FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark One)
[ X ]Quarterly Report Pursuant to Section 12 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1995
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _______________________
to________________________
For Quarter Ended March 31, 1995
Commission File Number 0-16572
AVONDALE INDUSTRIES, INC.
Louisiana 39-1097012
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 50280, New Orleans, Louisiana 70150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 504/436-2121
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 file such filing requirements
for the past 90 days. YES X NO .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Class Outstanding at
March 31, 1995
Common stock, par value $1.00 per share 14,464,175 shares
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Independent Accountants' Report
Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994
Consolidated Statements of Operations -
Three Months Ended March 31, 1995 and 1994
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1995 and 1994
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II.Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
Avondale Industries, Inc.
We have reviewed the condensed consolidated financial statements of
Avondale Industries, Inc. and subsidiaries, as listed in the
accompanying index, as of March 31, 1995 and for the three-month
periods ended March 31, 1995 and 1994. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and of making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to such condensed consolidated financial
statements for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Avondale
Industries, Inc. and subsidiaries as of December 31, 1994, and the
related consolidated statements of operations, shareholders' equity,
and cash flows for the year then ended (not presented herein); and in
our report dated February 24, 1995, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1994 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from
which it has been derived.
\s\ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
May 11, 1995
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(UNAUDITED)
March 31, December 31,
1995 1994
---------- ------------
ASSETS
Current Assets:
Cash and cash equivalents.... $ 2,030 $ 15,414
Restricted short-term investments (Note 3) 5,310 1,811
Receivables (Note 2):
Accounts receivable........ 30,740 25,342
Contracts in progress...... 66,687 59,168
Inventories:
Goods held for sale........ 7,975 7,908
Materials and supplies..... 7,977 8,201
Prepaid expenses and other current assets 5,672 10,092
------- -------
Total current assets....... 126,391 127,936
------- -------
Property, Plant and Equipment:
Land......................... 9,324 9,324
Buildings and improvements... 56,641 47,979
Machinery and equipment...... 174,253 174,694
------- -------
Total........................ 240,218 231,997
Less accumulated depreciation (116,994) (112,836)
------- -------
Property, plant and equipment - net 123,224 119,161
------- -------
Goodwill - net................. 15,197 15,431
Deferred tax assets............ 7,000 7,000
Funds held for construction (Note 3) 12,700
Other assets................... 5,508 3,975
------- -------
Total assets............... $ 290,020 $ 273,503
======= =======
See Notes to Consolidated Financial Statements.
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(UNAUDITED)
March 31, December 31,
1995 1994
---------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 6,459 $ 5,866
Accounts payable............. 56,171 60,917
Accrued employee compensation 11,786 12,948
Other........................ 16,293 13,369
------- -------
Total current liabilities.. 90,709 93,100
Long-term debt (Note 3)........ 62,584 45,875
Other liabilities and deferred credits 10,805 11,650
------- -------
Total liabilities............ 164,098 150,625
------- -------
Commitments and contingencies (Note 4)
Shareholders' Equity:
Common stock, $1.00 par value, authorized
30,000,000 shares; issued - 15,927,191
shares in 1995 and 1994.... 15,927 15,927
Additional paid-in capital... 373,911 373,911
Accumulated deficit.......... (252,060) (255,104)
------- -------
Total...................... 137,778 134,734
Treasury stock (common: 1,463,016 shares
in 1995 and 1994) at cost... ( 11,856) ( 11,856)
------- -------
Total shareholders' equity... 125,922 122,878
------- -------
Total........................ $ 290,020 $ 273,503
======= =======
See Notes to Consolidated Financial Statements.
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
1995 1994
Continuing Operations: ---- ----
Net sales.................... $ 133,575 $ 101,329
Cost of sales................ 120,171 91,823
------- -------
Gross profit................. 13,404 9,506
Selling, general and administrative
expenses 7,663 6,520
------- -------
Income from operations....... 5,741 2,986
Interest expense............. ( 1,279) ( 1,204)
Other - net.................. 332 136
------- -------
Income from continuing operations
before income taxes ....... 4,794 1,918
Income taxes ................ 1,750 ---
------- -------
Income from continuing operations 3,044 1,918
Discontinued Operations:
Income from discontinued
operations (Note 1) 116
------- -------
Net income..................... $ 3,044 $ 2,034
======= =======
Income per share of common stock
Continuing operations........ $ 0.21 $ 0.13
Discontinued operations...... --- 0.01
------- -------
Net income per share of common stock $ 0.21 $ 0.14
======= =======
Weighted average number of shares
outstanding 14,468 14,480
======= =======
See Notes to Consolidated Financial Statements.
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(In thousands)
(UNAUDITED)
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................... $ 3,044 $ 2,034
Adjustments to reconcile net income to
net cash provided by (used for)
operating activities:
Depreciation and amortization 2,418 2,878
Changes in operating assets and
liabilities:
Receivables.............. (12,917) 66,875
Inventories.............. 157 625
Prepaid expenses and other
current assets 2,670 415
Accounts payable......... ( 4,746) (5,001)
Accrued employee compensation ( 1,162) 107
Other - net.............. 2,313 (3,099)
------- -------
Net Cash Provided by (Used for)
Operating Activities..... (8,223) 64,834
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures......... ( 6,251) ( 763)
Purchase of restricted short-term
investments - net (Note 3) (16,212) (13,891)
------- -------
Net Cash Used for Investing Activities (22,463) (14,654)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term borrowings ( 478) (44,472)
Proceeds from long-term
borrowings (Note 3) 17,780
------- -------
Net Cash Provided by (Used For)
Financing Activities....... 17,302 (44,472)
------- -------
Net increase (decrease) in cash and
cash equivalents............. (13,384) 5,708
Cash and cash equivalents at
beginning of period 15,414 3,195
------- -------
Cash and cash equivalents at
end of period $ 2,030 $ 8,903
======= =======
Supplemental disclosures of cash
flow information:
Cash paid during the period for interest $ 574 $ 761
======= =======
See Notes to Consolidated Financial Statements.
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
include the accounts of Avondale Industries, Inc. and its
subsidiaries ("Avondale" or the "Company"). In the opinion of
the management of the Company, all adjustments (such adjustments
consisting only of a normal recurring nature) necessary for a
fair presentation of the operating results for the interim
periods presented have been included in the interim financial
statements. These interim financial statements should be read in
conjunction with the December 31, 1994 audited financial
statements and related notes filed on Form 10-K for the year
ended December 31, 1994 (the "1994 Form 10-K").
As disclosed in Note 7 of the Company's Annual Report on the 1994
Form 10-K, during the third quarter of 1994 the Company decided
to discontinue its service contracting line of business.
Accordingly, its operating results for the prior-year period are
reported as discontinued operations.
The financial statements required by Rule 10-01 of Regulation S-X
have been reviewed by independent public accountants as stated in
their report included herein.
2. RECEIVABLES
As discussed in the 1994 Form 10-K 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 MHCs currently being built by the Company.
In connection with developing the Minehunter REA, the
Company realized that it would be necessary to increase its
cost to complete estimates for the MHC vessels. The Company,
in consultation with outside counsel, reviewed the Minehunter
REA and determined a minimum estimate of its probable
recoverable amount. Based on this review and supported by
the view of outside counsel that they had no reason to
believe that the use of $16 million in quantifying the
minimum probable amount of recovery was unreasonable,
management concluded 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. To the extent
that any portion of the $16 million recognized is not
recovered, then losses in addition to those previously
recorded will have to be recognized. The Minehunter REA is
being evaluated currently by the U.S. Navy.
3. FINANCING ARRANGEMENTS
In February 1995 the Company completed financing of $17.8 million
of an approximately $20 million plant modernization effort by
issuing mortgage bonds utilizing a U.S. Government guarantee
<PAGE>
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 of $593,000 over a fifteen year
period beginning March 30, 1996.
The terms of the Title XI guarantee provide for the proceeds from
the financing to be held in a construction escrow fund and
released to the Company as allowable project costs are incurred
by the Company and approved by the U.S. Department of
Transportation, Maritime Administration. At March 31, 1995, the
Company estimates that it is currently entitled to $5.1 million
of the escrowed funds and accordingly has classified this amount
as a current asset in Restricted Short-term Investments. The
balance of the financing, $12.7 million at March 31, 1995, is
recorded as Funds Held for Construction which represents the
balance of the project costs which the Company will be entitled
to receive over the remaining life of the modernization project.
Shortly after the first quarter of 1995 the Company amended its
revolving credit agreement. The amendment, among other things,
increased the amount of the credit agreement to $42.5 million and
extended the term of the credit agreement from May 1996 to May
1997. Further, the amendment revised the credit agreement to
permit the issuance of the mortgage bonds discussed in the
preceding paragraph and revised the level of permitted capital
expenditures and certain coverage ratios, such revisions to take
into consideration the plant modernization project. There have
been no borrowings in 1995 under the revolving credit agreement.
There were $23.3 million of letters of credit outstanding under
the facility at March 31, 1995.
4. COMMITMENTS AND CONTINGENCIES
Litigation
As discussed in further detail in Note 12 of the Company's Annual
Report on the 1994 Form 10-K, in 1986 the Company was advised
that it may be a potentially responsible party ("PRP") with
respect to an oil reclamation site, operated by an unaffiliated
company, in Walker, Louisiana. 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 March 31,
1995, clean-up costs totalled $15 million, of which the Company
has contributed $3.5 million. Additional work scheduled for the
site includes the completion of site studies in 1995 and 1996,
and, if required by the results of these studies, subsequent
post-closure activities. Future aggregate expenses are expected
to be approximately $1 million, exclusive of any groundwater
monitoring and remediation, for 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.
<PAGE>
Since July 1986, a number of "toxic tort" lawsuits have been
filed against the Company and numerous other defendants alleging
various claims in connection with the oil reclamation site
discussed above. The plaintiffs also seek substantial punitive
damages. These cases have been consolidated and certified as a
class action. The court has set a trial date for September 3,
1996 and significant discovery activities are scheduled to occur
throughout 1995 and 1996.
Furthermore, the Company 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.
In May 1995, the Board of Directors of the Company approved a
settlement of the class action. This settlement will not become
final unless and until it has been approved by the Federal
District Court before which the action is currently pending.
If the settlement agreement is judicially approved, Avondale
would make a cash payment and deliver a promissory note for an
additional sum that would be payable over 18 months. Avondale
could also be responsible for payment to the plaintiffs of an
additional sum in the event that the plaintiffs were unsuccessful
in collecting certain amounts with respect to claims that would
be assigned to the plaintiffs by the Company under the settlement
agreement. Management of the Company believes that the cash
payment and issuance of the promissory note will not have a
material effect on the Company's financial condition or results
of operation because the Company had previously recorded an
accrual for a substantial portion of the settlement. The Company
has sufficient available cash from operations or under its credit
facility to fund the cash payment and the promissory note.
With respect to the potential contingent liability of the Company
to pay additional sums under the settlement agreement, management
believes that the eventual resolution of this matter will not
have a material affect on the Company's financial statements.
The Company will continue to consult with its counsel and to
establish a reserve against such exposure in an appropriate
amount if and when developments warrant.
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 damage 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 the eventual
resolution of these matters is not expected to have a material
adverse effect on the Company's financial statements.
<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 and insurance 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. Outstanding
letters of credit relating to these business activities amounted
to approximately $23.3 million at March 31, 1995 and December 31,
1994.
Plant Modernization Program
The Company's plant modernization and expansion project is
currently in progress. At an estimated cost of approximately
$20.0 million, the project is expected to be completed by the
third quarter of 1995.
The Company has recorded project costs to date of approximately
$7.6 million of which approximately $4.8 million was incurred in
1995. Outstanding purchase commitments at March 31, 1995 were
approximately $7.6 million. Refer to Note 3 herein regarding
financing for this project.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction with the
Company's unaudited consolidated financial statements for the periods
ended March 31, 1995 and 1994 and Management's Discussion and
Analysis of Financial Condition and Results of Operations included
under Item 7 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1994 (the "1994 Form 10-K").
Overview
The Company continued the trend of improvement in its operating
results, recording significant increases compared to the same period
in the prior year. Net sales for the first quarter of 1995 increased
over the first quarter of the prior year while the current quarter's
income from continuing operations before taxes more than doubled the
level reported in the first quarter of 1994.
In February 1995 the Company completed financing of $17.8 million of
its approximately $20.0 million plant modernization project (see Note
3 of the notes to the consolidated financial statements contained
elsewhere in this Form 10-Q). The project is estimated to be
completed in the third quarter of 1995.
The Company's backlog at March 31, 1995 was $1.3 billion (excluding
options). Included in the backlog is work to be performed on a $420
million U. S. Navy contract to construct two additional Strategic
Sealift ships which represent the second and third ships which the
Company has now been awarded in the Sealift program. Under the
original contract awarded in 1993, there are three remaining options
which are exercisable over the next three years. Not included in the
backlog is an approximately $144 million contract to construct
forebodies for four product carriers. Financing for the project was
completed on May 12, 1995 and the contract became effective at that
time. These will be the first U.S.-flag product carriers built in
the United States in eight years and are designed to comply fully
with the provisions of the Oil Pollution Act of 1990.
The delivery schedule for the balance of 1995 includes four vessels
for the U.S. Navy and one paddle-wheel gaming vessel. Included in
the scheduled deliveries to the U.S. Navy are two T-AO Oilers ("T-
AOs"), one of which is the first double-hulled ship built in the
United States. Also to be delivered in 1995 to the U.S. Navy is one
MHC-51 Class Minehunter ("MHC") and one Landing Ship Dock-Cargo
Variant ("LSD-CV").
As discussed in the 1994 Form 10-K 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 MHCs
currently being built by the Company. In connection with developing
<PAGE>
the Minehunter REA, the Company realized that it would be necessary
to increase its cost to complete estimates for the MHC vessels. The
Company, in consultation with outside counsel, reviewed the
Minehunter REA and determined a minimum estimate of its probable
recoverable amount. Based on this review and supported by the view
of outside counsel that they had no reason to believe that the use of
$16 million in quantifying the minimum probable amount of recovery
was unreasonable, management concluded 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. To the extent that any
portion of the $16 million recognized is not recovered, then losses
in addition to those previously recorded will have to be recognized.
The Minehunter REA is being evaluated currently by the U.S. Navy.
As detailed in Note 12 of the Company's Annual Report on the 1994
Form 10-K and as discussed in Note 4 of the notes to the consolidated
financial statements contained elsewhere in this Form 10-Q, the
Company has been informed that it may be a potentially responsible
party ("PRP") in connection with an oil reclamation site operated by
an unaffiliated company. The Company, along with other PRPs, has
funded fully its share of the cleanup costs incurred to date under a
preliminary agreement to fund the site's remediation. Additional
work scheduled for the site includes completion of site studies in
1995 and 1996, and, if required by the results of these studies,
subsequent post-closure activities. Future aggregate expenses are
expected to be approximately $1 million, exclusive of any groundwater
monitoring and remediation, for 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
cleanup costs will not be materially increased.
Additionally, since July 1986 a number of "toxic tort" lawsuits have
been filed against the Company and numerous other defendants alleging
various claims in connection with the oil reclamation site discussed
above. The plaintiffs also seek substantial punitive damages. These
cases have been consolidated and certified as a class action. The
court has set a trial date for September 3, 1996 and significant
discovery activities are scheduled to occur throughout 1995 and 1996.
The Company 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.
In May 1995, the Board of Directors of the Company approved a
settlement of the class action. This settlement will not become
final unless and until it has been approved by the Federal District
Court before which the action is currently pending.
<PAGE>
If the settlement agreement is judicially approved, Avondale would
make a cash payment and deliver a promissory note for an additional
sum that would be payable over 18 months. Avondale could also be
responsible for payment to the plaintiffs of an additional sum in the
event that the plaintiffs were unsuccessful in collecting certain
amounts with respect to claims that would be assigned to the
plaintiffs by the Company under the settlement agreement. Management
of the Company believes that the cash payment and issuance of the
promissory note will not have a material effect on the Company's
financial condition or results of operations because the Company had
previously recorded an accrual for a substantial portion of the
settlement. The Company has sufficient available cash from
operations or under its credit facility to fund the cash payment and
the promissory note.
With respect to the potential contingent liability of the Company to
pay additional sums under the settlement agreement, management
believes that the eventual resolution of this matter will not have a
material affect on the Company's financial statements. The Company
will continue to consult with its counsel and to establish a reserve
against such exposure in an appropriate amount if and when
developments warrant.
As discussed in the 1994 Form 10-K, 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.
Results of Operations
The Company recorded net income of approximately $3.0 million, or
$0.21 per share, for the first three months of 1995 compared to
approximately $2.0 million, or $0.14 per share, for the first three
months of 1994, representing a 50% increase over the first quarter of
1994. Additionally, income from operations of approximately $5.7
million in the current period increased approximately 92% over the
same period in the prior year. The increases in the Company's
operating results in the current period primarily reflect operating
profits recognized for the first time on the LSD-CV 52 contract. As
disclosed in Item 7 of the 1994 Form 10-K, the operating profit
projected to be recognized in 1995 will be related principally to the
LSD-CV 52 and seven T-AO contracts. Also contributing to the 1995
income from operations were profits recognized on the third gaming
vessel (scheduled for delivery in mid-1995) and by the Company's
marine repair, foundry and wholesale steel operations.
In the third quarter of 1994 the Company decided to discontinue its
service contracting business. The Company has restated first quarter
1994 results to record income from discontinued operations of
approximately $116,000, or $0.01 per share.
<PAGE>
The first quarter of 1995 reflects an increase in net sales of
approximately $32.2 million, or 32%, as compared to the prior year's
quarter. The increase in net sales is primarily due to increased net
sales revenues recorded on the contracts to construct the LSD-CV 52
and the first of three Strategic Sealift ships. These increases were
partially offset by reduced net sales revenues recorded on the
contracts to construct the three LSD-CVs and the seven T-AOs as these
contracts are in the latter stages of completion.
Gross profit for the first quarter of 1995 increased approximately
$3.9 million, or 41%, compared to the same period in 1994. The
increase in gross profit is primarily due to profits recognized on
contracts to construct the LSD-CV 52 and seven T-AOs (as discussed
above).
Selling, general and administrative ("SG&A") expenses for the first
three months of 1995 increased by approximately $1.1 million, or 18%,
compared to the same period in 1994. The increase is primarily due to
an increase in indirect labor and associated costs (resulting from an
across-the-board rate increase effective January 1, 1995) and an
overall increase in operating activity.
Interest expense increased by $75,000, or 6%, for the first quarter
of 1995 as compared to the same period in the prior year. The
Company projects an overall increase in interest expense for 1995
compared to 1994 due principally to the $17.8 million Title XI
financing completed in February.
The Company recorded a $1.75 million income tax provision for the
first quarter of 1995 which is essentially a non-cash charge due
primarily to the current utilization of available net operating loss
carryforwards for income tax purposes. For financial reporting
purposes the benefit of such carryforwards was recognized in prior
periods (including 1994) as a deferred tax asset.
Liquidity and Capital Resources
During the quarter ended March 31, 1995 the Company experienced a net
decrease in its cash resources of $13.4 million. This cash was used
primarily to fund current operating activities, including a $6.7
million increase in contracts in progress, and for capital
expenditures of $6.3 million primarily related to the plant
modernization project. As further discussed below, a significant
portion of the cash used for capital expenditures represents interim
funding of this project until such time as the proceeds from the
permanent financing are made available to the Company.
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 terms of the Title
XI guarantee provide for the proceeds from the financing to be held
in a construction escrow fund and released to the Company as
allowable project costs are incurred by the Company and approved by
<PAGE>
the U.S. Department of Transportation, Maritime Administration. At
March 31, 1995, the Company estimates that it is currently entitled
to $5.1 million of the escrowed funds and accordingly has classified
this amount as a current asset in Restricted Short-term Investments.
The balance of the financing, $12.7 million at March 31, 1995, is
recorded as Funds Held for Construction which represents the balance
of the project costs which the Company will be entitled to receive
over the remaining life of the modernization project. The Company
has recorded project costs to date of approximately $7.6 million of
which approximately $4.8 million was incurred in 1995. Outstanding
purchase commitments at March 31, 1995 were approximately $7.6
million. Project completion is estimated for the third quarter of
1995.
Additionally, shortly after the first quarter of 1995 the Company
obtained additional liquidity as its improved financial results
enabled it to amend its revolving credit agreement. The amendment,
among other things, increased the amount of the credit agreement to
$42.5 million and extended the term of the credit agreement from May
1996 to May 1997. Further, the amendment revised the credit
agreement to permit the issuance of the mortgage bonds discussed in
the preceding paragraph and revised the level of permitted capital
expenditures and certain coverage ratios, such revisions to take into
consideration the plant modernization project. There have been no
borrowings in 1995 under the revolving credit agreement. There were
$23.3 million of letters of credit outstanding under the facility at
March 31, 1995. The Company believes that its capital resources will
be sufficient to finance current and projected operations.
On May 15, 1995 the Company entered into an agreement to sell the
assets used in its foundry operation. Certain of the assets to be
sold are subject to final determination at a later date. The sale
could generate $3 - $5 million in cash proceeds and will not
significantly affect the Company's results of operations.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In May 1995, the Board of Directors of the Company approved
a settlement of the class action discussed in further detail
in Note 4 of the notes to the financial statements contained
elsewhere in this Form 10-Q. This settlement will not
become final unless and until it has been approved by the
Federal District Court before which the action is currently
pending.
If the settlement agreement is judicially approved, Avondale
would make a cash payment and deliver a promissory note for
an additional sum that would be payable over 18 months.
Avondale could also be responsible for payment to the
plaintiffs of an additional sum in the event that the
plaintiffs were unsuccessful in collecting certain amounts
with respect to claims that would be assigned to the
plaintiffs by the Company under the settlement agreement.
Management of the Company believes that the cash payment and
issuance of the promissory note will not have a material
effect on the Company's financial condition or results of
operation because the Company had previously recorded an
accrual for a substantial portion of the settlement. The
Company has sufficient available cash from operations or
under its credit facility to fund the cash payment and the
promissory note.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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(1), 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),
which has been further amended by a Third
Supplemental Indenture dated February 9,
1995.
(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(1), as further amended by the
Master Assumption Agreement (filed as
Exhibit 4.3(a) hereto). The Reserve Fund
and Financial Agreement has been further
amended, including the most recent
Amendment No. 5 to the Title XI Reserve
Fund and Financial Agreement dated
February 9, 1995.
(c) Form of 8.8% Sinking Bond Fund, Series A
(included in Exhibit 4.3(a)).
(d) Form of 9.3% Sinking Bond Fund, Series B
(included in Exhibit 4.3(a)).
(e) Form of 7.86% Sinking Bond Fund, 2000
Series.
4.6 Instruments Relating to February 1995 Title XI
Vessel Financing
(a) Trust Indenture dated February 9, 1995 by
and between the Company and Chemical Bank,
as Indenture Trustee, relating to
$17,780,000 of United States Government
Guaranteed Ship Financing Bonds.
(b) Title XI Reserve Fund and Financial
Agreement dated February 9, 1995, by and
between the Company and the United States
of America.
<PAGE>
(c) Form of 8.16% Sinking Fund Bond, 2010
Series.
10.3 Employee Benefit Plans
(c) The Company's Amended and Restated
Employee Stock Ownership Plan and the
Related Trust Agreement(1) , as amended
and restated on December 5, 1994(3), as
further amended by Amendment No. 1
adopted April 5, 1995.
(i) Avondale Industries, Inc. Management
Incentive Plan
15 Letter re: unaudited interim financial
information.
27 Financial Data Schedule
(b) Reports on Form 8-K:
Not applicable.
_______________
(1) 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.
(2) Incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993.
(3) Incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
AVONDALE INDUSTRIES, INC.
Date: May 15 , 1995 By:/s/ ALBERT L. BOSSIER, JR.
Albert L. Bossier, Jr.
Chairman, President &
Chief Executive Officer
Date: May 15 , 1995 By:/s/ THOMAS M. KITCHEN
Thomas M. Kitchen
Vice President &
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Number Description
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(1), 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), which has been further amended by a
Third Supplemental Indenture dated February 9, 1995.
(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(1), as further amended by the Master Assumption
Agreement (filed as Exhibit 4.3(a) hereto). The Reserve
Fund and Financial Agreement has been further amended,
including the most recent Amendment No. 5 to the Title
XI Reserve Fund and Financial Agreement dated February
9, 1995.
(c) Form of 8.8% Sinking Bond Fund, Series A (included in
Exhibit 4.3(a)).
(d) Form of 9.3% Sinking Bond Fund, Series B (included in
Exhibit 4.3(a)).
(e) Form of 7.86% Sinking Bond Fund, 2000 Series.
4.6 Instruments Relating to February 1995 Title XI Vessel Financing
(a) Trust Indenture dated February 9, 1995 by and between the
Company and Chemical Bank, as Indenture Trustee, relating
to $17,780,000 of United States Government Guaranteed Ship
Financind Bonds.
(b) Title XI Reserve Fund and Financial Agreement dated
February 9, 1995, by and between the Company and the United
States of America.
(c) Form of 8.16% Sinking Fund Bond, 2010 Series.
10.3 Employee Benefit Plans
(c) The Company's Amended and Restated Employee Stock
<PAGE>
Ownership Plan and the Related Trust Agreement(1) , as
amended and restated on December 5, 1994(3), as further
amended by Amendment No. 1 adopted April 5, 1995.
(i) Avondale Industries, Inc. Management Incentive Plan
EXHIBIT INDEX - CONTINUED
Number Description
15 Letter re: unaudited interim financial information.
27 Financial Data Schedule
_______________
(1) 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.
(2) Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993.
(3) Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.
<PAGE>
4.3(a)
THIRD SUPPLEMENTAL
INDENTURE
THIRD SUPPLEMENTAL INDENTURE
TO
TRUST INDENTURE
Relating to the Issuance of
United States Government Guaranteed
Ship Financing Bonds, 2000 Series,
due July 15, 2000
Between
AVONDALE INDUSTRIES, INC.,
Shipowner
and
CHEMICAL BANK,
Indenture Trustee
Dated: As of February 9, 1995
<PAGE>
THIRD SUPPLEMENTAL INDENTURE
TO
TRUST INDENTURE
THIS THIRD SUPPLEMENTAL INDENTURE dated as of February 9,
1995 ("Third Supplemental Indenture") to Trust Indenture dated
October 21, 1975 between AVONDALE INDUSTRIES, INC., a Louisiana
corporation (herein called the "Shipowner") and CHEMICAL BANK
(successor by merger to Manufacturers Hanover Trust Company), a
New York corporation (said bank and any successor or assign
hereunder, herein called the "Indenture Trustee").
RECITALS:
(a) Avondale Shipyards, Inc. and the Indenture Trustee
entered into that certain Trust Indenture, dated October 21, 1975
(the "Original Indenture") providing for the issuance of
$8,148,000 aggregate principal amount of 8.80% Series A Sinking
Fund Bonds, due July 15, 1986 (the "Series A Bonds") and
$10,864,000 aggregate principal amount of 9.30% Series B Sinking
Fund Bonds, due July 15, 2000 (the "Series B Bonds");
(b) On September 16, 1985, Avondale Industries, Inc., a
Delaware corporation ("Avondale"), and the Indenture Trustee
executed an Assumption Agreement and Supplemental Indenture
supplementing the Original Indenture to reflect the merger of
Avondale Shipyards, Inc. into Avondale;
(c) On March 13, 1991, Avondale, the Shipowner, the United
States of America, represented by the Secretary of
Transportation, acting by and through the Maritime Administrator,
and the Indenture Trustee executed a Master Assumption Agreement,
Supplemental Indenture No. 2 and Amendment to Title XI Finance
Agreements further supplementing the Original Indenture to
reflect the merger of Avondale into the Shipowner;
(d) Immediately prior to the execution and delivery of this
Third Supplemental Indenture, the Series B Bonds were
outstanding, all of which have been duly called for redemption
and funds sufficient for the payment thereof on the Redemption
Date have been deposited with the Indenture Trustee (including
interest to the Redemption Date together with premium thereon)
together with irrevocable instructions from the Shipowner to the
Indenture Trustee to pay the Bondholders with such funds;
(e) The Shipowner, pursuant to resolutions duly adopted by
its Board of Directors, has determined that it is advisable to
further supplement the Indenture under and in accordance with the
provisions thereof to create an additional issuance of bonds to
be designated "United States Government Guaranteed Ship Financing
Bonds, 2000 Series" (hereinafter called the "Obligations"), which
will refinance, through a redemption, the Series B Bonds and to
issue $4,268,000 principal amount of additional bonds more
particularly described in Article First hereof and maturing not
later than July 15, 2000; and
<PAGE>
(f) On the date hereof, the Secretary will execute and
deliver Amendment No. 3 to the Authorization Agreement, relating
to the United States Government Guarantees of the Obligations.
NOW, THEREFORE, pursuant to Article X of Exhibit 1 to the
Indenture, in consideration of the premises, of the mutual
covenants herein contained, of the purchase of the Obligations by
Holders thereof, and of other good and valuable consideration,
the receipt and adequacy of which the parties hereby acknowledge,
and for the equal and proportionate benefit of all the present
and future Holders of the Obligations, the parties hereto agree
as follows:
ARTICLE FIRST
ADDITIONS, DELETIONS AND AMENDMENTS
(a) Concerning Article Second of the Special Provisions to
the Indenture. Article Second of the Special Provisions to the
Indenture is hereby deleted in its entirety and the following is
substituted in lieu thereof:
"(a) The Obligations shall be designated "United
States Government Guaranteed Ship Financing Bonds, 2000
Series". The aggregate principal amount of the
Obligations which may be issued under this Indenture
shall not exceed $4,268,000 except as provided in
Sections 2.09, 2.10, 2.12 and 3.10(b) of Exhibit 1
hereto. (b) The Obligations, the Guarantees thereof,
and the Indenture Trustee's authentication certificate
to be endorsed thereon shall be substantially in the
forms set forth in Exhibit 2 hereto. (c) The
Obligations shall be in denominations of $250,000 or
any whole multiple of $1,000 in excess of $250,000;
provided, however, that if the principal amount of the
Bonds of any holder thereof is reduced below $250,000
as a result of a redemption payment or repurchase by
the Company, then Bonds may be issued in such lesser
amount. (d) The Shipowner shall at all times cause to
be maintained in Avondale, Louisiana an office or
agency for the purposes specified in Section 5.03 of
Exhibit 1 to this Indenture. (e) The Indenture Trustee
shall at all times have its Corporate Trust Office in
the City of New York, State of New York."
(b) Concerning Article Third of the Special Provisions to
the Indenture. Article Third of the Special Provisions to the
Indenture is hereby deleted in its entirety and the following is
inserted in lieu thereof:
"(a) Mandatory Sinking Fund Redemptions. The
Bonds are subject to redemption at a redemption price
equal to 100% of the principal amount thereof, together
with interest accrued thereon to the applicable sinking
<PAGE>
fund Redemption Date, through the operation of a
mandatory sinking fund providing for the semi-annual
redemption on January 15 and July 15 of each year,
commencing July 15, 1995, at 100% of the principal
amount thereof plus interest accrued thereon to the
date of redemption, of $388,000 principal amount of
Bonds (or such lesser principal amount of Bonds as
shall then be outstanding), plus accrued interest.
Notwithstanding the foregoing provisions of this
subsection (a), if the principal amount of Outstanding
Bonds shall be reduced by reason of any redemption
pursuant to Sections 3.04 or 3.05 of Exhibit 1 to this
Indenture, the principal amount of Bonds to be redeemed
pursuant to this subsection (a) on each subsequent
mandatory sinking fund Redemption Date for such Bonds
shall be reduced by an amount equal to the principal
amount of such Bonds retired by reason of such
redemption pursuant to Sections 3.04 or 3.05 of Exhibit
1 hereto divided by the number of mandatory sinking
fund Redemption Dates (including the Stated Maturity of
such Bonds) scheduled thereafter (subject to such
increase as shall be necessary so that the total
principal amount of Bonds to be redeemed on any such
sinking fund redemption date shall be an integral
multiple of $1,000); provided, however, that the entire
unpaid principal amount of the Outstanding Bonds shall
be paid not later than July 15, 2000. The Shipowner
shall, in accordance with Section 3.02(d) of Exhibit 1
hereto, promptly after each redemption pursuant to said
Section 3.04, furnish to the Secretary, the Indenture
Trustee and each Holder of an Obligation a revised
table of sinking fund payments reflecting the
reductions made pursuant to this subsection (a) as a
result of such redemption.
In lieu of making all or any part of any such
mandatory sinking fund redemption of Bonds, the
Shipowner may, at its option, receive credit for Bonds
not previously so credited or applied to reduce the
principal amount of Bonds Outstanding, (i) redeemed by
the Shipowner pursuant to the optional redemption
provision provided for in subsection (b) of this
Article, (ii) redeemed by the Shipowner pursuant to the
optional redemption provision provided for in
subsection (c) of this Article, or (iii) purchased or
acquired by the Shipowner (otherwise than by
redemption) and delivered to the Indenture Trustee for
cancellation pursuant to Section 2.13 of Exhibit 1
hereto. The Bonds so credited or applied shall be
credited or applied, as the case may be, by the
Indenture Trustee, at 100% of the principal amount
thereof. If the Shipowner shall elect to receive
credit or application as aforesaid in lieu of making
all or part of any mandatory sinking fund redemption,
it shall deliver to the Indenture Trustee, at least 40
<PAGE>
days but not more than 60 days prior to the due date
for such mandatory sinking fund redemption, a Request
(i) specifying the principal amount of Bonds so
optionally redeemed or otherwise acquired and so to be
credited or applied, as the case may be, and (ii)
stating that no such Bonds have theretofore been made
the basis of any such credit or application as
aforesaid and that none of such Obligations are subject
to the terms of any agreement or contract between the
Secretary, the Shipowner and/or any other person
restricting the Shipowner's right to apply any such
Obligations as a credit pursuant to the terms of this
subsection (a), together with the Bonds (uncancelled)
for which such credit or application is so requested
(unless such Bonds shall theretofore have been
delivered to the Indenture Trustee).
(b) Optional Sinking Fund Redemptions. At its
option, the Shipowner may redeem on any mandatory
sinking fund Redemption Date, at a redemption price
equal to 100% of the principal amount thereof, plus the
Make-Whole Amount determined for the mandatory sinking
fund Redemption Date with respect to the additional
principal amount to be redeemed, together with interest
accrued thereon to such date, an additional principal
amount of Bonds up to the principal amount of Bonds
required to be redeemed under the first paragraph of
subsection (a) of this Article on such date and before
any credit pursuant to the last paragraph of subsection
(a) of this Article. The right to make any such
optional sinking fund redemption shall not be
cumulative. If the Shipowner shall elect to make any
such optional sinking fund redemption, the Shipowner
shall, at least 40 days but not more than 60 days prior
to such mandatory sinking fund Redemption Date, deliver
to the Indenture Trustee a Request stating that the
Shipowner intends to exercise its right as set forth in
this subsection (b) to make such optional sinking fund
redemption and specifying the additional principal
amount of Bonds which the Shipowner intends to redeem
on such mandatory sinking fund Redemption Date. The
Request shall be accompanied by an Officer's
Certificate as to the estimated Make-Whole Amount due
in connection with such redemption (calculated as if
the date of such Request were the date of redemption),
setting forth the details of such computation. The
Indenture Trustee shall deliver such Officer's
Certificate to each Holder along with the notice of
redemption required by Section 3.08 of the general
provisions of the Indenture. Two Business Days prior
to such redemption, the Shipyard Owner shall deliver to
the Indenture Trustee and each Holder an Officer's
Certificate specifying the calculation of such Make-
Whole Amount as of the specified Redemption Date.
<PAGE>
(c) Optional Redemptions of Bonds at Premium. At
its option, the Shipowner may redeem the Bonds, in
whole or in part, at any time or from time to time, at
a redemption price equal to 100% of the principal
amount thereof, plus the Make-Whole Amount determined
for the Redemption Date with respect to the principal
amount to be redeemed, together with interest accrued
thereon to the date fixed for redemption. If the
Shipowner shall elect to make any such optional
redemption, the Shipowner shall, at least 40 days but
not more than 60 days prior to the date fixed for
redemption, deliver to the Indenture Trustee a Request
stating that the Shipowner intends to exercise its
rights as above set forth to make such optional
redemption and specifying the Redemption Date, and the
principal amount of Bonds which the Shipowner intends
to redeem on such date. The Request shall be
accompanied by an Officer's Certificate as to the
estimated Make-Whole Amount due in connection with such
redemption (calculated as if the date of such Request
were the date of redemption), setting forth the details
of such computation. The Indenture Trustee shall
deliver such Officer's Certificate to each Holder along
with the notice of redemption required by Section 3.08
of the general provisions of the Indenture. Two
Business Days prior to such redemption, the Shipowner
shall deliver to the Indenture Trustee and each Holder
an Officer's Certificate specifying the calculation of
such Make-Whole Amount as of the specified Redemption
Date."
(c) Concerning Article Fourth of the Special Provisions to
the Indenture. Article Fourth of the Special Provisions to the
Indenture is hereby deleted in its entirety.
(d) Concerning Article Fifth of the Special Provisions to
the Indenture. Article Fifth of the Special Provisions to the
Indenture is hereby renamed "Article Fourth".
(e) Concerning Exhibit 1 to the Original Indenture.
Exhibit 1 to the Original Indenture is hereby deleted in its
entirety and Exhibit 1 to Trust Indenture in the form attached
hereto as Exhibit 1 to this Third Supplemental Indenture is
inserted in lieu thereof.
(f) Concerning Exhibits 2-A and 2-B to the Original
Indenture. Exhibits 2-A and 2-B to the Original Indenture are
hereby deleted in their entirety and Exhibit 2 to Trust Indenture
in the form attached hereto as Exhibit 2 to this Third
Supplemental Indenture is inserted in lieu thereof.
(g) Concerning Article Sixth of the Special Provisions to
the Indenture. Article Sixth of the Special Provisions to the
Indenture is hereby renamed "Article Fifth" and is hereby deleted
in its entirety and the following is inserted in lieu thereof:
"The following additions, deletions and amendments are
hereby made to Exhibit 1 to this Indenture:
<PAGE>
(a) Concerning Section 2.04. The Shipowner and
the Indenture Trustee shall not enter into any
Supplemental Indenture, and the Indenture Trustee shall
not enter into any supplement to the Authorization
Agreement, pursuant to Section 2.04 of Exhibit 1 to
this Indenture, except to provide for the issuance of
additional Obligations of any series and Stated
Maturity theretofore issued or of one or more
additional series for the purpose of aiding in
financing or refinancing the construction,
reconstruction or reconditioning of the Vessel or to
refund Obligations issued for such purpose.
(b) Concerning Section 2.12. With respect to
clause (1) of the proviso to Section 2.12 of Exhibit 1
to the Indenture, a written agreement of indemnity
which is satisfactory in form and substance to the
Secretary, the Shipowner and the Indenture Trustee
executed and delivered by an institutional Holder
having a capital and surplus of at least $100,000,000
shall be considered sufficient indemnity to the
Secretary, the Shipowner and the Indenture Trustee in
connection with the execution, authentication and
delivery of any new Obligation or the making of any
payment as contemplated by said Section 2.12.
(c) Concerning Payment of the Bonds.
Notwithstanding anything to the contrary in Exhibit 1
hereto, the Bonds to be issued hereunder shall be
payable (other than in the case of a redemption in
whole of any of the Bonds or upon the maturity of any
of the Bonds) as to principal, premium, if any, and
interest, at an office or agency maintained by the
Shipowner for such purpose at the Corporate Trust
Office of the Indenture Trustee, or, at the option of
the Shipowner, as to payments of principal, premium, if
any, or interest by check mailed by such Corporate
Trust Office to the addresses of the Obligees as such
addresses shall appear in the Obligation Register,
subject in any event to the provisions hereof
concerning home office payment. Upon redemption in
whole of any of the Bonds or upon maturity of any of
the Bonds, the principal, premium, if any, and interest
due thereon shall be paid by check to the addresses of
the Obligees as such addresses shall appear in the
Obligation Register, subject to the provisions hereof
concerning home office payment, only upon surrender of
any such Bond, by mail or other means, to the Indenture
Trustee at the office of the Indenture Trustee set
forth herein. The Indenture Trustee agrees that within
30 days from the date of any payment of principal or
interest when the same shall become due and payable by
reason of maturity or redemption, a Responsible Officer
in the Corporate Trust Office of the Indenture Trustee
shall ascertain to his satisfaction that checks in
payment of such amounts have been mailed by such
<PAGE>
Corporate Trust Office to the addresses of the Obligees
as provided above, if payment is to be made by check
or, if payment is to be made by wire transfer or by
credit to an account maintained by the Obligee with the
Indenture Trustee, that such funds have been wired or
credited or, if payment is to be made at the Corporate
Trust Office, that funds were held by the Indenture
Trustee for such payment on the date payment was due.
The Indenture Trustee shall have no obligation to
determine whether such checks or payments were received
by the Obligees.
(d) Concerning Section 3.04. In the ninth line
of Section 3.04 of Exhibit 1 to this Indenture, delete
the words '45 days' and substitute in lieu thereof, the
words 'at least 30 but not more than 60 days'.
(e) Concerning Selection of Bonds to be Redeemed.
Notwithstanding the provisions of Section 3.07(b) of Exhibit
1 to this Indenture, (i) if less than all the Bonds are to
be optionally redeemed under any of the provisions contained
or referred to in Article Third hereof or Article III of
said Exhibit 1, the Indenture Trustee shall select for
redemption Bonds of the Stated Maturity or Stated Maturities
and (ii) if less than all the Bonds of a particular Stated
Maturity are to be redeemed under any provisions contained
or referred to in Article Third hereof or Article III of
Exhibit 1 to this Indenture, the Indenture Trustee shall
select the particular Bonds and/or portions ($1,000 or any
integral multiple thereof) of Bonds to be redeemed on the
Redemption Date by allocating the principal amount to be
redeemed among the Holders of Bonds of such Stated Maturity
in proportion to the respective principal amount of Bonds of
such Stated Maturity registered in their respective names.
(f) Concerning References to Section 3.09(b).
All cross-references to Section 3.09(b) made in Exhibit
1 hereto shall be deemed to refer to Section 3.10(b) of
Exhibit 1 hereto.
(g) Concerning Home Office Payment.
Notwithstanding any terms of this Indenture or the
Obligations to the contrary, the Shipowner may enter
into an agreement with any Holder of an Obligation
providing for payment to such Holder by certified or
official bank check or, at the request of such Holder,
by credit to an account maintained by the Holder with
the Indenture Trustee or by wire transfer of the
principal of and the premium, if any, and interest on
such Obligation or any part thereof at a place other
than the place or places specified in such Obligation
as the place for such payment, and for the making of
notation, if any, of such payment on such Obligation by
such Holder or by an agent of the Shipowner or of the
Indenture Trustee without presentation of such
Obligation. The Shipowner will furnish to the
Indenture Trustee a copy of each such agreement within
10 days prior to any payment date.
<PAGE>
The Indenture Trustee hereby consents to such agreement
contained in Section 7 of the Bond Purchase Agreement dated
as of February 2, 1995, between the Shipowner and the
purchasers named in Schedule 1 thereto and hereby
acknowledges receipt of a copy thereof.
(h) Concerning Section 6.09. In the fifth line
of Section 6.09 of Exhibit 1 to this Indenture, after
the word 'parties', and before the comma, add the
following phrase '(including the expiration of all
notice and cure periods provided for thereunder)'.
(i) Concerning Section 7.02. The amount
'$3,000,000' in Section 7.02 of Exhibit 1 hereto is
hereby deleted and there is substituted therefor the
amount '$25,000,000.'
(j) Concerning Section 10.01. Paragraph (2) of
Section 10.01 of Exhibit 1 to this Indenture is deleted
and the following substituted in lieu thereof:
'(2) to evidence the succession pursuant to
Article VIII of another corporation or entity
to the Shipowner or any assumption of all or
a part of the obligations of the Shipowner
hereunder;'.
(k) Concerning Notices. (1) Subject to the
provisions of Section 13.01 of Exhibit 1 to this
Indenture, any notice, request, demand, direction,
consent, waiver, approval or other communication to be
given to a party hereto or the Secretary shall be
deemed to have been sufficiently given or made when
addressed to:
The Indenture Trustee as: CHEMICAL BANK
450 West 33rd Street
New York, New York 10001
Attention:Corporate Trust
Department
The Shipowner as: AVONDALE INDUSTRIES, INC.
5100 River Road
Avondale, Louisiana 70094
Attention:Thomas M. Kitchen
The Secretary as: SECRETARY OF TRANSPORTATION
c/o Maritime Administrator
Department of Transportation
400 Seventh Street, SW
Washington, D.C. 20590
(2) The phrase 'in the manner provided in Section
6.04(c)' is hereby deleted wherever such phrase appears
in Sections 7.02(b) and 10.04, and substituted in lieu
thereof is the phrase 'by first class mail, postage
prepaid'."
<PAGE>
(h) Concerning Schedule A. Schedule A to the Indenture is
amended by (1) deleting the definitions for the terms "Series A
Bonds" and "Series B Bonds" in their entirety, (2) deleting the
definitions for the terms "Act", "Obligation" and "Secretary" and
inserting in lieu thereof the following:
"'Act' means the Merchant Marine Act, 1936, as
amended and in effect on the date of the Third
Supplemental Indenture.
'Obligation' means each, and 'Obligations' means
every, obligation of the Shipowner, including without
limitation the Bonds, bearing a Guarantee and
authenticated and delivered pursuant to the Indenture
and the Authorization Agreement.
'Secretary', means the Secretary of Transportation
or any official or body from time to time duly
authorized to perform the duties and functions under
Title XI of the Act (including the Maritime
Administrator, the Acting Maritime Administrator, and
to the extent so authorized, the Deputy Maritime
Administrator and other officials of the Maritime
Administration)."; and
(3) adding the following definitions:
"'Amendment No. 3 to Authorization Agreement'
means the Amendment, No. 3 to Authorization Agreement
dated as of February 9, 1995, between the Secretary and
the Indenture Trustee, as originally executed.
'Make-Whole Amount' means, with respect to any Bond, an
amount equal to the excess, if any, of the Discounted Value
of the Remaining Scheduled Payments with respect to the
Called Principal of such Bond over the amount of such Called
Principal, provided that the Make-Whole Amount may in no
event be less than zero. For the purposes of determining
the Make-Whole Amount, the following terms have the
following meanings:
'Called Principal' means, with respect to any
Bond, the principal of such Bond that is to be
optionally redeemed pursuant to Subsections (b) or (c)
of Article Third of the Special Provisions of the
Indenture.
'Discounted Value' means, with respect to the
Called Principal of any Bond, the amount obtained by
discounting all Remaining Scheduled Payments with
respect to such Called Principal from their respective
scheduled payment dates to the Redemption Date with
respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor
(applied on the same periodic basis as that on which
interest on the Bonds is payable) equal to the
Reinvestment Yield with respect to such Called
Principal.
<PAGE>
'Reinvestment Yield' means, with respect to the
Called Principal of any Bond, 35 basis points (.35
percent) over the yield to maturity implied by (i) the
yields reported, as of 10:00 A.M. (New York City time)
on the second Business Day preceding the Redemption
Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Access
Service (or such other display as may replace Page 678
on Telerate Access Service) for actively traded U.S.
Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of
such Redemption Date, or (ii) if such yields are not
reported as of such time or the yields reported as of
such time are not ascertainable, the Treasury Constant
Maturity Series Yields reported, for the latest day for
which such yields have been so reported as of the
second Business Day preceding the Redemption Date with
respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to
the Remaining Average Life of such Called Principal as
of such Redemption Date. Such implied yield will be
determined, if necessary, by (a) converting U.S.
Treasury bill quotations to bond-equivalent yields in
accordance with accepted financial practice and
(b) interpolating linearly between (1) the actively
traded U.S. Treasury security with the duration closest
to and greater than the Remaining Average Life and
(2) the actively traded U.S. Treasury security with the
duration closest to and less than the Remaining Average
Life.
'Remaining Average Life' means, with respect to
any Called Principal, the number of years (calculated
to the nearest one-twelfth year) obtained by dividing
(i) such Called Principal into (ii) the sum of the
products obtained by multiplying (a) the principal
component of each Remaining Scheduled Payment with
respect to such Called Principal by (b) the number of
years (calculated to the nearest one-twelfth year) that
will elapse between the Redemption Date with respect to
such Called Principal and the scheduled payment date of
such Remaining Scheduled Payment.
'Remaining Scheduled Payments' means, with respect
to the Called Principal of any Bond, all payments of
such Called Principal and interest thereon that would
be due after the Redemption Date with respect to such
Called Principal if no payment of such Called Principal
were made prior to its scheduled payment date, provided
that if such Redemption Date is not a date on which
interest payments are due to be made under the terms of
the Bonds, then the amount of the next succeeding
scheduled interest payment will be reduced by the
amount of interest accrued to such Redemption Date and
required to be paid on such Redemption Date pursuant to
Subsections (b) or (c) of Article Third of the Special
Provisions of the Indenture.
<PAGE>
'Original Indenture' means the Trust Indenture dated
October 21, 1975 between the Shipowner and the Indenture
Trustee, as originally executed.
'Secretary's Supplemental Indenture' means a
supplemental indenture evidencing the succession
pursuant to Section 6.09 of Exhibit 1 to the Indenture
of the Secretary to the Shipowner and the assumption by
the Secretary of the Obligations of the Shipowner under
the Indenture.
'Third Supplemental Indenture' means the Third
Supplemental Indenture dated as of February 9, 1995,
between the Shipowner and the Indenture Trustee."
ARTICLE SECOND
MISCELLANEOUS
(a) The Indenture Trustee accepts the modifications of the
Indenture hereby effected only upon the terms and conditions set
forth in the Original Indenture as supplemented and amended
through the date hereof and by the Third Supplemental Indenture.
Without limiting the generality of the foregoing, the Indenture
Trustee shall not be responsible for the correctness of the
recitals herein contained, which shall be taken as the statements
of the Shipowner and the Indenture Trustee makes no
representations as to the validity or the sufficiency of this
Third Supplemental Indenture.
(b) Except as otherwise expressly provided herein or unless
the context otherwise requires, all terms used herein and defined
in Schedule A to the Indenture shall have the respective meanings
specified in said Schedule A.
(c) This Third Supplemental Indenture may be executed in
any number of counterparts, each of which, when so executed,
shall be deemed to be an original, but such counterparts shall
together constitute but one and the same instrument.
(d) This Third Supplemental Indenture shall be construed
with and as part of the Indenture.
(e) In the event of any conflict in, or inconsistency
between the Special Provisions of the Indenture and Exhibit 1 to
the Indenture, said Special Provisions shall control.
(f) The Indenture, as amended and supplemented by this
Third Supplemental Indenture, is in all respects confirmed and
shall remain in full force and effect.
(g) The Indenture, as amended and supplemented by this
Third Supplemental Indenture, and each Obligation shall be
governed by the laws of the State of New York and, to the extent
applicable, the laws of the United States.
[Remainder of page intentionally left blank]
<PAGE>
-1-
IN WITNESS WHEREOF, this Third Supplemental Indenture has
been duly executed and delivered as of the day and year first
above written.
AVONDALE INDUSTRIES, INC.,
as Shipowner
BY:/s/ Thomas M. Kitchen
---------------------
Thomas M. Kitchen, Vice
President
(SEAL)
Attest:
By:/s/ Bruce L. Hicks
------------------
Bruce L. Hicks, Assistant Secretary
CHEMICAL BANK,
as Indenture Trustee
BY:/s/ Gregory McFarlane
-----------------
Gregory K. McFarlane,
Vice President
(SEAL)
Attest:
By: (Signature Unreadable)
<PAGE>
-2-
A C K N O W L E D G E M E N T
DISTRICT OF COLUMBIA
CITY OF WASHINGTON
On this the 9th day of February, 1995, before me personally
appeared Thomas M. Kitchen, to me known, who, being by me duly
sworn, did depose and say that he is Vice President of Avondale
Industries, Inc., a Louisiana corporation, one of the parties
described in and which executed the foregoing instrument; and
that he executed the same for the purposes and consideration
therein expressed and in the capacity therein stated.
/s/ Linda E. Waltz
------------------
Notary Public
(Notarial Stamp and Seal)
My Commission expires: My commission expires April 30, 1999
STATE OF NEW YORK
COUNTY OF NEW YORK
On this the 9th day of February, 1995, before me personally
appeared Gregory K. McFarlane, to me known, who, being by me duly
sworn, did depose and say that he is a Vice President of Chemical
Bank, the New York banking corporation described in and which
executed the foregoing instrument; and that he signed his name
thereto by like authority.
/s/ Annabelle DeLuca
-----------------
Annabelle DeLuca
Notary Public
(Notarial Stamp and Seal)
My Commission expires: 7/15/95
<PAGE>
2000 Series
CONSENT OF THE UNITED STATES OF AMERICA
TO THE THIRD SUPPLEMENTAL INDENTURE
Reference is made to the foregoing Third Supplemental
Indenture (the "Third Supplemental Indenture") dated as of
February 9, 1995, between Avondale Industries, Inc. (the
"Shipowner") and Chemical Bank (successor in interest to
Manufacturers Hanover Trust Company), Indenture Trustee,
supplementing a Trust Indenture dated October 21, 1975 (said
Trust Indenture, as supplemented to the date hereof herein called
the "Indenture").
The United States of America, represented by the Secretary
of Transportation, acting by and through the Maritime
Administrator hereby:
(1) Consents to the issuance of the Obligations
which are described in the Third Supplemental
Indenture;
(2) Approves the form of the Third Supplemental
Indenture; and
(3) Consents to the execution and delivery of the
Third Supplemental Indenture by the Shipowner and the Indenture
Trustee.
Capitalized terms used herein without definition shall have
the respective meanings set forth in Schedule A to the Indenture.
Dated:As of February 9, 1995
UNITED STATES OF AMERICA
SECRETARY OF TRANSPORTATION
BY: MARITIME ADMINISTRATOR
BY: /s/ Joel C. Richard
-------------------
Joel C. Richard
Secretary
Maritime Administration
[Seal]
Attest:
By: /s/ Sarah J. Johnson
--------------------
Sarah J. Johnson
Assistant Secretary
Maritime Administration
<PAGE>
4.3(b)
AMENDMENT NO. 5
TO
TITLE XI RESERVE FUND
AND FINANCIAL AGREEMENT
CONTRACT NO.
MA-8085
Contract No. MA-8085
<PAGE>
4.3(b) AMENDMENT NO. 5
TO
TITLE XI
RESERVE FUND AND FINANCIAL AGREEMENT
This Amendment No. 5 to Title XI Reserve Fund and Financial
Agreement ("Amendment No. 5") dated February 9, 1995, between
Avondale Industries, Inc., a Louisiana corporation (the
"Company"), and the United States of America, represented by the
Secretary of Transportation, acting by and through the Maritime
Administrator (successor by operation of law to the Secretary of
Commerce, acting by and through the Assistant Secretary of
Commerce for Maritime Affairs) (the "Secretary"), pursuant to the
provisions of Title XI of the Merchant Marine Act, 1936, as
amended.
RECITALS
A. The Company and the Secretary entered into the Title XI
Reserve Fund and Financial Agreement, dated October 21, 1975 (the
"Original Agreement"), in connection with the financing of the
vessel named AVONDALE DRYDOCK;
B. The Original Agreement was amended by Assumption
Agreement and Amendment No. 1 to Title XI Reserve Fund and
Financial Agreement ("Amendment No. 1") on September 16, 1985, by
Amendment No. 2 to Title XI Reserve Fund and Financial Agreement
on March 27, 1987 ("Amendment No. 2"), by Master Assumption
Agreement, Supplemental Indenture No. 2 and Amendment to Title XI
Financing Agreements on March 13, 1991 ("Amendment No. 3") and by
Amendment to Title XI Reserve Fund and Financial Agreement dated
as of April __, 1993 ("Amendment No. 4"; and, together with the
Original Agreement, Amendment No. 1, Amendment No. 2 and
Amendment No. 3 herein called the "Agreement"); and,
C. The Company desires to amend the Agreement at the
request of the Secretary as a condition to the Secretary's
consent to the refinance by the Company of its United States
Government Guaranteed Ship Financing Bonds, Series B.
NOW, THEREFORE, in consideration of the premises and other
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE FIRST
ADDITIONS, DELETIONS AND AMENDMENTS
1. Concerning Article First of the Special Provisions of
the Agreement. Article First of the Special Provisions of the
Agreement is hereby amended by deleting the "and" at the end of
<PAGE>
subparagraph (2); replacing "Shipowner." at the end of
subparagraph (3) with "Avondale Industries, Inc., a Louisiana
corporation;"; and adding the following clauses at the end
thereof:
"(4) The capitalized terms used herein but
otherwise not defined herein shall have the respective
meanings ascribed to them in Schedule X to the Security
Agreement, Contract No. MA-8083, dated October 21,
1975, as amended through the date hereof and from time
to time; and
(5) Capitalized terms used herein which are
defined in the General Provisions attached hereto as
Exhibit 1 shall have the respective meanings stated in
such General Provisions unless otherwise defined
pursuant to subparagraph 4 of this Article First."
2. Concerning Article Second of the Special Provisions of
the Agreement. Article Second of the Special Provisions of the
Agreement is hereby amended by adding the following sentence to
the end thereof:
"Where a provision of the General Provisions has been
modified or superseded by a provision of the Special
Provisions, all references in the General Provisions to the
modified or superseded sections shall be deemed to refer to
such sections as so modified or superseded."
3. Concerning Article Third of the Special Provisions of
the Agreement. Article Third of the Special Provisions to the
Agreement is hereby deleted in its entirety and the following is
inserted in lieu thereof:
"The following additions, deletions and amendments are
hereby made to Exhibit 1 hereto:
(a) Concerning Section 1 of Exhibit 1:
(1) Concerning Subsection 1(d). Subsection 1(d)
of Exhibit 1 is amended by adding after the word
'entity,' the phrase, 'except for guarantees of the
obligations of American Heavy Lift Shipping Company,'.
(b) Concerning Section 2 of Exhibit 1:
(1) Concerning Subsection 2(a). Subsection 2(a)
of Exhibit 1 hereto is amended by adding the following
sentence at the end of thereof:
'Wherever reference is made in this
Exhibit 1 to Title XI Reserve Fund and
Financial Agreement to the Title XI
Reserve Fund special joint depository
account, such reference shall be changed
to a separate depository account held by
the Title XI Reserve Fund Depository-
Bailee, as bailee, in the name of
"Avondale Industries, Inc., entirely as
<PAGE>
collateral for the United States of
America, represented by the Secretary of
Transportation acting by and through the
Maritime Administrator (the "Secretary")
and held by the Depository-Bailee solely
and exclusively for the Secretary.'
(c) Concerning Section 8 of Exhibit 1. Section 8 is
amended by adding the following paragraph thereto:
'All amounts held by the Title XI
Reserve Fund Depository, at whatever
time, pursuant to the provisions of the
Depository Agreement, whether money,
instruments, negotiable documents,
chattel paper, proceeds thereof, or
otherwise, shall constitute and be held
by said Depository-Bailee (as bailee)
solely and exclusively as bailee for the
Secretary as security for the payment
and performance of any and all of the
Company's Secretary's Notes.'
(d) Concerning Section 13 of Exhibit 1:
(1) Concerning Subsection 13(a). Pursuant to
Subsection 13(a), the Company hereby certifies that it
meets the conditions to make the election contemplated
by Section 2(b)(2)(D) of Exhibit 1 hereto and elects to
be governed by Subsections 13(b) and (c) of Exhibit 1
hereto, as amended herein, and the Secretary consents
hereby to such election. From the date hereof, the
covenants set forth in Section 12 of Exhibit 1 hereto
shall not apply to the Company and shall have no
applicability to the Company under any circumstances
whatsoever.
(2) Concerning Subsection 13(b). The covenants
in Subsection 13(b) will not apply if the transaction
or event contemplated by the covenant occurs within the
Company's consolidated group.
(3) Concerning Subsection 13(b)(9). The
provisions of Subsection 13(b)(9) are hereby amended so
as to add the phrase, 'except for leases with respect
to equipment leased or rented in the normal course of
business,' after the parenthetical phrase '(having a
term of six months or more)' and provide that the
aggregate annual payments of charter hire and rent for
which the Company may become liable (directly or
indirectly) under charters and leases (having a term of
six months or more), except for leases with respect to
equipment leased or rented in the normal course of
business, shall not exceed $4,000,000.
<PAGE>
(4) Concerning Subsection 13 (b)(12). Subsection
13(b)(12) of Exhibit 1 hereto is amended by deleting
the words 'or have' appearing at the beginning thereof.
(5) Concerning Subsection 13(b)(13). Subsection
13(b)(13) of Exhibit 1 hereto is amended by deleting
the word 'and' before the number '(ii)' and
substituting a comma therefor, and, after the last word
thereof, namely, 'exists', adding a comma and the
phrase 'and (iii) loans, mortgages, liens, charges,
security interests, encumbrances and indebtedness
approved, consented to or permitted by the Secretary,
and the refinancing or renewal thereof on terms and
conditions substantially similar to those approved,
consented to or permitted by the Secretary (with ten
(10) days written notice to the Secretary prior to the
closing of such refinancing or renewal), whether (xx)
prior to, as of the date of, or after the applicability
of this Subsection 13(b) to the Company or (yy)
permitted under Subsection 13(c) hereof prior to the
applicability of this Subsection 13(b) to the Company.'
(6) Concerning Subsection 13(c)(1). Subsection
13(c)(1) of Exhibit 1 hereto is deleted in its entirety
and the following is substituted therefor:
'(1) Make any distribution of
earnings, except as may be
permitted by (A), (B) or (C) below:
(A) From retained earnings in
an amount specified in subparagraph
(C) below provided that in the
fiscal year in which the
distribution of earnings is made
there is no operating loss to the
date of such payment of such
distribution of earnings and (i)
there was no operating loss in the
immediately preceding three fiscal
years, or (ii) there was a one-year
operating loss during the
immediately preceding three fiscal
years, but (x) such loss was not in
the immediately preceding fiscal
year, and (y) there was positive
net income for the three year
period;
(B) If distributions of
earnings may not be made under (A)
above, a distribution can be made
in an amount equal to the total
operating net income for the
immediately preceding three fiscal
year period, provided that (i)
there were no two successive years
of operating losses, (ii) in the
<PAGE>
fiscal year in which such
distribution is made there is no
operating loss to the date of such
distribution, and (iii) the
distribution or earnings made would
not exceed an amount specified in
subparagraph (C) below;
(C) Distributions of earnings
may be made from earnings of prior
years in an aggregate amount equal
to (i) 40 percent of the Company's
total net income after tax for each
of the prior years, less any
distributions that were made in
such years; or (ii) the aggregate
of the Company's total net income
after tax for such prior years
provided that after making such
distribution, the Company's Long
Term Debt does not exceed its Net
Worth. In computing net income for
purposes of this subparagraph (C),
extraordinary gains, such as gains
from the sale of assets, shall be
excluded;'
(7) Concerning Subsection 13(c)(3). The
provisions of Subsection 13(c)(3) of Exhibit 1 hereto
are hereby amended and restated in their entirety to
read as follows:
'(i) Sell, mortgage, transfer or
demise charter the Vessel or any
assets (except for any assets in
inventory and/or the proceeds
thereof) to any non-Affiliate
except as permitted in Subsection
13(c)(7) below; or (ii) sell,
mortgage, transfer or demise
charter the Vessel or any assets
(except for any assets in inventory
and/or the proceeds thereof) to an
Affiliate unless such transaction
is (a) at a fair market value as
determined by an independent
appraiser acceptable to the
Secretary, and, (b) a total cash
transaction or, in the case of a
charter, the charter payments are
cash payments; and (iii) for the
purposes of this section, the term
'Affiliate' shall also include any
officer, director or shareholder of
the Company.'
<PAGE>
(8) Concerning Subsection 13(c)(5). In
Subsection 13(c)(5), insert '(i)' after the word
'except' the last time such word appears; substitute a
comma for the semicolon at the end of the clause; and
add '(ii) for guarantees of the obligations of American
Heavy Lift Shipping Company, (iii) for any wholly owned
subsidiary in the Company's consolidated group, or (iv)
as to work or the performance of work by the Company's
subcontractors, suppliers or vendors with respect to
the sale of products or services by the Company to
third parties.'
(9) Concerning Subsection 13(c)(6). At the end
of Subsection 13(c)(6), add the phrase, 'except if the
primary business activity of the Company remains
shipping and/or shipbuilding.'
(10) Concerning Subsection 13(c)(7). The
provisions of Subsection 13(c)(7) of Exhibit 1 hereto
are hereby amended and restated in their entirety to
read as follows:
'Enter into any merger or
consolidation or convey, sell,
lease, mortgage, grant a security
interest in or otherwise transfer
or dispose of any substantial
portion of its properties or
assets, except for any assets in
inventory and/or the proceeds
thereof, provided, however, the
Company shall not be deemed to have
conveyed, sold, leased, mortgaged,
granted a security interest in or
otherwise transferred or disposed
of a substantial portion of its
properties or assets if (i) the Net
Book Value (defined as the original
book value of an asset less
depreciation calculated on a
straight line basis over its useful
life) of the aggregate of all of
the assets (except for any assets
in inventory and/or the proceeds
thereof) in which a security
interest has been granted, or which
have been conveyed, sold, leased,
mortgaged or otherwise transferred
or disposed of (and with respect to
assets subject to the restrictions
of this Subsection, which assets
are leased, mortgaged, or a
security interest granted therein,
excluding assets leased, mortgaged
or so encumbered in a prior 12
<PAGE>
consecutive calendar month period
or undertaken in connection with a
refinancing or renewal of the
indebtedness secured thereby on
terms and conditions substantially
similar to those terms and
conditions of such prior financing,
with ten (10) days written notice
to the Secretary prior to the
closing of such refinancing or
renewal) by the Company during any
period of 12 consecutive calendar
months does not exceed 10 percent
of the total Net Book Value of all
of the Company's assets (except for
any assets in inventory and/or the
proceeds thereof, and, further, the
assets which are the basis for the
calculation of the 10 percent of
the Net Book Value are those
assets, except for any assets in
inventory and/or the proceeds
thereof, indicated on the most
recent audited annual financial
statement required to be submitted
pursuant to Section 14 hereof prior
to the date of the sale); (ii) the
Company retains the proceeds of (x)
the conveyance, sale, lease, or
other transfer or disposition of
assets (other than inventory and/or
the proceeds thereof) or (y) any
indebtedness or obligations secured
by the mortgage, granting of a
security interest in or other
similar transfer or disposition of
assets (other than inventory and/or
the proceeds thereof) for use in
accordance with the Company's
regular business activities,
including without limitation, the
repayment of indebtedness of the
Company, and (iii) the sale is not
otherwise prohibited by subsection
13(c)(3) above. Notwithstanding
any other provision of this
subsection 13(c)(7), the Company
shall not consummate such sale
without the prior written consent
of the Secretary if the Company has
not, prior to the time of such
sale, submitted to the Secretary
the financial statement referred to
in (i) of this subsection, and any
attempt to so consummate such sale
absent such approval shall be null
and void ab initio.'"
<PAGE>
4. Concerning Attachment A to the Special Provisions of
the Agreement. Attachment A to the Special Provisions of the
Agreement is hereby deleted in its entirety and Attachment A to
Title XI Reserve Fund and Financial Agreement in the form
attached hereto as Exhibit 1 to this Amendment No. 5 is inserted
in lieu thereof. The Agreement, as amended by this Amendment No.
5, shall apply to the Vessel described in Attachment A to Exhibit
1 attached hereto. Any allocable financial requirements or other
specific requirements relating to the Vessel shall be so
indicated in Attachment A. It is the intention of the Agreement,
as amended by this Amendment No. 5, that it remain in effect so
long as the Company owns the Vessel with Title XI guaranteed
obligations outstanding relating to such Vessel.
ARTICLE SECOND
COUNTERPARTS
This Amendment No. 5 may be executed in any number of
counterparts. Each of said counterparts shall be deemed to be an
original, but together shall constitute but one and the same
instrument.
ARTICLE THIRD
CONFLICT
In the event of any conflict in or inconsistency between the
Special Provisions of the Agreement and Exhibit 1 to the
Agreement, said Special Provisions shall control.
ARTICLE FOURTH
CONCERNING REGULATIONS
Pursuant to 46 C.F.R S298.43 in effect on the date hereof,
the regulations set forth in 46 C.F.R. S298.1, et seq. (the
"Regulations") in effect on the date hereof are fully applicable
herein; provided, however, that to the extent the Secretary has
authority to waive such Regulations, or any of them, and has
waived them herein, they are hereby waived; and provided,
further, that any amendment to said Regulations or any regulation
or regulations hereafter promulgated or issued shall not be
applicable herein. The Secretary has not used any of his
authority under 46 C.F.R. S298.39 to exempt the Company from any
requirement of the Regulations.
<PAGE>
ARTICLE FIFTH
AMENDMENT
The Agreement, as amended and supplemented by this Amendment
No. 5, is in all respects confirmed and shall remain in full
force and effect.
IN WITNESS WHEREOF, this Amendment No. 5 has been executed
by the parties hereto on the day and year first above written.
AVONDALE INDUSTRIES, INC., as Shipowner
(SEAL) By: /s/ Thomas M. Kitchen
---------------------
Thomas M. Kitchen, Vice President
ATTEST:
/s/ Bruce Hicks
---------------
Bruce Hicks
Assistant Secretary
UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
BY: MARITIME ADMINISTRATOR
(SEAL) By: /s/ Joel C. Richard
-------------------
Joel C. Richard
Secretary, Maritime Administration
ATTEST:
/s/ Sarah J. Johnson
--------------------
Sarah J. Johnson
Assistant Secretary
Maritime Administration
<PAGE>
4.3(c)
EXHIBIT 2
TO
THIRD SUPPLEMENTAL
INDENTURE
S P E C I M E N B O N D
$_______________ No. ____
UNITED STATES GOVERNMENT GUARANTEED
SHIP FINANCING BOND - 2000 SERIES
7.86% Sinking Fund Bond due July 15, 2000
Issued by
AVONDALE INDUSTRIES, INC.
Principal and interest guaranteed under
Title XI of the Merchant Marine Act, 1936, as amended.
AVONDALE INDUSTRIES, INC., a Louisiana corporation, (herein
called the "Shipowner"), FOR VALUE RECEIVED, promises to pay to
_________________________
_________________________________________________________________,
or registered assigns, the principal sum of
__________________________________________________________DOLLARS
on July 15, 2000 and to pay interest, semi-annually on January 15
and July 15 of each year, commencing on July 15, 1995, on the
unpaid principal amount of this Bond at the rate of 7.86% per
annum (calculated on the basis of a 360-day year of twelve 30-day
months) from the interest payment date referred to above next
preceding the date of this Bond to which interest on the Bonds
has been paid (unless the date hereof is the date to which
interest on the Bonds has been paid, in which case from the date
of this Bond), or, if no interest has been paid on the Bonds
since the original issue date (as defined in the Indenture
hereinafter mentioned) of this Bond, from such original issue
date, until payment of said principal sum has been made or duly
provided for, and at the same rate per annum on any overdue
principal.
The principal of and the interest on this Bond, as well as
any premium hereon in case of certain redemptions hereof prior to
maturity, are payable to the registered owner hereof at the
Corporate Trust Office of the Indenture Trustee hereinafter
referred to, Chemical Bank, 450 West 33rd Street, New York, New
York 10001, or at the offices or agencies which may be maintained
<PAGE>
from time to time by the Shipowner for such purposes 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 therein; provided, that principal, premium, if any, or
interest may be paid at the option of the Shipowner (other than
in the case of a redemption in whole of this Bond or upon the
maturity of this Bond) by check mailed to the address of the
registered owner hereof as such address shall appear in the
Obligation Register of said Indenture Trustee, and provided
further, that the Shipowner and the registered owner hereof may
enter into other arrangements as to payment in accordance with
the Special Provisions of the Indenture. Prior to any sale,
assignment or transfer of this Bond by the registered owner
hereof in respect of which a principal payment has been made, the
registered owner hereof shall either: (i) cause a proper
notation of all such principal payments to be made hereon, or
(ii) present this Bond to the Indenture Trustee so that it may
make such notation. Upon redemption in whole of this Bond or
upon maturity of this Bond, the principal, premium, if any, and
interest due thereon shall be paid by check to the address of the
registered owner hereof as such address shall appear in the
Obligation Register, subject to the provisions of the Special
Provisions of the Indenture concerning home office payment, only
upon surrender of this Bond, by mail or other means, to the
Indenture Trustee at the office of the Indenture Trustee set
forth in the Special Provisions of the Indenture.
This Bond is one of an issue of bonds of the Shipowner of
$4,268,000 aggregate principal amount of sinking fund bonds
designated as its "United States Government Guaranteed Ship
Financing Bonds, 2000 Series" as issued pursuant to the Third
Supplemental Indenture to Trust Indenture dated as of February 9,
1995 (the "Third Supplemental Indenture") which supplemented a
Trust Indenture dated October 21, 1975 (said Trust Indenture, as
supplemented by Assumption Agreement and Supplemental Indenture
dated September 16, 1985, Master Assumption Agreement
Supplemental Indenture No. 2 and Amendment to Title XI Financing
Documents dated March 13, 1991 and the Third Supplemental
Indenture and as the same may be further amended, modified or
supplemented from time to time as permitted thereunder, herein
called the "Indenture"), between the Shipowner and Chemical Bank
(successor by merger to Manufacturers Hanover Trust Company), a
New York corporation, as Indenture Trustee (said Indenture
Trustee and its successors under the Indenture, herein called the
"Indenture Trustee"), for the purpose of refinancing, through a
redemption, the outstanding United States Government Guaranteed
Ship Financing Bonds, Series B issued on October 21, 1975
("Original Bonds"). Reference is hereby made to the Indenture
for a definition of certain terms used herein and a description
of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Shipowner and the Indenture Trustee
and the rights and limitations of rights thereunder of the
Holders of the Bonds.
<PAGE>
In accordance with the terms of an Authorization Agreement
dated October 21, 1975, as supplemented by Supplement No. 1 to
Authorization Agreement dated as of September 16, 1985, Master
Assumption Agreement, Supplemental Indenture No. 2 and Amendment
to Title XI Financing Agreements dated March 13, 1991, and
Amendment No. 3 to Authorization Agreement dated the date hereof
(said Authorization Agreement, as so supplemented and amended and
as the same may be further amended, modified or supplemented from
time to time as permitted thereunder, herein called the
"Authorization Agreement") between the United States of America,
represented by the Secretary of Transportation, acting by and
through the Maritime Administrator, successor by operation of law
to the Secretary of Commerce, acting by and through the Assistant
Secretary of Commerce for Maritime Affairs (herein called the
"Secretary"), and the Indenture Trustee and by endorsement of the
guarantee of the United States of America (herein collectively
called the "Guarantees") on each of the Bonds and the
authentication and delivery of the Guarantees by the Indenture
Trustee, all pursuant to Title XI of the Merchant Marine Act,
1936, as amended and in effect on February 9, 1995 (herein called
the "Act"), the Bonds are guaranteed by the United States of
America as provided in the Authorization Agreement and in the
Guarantees endorsed thereon. Reference is hereby made to the
Authorization Agreement for a description of the rights,
limitations of rights, obligations, duties and immunities
thereunder of the Secretary and the Indenture Trustee and the
rights and limitations of rights of the Holders of the Bonds.
Section 1103(d) of Title XI of the Act provides that:
"The full faith and credit of the United States is
pledged to the payment of all guarantees made under
this title with respect to both principal and interest,
including interest, as may be provided for in the
guarantee, accruing between the date of default under a
guaranteed obligation and the payment in full of the
guarantee."
If an Indenture Default (defined in Section 6.01 of Exhibit
1 to the Indenture as a Payment Default or the giving of a
Secretary's Notice) shall have occurred and be continuing, the
Indenture Trustee, as provided in the Indenture, shall, not later
than 60 days from the date of such Indenture Default, demand
payment by the Secretary of the Guarantees, whereupon the entire
unpaid principal amount of the Outstanding Bonds and all unpaid
interest thereon shall become due and payable on the first to
occur of the date which is 30 days from the date of such demand
or the date on which the Secretary pays the Guarantees. If no
demand for payment of the Guarantees shall have been made by the
Indenture Trustee on or before the 30th day following an
Indenture Default, the Holder of any Outstanding Bond may, in the
manner provided in the Indenture, make such demand in place of
the Indenture Trustee. In the event of an Indenture Default of
which the Secretary has actual knowledge, the Secretary, as
provided in the Authorization Agreement, will publish notice in
the authorized newspapers, which shall include "The Wall Street
Journal" (all editions) and "The Journal of Commerce", of the
<PAGE>
occurrence of such Indenture Default within 30 days from the date
of such Indenture Default unless demand for payment under the
Guarantees shall previously have been made by the Indenture
Trustee, but any failure to publish such notice or any defect
therein shall not affect in any way any rights of the Indenture
Trustee or any Holder of a Bond in respect of such Indenture
Default.
Within 30 days from the date of any demand for payment of
the Guarantees, the Secretary shall pay to the Indenture Trustee,
as agent and attorney-in-fact for the Holders of the Outstanding
Bonds (including this Bond), all the unpaid interest to the date
of such payment on, and the unpaid balance of the principal of
such Bonds in full, in cash; provided that, in the case of a
demand made as a result of a Payment Default, the Secretary shall
not be required to make any such payment if within such 30-day
period (and prior to any payment of the Guarantees by the
Secretary) the Secretary finds either that there was no Payment
Default or that such Payment Default was remedied prior to the
demand for payment of the Guarantees, in which event the
Guarantees shall continue in full force and effect.
The Holder of this Bond, by the purchase and acceptance
hereof, hereby irrevocably appoints the Indenture Trustee and
each other Holder of any Outstanding Bond as agent and attorney-
in-fact for the purpose of making any demand for payment of the
Guarantees and (in the case of the Indenture Trustee) of
receiving and distributing such payment; provided that no action
or failure to act by the Indenture Trustee shall affect the right
of the Holder of this Bond to take any action whatsoever
permitted by law and not in violation of the terms of this Bond
or of the Indenture.
In the event of (a) a default, continued for 25 days, in the
payment of the principal of or interest on the Bonds (including
this Bond) when due or (b) any default under a mortgage, loan
agreement or other security agreement between the Secretary, the
Shipowner and any other parties (including the expiration of all
notice and cure periods provided for thereunder), the Secretary
shall have the right to and may, in its discretion by written
notice given to the Indenture Trustee on or after said 25-day
period or after such default but prior to receipt by the
Secretary of a demand in accordance with the Indenture for
payment under the Guarantees, assume all of the rights and
obligations of the Shipowner under the Indenture and the Bonds
and, if such default relates to the payment of the principal of
and interest on the Bonds, make all payments then in default
under the Bonds.
Any amount payable by the Secretary under the Guarantees
shall not be subject to any claim or defense of the United States
of America, the Secretary, or others, whether by way of
counterclaim, set-off, reduction or otherwise. Further, the
Holder of this Bond shall have no right, title or interest in any
collateral or security given by the Shipowner to the Secretary.
<PAGE>
After payment of the Guarantees by the Secretary to the
Indenture Trustee, this Bond (1) if it has not then been
surrendered for cancellation or cancelled, shall represent only
the right to receive payment in cash of an amount (less the
amount, if any, required to be withheld in respect of transfer or
other taxes on payments to the Holder of this Bond) equal to the
unpaid principal amount hereof and the unpaid interest accrued
hereon to the date on which the Secretary shall have paid the
Guarantees in full in cash to the Indenture Trustee, (2) shall
otherwise no longer constitute or represent an obligation of the
Shipowner, and (3) shall not be entitled to any other rights or
benefits provided in the Indenture, subject to Section 6.08 of
the Indenture.
The Bonds (including this Bond) may be redeemed upon the
terms and conditions provided in the Indenture, in whole or in
part, at the option of the Shipowner, at any time or from time to
time upon at least 30 and not more than 60 days' prior notice
given as provided in the Indenture, at a redemption price equal
to 100% of the principal amount thereof, plus the Make-Whole
Amount (as defined in the Indenture) determined for the
Redemption Date with respect to the principal amount to be
redeemed, together with the interest accrued thereon to the date
fixed for redemption.
The Bonds (including this Bond) are also subject to
redemption, upon the terms and conditions provided in the
Indenture and upon like notice , through the operation of a
mandatory sinking fund providing for the redemption on July 15,
1995, and on each January 15 and July 15 thereafter to and
including January 15, 2000, at 100% of the principal amount
thereof plus interest accrued thereon to such date, of a
principal amount of such Bonds equal to $388,000 and on July 15,
2000, the entire unpaid principal amount of the Outstanding Bonds
shall be paid in full, together with all interest accrued thereon
to such date, provided, however, that notwithstanding the
foregoing provisions of this paragraph, that in case the
principal amount of Outstanding Bonds shall be reduced by reason
of any redemption described in the next succeeding paragraph, the
principal amount of Bonds to be redeemed through the operation of
the mandatory sinking fund on each subsequent mandatory sinking
fund redemption date shall be subject to reduction as provided in
the Indenture. In lieu of making all or any part of any such
mandatory sinking fund redemption, the Shipowner may, at its
option, receive credit for Bonds (not previously credited against
a mandatory sinking fund payment or which the Shipowner has
advised the Indenture Trustee have been credited with respect to
a determination by the Secretary as to whether or not the
principal amount of Outstanding Obligations exceeds 75% of the
depreciated actual cost or actual cost, as the case may be, of
the Vessel, as determined by the Secretary under Section
1104A(b)(2) of the Act) (i) redeemed pursuant to the optional
sinking fund redemption provided for in the last sentence of this
paragraph, (ii) redeemed by the Shipowner pursuant to the
optional redemption at a premium referred to above, or (iii)
purchased or acquired by the Shipowner otherwise than by
<PAGE>
redemption. Bonds so credited shall be credited by the Indenture
Trustee at 100% of the principal amount thereof. In addition to
any such mandatory sinking fund redemption, the Shipowner may, at
its option, redeem on the due date of any such mandatory sinking
fund redemption, at 100% of the principal amount thereof , plus
the Make-Whole Amount determined for the Redemption Date with
respect to the additional principal amount to be redeemed, plus
interest accrued thereon to such date, an additional principal
amount of Bonds up to the principal amount of Bonds required to
be redeemed pursuant to such mandatory sinking fund requirement
on such date and before any credit pursuant to the preceding
sentence; provided that the right to make any such optional
sinking fund redemption shall not be cumulative.
The Bonds (including this Bond) are also subject to
redemption, upon the terms and conditions provided in the
Indenture, in whole or in part, at 100% of the principal amount
thereof plus interest accrued thereon to the date of redemption,
upon at least 30 and not more than 60 days prior notice (a) in
the event that Bonds must be redeemed so that the principal
amount of all Obligations Outstanding after such redemption will
not exceed 75% of the depreciated actual cost or actual cost, as
the case may be, of the Vessel, as determined by the Secretary,
(b) in the event of an actual, constructive, agreed or
compromised total loss of, or requisition of title to, or seizure
or forfeiture of, the Vessel or (c) in the event that, after an
assumption by the Secretary of the Bonds, a purchaser of the
Vessel from the Secretary does not assume all the rights and
obligations of the Shipowner under the Indenture relating to the
Vessel.
The Bonds (including this Bond) may also be redeemed upon
the terms and conditions provided in the Indenture, in whole or
in part, at the option of the Secretary, at any time following an
assumption of the Bonds and the Indenture by the Secretary and
prior to any sale of the Vessel to a purchaser which assumes the
Shipowner's rights and obligations under the Bonds and the
Indenture, upon at least 30 and not more than 60 days' prior
notice given as provided in the Indenture at a Redemption Price
equal to 100% of the principal amount to be redeemed plus
interest accrued to the date fixed for redemption.
Any optional redemption shall be subject to the receipt of
the redemption moneys by the Indenture Trustee or any Paying
Agent. Bonds called for redemption shall (unless the Shipowner
shall default in the payment of such Bonds at the applicable
redemption price plus accrued interest) cease to bear interest on
and after the date fixed for redemption.
As provided in and subject to Section 10.04 of the Indenture
and to the extent permitted thereby, compliance by the Shipowner
with any of the terms of the Indenture may be waived, and the
Indenture and the rights and obligations of the Shipowner and the
rights of the Holders of the Bonds (including this Bond)
thereunder may be modified, at any time with the prior consent of
<PAGE>
the Secretary and, except as otherwise expressly provided in the
Indenture, the consent of the Holders of at least 60% in
principal amount of the Outstanding Bonds affected thereby in the
manner and subject to the limitations set forth in the Indenture;
provided that no such waiver or modification shall (1) without
the consent of the Holder of each Bond affected thereby:
(a) change the Stated Maturity or reduce the principal amount of
any Bond, (b) extend the time of payment of, or reduce the rate
of, interest thereon, (c) change the due date of or reduce the
amount of any sinking fund payment, (d) reduce any premium
payable upon the redemption thereof, or (e) change the coin or
currency in which any Bond or the interest thereon is payable; or
(2) without the consent of all Holders of Bonds: (v) terminate or
modify any of the Guarantees or the obligations of the United
States of America thereunder, (w) reduce the amount of any of the
Guarantees, (x) eliminate, modify or condition the duties of the
Indenture Trustee to demand payment of the Guarantees, (y)
eliminate or reduce the eligibility requirements of the Indenture
Trustee, or (z) reduce the percentage of principal amount of
Bonds the consent of whose Holders is required for any such
modification or waiver.
The Indenture provides that the Bonds (including this Bond)
shall no longer be entitled to any benefit provided therein if
the Bonds shall have become due and payable at Maturity (whether
by redemption or otherwise) and funds sufficient for the payment
thereof (including interest to the date fixed for such payment,
together with any premium thereon) and available for such payment
(1) shall be held by the Indenture Trustee or any Paying Agent,
or (2) shall have been so held and shall thereafter have been
paid to the Shipowner after having been unclaimed for 6 years
after the date of maturity thereof (whether by redemption or
otherwise) or the date of payment of the Guarantees, except for
the right, if any, of the Holder to receive payment from the
Shipowner of any amounts paid to the Shipowner as provided in (2)
above with respect to this Bond, all subject, however, to the
provisions of Section 6.08 of Exhibit 1 to the Indenture.
This Bond is transferable by the registered Holder or by his
duly authorized attorney, at the Corporate Trust Office of the
Indenture Trustee, upon surrender or cancellation of this Bond,
accompanied by an instrument of transfer in form satisfactory to
the Shipowner and the Indenture Trustee, duly executed by the
registered Holder hereof or his attorney duly authorized in
writing, and thereupon a new, fully registered Bond or Bonds of
like series and maturity for the same aggregate principal amount
will be issued to the transferee in exchange therefor, each in
the principal amount of $250,000 or any whole multiple of $1,000
in excess of $250,000 subject to the provisions of the Indenture.
The Indenture provides that the Shipowner shall not be required
to make transfers or exchanges of (1) Bonds for a period of 15
days immediately prior to an interest payment date or (2) Bonds
after demand for payment of the Guarantees and prior to payment
thereof or rescission of such demand as provided in Section
6.02(a) of Exhibit 1 to the Indenture or (3) any Bond which has
been selected for redemption in whole or in part.
<PAGE>
The Shipowner, the Secretary, the Indenture Trustee and any
office or agency for the payment of Bonds may deem and treat the
person in whose name this Bond is registered as the absolute
owner thereof for all purposes, and neither the Shipowner, the
Secretary, the Indenture Trustee, nor any such office or agency
shall be affected by any notice to the contrary, whether this
Bond shall be past due or not.
No recourse shall be had for the payment of principal of, or
the interest or premium (if any) on, this Bond, or for any claim
based hereon or on the Indenture, against any incorporator or any
past, present or future subscriber to the capital stock,
stockholder, officer or director of the Shipowner or of any
successor corporation, as such, either directly or through the
Shipowner or any such successor corporation, under any
constitution, statute or rule of law or by the enforcement of any
assessment, or otherwise, all such liability being expressly
waived and released by the acceptance of this Bond and by the
terms of the Indenture.
Neither this Bond nor the Guarantee endorsed hereon shall be
valid or become obligatory for any purpose until the Indenture
Trustee shall have fully signed the authentication certificate
endorsed hereon.
<PAGE>
IN WITNESS WHEREOF, the Shipowner has caused this Bond to be
duly executed by the manual or facsimile signatures of its duly
authorized officers under its corporate seal or facsimile
thereof.
Dated:February 9, 1995
AVONDALE INDUSTRIES, INC.
BY:__________________________________
ITS:__________________________________
[Seal]
Attest:
By:_________________________________
Secretary
-1-
<PAGE>
FORMS OF GUARANTEE AND TRUSTEE'S AUTHENTICATION CERTIFICATE
FOR BONDS
GUARANTEE OF THE UNITED STATES OF AMERICA
The United States of America, represented by the Secretary
of Transportation, acting by and through the Maritime
Administrator, pursuant to Title XI of the Merchant Marine Act,
1936, as amended, hereby guarantees to the holder of the within
Bond, upon demand of the holder or his agent, payment of the
unpaid interest on, and the unpaid balance of the principal of,
such Bond, including interest accruing between the date of
default under such Bond and the payment in full of this
Guarantee. The full faith and credit of the United States of
America is pledged to the payment of this Guarantee. The
validity of this Guarantee is incontestable in the hands of any
holder of such Bond. Payment of this Guarantee will be made in
accordance with the provisions of such Bond.
UNITED STATES OF AMERICA
SECRETARY OF TRANSPORTATION
BY:___________________________________
Maritime Administrator
[Seal of the Department of Transportation]
TRUSTEE'S AUTHENTICATION CERTIFICATE
This is one of the Bonds described in the Indenture and the
foregoing Guarantee is one of the Guarantees described in the
Authorization Agreement.
CHEMICAL BANK,
Indenture Trustee
BY:________________________________
Authorized Officer
-2-
<PAGE>
PAYMENTS ON ACCOUNT OF PRINCIPAL
Amount of Balance of Authorized
Payment Date Principal Paid Principal Unpaid Signature
------------ -------------- ---------------- ----------
-3-
<PAGE>
4.6(a)_______________________________________________________________________
TRUST INDENTURE
Relating to United States Government Guaranteed
Shipyard Financing Obligations
Between
AVONDALE INDUSTRIES, INC.
Shipyard Owner
AND
CHEMICAL BANK
Indenture Trustee
Dated as of February 9, 1995
_______________________________________________________________________________
<PAGE>
TRUST INDENTURE
between
AVONDALE INDUSTRIES, INC.
Shipyard Owner
And
CHEMICAL BANK
Indenture Trustee
Dated as of February 9, 1995
TABLE OF CONTENTS TO SPECIAL PROVISIONS OF THE INDENTURE [1]
Page
Parties.........................................................1
Recitals........................................................1
ARTICLE FIRST
Incorporation of General Provisions.............................2
ARTICLE SECOND
The Bonds.......................................................2
ARTICLE THIRD
Certain Redemptions.............................................3
(a) Mandatory Sinking Fund Redemptions.........................3
(b) Optional Sinking Fund Redemptions..........................4
(c) Optional Redemptions of Bonds at Premium...................4
ARTICLE FOURTH
Definitions.....................................................4
ARTICLE FIFTH
Additions, Deletions and Amendments to Exhibit 1................5
(a) Concerning Section 2.04....................................5
(b) Concerning Section 2.12....................................5
(c) Concerning Payment of the Bonds............................5
(d) Concerning Section 3.04....................................6
(e) Concerning Selection of Bonds to be Redeemed...............6
(f) Concerning References to 3.09(b)...........................6
(g) Concerning Home Office Payment.............................6
(h) Concerning Section 6.09....................................6
<PAGE>
(i) Concerning Section 7.02....................................6
(j) Concerning Section 10.01...................................6
(k) Concerning Notices.........................................7
(l) Concerning the Special Provisions .........................7
(m) Concerning Applicable Law..................................7
(n) Execution of Counterparts..................................7
Signatures......................................................8
Acknowledgements.........................................9 and 10
EXHIBITS TO TRUST INDENTURE
SCHEDULE A Schedule of Definitions to Trust Indenture
EXHIBIT 1 General Provisions of the Indenture
Incorporated by Reference
EXHIBIT 2 Forms of Bond, Guarantee and Trustee's
Authentication Certificate
EXHIBIT 3 Authorization Agreement
EXHIBIT 4 Form of Secretary Supplemental Indenture
**FOOTNOTES**
[1]: This Table of Contents is not a part of the Indenture and
has no bearing upon the interpretation of any of its terms and
provisions.
TRUST INDENTURE
Special Provisions
THIS TRUST INDENTURE, dated as of February 9, 1995 (said
Trust Indenture, as the same may be amended, modified or
supplemented from time to time as permitted hereunder, herein
called the "Indenture"), between (i) AVONDALE INDUSTRIES, INC., a
Louisiana corporation (herein called the "Shipyard Owner"), and
(ii) Chemical Bank, a New York corporation (said Bank, and any
successor or assign hereunder, herein called the "Indenture
Trustee").
Recitals:
A. The Shipyard Owner is or will be the sole owner of the
shipyard advanced technology and modernization project identified
in Exhibit A to the Commitment To Guarantee Obligations (the
"Shipyard Project");
<PAGE>
B. To aid in financing the construction of the Shipyard
Project, the Shipyard Owner will borrow an aggregate principal
amount approximately equal to, but in no event in excess of,
87.5% of the Actual Cost of the Shipyard Project as of the
Closing Date;
C. As one means of such financing of the construction of
the Shipyard Project, the Shipyard Owner has entered into a bond
purchase agreement (the "Bond Purchase Agreement") with the
purchasers named therein, providing for the sale and delivery, on
the Closing Date, of not in excess of $17,780,000 aggregate
principal amount of bonds designated, "United States Government
Guaranteed Shipyard Financing Bonds, 2010 Series" (the
"Obligations" or the "Bonds") having the maturity date and
interest rate set forth therein;
D. It is intended that pursuant to the terms of the
Authorization Agreement, Contract MA-12950, the Secretary, on
behalf of the United States, will authorize the Indenture
Trustee, under the terms of Title XI of the Act, to cause the
Guarantees, bearing the facsimile signature of the Secretary and
the facsimile seal of the United States Department of
Transportation, to be imprinted on the Obligations issued, and to
authenticate and deliver said Obligations on the Closing Date;
and
E. Pursuant to Section 1112(b) of the Act, the Secretary
has determined that the interest to be borne by the Obligations
(exclusive of charges for the guarantee fee and service charges,
if any) at the rate specified in the Obligations is reasonable.
NOW THEREFORE, in consideration of the premises, of the
mutual covenants herein contained, of the purchase of the
Obligations by the Holders thereof, and of other good and
valuable consideration, the receipt and adequacy of which the
parties hereby acknowledge, and for the equal and proportionate
benefit of all the present and future Holders of the Obligations,
the parties hereto agree as follows:
ARTICLE FIRST
Incorporation of General Provisions
This Indenture shall consist of two parts: the Special
Provisions and the General Provisions attached hereto as Exhibit
<PAGE>
1, made a part of this Indenture and incorporated herein by
reference.
ARTICLE SECOND
The Bonds
(a) Pursuant to the terms hereof, on the date of this
Indenture, the Shipyard Owner shall issue those certain bonds,
which shall be designated "United States Government Guaranteed
Shipyard Financing Bonds, 2010 Series"; and the aggregate
principal amount of Bonds which may be issued under this
Indenture shall not exceed $17,780,000 except as provided in
Sections 2.09, 2.10, 2.12 and 3.10(b) of Exhibit 1 hereto.
(b) The Obligations, the Guarantees thereof, and the
Indenture Trustee's authentication certificate to be endorsed
thereon shall be substantially in the forms set forth in Exhibit
2 hereto.
(c) The Bonds shall be in the denominations of $250,000 or
any whole multiple of $1,000 in excess of $250,000; provided,
however, that in the event the principal amount of the Bonds of
any holder thereof is reduced below $250,000 as a result of a
redemption payment or repurchase by the Shipyard Owner, then
Bonds may be issued in such lesser amount.
(d) The Shipyard Owner shall at all times cause to be
maintained in Avondale, Louisiana an office or agency for the
purposes specified in Section 5.03 of Exhibit 1 to this
Indenture.
(e) The Indenture Trustee shall at all times have its
Corporate Trust Office in the City of New York, State of New
York.
BUS\21645.4
ARTICLE THIRD
Certain Redemptions
(a) Mandatory Sinking Fund Redemptions. The Bonds are
subject to redemption at a redemption price equal to 100% of the
principal amount thereof, together with interest accrued thereon
to the applicable sinking fund Redemption Date, through the
operation of a mandatory sinking fund providing for the semi-
annual redemption on March 31 and September 30 of each year,
commencing March 31, 1996, at 100% of the principal amount
thereof plus interest accrued thereon to the date of redemption,
of $593,000 principal amount of Bonds (or such lesser principal
amount of Bonds as shall then be outstanding), plus accrued
interest. Notwithstanding the foregoing provisions of this
subsection (a), if the principal amount of Outstanding Bonds
shall be reduced by reason of any redemption pursuant to Sections
<PAGE>
3.04 or 3.05 of Exhibit 1 to this Indenture, the principal amount
of Bonds to be redeemed pursuant to this subsection (a) on each
subsequent mandatory sinking fund Redemption Date for such Bonds
shall be reduced by an amount equal to the principal amount of
such Bonds retired by reason of such redemption pursuant to
Sections 3.04 or 3.05 of Exhibit 1 hereto divided by the number
of mandatory sinking fund Redemption Dates (including the Stated
Maturity of such Bonds) scheduled thereafter (subject to such
increase as shall be necessary so that the total principal amount
of Bonds to be redeemed on any such sinking fund redemption date
shall be an integral multiple of $1,000); provided, however, that
the entire unpaid principal amount of the Outstanding Bonds shall
be paid not later than September 30, 2010. The Shipyard Owner
shall, in accordance with Section 3.02(d) of Exhibit 1 hereto,
promptly after each redemption pursuant to said Section 3.04,
furnish to the Secretary, the Indenture Trustee and each Holder
of an Obligation a revised table of sinking fund payments
reflecting the reductions made pursuant to this subsection (a) as
a result of such redemption.
In lieu of making all or any part of any such mandatory
sinking fund redemption of Bonds, the Shipyard Owner may, at its
option, receive credit for Bonds not previously so credited or
applied to reduce the principal amount of Bonds Outstanding, (i)
redeemed by the Shipyard Owner pursuant to the optional
redemption provision provided for in subsection (b) of this
Article, (ii) redeemed by the Shipyard Owner pursuant to the
optional redemption provision provided for in subsection (c) of
this Article, or (iii) purchased or acquired by the Shipyard
Owner (otherwise than by redemption) and delivered to the
Indenture Trustee for cancellation pursuant to Section 2.13 of
Exhibit 1 hereto. The Bonds so credited or applied shall be
credited or applied, as the case may be, by the Indenture
Trustee, at 100% of the principal amount thereof. If the
Shipyard Owner shall elect to receive credit or application as
aforesaid in lieu of making all or part of any mandatory sinking
fund redemption, it shall deliver to the Indenture Trustee, at
least 40 days but not more than 60 days prior to the due date for
such mandatory sinking fund redemption, a Request (i) specifying
the principal amount of Bonds so optionally redeemed or otherwise
acquired and so to be credited or applied, as the case may be,
and (ii) stating that no such Bonds have theretofore been made
the basis of any such credit or application as aforesaid and that
none of such Obligations are subject to the terms of any
agreement or contract between the Secretary, the Shipyard Owner
and/or any other person restricting the Shipyard Owner's right to
apply any such Obligations as a credit pursuant to the terms of
this subsection (a), together with the Bonds (uncancelled) for
which such credit or application is so requested (unless such
Bonds shall theretofore have been delivered to the Indenture
Trustee).
(b) Optional Sinking Fund Redemptions. At its option, the
Shipyard Owner may redeem on any mandatory sinking fund
Redemption Date, at a redemption price equal to 100% of the
principal amount thereof, plus the Make-Whole Amount determined
for the mandatory sinking fund Redemption Date with respect to
<PAGE>
the additional principal amount to be redeemed, together with
interest accrued thereon to such date, an additional principal
amount of Bonds up to the principal amount of Bonds required to
be redeemed under the first paragraph of subsection (a) of this
Article on such date and before any credit pursuant to the last
paragraph of subsection (a) of this Article. The right to make
any such optional sinking fund redemption shall not be
cumulative. If the Shipyard Owner shall elect to make any such
optional sinking fund redemption, the Shipyard Owner shall, at
least 40 days but not more than 60 days prior to such mandatory
sinking fund Redemption Date, deliver to the Indenture Trustee a
Request stating that the Shipyard Owner intends to exercise its
right as set forth in this subsection (b) to make such optional
sinking fund redemption and specifying the additional principal
amount of Bonds which the Shipyard Owner intends to redeem on
such mandatory sinking fund Redemption Date. The Request shall
be accompanied by an Officer's Certificate as to the estimated
Make-Whole Amount due in connection with such redemption
(calculated as if the date of such Request were the date of the
redemption), setting forth the details of such computation. The
Indenture Trustee shall deliver such Officer's Certificate to
each Holder along with the notice of redemption required by
Section 3.08 of the general provisions of the Indenture. Two
Business Days prior to such redemption, the Shipyard Owner shall
deliver to the Indenture Trustee and each Holder an Officer's
Certificate specifying the calculation of such Make-Whole Amount
as of the specified Redemption Date.
(c) Optional Redemptions of Bonds at Premium. At its
option, the Shipyard Owner may redeem the Bonds, in whole or in
part, at any time or from time to time, at a redemption price
equal to 100% of the principal amount thereof, plus the Make-
Whole Amount determined for the Redemption Date with respect to
the principal amount to be redeemed, together with interest
accrued thereon to the date fixed for redemption. If the Shipyard
Owner shall elect to make any such optional redemption, the
Shipyard Owner shall, at least 40 days but not more than 60 days
prior to the date fixed for redemption, deliver to the Indenture
Trustee a Request stating that the Shipyard Owner intends to
exercise its rights as above set forth to make such optional
redemption and specifying the Redemption Date, and the principal
amount of Bonds which the Shipyard Owner intends to redeem on
such date. The Request shall be accompanied by an Officer's
Certificate as to the estimated Make-Whole Amount due in
connection with such redemption (calculated as if the date of
such Request were the date of the redemption), setting forth the
details of such computation. The Indenture Trustee shall deliver
such Officer's Certificate to each Holder along with the notice
of redemption required by Section 3.08 of the general provisions
of the Indenture. Two Business Days prior to such redemption,
the Shipyard Owner shall deliver to the Indenture Trustee and
each Holder an Officer's Certificate specifying the calculation
of such Make-Whole Amount as of the specified Redemption Date.
<PAGE>
ARTICLE FOURTH
Definitions
For all purposes of this Indenture, unless otherwise
expressly provided or unless the context otherwise requires:
(1) All references herein to Articles, Sections
or other subdivisions, unless otherwise specified,
refer to the corresponding Articles, Sections and other
subdivisions of this Indenture;
(2) The terms "hereof," "herein," "hereby,"
"hereto," "hereunder" and "herewith" refer to this
Indenture;
(3) The terms used herein and defined in Schedule
A to this Indenture shall have the respective meanings
stated in said Schedule.
ARTICLE FIFTH
Additions, Deletions and Amendments to Exhibit 1
The following additions, deletions and amendments are hereby
made to Exhibit 1 to this Indenture.
(a) Concerning Section 2.04. The Shipyard Owner and the
Indenture Trustee shall not enter into any Supplemental
Indenture, and the Indenture Trustee shall not enter into any
supplement to the Authorization Agreement, pursuant to Section
2.04 of Exhibit 1 to this Indenture, except to provide for the
issuance of additional Obligations of any series and Stated
Maturity theretofore issued or of one or more additional series
for the purpose of aiding in financing or refinancing of the
Shipyard Project or to refund Obligations issued for such
purpose.
(b) Concerning Section 2.12. With respect to clause (1) of
the proviso to Section 2.12 of Exhibit 1 to the Indenture, a
written agreement of indemnity which is satisfactory in form and
substance to the Secretary, the Shipyard Owner and the Indenture
Trustee executed and delivered by an institutional Holder having
a capital and surplus of at least $100,000,000 shall be
considered sufficient indemnity to the Secretary, the Shipyard
Owner and the Indenture Trustee in connection with the execution,
authentication and delivery of any new Obligation or the making
of any payment as contemplated by said Section 2.12.
(c) Concerning Payment of the Bonds. Notwithstanding
anything to the contrary in Exhibit 1 hereto, the Bonds to be
issued hereunder shall be payable (other than in the case of a
redemption in whole of any of the Bonds or upon the maturity of
any of the Bonds) as to principal, premium, if any, and interest
<PAGE>
by check mailed by the Corporate Trust Office to the addresses of
the Obligees as such addresses shall appear in the Obligation
Register, subject in any event to the provisions hereof
concerning home office payment. Upon redemption in whole of any
of the Bonds or upon maturity of any of the Bonds, the principal,
premium, if any, and interest due thereon shall be paid by check
to the addresses of the Obligees as such addresses shall appear
in the Obligation Register, subject to the provisions hereof
concerning home office payment, only upon surrender of any such
Bond, by mail or other means, to the Indenture Trustee at the
office of the Indenture Trustee set forth herein. The Indenture
Trustee agrees that within 30 days from the date of any payment
of principal or interest when the same shall become due and
payable by reason of maturity or redemption, a Responsible
Officer in the Corporate Trust Office of the Indenture Trustee
shall ascertain to his satisfaction that checks in payment of
such amounts have been mailed by such Corporate Trust Office to
the addresses of the Obligees as provided above, if payment is to
be made by check or, if payment is to be made by wire transfer or
by credit to an account maintained by the Obligee with the
Indenture Trustee, that such funds have been wired or credited
or, if payment is to be made at the Corporate Trust Office, that
funds were held by the Indenture Trustee for such payment on the
date payment was due. The Indenture Trustee shall have no
obligation to determine whether such checks or payments were
received by the Obligees.
(d) Concerning Section 3.04. In the ninth line of Section
3.04 of Exhibit 1 to this Indenture, delete the words "45 days"
and substitute in lieu thereof, the words "at least 30 but not
more than 60 days".
(e) Concerning Section 3.05. Paragraph (c) of Section 3.05
of Exhibit 1 to this Indenture is deleted and the following
substituted thereof:
(c) the Shipyard Project is not substantially complete
by March 31, 1996,
(f) Concerning Selection of Bonds to be Redeemed.
Notwithstanding the provisions of Section 3.07(b) of Exhibit 1 to
this Indenture, (i) if less than all the Bonds are to be
optionally redeemed under any of the provisions contained or
referred to in Article Third hereof or Article III of said
Exhibit 1, the Indenture Trustee shall select for redemption
Bonds of the Stated Maturity or Stated Maturities and (ii) if
less than all the Bonds of a particular Stated Maturity are to be
redeemed under any provisions contained or referred to in Article
Third hereof or Article III of Exhibit 1 to this Indenture, the
Indenture Trustee shall select the particular Bonds and/or
portions ($1,000 or any integral multiple thereof) of Bonds to be
redeemed on the Redemption Date by allocating the principal
amount to be redeemed among the Holders of Bonds of such Stated
Maturity in proportion to the respective principal amount of
Bonds of such Stated Maturity registered in their respective
names.
<PAGE>
(g) Concerning References to Section 3.09(b). All cross-
references to Section 3.09(b) made in Exhibit 1 hereto shall be
deemed to refer to Section 3.10(b) of Exhibit 1 hereto.
(h) Concerning Home Office Payment. Notwithstanding any
terms of this Indenture or the Obligations to the contrary, the
Shipyard Owner may enter into an agreement with any Holder of an
Obligation providing for payment to such Holder by certified or
official bank check or at the request by such Holder, by credit
to an account maintained by the Holder with the Indenture Trustee
or by wire transfer of the principal of and the premium, if any,
and interest on such Obligation or any part thereof at a place
other than the place or places specified in such Obligation as
the place for such payment, and for the making of notation, if
any, of such payment on such Obligation by such Holder or by an
agent of the Shipyard Owner or of the Indenture Trustee without
presentation of such Obligation. The Shipyard Owner will furnish
to the Indenture Trustee a copy of each such agreement within 10
days prior to any payment date.
The Indenture Trustee hereby consents to such agreement
contained in Section 7.0 of the Bond Purchase Agreement dated as
of February 2, 1995, between the Shipyard Owner and the
Purchasers named in Schedule 1 thereto and hereby acknowledges
receipt of a copy thereof.
(i) Concerning Section 6.09. In the fifth line of Section
6.09 of Exhibit 1 to this Indenture, after the word "parties",
and before the comma, add the following phrase "(including the
expiration of all notice and cure periods provided for
thereunder)".
(j) Concerning Section 7.02. The amount "$3,000,000" in
Section 7.02 of Exhibit 1 hereto is hereby deleted and there is
substituted therefor the amount "$25,000,000."
(k) Concerning Section 10.01. Paragraph (b) of Section
10.01 of Exhibit 1 to this Indenture is deleted and the following
substituted in lieu thereof:
"(b) to evidence the succession pursuant to
Article VIII of another corporation or entity
to the Shipyard Owner or any assumption of
all or a part of the obligations the Shipyard
Owner hereunder;"
(l) Concerning Notices. (1) Subject to the provisions of
Section 13.01 of Exhibit 1 to this Indenture, any notice,
request, demand, direction, consent, waiver, approval or other
communication to be given to a party hereto or the Secretary
shall be deemed to have been sufficiently given or made when
addressed to:
<PAGE>
The Indenture Trustee as: CHEMICAL BANK
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Corporate Trust Department
The Shipyard Owner as: [Mail]
AVONDALE INDUSTRIES, INC.
P. O. Box 50280
New Orleans, Louisiana 70150
Attention:Thomas M. Kitchen, Vice
President, Chief Financial
Officer and Secretary
[Courier]
AVONDALE INDUSTRIES, INC.
5100 River Road
Avondale, Louisiana 70094
Attention:Thomas M. Kitchen, Vice
President, Chief Financial
Officer and Secretary
The Secretary as: SECRETARY OF TRANSPORTATION
c/o Maritime Administrator
Department of Transportation
400 Seventh Street, SW
Washington, D.C. 20590
(2) The phrase "in the manner provided in Section
6.04(c)" is hereby deleted wherever such phrase appears in
Sections 7.02(b) and 10.04, and substituted in lieu thereof is
the phrase "by first class mail, postage prepaid".
(m) Concerning the Special Provisions. In the event of any
conflict in, or inconsistency between the Special Provisions of
this Trust Indenture and Exhibit 1 hereto, said Special
Provisions shall control.
(n) Concerning Applicable Law. This Indenture and each
Obligation shall be governed by the laws of the State of New York
and, to the extent applicable, the laws of the United States.
(o) Execution of Counterparts. This Indenture may be
executed in any number of counterparts. All such counterparts
shall be deemed to be originals and shall constitute but one and
the same instrument.
<PAGE>
IN WITNESS WHEREOF, this Trust Indenture has been duly
executed by the parties hereto as of the day and year first above
written.
AVONDALE INDUSTRIES, INC.
Shipyard Owner
(SEAL)
BY /s/ Thomas M. Kitchen
---------------------
Thomas M. Kitchen, Vice
President, Chief Financial
Officer and Secretary
Attest:
/s/ Bruce L. Hicks
------------------
Bruce L. Hicks, Assistant Secretary
CHEMICAL BANK
Indenture Trustee
BY /s/Gregory McFarlane
--------------------
Gregory K. McFarlane,
Vice President
Attest:
(Signature Unreadable)
<PAGE>
DISTRICT OF COLUMBIA
CITY OF WASHINGTON
On this 9th day of February, 1995, before me personally
appeared Thomas M. Kitchen, to me known, who being by me duly
sworn, did depose and say that he resides at 6627 Canal
Boulevard, Louisiana 70124; that he is Vice President, Chief
Financial Officer and Secretary of AVONDALE INDUSTRIES, INC.;
that he knows the seal affixed to said instrument is such
corporation's seal; that the seal affixed to said instrument is
such corporation's seal; that it was so affixed by authority of
the Board of Directors of said corporation, and that he signed
his name thereto by like authority.
In testimony whereof, I have hereunto set my hand and seal
this 9th day of February, 1995.
/s/ Linda E. Waltz
------------------
Linda E. Waltz
NOTARY PUBLIC
(Notarial Stamp and Seal) My Commission Expires April 30, 1999
<PAGE>
STATE OF NEW YORK
COUNTY OF NEW YORK
Be it known, that on this 9th day of February,
1995, personally appeared before me Gregory K. McFarlane who
after being duly sworn, deposed and said that he is a Trust
Officer of Chemical Bank, the banking association which is
described in and executed the within instrument, and that he
signed the within instrument by order of the Board of Directors
of the said banking association and acknowledged the within
instrument to be the free act and deed of the said banking
association.
In testimony whereof, I have hereunto set my hand and seal
this 9th day of February, 1995.
/s/ Annabelle DeLuca
----------------
Annabelle DeLuca
NOTARY PUBLIC
(Notarial Stamp and Seal) Commission Expires July 15, 1995
<PAGE>
4.6(b)
_______________________________________________________________________________
Contract No. MA-12953
TITLE XI RESERVE FUND AND
FINANCIAL AGREEMENT
Between
AVONDALE INDUSTRIES, INC.
and
THE UNITED STATES OF AMERICA
Dated as of February 9, 1995
_______________________________________________________________________________
<PAGE>
TITLE XI RESERVE FUND
AND FINANCIAL AGREEMENT
TABLE OF CONTENTS TO
SPECIAL PROVISIONS
Page
Recitals........................................................1
Granting Clause.................................................2
ARTICLE FIRST
Definitions.....................................................2
ARTICLE SECOND
Incorporation of General Provisions.............................3
ARTICLE THIRD
Additions, Deletions and Amendments to Exhibit..................3
(a) Concerning Section 1 of Exhibit 1.....................3
(b) Concerning Section 2 of Exhibit 1.....................3
(c) Concerning Section 8 of Exhibit 1.....................3
(d) Concerning Section 13 of Exhibit 1....................4
ARTICLE FOURTH
Shipyard Project Application....................................7
ARTICLE FIFTH
Counterparts....................................................8
ARTICLE SIXTH
Conflict........................................................8
ARTICLE SEVENTH
Concerning Regulations..........................................8
Signatures......................................................9
<PAGE>
Exhibit 1 General Provisions Incorporated into the
Title XI Reserve Fund and Financial
Agreement by Reference.
Attachment AAttachment A to Exhibit 1 to Title XI
Reserve Fund and Financial Agreement.
Contract No.
MA-12953
TITLE XI RESERVE FUND
AND FINANCIAL AGREEMENT
THIS TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT dated as
of February 9, 1995 between AVONDALE INDUSTRIES, INC., a
Louisiana corporation (the "Company") and THE UNITED STATES OF
AMERICA (the "United States"), represented by the Secretary of
Transportation, acting by and through the Maritime Administrator
(the "Secretary"), pursuant to the provisions of Title XI of the
Merchant Marine Act, 1936, as amended.
R E C I T A L S:
A. The Company has authorized the issuance of and on this
date intends to issue bonds designated "United States Government
Guaranteed Shipyard Financing Bonds, 2010 Series" in an aggregate
principal amount not to exceed $17,780,000 (individually, an
"Obligation", and collectively, the "Obligations") to finance the
cost of the acquisition, installation and development of advanced
and modern shipyard technology (the "Shipyard Project").
B. Under the provisions of an Authorization Agreement (the
"Authorization Agreement"), Contract No. MA-12950, to be entered
into as of the date hereof between the Secretary and the
Indenture Trustee, the Secretary intends to authorize a guarantee
to be endorsed upon each of the Obligations, pursuant to which
the Secretary has guaranteed the payment in full of all of the
unpaid interest to the date of payment on, and all of the unpaid
principal balance of each Obligation (individually, a "Guarantee"
and collectively, the "Guarantees").
C. As part of the Guarantee transaction, and as security
to the United States for the payment to the United States of the
principal of and the interest due or to become due on the
promissory note, dated the date hereof, to be executed and
delivered by the Company to the Secretary with respect to the
Obligations (the "Secretary's Note"), in accordance with the
terms thereof, the Company has agreed to make and enter into a
Security Agreement, dated as of the date hereof, between the
Company and the Secretary (the "Security Agreement"), and the
Title XI Reserve Fund and Financial Agreement.
<PAGE>
D. As of the date hereof, the Company has executed and
delivered a mortgage (the "Mortgage") on the Shipyard Project in
favor of the Secretary.
E. The Company, the Secretary and Chemical Bank, a
national banking association ("Depository-Bailee" or the
"Depository") are entering into the Depository Agreement,
Contract No. MA-12954, dated as of the date hereof, providing,
among other things, for the creation of the Title XI Reserve
Fund.
NOW, THEREFORE, in consideration of the premises and
mutual covenants herein contained, and of other good and valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereby agree as follows:
GRANTING CLAUSE
The Company hereby sells, grants, conveys, mortgages,
assigns, transfers, pledges, confirms and sets over unto the
Secretary a continuing security interest in all of its right,
title and interest in and to (a) the Title XI Reserve Fund, and
(b) all sums, instruments, money, negotiable documents, chattel
paper and proceeds thereof currently on deposit, or hereafter
deposited in the Title XI Reserve Fund, all of which foregoing
collateral shall be held by the Depository-Bailee as bailee in
accounts in the name of "Avondale Industries, Inc., entirely as
collateral for the United States of America, as represented by
the Secretary of Transportation, acting by and through the
Maritime Administrator (the "Secretary") and held by the
Depository-Bailee solely and exclusively as bailee for the
Secretary."
ARTICLE FIRST
DEFINITIONS
For all purposes of this Title XI Reserve Fund and Financial
Agreement, unless otherwise expressly provided or unless the
context otherwise requires:
(1) All references to Sections or other subdivisions,
unless otherwise specified, refer to the corresponding Sections
and other subdivisions of the Title XI Reserve Fund and Financial
Agreement;
(2) The terms "hereof," "herein," "hereto," "hereunder" and
"herewith" refer to this Title XI Reserve Fund and Financial
Agreement;
(3) The capitalized terms used herein but not otherwise
defined herein shall have the respective meanings ascribed to
them in Schedule X to the Security Agreement; and
(4) Capitalized terms used herein which are defined in the
General Provisions attached hereto as Exhibit 1 shall have the
respective meanings stated in said General Provisions unless
otherwise defined pursuant to subparagraph 3 of this Article
First.
<PAGE>
ARTICLE SECOND
INCORPORATION OF GENERAL PROVISIONS
This Title XI Reserve Fund and Financial Agreement shall
consist of two parts: the Special Provisions and the General
Provisions attached hereto as Exhibit 1, made a part of the Title
XI Reserve Fund and Financial Agreement and incorporated herein
by reference. Where a provision of the General Provisions has
been modified or superseded by a provision of the Special
Provisions, all references in the General Provisions to the
modified or superseded sections shall be deemed to refer to such
sections as so modified or superseded.
ARTICLE THIRD
ADDITIONS, DELETIONS AND AMENDMENTS TO EXHIBIT 1
The following additions, deletions and amendments are hereby
made to Exhibit 1 hereto:
(a) Concerning Section 1 of Exhibit 1:
(1) Concerning Subsection 1(d). Subsection 1(d) of
Exhibit 1 hereto is amended by adding after the word
"entity," the phrase, "except for guarantees of the
obligations of American Heavy Lift Shipping Company,".
(b) Concerning Section 2 of Exhibit 1:
(1) Concerning Subsection 2(a). Subsection 2(a) of
Exhibit 1 hereto is amended by adding the following
sentence at the end of thereof:
"Wherever reference is made in this
Exhibit 1 to Title XI Reserve Fund and
Financial Agreement to the Title XI
Reserve Fund special joint depository
account, such reference shall be changed
to a separate depository account held by
the Title XI Reserve Fund Depository-
Bailee, as bailee, in the name of
"Avondale Industries, Inc., entirely as
collateral for the United States of
America, represented by the Secretary of
Transportation acting by and through the
Maritime Administrator (the "Secretary")
and held by the Depository-Bailee solely
and exclusively for the Secretary."
(c) Concerning Section 8 of Exhibit 1. Section 8 of
Exhibit 1 is hereby amended by adding the following paragraph
thereto:
<PAGE>
"All amounts held by the Title XI
Reserve Fund Depository, at whatever
time, pursuant to the provisions of the
Depository Agreement, whether money,
instruments, negotiable documents,
chattel paper, proceeds thereof, or
otherwise, shall constitute and be held
by said Depository-Bailee (as bailee)
solely and exclusively as bailee for the
Secretary as security for the payment
and performance of any and all of the
Company's Secretary's Notes."
(d) Concerning Section 13 of Exhibit 1:
(1) Concerning Subsection 13(a). Pursuant to
Subsection 13(a), the Company hereby certifies that it meets
the conditions to make the election contemplated by Section
2(b)(2)(B) of Exhibit 1 hereto and elects to be governed by
Subsections 13(b) and (c) of Exhibit 1 hereto, as amended
herein, and the Secretary consents hereby to such election.
From the date hereof, the covenants set forth in Section 12
of Exhibit 1 hereto shall not apply to the Company and shall
have no applicability to the Company under any circumstances
whatsoever.
(2) Concerning Subsection 13(b). The covenants in
Subsection 13(b) will not apply if the transaction or event
contemplated by the covenant occurs within the Company's
consolidated group.
(3) Concerning Subsection 13(b)(8). The provisions of
Subsection 13(b)(8) are hereby amended so as to add the
phrase, "except for leases with respect to equipment leased
or rented in the normal course of business," after the
parenthetical phrase "(having a term of six months or more)"
and provide that the aggregate annual payments of charter
hire and rent for which the Company may become liable
(directly or indirectly) under charters and leases (having a
term of six months or more), except for leases with respect
to equipment leased or rented in the normal course of
business, shall not exceed $4,000,000.
(4) Concerning Subsection 13 (b)(11). Subsection
13(b)(11) of Exhibit 1 hereto is amended by deleting the
words "or have" appearing at the beginning thereof.
(5) Concerning Subsection 13(b)(12). Subsection
13(b)(12) of Exhibit 1 hereto is amended by deleting the
word "and" before the number "(ii)" and substituting a comma
therefor, and, after the last word thereof, namely,
"exists", adding a comma and the phrase "and (iii) loans,
mortgages, liens, charges, security interests, encumbrances
and indebtedness approved, consented to or permitted by the
Secretary, and the refinancing or renewal thereof on terms
and conditions substantially similar to those approved,
consented to or permitted by the Secretary (with ten (10)
<PAGE>
days written notice to the Secretary prior to the closing of
such refinancing or renewal), whether (xx) prior to, as of
the date of, or after the applicability of this Subsection
13(b) to the Company or (yy) permitted under Subsection
13(c) hereof prior to the applicability of this Subsection
13(b) to the Company."
(6) Concerning Subsection 13(c)(1). Subsection
13(c)(1) of Exhibit 1 hereto is deleted in its entirety and
the following is substituted therefor:
"(1) Make any distribution of earnings,
except as may be permitted by (A), (B)
or (C) below:
(A) From retained earnings in an
amount specified in subparagraph (C)
below provided that in the fiscal year
in which the distribution of earnings is
made there is no operating loss to the
date of such payment of such
distribution of earnings and (i) there
was no operating loss in the immediately
preceding three fiscal years, or (ii)
there was a one-year operating loss
during the immediately preceding three
fiscal years, but (x) such loss was not
in the immediately preceding fiscal
year, and (y) there was positive net
income for the three year period;
(B) If distributions of earnings
may not be made under (A) above, a
distribution can be made in an amount
equal to the total operating net income
for the immediately preceding three
fiscal year period, provided that (i)
there were no two successive years of
operating losses, (ii) in the fiscal
year in which such distribution is made
there is no operating loss to the date
of such distribution, and (iii) the
distribution or earnings made would not
exceed an amount specified in
subparagraph (C) below;
(C) Distributions of earnings may
be made from earnings of prior years in
an aggregate amount equal to (i) 40
percent of the Company's total net
income after tax for each of the prior
years, less any distributions that were
made in such years; or (ii) the
aggregate of the Company's total net
<PAGE>
income after tax for such prior years
provided that after making such
distribution, the Company's Long Term
Debt does not exceed its Net Worth. In
computing net income for purposes of
this subparagraph (C), extraordinary
gains, such as gains from the sale of
assets, shall be excluded;"
(7) Concerning Subsection 13(c)(2). The provisions of
Subsection 13(c)(2) of Exhibit 1 hereto are hereby amended
and restated in their entirety to read as follows:
(i) Sell, mortgage, transfer or
lease the Shipyard Project or any
assets (except for any assets in
inventory and/or the proceeds
thereof) to any non-Affiliate
except as permitted in Subsection
13(c)(6) below; or (ii) sell,
mortgage, transfer or lease the
Shipyard Project or any assets
(except for any assets in inventory
and/or the proceeds thereof) to an
Affiliate unless such transaction
is (a) at a fair market value as
determined by an independent
appraiser acceptable to the
Secretary, and, (b) a total cash
transaction or, in the case of a
lease, the lease payments are cash
payments; and (iii) for the
purposes of this section, the term
"Affiliate" shall also include any
officer, director or shareholder of
the Company."
(8) Concerning Subsection 13(c)(4). In Subsection
13(c)(4), insert "(i)" after the word "except" the last time
such word appears; substitute a comma for the semicolon at
the end of the clause; and add "(ii) for guarantees of the
obligations of American Heavy Lift Shipping Company, (iii)
for any wholly owned subsidiary in the Company's
consolidated group, or (iv) as to work or the performance of
work by the Company's subcontractors, suppliers or vendors
with respect to the sale of products or services by the
Company to third parties."
(9) Concerning Subsection 13(c)(5). At the end of
Subsection 13(c)(5), add the phrase, "except if the primary
business activity of the Company remains shipping and/or
shipbuilding."
(10) Concerning Subsection 13(c)(6). The provisions of
Subsection 13(c)(6) of Exhibit 1 hereto are hereby amended
and restated in their entirety to read as follows:
"Enter into any merger or consolidation
or convey, sell, lease, mortgage, grant
a security interest in or otherwise
transfer or dispose of any substantial
portion of its properties or assets,
except for any assets in inventory
and/or the proceeds thereof, provided,
however, the Company shall not be deemed
to have conveyed, sold, leased,
mortgaged, granted a security interest
in or otherwise transferred or disposed
of a substantial portion of its
properties or assets if (i) the Net Book
Value (defined as the original book
value of an asset less depreciation
calculated on a straight line basis over
its useful life) of the aggregate of all
of the assets (except for any assets in
inventory and/or the proceeds thereof)
in which a security interest has been
granted, or which have been conveyed,
sold, leased, mortgaged or otherwise
transferred or disposed of (and with
respect to assets subject to the
restrictions of this Subsection, which
assets are leased, mortgaged, or a
security interest granted therein,
excluding assets leased, mortgaged or so
encumbered in a prior 12 consecutive
calendar month period or undertaken in
connection with a refinancing or renewal
of the indebtedness secured thereby on
terms and conditions substantially
similar to those terms and conditions of
such prior financing, with ten (10) days
written notice to the Secretary prior to
the closing of such refinancing or
<PAGE>
renewal) by the Company during any
period of 12 consecutive calendar months
does not exceed 10 percent of the total
Net Book Value of all of the Company's
assets (except for any assets in
inventory and/or the proceeds thereof,
and, further, the assets which are the
basis for the calculation of the 10
percent of the Net Book Value are those
assets, except for any assets in
inventory and/or the proceeds thereof,
indicated on the most recent audited
annual financial statement required to
be submitted pursuant to Section 14
hereof prior to the date of the sale);
(ii) the Company retains the proceeds of
(x) the conveyance, sale, lease, or
other transfer or disposition of assets
(other than inventory and/or the
proceeds thereof) or (y) any
indebtedness or obligations secured by
the mortgage, granting of a security
interest in or other similar transfer or
disposition of assets (other than
inventory and/or the proceeds thereof)
for use in accordance with the Company's
regular business activities, including
without limitation, the repayment of
indebtedness of the Company, and (iii)
the sale is not otherwise prohibited by
subsection 13(c)(2) above.
Notwithstanding any other provision of
this subsection 13(c)(6), the Company
shall not consummate such sale without
the prior written consent of the
Secretary if the Company has not, prior
to the time of such sale, submitted to
the Secretary the financial statement
referred to in (i) of this subsection,
and any attempt to so consummate such
sale absent such approval shall be null
and void ab initio."
ARTICLE FOURTH
SHIPYARD PROJECT APPLICATION
This Title XI Reserve Fund and Financial Agreement shall
apply to the Shipyard Project described in Attachment A to
Exhibit 1 attached hereto. Any allocable financial requirements
or other specific requirements relating to the Shipyard Project
shall be so indicated in Attachment A. It is the intention of
this Title XI Reserve Fund and Financial Agreement that it remain
in effect so long as the Company owns the Shipyard Project with
Title XI guaranteed obligations outstanding relating to such
Shipyard Project.
<PAGE>
ARTICLE FIFTH
COUNTERPARTS
This Title XI Reserve Fund and Financial Agreement may be
executed in any number of counterparts. All such counterparts
shall be deemed to be originals and shall together constitute but
one and the same instrument.
ARTICLE SIXTH
CONFLICT
In the event of any conflict in or inconsistency between the
Special Provisions of this Title XI Reserve Fund and Financial
Agreement and Exhibit 1 hereto, said Special Provisions shall
control.
ARTICLE SEVENTH
CONCERNING REGULATIONS
Pursuant to 46 C.F.R S298.43 in effect on the date hereof,
the regulations set forth in 46 C.F.R. S298.1, et seq. (the
"Regulations") in effect on the date hereof are fully applicable
herein; provided, however, that to the extent the Secretary has
authority to waive such Regulations, or any of them, and has
waived them herein, they are hereby waived; and provided,
further, that any amendment to said Regulations or any regulation
or regulations hereafter promulgated or issued shall not be
applicable herein. The Secretary has not used any of his
authority under 46 C.F.R. S298.39 to exempt the Company from any
requirement of the Regulations.
<PAGE>
IN WITNESS WHEREOF, this Title XI Reserve Fund and Financial
Agreement has been executed by the parties hereto as of the day
and year first above written.
AVONDALE INDUSTRIES, INC.
(SEAL)
BY: /s/ Thomas M. Kitchen
---------------------
Thomas M. Kitchen, Vice
President, Chief Financial
Officer and Secretary
Attest:
/s/ Bruce L. Hicks
------------------
Bruce L. Hicks, Assistant Secretary
UNITED STATES OF AMERICA
By: SECRETARY OF TRANSPORTATION
By: MARITIME ADMINISTRATOR
By: /s/ Joel C. Richard
-------------------
Joel C. Richard
Attest:
/s/ Sarah J. Johnson
--------------------
Sarah J. Johnson
Assistant Secretary
Maritime Administration
<PAGE>
4.6(c)
EXHIBIT "B"
S P E C I M E N B O N D
$_______________ No. ____
UNITED STATES GOVERNMENT GUARANTEED
SHIPYARD FINANCING BOND, 2010 SERIES
8.16% Sinking Fund Bond Due September 30, 2010
Issued by
AVONDALE INDUSTRIES, INC.
Principal and interest guaranteed under Title XI of the
Merchant Marine Act, 1936, as amended.
AVONDALE INDUSTRIES, INC., a Louisiana corporation (herein
called the "Shipyard Owner"), FOR VALUE RECEIVED, promises to pay
to ________________________ __________________ or registered
assigns, the principal sum of ______________________
_________________________ AND NO/100 DOLLARS ($_____________.00)
on September 30, 2010, and to pay interest, semiannually on March
31 and September 30 of each year, commencing March 31, 1995, on
the unpaid principal amount of this Bond at the rate of 8.16% per
annum (calculated on the basis of a 360-day year of twelve 30-day
months) from the interest payment date referred to above next
preceding the date of this Bond to which interest on the Bonds
has been paid (unless the date hereof is the date to which
interest on the Bonds has been paid, in which case from the date
of this Bond), or, if no interest has been paid on the Bonds
since the original issue date (as defined in the Indenture
hereinafter mentioned) of this Bond, from such original issue
date, until payment of said principal sum has been made or duly
provided for, and at the same rate per annum on any overdue
principal.
The principal of and the interest on this Bond, as well as
any premium hereon in case of certain redemptions hereof prior to
maturity, are payable to the registered owner hereof at the
Corporate Trust Office of the Indenture Trustee hereinafter
referred to, Chemical Bank, 450 West 33rd Street, New York, New
York 10001, or at the offices or agencies which may be maintained
from time to time by the Shipyard Owner for such purpose 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 therein; provided, that principal, premium, if any,
or interest may be paid at the option of the Shipyard Owner
(other than in the case of a redemption in whole of this Bond or
<PAGE>
upon the maturity of this Bond) by check mailed to the address of
the registered owner hereof as such address shall appear in the
Obligation Register of said Indenture Trustee, and provided
further, that the Shipyard Owner and the registered owner hereof
may enter into other arrangements as to payment in accordance
with the Special Provisions of the Indenture. Prior to any sale,
assignment or transfer of this Bond by the registered owner
hereof in respect of which a principal payment has been made, the
registered owner hereof shall either: (i) cause a proper
notation of all such principal payments to be made hereon, or
(ii) present this Bond to the Indenture Trustee so that it may
make such notation. Upon redemption in whole of this Bond or
upon maturity of this Bond, the principal, premium, if any, and
interest due thereon shall be paid by check to the address of the
registered owner hereof as such address shall appear in the
Obligation Register, subject to the provisions of the Special
Provisions of the Indenture concerning home office payment, only
upon surrender of this Bond, by mail or other means, to the
Indenture Trustee at the office of the Indenture Trustee set
forth in the Special Provisions of the Indenture.
This Bond is one of an issue of bonds of the Shipyard Owner
of $17,780,000 aggregate principal amount of sinking fund bonds,
designated as its "United States Government Guaranteed Shipyard
Financing Bonds, 2010 Series", all issued under a Trust Indenture
dated as of February 9, 1995 (said Trust Indenture, as the same
may be amended, modified or supplemented from time to time as
permitted thereunder, herein called the "Indenture"), between the
Shipyard Owner and Chemical Bank, a New York corporation, as
Indenture Trustee (said Indenture Trustee, and its successor as
defined in the Indenture, herein called the "Indenture Trustee")
to aid in financing the cost of the construction by the Shipyard
Owner of the Shipyard Project (as defined in the Indenture).
Reference is hereby made to the Indenture for a definition of
certain terms used herein and a description of the rights,
limitations of rights, obligations, duties and immunities
thereunder of the Shipyard Owner and the Indenture Trustee and
the rights and limitations of rights of the Holders of the Bonds.
In accordance with the terms of an Authorization Agreement
dated as of February 9, 1995 (herein the "Authorization
Agreement"), between the United States of America, represented by
the Secretary of Transportation, acting by and through the
Maritime Administrator (herein called the "Secretary") and the
Indenture Trustee and by endorsement of the guarantee of the
United States of America (herein collectively called the
"Guarantees") on each of the Bonds and the authentication and
delivery of the Guarantees by the Indenture Trustee, all pursuant
to Title XI of the Merchant Marine Act, 1936, as amended and in
effect on February 9, 1995 (herein called the "Act"), the Bonds
are guaranteed by the United States of America as provided in the
Authorization Agreement and in the Guarantees endorsed thereon.
Reference is hereby made to the Authorization Agreement for a
description of the rights, limitations of rights, obligations,
duties and immunities thereunder of the Secretary and the
Indenture Trustee and the rights and limitations of rights of the
Holders of the Bonds.
<PAGE>
Section 1103(d) of Title XI of the Act provides that:
"The full faith and credit of the United
States is pledged to the payment of all
guarantees made under this title with respect
to both principal and interest, including
interest, as may be provided for in the
guarantee, accruing between the date of
default under a guaranteed obligation and the
payment in full of the guarantee."
If an Indenture Default (defined in Section 6.01 of Exhibit
1 to the Indenture as a Payment Default or the giving of a
Secretary's Notice) shall have occurred and be continuing, the
Indenture Trustee, as provided in the Indenture, shall, not later
than 60 days from the date of such Indenture Default, demand
payment by the Secretary of the Guarantees, whereupon the entire
unpaid principal amount of the Outstanding Bonds and all unpaid
interest thereon shall become due and payable on the first to
occur of the date which is 30 days from the date of such demand
or the date on which the Secretary pays the Guarantees. If no
demand for payment of the Guarantees shall have been made by the
Indenture Trustee on or before the 30th day following an
Indenture Default, the Holder of any Outstanding Bond may, in the
manner provided in the Indenture, make such demand in place of
the Indenture Trustee. In the event of an Indenture Default of
which the Secretary has actual knowledge, the Secretary, as
provided in the Authorization Agreement, will publish notice in
the authorized newspapers, which shall include "The Wall Street
Journal" (all editions) and "The Journal of Commerce" , of the
occurrence of such Indenture Default within 30 days from the date
of such Indenture Default unless demand for payment under the
Guarantees shall previously have been made by the Indenture
Trustee, but any failure to publish such notice or any defect
therein shall not affect in any way any rights of the Indenture
Trustee or any Holder of a Bond in respect of such Indenture
Default.
Within 30 days from the date of any demand for payment of
the Guarantees, the Secretary shall pay to the Indenture Trustee,
as agent and attorney-in-fact for the Holders of the Outstanding
Bonds (including this Bond), all the unpaid interest to the date
of such payment on, and the unpaid balance of the principal of
such Bonds in full, in cash; provided that, in the case of a
demand made as a result of a Payment Default, the Secretary shall
not be required to make any such payment if within such 30-day
period (and prior to any payment of the Guarantees by the
Secretary) the Secretary finds either that there was no Payment
Default or that such Payment Default was remedied prior to the
demand for payment of the Guarantees, in which event the
Guarantees shall continue in full force and effect.
The Holder of this Bond, by the purchase and acceptance
hereof, hereby irrevocably appoints the Indenture Trustee and
each other Holder of any Outstanding Bond as agent and attorney-
in-fact for the purpose of making any demand for payment of the
<PAGE>
Guarantees and (in the case of the Indenture Trustee) of
receiving and distributing such payment; provided that no action
or failure to act by the Indenture Trustee shall affect the right
of the Holder of this Bond to take any action whatsoever
permitted by law and not in violation of the terms of this Bond
or of the Indenture.
In the event of (a) a default, continued for 25 days, in the
payment of the principal of or interest on the Bonds (including
this Bond) when due or (b) any default under a mortgage, loan
agreement or other security agreement between the Secretary, the
Shipyard Owner and any other parties (including the expiration of
all notice and cure periods provided for thereunder), the
Secretary shall have the right to and may, in its discretion by
written notice given to the Indenture Trustee on or after said
25-day period or after such default but prior to receipt by the
Secretary of a demand in accordance with the Indenture for
payment under the Guarantees, assume all of the rights and
obligations of the Shipyard Owner under the Indenture and the
Bonds and, if such default relates to the payment of the
principal of and interest on the Bonds, make all payments then in
default under the Bonds.
Any amount payable by the Secretary under the Guarantees
shall not be subject to any claim or defense of the United States
of America, the Secretary, or others, whether by way of
counterclaim, set-off, reduction or otherwise. Further, the
Holder of this Bond shall have no right, title or interest in any
collateral or security given by the Shipyard Owner to the
Secretary.
After payment of the Guarantees by the Secretary to the
Indenture Trustee, this Bond (1) if it has not then been
surrendered for cancellation or cancelled, shall represent only
the right to receive payment in cash of an amount (less the
amount, if any, required to be withheld in respect of transfer or
other taxes on payments to the Holder of this Bond) equal to the
unpaid principal amount hereof and the unpaid interest accrued
hereon to the date on which the Secretary shall have paid the
Guarantees in full in cash to the Indenture Trustee, (2) shall
otherwise no longer constitute or represent an obligation of the
Shipyard Owner, and (3) shall not be entitled to any other rights
or benefits provided in the Indenture, subject to Section 6.08 of
the Indenture.
The Bonds (including this Bond) may be redeemed upon the
terms and conditions provided in the Indenture, in whole or in
part, at the option of the Shipyard Owner, at any time or from
time to time upon at least 30 and not more than 60 days' prior
notice to the registered holders thereof given as provided in the
Indenture, at a redemption price equal to 100% of the principal
amount hereof, plus the Make-Whole Amount (as defined in the
Indenture) determined for the Redemption Date with respect to the
principal amount to be redeemed, together with the interest
accrued thereon to the date fixed for redemption.
<PAGE>
The Bonds (including this Bond) are also subject to
redemption, upon the terms and conditions provided in the
Indenture and upon like notice, through the operation of a
mandatory sinking fund providing for the redemption on March 31,
1996, and on each September 30 and March 31 thereafter to and
including March 31, 2010, at 100% of the principal amount thereof
plus interest accrued thereon to such date, of a principal amount
of such Bonds equal to $593,000 and on September 30, 2010, the
entire unpaid principal amount of the Outstanding Bonds shall be
paid in full, together with all interest accrued thereon to such
date, provided, however, that notwithstanding the foregoing
provisions of this paragraph, that in case the principal amount
of Outstanding Bonds shall be reduced by reason of any redemption
described in the next succeeding paragraph, the principal amount
of Bonds to be redeemed through the operation of the mandatory
sinking fund on each subsequent mandatory sinking fund redemption
date shall be subject to reduction as provided in the Indenture.
In lieu of making all or any part of any such mandatory sinking
fund redemption, the Shipyard Owner may, at its option, receive
credit for Bonds (not previously credited against a mandatory
sinking fund payment or which the Shipyard Owner has advised the
Indenture Trustee have been credited with respect to a
determination by the Secretary as to whether or not the principal
amount of Outstanding Obligations exceeds 87.5% of the
depreciated actual cost or actual cost, as the case may be, of
the Shipyard Project, as determined by the Secretary under
Section [1112(b)] of the Act) (i) redeemed pursuant to the
optional sinking fund redemption provided for in the last
sentence of this paragraph, (ii) redeemed by the Shipyard Owner
pursuant to the optional redemption at a premium referred to
above, or (iii) purchased or acquired by the Shipyard Owner
otherwise than by redemption. Bonds so credited shall be
credited by the Indenture Trustee at 100% of the principal amount
thereof. In addition to any such mandatory sinking fund
redemption, the Shipyard Owner may, at its option, redeem on the
due date of any such mandatory sinking fund redemption, at 100%
of the principal amount thereof, plus the Make-Whole Amount
determined for the mandatory sinking fund Redemption Date with
respect to the additional principal amount to be redeemed,
together with interest accrued thereon to such date, an
additional principal amount of Bonds up to the principal amount
of Bonds required to be redeemed pursuant to such mandatory
sinking fund requirement on such date and before any credit
pursuant to the preceding sentence; provided that the right to
make any such optional sinking fund redemption shall not be
cumulative.
The Bonds (including this Bond) are also subject to
redemption, upon the terms and conditions provided in the
Indenture, in whole or in part, at 100% of the principal amount
thereof plus interest accrued thereon to the date of redemption,
upon at least 30 and not more than 60 days prior notice to the
registered holders thereof (a) in the event that Bonds must be
redeemed so that the principal amount of all Obligations
Outstanding after such redemption will not exceed 87.5% of the
depreciated actual cost or actual cost, as the case may be, of
the Shipyard Project, as determined by the Secretary, (b) in the
event of an actual, constructive, agreed or compromised total
<PAGE>
loss of, requisition of title to, or seizure or forfeiture of,
the Shipyard Project, or condemnation thereof, (c) in the event
the Shipyard Project is not substantially completed by March 31,
1996, or (d) in the event that, after an assumption by the
Secretary of the Bonds, a purchaser of the Shipyard Project from
the Secretary does not assume all the rights and obligations of
the Shipyard Owner under the Indenture relating to the Shipyard
Project.
The Bonds (including this Bond) may also be redeemed upon
the terms and conditions provided in the Indenture, in whole or
in part, at the option of the Secretary, at any time following an
assumption of the Bonds and the Indenture by the Secretary and
prior to any sale of the Shipyard Project to a purchaser which
assumes the Shipyard Owner's rights and obligations under the
Bonds and the Indenture, upon at least 30 and not more than 60
days' prior notice to the registered holders thereof given as
provided in the Indenture, at a Redemption Price equal to 100% of
the principal amount to be redeemed plus interest accrued to the
date fixed for redemption.
Any optional redemption shall be subject to the receipt of
the redemption moneys by the Indenture Trustee or any Paying
Agent. Bonds called for redemption shall (unless the Shipyard
Owner shall default in the payment of such Bonds at the
applicable redemption price plus accrued interest) cease to bear
interest on and after the date fixed for redemption.
As provided in and subject to Section 10.04 of the Indenture
and to the extent permitted thereby, compliance by the Shipyard
Owner with any of the terms of the Indenture may be waived, and
the Indenture and the rights and obligations of the Shipyard
Owner and the rights of the Holders of the Bonds (including this
Bond) thereunder may be modified, at any time with the prior
consent of the Secretary and, except as otherwise expressly
provided in the Indenture, the consent of the Holders of at least
60% in principal amount of the Outstanding Bonds affected thereby
in the manner and subject to the limitations set forth in the
Indenture; provided that no such waiver or modification shall (1)
without the consent of the Holder of each Bond affected thereby:
(a) change the Stated Maturity or reduce the principal amount of
any Bond, (b) extend the time of payment of, or reduce the rate
of, interest thereon, (c) change the due date of or reduce the
amount of any sinking fund payment, (d) reduce any premium
payable upon the redemption thereof, or (e) change the coin or
currency in which any Bond or the interest thereon is payable; or
(2) without the consent of all Holders of Bonds: (v) terminate or
modify any of the Guarantees or the obligations of the United
States of America thereunder, (w) reduce the amount of any of the
Guarantees, (x) eliminate, modify or condition the duties of the
Indenture Trustee to demand payment of the Guarantees, (y)
eliminate or reduce the eligibility requirements of the Indenture
Trustee, or (z) reduce the percentage of principal amount of
Bonds the consent of whose Holders is required for any such
modification or waiver.
<PAGE>
The Indenture provides that the Bonds (including this Bond)
shall no longer be entitled to any benefit provided therein if
the Bonds shall have become due and payable at Maturity (whether
by redemption or otherwise) and funds sufficient for the payment
thereof (including interest to the date fixed for such payment,
together with any premium thereon) and available for such payment
(1) shall be held by the Indenture Trustee or any Paying Agent,
or (2) shall have been so held and shall thereafter have been
paid to the Shipyard Owner after having been unclaimed for 6
years after the date of maturity thereof (whether by redemption
or otherwise) or the date of payment of the Guarantees, except
for the right, if any, of the Holder to receive payment from the
Shipyard Owner of any amounts paid to the Shipyard Owner as
provided in (2) above with respect to this Bond, all subject,
however, to the provisions of Section 6.08 of Exhibit 1 to the
Indenture.
This Bond is transferable by the registered Holder or by his
duly authorized attorney, at the Corporate Trust Office of the
Indenture Trustee, upon surrender or cancellation of this Bond,
accompanied by an instrument of transfer in form satisfactory to
the Shipyard Owner and the Indenture Trustee, duly executed by
the registered Holder hereof or his attorney duly authorized in
writing, and thereupon a new, fully registered Bond or Bonds of
like series and maturity for the same aggregate principal amount
will be issued to the transferee in exchange therefor, each in
the principal amount of $250,000 or any whole multiple of $1000
in excess of $250,000 subject to the provisions of the Indenture.
The Indenture provides that the Shipyard Owner shall not be
required to make transfers or exchanges of (1) Bonds for a period
of 15 days immediately prior to an interest payment date or (2)
Bonds after demand for payment of the Guarantees and prior to
payment thereof or rescission of such demand as provided in
Section 6.02(a) of Exhibit 1 to the Indenture or (3) any Bond
which has been selected for redemption in whole or in part.
The Shipyard Owner, the Secretary, the Indenture Trustee and
any office or agency for the payment of Bonds may deem and treat
the person in whose name this Bond is registered as the absolute
owner thereof for all purposes, and neither the Shipyard Owner,
the Secretary, the Indenture Trustee, nor any such office or
agency shall be affected by any notice to the contrary, whether
this Bond shall be past due or not.
No recourse shall be had for the payment of principal of, or
the interest or premium (if any) on, this Bond, or for any claim
based hereon or on the Indenture, against any incorporator or any
past, present or future subscriber to the capital stock,
stockholder, officer or director of the Shipyard Owner or of any
successor corporation, as such, either directly or through the
Shipyard Owner or any such successor corporation, under any
constitution, statute or rule of law or by the enforcement of any
assessment, or otherwise, all such liability being expressly
waived and released by the acceptance of this Bond and by the
terms of the Indenture.
<PAGE>
Neither this Bond nor the Guarantee endorsed hereon shall be
valid or become obligatory for any purpose until the Indenture
Trustee shall have fully signed the authentication certificate
endorsed hereon.
IN WITNESS WHEREOF, the Shipyard Owner has caused this Bond
to be duly executed by the manual or facsimile signatures of its
duly authorized officers under its corporate seal or facsimile
thereof.
Dated as of February 9, 1995 AVONDALE INDUSTRIES, INC.
BY:
----------------------
Thomas M. Kitchen, Vice
President, Chief Financial
Officer and Secretary
(SEAL)
Attest:
___________________________________
Bruce L. Hicks, Assistant Secretary
GUARANTEE OF THE UNITED STATES OF AMERICA
The United States of America, represented by the Secretary
of Transportation, acting by and through the Maritime
Administrator, pursuant to Title XI of the Merchant Marine Act,
1936, as amended, hereby guarantees to the holder of the within
Bond, upon demand of the holder or his agent, payment of the
unpaid interest on, and the unpaid balance of the principal of,
such Bond, including interest accruing between the date of
default under such Bond and the payment in full of this
Guarantee. The full faith and credit of the United States of
America is pledged to the payment of this Guarantee. The
validity of this Guarantee is incontestable in the hands of any
holder of such Bond. Payment of this Guarantee will be made in
accordance with the provisions of such Bond.
UNITED STATES OF AMERICA
SECRETARY OF TRANSPORTATION
(SEAL OF THE DEPARTMENT
OF TRANSPORTATION)
BY:
-------------------
Maritime Administrator
<PAGE>
TRUSTEE'S AUTHENTICATION CERTIFICATE
This is one of the Bonds described in the Indenture and the
foregoing Guarantee is one of the Guarantees described in the
Authorization Agreement.
CHEMICAL BANK
Indenture Trustee
BY:_______________________________
Authorized Officer
PAYMENTS ON ACCOUNT OF PRINCIPAL
Amount of Balance of Authorized
Payment Date Principal Paid Principal Unpaid Signature
------------ -------------- ---------------- -----------
<PAGE>
AMENDMENT NUMBER ONE
TO
AVONDALE INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, Avondale Industries, Inc., a corporation organized
and existing under the laws of the State of Louisiana, adopted
the Avondale Industries, Inc. Employee Stock Ownership Plan (the
"Plan") effective September 1, 1985; said Plan has been amended
from time to time; said Plan was amended and restated effective
January 1, 1989 and executed December 28, 1994;
WHEREAS, Avondale Industries, Inc. reserved the right to
amend the Plan by resolution of the Board of Directors;
WHEREAS, it is desirable to amend the Plan as set forth
herein;
NOW, THEREFORE, as authorized by Section 11.1, the Plan is
hereby amended, as follows:
I.
The second sentence of the fourth paragraph of Section 10.4
is amended effective March 30, 1995 to read as follows:
Within a reasonable time 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.
II.
Except as herein amended, the Plan shall remain in full
force and effect.
EXECUTED in multiple originals in Avondale, Louisiana, this
5th day of April, 1995.
AVONDALE INDUSTRIES, INC
BY: /s/ Thomas. M. Kitchen
----------------------
Thomas M. Kitchen,
Secretary
ATTEST
/s/ Jackie H. Walker
--------------------
Jackie H. Walker
(Corporate Seal)
<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 Amendment Number One to
the 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.
/s/ Thomas M. Kitchen
---------------------
Thomas M. Kitchen
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 7th DAY
OF APRIL, 1995.
/s/ A. Blomkalns
----------------
A. Blomkalns
NOTARY PUBLIC
<PAGE>
AMENDMENT NUMBER ONE
TO
AVONDALE INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP TRUST AGREEMENT
WHEREAS, Avondale Industries, Inc., a corporation organized
and existing under the laws of the State of Louisiana, adopted
the Avondale Industries, Inc. Employee Stock Ownership Trust
Agreement (the "Trust") effective September 1, 1985; said Trust
has been amended from time to time; said Plan was amended and
restated effective January 1, 1994 and executed December 28,
1994;
WHEREAS, Avondale Industries, Inc. reserved the right to
amend the Trust by resolution of the Board of Directors;
WHEREAS, it is desirable to amend the Trust as herein
provided;
NOW, THEREFORE, as authorized by Section 8.1, the Trust is
hereby amended, as follows:
I.
The second sentence of Article XI, Section 9.6, is amended,
effective March 30, 1995, to read as follows:
Within a reasonable time 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.
II.
Except as herein amended, the Plan shall remain in full
force and effect.
EXECUTED in multiple originals in Avondale, Louisiana, this
5th day of April, 1995.
AVONDALE INDUSTRIES, INC
BY: /s/Thomas M. Kitchen
--------------------
Thomas M. Kitchen, Secretary
ATTEST
/s/Jackie H. Walker
-------------------
Jackie H. Walker
(Corporate Seal)
<PAGE>
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 /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
-------------------
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 5th day of
April, 1995.
/s/ A. Blomkalns
----------------
A. Blomkalns
NOTARY PUBLIC
<PAGE>
AVONDALE INDUSTRIES, INC.
MANAGEMENT INCENTIVE PLAN
1. Purpose. The purpose of the Management Incentive Plan (the
"Plan") is to advance the interests of Avondale Industries,
Inc. (the "Company") by providing an annual incentive cash
bonus to be paid to key employees based on the achievement
of pre-established objective Company performance goals.
2. Administration. The Compensation Committee of the Board of
Directors of the Company (the "Committee") shall have
authority to administer the Plan in all respects and, in
particular, shall have authority to:
(a) Determine who will participate in the Plan;
(b) Establish performance goals;
(c) Establish regulations for the administration of the
Plan and make all determinations deemed necessary for
the administration of the Plan; and
(d) Determine whether and to what extent performance goals
have been met and the amount of the bonus to be paid to
each participant.
3. Incentive Bonus. Each key employee designated by the
Committee as a participant in the Plan shall be eligible to
be paid a cash bonus equal to a percentage of the
participant's annual salary. The exact amount of the annual
bonus shall be calculated according to a formula for the
year established by the Committee based on the achievement
of annual performance goals as of November 30. The formula
is based upon the Company's actual operating profit through
November plus forecasted operating profit for December and
upon changes in the Company's composite labor rate, man hour
estimates at completion, direct material estimates at
completion and projected profit estimates at completion.
For future years, the Committee may establish different
performance goals and formulas for calculation of the bonus.
4. Payment of Incentive Bonus. As soon as practicable after
November 30, the Committee shall apply that year's formula,
determine the amount of the incentive bonuses and pay the
incentive bonuses. Prior to payment, the Committee's
application of the formula shall be reviewed by the
Company's outside accountants.
5. Termination of Employment. In the event a participant's
employment with the Company is terminated for any reason,
including disability or death, prior to November 30 of a
year in which the Plan is in effect, the participant shall
not receive an incentive bonus for that year.
6. Assignments and Transfers. The participant may not assign,
encumber or transfer his rights and interests under the
Plan.
7. Amendment and Termination. The Committee may amend, suspend
or terminate the Plan at any time and no participant in the
Plan has any vested rights to any benefits hereunder.
8. Withholding of Taxes. The Company shall deduct from the
amount of any incentive bonus paid hereunder any federal or
state taxes required to be withheld.
9. Term of Plan. The Plan shall consist of individual calendar
year Plans, commencing effective January 1, 1995 and each
consecutive January 1 thereafter during the continuation of
the Plan. The Plan shall continue until terminated by the
Committee.
-1-
May 11, 1995
Avondale Industries, Inc.
Post Office Box 50280
New Orleans, Louisiana 70150
We have made a review, in accordance with standards established by
the American Institute of Certified Public Accountants, of the
unaudited interim financial information of Avondale Industries, Inc.
and subsidiaries for the periods ended March 31, 1995 and 1994, as
indicated in our report dated May 11, 1995; because we did not
perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in
your Quarterly Report on Form 10-Q for the quarter ended March 31,
1995, is incorporated by reference in Registration Statement No. 33-
31984 on Forms S-8 and S-3.
We also are aware that the aforementioned report, pursuant to Rule
436(c) under the Securities Act of 1933, is not considered a part of
the Registration Statement prepared or certified by an accountant or
a report prepared or certified by an accountant within the meaning of
Sections 7 and 11 of that Act.
\s\ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AVONDALE
INDUSTRIES, INC.'S QUARTERLY REPORT FILED ON FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 2,030
<SECURITIES> 0
<RECEIVABLES> 97,427
<ALLOWANCES> 0
<INVENTORY> 15,952
<CURRENT-ASSETS> 126,391
<PP&E> 240,218
<DEPRECIATION> (116,994)
<TOTAL-ASSETS> 290,020
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<BONDS> 59,584
<COMMON> 15,927
0
0
<OTHER-SE> 109,995
<TOTAL-LIABILITY-AND-EQUITY> 290,020
<SALES> 133,575
<TOTAL-REVENUES> 133,575
<CGS> 120,171
<TOTAL-COSTS> 120,171
<OTHER-EXPENSES> 7,995
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,279
<INCOME-PRETAX> 4,794
<INCOME-TAX> 1,750
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<EPS-PRIMARY> .21
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