be subject to either
a material civil penalty assessed pursuant to Section 502(i) of
ERISA or a material tax imposed by Section 4975 of the Code:
(b) terminate any Plan maintained by the Company or an
ERISA Affiliate in a manner, or take any other action, which in
any case could reasonably be expected to have a Material Adverse
Effect;
(c) fail to make full payment when due of any amounts
which, under the provisions of any Plan or any employee pension
benefit plan (as defined in ERISA) maintained by a Code
Affiliate, the Company or Code Affiliate is required to pay as
contributions thereto under Section 302 of ERISA and Section 412
of the Code, or permit to exist any accumulated funding
deficiency, whether or not waived, with respect to any such Plan
or any such employee pension benefit plan where such failure to
pay could reasonably be expected to have a Material Adverse
Effect;
(d) fail to make any payments when due to any
Multiemployer Plan which the Company or any ERISA Affiliate may
be required to make under any agreement relating to such
Multiemployer Plan or any law pertaining thereto where such
failure to pay could reasonably be expected to have a Material
Adverse Effect. The Company agrees (x) upon the request of the
Agent to obtain a current statement of withdrawal liability from
each Multiemployer Plan to which the Company or an ERISA
Affiliate contributes or to which the Company or an ERISA
Affiliate has an obligation to contribute and (y) to transmit a
copy of such statement to the Agent with sufficient copies for
the Banks; or
(e) amend a Plan or an employee pension benefit Plan
(as defined in ERISA) maintained by a Code Affiliate where such
amendment would result in an increase in current liability for
the plan year such that either the Company or the Code Affiliate
is required to provide security to such plan under Section
401(a)(29) of the Code.
Section 7.12 Prepayments. Make any voluntary
prepayments of any Indebtedness (other than the Obligations);
<PAGE>
provided that the Company shall be permitted to prepay prior to
their stated maturity its obligations with respect to that
certain $3,000,000 General Obligation Bond Financing between
Harrison County, Mississippi and the Company.
Section 7.13 Indebtedness. Incur or permit to exist
any Indebtedness except (i) Indebtedness of the Company secured
by Permitted Liens; provided, however, that the aggregate
principal amount of Indebtedness secured by the Liens permitted
pursuant to Section 7.2(j) shall not exceed $12,500,000 in the
aggregate, (ii) unsecured Indebtedness of the Company in an
aggregate principal amount not to exceed $15,500,000 in the
aggregate less the amount of Indebtedness secured by Liens
permitted by Section 7.2(j), (iii) Indebtedness constituting an
Investment which is permitted pursuant to Section 7.3(vi), (iv)
Indebtedness in an original principal amount equal to $8,000,000
issued by the Company pursuant to the requirements of the Ogden
Letter of Intent, which Indebtedness shall be on terms and
conditions satisfactory to the Agent, and (v) Indebtedness
existing on the date hereof and listed on Schedule 7.13 and any
extension, renewal or replacement of the Indebtedness listed on
Schedule 7.13, provided that (A) the aggregate principal amount
of Indebtedness issued (or, if such Indebtedness is issued at a
price less than the principal amount thereof, the original issue
price) to extend, renew or replace such Indebtedness shall not
exceed the aggregate principal amount of the Indebtedness being
so extended, renewed or replaced (plus accrued interest thereon),
(B) any such Indebtedness so issued shall not mature prior to the
stated maturity of the Indebtedness being extended, renewed or
replaced and shall, after giving effect to all of the economic
terms thereof, not impact the cash flow of the Company or such
Subsidiary any more unfavorably than the terms of the
Indebtedness being refinanced and (C) such Indebtedness being so
issued shall contain terms no more restrictive vis a vis the
Company or such Subsidiary than the Indebtedness being so
refinanced.
Section 7.14 No Additional Subsidiaries. The Company
will not, and shall not permit any of its Subsidiaries to,
directly or indirectly, form or acquire any new Subsidiaries
after the date hereof.
Section 7.15 Debits. To the extent the Company has
not terminated the Preferred Stock Purchase Agreement pursuant to
the Ogden Letter of Intent or otherwise with the prior written
consent of the Agent, (i) satisfy any Debits by the payment of
cash other than in accordance with Section 6.10(c) or (ii) issue
any Subordinated Debentures pursuant to the Preferred Stock
Purchase Agreement that fail to contain subordinated provisions
acceptable to the Agent.
Section 7.16 Preferred Stock Purchase Agreement and
Tax Sharing Agreement. (i) Terminate the Preferred Stock
Purchase Agreement and the Tax Sharing Agreement except pursuant
to the Ogden Letter of Intent or otherwise with the prior written
consent of the Agent, or (ii) if the Preferred Stock Purchase
<PAGE>
Agreement and the Tax Sharing Agreement are not terminated in the
manner permitted in clause (i) above, amend or otherwise modify
(or agree with Ogden to amend or otherwise modify) any provision
of the Preferred Stock Purchase Agreement or the Tax Sharing
Agreement or waive or release any right, power, privilege or
remedy of the Company thereunder or waive or release Ogden from
any liability or obligation thereunder, in any such case without
the prior written consent of the Agent.
Section 7.17 Jo Ann Agreements. (i) Cause the Jo Ann
Bonds to be refunded, refinanced or otherwise repaid except from
the proceeds of the issuance of the Board of Commissioners of the
Port of New Orleans Industrial Revenue Refunding Bonds (Avondale
Industries, Inc. Project) Series 1994 pursuant to the terms and
conditions set forth in that certain commitment letter dated
March 30, 1994, by Chemical Securities, Inc. and Exhibit A
thereto or any other financing containing terms substantially
similar thereto, which terms and conditions may not be modified
in any material respect without the prior written consent of the
Agent, or (ii) to the extent the Jo Ann Bonds are not refunded in
the manner permitted in clause (i) above, approve any optional
redemption, or purchase in lieu of redemption, of any of the Jo
Ann Bonds or purchase, redeem or otherwise make any payments or
prepayments of principal in respect of the Jo Ann Bonds (whether
pursuant to the Installment Sales Agreement or otherwise) or make
payments or prepayments of any other amounts in respect of the Jo
Ann Bonds which Ogden is required to pay pursuant to the
Preferred Stock Purchase Agreement (if then in effect), in each
such case, without the prior written consent of the Agent;
provided, however, in the case of clause (ii), the Jo Ann Bonds
may be redeemed with funds obtained through a drawing on the
Ogden Letter of Credit or through other funds provided by Ogden
(without any right of reimbursement or subrogation against the
Company except Ogden's right to receive Preferred Stock and/or
(with the consent of the Agent) Subordinated Debentures).
Section 7.18 PSPA Guaranteed Obligations. Unless the
Preferred Stock Purchase Agreement has been terminated pursuant
to the Ogden Letter of Intent or has otherwise terminated in
accordance with its terms or with the prior written consent of
the Agent, and except to the extent permitted in Section 6.10(c),
pay, or permit any Subsidiary to pay, any PSPA Guaranteed
Obligations (it being represented and warranted by the Company
that so long as the Preferred Stock Purchase Agreement remains in
effect, pursuant to the terms of the Preferred Stock Purchase
Agreement, Ogden is obligated to pay all PSPA Guaranteed
Obligations and has no rights of subrogation or reimbursement
against the Company in respect of any such payments except its
right to receive Preferred Stock and/or (with the prior written
consent of the Agent) Subordinated Debentures in accordance with
the provisions of the Preferred Stock Purchase Agreement).
Section 7.19 Change of Location or Name. Change (a)
the location of its principal place of business, chief executive
office or major executive office, or its records concerning the
Collateral, or (b) its name or the name under or by which it
<PAGE>
conducts its business,in each case, without first giving the
Agent not less than 30 days' prior written notice thereof and
taking any and all actions which may be necessary or desirable,
or which the Agent may reasonably request, to maintain and
preserve all Liens in favor of the Agent granted pursuant to the
Collateral Documents, provided that, notwithstanding the
foregoing, the Company will not, and will not permit any of its
Subsidiaries to, change the location of its principal place of
business or chief executive office of its records concerning the
Collateral from the contiguous continental United States of
America to any place outside the contiguous continental United
States of America.
Section 7.20 Additional Negative Pledges and Other
Payment Restrictions Affecting Subsidiaries. The Company will
not, and shall not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or
become effective, or permit any of the Subsidiaries to create or
otherwise cause or suffer to exist or become effective, directly
or indirectly, (i) any prohibition or restriction (including any
agreement to provide equal and ratable security to any other
Person in the event a Lien is granted to or for the benefit of
the Agent and the Banks) on the creation or existence of any Lien
upon the assets of the Company or any of its Subsidiaries,
(ii) any contractual obligation which may restrict or inhibit the
Agent's rights or ability to sell or otherwise dispose of the
Collateral or any part thereof after the occurrence of an Event
of Default or (iii) any encumbrance or restriction on the ability
any of the Subsidiaries of the Company to (A) pay dividends or
make any other distributions on such Subsidiary's capital stock
or pay any Indebtedness owed to the Company or a Subsidiary of
the Company, (B) make loans or advances to the Company or a
Subsidiary of the Company or (C) transfer any of its properties
or assets to the Company; provided that the foregoing shall not
prohibit (i) restrictions contained in any agreement evidencing a
Lien permitted by Section 7.2 which may restrict the transfer of
the property subject to such Liens, (ii) customary non-assignment
provisions of any lease governing a leasehold interest of the
Company or any of its Subsidiaries and (iii) to the extent
required at the time of the issuance of the Jo Ann Refinancing
Indebtedness, restrictions in favor of the holders of the Jo Ann
Refinancing Indebtedness on the creation or existence of Liens on
any of the Jo Ann Drydock Assets.
SECTION VIII
EVENTS OF DEFAULT
Upon the occurrence of any of the following events:
(a) The Company shall fail to pay any principal of the
Loans or any Revolving Notes when due in accordance with the
terms thereof or hereof, or the Company shall fail to make any
payment to the Agent as required pursuant to Section 2.5; or the
Company shall fail to pay any interest on any Loans or Revolving
Notes, or any other amount payable hereunder (including, without
limitation, any Reimbursement Obligations or any amount owing
under any of the Loan Documents) and such failure shall continue
for five (5) days; or
<PAGE>
(b) Any representation or warranty made or deemed made
(pursuant to Section 5.3 hereof) by the Company herein or in any
of the other Loan Documents or which is contained in any exhibit,
schedule, certificate, document or financial or other statement
furnished at any time under or in connection with this Agreement
or any of the other Loan Documents shall prove to have been
incorrect in any material respect on or as of the date made or
deemed made; or
(c) The Company shall default in the observance or
performance of any agreement contained in Section VII or an
"Event of Default" under and as defined in any other Loan
Document shall occur; or
(d) The Company shall default in the observance or
performance of any other agreement contained in this Agreement
(other than defaults described in other subparagraphs of this
Section VIII) or any of the other Loan Documents, and such
default shall continue unremedied for a period of thirty days; or
(e) Any Subsidiary shall take any action set forth in
Section VII which action the Company has undertaken not to
permit; or
(f) Any Subsidiary shall fail to take any action set
forth in Section VI which action the Company has undertaken to
cause and such failure shall not be remedied for a period of
thirty days after notice thereof is given to the Company by the
Agent; or
(g) The Company or any Subsidiary shall (i) default in
any payment of principal of or interest on any Indebtedness
(other than the Revolving Notes and Reimbursement Obligations) or
in the payment of any Contingent Obligation, in either case in
the aggregate principal amount of more than $3,000,000, in each
instance, beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness or
Contingent Obligation was created; or (ii) default in the
observance or performance of any other agreement or condition
relating to any such Indebtedness or Contingent Obligation or
contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is
to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Contingent Obligation (or
a trustee, agent or other Person acting on behalf of such holder
or holders or beneficiary or beneficiaries) to cause, with the
giving of notice or lapse of time if required, such Indebtedness
to become due prior to its stated maturity or such Contingent
Obligation to become payable; or
(h) (i) The Company or any Subsidiary shall commence a
case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors,
seeking to have an order for relief entered with respect to it,
or seeking to adjudicate it a bankrupt or insolvent, or seeking
<PAGE>
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any
substantial part of its assets, or the Company or any Subsidiary
shall make a general assignment for the benefit of its creditors;
or (ii) there shall be commenced against the Company or any
Subsidiary any case, proceeding or other action of a nature
referred to in clause (i) above which (A) results in the entry of
an order for relief or any such adjudication or appointment or
(B) remains undismissed or undischarged for a period of sixty
days; or (iii) there shall be commenced against the Company or
any Subsidiary any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets
which results in the entry of an order for any such relief which
shall not have been vacated, discharged or stayed pending appeal
within sixty days from the entry thereof; or (iv) the Company or
any Subsidiary shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any
of the acts set forth in clause (i), (ii), or (iii) above; or (v)
the Company or any Subsidiary shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its
debts as they become due; or
(i) (i) If any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975
of the Code) involving any Plan, (ii) any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not
waived, shall exist with respect to any Plan or any employee
pension benefit plan (as defined in ERISA) maintained by a Code
Affiliate, (iii) a Reportable Event shall occur with respect to,
or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or institution of
proceedings or appointment of a trustee is likely to result in
the termination of such Plan for purposes of Title IV of ERISA,
and, in the case of a Reportable Event, the continuance of such
Reportable Event unremedied for ten days after notice of such
Reportable Event pursuant to Section 4043(a), (c) or (d) of ERISA
is given and, in the case of the institution of proceedings, the
continuance of such proceedings for ten days after commencement
thereof, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA, (v) the Company or an ERISA
Affiliate shall partially or completely withdraw from, or incur
withdrawal liability with respect to, any Multiemployer Plan or
(vi) any other event or condition shall occur or exist, with
respect to any Plan; and in each case in clauses (i) through (vi)
above, such event or condition, together with all other such
events or conditions, if any, could subject the Company or any of
the Subsidiaries to any tax, penalty or other liabilities in
excess of $1,000,000; or
(j) One or more judgments, decrees, arbitration
awards, rulings or decisions (including, without limitation,
rulings of the Board of Contract Appeals), shall be entered
<PAGE>
against the Company or any of the Subsidiaries involving in the
aggregate a liability (not paid or fully covered by insurance) of
$1,000,000 or more and all such judgments, decrees, awards and
rulings shall not have been vacated, paid, discharged, stayed or
bonded pending appeal within 60 days from the entry thereof; or
the Company or any Subsidiary fails to timely appeal any final
decision of a contracting officer against the Company or any
Subsidiary, as the case may be, involving an aggregate liability
of at least $1,000,000 or more to the Armed Services Board of
Contract Appeals (the "ASBCA") or the U.S. Claims Court and/or
the ASBCA or the U.S. Claims Court confirms any such final report
or decision; or
(k) At any time, the backlog of firm contracts
(excluding intercompany contracts and excluding unexercised
options or unexercised rights under contracts) of the Company and
the Subsidiary Guarantors shall be less than $600,000,000; or
(l) If (i) the Company or any of the Subsidiaries is
debarred or suspended from contracting (as a first tier or any
other level of subcontractor) for, bidding on, or entering into
any Government Contract; or (ii) if a material current or
material backlogged Government Contract is forfeited or
terminated for cause; or
(m) The Company or any Subsidiary shall default in the
performance of any term or condition contained or applicable to
any Preferred Stock of such Person; or
(n) The Company or any Governmental Authority
challenges the efficacy of the assignments noticed in the
Assignment of Claims Notices (Company) or fails to comply with
the terms thereof; or
(o) Work on any Navy Contract is interrupted for the
lesser of (i) 90 days or (ii) the period of time permitted for
interruption in such contract, unless in the case of this clause
(ii) such interruption is at the direction of the United States
Navy; or
(p) The Company or any Subsidiary shall contest the
validity or enforceability of, or otherwise disaffirm, or fail to
honor, any of its covenants, agreements or obligations under any
Loan Document to which it is a party, or any Lien granted or
purported to be granted to the Agent pursuant to the terms of the
Collateral Documents with respect to property, individually or in
the aggregate, having a fair market value in excess of
$1,000,000, shall cease to be or shall not be a valid and
perfected Lien having the priority contemplated by this Agreement
and the Collateral Documents; or
(q) The Company shall have failed to deliver to the
Agent by no later than June 15, 1994 any of the following items:
(i) the consent of the Secretary of Transportation to the Liens
to be granted to the Agent pursuant to the 900 Foot Floating
Drydock Mortgage, (ii) the 900 Foot Floating Drydock Mortgage
duly executed by the Company, and (iii) a title opinion from
<PAGE>
Jones, Walker, Waechter, Poitevent, Carrere & Denegre in form and
substance satisfactory to the Agent as to the Company's title in
and to the Avondale Drydock and as to the perfection, priority
and validity of the 900 Foot Floating Drydock Mortgage; or
(r) The occurrence of a Change of Control;
then, and in any such event, (A) if such event is an Event of
Default specified in subsection (h) above with respect to the
Company or any Subsidiary, automatically the Commitments shall
immediately terminate and the Loans and any Reimbursement
Obligations hereunder (with accrued interest thereon) and all
other Obligations owing under this Agreement, the Revolving Notes
and the other Loan Documents shall immediately become and be due
and payable without the giving of any notice of any kind, and (B)
if such event is any other Event of Default, either or both of
the following actions may be taken: (i) the Agent may (with the
consent of the Required Banks) and shall (upon the request of the
Required Banks), by notice to the Company declare the Commitments
to be terminated forthwith, whereupon the Commitments shall
immediately terminate; and (ii) the Agent may (with the consent
of the Required Banks) and shall (upon the request of the
Required Banks), by notice to the Company, declare the Loans and
any Reimbursement Obligations hereunder (with accrued interest
thereon) and all other Obligations owing under this Agreement,
the Revolving Notes and the other Loan Documents to be due and
payable forthwith, whereupon the same shall immediately become
and be due and payable. Except as expressly provided above in
this Section VIII, presentment, demand, protest and all other
notices of any kind are hereby expressly waived by the Company.
If the maturity of the Loans is accelerated, the LC Issuer shall
give notice of termination under each Letter of Credit which
permits the LC Issuer to cause its termination.
SECTION IX
THE AGENT
Section 9.1 Actions. Each Bank authorizes the Agent
to act on behalf of such Bank under this Agreement, the other
Loan Documents and any other related instruments and, in the
absence of other written instructions from the Banks received
from time to time by the Agent (with respect to which the Agent
agrees that it will, subject to the last two sentences of this
Section 9.1, comply in good faith except as otherwise advised by
counsel), to exercise such powers hereunder and thereunder as are
specifically delegated to or required of the Agent by the terms
hereof and thereof, together with such powers as may be
reasonably incidental thereto. Each Bank agrees (which agreement
shall survive any termination of this Agreement) to indemnify the
Agent, pro rata according to such Bank's Percentage, from and
against any and all liabilities, obligations, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever which may at any time be imposed
on, incurred by, or asserted against the Agent in any way
relating to or arising out of this Agreement, the Revolving
<PAGE>
Notes, the Letters of Credit, any of the other Loan Documents and
any other related instruments, including, without limitation, the
reimbursement of the Agent for all reasonable out-of-pocket
expenses (including, without limitation, syndication costs and
attorneys' fees) incurred by the Agent hereunder or in connection
herewith or in enforcing the obligations of the Company under
this Agreement, under any of the other Loan Documents or any
other related instruments, in all cases as to which the Agent is
not reimbursed by the Company; provided that no Bank shall be
liable for the payment of any portion of such liabilities,
obligations, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements determined by a court of proper
jurisdiction in a final proceeding to have resulted solely from
the Agent's gross negligence or willful misconduct. The Agent
shall not be required to take any action hereunder or under any
other related instruments, or to prosecute or defend any suit in
respect of this Agreement or any such instrument, unless
indemnified to its satisfaction by the Banks against costs,
liability, and expense. Each Bank's obligation to indemnify the
Agent as set forth above shall be unconditional under any and all
circumstances and irrespective of any set off, counterclaim or
defense to payment which such Bank may have or have had against
the Agent, the Company, any Subsidiary or any other Person. If
any indemnity in favor of the Agent shall become impaired, the
Agent may call for additional indemnity and cease to do the acts
indemnified against until such additional indemnity is given.
The Agent may delegate its duties hereunder to affiliates, agents
or attorneys-in-fact selected in good faith by the Agent.
Section 9.2 Exculpation. The Agent shall have no
duties or responsibilities except those expressly set forth in
this Agreement. Neither the Agent nor any of its directors,
officers, employees, or agents (collectively, the "Related
Parties") shall be liable to any Bank for any action taken or
omitted to be taken by it under this Agreement, the other Loan
Documents or any other related instrument, or in connection
herewith or therewith, except for its own willful misconduct or
gross negligence, nor shall the Agent or any Related Parties be
responsible for any recitals or representations or warranties
herein or therein, or for the effectiveness, enforceability,
validity or due execution of this Agreement, the other Loan
Documents or any other related instruments, nor shall the Agent
or any Related Parties be obligated to make any inquiry
respecting the performance by the Company of its obligations
hereunder or thereunder. The Agent shall be entitled to rely
upon advice of counsel concerning legal matters and upon any
notice, consent, certificate, statement or writing which it
believes to be genuine and to have been presented by a proper
Person. The Agent may at any time request instructions from the
Banks with respect to any actions or approvals which, by the
terms of this Agreement, the Agent is permitted or required to
take or grant, and the Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and
shall not be under any liability whatsoever to any Person for
refraining from taking any action or withholding any approval
under this Agreement or any of the other Loan Documents until it
<PAGE>
has received instructions from the Required Banks. No Bank shall
have any right of action whatsoever against the Agent as a result
of the Agent acting or refraining from acting hereunder or under
any of the other Loan Documents in accordance with instructions
from the (i) Required Banks, or (ii) all of the Banks to the
extent required hereunder.
Section 9.3 Successor. The Agent may resign as such
at any time upon at least ten days' prior notice to the Company
and all Banks. If the Agent at any time shall resign or be
removed, the Required Banks may appoint another Bank as a
successor Agent. If the Required Banks do not make such
appointment within thirty days, the resigning or removed Agent
shall appoint a new Agent from among the Banks or, if no Bank
accepts such appointment, from among commercial banking
institutions or trust institutions generally. Upon the acceptance
of any appointment as Agent by a successor Agent, such successor
Agent shall thereupon become the Agent hereunder and shall be
entitled to receive from the prior Agent such documents of
transfer and assignment as such successor Agent may reasonably
request, and the resigning or removed Agent shall (i) be
discharged from its duties and obligations under this Agreement
and the other related instruments and (ii) entitled to the
continued benefit of this Section IX with respect to all actions
taken by it prior to its removal or resignation.
Section 9.4 Credit Decisions. Each Bank represents
and acknowledges to the Agent and each other Bank that it has,
independently of the Agent and each other Bank, and based on the
financial information referred to in this Agreement and the other
Loan Documents and such other documents, information and
investigations as it has deemed appropriate, made its own credit
decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently of the Agent and each
Bank, and based on such documents, information and investigations
as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising or not exercising from time
to time any rights and privileges available to it under this
Agreement, the Loan Documents or any other related instruments.
Section 9.5 Notices, etc. from Agent. The Agent shall
give prompt notice to each Bank of each notice or request given
to the Agent by the Company pursuant to the terms of this
Agreement. The Agent will distribute to each Bank each
instrument received for such Bank's account and copies of all
other communications received by the Agent from the Company for
distribution to the Banks by the Agent in accordance with the
terms of this Agreement.
Section 9.6 Collateral Documents. Each Bank and the
Agent hereby (i) authorizes the Agent to enter into the
Collateral Documents and to take all action contemplated thereby
and (ii) confirms its appointment of Continental Bank N.A., as
Agent under the terms and conditions of the Collateral Documents.
Each Bank hereby confirms its agreement to be bound by the terms
and conditions of the Collateral Documents. Each Bank and the
<PAGE>
Agent agrees that no Bank shall have any right individually to
seek to realize upon the collateral granted for the benefit of
the Banks pursuant to any of the Collateral Documents, it being
understood and agreed that such rights and remedies may be
exercised by the Agent as Agent for the benefit of the Agent and
the Banks upon the terms of the Collateral Documents.
Section 9.7 Loans by the Agent. The Agent shall have
the same rights and powers with respect to the Loans made by it
or any of its Affiliates as any Bank and may exercise the same as
if it were not the Agent hereunder.
Section 9.8 Other Collateral Matters. Each Bank
hereby agrees, and each holder of any Obligations by the
acceptance thereof will be deemed to agree, that, except as
otherwise set forth herein, any action taken by the Agent or the
Required Banks in accordance with the provisions of this
Agreement or the Loan Documents, and the exercise by the Agent or
the Required Banks of the powers set forth herein or therein,
together with such other powers as are reasonably incidental
thereto, shall be authorized and binding upon all of the Banks.
The Agent is hereby authorized on behalf of all of the Banks,
without the necessity of any notice to or further consent from
any Bank, from time to time prior to an Event of Default, to take
any action with respect to any Collateral or Loan Documents which
may be necessary to perfect and maintain perfected the security
interest in and Liens on the Collateral granted pursuant to the
Loan Documents. Without limiting the foregoing, the Banks
irrevocably authorize the Agent at its option and in its
discretion, to release any Lien granted to or held by the Agent
upon any Collateral (i) upon termination of the Commitments and
payment in full of all other Obligations payable under this
Agreement and under any other Credit Document; (ii) constituting
property sold or to be sold or disposed of as part of or in
connection with any disposition permitted hereunder; (iii)
constituting property in which the Company owned no interest at
the time the Lien was granted or at any time thereafter; (iv)
constituting property leased to the Company under a lease which
has expired or been terminated in a transaction permitted under
this Agreement or is about to expire and which has not been, and
is not intended by the Company to be, renewed or extended; (v)
consisting of an instrument evidencing Indebtedness if the
Indebtedness evidenced thereby has been paid in full; or (vi)
subject to Section 10.2(g), if approved, authorized or ratified
in writing by the Required Banks. Upon request by the Agent at
any time, the Banks will confirm in writing the Agent's authority
to release particular types or items of Collateral pursuant to
this Section 9.8.
SECTION X
MISCELLANEOUS
Section 10.1 Notices. All notices by the Company to
the Agent on behalf of the Banks (including, but not limited to,
notices relating to borrowings), and by the Agent on behalf of
<PAGE>
the Banks to the Company shall be sent by telegram, telecopier,
telex or letter, or by telephone, which telephoned communication
shall be confirmed by telegram, telecopier, telex or letter, and
shall be effective (i) when telephoned or, in the case of a
telegram, telecopy message, telex or letter when received, if
telephoned or received before 10:00 a.m. Chicago time or (ii) on
the next Business Day following such telephonic message or
receipt of a telegram, telecopy message, telex or letter, if
telephoned or received after 10:00 a.m. Chicago time, and all
other notices, requests, demands, directions and other
communications (collectively, "notices") given to or made upon
any party hereto under the provisions of this Agreement shall be
in writing (including telexed, telecopied or telegraphed
communication) unless otherwise expressly permitted hereunder and
shall be delivered or sent by first class mail, certified mail
return receipt requested, or overnight mail, or by telex or
telegram with confirmation in writing mailed first class, in all
cases with postage or charges prepaid, to the applicable party
addressed, if to the Agent, at such address and telephone, telex
and telecopy numbers as the Agent shall specify to the Company
and the Banks in accordance with the provisions of this Section
10.1. Notwithstanding the provisions of the immediately preceding
sentence, any notice sent via certified mail -- return receipt
requested, certified fee and normal postage prepaid, shall be
deemed to have been received on the earlier of actual receipt
thereof or the fifth (5th) day after the postmarked date
indicated on the Receipt for Certified Mail (PS Form 3800, June
1985, or any successor form). Notices given to the Company shall
be delivered at its offices at 5100 River Road, Avondale,
Louisiana 70094, Attention: Mr. Thomas M. Kitchen, telephone:
504-436-5237, telecopier: 504-436-5304, and if notice is given to
any Bank, to its address and telephone, telex and telecopy
numbers as such Bank shall specify to the Agent, the Company and
the other Banks in accordance with the provisions of this Section
10.1. Except as otherwise expressly provided herein, any
properly given notice hereunder shall be effective when received.
Section 10.2 Amendments and Waivers. No amendment or
waiver of any provision of this Agreement, or any of the other
Loan Documents, nor consent to any departure by the Company
therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Required Banks, and then such
waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent, unless in writing
and signed by all the Banks, shall do any of the following: (a)
waive any of the conditions specified in Section V (though the
Agent alone may defer the fulfillment of such conditions until
the date of the applicable borrowing), (b) increase the amount or
extend the term of the Commitments of the Banks or subject the
Banks to any additional obligations, (c) reduce the principal of,
or interest on, the Loans or any of the Revolving Notes or
Reimbursement Obligations, or reduce any fees payable hereunder,
(d) postpone any date fixed for any payment in respect of
principal of, or interest on, the Loans, the Reimbursement
Obligations or any of the Revolving Notes, as the case may be, or
<PAGE>
fees payable hereunder, (e) change any of the components which
shall be required for the Banks or any Bank to take any action
hereunder, (i.e., the percentage of the Commitments, or the
aggregate unpaid principal amount of the Loans, or the number of
Banks), (f) amend this Section 10.2, or (g) release all or any
substantial portion of the Collateral (other than any Collateral
which is permitted to be disposed of pursuant to the terms of
this Agreement or the terms of the Collateral Documents) or
release any Subsidiary Guarantor from the Subsidiary Guaranty
executed by it; and provided, further, that no amendment, waiver
or consent shall, unless in writing and signed by the Agent or
the LC Issuer, as applicable, in addition to the Banks
hereinabove required to take such action, affect the rights or
duties of the Agent or the LC Issuer, respectively, under this
Agreement. Without derogating from the foregoing, except as set
forth below, no amendment to this Agreement shall be effective
unless signed by the Company. Notwithstanding anything in this
Agreement to the contrary, the consent of the Company shall not
be required for any amendment, modification or waiver of the
provisions of Section IX.
Notwithstanding the foregoing, without the consent of
any Bank or the LC Issuer, the Agent, upon the request of the
Company, shall release its Lien, or enter into intercreditor
and/or subordination agreements with lenders to the Company's and
any Subsidiary Guarantor's customers subordinating the Agent's
Lien, on certain Inventory which shall constitute or form a part
of work-in-process with respect to which title thereto has passed
to customers of the Company or any Subsidiary Guarantor pursuant
to the terms of the applicable contract with such customers and,
in the case of any release of such Lien, for which an Account has
arisen (whether or not such Account has been billed). It is
intended and such releases (or such agreements) would only be
executed by the Agent in the event any such customer is financing
its purchase of a vessel with a third party lender and the
related construction agreement contemplates that title will pass
from the Company or the applicable Subsidiary Guarantor to such
customer with respect to all or a portion of the vessel so
financed. Prior to the occurrence of an Event of Default nothing
set forth in this Agreement shall limit the right of the Company
to release any claim or lien it may have to work in process with
respect to which title thereto has been passed to its customers
pursuant to the terms of the applicable contract with such
customers.
Section 10.3 No Waiver: Cumulative Remedies. No
failure to exercise and no delay in exercising, on the part of
the Agent or any Bank, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
Section 10.4 Survival of Representations and
Warranties. All representations and warranties made hereunder
<PAGE>
and in any document, certificate or statement delivered pursuant
hereto or in connection herewith shall survive the execution and
delivery of this Agreement and the other Loan Documents.
Section 10.5 Payment of Expenses and Taxes; Indemnity
and Release. (a) The Company agrees (a) to promptly pay or
reimburse the Agent for all its reasonable out-of-pocket costs
and expenses incurred in connection with the structuring,
negotiation, preparation, execution, delivery, implementation and
administration of, and any amendment, supplement or modification
(including, without limitation, proposed amendments, supplements,
or modifications whether or not effective) to, this Agreement,
and the other Loan Documents and any other documents prepared in
connection herewith, and the consummation of the transactions
contemplated hereby and thereby, including, without limitation,
the reasonable fees and disbursements of counsel to the Agent,
including, without limitation, the reasonable fees of any
auditors (including in-house auditors), consultants, appraisers
or other professionals retained by the Agent or its counsel, (b)
to promptly pay or reimburse the Agent, the Banks and the LC
Issuer for all their costs and expenses incurred in connection
with the monitoring and inspection of the Collateral and the
collection of any Obligations or the enforcement or preservation
of any rights under this Agreement, the Letters of Credit and any
of the other Loan Documents and any such other documents (whether
such collection, enforcement or preservation is undertaken in
connection with any proceeding described in Section VIII(h) or
any refinancing or restructuring of the credit arrangements
provided for in this Agreement in the nature of a workout or
otherwise), including, without limitation, the reasonable fees
and disbursements of counsel to the Agent, the Banks and the LC
Issuer including, without limitation, the reasonable fees of any
auditors (including in-house auditors), consultants, appraisers
or other professionals retained by the Agent or its counsel, and
(c) to promptly pay, indemnify, and hold the Agent and the Banks
harmless from any and all recording and filing fees and any and
all liabilities payable in connection with the execution and
delivery of, or consummation of any of the transactions
contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement,
any of the other Loan Documents and any such other documents.
(b) In consideration of the execution and delivery of
this Agreement by the Agent and the Banks, and the Banks'
extension of their respective Commitments, the Company hereby
indemnifies, exonerates and holds the Agent, each Bank, the LC
Issuer, each Affiliate of the Agent, each Affiliate of each Bank,
each Affiliate of the LC Issuer and each of their respective
officers, directors, employees, and agents, (herein collectively
called the "Bank Parties" and individually called a "Bank Party")
free and harmless from and against any and all actions, causes of
action, suits, losses, costs, liabilities and damages, and
expenses actually incurred in connection therewith (irrespective
of whether such Bank Party is a party to the action for which
indemnification hereunder is sought), including reasonable
attorneys' fees and disbursements including allocated costs of
staff counsel (collectively, the "Indemnified Liabilities"),
incurred by the Bank Parties or any of them as a result of, or
arising out of, or relating to
<PAGE>
(i) any transaction financed or to be
financed in whole or in part, directly or indirectly,
with the proceeds of any Loan;
(ii) any investigation, litigation, or
proceeding related to any acquisition (or Acquisition)
or proposed acquisition (or proposed Acquisition) by
the Company or any of its Subsidiaries of all or any
portion of the stock or all or substantially all of the
assets of any Person, regardless of whether any Bank
Party is a party thereto; or
(iii) the presence on or under, or the
escape, seepage, leakage, spillage, discharge,
emission, discharging or releases from, any real
property owned or operated by the Company or any of its
Subsidiaries of any Hazardous Material (including,
without limitation, any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising
under CERCLA, any so-called "Superfund" or "Superlien"
law, or any other federal, state, local or other
statute, law, ordinance, code, rule, regulation, order
or decree regulating, relating to or imposing liability
or standards on conduct concerning, any Hazardous
Material), regardless of whether caused by, or within
the control of, the Company or any of its Subsidiaries;
except for any such Indemnified Liabilities arising for the
account of a particular Bank Party which a court of competent
jurisdiction shall have determined in a final proceeding to have
arisen by reason of the relevant Bank Party's gross negligence or
willful misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Company
hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law (the foregoing shall not
derogate from any greater requirements contained in any of the
Collateral Documents in favor of the Agent and the Banks).
The agreements in this Section shall survive repayment
of the Revolving Notes and the Obligations and all other amounts
payable hereunder and under the other Loan Documents.
Section 10.6 Headings: Table of Contents. The Section
and other headings contained in this Agreement and the Table of
Contents which precedes this Agreement are for reference purposes
only and shall not control or affect the construction of this
Agreement or the interpretation hereof in any respect.
Section 10.7 Successors and Assigns. (a) This
Agreement shall be binding upon and shall inure to the benefit of
the Agent, the Banks, the Company and their respective successors
and assigns, except that the Company may not assign or delegate
its rights or obligations hereunder or any interest herein
without the consent of each Bank.
(b) The Banks may grant participations in any part of
the Loans, Revolving Notes or their obligations with respect to
<PAGE>
Letters of Credit and the other Loan Documents to any of their
affiliates or to any other commercial bank, insurance company,
savings and loan, savings bank or other financial institution;
provided, however, that (1) such selling Bank's obligations under
this Agreement and the other Loan Documents shall remain
unchanged, (2) such selling Bank shall remain solely responsible
for the performance of such obligations and (3) the Company, the
Agent and the other Banks shall continue to deal solely and
directly with such selling Bank in connection with all rights and
obligations under this Agreement. Any agreement pursuant to
which a selling Bank may grant a participation may provide that
such Bank will not agree to any amendment or waiver expressed in
subsections (b), (c), (d), (f) or (g) of Section 10.2 of this
Agreement without the consent of the participant, but shall not
require any Bank to take or omit to take any other action
hereunder.
(c) Each Bank may, with the consent of the Agent and
the Company (which consent shall not be unreasonably withheld),
but without the consent of any other Bank, assign to one or more
banks or other financial institutions all or a portion of its
rights and obligations under this Agreement and the Revolving
Notes; provided that (i) for each such assignment, the parties
thereto shall execute and deliver to the Agent, for its
acceptance and recording in the Register (as defined below), an
Assignment and Assumption Agreement, together with any Revolving
Note or Revolving Notes subject to such assignment and a
processing and recordation fee of $3,000 and (ii) no such
assignment shall be for less than $5,000,000 of the Commitments,
unless such assignment is to a then-current holder of a Revolving
Note or otherwise consented to by the Agent in writing. Upon
such execution and delivery of the Assignment and Assumption
Agreement to the Agent, from and after the date specified as the
effective date in the Assignment and Assumption Agreement (the
"Acceptance Date"), (x) the assignee thereunder shall be a party
hereto, and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and
Assumption Agreement, such assignee shall have the rights and
obligations of a Bank hereunder and (y) the assignor thereunder
shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment and Assumption
Agreement, relinquish its rights (other than any rights it may
have pursuant to Section 10.5 which will survive) and be released
from its obligations under this Agreement (and, in the case of an
Assignment and Assumption Agreement covering all or the remaining
portion of an assigning Bank's rights and obligations under this
Agreement, such Bank shall cease to be a party hereto).
(d) By executing and delivering an Assignment and
Assumption Agreement, the assignee thereunder confirms and agrees
as follows: (i) other than as provided in such Assignment and
Assumption Agreement, the assigning Bank makes no representation
or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in
connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of
<PAGE>
this Agreement, the Revolving Notes or any other instrument or
document furnished pursuant hereto, (ii) such assigning Bank
makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Company or any or
its Subsidiaries or the performance or observance by the Company
or any of its Subsidiaries of any of its obligations under this
Agreement or any other instrument or document furnished pursuant
hereto, (iii) such assignee confirms that it has received a copy
of this Agreement, together with copies of the financial
statements referred to in Section 4.1 and such other documents
and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and
Assumption Agreement, (iv) such assignee will, independently and
without reliance upon the Agent, such assigning Bank or any other
Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement,
(v) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under
this Agreement as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto
and (vi) such assignee agrees that it will perform in accordance
with their terms all of the obligations which by the terms of
this Agreement are required to be performed by it as a Bank.
(e) The Agent shall maintain at its address referred
to in Section 10.1 a copy of each Assignment and Assumption
Agreement delivered to and accepted by it and a register for the
recordation of the names and addresses of the Banks and the
Commitments of, and principal amount of the Loans owing to, each
Bank from time to time (the "Register"). The entries in the
Register shall be conclusive and binding for all purposes, absent
manifest error, and the Company, the Agent and the Banks may
treat each Person whose name is recorded in the Register as a
Bank hereunder for all purposes of this Agreement. The Register
and copies of each Assignment and Assumption shall be available
for inspection by the Company or any Bank at any reasonable time
and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Assumption
Agreement executed by an assigning Bank, together with the
Revolving Note or Revolving Notes subject to such assignment, the
Agent shall, if such Assignment and Assumption Agreement has been
completed and is in substantially the form of Exhibit A,
(i) accept such Assignment and Assumption Agreement, (ii) record
the information contained therein in the Register and (iii) give
prompt notice thereof to the Company. Within five (5) Business
Days after its receipt of such notice, the Company shall execute
and deliver to the Agent in exchange for the surrendered
Revolving Note or Revolving Notes a new Revolving Note or
Revolving Notes to the order of the assignee in an amount equal
to the Commitment or Commitments assumed by it pursuant to such
Assignment and Assumption Agreement and, if the assigning Bank
has retained a Commitment or Commitments hereunder, a new
Revolving Note or Revolving Notes to the order of the assigning
Bank in an amount equal to the Commitment or Commitments retained
<PAGE>
by it hereunder. Such new Revolving Note or Revolving Notes
shall re-evidence the Indebtedness outstanding under the old
Revolving Note or Revolving Notes and shall be in an aggregate
principal amount equal to the aggregate principal amount of such
surrendered Revolving Note or Revolving Notes, shall be dated the
date of the Initial Credit Event and shall otherwise be in
substantially the form of the Revolving Note or Revolving Notes
subject to such assignments.
Section 10.8 Tax Forms. Each Bank which is a Non-
United States Person agrees (to the extent it is permitted to do
so under the laws and any applicable double taxation treaties of
the United States, the jurisdiction of its incorporation and the
jurisdictions in which its Domestic Office and its Eurodollar
Office are located) to execute and deliver to the Agent for
delivery to the Company, before the first scheduled payment date
in each taxable year of such Bank, two copies of either (1) a
United States Internal Revenue Service Form 1001, (2) a United
States Internal Revenue Service Form 4224 together with a United
States Internal Revenue Service Form W-9, or (3) a United States
Internal Revenue Service Form W-8 together with a certificate
substantially in the form of Exhibit K and containing any
additional certifications as the Agent may require to establish
such Bank's exemption from United States Federal Taxes pursuant
to section 881(c) or 871(h) of the Code (or any successor Forms,
as appropriate), and such other and further Forms which the
Company may reasonably request, in each case properly completed
and properly claiming complete or partial, as the case may be,
exemption from withholding and deduction of United States Federal
Taxes.
Section 10.9 Setoff. In addition to any rights now or
hereafter granted under applicable law and not by way of
limitation of any such rights, upon the occurrence and during the
continuance of any Event of Default, the Agent and each Bank and
each participant of each Bank is hereby authorized by the Company
at any time or from time to time, without notice to the Company,
or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to,
Indebtedness evidenced by certificates of deposit, whether
matured or unmatured but not including trust accounts) and any
other Indebtedness at any time held or owing by the Bank to or
for the credit or the account of the Company against and on
account of the Obligations and liabilities of the Company to the
Agent or such Bank under this Agreement and the other Loan
Documents, including, but not limited to, all claims of any
nature or description arising out of or connected with this
Agreement or the other Loan Documents.
Section 10.10 Sharing. (a) Each of the Banks agree
among themselves that with respect to all amounts received by
them which are applicable to the payment or satisfaction of all
or part of the Loans or Reimbursement Obligations, interest
thereon, any fees or any other amount payable hereunder or under
the other Loan Documents, equitable adjustment will be made so
that, in effect, all such amounts will be shared among the Banks
in proportion to their respective Percentage, whether received by
<PAGE>
voluntary payment, by the exercise of the right of set off or
banker's lien, by counterclaim or by the enforcement of their
rights hereunder or under the other Loan Documents.
(b) If any Bank shall, through the exercise of any
right of counterclaim, set off, banker's lien or otherwise,
receive payment or reduction of a proportion of the aggregate
amount of the Loans or Reimbursement Obligations or interest
thereon due to such Bank, or any other amount payable hereunder,
as the case may be, which is greater than the proportion received
by any other Bank or Banks in respect to the aggregate amount of
any Loan or Reimbursement Obligation and interest thereon due
such Bank, or with respect to any other amount payable hereunder,
that Bank receiving such proportionately greater payment shall
notify the other Banks and the Agent of such receipt and purchase
participations (which it shall be deemed to have done
simultaneously upon the receipt of such excess payment) in the
Loans and Reimbursement Obligations held by the other Bank or
Banks so that all such recoveries of principal and interest with
respect to the Loans and Reimbursement Obligations shall be
proportionate to each Bank's respective Percentage; provided that
if all or part of such proportionately greater payment received
by such purchasing Bank is thereafter recovered from such Bank,
those purchases shall be rescinded and the purchase prices paid
for such participations shall be returned to the purchasing Bank
to the extent of such recovery, but without interest. Each
participant of any Bank shall have the same rights of set off
against the Company set forth in Section 10.9 as if it were a
Bank and agrees that, with respect to any setoff made by such
participant, the provisions of this Section 10.10 shall similarly
apply as if it were a Bank.
(c) The Company expressly consents to the arrangement
described in this Section 10.10.
Section 10.11 Counterparts. This Agreement may be
executed by one or more of the parties to this Agreement on any
number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same
instrument.
Section 10.12 Severability. Any provision of this
Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
Section 10.13 Governing Law. This Agreement and the
Revolving Notes and the rights and obligations of the parties
under this Agreement and the Revolving Notes shall be governed
by, and construed and interpreted in accordance with, the
internal laws (as opposed to conflict of laws provisions) of the
State of Illinois.
<PAGE>
Section 10.14 Marshalling; Recapture. Neither the
Agent nor any Bank shall be under an obligation to marshall any
assets in favor of the Company, any Subsidiary of the Company or
any other party or against or in payment of any or all of the
Obligations. To the extent any Bank receives any payment by or
on behalf of the Company, which payment or any part thereof is
subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to the Company,
its estate, trustee, receiver, custodian or any other party under
any bankruptcy law, state or Federal law, common law or equitable
cause, then to the extent of such payment or repayment, the
obligation or part thereof which has bee paid, reduced or
satisfied by the amount so repaid shall be reinstated by the
amount so repaid and shall be included within the liabilities of
the Company to such Bank as of the date such initial payment,
reduction or satisfaction occurred.
Section 10.15 Jurisdiction. The Company hereby
irrevocably submits to the jurisdiction of any Illinois State or
Federal court sitting in Cook County, Illinois in any action or
proceeding arising out of or relating to this Agreement and/or
the other Loan Documents and the Company hereby irrevocably
agrees that all claims in respect of such action or proceeding
may be heard and determined in such Illinois State court, or to
the extent permitted by law, in such Federal court. The Company
hereby irrevocably waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. The Company also
irrevocably consents to the service of any and all process in any
such action or proceeding by the mailing of copies of such
process to the Company at its address specified in Section 10.1
hereof. The Company agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other
manner provided by law.
Section 10.16 Waiver of Jury Trial. EACH OF THE
BANKS, THE AGENT AND THE COMPANY MUTUALLY WAIVES TRIAL BY JURY IN
ANY ACTION OR PROCEEDING (INCLUDING, ANY COUNTERCLAIM) IN ANY
COURT ARISING ON, OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS, THE RELATED AGREEMENTS OR ANY
AMENDMENT OR SUPPLEMENT HERETO OR THERETO OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
[The Remainder Of This Page Is Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and
duly authorized officers as of year first above written.
AVONDALE INDUSTRIES, INC.
By: \s\ Thomas M. Kitchen
Name: Thomas M. Kitchen
Title: Vice President
CONTINENTAL BANK N.A.,
as Agent
By: \s\ Laurens F. Schaad, Jr.
Name: Laurens F. Schaad, Jr.
Title: Vice President
THE BANKS:
CONTINENTAL BANK N.A.,
as a Bank and as LC Issuer
By: \s\ Laurens F. Schaad, Jr.
Name: Laurens F. Schaad, Jr.
Title: Vice President
Domestic and Eurodollar Office
231 South LaSalle Street
Chicago, Illinois 60697
5
WHITNEY NATIONAL BANK
By: \s\ E. H. Hemphill, Jr.
Name: E. H. Hemphill, Jr.
Title: Sr. Vice President
Domestic and Eurodollar Office
P.O. Box 61260
New Orleans, Louisiana 70160
6
<PAGE>
FIRST INTERSTATE BANK OF TEXAS,
N.A.
By: \s\ Frank W. Schageman
Name: Frank W. Schageman
Title: Assistant Vice President
Domestic and Eurodollar Office
1000 Louisiana
Houston, Texas 77002
7
FIRST NATIONAL BANK OF COMMERCE
By: \s\ Suzanne H. Marquette
Name: Suzanne H. Marquette
Title: Vice President
Domestic and Eurodollar Office
210 Baronne Street
New Orleans, Louisiana 70112
8
<PAGE>
TABLE OF CONTENTS
Page
SECTION I - DEFINITIONS....................................... 2
Section 1.1 Defined Terms............................... 2
Section 1.2 Other Definitional Provisions............... 28
Section 1.3 Accounting Terms and Determinations......... 29
SECTION II - REVOLVING LOANS.................................. 29
Section 2.1 Revolving Loan Commitment................... 29
Section 2.2 Revolving Note.............................. 30
Section 2.3 Determination of Borrowing Base............. 30
Section 2.4 Procedure for Borrowing..................... 31
Section 2.5 Reduction of Commitments.................... 32
Section 2.6 Optional Prepayments........................ 33
Section 2.7 Continuation and Conversion Elections....... 33
Section 2.8 Interest Rate and Payment Dates............. 34
Section 2.9 Fees........................................ 35
Section 2.10 Computation of Interest.................... 35
Section 2.11 Payments................................... 36
Section 2.12 Inability to Determine Interest Rate....... 37
Section 2.13 Illegality................................. 38
Section 2.14 Requirements of Law........................ 38
Section 2.15 Funding Losses............................. 41
Section 2.16 Use of Proceeds............................ 41
Section 2.17 Extensions of Expiration Date.............. 42
<PAGE>
SECTION III - LETTERS OF CREDIT............................... 42
Section 3.1 Requests.................................... 42
Section 3.2 Issuance.................................... 43
Section 3.3 Fees and Expenses........................... 43
Section 3.4 Banks' Participation........................ 43
Section 3.5 Disbursements............................... 44
Section 3.6 Reimbursement............................... 44
Section 3.7 Deemed Disbursements; Other Cash
Collateral Requirements................... 45
Section 3.8 Nature of Reimbursement Obligations......... 46
Section 3.9 Indemnity................................... 47
SECTION IV - REPRESENTATIONS AND WARRANTIES................... 47
Section 4.1 Financial Condition. ...................... 47
Section 4.2 No Change. ................................. 48
Section 4.3 Corporate Existence: Compliance with Law.... 48
Section 4.4 Corporate Power: Authorization:
Enforceable Obligations..................... 48
Section 4.5 No Bar. .................................... 49
Section 4.6 No Material Litigation. .................... 49
Section 4.7 No Default.................................. 49
Section 4.8 Ownership of Property: Liens................ 49
Section 4.9 No Burdensome Restrictions.................. 49
Section 4.10 Taxes...................................... 49
Section 4.11 Regulations G, T, U and X.................. 50
Section 4.12 ERISA...................................... 50
Section 4.13 Subsidiaries............................... 52
Section 4.14 Government Regulation...................... 52
Section 4.15 Environmental Matters...................... 52
Section 4.16 Preferred Stock Purchase Agreement......... 52
<PAGE>
Section 4.17 Judgments or Litigation.................... 53
Section 4.18 Government Contracts....................... 53
Section 4.19 Modular Construction....................... 53
Section 4.20 Licenses, Permits. ........................ 54
Section 4.21 Navy Contracts. ........................... 54
Section 4.22 Loan Documents. etc........................ 54
Section 4.23 No Federal Tax or ERISA Liens.............. 54
Section 4.24 No Bonds................................... 54
Section 4.25 Labor Controversies........................ 54
Section 4.26 Capitalization............................. 55
Section 4.27 Patents, Trademarks, etc................... 55
Section 4.28 Collateral Documents....................... 55
Section 4.29 Accuracy of Information.................... 55
Section 4.30 Solvency................................... 56
SECTION V - CONDITIONS PRECEDENT TO EFFECTIVE DATE AND
EACH EXTENSION OF CREDIT.......................... 56
Section 5.1 Initial Credit Extensions................... 56
Section 5.2 Conditions to Initial Letter
of Credit Issuance.......................... 60
Section 5.3 Conditions to Each Extension of Credit...... 60
SECTION VI - AFFIRMATIVE COVENANTS............................ 61
Section 6.1 Financial Statements........................ 61
Section 6.2 Certificates: Other Information............. 62
Section 6.3 Payment of Obligations. .................... 64
Section 6.4 Maintenance of Property: Insurance. ........ 64
Section 6.5 Conduct of Business and Maintenance
of Existence................................ 64
Section 6.6 Inspection of Property: Books
and Records; Discussions.................... 65
Section 6.7 Notices..................................... 65
<PAGE>
Section 6.8 ERISA....................................... 66
Section 6.9 Additional Title Opinions and Appraisals
for the Avondale Drydock. .................. 66
Section 6.10 Preferred Stock Purchase Agreement......... 66
Section 6.11 Delivery; Further Assurances............... 68
Section 6.12 Cash Management Letters.................... 68
Section 6.13 Updated Appraisal of Avondale Drydock...... 69
Section 6.14 Delivery of Assignment of Claims Notices... 69
SECTION VII - NEGATIVE COVENANTS.............................. 70
Section 7.1 Financial Condition Covenants............... 70
Section 7.2 Limitation on Liens......................... 70
Section 7.3 Limitation on Investments and
Intercompany Activity. ..................... 72
Section 7.4 Limitation on Fundamental Changes. ......... 72
Section 7.5 Limitation on Sale of Assets................ 72
Section 7.6 Limitation on Dividends..................... 73
Section 7.7 Limitation on Capital Expenditures.......... 73
Section 7.8 Sale and Leaseback.......................... 73
Section 7.9 Acquisitions................................ 73
Section 7.10 Environmental Liabilities. ................ 74
Section 7.11 Compliance with ERISA...................... 74
Section 7.12 Prepayments................................ 75
Section 7.13 Indebtedness. ............................. 75
Section 7.14 No Additional Subsidiaries................. 75
Section 7.15 Debits..................................... 75
Section 7.16 Preferred Stock Purchase Agreement
and Tax Sharing Agreement.................. 76
Section 7.17 Jo Ann Agreements.......................... 76
Section 7.18 PSPA Guaranteed Obligations................ 76
Section 7.19 Change of Location or Name................. 77
<PAGE>
Section 7.20 Additional Negative Pledges and Other
Payment Restrictions Affecting Subsidiaries 77
SECTION VIII - EVENTS OF DEFAULT.............................. 78
SECTION IX - THE AGENT........................................ 82
Section 9.1 Actions..................................... 82
Section 9.2 Exculpation. ............................... 83
Section 9.3 Successor................................... 83
Section 9.4 Credit Decisions............................ 84
Section 9.5 Notices, etc. from Agent.................... 84
Section 9.6 Collateral Documents........................ 84
Section 9.7 Loans by the Agent.......................... 84
Section 9.8 Other Collateral Matters.................... 84
SECTION X - MISCELLANEOUS..................................... 85
Section 10.1 Notices.................................... 85
Section 10.2 Amendments and Waivers. ................... 86
Section 10.3 No Waiver: Cumulative Remedies............. 87
Section 10.4 Survival of Representations and
Warranties................................. 87
Section 10.5 Payment of Expenses and Taxes;
Indemnity and Release...................... 87
Section 10.6 Headings: Table of Contents. .............. 89
Section 10.7 Successors and Assigns..................... 89
Section 10.8 Tax Forms. ................................ 92
Section 10.9 Setoff..................................... 92
Section 10.10 Sharing................................... 92
Section 10.11 Counterparts.............................. 93
Section 10.12 Severability.............................. 93
Section 10.13 Governing Law. ........................... 93
<PAGE>
Section 10.14 Marshalling; Recapture.................... 94
Section 10.15 Jurisdiction.............................. 94
Section 10.16 Waiver of Jury Trial...................... 94
EXHIBITS AND SCHEDULES
Exhibits
Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of Borrowing Base Certificate
Exhibit C Form of Borrowing Request
Exhibit D Form of Cash Management Letter
Exhibit E Form of Continuation/Conversion Notice
Exhibit F Form of Extension Notice
Exhibit G Form of Issuance Request
Exhibit H Form of Subsidiary Guarantee
Exhibit I Form of Subsidiary Security Agreement
Exhibit J Form of Revolving Note
Exhibit K Form of Foreign Lender Certification
Schedules
Schedule I Commitments
Schedule II Navy Contracts
Schedule 4.6 Litigation
Schedule 4.13 Existing Subsidiaries
Schedule 4.15 Environmental Disclosure
Schedule 4.21 Permitted Setoffs Under Navy Contracts
Schedule 4.25 Labor Disclosure
Schedule 4.26 Ownership of the Company
Schedule 6.1 Monthly Reporting Requirements
Schedule 6.12 Existing Collection Accounts
Schedule 7.2 Existing Liens
Schedule 7.3 Existing Investments
Schedule 7.5 Assets Held for Sale
Schedule 7.13 Existing Indebtedness
<PAGE>
FIRST AMENDMENT AND WAIVER TO REVOLVING CREDIT AGREEMENT
THIS FIRST AMENDMENT AND WAIVER TO REVOLVING CREDIT
AGREEMENT (this "Amendment") is entered into as of May 31, 1994,
by and among AVONDALE INDUSTRIES, INC., a Louisiana corporation
(the "Company"), the various financial institutions signatory
hereto (collectively, the "Banks," and, individually, a "Bank"),
and CONTINENTAL BANK N.A., as agent for the Banks (the "Agent").
Words and phrases having defined meanings in the Credit Agreement
referred to below shall have the same respective meanings when
used herein, unless otherwise expressly defined herein.
WITNESSETH:
WHEREAS, the parties hereto have entered into a
Revolving Credit Agreement, dated as of May 10, 1994 (the "Credit
Agreement"), relating to a revolving credit facility in amount
not to exceed $35,000,000 for the Company's ongoing working
capital and general corporate needs; and
WHEREAS, the Company, the Banks and the Agent desire to
amend the Credit Agreement on the terms as hereinafter set forth,
to permit the Company to make certain deposits pursuant to the
requirements of the documents governing the Jo Ann Refinancing
Indebtedness;
NOW THEREFORE, in consideration of the premises and the
mutual agreements set forth herein and for other consideration
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows;
1. Amendments to Credit Agreement. Subject to and
conditioned upon the fulfillment of each of the conditions
precedent set forth in Section 3 hereof, Section 7.2 of the
Credit Agreement is hereby amended to delete the terms of clause
(k) thereof in their entirety and to insert the following
therefor:
(k) (i) to the extent required at the time of the
issuance of the Jo Ann Refinancing Indebtedness, Liens
granted on the Jo Ann Drydock to secure such Indebtedness
and (ii) deposits made pursuant to the requirements of the
documents governing the Jo Ann Refinancing Indebtedness as
originally in effect to secure such Indebtedness in an
aggregate amount not to exceed $3,625,000 at any one time;
and
2. Waiver to Credit Agreement. Subject to and
conditioned upon the fulfillment of each of the conditions
precedent set forth in Section 3 hereof, the provisions of
Section 7.20 of the Credit Agreement are hereby waived to the
extent necessary to permit the Company to agree to a negative
pledge clause in favor of the holders of the Jo Ann Refinancing
Indebtedness substantially in the form of that set forth on
Exhibit A hereto.
<PAGE>
3. Conditions Precedent to Amendment Effectiveness.
The amendments and modifications set forth in Section 1 hereof
and the waiver set forth in Section 2 hereof shall become
effective upon, and are expressly conditioned upon, the
fulfillment of each of the following conditions precedent on or
prior to June 1, 1994:
(a) Agreement. The Agent shall have received this
Amendment, duly executed and delivered by an authorized officer
of the Company and the Required Banks.
(b) Subsidiary Guarantor Consent. The Agent shall
have received (with a copy for each of the other Banks) from each
of the Subsidiary Guarantors a reaffirmation of the Subsidiary
Guarantee executed by it.
(C) Material Adverse Change. In the opinion of the
Agent, no event or condition shall have occurred or exist which
could reasonably be expected to have a Material Adverse Effect.
4. Representations and Warranties. In order to induce
the Agent and the Banks to enter into this Amendment, the Company
hereby represents and warrants to the Agent and the Banks as
follows:
(a) The execution, delivery and performance by
the Company of this Amendment (i) are within the Company's
corporate powers, (ii) have been duly authorized by all
necessary corporate action, (iii) require no action by or in
respect of, or filing with, any governmental body, agency or
official, (iv) do not contravene, or constitute a default
under, any provision of any applicable law, statute,
ordinance, regulation, rule, order or other governmental
restriction or of the Certificate or Articles of
Incorporation or By-Laws of the Company, (v) do not
contravene, or constitute a default under, any agreement,
judgment, injunction, order, decree, indenture, contract,
lease, instrument or other commitment to which the Company
is a party or by which the Company or any of its assets are
bound and (vi) will not result in the creation or imposition
of any Lien upon any asset of the Company under any existing
indenture, mortgage, deed of trust, loan or credit agreement
or other agreement or instrument to which the Company is a
party or by which it or any of its assets may be bound or
affected.
(b) This Amendment and the Credit Agreement as
amended by this Amendment are the legal, valid and binding
obligations of the Company, and are enforceable against the
Company in accordance with their terms.
(c) The representations and warranties contained
in the Credit Agreement and the other Loan Documents are
true and correct in all material respects on and as of the
date hereof as though made on the date hereof, except to the
extent that such representations expressly relate solely to
an earlier date (in which case such representations and
warranties were true and accurate on and as of such earlier
date).
<PAGE>
(d) No Default or Event of Default has occurred
and is continuing.
5. Reference to and Effect Upon the Credit Agreement.
Upon the effectiveness of this Amendment, each reference in the
Credit Agreement to "the Agreement", "hereunder", "hereof",
"herein", or words of like import, shall mean and be a reference
to the Credit Agreement, as amended hereby and each reference to
the Credit Agreement in any other Loan Document shall mean and be
a reference to the Credit Agreement, as amended hereby.
6. Reaffirmation; Expenses. The Company hereby
reaffirms to the Agent and each of the Banks that, except as
modified hereby, the Credit Agreement and all of the Loan
Documents remain in full force and effect and have not been
otherwise waived, modified or amended. Except as expressly
modified hereby, all of the terms and conditions of the Credit
Agreement shall remain unaltered and in full force and effect.
The Company acknowledges that all legal expenses of the Agent
related to this Amendment shall be paid by the Company.
7. Confirmation of Collateral Documents. The Company
hereby (i) ratifies and confirms its obligations under the
Collateral Documents and acknowledges and agrees that the
Collateral Documents to which the Company is a party are the
legal, valid and binding obligations of the Company, enforceable
against it in accordance with their terms; and (ii) agrees that
the Obligations (for purposes of each of such Collateral
Documents) shall include, without limitation, the Obligations
under and as defined in this Credit Agreement as amended by this
Amendment.
8. Choice of Law. THIS AMENDMENT SHALL BE GOVERNED
BY AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ILLINOIS
AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANY,
THE ADMINISTRATIVE AGENT, THE AGENT AND THE BANKS IN CONNECTION
WITH THIS AMENDMENT, AND WHETHER ARISING IN CONTRACT, TORT,
EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE
INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS.
9. Counterparts. This Amendment may be executed in
one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument. One or more counterparts of this Amendment may
be delivered by telecopier, with the intention that they shall
have the same effect as an original counterpart thereof.
IN WITNESS WHEREOF, the parties hereto have caused
their duly authorized officers to execute and deliver this
Agreement as of the date first above written.
AVONDALE INDUSTRIES, INC.
By: \s\ Thomas M. Kitchen
Name: Thomas M. Kitchen
Title: Vice President
<PAGE>
CONTINENTAL BANK N.A.,
as Agent
By: \s\ Laurens F. Schaad, Jr.
Name: Laurens F. Schaad, Jr.
Title: Vice President
THE BANKS:
CONTINENTAL BANK N.A.,
as a Bank and as LC Issuer
By: \s\ Laurens F. Schaad, Jr.
Name: Laurens F. Schaad, Jr.
Title: Vice President
WHITNEY NATIONAL BANK
By: \s\ Elmer H. Hemphill, Jr.
Name: Elmer H. Hemphill, Jr.
Title: Sr. Vice President
FIRST INTERSTATE BANK OF TEXAS, N.A.
By: \s\ Frank W. Schageman
Name: Frank W. Schageman
Title: Assistant Vice President
FIRST NATIONAL BANK OF COMMERCE
By: \s\ Gary L. Lorio
Name: Gary L. Lorio
Title: Vice President
EXHIBIT A
PROPOSED NEGATIVE PLEDGE CLAUSE
(Redacted from the Limited Offering
Memorandum relating to the refinancing bonds)
The Company [Avondale Industries, Inc.] will not
create, incur, assume or permit to exist any Lien upon any of its
revenues, property (including, but not limited to, fixed assets,
inventory, real property, receivables, intangible rights and
stock) or other assets, whether now owned or hereafter acquired,
other than Permitted Encumbrances unless (a) (i) the Revolving
Credit Agreement dated as of May 10, 1994 by and among the
Company, Continental Bank N.A. and the Banks as defined therein,
including extensions according to its terms, is continuing in
effect or (ii) the Consolidated Senior Debt Service Coverage
Ratio is greater than 2.5 to 1.0 or (b) the Company delivers to
the Trustee (i) an independent appraisal of all Project assets,
(ii) perfected security interests in all Project assets, and
<PAGE>
(iii) to the extent the appraised value of the Project assets is
less than the outstanding par amount of the Series 1994 Bonds,
perfected security interests on additional Company assets, with
an independent appraised value equal to the difference:
"Permitted Encumbrances" shall mean (a) Liens existing
on the date of this Limited Offering Memorandum securing
Indebtedness of the Company in connection with the Revolving
Credit Agreement, by and among the Company, Continental Bank N.A.
and the Banks as defined therein dated as of May 10, 1994; (b)
Liens arising out of the refinancing, extension, renewal or
refunding of any Indebtedness of the Company secured by Liens
permitted in clause (a) provided that such Indebtedness (i) does
not exceed $50,000,000, (ii) is not secured by any additional
assets and (iii) does not provide any additional rights to
Continental Bank N.A. [or any new lender]; (c) Liens granted by
the Company in its ordinary course of business for the purpose of
meeting bonding requirements provided that such Liens do not
secure such Indebtedness in an aggregate principal amount
exceeding $25,000,000; (d) Liens granted by the Company in its
ordinary course of business to owners of ships being constructed
or repaired; (e) a Lien on the Company's 900-foot floating
drydock/launch platform; (f) Liens on certain property located in
Harrison County, Mississippi granted pursuant to a Guaranty
Agreement between the Company and said Harrison County; (g) Liens
granted by the Company in its ordinary course of business on
property acquired after the date of this Limited Offering
Memorandum; (h) Liens for taxes, assessments, charges or other
governmental levies not delinquent or which are being contested
in good faith by appropriate proceedings and for which adequate
reserves have been established by the Company or the respective
Subsidiary, as the case may be, to the extent required by
generally accepted accounting principles; (i) mechanics',
worker's, materialmen's, operators', carriers', or other like
Liens arising in the ordinary and normal course of business with
respect to obligations which are not due or which are being
contested in good faith by appropriate proceedings; and (j) Liens
not created by the Company or the respective Subsidiary, as the
case may be, which are promptly contested in good faith and by
appropriate proceedings and which are discharged or bonded within
30 days of notice thereof to the Company or the respective
Subsidiary, as the case may be.
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing First Amendment and Waiver to Revolving Credit
Agreement and acknowledges the continued validity, enforceability
and effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
<PAGE>
AVONDALE GULFPORT MARINE, INC.
By \s\ Thomas M. Kitchen
Title: Vice President
Dated: May 31, 1994
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing First Amendment and Waiver to Revolving Credit
Agreement and acknowledges the continued validity, enforceability
and effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
AVONDALE TECHNICAL SERVICES, INC.
By \s\ Thomas M. Kitchen
Title: President
Dated: May 31, 1994
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing First Amendment and Waiver to Revolving Credit
Agreement and acknowledges the continued validity, enforceability
and effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
CRAWFORD TECHNICAL SERVICES, INC.
By \s\ B. L. Hicks
Title: Secretary
Dated: May 31, 1994
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
<PAGE>
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing First Amendment and Waiver to Revolving Credit
Agreement and acknowledges the continued validity, enforceability
and effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
GENCO INDUSTRIES, INC.
By \s\ B. L. Hicks
Title: Secretaru
Dated: May 31, 1994
<PAGE>
SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT
THIS SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT
(this "Amendment") is entered into as of February 9, 1995, by and
among AVONDALE INDUSTRIES, INC., a Louisiana corporation (the
"Company"), the various financial institutions signatory hereto
(collectively, the "Banks," and, individually, a "Bank"), and
BANK OF AMERICA ILLINOIS, successor-in-interest to CONTINENTAL
BANK, as agent for the Banks (the "Agent"). Words and phrases
having defined meanings in the Credit Agreement referred to below
shall have the same respective meanings when used herein, unless
otherwise expressly defined herein.
WITNESSETH:
WHEREAS, the parties hereto have entered into a
Revolving Credit Agreement, dated as of May 10, 1994 (as amended
by that certain First Amendment and Waiver to Revolving Credit
Agreement dated as of May 31, 1994 (collectively, the "Existing
Agreement" and as amended by this Amendment, the "Credit
Agreement"), relating to a revolving credit facility in amount
not to exceed $35,000,000 for the Company's ongoing working
capital and general corporate needs;
WHEREAS, the Company, the Banks and the Agent desire to
amend the Credit Agreement and provide for the waiver of certain
of the provisions of the Credit Agreement, in each case, on the
terms as hereinafter set forth, to (i) permit the financing of
the advanced and modern shipyard technology project at the
Company's shipyard located in Avondale, Louisiana (the "Shipyard
Project") through Title XI of the Merchant Marine Act, 1936, as
amended (the "Title XI Program") and (ii) make certain technical
changes to the Credit Agreement as more fully described below;
WHEREAS, in connection with the Shipyard Project, the
Company contemplates (i) that it will transfer a portion of the
real property underlying its shipyard located in Avondale,
Louisiana (the "Shipyard Real Property Assets") to Avondale Land
Management Company, a newly formed general partnership organized
under the laws of the State of Louisiana (the "Shipyard
Partnership") and the Shipyard Real Property Assets will be
leased back to the Company pursuant to two specific lease
agreements, and (ii) that 99% of the partnership interest in the
Shipyard Partnership will be owned by the Company and 1% of the
partnership interest in the Shipyard Partnership will be owned by
Avondale Properties, Inc., a Louisiana corporation ("Avondale
Properties") and a newly formed wholly-owned Subsidiary of the
Company; and
WHEREAS, the Agent may resign as Agent under the Credit
Agreement and in the event of any such resignation, the Banks
desire to appoint Bank of America National Trust and Savings
Association ("BofA NTSA") as successor agent;
NOW THEREFORE, in consideration of the premises and the
mutual agreements set forth herein and for other consideration
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows;
<PAGE>
1. Amendments to the Existing Agreement. Subject to
and conditioned upon the fulfillment of each of the conditions
precedent set forth in Section 4 hereof, the Existing Agreement
is hereby amended as follows:
(a) The definition of "Adjusted Consolidated Net Income --
Cash Flow Coverage" is hereby amended to delete the terms of
clause (d) thereof in their entirety and to insert the following
therefor:
(d) Capital Expenditures of the Company or its
Subsidiaries for such period (other than those Capital
Expenditures that are (i) incurred in connection with
the Shipyard Project, (ii) reviewed and approved by
Deloitte & Touche and (iii) permitted by Section 7.7);
and
(b) The definition of "Cash Equivalent Investments" is
hereby amended to delete the terms of clause (iii) thereof in
their entirety and to insert the following therefor:
(iii) repurchase agreements or reverse repurchase
agreements with terms of not more than seven days from
the date acquired, for securities of the type described
in clause (i) above and entered into only with
commercial banks having the qualifications described in
clause (ii) above;
(c) The definition of "Letter of Credit Availability" is
hereby amended to delete the definition in its entirety and to
insert the following therefor:
"Letter of Credit Availability" shall mean, at any time, the
lesser of (a) $35,000,000 minus any Letter of Credit
Outstanding(s) and (b) the aggregate amount of then
Available Commitments.
(d) The following definitions are added to the Existing
Agreement after the definition of "Loans" and before the
definition of "Material Adverse Effect" contained therein:
"MARAD" shall mean the United States Department of
Transportation Maritime Administration and its successors.
"MARAD Financing Documents" shall mean the documents,
instruments and agreements initially entered into by the
Company and its Subsidiaries in connection with the Shipyard
Project, without giving effect to any amendments or
modifications thereof or thereto.
"MARAD Financing Liens" shall mean those Liens initially
granted by the Company or the Subsidiaries to MARAD or its
designee in connection with the Shipyard Project, which
Liens shall, in no event, extend to or otherwise attach to
any of the Collateral or secure Indebtedness in an aggregate
principal amount in excess of $17,800,000 at any time.
(e) The following definitions are added to the Existing
Agreement after the definition of "Security Agreement (Company)"
contained therein:
<PAGE>
"Shipyard Partnership" shall mean Avondale Land Management
Company, a general partnership organized under the laws of
the State of Louisiana.
"Shipyard Project" shall mean the advanced and modern
shipyard technology project of the Company intended to
modernize the Company's shipyard located in Avondale,
Louisiana and financed, in part, through Title XI of
the Merchant Marine Act, 1936, as amended.
"Shipyard Real Property Assets" shall mean that portion of
the real property underlying the Company's shipyard located
in Avondale, Louisiana which is contributed by the Company
to the Shipyard Partnership in connection with the Shipyard
Project and leased back to the Company.
(f) The definition of "Subsidiary Guarantor" is hereby
amended to delete the definition in its entirety and to insert
the following therefor:
"Subsidiary Guarantor" shall mean the following Subsidiaries
of the Company: (i) Gulfport, (ii) Avondale Technical
Services, Inc., a Louisiana corporation, (iii) Crawford
Technical Services, Inc., a Louisiana corporation, (iv)
Genco Industries, Inc., a Texas corporation, (v) Avondale
Properties, Inc., a Louisiana corporation, and (vi) the
Shipyard Partnership.
(g) Section 2.4(a) of the Existing Agreement is hereby
amended to delete the terms of clause (ii) of the first sentence
thereof in their entirety and to insert the following therefor:
(ii) at or before 10:00 a.m. Chicago time on the
requested Borrowing Date, in the case of Base Rate
Loans,
(h) Section 3.2 of the Existing Agreement is hereby amended
to delete the terms of the parenthetical contained at the end
thereof and to insert the following therefor:
(and will promptly provide the Agent with a copy of such
Letter of Credit and the Agent shall promptly provide a copy
thereof to each of the Banks).
(i) Section 6.1(c) of the Existing Agreement is hereby
amended to delete the terms thereof in their entirety and to
insert the following therefor:
(c) as soon as available, but in any event within 45
days after the end of each fiscal month of the Company, (i)
the information described on Schedule 6.1 with respect to
the Company and the Subsidiary Guarantors, prepared in a
form acceptable to the Agent and (ii) a calculation of the
Company's "Working Capital", "Long-Term Debt" and "Net
Worth" as defined in that certain Title XI Reserve Fund and
Financial Agreement dated as of February 9, 1995 between the
Company and the United States of America, and a statement as
to whether the provisions of Section 13(b) of such Agreement
are applicable to the Company as a result of the Company's
failure to meet the thresholds set forth in Section 13(b)(i)
of such Agreement; and
<PAGE>
(j) Section 6.2 of the Existing Agreement is hereby amended
by adding a new subsection 6.2 (j) thereto after Section 6.2(i)
and before Section 6.3:
(j) until such time as the improvements contemplated
by the Shipyard Project are completed, copies of any
compliance statements (and any attachments thereto) or
similar documents prepared by or on behalf of the
Company or its Subsidiaries and delivered to MARAD or
its designee in connection with the Shipyard Project
promptly after the same have been sent to MARAD.
(k) The following Section is added after Section 6.14
(Delivery of Assignment of Claims Notices) and before Section
VII:
Section 6.15 Financing of Shipyard Project. On or
prior to March 1, 1995, the Company shall have received
at least $16,000,000 in proceeds to be used to complete
the Shipyard Project (or such an amount of proceeds
shall have been placed in escrow) with the terms of
such financing to be reasonably satisfactory to Agent.
(l) Section 7.1(d) of the Existing Agreement is hereby
amended to delete the terms thereof in their entirety and to
insert the following therefor:
(d) Maintenance of Debt Coverage Ratio. Permit the
Cash Flow Coverage Ratio as of the last day of any of
its fiscal quarters to be less than (i) .10 to 1 for
any such fiscal quarter ending on or prior to December
31, 1994, (ii) .15 to 1 for any such fiscal quarter
ending after January 1, 1995 and on or before September
30, 1995 or (iii) .20 to 1 for any such fiscal quarter
ending thereafter.
(m) Section 7.2(f) of the Existing Agreement is hereby
amended to delete the terms thereof in their entirety and to
insert the following therefor:
(f) Liens (other than the MARAD Financing Liens) granted
with respect to real and/or tangible or intangible personal
property, which property is acquired after the date hereof
(by purchase, construction or otherwise) by the Company or
any Subsidiary, each of which Liens were incurred to
finance, refinance or refund, the cost (including the cost
of construction) of the respective property; provided that
no such Lien shall extend to or cover any other property of
the Company or any such Subsidiary other than the respective
property so acquired and improvements thereon or extend to
or cover any Collateral;
(n) Section 7.2(j) of the Existing Agreement is hereby
amended to delete the terms thereof in their entirety and to
insert the following therefor:
(j) in addition to and without duplication of the
Liens permitted under clause (f) above, Liens securing
Indebtedness and other obligations of the Company or
<PAGE>
any of its Subsidiaries permitted by this Agreement
which encumber Fixed Asset Property having a net book
value (or if greater, a fair market value) which, in
the aggregate, is less than or equal to $5,000,000;
(o) Section 7.2 of the Existing Agreement is hereby amended
to delete the word "and" and the end of subsection (k) thereof,
replace the period and the end of subsection (l) thereof with a
semi-colon and the word "and" and add the following subsection
(m) thereto:
(m) the MARAD Financing Liens.
(p) Section 7.2 of the Existing Agreement is hereby amended
to delete the last sentence thereof in its entirety and to
substitute the following therefor:
Clauses (a) through (m) of this Section 7.2 are
referred to as "Permitted Liens."
(q) Section 7.7 of the Existing Agreement is hereby amended
to delete the terms thereof in their entirety and to insert the
following therefor:
Section 7.7 Limitation on Capital Expenditures. Incur
Capital Expenditures which, in the aggregate for the
Company and its Subsidiaries taken as a whole, exceed
$7,500,000 for the Company's fiscal year ending
December 31, 1994, $25,000,000 for the Company's fiscal
year ending December 31, 1995 and $9,000,000 for any
fiscal year thereafter.
(r) Section 7.13 of the Existing Agreement is hereby
amended to delete the terms of clauses (i) and (ii) thereof in
their entirety and to insert the following therefor:
(i) Indebtedness of the Company secured by Permitted
Liens; provided, however, that the aggregate principal
amount of Indebtedness secured by the Liens permitted
pursuant to Section 7.2(j) shall not exceed $5,000,000
in the aggregate, (ii) unsecured Indebtedness of the
Company in an aggregate principal amount not to exceed
$5,000,000 in the aggregate less the amount of
Indebtedness secured by Liens permitted by Section
7.2(j),
(s) Section VII of the Existing Agreement is hereby
amended by adding the following new Sections 7.21 and 7.22
thereto:
Section 7.21 Additional Restrictions on Avondale
Properties, Inc. and the Shipyard Partnership. The Company
will not (i) permit Avondale Properties, Inc. to engage in
any business activity other than the ownership of the 1%
general partnership interest in the Shipyard Partnership or
(ii) permit the Shipyard Partnership to engage in any
business activity other than the ownership of the Shipyard
Real Property Assets which are contributed to it by the
Company in connection with the transactions contemplated by
the MARAD Financing Documents and the leasing back to the
Company of such property.
<PAGE>
Section 7.22 Amendments to the MARAD Financing
Documents. The Company will not alter, amend, modify,
rescind, terminate or waive any provision of the MARAD
Financing Documents or any of its rights thereunder.
2. Waiver and Consent to Appointment of New Agent.
Each Bank hereby consents to the appointment of BofA NTSA as
successor Agent to Bank of America Illinois effective upon, and
only upon, the resignation of Bank of America Illinois in such
capacity. Such appointment shall take effect promptly upon
(i) the resignation of Bank of America Illinois as Agent and
(ii) the acceptance by BofA NTSA of its appointment as successor
Agent (the "Succession Date"). Until the Succession Date, Bank
of America Illinois shall continue to act as Agent for the Banks
and BofA NTSA shall have no rights or duties with respect
thereto. The Banks and the Company authorize Bank of America
Illinois and BofA NTSA to (i) enter into and deliver all
necessary assignment documentation, (ii) amend all Loan Documents
that Bank of America Illinois and BofA NTSA determine should be
amended to reflect the assignment of the Agent's rights and
duties to BofA NTSA and (iii) take all other actions and execute
and deliver all other documents as may be required to fully
assign the rights and duties of Bank of America Illinois as Agent
to BofA NTSA and to maintain the perfection of the Agent's liens
in the Collateral. Effective as of the Succession Date, BofA
NTSA is hereby appointed as successor Agent and after such date:
(a) BofA NTSA shall be entitled to all the rights (including
rights to indemnification) and shall assume all of the duties of
the Agent under the Credit Agreement; (b) Bank of America
Illinois shall be discharged from its duties and obligations
under the Credit Agreement and the other related instruments
(except that nothing herein shall be deemed to affect Bank of
America Illinois as a Bank under the Credit Agreement and the
other related documents); and (c) Bank of America Illinois shall
be entitled to the continued benefit of Section IX of the Credit
Agreement with respect to all actions taken by it or its
predecessor on or prior to the Succession Date. The Company and
the Banks hereby waive any notice of resignation which the Agent
may be required to give under the Credit Agreement in connection
with the resignation and appointment contemplated by this Section
2. In addition to the foregoing, each of the Company and each of
the Banks agrees that the Agent may delegate all or a portion of
its duties to, one or more of its Affiliates; provided, however,
that the Agent shall remain responsible for the ultimate
performance of any of the Agent's duties so delegated as if such
delegation had not occurred.
3. Waivers in Connection with Transfer of Avondale
Shipyard to the Shipyard Partnership. Subject to and conditioned
upon the fulfillment of each of the conditions precedent set
forth in Section 4 hereof, Sections 7.3(a) and (b), 7.5, 7.14 and
7.20 of the Existing Agreement are hereby waived to the extent,
and solely to the extent, necessary to permit the Company to
complete the following transactions:
(a) The formation of the Shipyard Partnership solely
for the purpose of acquiring title to the Shipyard Real
Property Assets through the Company's contribution of such
assets to the Shipyard Partnership.
<PAGE>
(b) The formation of Avondale Properties solely for
the purpose of holding a 1% general partnership interest in
the Shipyard Partnership.
(c) The Company's contribution of the Shipyard Real
Property to the Shipyard Partnership and the leasing back to
the Company of the portion of such Shipyard Real Property
Assets on which the improvements financed by the Title XI
Program are to be located.
(d) The inclusion of the negative pledge clauses set
forth in the MARAD Financing Documents.
(e) The initial Investments made by the Company in
connection with the formation of each of Avondale Properties
and the Shipyard Partnership.
4. Conditions Precedent to Amendment Effectiveness and
Consent to Release Certain Collateral. (a) The amendments and
modifications set forth in Section 1 hereof and the waivers and
consent set forth in Sections 2 and 3 hereof shall become
effective upon, and are expressly conditioned upon, the
fulfillment of each of the following conditions precedent on or
prior to March 1, 1995:
(i) Amendment. The Agent shall have received this
Amendment, duly executed and delivered by an authorized officer
of the Company and the Required Banks.
(ii) Subsidiary Guarantor Consent. The Agent shall
have received (with a copy for each of the other Banks) from each
of the Subsidiary Guarantors a reaffirmation of the Subsidiary
Guarantee executed by it.
(iii) Material Adverse Change. In the opinion of the
Required Banks (as evidenced by their execution of this
Amendment), no event or condition shall have occurred or exist
which could reasonably be expected to have a Material Adverse
Effect.
(iv) Additional Subsidiary Documentation. The Agent
shall have received a Subsidiary Guarantee and a Subsidiary
Security Agreement executed by each of the Shipyard Partnership
and Avondale Properties and the Company shall have pledged to the
Agent as additional security all of the issued and outstanding
capital stock of Avondale Properties, in each case, pursuant to
such agreements and documents as shall be reasonably satisfactory
to the Required Banks (as evidenced by their execution of this
Amendment).
(v) MARAD Approval. The Agent shall have received
copies of MARAD documentation approving the Shipyard Project and
indicating that the Shipyard Project qualifies for financing
under the Title XI Program.
(vi) Legal Opinion. The Agent shall have received the
favorable opinion of Jones, Walker, Waechter, Poitevent, Carrere
& Denegre, Louisiana counsel to the Company, addressed to the
Agent, the LC Issuer and the Banks in form and substance
satisfactory to the Agent and its counsel.
<PAGE>
(vii) Other Documents. The Agent shall have received
such other documents, instruments and agreement as it shall have
reasonably requested in connection with the transactions
contemplated by this Amendment.
(b) Each of the Banks hereby consents to and
authorizes the Agent to release its Lien on the Collateral
described on Exhibit A hereto.
5. Representations, Warranties and Covenants. In
order to induce the Agent and the Banks to enter into this
Amendment, the Company hereby represents, warrants and covenants
to the Agent and the Banks as follows:
(a) The execution, delivery and performance by
the Company of this Amendment (i) are within the Company's
corporate powers, (ii) have been duly authorized by all
necessary corporate action, (iii) require no action by or in
respect of, or filing with, any governmental body, agency or
official, (iv) do not contravene, or constitute a default
under, any provision of any applicable law, statute,
ordinance, regulation, rule, order or other governmental
restriction or of the Certificate or Articles of
Incorporation or By-Laws of the Company, (v) do not
contravene, or constitute a default under, any agreement,
judgment, injunction, order, decree, indenture, contract,
lease, instrument or other commitment to which the Company
is a party or by which the Company or any of its assets are
bound and (vi) will not result in the creation or imposition
of any Lien upon any asset of the Company under any existing
indenture, mortgage, deed of trust, loan or credit agreement
or other agreement or instrument to which the Company is a
party or by which it or any of its assets may be bound or
affected.
(b) This Amendment and the Credit Agreement are
the legal, valid and binding obligations of the Company, and
are enforceable against the Company in accordance with their
terms.
(c) The representations and warranties contained
in the Credit Agreement and the other Loan Documents are
true and correct in all material respects on and as of the
date hereof as though made on the date hereof, except to the
extent that such representations expressly relate solely to
an earlier date (in which case such representations and
warranties were true and accurate on and as of such earlier
date).
(d) No Default or Event of Default has occurred
and is continuing.
(e) None of the "MARAD Financing Liens" referred
to above covers or will cover or attach to any of the
Collateral.
(f) The Company shall use its best efforts to
obtain from MARAD (i) an express consent to the liens and
security interests granted to the Agent on the Collateral
pursuant to, under and in connection with the Credit
<PAGE>
Agreement (together with a consent to the granting of liens
on such Collateral in connection with a refinancing of the
Obligations on terms and condition no more restrictive to
the Company than those set forth in the Credit Agreement),
and (ii) an access agreement executed by MARAD, such consent
and such agreement to be in form and substance satisfactory
to the Agent.
6. Reference to and Effect Upon the Credit Agreement.
Upon the effectiveness of this Amendment, each reference in the
Existing Agreement to "the Agreement", "hereunder", "hereof",
"herein", or words of like import, shall mean and be a reference
to the Credit Agreement, as amended hereby and each reference to
the Existing Agreement in any other Loan Document shall mean and
be a reference to the Credit Agreement, as amended hereby.
7. Reaffirmation; Expenses. The Company hereby
reaffirms to the Agent and each of the Banks that, except as
modified hereby, the Credit Agreement and all of the Loan
Documents remain in full force and effect and have not been
otherwise waived, modified or amended. Except as expressly
modified hereby, all of the terms and conditions of the Credit
Agreement shall remain unaltered and in full force and effect.
The Company acknowledges that all reasonable legal expenses of
the Agent related to this Amendment shall be paid by the Company.
8. Confirmation of Collateral Documents. The Company
hereby (i) ratifies and confirms its obligations under the
Collateral Documents and acknowledges and agrees that the
Collateral Documents to which the Company is a party are the
legal, valid and binding obligations of the Company, enforceable
against it in accordance with their terms; and (ii) agrees that
the Obligations (for purposes of each of such Collateral
Documents) shall include, without limitation, the Obligations
under and as defined in the Credit Agreement as amended by this
Amendment.
9. Role of BA Securities, Inc. Each of the Company
and the Lenders acknowledges that it is aware of the facts that
(i) BA Securities, Inc. ("BASI") has acted as exclusive agent for
the Company in connection with the sale of the bonds issued in
connection with the Shipyard Project under the Title XI Program,
(ii) Bank of America Illinois ("BAI") provides, for a fee,
investment services regarding the Company's pension fund, and
(iii) BAI from time to time provides incidental equipment trustee
services to the Company. Each of the Company and the Lenders
acknowledges and consents to any and all of the foregoing roles
of BASI, BAI and their respective Affiliates and waives any
objections it may have to actual or potential conflict of
interest caused by BASI and BAI acting in such capacity. Each of
the Lenders further agrees that in connection with any of the
foregoing roles, BASI and BAI may take, or refrain from taking,
any action which they in their discretion deem appropriate.
10. Choice of Law. THIS AMENDMENT SHALL BE GOVERNED
BY AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ILLINOIS
AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANY,
<PAGE>
THE SUBSIDIARIES, THE AGENT AND THE BANKS IN CONNECTION WITH THIS
AMENDMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS
AND DECISIONS OF THE STATE OF ILLINOIS.
11. Counterparts. This Amendment may be executed in
one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument. One or more counterparts of this Amendment may
be delivered by telecopier, with the intention that they shall
have the same effect as an original counterpart thereof.
IN WITNESS WHEREOF, the parties hereto have caused
their duly authorized officers to execute and deliver this
Agreement as of the date first above written.
AVONDALE INDUSTRIES, INC.
By: \s\ Thomas M. Kitchen
Name: Thomas M. Kitchen
Title: Vice President
BANK OF AMERICA ILLINOIS,successor-
in-interest to CONTINENTAL BANK,
as Agent
By: \s\ Daniel G. Farthing
Name: Daniel G. Farthing
Title: Vice President
THE BANKS:
BANK OF AMERICA ILLINOIS,successor-
in-interest to CONTINENTAL BANK,
as a Bank and as LC Issuer
By: \s\ Thomas Barnett
Name: Thomas Barnett
Title: Vice President
WHITNEY NATIONAL BANK
By: \s\ Elmer H. Hemphill, Jr.
Name: Elmer H. Hemphill, Jr.
Title: Senior Vice President
FIRST INTERSTATE BANK OF TEXAS,N.A.
By: \s\ Frank W. Schageman
Name: Frank W. Schageman
Title: Assistant Vice President
FIRST NATIONAL BANK OF COMMERCE
By: \s\ David A. Doherty
Name: David A. Doherty
Title: Vice President
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Second Amendment to Revolving Credit Agreement and
acknowledges the continued validity, enforceability and
effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
AVONDALE GULFPORT MARINE, INC.
By \s Thomas M. Kitchen
Title: Vice President
Dated: February 9, 1995
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Second Amendment to Revolving Credit Agreement and
acknowledges the continued validity, enforceability and
effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
AVONDALE TECHNICAL SERVICES, INC.
By \s\ Thomas M. Kitchen
Title: President
Dated: February 9, 1995
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Second Amendment to Revolving Credit Agreement and
acknowledges the continued validity, enforceability and
effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
<PAGE>
CRAWFORD TECHNICAL SERVICES, INC.
By \s\ B. L Hicks
Title: Secretary
Dated: February 9, 1995
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Second Amendment to Revolving Credit Agreement and
acknowledges the continued validity, enforceability and
effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
GENCO INDUSTRIES, INC.
By \s\ Thomas M. Kitchen
Title: Director
Dated: February 9, 1995
EXHIBIT A
All of the following property whether now owned or
existing or hereafter acquired or arising:
(i) each and every construction, supply or similar
agreement relating to the Shipyard Project, as each may be
amended from time to time; and
(ii) Avondale Industry Inc.'s ("Avondale's") rights to
receive all monies which from time to time become due to
Avondale in respect of the construction of the Shipyard
Project regardless of legal theory by which monies are
recovered.
"Shipyard Project" means the construction (including
the designing, inspecting, outfitting and equipping) of the
advanced and modern shipyards technology project undertaken by
Avondale at its main shipyard facility in Avondale, Louisiana.
Avondale Properties, Inc.
Avondale Services Corporation
Avondale Transportation Company, Inc.
Avondale Shipyard of Texas, Inc.
Avondale Construction Management, Inc.
Avondale Gulfport Marine, Inc.
Avondale Industries of New York, Inc.
Avondale Enterprises, Inc.
Avondale Technical Services, Inc.
Crawford Technical Services, Inc.
Genco Industries, Inc.
M & D Steel Fabrication, Inc.
AAA Quality Construction, Inc.
Genco Industries of Lufkin, Inc.
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 33-31984 of Avondale Industries, Inc. on Forms S-8 and S-3 of our
report dated February 24, 1995, appearing in this Annual Report on
Form 10-K of Avondale Industries, Inc. for the year ended December
31, 1994.
\s\ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
New Orleans, Louisiana
February 24, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AVONDALE
INDUSTRIES, INC.'S CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1994 AND ITS
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR THEN ENDED AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 15,414
<SECURITIES> 0
<RECEIVABLES> 84,510
<ALLOWANCES> 0
<INVENTORY> 16,109
<CURRENT-ASSETS> 127,936
<PP&E> 231,997
<DEPRECIATION> (112,836)
<TOTAL-ASSETS> 273,503
<CURRENT-LIABILITIES> 93,100
<BONDS> 42,875
<COMMON> 15,927
0
0
<OTHER-SE> 106,951
<TOTAL-LIABILITY-AND-EQUITY> 273,503
<SALES> 475,810
<TOTAL-REVENUES> 475,810
<CGS> 428,325
<TOTAL-COSTS> 428,325
<OTHER-EXPENSES> 30,536
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,385
<INCOME-PRETAX> 13,375
<INCOME-TAX> 300
<INCOME-CONTINUING> 13,075
<DISCONTINUED> (4,552)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,523
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
</TABLE>
