SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1995
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 0-16572
Avondale Industries, Inc.
(Exact name of registrant as specified in its charter)
Louisiana 39-1097012
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5100 River Road, Avondale, Louisiana 70094
(Address of principal executive offices) (Zip Code)
(504) 436-2121
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
(affiliates being directors, executive officers and holders of more than 5% of
the Company's common stock) of the Registrant at December 31, 1995 was
approximately $77,267,832.
The number of shares of the Registrant's common stock, $1.00 par value
per share, outstanding at December 31, 1995 was 14,464,175.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for its 1996 Annual Meeting
have been incorporated by reference into Part III of this Form 10-K.
<PAGE>
PART I
Item 1. Business.
Overview
Avondale is one of the largest shipbuilders in the United States,
specializing in the design, construction, conversion, repair and modernization
of various types of ocean-going vessels for the military and commercial
markets. A majority of Avondale's contracts in recent years has been for the
construction of U.S. Navy surface ships, although it has secured two large
commercial contracts in the past year for the construction or conversion of
double-hulled product carriers. Management believes the Company's low cost
structure, experienced and skilled work force, sophisticated construction
processes and extensive experience gained over the past 25 years in building a
variety of military and commercial vessels, position the Company as one of the
most cost-efficient and versatile shipbuilders in the United States. At
December 31, 1995, the Company's firm backlog was approximately $1.4 billion
exclusive of unexercised options aggregating $485 million held by the U.S. Navy
for additional ship orders (including contract escalation) and a commercial
contract subject to financing. Of the firm backlog, approximately $1.3 billion
was attributable to contracts to build ships for the U.S. Navy.
During the past 25 years, Avondale has built over 72 vessels for the U.S.
Navy and other branches of the military, ranging from vessels such as AOs and
T-AOs that principally require large-scale steel fabrication at a competitive
cost, to highly sophisticated vessels such as the T-AGS 45, the LSD-CVs and the
MHCs (with fiberglass hulls) that also require extensive outfitting of
electrical, command and control and weapons systems. U.S. Navy vessels
currently under construction include four Sealift ships, three MHCs, two LSD-
CVs, one T-AO and one Icebreaker. The Company anticipates that it will continue
to focus primarily on securing contracts to construct and convert military
vessels. See "Glossary of Selected Industry Terms."
Within the past year, Avondale has secured two commercial contracts that
should benefit from the Company's expertise and newly adopted construction
techniques. In May 1995, Avondale finalized a $143.9 million contract to
construct four double-hulled forebodies for product carriers owned by American
Heavylift Shipping Company. Construction of these forebodies has begun and is
expected to be completed by mid-1997. The Company has also signed a contract
with Maritrans Ocean Transport, Inc. ("Maritrans") for the construction of up
to six (but not less than four) double-hulled product carriers. This contract
is subject to Maritrans' ability to qualify for and receive a Title XI MARAD
financing guarantee. Assuming receipt of such guarantee, the contract calls for
delivery of the vessels by the end of 1998.
Background. Avondale has historically maintained a flexible, versatile
shipyard and has been the successful bidder for a variety of marine
construction projects. Organized in 1938, Avondale first began building ocean-
going ships in the 1950s. From 1959 to 1985, the Company was operated as a
subsidiary of Ogden Corporation, a diversified New York Stock Exchange listed
company headquartered in New York, New York. Prior to the 1980s, Avondale built
both military and commercial vessels. In addition to the construction of 27
destroyer escorts for the U.S. Navy, Avondale successfully completed a variety
of construction projects during that period, including general cargo and multi-
product carriers, such as LASH vessels, container vessels, crude oil tankers
and product carriers. In the early 1980s, however, several measures were
implemented that changed the marine construction industry significantly. The
<PAGE>
termination of the U.S. construction-differential subsidy program in 1981
significantly curtailed the ability of U.S. shipyards to compete successfully
for international commercial shipbuilding contracts with foreign shipyards,
many of which are heavily subsidized by their governments. The effects of the
elimination of these subsidies were largely offset, however, by the initiative
to expand the U.S. Navy fleet to 600 vessels, thereby significantly increasing
the U.S. Navy shipbuilding opportunities available to Avondale.
Initially, Avondale capitalized on the U.S. Navy shipbuilding opportunities
through its construction of five AOs during the early 1980s. Since AOs are
essentially oil tankers modified to meet certain military requirements, they
were a natural extension of the product carrier vessels previously built by
Avondale.
During the remainder of the 1980s and the first part of this decade,
Avondale steadily expanded the range of vessels that it built for the U.S. Navy.
The Company principally focused on those vessels that were related to, or
natural extensions of, predecessor vessels constructed by Avondale, where
Avondale could best capitalize on its prior experience and proven capabilities.
Among the U.S. Navy vessels built or under construction during this period were
16 T-AOs, five LSDs, four LSD-CVs, five AOJs (which constituted conversions of
AOs previously built by Avondale), one T-AGS 45, 15 LCACs, four MHCs and three
SL 7 conversions.
With the end of the Cold War, and the pressure of domestic budget
constraints, spending for new vessel construction by the U.S. Navy has been
substantially reduced, with the rate of new vessel construction reduced to
approximately 50% of that in the 1980s. Despite the contraction in U.S. Navy
shipbuilding activity, management believes that Avondale's versatility has been
a significant factor in its successful efforts to restore its backlog, which
efforts have also been bolstered by Avondale's experience in building vessels
comparable to those currently in demand.
U.S. Military. Included in the current firm backlog for the military are
contracts to construct four Sealift ships at an original contract price of $880
million. The Sealift ships, which are designed to assist in the rapid
transportation and deployment of military personnel, equipment and supplies,
are comparable to other vessels, such as auxiliary and amphibious support
ships, that have been previously constructed by Avondale for the military. In
addition, the Company has been awarded options to construct two additional
Sealift vessels for an additional $485 million in the aggregate (including
contract escalation), which options have not yet been exercised by the U.S.
Navy. The first Sealift ship is scheduled for delivery in 1998 with the final
ship (assuming exercise by the U.S. Navy of the remaining Sealift options)
scheduled for delivery in 2001.
The award of the Sealift contract was one of a series of significant
military contract awards received by the Company since the beginning of 1993.
In 1993, the Company was awarded a $232.5 million contract for the construction
of the Icebreaker for the U.S. Coast Guard (scheduled for delivery in 1998) and
a contract to build one LSD-CV for the U.S. Navy at a contract price of $257.5
million. The 1994 LSD-CV award brought the total number of LSD-CV contracts
awarded to the Company to four, with two of the vessels having been delivered
to date, and the final two vessels scheduled for delivery in 1996 and 1998,
respectively. See "Glossary of Selected Industry Terms" and "--Shipbuilding--
Vessel Deliveries and Backlog."
In early 1994 Avondale was one of five U.S. shipyards awarded a contract
to undertake a preliminary design study on the U.S. Navy's LPD-17 (formerly LX)
<PAGE>
ship. The U.S. Navy has stated its expectation that the LPD-17 vessels will be
a mainstay of the U.S. Navy over the next two decades, replacing a number of
vessels nearing the end of their useful lives. In November 1995, Congress
appropriated $974.0 million for the construction of the first of an anticipated
12 vessels under the LPD-17 program. The LPD-17, which the U.S. Navy has
announced will be the next significant class of amphibious vessels, will be
outfitted with sophisticated command and control systems, as well as ship-based
weapon systems. The Company believes that the U.S. Navy will award a contract
for the first LPD-17, together with options for two additional vessels, in mid-
1996.
In connection with its pursuit of the LPD-17 contract, Avondale has
announced an alliance with Bath Iron Works Corporation ("Bath") (recently
acquired by General Dynamics Corporation) and Hughes Aircraft Company ("Hughes
Aircraft"), a subsidiary of Hughes Electronics Corporation. Under the alliance,
which Avondale expects to finalize prior to submission of the LPD-17 contract
bid, Avondale would be the lead contractor, and the LPD-17 vessels would be
constructed in both the Avondale and Bath shipyards, with Hughes Aircraft being
responsible for integration of the ships' electronic and weapons systems. More
recently, Ingalls Shipbuilding, a subsidiary of Litton Industries, announced
that it had formed an alliance with Tenneco's Newport News Shipbuilding,
National Steel and Shipbuilding Company and Lockheed Martin Government
Electronic Systems to pursue the same contract. Avondale believes that the
formation of its alliance with Bath and Hughes Aircraft, coupled with the
Company's low cost structure and proven experience in building vessels
comparable to the LPD-17, such as the LSD-CVs, will enhance the viability and
competitiveness of the Company's bid for the LPD-17 contracts.
If Avondale is the successful bidder for the first LPD-17 contract, in
order to satisfy the terms of the contract, it will be required to make a
significant capital investment, including, among others, the enhancement of its
computer-aided design capabilities and installation of sophisticated computer-
based data systems, which are necessary for completing the LPD-17.
Although funds for the construction of the first LPD-17 vessel have been
appropriated as part of the overall Department of Defense appropriations for
1996, the President vetoed the companion defense authorization bill. The veto
of the defense authorization bill has created some uncertainty as to the
obligation of the Department of Defense to spend appropriated funds, but it is
the Company's belief, based on public statements made by Department of Defense
representatives, that the veto will not have a negative impact on the
shipbuilding programs of the U.S. Navy, including the LPD-17.
In addition to the LPD-17, there are several other anticipated U.S. Navy
programs that may offer shipbuilding opportunities to Avondale, including the
possible construction of two additional Sealift vessels, a class of
prepositioning vessels for the U.S. Marine Corps, up to 14 ADC(X) vessels, and
the SC-21, which represents the next generation of surface combatant vessels.
Reemergence of Commercial Shipbuilding. The termination of the U.S.
construction-differential subsidy program in 1981 significantly curtailed the
ability of U.S. shipyards to compete successfully for international commercial
shipbuilding contracts with foreign shipyards, many of which are heavily
subsidized by their governments. Most of the commercial ships built in the
United States since 1981 have been constructed primarily due to the Jones Act
requirement that all vessels transporting products between U.S. ports be
constructed by U.S. shipyards. However, two recent legislative initiatives have
significantly enhanced U.S. commercial shipbuilding opportunities.
<PAGE>
The Oil Pollution Act of 1990, which requires the phased-in transition of
single-hulled tankers and product carriers to double-hulled vessels beginning
January 1, 1995, has created a demand (that is expected to continue through the
remainder of the decade) for the retro-fitting of existing tankers and the
construction of new double-hulled tankers, as oil and energy companies and
other ship operators upgrade their fleets to comply with the law. Industry
analysts believe that other countries may pass laws comparable to the Oil
Pollution Act of 1990, which would further increase worldwide demand for
double-hulled product carriers.
In late 1993, Congress amended the loan guarantee program under Title XI of
the Merchant Marine Act, 1936, to permit the U.S. government to guarantee loan
obligations of foreign vessel owners for foreign-flagged vessels that are built
in U.S. shipyards. Title XI authorizes MARAD to guarantee debt with a term of
up to 25 years in an amount up to 87.5% of the vessel cost, thereby enabling
shipowners to obtain construction financing on more favorable terms than those
currently offered by other countries having guarantee or subsidy programs for
foreign nationals similar to Title XI. These 1993 amendments expanded Title XI
in a manner that has attracted foreign owners and created foreign commercial
shipbuilding opportunities for U.S. shipyards.
Management believes these initiatives have assisted Avondale in attracting
commercial shipbuilding opportunities during the past year. In May 1995, the
Company finalized a $143.9 million contract to construct four double-hulled
forebodies for product carriers owned by a U.S. shipping company. These double-
hulled product carriers are the first U.S.-flag product carriers built in the
United States in eight years. The contract is supported by a Title XI guarantee
by MARAD. Construction of the forebodies has already begun and is expected to
be completed by mid-1997. Avondale believes its receipt of this contract was
further assisted by its prior experience in constructing three double-hulled T-
AOs on behalf of the U.S. Navy.
In November 1995, the Company signed a contract with Maritrans for the
construction of up to six (but not less than four) double-hulled product
carriers. This contract is subject to Maritrans' ability to qualify for and
receive a Title XI MARAD financing guarantee. Assuming receipt of such
guarantee, the contract calls for delivery of the vessels by the end of 1998.
These U.S.-flag vessels will comply with all requirements of the Oil Pollution
Act of 1990 and will engage in transportation of petroleum products between
U.S. ports under the Jones Act.
Recently, bills have been introduced in the U.S. Congress that would
eliminate the competitive advantages afforded to U.S. shipyards under the 1993
amendments to the Title XI guarantee program. This legislation would implement
a December 1994 trade agreement among the United States, the European Union,
Finland, Japan, Korea, Norway and Sweden (which collectively control over 75%
of the market share for worldwide vessel construction) negotiated under the
auspices of the Organization for Economic Cooperation and Development (the
"OECD Agreement"). The OECD Agreement and related accords seek, among other
things, to eliminate government subsidies provided to commercial shipbuilders
and to adopt a uniform standard of government credit assistance for foreign
nationals. Under these multilateral accords, each participating nation agreed
not to provide credit assistance to foreign nationals in excess of 80% of the
vessel construction price, and to limit the term of any credit assistance to
not more than 12 years. In mid-December 1995, a subcommittee of the Ways and
Means Committee of the U.S. House of Representatives passed a bill seeking to
implement the OECD Agreement. If this bill is enacted by Congress in its
current form, the Title XI guarantee program would be modified to be in accord
<PAGE>
with the uniform credit assistance standards mandated under the OECD Agreement,
thereby eliminating the advantages available to U.S. shipyards under the 1993
Title XI amendments.
Avondale is not able at this time to assess whether legislation
implementing the OECD Agreement will be enacted by Congress or the ultimate
impact that any such legislation may have. Although the OECD Agreement promotes
the goal of eliminating commercial shipbuilding subsidies by signatory nations,
there can be no assurance that certain safeguards in the agreement will not be
circumvented or will be adequately enforced, or that worldwide commercial
shipbuilding opportunities may continue to flow to foreign shipyards located in
signatory nations (which may have developed structural competitive advantages
as a result of their long histories of subsidization) or may be diverted to
non-signatory nations. If the competitive advantages of the current Title XI
guarantee program are eliminated and the OECD Agreement fails to achieve its
objectives, Avondale's ability to compete for international commercial
shipbuilding contracts will remain limited, notwithstanding the increased
opportunities that are expected to arise as vessels of the worldwide tanker and
product carrier fleet approach the end of their useful lives.
The OECD Agreement is not expected to immediately diminish commercial
opportunities arising under the Oil Pollution Act of 1990 and the Jones Act.
Legislative bills seeking to rescind or substantially modify the provisions of
the Jones Act mandating the use of U.S.-built ships for coastwise trade are
introduced in Congress from time to time, and are expected to be introduced in
the future. Although management believes it is unlikely the Jones Act will be
rescinded or materially modified in the foreseeable future, there can be no
assurance to this effect with respect to the Jones Act or any other law or
regulation benefitting U.S. shipbuilders.
Technological Innovations. To assure that its shipyard remains among the
most modern in the world, Avondale regularly reviews and assesses its
construction and production process. In this regard, Avondale often consults
with other highly successful shipbuilding companies concerning advances in
shipbuilding technology. In the early 1980s, the Company was the first U.S.
shipyard to successfully implement modular construction techniques that had
previously been perfected by Japanese shipbuilders. Management believes these
techniques were a major factor in Japan's dominance of the commercial
shipbuilding market during the 1970s. Avondale obtained its modular construction
capabilities and "know-how" pursuant to an agreement with Ishikawajima-Harima
Heavy Industries Co., Ltd. ("IHI"), one of Japan's largest shipbuilders, which
worked with Avondale to change its manufacturing processes and to train
Avondale's employees. Modular construction afforded Avondale significant
production efficiencies in the installation of ship systems, largely due to the
greater ease with which such systems could be installed in open modules rather
than closed-in hulls. As a result of these efforts, Avondale realized
substantial increases in labor productivity.
The Company has also embarked on a modernization program to enhance its
ability to build and deliver vessels at a lower cost. In 1994 the Company
entered into a technology sharing agreement with AESA of Spain, regarded as an
innovative and successful world-class shipyard. After an on-site review of
Avondale's shipyard by AESA, as well as a review by Avondale of current
shipbuilding technology in other countries, Avondale invested $20 million in
capital improvements designed to increase efficiency by improving production
flow. In particular, the Company integrated certain assembly-line techniques
with its modular construction processes. To that end, the Company has built a
covered facility that houses two production lines dedicated to military vessels
<PAGE>
and two lines for commercial vessels. Avondale believes that sheltering the
production process and separating the unit lines will enhance production
efficiencies and lower unit production costs.
Because the construction of commercial vessels, particularly the product
carriers that Avondale has traditionally built, places an emphasis on steel
fabrication rather than the complex technological outfitting involved in U.S.
naval construction, the assembly-line process implemented by the Company's new
production facility should particularly benefit Avondale's efforts to remain an
efficient, low-cost commercial shipbuilder. In addition, the Company's recent
experience in constructing U.S. naval vessels that are primarily transport
vessels, such as the Sealift and the LSD-CV, can be beneficially applied to the
construction of large-scale commercial product carriers.
Shipbuilding
The Company is predominantly engaged in the design, construction,
conversion, repair and modernization of various types of military and commercial
vessels.
The main shipyard facility, which is located on a 257-acre site on the
Mississippi River near New Orleans, includes multiple building ways, side
launching facilities, a 900-foot floating dry dock/launch platform that permits
construction of vessels up to 1,000 feet in length, and a 650-foot floating dry
dock principally used for ship repair. The main shipyard is equipped to build
almost any type of vessel other than nuclear submarines and surface vessels of
the largest classes, such as ultra-large crude carriers. Avondale also operates
several other facilities in the vicinity of the main shipyard, including its
Westwego shipyard, which is used primarily for boat construction and repair,
and its Algiers shipyard, which is used primarily for the repair and overhaul
of ocean-going vessels.
The Company has been and continues to be materially dependent on the U.S.
Navy's ship construction and conversion programs. The following table sets
forth the distribution of marine construction and repair activities during the
last five years based on contract billings. As the table indicates, a majority
of Avondale's work in the year ended December 31, 1995 was comprised of new
military construction. Commercial new construction increased in 1995,
principally due to the construction of the four forebodies for American
Heavylift Shipping Company and the construction of the river hopper barges
discussed in "--Other Operations--Boat Division."
<PAGE>
Distribution of Marine Construction and Repair Work
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
U.S. MILITARY:
New construction................................ 72% 87% 88% 81% 80%
Repair, overhaul and conversion................. 13% 6% 2%
COMMERCIAL:
New construction................................ 10% 2% 6% 11% 16%
Repair, overhaul and conversion................. 5% 5% 4% 8% 4%
--- --- --- --- ---
TOTAL: 100% 100% 100% 100% 100%
=== === === === ===
</TABLE>
The percentage of new construction for the U.S. Navy in 1995 was virtually
unchanged for 1994. Commercial repair, overhaul and conversion decreased in
1995 as compared to 1994 as the Company's work on several contracts with a
private contractor for the repair of Sealift ships approached completion.
See "--Other Operations--Repair Operations."
Government Contracting. Avondale's principal U.S. government business is
currently being performed under fixed-price and fixed-price incentive
contracts. Under fixed-price contracts, the contractor retains all cost savings
on completed contracts but is also liable for the full amount of all cost
overruns for which it is responsible. Fixed-price incentive contracts, on the
other hand, provide for sharing between the government and the contractor of
cost savings and cost overruns based primarily on a specified formula that
compares the contract target cost with actual cost. In addition, such fixed-
price incentive contracts generally provide for payment of escalation of costs
based on published indices relating to the shipbuilding industry. Although all
cost savings are shared under fixed-price incentive contracts, cost overruns in
excess of a specified amount must be borne entirely by the contractor. Recent
contract awards for the Sealift vessels, the fourth LSD-CV and the Icebreaker
are each fixed-price incentive contracts.
All contracts for the construction and conversion of U.S. Navy vessels are
subject to competitive bidding. As a safeguard to anti-competitive bidding
practices, the U.S. Navy has recently employed the concept of "cost realism,"
which requires that each bidder submit information on pricing, estimated costs
of completion and anticipated profit margins. The U.S. Navy uses this and other
data to determine an estimated cost for each bidder. The U.S. Navy then re-
evaluates the bids by using the higher of the bidder's and the U.S. Navy's cost
estimates.
Under government regulations, certain costs, including certain financing
costs, portions of research and development costs and certain marketing
expenses, are not allowable costs under fixed-price incentive contracts. The
government also regulates the methods by which overhead costs are allocated to
government contracts.
U.S. government contracts are subject to termination by the government
either for its convenience or upon default by the contractor. If the termination
<PAGE>
is for the government's convenience, contracts provide for payment upon
termination for items delivered to and accepted by the government, payment of
the contractor's costs incurred plus the costs of settling and paying claims by
terminated subcontractors, other settlement expenses and a reasonable profit.
However, if a contract termination results from the contractor's default, the
contractor is paid such amount as may be agreed upon for completed and
partially completed products and services accepted by the government. The
government is not liable for the contractor's costs with respect to unaccepted
items and is entitled to repayment of advance payments and progress payments,
if any, related to the terminated portions of the contract. In addition, the
contractor may be liable for excess costs incurred by the government in
procuring undelivered items from another source.
The continuation of any U.S. Navy shipbuilding program is dependent upon
the continuing availability of Congressional appropriations for that program. It
is customary for the U.S. Navy to award contracts to build one or more vessels
of a program to a contractor together with options (exercisable by the U.S.
Navy) to purchase additional vessels in the program. Generally, contracts to
build vessels are not awarded until funds to pay the full contract have been
appropriated. However, because Congress usually appropriates funds on a fiscal
year basis, funds may never be appropriated to permit the U.S. Navy to exercise
options that have been awarded. In addition, even if funds are appropriated,
the U.S. Navy is not required to exercise the options.
Because its U.S. Navy contracts require the Company to have access to
classified information, Avondale must maintain a security clearance for its
facility. Among other things, facilities with such clearances must restrict the
access of non-U.S. citizens to classified information. If in the future the
percentage of foreign ownership of the Company's Common Stock is increased to a
level that could result in foreign dominance or control of its activities, the
Company would be required to implement additional measures to insure that
classified material would not be compromised or risk the loss of its security
clearance.
Due to the complexity of government contracts and applicable regulations,
contract disputes with the government may occur in the ordinary course of the
Company's business. Based upon management's analysis of each such dispute and
advice of counsel, the Company records, if appropriate, an estimate of the
amount recoverable upon resolution of such disputes. There are currently no
such amounts recorded. Although management believes its estimates are based
upon a reasonable analysis of such disputes, no assurance can be given that its
estimates will be accurate, and variances between such estimates and actual
results can be material. The Company believes that adequate provision has been
made in its financial statements for this and other normal uncertainties
incident to its government business.
There is significant oversight of defense contractors to prevent waste in
the defense procurement process. Areas of contract dispute are reviewed by the
government for evidence of criminal misconduct such as mischarging, product
substitution and false certification of pricing and other data. In the event
the government alleges a violation of its procurement regulations, it may seek
compensatory, treble or punitive damages in substantial amounts and
indictments, fines, penalties and forfeitures. In addition, the government has
the right to suspend or debar a contractor from government contracting for
significant violations of government procurement regulations. Avondale has
never been subject to suspension or debarment.
Vessel Deliveries and Backlog. At December 31, 1995, the Company had a
<PAGE>
firm backlog of shipbuilding contracts of approximately $1.4 billion (exclusive
of unexercised options aggregating $485.0 million held by the U.S. Navy for
additional ship orders (including contract escalation) and a commercial
contract subject to financing), compared with backlogs of $1.4 billion at
December 31, 1994 and $1.3 billion at December 31, 1993. The backlog at
December 31, 1995 included $40.0 million to complete the one remaining T-AO out
of the seven awarded in the initial contract; $140.0 million to complete two of
the four LSD-CV vessels that were awarded (two of which were delivered in
1995); $240.0 million related to the Icebreaker under a contract awarded in
1993; and $880.0 million related to four Sealift ships, under contracts awarded
in 1993, 1994 and 1995. Also included in the firm backlog at December 31, 1995
was $35.0 million to complete three MHCs out of the four contracted for by the
U.S. Navy. The first MHC has already been delivered. Currently two of the MHCs
are scheduled for delivery in 1996 and one in 1997. In addition, Avondale has
recently signed two commercial shipbuilding contracts, one of which is subject
to the shipping company's ability to qualify for and receive a Title XI MARAD
financing guarantee.
All major U.S. Navy contracts in the backlog, except for the contract to
construct three LSD-CVs and the last three T-AOs, contain cost escalation
clauses that are intended to compensate the Company for increases in wage rates
and material costs based on industry indices. The contract to construct the
three LSD-CVs and the last three T-AOs, as originally awarded, contained a cost
escalation clause, but as part of the contract modifications the contracts were
converted to fixed-price contracts.
Vessel deliveries in 1994 and 1995 included three T-AOs, two LSD-CVs, one
MHC and three gaming vessels. The Company plans to continue to actively pursue
other government construction and conversion opportunities, as well as
commercial opportunities, when they become available.
The Company also has been actively pursuing commercial shipbuilding
opportunities, although international commercial shipbuilding opportunities
remain limited because shipbuilders in foreign countries are often subsidized
by their governments, which allows them to sell their ships for prices below
their construction costs. Domestic shipbuilding opportunities that are not
affected by foreign subsidies offer better possibilities for the Company. See
"--Overview--Reemergence of Commercial Shipbuilding."
In connection with the bids and proposals that the Company has submitted
or plans to submit to various commercial and government customers, no assurance
can be given that the Company will be the successful bidder or that the vessels
bid on will actually be built.
Other Operations
Overview. Although the Company has from time to time, on a limited basis,
pursued opportunities to diversify its business, management strongly believes
that the Company's resources are most profitably employed in marine
construction. As noted in "Management's Discussion and Analysis of Financial
Condition and Results of Operations," in order to focus on its core
shipbuilding business and improve liquidity, the Company sold or discontinued
certain of its non-core operations. The Company will continue to evaluate
suitable diversification opportunities, principally those that would not
detract from Avondale's core business and that would utilize the Company's
existing facilities. Among possible diversification opportunities are: (i) the
construction of large industrial facilities utilizing modular shipbuilding
expertise and project management experience; (ii) the repair and overhaul of
<PAGE>
U.S. Navy and commercial vessels; (iii) the construction of semi-submersible
rigs, tension-leg platforms or similar structures used in the offshore oil and
gas industry (which the Company has constructed from time to time in the past);
(iv) steel fabrication and other operations.
Modular Construction. The Company has been able to apply its modular
construction methods to a variety of non-marine industrial fabrication
projects, including a sulphur recovery plant that was shipped to Saudi Arabia
for on-site assembly and installation, two cryogenic gas separation systems,
two waste disposal units, six turbine compressors and turbine generators, six
condenser modules for inclusion in a nuclear power plant, and two sled and
receiver modules for sub-sea pipeline connections. The Company has also
fabricated steel bridges and a hydroelectric power plant that was floated up
the Mississippi River and installed in Vidalia, Louisiana in 1990. In January
1992, the Company delivered to the City of New York an 800-bed floating
detention facility that is 625 feet long, 125 feet wide, and five stories high.
Avondale's modular construction division has not engaged in any
significant projects since the floating detention center was delivered in the
early 1990s. Although at present there is a minimal level of production
activity in this division, Avondale will continue to pursue non-shipbuilding
marine and industrial-commercial projects suitable for modular construction as
attractive opportunities arise.
Small Vessel Construction. The Company pursues available opportunities for
the construction of special purpose vessels, and relatively small, special
purpose military vessels, commercial fishing boats, dredges, barges, and
ferries.
Boat Division. The Company has a facility equipped for boat construction at
its Westwego, Louisiana shipyard that is capable of building vessels up to 450
feet in length. In 1994, the Boat Division delivered two gaming vessels which
are 266 and 210 feet in length, and in mid-1995 the division delivered a third
gaming vessel which is 350 feet in length. The Boat Division has also recently
signed a $26 million contract to construct river hopper barges for Ingram Ohio
Barge Company. The Boat Division is actively pursuing other projects, involving
the construction of additional gaming boats as well as passenger vessels and
ferries, towboats and other vessels. The Boat Division's backlog at December
31, 1995, 1994 and 1993 was approximately $18.8 million, $18.3 million and
$13.0 million, respectively.
Steel Operations. Through its Steel Sales operation, Avondale sells steel
plate and structural steel to the marine and industrial markets in the Gulf
Coast region of the United States. Net sales to other Avondale divisions are
not significant. Sales to unrelated parties for the years ended December 31,
1995, 1994 and 1993 were approximately $28.2 million, $22.4 million and $19.0
million, respectively.
Repair Operations. At its main shipyard and the Algiers shipyard, Avondale
engages in the repair, overhaul and conversion of ocean-going vessels. With the
900 and 650 foot drydocks located at the Company's main shipyard, the Company
is capable of offering a complete range of vessel repairs and overhaul
services. The Algiers shipyard is operated under a long-term lease and is
designed primarily for the topside repair and overhaul of large ocean-going
vessels. Although historically Avondale has engaged in the repair and overhaul
of U.S. Navy vessels, these opportunities have been curtailed by the U.S.
Navy's current policy of requiring such work to be conducted at or near the
vessels' home ports.
<PAGE>
Competition
The shipbuilding industry is divided into two distinct markets, U.S.
government contracts, which is dominated by contracts for the U.S. Navy, and
domestic and international shipbuilding contracts for commercial customers. The
reduced level of shipbuilding activity by the U.S. government during the past
decade has significantly intensified competition. With respect to the market
for U.S. military contracts, there are principally five private U.S. shipyards,
including Avondale, that compete for contracts to construct or convert surface
vessels. Three of these companies are subsidiaries of much larger corporations
that have substantially greater resources than Avondale.
With respect to commercial vessels that must be constructed by a U.S.
shipyard under the Jones Act, there are approximately 20 private U.S. shipyards
that can accommodate the construction of vessels up to 400 feet in length, ten
of which Avondale considers to be its direct competitors for commercial
contracts. Because of the current overcapacity at U.S. shipyards, the current
small volume of commercial work available, and the fact that most contracts are
awarded on the basis of competitive bidding, price competition is particularly
intense. With respect to the international commercial shipbuilding market,
Avondale competes with numerous shipyards in several countries, many of which
are heavily subsidized by their governments. See "--Overview--Reemergence of
Commercial Shipbuilding."
Substantially all military and commercial contracts awarded to U.S.
shipyards are competitively bid. The Company has been successful recently in
securing competitively bid contracts in large part because the Company
submitted the most cost-effective bids for the available contracts. The Company
believes that it will continue to be competitive in bidding for selected U.S.
Navy and commercial shipbuilding contracts in the future. However, no assurance
can be given that the Company will be the successful bidder on any future
contracts or that, if successful, it will realize profits on such contracts.
Marketing
The Company's marketing effort is decentralized and conducted separately
by each division. Generally, the Company and its competitors are all aware of
the shipbuilding, repair and conversion plans of the U.S. Navy and most
prospective commercial customers, and are invited to bid on all major projects.
The Company's boatbuilding and repair operations are marketed by the sales
and business development personnel of the appropriate divisions primarily
through direct, personal sales calls. The services of the Steel Sales operation
are marketed through industry advertising, personal sales calls and prior
business relationships.
Materials and Supplies
The principal materials used by Avondale in its shipbuilding, conversion
and repair business are standard steel shapes, steel plate and paint. Other
materials used in large quantities include aluminum, copper-nickel and steel
pipe, electrical cable and fittings. The Company also purchases component parts
such as propulsion systems, boilers, generators and other equipment. All of
these materials and parts are currently available in adequate supply from
domestic and foreign sources. Generally, for all its long-term contracts, the
Company obtains price quotations for its materials requirements from multiple
suppliers to ensure competitive pricing. In addition, through the cost
escalation provisions contained in its U.S. military contracts, the Company is
<PAGE>
protected from increases in its materials costs to the extent that the
increases in the Company's costs are in line with industry indices.
In connection with its government contracts, the Company is required to
procure certain materials and component parts from supply sources approved by
the U.S. Government. Although certain components and sub-assemblies are
manufactured by subcontractors, the Company's reliance on subcontractors has
been and is expected by management to continue to be limited. The Company is
not dependent upon any one supply source and believes that its supply sources
are adequate to meet its future needs.
Insurance
The Company maintains insurance against property damage caused by fire,
explosion and similar catastrophic events that may result in physical damage or
destruction to the Company's premises and properties. The Company also
maintains general liability insurance in amounts it deems appropriate for its
business. The Company is self-insured for workers' compensation liability and
employees' health insurance except for losses in excess of $1.0 million per
occurrence, for which the Company maintains insurance in amounts it deems
appropriate.
Environmental and Safety Matters
General. Avondale is subject to federal, state and local environmental
laws and regulations that impose limitations on the discharge of pollutants
into the environment and establish standards for the treatment, storage and
disposal of toxic and hazardous wastes. Stringent fines and penalties may be
imposed for non-compliance with these laws and regulations, and certain
environmental laws impose joint and several "strict liability" for remediation
of spills and releases of oil and hazardous substances rendering a person liable
for environmental damage, without regard to negligence or fault on the part of
such person. Such laws and regulations may expose the Company to liability for
the conduct of or conditions caused by others, or for acts of the Company which
are or were in compliance with all applicable laws at the time such acts were
performed. The Company is covered under its various insurance policies for
some, but not all, potential environmental liabilities. See Note 10 of the
Notes to Consolidated Financial Statements.
The Company is also subject to the federal Occupational Safety and Health
Act ("OSHA") and similar state statutes. The Company has an extensive health and
safety program and employs a staff of safety inspectors and industrial hygiene
technicians, whose primary functions are to develop Company policies that meet
or exceed the safety standards set by OSHA, train supervisors and make daily
inspections of safety procedures to insure their compliance with Company
policies on safety and industrial hygiene. All supervisors are required to
attend safety training meetings at which the importance of full compliance with
safety procedures is emphasized.
Waste Disposal. Avondale's operations produce a limited amount of
industrial waste products and certain hazardous materials. The Company's
industrial waste products, which consist principally of residual petroleum,
other combustibles and blasting abrasives, are shipped to third party disposal
sites that are licensed to handle such materials.
Employees
Since September 1985, when all of its outstanding Common Stock was
<PAGE>
purchased by the ESOP from Ogden Corporation, Avondale has been owned
principally by its current and former employees. At December 31, 1995, Avondale
had approximately 5,300 employees, many of whom have been employed by the
Company for many years.
None of Avondale's employees are currently covered by any collective
bargaining agreement. However, on June 23, 1993 an election was conducted to
determine whether certain of the New Orleans area employees desired to have
union representation. A total of 3,914 workers cast votes, of which
approximately 850 votes were challenged by the NLRB and union organizers on a
variety of grounds. Although the union did receive a majority of the
unchallenged ballots, challenged ballots (which remain under seal) in numbers
sufficient to determine the outcome of the election remain uncounted awaiting
the NLRB's decision. The Company has filed objections with the NLRB seeking to
have the election set aside. The NLRB is currently reviewing the challenged
votes and evaluating the Company's objections to the election. The hearing
officer assigned to the case has recommended to the NLRB that certain of the
disputed votes be counted and that the Company's objections be rejected. If the
NLRB upholds the election and certifies the union, and that decision is not
overturned by subsequent judicial proceedings, the Company would be required
under federal labor laws to bargain in good faith with the union on matters such
as wages, hours and other working conditions. Even though Avondale will only
agree to bargaining demands that can be economically justified, union
certification may result in an increased risk that the union will engage in
potentially disruptive activities such as strikes or picketing, or that the
Company may incur higher labor and operating costs.
The union has also filed numerous unfair labor practice charges with the
NLRB alleging that Avondale has committed a variety of violations of the
National Labor Relations Act principally involving claims that employees were
wrongfully disciplined or discharged. Although the Company disputes these
claims and is waging a vigorous defense, if there is a finding against the
Company, depending on the facts of each case, the employee would be entitled to
back pay from the time of his or her claim until the resolution of the case.
However, even if there is a finding in favor of some of the claimants with
respect to one or more of the unfair labor practice claims, management believes
that any judgment would not have a material impact on Avondale's financial
condition, results of operations or cash flows.
Glossary of Selected Industry Terms
<TABLE>
<C> <S>
ADC(X) A class of auxiliary vessels designed to deliver a steady supply of
fuel, ammunition and stores to the U.S. Navy fleet. It is currently
envisioned that these vessels will have "Refuel at Sea"
capabilities similar to the T-AOs currently under construction at
Avondale.
AO An auxiliary oil tanker constructed for the U.S. Navy and crewed by
U.S. Navy personnel. Avondale has built five AOs.
AOJ An AO which has been "jumboized" i.e., lengthened by the Company by
inserting a 108 foot midbody. Avondale has converted five AOJs.
Icebreaker WAGB-20 Polar Icebreaker, which has been ordered by the U.S. Coast
Guard for its polar operations.
<PAGE>
Jones Act Merchant Marine Act of 1920, as amended.
LASH "Lighter aboard ship," a LASH vessel carries its cargo in pre-
loaded barges (lighters). The Company constructed 21 such vessels
in the late 1960s and early 1970s for five commercial customers.
LCAC "Landing craft air cushion," a surface effect vessel that was
constructed at the Company's Gulfport facility. Avondale has built
15 LCACs.
LPD-17 The next class of amphibious assault ship proposed by the U.S.
Navy.
LSD "Landing ship dock," designed to carry troops, materials and up to
four LCACs. Avondale has built five LSDs.
LSD-CV An LSD with a "cargo variant" design allowing for carrying of more
cargo and only 2 LCACs. Avondale has built four LSD-CVs.
MARAD United States Maritime Administration, Department of
Transportation.
MHC MHC-51 class fiberglass coastal minehunter. Avondale has built four
MHCs.
REAs Requests for Equitable Adjustments submitted by a government
contractor to the U.S. government, as explained further under the
heading "Risk Factors."
SC-21 "Surface Combatant 21st Century," the next generation of surface
combatant to be built for the U.S. Navy. As currently conceived,
this vessel would most closely resemble the Aegis class destroyer.
SL 7 A "Roll on Roll off" vessel operated by a private company for the
Military Sealift Command. Avondale has converted three SL 7s.
Sealift As used herein, TAKR 300 Class Sealift vessels are transport
vessels built for the U.S. Navy. Avondale has contracts to build
four Sealift vessels with options to build an additional two
vessels.
T-AGS 45 An oceanographic research vessel constructed by Avondale and
delivered to the U.S. Navy in May 1993.
T-AO Same as an "AO" but operated by the military sealift command and
crewed by a civilian crew. Avondale has built sixteen T-AOs.
</TABLE>
Item 2. Properties
The Company's corporate headquarters and main shipyard are located on the
west bank of the Mississippi River at Avondale, Louisiana, approximately 15
miles from downtown New Orleans. That facility includes approximately 226 acres
of Company-owned land with 174 buildings enclosing approximately 2.0 million
square feet of space, approximately 31 acres of leased land, a 900-foot floating
dry dock/launch platform that permits construction, conversion or repair of
vessels up to approximately 1,000 feet in length, and a 650-foot floating dry
<PAGE>
dock principally used for ship repair and multiple building ways and side
launching facilities. The main shipyard includes approximately 6,500 feet of
wharves, 1,200 feet of launch ways and 2,900 feet of unimproved waterfront
along the Mississippi River. The Company's shipyard facilities have the
capacity to build virtually any type of vessel other than submarines and
surface vessels of the largest classes, such as ultra-large crude carriers.
The Company's 900-foot floating drydock was constructed in 1975 and
financed pursuant to Title XI of the Merchant Marine Act, 1936, as amended. The
900 foot drydock is currently subject to a Title XI mortgage of approximately
$3.9 million. As discussed further in Note 4 of the Notes to the Consolidated
Financial Statements, these mortgage bonds were refinanced in February 1995.
The Company's 650-foot floating drydock and support facilities were
constructed in 1982 and financed with $36.25 million of industrial revenue bonds
(see Note 4 of the Notes to the Consolidated Financial Statements). As part of
its program to significantly improve its efficiency, in 1995 the Company
completed an approximate $20 million capital expenditure program, financed
principally through $17.8 million of bonds issued in February 1995 utilizing a
Title XI guarantee (see "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources" and
Note 4 to the Notes to the Consolidated Financial Statements). The
modernization program includes construction of a covered facility, which should
provide productivity gains by eliminating weather-related problems, and
adoption of a more automated process for building the various modules which are
assembled into a completed vessel.
As part of its program to significantly improve its efficiency, in 1995 the
Company completed an approximate $20 million capital expenditure program,
financed principally through $17.8 million of bonds issued in February 1995
utilizing a Title XI guarantee (see "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Capital Resources"
and Note 4 of the Notes to Consolidated Financial Statements). The
modernization program includes construction of a covered facility, which should
provide productivity gains by eliminating weather-related problems, and
adoption of a more automated process for building the various modules which are
assembled into a completed vessel.
During February 1995, the Company established two additional entities for
the purpose of owning certain parcels of Avondale's real estate which underlie
the building and improvements funded with the proceeds of the debt guaranteed
under Title XI (as discussed above). The first entity is Avondale Properties,
Inc., a Louisiana corporation, wholly owned by Avondale Industries, Inc. The
second entity is Avondale Land Management Company, a Louisiana Partnership owned
99% by Avondale Properties, Inc. The properties transferred represent
approximately 143 of the 210 acres which comprise the Company's main facility.
These parcels are leased back to Avondale Industries, Inc. pursuant to certain
lease agreements with a term coincident with the Title XI debt.
The Company also operates several other facilities in the vicinity of the
main shipyard. The Westwego Yard is located five miles down-river from the main
shipyard on 16.6 acres of leased land and includes facilities for the
construction or repair of boats and vessels up to 450 feet in length. The
Algiers Yard is located 19 miles down-river from the main shipyard on 22 acres
of leased land and includes construction facilities used predominantly for the
repair and overhaul of large ocean-going vessels. The Steel Sales operation is
located on 4.4 acres of property leased on a month-to-month basis in Harvey,
Louisiana, where a steel warehouse is located. The location has direct access
<PAGE>
to the Mississippi River via the Harvey Canal. The Modular Construction
operation, located in an approximately 70,000 square foot facility on a 58 acre
Company-owned site a few miles up-river from the main shipyard, consists of a
complete machine shop with steel fabricating facilities.
The Avondale Gulfport Marine, Inc. ("AGM") facility is located on 24.5
acres of Company-owned land located six miles northeast of Gulfport, Mississippi
on an industrial seaway. The site has a 98,800 square foot manufacturing
facility and a 25,000 square foot assembly building. The site also includes a
test area, a craft storage area and a waterway access ramp. This facility is
currently idle and has been listed for sale. However, the Company continues to
seek alternative uses for this facility.
The Avondale Enterprises, Inc. ("AEI") facility is located on a Company-
owned 121.5 acre site four miles north northeast of Gulfport, Mississippi on the
same industrial seaway as AGM. The facility includes a 263,447 square foot
manufacturing facility and a 6,300 square foot administration building. This
facility was acquired in 1989 for construction of the MHCs. AEI has pledged a
portion of the facility to secure a $3 million loan it entered into in 1991 to
finance a portion of its 1989 acquisition debt. Upon the transfer of the final
MHC hull to the main shipyard in December 1994, this facility became idle. The
Company is currently utilizing a portion of the facility for the construction of
barge covers as part of the river hopper barge construction contract discussed
at "Business - Other Operations - Boat Division."
The main facility operated by the Genco Industries Group ("Genco") is
located on a Company-owned 8.7 acre site 20 miles southeast of Beaumont, Texas.
The facility includes five buildings utilized for manufacturing and
administration comprising approximately 66,800 square feet. Genco has a smaller
facility that is located on a Company-owned 3.2 acre site approximately 80 miles
northwest of Beaumont. This facility consists of three manufacturing-
administration buildings totaling approximately 26,500 square feet. Genco's
facilities became idle in 1994 after completion of their contracts. The Company
currently has these facilities listed for sale and is exploring alternative
uses.
Except as otherwise noted above, the above-described facility leases are
for various terms extending through at least 1999, including renewal options.
The Company believes that its core marine construction and repair
facilities provide it with sufficient capacity to handle any business it
reasonable expects to obtain in the foreseeable future. In general, the
Company's productive capacity is limited less by physical facilities than by the
number of employees the Company can effectively supervise. Management believes
that the Company would be operating at full capacity with approximately 10,000
employees. The Company's core business currently operates with more than 5,200
employees.
Item 3. Legal Proceedings
Environmental Proceedings. Various governmental and private parties have
from time to time alleged that the Company is a potentially responsible party
with respect to certain hazardous waste sites, including, among other things,
the site listed below.
In January 1986, the Louisiana Department of Environmental Quality ("DEQ")
advised the Company that it may be a potentially responsible party ("PRP") with
<PAGE>
respect to an oil reclamation site operated by an unaffiliated company in
Walker, Louisiana. The Company sold to the operator a substantial portion of the
waste oil that was processed at the reclamation site during the period 1978
through 1982. The Company's potential liability, if any, for cleanup of this
site will be based on the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA") or the Louisiana Environmental Affairs Act.
Under these statutes, such liability is presumptively joint and several, but is
typically apportioned among the responsible parties based on the volume of
material sent by each to the waste site. The Company has cooperated with other
PRPs to study the potential aggregate liability under these statutes. Moreover,
the Company believes it has substantial defenses against liability and defenses
that could mitigate the portion of liability, if any, that would otherwise be
attributable to it.
To date, the Company and certain of the other PRPs for the site have funded
the site's remediation under a preliminary cost-sharing agreement. As of
December 31, 1995 clean-up costs totalled $17 million, of which the Company has
contributed $3.6 million. Additional work scheduled for the site includes
completion of studies in 1996, and if required by the results of these studies,
subsequent remediation. Following completion of any such required additional
remediation, it will be necessary to obtain Environmental Protection Agency
approval to close the site, which consent may require subsequent post-closure
activities such as groundwater monitoring and site maintenance for many years.
The Company is not able to estimate the final costs for any such additional
remedial work or post-closure costs that may be required; however, the Company
believes that its proportionate share of expenditures for any additional work
will not have a material adverse 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 changed.
Since July 1986, a number of "toxic tort" suits have been filed against the
Company and numerous other defendants alleging claims for personal injury,
property damage, and "fear of cancer" in connection with the reclamation site
discussed above. The plaintiffs also sought substantial punitive damages. These
cases were consolidated and certified as a class action. In 1995, the Judge for
the Federal District Court for the Western District of Louisiana issued a ruling
from the bench approving the Company's settlement of the class action lawsuit.
Based on the advice of its counsel, the Company believes that a written order
confirming its earlier bench ruling will be issued by the Federal District Court
in the near future. Under the terms of the court approved settlement, which is
subject to appeal following the issuance of the final written order, the Company
paid $4.0 million cash into a settlement fund in the third quarter of 1995,
using cash from operations, and issued a $2.0 million unsecured note to the
plaintiff class. The note bears interest at 8% per annum and is due on
January 28,1997. The Company had previously recorded an accrual sufficient to
provide for the $6.0 million settlement and has sufficient liquidity to fund the
note. The Company could also be responsible for payment to the plaintiffs of up
to an additional $6.0 million (plus interest at 8% per annum) if the plaintiffs
are unsuccessful in collecting certain claims under Avondale's insurance
policies that have been assigned to the plaintiff class under the settlement
agreement. 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 adverse effect on
the Company's results of operations, financial position or cash flows.
Furthermore, the Company has initiated litigation against its insurer for a
declaration of coverage of the liability, if any, that may arise in connection
with the remediation of the site referred to above. The court has ruled that the
<PAGE>
insurer has the duty to defend the Company, but has not yet ruled on whether
the carrier has a duty to indemnify the Company if any liability is ultimately
assessed against it. After consultation with counsel, the Company is unable to
predict the eventual outcome of this litigation or the degree to which such
potential liability would be indemnified by its insurance carrier.
In addition to the above, the Company is also named as a defendant in other
lawsuits and proceedings arising in the ordinary course of business, some of
which involve substantial claims.
The Company has established accruals as appropriate for certain of the
matters discussed above. While the ultimate outcome of lawsuits and proceedings
against the Company cannot be predicted with certainty, management believes,
based on current facts and circumstances and after review with counsel, that,
the eventual resolution of these matters is not expected to have a material
adverse effect on the Company's financial statements.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company did not submit any matters to a vote of security holders during
the fourth quarter of its fiscal year ended December 31, 1995.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Company's common stock has traded on The Nasdaq Stock Market ("NASDAQ")
under the symbol AVDL. The following table sets forth the range of high and low
per share sales prices, as reported by NASDAQ, for the periods indicated.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1994
----
First Quarter $ 8 1/2 $ 6 5/8
Second Quarter $ 8 1/2 $ 6 1/4
Third Quarter $ 8 1/4 $ 6 1/8
Fourth Quarter $ 8 $ 6 5/8
1995
----
First Quarter $ 8 1/8 $ 7 1/8
Second Quarter $ 9 1/4 $ 7
Third Quarter $ 15 7/8 $ 8 1/8
Fourth Quarter $ 16 3/8 $ 12 3/4
</TABLE>
At December 31, 1995, there were 719 holders of record of the Company's
Common Stock.
<PAGE>
The Company does not currently pay dividends on its Common Stock and no
dividends were paid on the Company's Common Stock during the two years ended
December 31, 1995. As discussed in Note 4 of the Notes to Consolidated
Financial Statements, the terms of the Company's revolving credit agreement
limit or restrict, without bank approval, the payment of cash dividends.
<PAGE>
Item 6. Selected Consolidated Financial Data.
SELECTED FINANCIAL DATA
The following table contains selected consolidated financial data for the
Company and its subsidiaries for each of the fiscal years in the five-year
period ended December 31, 1995. The data for each of the fiscal years in the
five-year period ended December 31, 1995 are derived from the consolidated
financial statements of the Company and its subsidiaries. The consolidated
financial statements as of December 31, 1994 and 1995, and for each of the
years in the three-year period ended December 31, 1995, and the report of
Deloitte & Touche LLP thereon, have been included in this Form 10-K.
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------
(In thousands, except per share data)
1991 1992 1993(2) 1994(2) 1995(2)
-------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:(1)
Continuing operations:
Net sales.............. $768,887 $576,384 $ 456,724 $ 475,810 $ 576,308
Gross profit (loss).... (30,090) 37,796 33,180 47,485 58,671
Income (loss) from
operations............ (119,842) 7,281 3,400 16,949 26,548
Net ESOP
contribution(5)....... 24,000 8,141 -- -- --
Income (loss) from
continuing operations. (139,173) (11,321) (5,233) 13,075 28,180
Income (loss) from
discontinued
operations............. (1,705) 104 (3,561) (4,552) --
Net income
(loss)(3)(4)(6)........ (140,878) (11,217) (8,794) 8,523 28,180
Income (loss) per share
of Common Stock:
Continuing operations.. (9.64) (0.78) (0.36) 0.90 1.95
Discontinued
operations............ (0.12) -- (0.25) (0.31) --
Total.................. (9.76) (0.78) (0.61) 0.59 1.95
Cash dividends per share
of Common Stock(7)..... -- -- -- -- --
BALANCE SHEET DATA:
Current assets.......... $199,815 $177,075 $ 151,597 $ 127,936 $ 173,593
Current liabilities..... 127,522 113,917 127,032 93,100 92,605
Total assets............ 383,670 346,196 302,139 273,503 316,727
Long-term debt.......... 110,009 90,469 43,848 45,875 60,593
Total liabilities....... 257,528 223,047 187,784 150,625 165,669
Shareholders' equity.... 126,142 123,149 114,355 122,878 151,058
OTHER FINANCIAL DATA:
EBITDA(8)............... $(49,395) $ 19,599 $ 15,210 $ 28,501 $ 36,367
OPERATIONAL DATA:
Firm backlog............ $921,400 $678,000 $1,268,000 $1,424,000 $1,413,000
</TABLE>
- --------
(1) Income statement data for years 1991 through 1993 have been restated to
present Avondale's service contracting subsidiary as discontinued
operations (see Note 5 of the Notes to Consolidated Financial Statements).
(2) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Notes to Consolidated Financial Statements
relating to, among other things, (i) proceeds received by the Company from
the settlements of REAs in December 1993 and December 1995 and (ii) the
impact of revisions of estimated profits on several previously completed
shipbuilding contracts in 1994.
(3) During 1991, the Company revised its estimated costs to complete certain
<PAGE>
contracts which had the effect of decreasing net income by approximately
$69.0 million, or $4.78 per share.
(4) During 1991, the Company revised its estimate of the continuing value and
future benefits of goodwill. Accordingly, the Company reduced the carrying
value of goodwill which had the effect of decreasing net income for 1991
by $57.6 million, or $3.99 per share.
(5) The amounts reflected as Net ESOP contributions for 1991 and 1992 reflect
contributions made by the Company to the ESOP, all of which were returned
to the Company as repayments of indebtedness owed by the ESOP to the
Company incurred in connection with the purchase by the ESOP of the Common
Stock of the Company in 1985. Although these contributions were charged
against income, they had no net effect on Shareholders' equity.
(6) Net income for the year ended December 31, 1995 includes a deferred income
tax benefit of $13.0 million ($.90 per share) attributable to certain net
operating loss carryforwards available to offset estimated future taxable
earnings.
(7) The Company does not currently pay cash dividends on its Common Stock.
(8) As used herein, EBITDA is income (loss) from operations plus depreciation
and amortization. EBITDA is frequently used by securities analysts and is
presented here to provide additional information about the Company's
operations. EBITDA should not be considered as an alternative to net
income as a measure of the Company's operating performance or as an
alternative to cash flows as a better measure of the Company's liquidity.
For 1991, EBITDA does not include a $57.6 million write-down of goodwill.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with Avondale
Industries, Inc.'s (the "Company" or "Avondale") Consolidated Financial
Statements and Notes thereto included elsewhere in this Form 10-K.
Overview
The Company's results of operations improved substantially during fiscal
1995 compared to the prior year. Net sales were 21% above the level recorded in
1994 while income from continuing operations before income taxes increased 78%
from the amount reported for fiscal year 1994. Further, 1995 net income more
than tripled that of 1994.
The Company's firm backlog at December 31, 1995 was approximately $1.4
billion exclusive of unexercised options aggregating $485 million held by the
U.S. Navy for additional ship orders (including contract escalation) and a
commercial contract subject to financing. Firm backlog includes several
contracts awarded in 1995 with the most significant occurring in December 1995,
when the U.S. Navy exercised a previously awarded option to construct an
additional Sealift ship for approximately $206 million (or more than $235
million after considering certain additional components and cost escalation).
The exercise of this option represents the fourth ship which the Company has
been awarded in the Sealift program. The U.S. Navy holds options for two
additional Sealift ships that are exercisable over the next two years.
<PAGE>
Other 1995 contract awards include a $143.9 million contract finalized in
May 1995 to construct four double-hulled forebodies for product carriers and a
$25.9 million contract to construct a series of river hopper barges.
Construction of the forebodies has begun and is expected to be completed by
mid-1997. In 1995 the Company also signed a contract with a U.S. shipping
company for the construction of up to six (but not less than four) double-
hulled product carriers. This contract is subject to the shipping company's
ability to qualify for and receive a Title XI MARAD financing guarantee.
Assuming receipt of such guarantee, the contract calls for delivery of the
vessels by the end of 1998.
The Company previously disclosed that it had filed a REA with the U.S.
Navy related to the four MHCs currently under contract with the Company (the
"Minehunter REA"). On December 29, 1995 the Company announced that it settled
the Minehunter REA for an amount that was consistent with the previously
recorded estimate of the amount recoverable under the Minehunter REA. The
settlement should enable the Company to complete the MHC program on a break-
even basis through the remainder of contract performance. The first of the four
MHCs was delivered to the U.S. Navy in August 1995, with the remaining three
ships scheduled for completion and delivery during 1996 and early 1997.
With the exception of the contracts to construct the four MHCs and the
three LSD-CVs, which are projected to be completed on essentially a break-even
basis through the remainder of contract performance, the Company's committed
backlog is projected to be completed profitably. The operating profit projected
for 1996 will be related principally to the LSD-CV 52, the T-AO and the Sealift
ship contracts, while profits projected for 1997 and 1998 will reflect the LSD-
CV 52 as well as the Sealift, Icebreaker and double-hulled forebodies
contracts. The Company records profits under the percentage-of-completion
method of accounting based on direct labor charges. Although the Company
generally does not begin to record profits on its contracts until contract
performance is sufficient to estimate final results with reasonable accuracy,
actual profits taken with respect to such contracts may be diminished if the
Company is required in the future to revise its estimate of the cost to
complete one or more of such contracts.
As discussed further in Note 10 of the Notes to Consolidated Financial
Statements, the Company was informed that it was a potentially responsible
party ("PRP") in connection with an oil reclamation site in Walker, Louisiana
operated by an unaffiliated company. The Company, along with other PRPs, has
fully funded its share of the clean-up costs incurred to date under a
preliminary cost-sharing agreement to fund the site's remediation. As of
December 31, 1995, clean-up costs totaled $17 million, of which the Company has
contributed $3.6 million. Additional work scheduled for the site includes
completion of studies in 1996, and if required by the results of these studies,
subsequent remediation. Following completion of any such required additional
remediation, it will be necessary to obtain Environmental Protection Agency
approval to close the site, which consent may require subsequent post-closure
activities such as groundwater monitoring and site maintenance for many years.
The Company is not able to estimate the final costs for any such additional
remedial work or post-closure costs that may be required; however, the Company
believes that its proportionate share of expenditures for any additional work
will not have a material adverse 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 changed.
Since July 1986, a number of "toxic tort" suits have been filed against the
Company and numerous other defendants alleging claims for personal injury,
<PAGE>
property damage, and "fear of cancer" in connection with the reclamation site
discussed above. The plaintiffs also sought substantial punitive damages. These
cases were consolidated and certified as a class action. In 1995, the Judge for
the Federal District Court for the Western District of Louisiana issued a ruling
from the bench approving the Company's settlement of the class action lawsuit.
Based on the advice of its counsel, the Company believes that a written order
confirming its earlier bench ruling will be issued by the Federal District Court
in the near future. Under the terms of the court approved settlement, which is
subject to appeal following the issuance of the final written order, the Company
paid $4.0 million cash into a settlement fund in the third quarter of 1995,
using cash from operations, and issued a $2.0 million unsecured note to the
plaintiff class. The note bears interest at 8% per annum and is due on
January 28,1997. The Company had previously recorded an accrual sufficient to
provide for the $6.0 million settlement and has sufficient liquidity to fund the
note. The Company could also be responsible for payment to the plaintiffs of up
to an additional $6.0 million (plus interest at 8% per annum) if the plaintiffs
are unsuccessful in collecting certain claims under Avondale's insurance
policies that have been assigned to the plaintiff class under the settlement
agreement. 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 adverse effect on
the Company's results of operations, financial position or cash flows.
As previously disclosed, 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 these properties, the Company
currently is not aware of any material environmental liabilities to be incurred
for site restoration, post closure, monitoring commitments, or other exit costs.
Results of Operations
1995 VS. 1994. The Company recorded net income of $28.2 million, or $1.95
per share, for 1995 compared to $8.5 million, or $0.59 per share, for 1994
representing a threefold increase in net income over the prior year. The 1995
net income includes a $4.4 million, or $0.30 per share, net income tax benefit
(discussed below). Also included in 1995 net income is $4.5 million, or $0.31
per share, which is a reduction of a previously recognized loss which was
recorded in prior years on the contract to construct three LSD-CVs. The
reduction was due primarily to a revision of the total estimated contract cost
as it nears completion. Included in net income for 1994 are a $3.5 million, or
$0.24 per share, net gain related to revisions of estimated contract profits on
several previously completed shipbuilding contracts and a loss from
discontinued operations of $4.6 million, or $0.31 per share, reflecting the
Company's decision in 1994 to discontinue its service contracting business.
The significant increases in the Company's operating results in 1995
primarily reflect increased operating profits recognized on the LSD-CV 52
contract, as well as the reversal of part of a previously recognized loss on
the contract to construct three LSD-CVs, and the recognition of operating
profit on the T-AO contract. Also contributing to the increase in operating
results for 1995 were profits recorded by the Company's marine repair and
wholesale steel operations and an increase in interest income primarily
resulting from an increase in the Company's invested cash balances.
The Company's net sales in 1995 increased $100.5 million, or 21%, as
compared to the prior year. The increase in 1995 net sales was due primarily to
increases in sales revenues recognized on the contracts to construct the first
<PAGE>
three Sealift ships, the forebodies for four double-hulled product tankers, the
LSD-CV 52 and the Icebreaker, which collectively accounted for 54% of the
Company's 1995 net sales revenue. The increase in net sales was partially
increase in net sales was partially offset by reductions in sales revenues
recognized on the contracts to construct the T-AOs (the fifth and sixth of
which were delivered in 1995), three LSD-CVs (the second of which was delivered
in 1995) and four MHCs (the first of which was delivered in 1995), as these
contracts approach completion. The contracts to construct the T-AOs, three LSD-
CVs, and four MHCs collectively accounted for 28% of the Company's 1995 net
sales revenue.
Gross profit for 1995 increased $11.2 million, or 24%, compared to 1994.
The increase in 1995 gross profit was primarily due to profits recognized on
the contract to construct the LSD-CV 52 as the percentage of completion was
sufficient to begin profit recognition in 1995.
Selling, general and administrative ("SG&A") expenses increased $1.6
million, or 5%, for 1995 compared to 1994. The overall increase in SG&A
expenses primarily reflected increased operating activity at the Company's main
shipyard and, in part, an increase in indirect labor and associated costs
resulting from a wage increase given in January 1995 to all employees. These
increases in SG&A expenses were partially offset by a decrease in SG&A expenses
resulting from the closing of certain subsidiary operations.
Interest expense increased by $457,000, or 10%, in 1995 as compared to
1994. The increase was due principally to interest expense associated with the
$17.8 million Title XI financing completed in February 1995 (as discussed
below), $36.3 million of Series 1994 industrial revenue bonds (see Note 4 of
the Notes to Consolidated Financial Statements) and a note issued as part of a
litigation settlement (discussed in Note 10 of the Notes to Consolidated
Financial Statements). These increases were partially offset by an increase in
interest capitalized on assets under construction relating primarily to the
modernization project.
The Company's 1995 operating results include a net income tax benefit of
$4.4 million, or $0.30 per share. As further discussed in Note 7 of the Notes
to Consolidated Financial Statements, the net income tax benefit is principally
the result of recognizing, for financial reporting purposes, a $13 million
income tax benefit from certain net operating loss carryforwards available to
offset estimated future taxable earnings. The $13 million tax benefit was
partially offset by an income tax provision of $8.6 million related to 1995
operating results. There was a minor provision for income taxes in the same
period in 1994 as an income tax benefit related to available net operating loss
carryforwards was recognized only to the extent of then current operating
results. The further recognition of any remaining available tax benefit
(approximately $9.5 million) will depend on future assessments of estimated
taxable income.
During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of" and Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." These statements are effective for fiscal 1996. Management
believes that implementation of these new accounting standards will not have a
material impact on the Company's financial statements.
1994 VS. 1993. The Company recorded income from continuing operations of
approximately $13.1 million, or $0.90 per share, for the year ended December
<PAGE>
31, 1994 compared to a loss of approximately $5.2 million, or $0.36 per share,
for 1993. The improvement in the Company's 1994 income from continuing
operations principally reflects net gains of approximately $3.5 million, or
$0.24 per share, related to revisions of estimated contract profits on several
previously completed shipbuilding contracts, increases in operating income at
the Company's marine repair, wholesale steel and boat building operations and a
reduction in interest expense. The decrease in interest expense was due
primarily to the Company's repayment in early 1994 of balances owed on its
previously outstanding revolving credit facilities and senior notes. The
repayment of these debt obligations was made possible by the successful
resolution and settlement of the Company's REAs in December 1993.
In the third quarter of 1994 the Company decided to discontinue its
service contracting subsidiary formed in 1990 to pursue large-scale service
contracts with government and commercial operations. The Company concluded
that managerial and financial resources devoted to service contracting could be
more productively invested in the Company's core marine construction operations.
As a result, the operating results for 1994 and prior years are reported as
discontinued operations (see Note 5 of the Notes to Consolidated Financial
Statements). The Company recorded a loss from discontinued operations of
approximately $4.6 million (including estimated costs related to a contract
termination), or $0.31 per share, for the year ended December 31, 1994 and has
restated prior year results to reflect a loss from discontinued operations of
approximately $3.6 million, or $0.25 per share, for the year ended December 31,
1993.
The Company's net sales from continuing operations in 1994 increased
approximately $19.1 million, or 4.2%, compared to the prior year. The increase
in 1994 net sales was due primarily to increases in sales revenues recognized
on the contracts to construct the fourth LSD-CV, the contracts to construct the
three gaming vessels (two of which were delivered in 1994) and the start-up of
the first Sealift ship. These increases in sales were partially offset by
reductions in sales revenues recognized on the contracts to construct the three
LSD-CVs (the first of which was delivered in 1994), the T-AOs (the fourth of
which was delivered in 1994) and the four MHCs, as these contracts approached
completion. Additionally, the Company experienced reduced sales revenues in
1994 associated with the T-AGS 45 contract, which was delivered in 1993, and at
its Avondale Gulfport Marine, Inc. ("AGM") and Genco Industries, Inc. ("Genco")
operations. AGM delivered its last LCAC in June 1993, and Genco completed its
remaining construction contracts in August 1994. The contracts to construct the
four LSD-CVs, the four MHCs and the seven T-AOs collectively accounted for
approximately 69% of the Company's 1994 net sales revenue.
Gross profit for 1994 increased approximately $14.3 million, or 43%,
compared to 1993. The increase in 1994 gross profit was primarily due to
profits recognized on the contract to construct the seven T-AOs and revisions
of contract profits on several previously completed shipbuilding contracts.
Also contributing to the 1994 gross profit were profits recognized on the two
gaming vessels delivered in 1994 and profits recognized by the Company's marine
repair and wholesale steel operations.
SG&A expenses increased by approximately $756,000, or 2.5%, for 1994
compared to 1993. The overall increase in SG&A expenses primarily resulted from
increased operating activity at the Company's main shipyard and a wage increase
given in January 1994 to all employees. This increase in SG&A expenses was
partially offset by a decrease in SG&A expenses resulting from the closing of
the AGM and Genco operations.
<PAGE>
Interest expense decreased by approximately $4.4 million, or 50%, in 1994
compared to 1993. The decrease was due to the reduction in the Company's
overall level of debt, which decreased by approximately $37 million, or 41.7%,
at December 31, 1994 as compared to December 31, 1993. See "--Liquidity and
Capital Resources."
The Company recorded a $300,000 provision for income taxes in 1994 while
no provision was recorded in 1993 due to the loss from operations. See Note 7
of the Notes to Consolidated Financial Statements for further discussion.
Liquidity and Capital Resources
The Company's cash and cash equivalents totaled $38.5 million at
December 31, 1995 compared to $15.4 million at December 31, 1994. The Company's
principal sources of cash in 1995 consisted of $28 million of funds provided by
operations, $3.2 million of proceeds from the sale of assets and $17.8 million
from long-term borrowings (both of which are discussed below). The Company's
primary uses of cash in 1995 consisted of $21.3 million of capital
expenditures, principally representing the plant modernization project, and
payment of long-term borrowings of $5.9 million.
In February 1995 the Company completed financing of its approximately $20
million plant modernization effort by issuing $17.8 million of mortgage bonds
utilizing a Title XI MARAD financing guarantee. The terms of the Title XI
guarantee provide for the bond proceeds to be held in escrow and released to
the Company as allowable project costs are incurred by the Company and approved
by MARAD. At December 31, 1995, $17.4 million of these bond proceeds had been
released to the Company. The Company has recorded project costs to date of $20.1
million of which $17.3 million were incurred in 1995. Outstanding purchase
commitments on the project at December 31, 1995 were $741,000.
In the second quarter of 1995 the Company obtained additional liquidity as
its improved financial condition enabled it to amend its revolving credit
agreement. The amendment, among other things, increased the amount available
under the credit agreement to $42.5 million and extended its term to May 1997.
Further, the amendment permitted the issuance of the Title XI mortgage bonds
and revised the level of permitted capital expenditures and certain coverage
ratios to take into consideration the plant modernization project. While there
have been no borrowings in 1995 under the revolving credit agreement, there are
$25.4 million of letters of credit outstanding under the facility at December
31, 1995. See Note 4 of the Notes to Consolidated Financial Statements.
In connection with the year-end settlement of the Minehunter REA, the
Company submitted invoices totaling approximately $30.7 million to the U.S.
Navy. The Company expects that these invoiced amounts will be collected in full
during the first quarter of 1996.
As previously disclosed, in May 1995 the Company sold substantially all of
the operating assets used in its foundry operations. The sale generated $3.2
million of cash proceeds and did not significantly affect the Company's results
of operations.
The Company believes that its liquidity and capital resources will be
sufficient to finance current and projected operations.
Item 8. Financial Statements and Supplementary Data.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Avondale Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Avondale
Industries, Inc. and subsidiaries as of December 31, 1994 and 1995, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Avondale Industries, Inc. and
subsidiaries at December 31, 1994 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
---------------------
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
January 19, 1996
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
December 31,
------------------
ASSETS 1994 1995
- ------ -------- --------
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................. $ 15,414 $ 38,524
Receivables (Note 2)...................................... 84,510 93,184
Inventories (Note 3)...................................... 16,109 15,289
Deferred tax assets (Note 7).............................. 4,100 23,650
Prepaid expenses and other current assets................. 7,803 2,946
-------- --------
Total current assets...................................... 127,936 173,593
-------- --------
Property, Plant and Equipment (Note 4):
Land...................................................... 9,324 9,161
Buildings and improvements................................ 47,979 59,991
Machinery and equipment................................... 174,694 182,547
-------- --------
Total..................................................... 231,997 251,699
Less accumulated depreciation............................. (112,836) (121,661)
-------- --------
Property, plant and equipment--net........................ 119,161 130,038
-------- --------
Goodwill--net (Note 7).................................... 15,431 8,637
Deferred tax assets--net (Note 7)......................... 7,000 --
Other assets.............................................. 3,975 4,459
-------- --------
TOTAL ASSETS............................................ $273,503 $316,727
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt (Note 4)............. $ 5,866 $ 5,062
Accounts payable.......................................... 60,917 65,517
Accrued employee compensation............................. 12,948 10,777
Other..................................................... 13,369 11,249
-------- --------
Total current liabilities................................. 93,100 92,605
Long-term debt (Note 4)................................... 45,875 60,593
Other liabilities and deferred credits.................... 11,650 12,471
-------- --------
Total liabilities......................................... 150,625 165,669
-------- --------
Commitments and Contingencies (Notes 6 and 10)
SHAREHOLDERS' EQUITY (Note 9):
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....................................... (255,104) (226,924)
-------- --------
Total..................................................... 134,734 162,914
Treasury stock (1,463,016 shares in 1995 and 1994) at
cost..................................................... (11,856) (11,856)
-------- --------
Total shareholders' equity................................ 122,878 151,058
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................ $273,503 $316,727
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Continuing Operations:
Net sales (Note 2)............................... $456,724 $475,810 $576,308
Cost of sales.................................... 423,544 428,325 517,637
-------- -------- --------
Gross profit..................................... 33,180 47,485 58,671
Selling, general and administrative expenses..... 29,780 30,536 32,123
-------- -------- --------
Income from operations........................... 3,400 16,949 26,548
Interest expense................................. (8,769) (4,385) (4,842)
Other--net....................................... 136 811 2,074
-------- -------- --------
Income (Loss) from continuing operations before
income taxes.................................... (5,233) 13,375 23,780
Income taxes (Note 7)............................ -- 300 (4,400)
-------- -------- --------
Income (Loss) from continuing operations......... (5,233) 13,075 28,180
-------- -------- --------
Discontinued Operations (Note 5):
Loss from discontinued operations................ (3,561) (1,909) --
Disposal costs................................... -- (2,643) --
-------- -------- --------
Loss from discontinued operations................ (3,561) (4,552) --
-------- -------- --------
NET INCOME (LOSS)................................ $ (8,794) $ 8,523 $ 28,180
======== ======== ========
Income (Loss) per share of common stock (Note 9):
Continuing operations............................ $ (0.36) $ 0.90 $ 1.95
Discontinued operations.......................... (0.25) (0.31) --
-------- -------- --------
INCOME (LOSS) PER SHARE OF COMMON STOCK.......... $ (0.61) $ 0.59 $ 1.95
======== ======== ========
Weighted average number of shares outstanding.... 14,464 14,464 14,464
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
F-4
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 1993, 1994 and 1995
(in thousands)
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Accumulated Treasury Shareholders'
Stock Capital Deficit Stock Equity
------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1,
1993................... $15,927 $373,911 $(254,833) $(11,856) $123,149
Net (loss).............. (8,794) (8,794)
------- -------- --------- -------- --------
BALANCE, DECEMBER 31,
1993................... 15,927 373,911 (263,627) (11,856) 114,355
Net income.............. 8,523 8,523
------- -------- --------- -------- --------
BALANCE, DECEMBER 31,
1994................... 15,927 373,911 (255,104) (11,856) 122,878
Net income.............. 28,180 28,180
------- -------- --------- -------- --------
BALANCE, DECEMBER 31,
1995................... $15,927 $373,911 $(226,924) $(11,856) $151,058
======= ======== ========= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years ended December
31,
-------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................. $(8,794) $ 8,523 $28,180
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization.................... 11,810 11,552 9,819
Deferred income tax benefit...................... -- -- (5,900)
Gain on sale of assets........................... -- -- (813)
Change in operating assets and liabilities, net
of dispositions:
Receivables.................................... 16,634 45,542 (9,674)
Inventories.................................... 189 (2,500) 296
Prepaid expenses and other current assets...... 653 (1,251) 3,429
Accounts payable............................... (4,476) 4,120 4,600
Accrued employee compensation.................. (248) 596 (2,171)
Other--net..................................... 1,098 2,546 229
------- ------- -------
Net cash provided by operating activities.......... 16,866 69,128 27,995
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................... (2,863) (5,120) (21,290)
Proceeds from sale of assets....................... 9,467 -- 3,248
Change in restricted short-term investments--net... -- (1,811) 1,243
Payment to former corporate parent (Note 4)........ -- (5,000) --
------- ------- -------
Net cash provided by (used for) investing
activities........................................ 6,604 (11,931) (16,799)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term borrowings.................... (27,888) (81,228) (5,866)
Proceeds from issuance of long-term borrowings
(Note 4).......................................... -- 36,250 17,780
------- ------- -------
Net cash provided by (used for) financing
activities........................................ (27,888) (44,978) 11,914
------- ------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS.......... (4,418) 12,219 23,110
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR..... 7,613 3,195 15,414
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR........... $ 3,195 $15,414 $38,524
======= ======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the year for:
Interest (net of amounts capitalized).............. $ 8,659 $ 4,537 $ 5,255
======= ======= =======
Income taxes paid.................................. $ 945
=======
Noncash investing and financing activities:
Note issued in litigation settlement (Note 10)..... $ 2,000
=======
Note issued to former corporate parent............. $ 8,000
=======
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Avondale
Industries, Inc. and its wholly-owned subsidiaries ("Avondale" or the
"Company") which are primarily engaged in marine construction and repair. All
significant intercompany transactions have been eliminated.
Revenue Recognition
Profits on long-term contracts are recorded on the basis of the Company's
estimates of the percentage of completion of individual contracts, commencing
when progress reaches a point where contract performance is sufficient to
estimate final results with reasonable accuracy. Estimates of the percentage of
completion are based on direct labor charges. Revisions in cost and profit
estimates during the course of the work are reflected in the accounting period
in which the facts requiring the revisions become known. Amounts in excess of
agreed upon contract price for customer caused delays, disruptions, unapproved
change orders or other causes of additional contract costs are recognized in
contract value if it is probable that the claim for such amounts will result in
additional revenue and the amount can be reasonably estimated (see Note 2).
Provisions for estimated losses, if any, on uncompleted contracts are made in
the period in which such losses are determined.
Statements of Cash Flows
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
Fair Value Disclosures
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" ("SFAS 107"), requires the disclosure of the
fair value of all significant financial instruments. The estimated fair value
amounts have been developed by the Company based on available market
information and appropriate valuation methodologies. However, considerable
judgment is required in developing the estimates of fair value. Therefore, such
estimates are not necessarily indicative of the amounts that could be realized
in a current market exchange. After such analysis, management believes that the
carrying values of the Company's significant financial instruments (consisting
of cash and cash equivalents, short-term investments, receivables, payables,
certain accrued liabilities and long-term debt) approximate fair values.
Inventories
Inventories are recorded principally at the lower of cost (average or first-
in, first-out) or market.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation of property,
plant and equipment is computed in the financial statements on the straight-
<PAGE>
line method based on estimates of useful lives as follows:
<TABLE>
<CAPTION>
TYPE PERIOD
---- -----------
<S> <C>
Machinery and equipment.......... 3-20 years
Buildings and improvements....... 15-40 years
</TABLE>
Accelerated depreciation methods are generally used for income tax purposes.
Maintenance and repairs are charged directly to expense as incurred. Additions,
improvements and major renewals are capitalized. Interest costs for the
construction of certain long-term assets are capitalized as part of the cost of
property, plant and equipment and amortized over the related assets' useful
lives. Interest costs capitalized in fiscal 1993 and 1994 were not material.
Interest costs capitalized in fiscal 1995 approximated $1.2 million.
Goodwill
Goodwill represents the excess of the purchase price over the underlying fair
value of the net assets of acquired businesses and is being amortized on a
straight-line basis over its estimated useful life of twenty years. Management
evaluates the continuing value and future benefits of goodwill, including the
appropriateness of related amortization periods, on a current basis.
The recoverability of goodwill is assessed by determining whether the
unamortized balance can be recovered through projected cash flows and operating
results over its remaining life. Any impairment of the asset is recognized when
it is probable that such future undiscounted cash flows will be less than the
carrying value of the asset.
Accumulated amortization at December 31, 1994 and 1995 amounted to $73.7
million and $74.5 million, respectively.
Income Taxes
The Company and its subsidiaries file a consolidated Federal income tax
return. Deferred income taxes are provided in the financial statements, where
necessary, to account for the tax effect of temporary differences resulting
from reporting revenues and expenses for income tax purposes in periods
different from those used for financial reporting purposes. The temporary
differences result principally from the use of different methods of accounting
for depreciation, long-term contracts and certain employee benefits.
New Accounting Standards
During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS
121 establishes accounting standards for recording the impairment of long-lived
assets, certain identifiable intangibles, goodwill, and assets to be disposed
of. The Company is required to adopt SFAS 121 effective for fiscal 1996.
Management believes that the implementation of SFAS 121 will not have a
material impact on the Company's financial statements.
During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based
<PAGE>
Compensation" ("SFAS 123"). SFAS 123, which the Company is required to adopt
effective for fiscal 1996, provides guidance relating to the recognition,
measurement and disclosure of stock-based compensation. Management believes
that the implementation of SFAS 123 will not have a material impact on the
Company's financial statements.
Reclassifications
Certain reclassifications of prior year amounts have been made to conform to
the current year presentation. These reclassifications were made for
comparative purposes only and have no effect on net income as previously
reported.
2. Receivables
Receivables consisted of the following at December 31, 1994 and 1995 (in
thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Long-term contracts:
U.S. Government:
Amounts billed............................................. $13,754 $30,151
Unbilled costs, including retentions, and estimated profits
on contracts in progress.................................. 48,254 41,119
------- -------
Total...................................................... 62,008 71,270
Commercial:
Amounts billed............................................. 7,568 4,364
Unbilled costs, including retentions, and estimated profits
on contracts in progress.................................. 10,914 12,312
------- -------
Total from long-term contracts............................. 80,490 87,946
Trade and other current receivables............................ 4,020 5,238
------- -------
Total.......................................................... $84,510 $93,184
======= =======
</TABLE>
Unbilled costs, including retentions, and estimated profits on contracts in
progress were not billable to customers at the balance sheet dates under terms
of the respective contracts. Of the unbilled costs and estimated profits,
approximately $5.1 million is expected to be collected in 1996 with the balance
to be collected in subsequent years as contract deliveries are made and
warranty periods expire. Net sales to the United States Government in 1993,
1994 and 1995 account for approximately 79%, 77% and 74% of the net sales,
respectively.
Costs and estimated profits (losses) on contracts in progress at December
31, 1994 and 1995 were as follows (in thousands):
<PAGE>
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Costs incurred on contracts in progress................. $2,177,750 $2,668,388
Estimated profits recognized............................ 25,634 49,287
Reserve for anticipated contract losses................. (39,000) (34,500)
---------- ----------
Total................................................... 2,164,384 2,683,175
Less billings to date................................... (2,108,384) (2,643,912)
---------- ----------
Net value of contracts in progress...................... $ 56,000 $ 39,263
========== ==========
</TABLE>
Net value of contracts in progress was comprised of the following amounts (in
thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Unbilled costs and estimated profits on contracts in progress
(included in receivables)................................... $59,168 $53,431
Billings in excess of costs and estimated profits on
contracts in progress (included in accounts payable)........ (3,168) (14,168)
------- -------
Total........................................................ $56,000 $39,263
======= =======
</TABLE>
The reserve for anticipated contract losses of $39.0 million and $34.5
million included in the net value of contracts in progress at December 31, 1994
and 1995, respectively, is related to certain U.S. Navy contracts which are
presently scheduled for delivery at varying dates into 1997. The reserve
decreased in 1995 when the Company recorded a $4.5 million reduction of a
previously recognized loss due primarily to a revision of the total estimated
contract cost as it nears completion.
The Company filed a Request for Equitable Adjustment ("Minehunter REA") with
the U.S. Navy seeking substantial increases in the contract prices related to
four MHC-51 Class Minehunters currently under contract. The Company believes
that the additional costs addressed by the Minehunter REA resulted from
defective ship specifications provided to the Company that proved impossible to
perform at the original cost estimate developed by the Company. In December
1995, the Company settled the Minehunter REA for $23 million, which
approximates the previously recorded estimate of the amount recoverable. This
should enable the Company to complete the MHC program on a break-even basis
through the remainder of contract performance. In connection with the
settlement of the Minehunter REA in December 1995, the Company submitted
invoices totalling $30.7 million to the U.S. Navy, which includes certain
contractual cost sharing and cost escalation provisions which obligate the U.S.
Navy to bear a portion of the additional costs. The Company expects that these
amounts will be collected in full during the first quarter of 1996.
3. Inventories
<PAGE>
Inventories consisted of the following at December 31, 1994 and 1995 (in
thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Goods held for sale............................................. $ 7,908 $ 7,409
Materials and supplies.......................................... 8,201 7,880
------- -------
Total........................................................... $16,109 $15,289
======= =======
</TABLE>
4. Financing Arrangements
Revolving Credit Agreement
In 1994, the Company entered into a two-year revolving credit agreement with
various financial institutions, which established an available line of credit
equal to the lesser of $35 million or a specified borrowing base. Borrowings
under the facility bear interest at fluctuating rates. The credit facility is
collateralized by substantially all of the Company's working capital assets and
its 900-foot floating drydock and, among other things, (1) requires the Company
to meet certain financial covenants (relating to net worth, debt coverage,
interest coverage and backlog), (2) imposes limitations and restrictions
related to annual capital expenditures, the incurrence of new indebtedness and
the payment of dividends and (3) requires compliance with the terms and
conditions of all other debt agreements.
During 1995, the Company amended the revolving credit agreement. The
amendment, among other things, increased the amount available under the credit
agreement to $42.5 million and extended its term to May 1997. Further, the
amendment permitted the issuance of $17.8 million of mortgage bonds (as
discussed below) and revised the level of permitted capital expenditures and
certain coverage ratios to take into consideration the plant modernization
project. There were no borrowings in 1994 and 1995 under the revolving credit
agreement.
The credit facility also provides the Company with the right to require the
bank group to post letters of credit on the Company's behalf in support of its
operations (see Note 10).
<PAGE>
Long-Term Debt
Long-term debt consisted of the following at December 31, 1994 and 1995 (in
thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Industrial revenue bonds..................................... $36,250 $36,250
Mortgage bonds, interest at 8.16%, payable in semi-annual
principal installments to 2010.............................. 17,780
Mortgage bonds, payable in semi-annual principal installments
to 2000..................................................... 4,656 3,880
General obligation industrial bonds, interest at 7%, payable
in annual installments to 2011.............................. 2,835 2,745
Other long-term debt......................................... 8,000 5,000
------- -------
Total........................................................ 51,741 65,655
Less current maturities of long-term debt.................... (5,866) (5,062)
------- -------
Long-term debt............................................... $45,875 $60,593
======= =======
</TABLE>
The $36.3 million of industrial revenue bonds represent Series 1994 bonds
which consist of (1) $6 million bearing interest at 8.25% and payable in annual
principal installments ranging from $550,000 in 1997 to final payment of
$985,000 in 2004 and (2) $30.3 million bearing interest at 8.50% and payable in
annual principal installments ranging from $340,000 in 1997 to final payment of
$3.8 million in 2014. The Series 1994 bonds are secured by certain property and
equipment. Among other things, the terms and conditions of the Series 1994
bonds (1) require the Company to meet certain financial covenants (relating to
net worth, debt and debt service coverage and liquidity), (2) impose
limitations and restrictions related to the incurrence of new indebtedness and
the payment of dividends, and (3) require compliance with the terms and
conditions of other specified debt agreements.
The $17.8 million of mortgage bonds were issued in February 1995 as part of
the financing of the Company's approximately $20 million plant modernization
effort. The bonds were issued utilizing a U.S. Government guarantee under Title
XI of the Merchant Marine Act, 1936, as amended ("Title XI"), bear interest at
the annual rate of 8.16% and are payable in equal semi-annual principal
payments of $593,000 over a 15 year period beginning in 1996. The terms of the
financing include various restrictive covenants including provisions relating
to the maintenance of working capital, incurrence of additional indebtedness,
and the maintenance of a minimum net worth. The plant modernization assets have
been pledged as collateral for these mortgage bonds.
The $3.9 million of mortgage bonds at December 31, 1995 represent the balance
of an earlier mortgage bond issue which also utilized a Title XI guarantee. The
Company refinanced these mortgage bonds in February 1995 (approximately $4.3
million) which reduced the annual interest rate from 9.30% to 7.86%. The
refinancing agreement contains various restrictive covenants similar to those
for the $17.8 million of Title XI mortgage bonds discussed above. These bonds
are payable in equal semi-annual principal payments of $388,000 and mature in
the year 2000. Property, plant and equipment having a net book value of
<PAGE>
approximately $13.5 million at December 31, 1995 has been pledged as collateral
for these mortgage bonds.
Included in other long-term debt at December 31, 1995 is the $3 million
balance of a two-year $8 million unsecured note issued to the Company's former
corporate parent as part of a settlement in 1994 which terminated certain
arrangements which had existed since 1985. The note bears interest at 10% per
annum with the $3 million balance payable on June 30, 1996. Also included in
other long-term debt at December 31, 1995 is a $2 million unsecured note issued
as part of the settlement of certain claims against the Company (as further
discussed in Note 10). The note bears interest at 8% per annum and is due in
January 1997.
Annual maturities of long-term debt for each of the next five years and in
total thereafter follow (in thousands):
<TABLE>
<S> <C>
1996................................. $ 5,062
1997................................. 4,957
1998................................. 3,047
1999................................. 3,137
2000................................. 3,237
Thereafter........................... 46,215
-------
Total................................ $65,655
=======
</TABLE>
5. Discontinued Operations
During the third quarter of 1994 the Company decided to discontinue operation
of its service contracting subsidiary formed in 1990 to pursue large-scale
service contracts with government and commercial operations. The Company
concluded that managerial and financial resources could be more productively
invested in the Company's core marine construction operations.
The operating results for the prior-year periods are reported as discontinued
operations. Summarized results are as follows (in thousands):
<TABLE>
<CAPTION>
1993 1994
------- -------
<S> <C> <C>
Net sales............................................. $14,442 $13,520
Costs and expenses.................................... 18,003 15,429
------- -------
Income (Loss) from discontinued operations............ (3,561) (1,909)
Loss on disposal of discontinued operations........... -- (2,643)
------- -------
Income (Loss) from discontinued operations............ $(3,561) $(4,552)
======= =======
</TABLE>
6. Leases
The Company leases equipment and real property in the normal course of
business under various operating leases, including non-cancelable and month-to-
<PAGE>
month agreements. Certain of the leases provide for renewal privileges with
escalation of the lease payments based on changes in selected economic indices.
Rental expense for operating leases was $5.3 million, $5.8 million and $6.3
million in 1993, 1994 and 1995, respectively.
Minimum rental commitments under leases having an initial or remaining
noncancelable term in excess of twelve months follow (in thousands):
<TABLE>
<S> <C>
1996.................................. $3,243
1997.................................. 1,747
1998.................................. 1,260
1999.................................. 297
2000.................................. 52
------
Total................................. $6,599
======
</TABLE>
7. Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). The
statement requires the use of the asset and liability approach for financial
accounting and reporting for income taxes. Financial statements for prior years
have not been restated and the cumulative effect of the accounting change was
not material.
The Company has provided for Federal income taxes as follows (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -------
<S> <C> <C> <C>
Current provision........................................ $ -- $ 600 $ 1,500
Deferred provision (benefit)............................. -- (300) 7,100
Deferred benefit attributable to the realization of net
operating loss carryforwards............................ -- -- (13,000)
----- ----- -------
Provision (benefit) for income taxes..................... $ -- $ 300 $(4,400)
===== ===== =======
</TABLE>
<PAGE>
The provision (benefit) for income taxes varied from the Federal statutory
income tax rate due to the following (dollars in thousands):
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------
1993 1994 1995
------------ ----------- -------------
Amount % Amount % Amount %
------- --- ------ --- -------- ---
<S> <C> <C> <C> <C> <C> <C>
Taxes at Federal statutory rate...... $(3,078) (35) $3,088 35 $ 8,323 35
Amortization of goodwill not
deductible.......................... 357 4 511 6 246 1
Net operating loss carryforwards
utilized............................ -- -- -- -- (13,000) (55)
Settlement of prior year tax
examinations........................ -- -- (3,200) (36) -- --
Losses for which no tax benefit was
provided............................ 2,595 30 -- -- -- --
Other................................ 126 1 (99) (1) 31 --
------- --- ------ --- -------- ---
Total................................ $ -- -- $ 300 4 $( 4,400) (19)
======= === ====== === ======== ===
</TABLE>
At December 31, 1995 the Company has available for Federal income tax
purposes net operating loss carryforwards and tax credit carryforwards of $69.5
million and $5.3 million, respectively. The net operating loss carryforwards
expire in years 2004 through 2008 and the tax credit carryforwards expire in
the years 2000 through 2010. Additionally, the Company has $1.9 million of
minimum tax credits which may be carried forward indefinitely.
Deferred income taxes represent the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and their tax bases, and (b) operating loss and
tax credit carryforwards. The tax effects of significant items comprising the
Company's net deferred tax balances at December 31, 1994 and 1995 are as
follows (in thousands):
<PAGE>
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Deferred Tax Liabilities:
Differences between book and tax basis of property, plant and
equipment................................................... $27,018 $26,266
Other........................................................ 1,511 759
------- -------
Total...................................................... 28,529 27,025
------- -------
Deferred Tax Assets:
Reserves not currently deductible............................ 6,020 5,174
Long-term contracts.......................................... 5,252 18,557
Other temporary differences.................................. 3,598 4,263
Operating loss carryforwards................................. 47,600 24,334
Tax credit carryforwards..................................... 5,800 7,200
------- -------
68,270 59,528
Valuation Allowance.......................................... (28,641) (9,703)
------- -------
Total...................................................... 39,629 49,825
------- -------
Net deferred tax assets...................................... $11,100 $22,800
======= =======
</TABLE>
The net deferred tax assets are included in the following balance sheet
captions (in thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Current deferred tax assets.................................... $ 4,100 $23,650
Non-current deferred tax assets................................ 7,000 --
Other non-current liabilities and deferred tax credits......... -- (850)
------- -------
Net deferred tax assets...................................... $11,100 $22,800
======= =======
</TABLE>
During 1995, the deferred tax valuation allowance decreased approximately
$19.0 million as a result of the Company's current year operating results and a
re-evaluation of its expectations of the likelihood of future operating income
related to its existing backlog. Approximately $6.0 million of this decrease in
the valuation allowance was recorded as a reduction in goodwill in accordance
with SFAS 109, which requires that the realization of tax benefits first be
attributed to any acquired tax assets. In the event that additional tax
benefits are realized in future periods, all such benefits will be recorded as
a reduction of income tax expense.
8. Retirement Plans
ESOP
<PAGE>
In 1985, the Company established the Avondale Industries, Inc. Employee Stock
Ownership Plan (the "ESOP"). The ESOP is a qualified, defined contribution plan
designed primarily to invest in equity securities of the Company and is
specifically authorized to leverage its acquisition of these securities. The
ESOP is intended to cover all employees of the Company upon completion of one
year of service, except certain employees who are covered by collective
bargaining agreements, unless, by the terms of such agreements, the employees
are to participate in the ESOP. The ESOP owned approximately 7,096,000 and
6,822,000 shares of the Company's Common Stock at December 31, 1994 and 1995,
respectively.
401(k) Savings Plan
Beginning in 1996 the Company will sponsor a 401(k) Savings Plan.
Participation in this defined contribution plan is available to substantially
all employees of the Company. The Company may elect to make contributions to
the Plan; however, the timing and amount of such contributions is at the
discretion of the Company's Board of Directors.
Pension Plan
The Company also sponsors a defined benefit pension plan, which is
coordinated with the benefits payable to participating employees in the ESOP.
At retirement, a person's benefit is based upon the greater of (i) the market
value of the shares of common stock allocated to his ESOP account or (ii) the
benefit calculated under the pension plan formula. The pension plan formula
benefits are based on a defined dollar amount multiplied by a fraction related
to a participant's credited service.
The net periodic pension cost for the years ended December 31, 1993, 1994 and
1995 included the following components (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- ------
<S> <C> <C> <C>
Service costs of the current period.................. $ 3,700 $ 3,400 $3,300
Interest cost on the projected benefit obligation.... 4,400 3,800 4,200
Actual return on plan assets......................... (7,000) (2,700) (3,600)
Net amortization of transition liability and deferred
investment gain (loss).............................. 5,000 (200) 300
------- ------- ------
Net periodic pension cost............................ $ 6,100 $ 4,300 $4,200
======= ======= ======
</TABLE>
<PAGE>
The following table sets forth the pension plan's estimated funded status as
of December 31, 1994 and 1995 (in thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Projected benefit obligation:
Vested benefits............................................ $40,800 $49,100
Nonvested benefits......................................... 600 400
------- -------
Accumulated benefit obligation............................. 41,400 49,500
Effect of projected future compensation levels............. 4,200 12,700
------- -------
Projected benefit obligation................................. 45,600 62,200
Plan assets at market value.................................. 44,200 50,400
------- -------
Plan assets less than projected benefit obligation........... (1,400) (11,800)
Unrecognized net transition obligation....................... 200 100
Unrecognized prior service costs............................. (3,000) (2,500)
Unrecognized net loss........................................ 6,800 12,600
------- -------
Prepaid pension costs (pension liability).................... $ 2,600 $(1,600)
======= =======
</TABLE>
The Company's funding policy is to contribute each year an amount equal to
the minimum required contribution under the Employee Retirement Income Security
Act of 1974. However, the contribution for any year will not be greater than
the maximum tax deductible contribution. Plan assets consist primarily of
United States Government and Agency securities, corporate bonds and notes,
corporate stocks, and an unallocated insurance contract. The weighted-average
discount rate used in determining the actuarial present value of the projected
benefit obligation was 8.5% for 1994 and 7.25% for 1995. The rate of increase
in future compensation levels used was 3.5% for 1994 and 4.0% for 1995 and
thereafter. The expected long-term rate of return on the assets was 9.0% for
1994 and 1995.
9. Shareholders' Equity
Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock, $1.00
par value, none of which was outstanding at December 31, 1994 and 1995.
Income (Loss) Per Share
The weighted average number of shares used in the computation of income
(loss) per share was 14,464,000, for each of the years ended December 31, 1993,
1994 and 1995, respectively. The assumed exercise of stock options would not
result in dilution in any of such periods.
Performance Share Plan
The Company's Performance Share Plan provided for the award of shares of
common stock to senior executives of the Company, as designated by a committee
of the Board of Directors, which were earned upon the attainment of specified
<PAGE>
performance objectives. These performance objectives have been attained and
therefore no further awards will be made. Transactions relating to the plan
during 1993, 1994 and 1995 were not material.
The plan provided for a cash distribution in an amount equal to the
Participant's income tax liability resulting from the settlement of an award.
To the extent that a Participant received cash in lieu of common stock as
payment of an award, options were granted to the participant to purchase an
equivalent number of such shares. There were 303,159 stock options outstanding
at December 31, 1993, 279,155 stock options outstanding at December 31, 1994
and 240,971 stock options outstanding at December 31, 1995 . The stock options
are exercisable at prices of $3.875 to $19.00 per share, the majority of which
contain a stock appreciation right feature and expire on various dates to
February 2002.
Stock Appreciation Plan
The Company maintains a Stock Appreciation Plan for key management employees
which contains a stock appreciation right feature. There are 500,000 shares of
common stock of the Company reserved for award under the plan. Transactions of
the Stock Appreciation Plan during 1993, 1994 and 1995 were as follows:
<TABLE>
<CAPTION>
Number of Shares
-------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Outstanding, January 1............................... 60,000 50,000 40,000
Canceled............................................. (10,000) (10,000) (40,000)
------- ------- -------
Outstanding, December 31............................. 50,000 40,000 --
======= ======= =======
Exercisable at end of year........................... 2,000 -- --
======= ======= =======
Available for grant at end of year................... 387,000 397,000 437,000
======= ======= =======
</TABLE>
Options were outstanding at prices ranging from $11.25 to $18.375 per share
at December 31, 1993 and $11.25 per share at December 31, 1994. Under the terms
of the plan, options expired on March 31, 1995.
10. Commitments and Contingencies
Litigation
In January 1986, the Louisiana Department of Environmental Quality ("DEQ")
advised the Company that it may be a potentially responsible party ("PRP") with
respect to an oil reclamation site operated by an unaffiliated company in
Walker, Louisiana. The Company sold to the operator a substantial portion of
the waste oil that was processed at the reclamation site during the period 1978
through 1982. The Company's potential liability, if any, for cleanup of this
site will be based on the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA") or the Louisiana Environmental Affairs
Act. Under these statutes, such liability is presumptively joint and several,
but is typically apportioned among the responsible parties based on the volume
<PAGE>
of material sent by each to the waste site. The Company has cooperated with
other PRPs to study the potential aggregate liability under these statutes.
Moreover, the Company believes it has substantial defenses against liability
and defenses that could mitigate the portion of liability, if any, that would
otherwise be attributable to it.
To date, the Company and certain of the other PRPs for the site have funded
the site's remediation under a preliminary cost-sharing agreement. As of
December 31, 1995 clean-up costs totalled $17 million, of which the Company has
contributed $3.6 million. Additional work scheduled for the site includes
completion of studies in 1996, and if required by the results of these studies,
subsequent remediation. Following completion of any such required additional
remediation, it will be necessary to obtain Environmental Protection Agency
approval to close the site, which consent may require subsequent post-closure
activities such as groundwater monitoring and site maintenance for many years.
The Company is not able to estimate the final costs for any such additional
remedial work or post-closure costs that may be required; however, the Company
believes that its proportionate share of expenditures for any additional work
will not have a material adverse 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 changed.
Since July 1986, a number of "toxic tort" suits have been filed against the
Company and numerous other defendants alleging claims for personal injury,
property damage, and "fear of cancer" in connection with the reclamation site
discussed above. The plaintiffs also sought substantial punitive damages. These
cases were consolidated and certified as a class action. In 1995, the Judge for
the Federal District Court for the Western District of Louisiana issued a ruling
from the bench approving the Company's settlement of the class action lawsuit.
Based on the advice of its counsel, the Company believes that a written order
confirming its earlier bench ruling will be issued by the Federal District Court
in the near future. Under the terms of the court approved settlement, which is
subject to appeal following the issuance of the final written order, the Company
paid $4.0 million cash into a settlement fund in the third quarter of 1995,
using cash from operations, and issued a $2.0 million unsecured note to the
plaintiff class. The note bears interest at 8% per annum and is due on
January 28,1997. The Company had previously recorded an accrual sufficient to
provide for the $6.0 million settlement and has sufficient liquidity to fund the
note. The Company could also be responsible for payment to the plaintiffs of up
to an additional $6.0 million (plus interest at 8% per annum) if the plaintiffs
are unsuccessful in collecting certain claims under Avondale's insurance
policies that have been assigned to the plaintiff class under the settlement
agreement. 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 adverse effect on
the Company's results of operations, financial position or cash flows.
Furthermore, the Company has initiated litigation against its insurer for a
declaration of coverage of the liability, if any, that may arise in connection
with the remediation of the site referred to above. The court has ruled that
the insurer has the duty to defend the Company, but has not yet ruled on
whether the carrier has a duty to indemnify the Company if any liability is
ultimately assessed against it. After consultation with counsel, the Company is
unable to predict the eventual outcome of this litigation or the degree to
which such potential liability would be indemnified by its insurance carrier.
In addition to the above, the Company is also named as a defendant in other
lawsuits and proceedings arising in the ordinary course of business, some of
<PAGE>
which involve substantial claims.
The Company has established accruals as appropriate for certain of the
matters discussed above. While the ultimate outcome of lawsuits and proceedings
against the Company cannot be predicted with certainty, management believes,
based on current facts and circumstances and after review with counsel, that,
the eventual resolution of these matters is not expected to have a material
adverse effect on the Company's financial statements.
Letters of Credit
In the normal course of its business activities, the Company is required to
provide letters of credit to secure the payment of workers' compensation
obligations. Additionally, under certain contracts, the Company may be required
to provide letters of credit to secure certain performance obligations of the
Company thereunder. At December 31, 1995, outstanding letters of credit
relating to these business activities amounted to approximately $25.4 million.
11. Quarterly Results (Unaudited)
Consolidated operating results for the four quarters of 1994 and 1995 were as
follows (in thousands, except per share data):
<TABLE>
<CAPTION>
1994 1995
------------------------------------- -----------------------------------
(1) (1) (2) (3) (3) (3)
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $101,329 $118,437 $125,487 $130,557 $133,575 $152,788 $148,785 $141,160
Gross Profit............ 9,506 11,283 14,943 11,753 13,404 13,820 14,793 16,654
Income (Loss) from
Continuing Operations.. 1,918 2,470 6,323 2,364 3,044 8,493 12,054 4,589
Income (Loss) from
Discontinued
Operations............. 116 (396) (4,272) -- -- -- -- --
Net Income.............. 2,034 2,074 2,051 2,364 3,044 8,493 12,054 4,589
Net Income (Loss) per
Share:
Continuing Operations... $ 0.13 $ 0.17 $ 0.44 $ 0.16 $ 0.21 $ 0.59 $ 0.83 $ 0.32
Discontinued Operations. 0.01 (0.03) (0.30) -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net Income per Share.... $ 0.14 $ 0.14 $ 0.14 $ 0.16 $ 0.21 $ 0.59 $ 0.83 $ 0.32
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
- --------
(1) Income statement data for these periods have been restated to present
discontinued operations (See Note 5).
(2) During the third quarter of 1994, the Company revised its estimated profits
on several previously-completed shipbuilding contracts which had the effect
of increasing net income for the third quarter of 1994 by approximately
$3.5 million, or $0.24 per share.
<PAGE>
(3) During 1995, the Company recorded a reduction of a previously recorded loss
on a shipbuilding contract which had the effect of increasing net income
for the second, third and fourth quarters of 1995 by approximately $2.3
million (or $0.16 per share), $750,000 (or $0.05 per share) and $1.5
million (or $0.10 per share), respectively.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information concerning the Company's directors and officers called for by
this item will be included in the Company's definitive Proxy Statement prepared
in connection with the 1996 Annual Meeting of shareholders and is incorporated
herein by reference.
Item 11. Executive Compensation.
Information concerning the executive compensation called for by this item
will be included in the Company's definitive Proxy Statement prepared in
connection with the 1996 Annual Meeting of shareholders and is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information concerning security ownership of certain beneficial owners and
management called for by this item will be included in the Company's definitive
Proxy Statement prepared in connection with the 1996 Annual Meeting of
shareholders and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
Information concerning certain relationships and related transactions
called for by this item will be included in the Company's definitive Proxy
Statement prepared in connection with the 1996 Annual Meeting of shareholders
and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1)Financial Statements
Independent Auditors' Report.
Consolidated Balance Sheets as of December 31, 1994 and 1995.
Consolidated Statements of Operations for the years ended
<PAGE>
December 31, 1993, 1994 and 1995.
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1993, 1994 and 1995.
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1994 and 1995.
Notes to Consolidated Financial Statements.
(a)(2)Financial Statement Schedules
Not applicable
(a)(3)Exhibits
3.1 Articles of Incorporation of the Company.(1)
3.2 By-laws of the Company.(2)
4.1 See Exhibits 3.1 and 3.2 for provisions of the Company's
Articles of Incorporation and By-laws defining the rights of
holders of Common Stock.
4.2 Specimen of Common Stock Certificate.(3)
4.3 Instruments Relating to Title XI Vessel Financing
(a) Trust Indenture dated October 21, 1975, by and between
the Company and Manufacturers Hanover Trust Company, as
Indenture Trustee, relating to $19,012,000 of United
States Government Guaranteed Ship Financing Bonds, as
amended by an Assumption Agreement and Supplemental
Indenture dated September 16, 1985(4), as further
amended by a Master Assumption Agreement, Supplemental
Indenture No. 2 and Amendment to Title XI Finance
Agreements dated March 13, 1991 (the "Master Assumption
Agreement"),(5) which has been further amended by a
Third Supplemental Indenture dated February 9, 1995.(6)
(b) Title XI Reserve Fund and Financial Agreement dated
October 21, 1975, by and between the Company and the
United States of America, as amended by Amendments Nos.
1 and 2(4), as further amended by the Master Assumption
Agreement (filed as Exhibit 4.3(a) hereto). 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.(6)
(c) Form of 8.80% Sinking Fund Bond, Series A (included in
Exhibit 4.3(a)).
(d) Form of 9.30% Sinking Fund Bond, Series B (included in
Exhibit 4.3(a)).
(e) Form of 7.86% Sinking Bond Fund, 2000 Series.(6)
<PAGE>
4.4 Instruments relating to AEI's and the Company's obligations
arising in connection with the issuance of General Obligation
Bonds by Harrison County, Mississippi.
(a) Loan Agreement dated April 1, 1991 between Harrison
County, Mississippi and AEI, pursuant to which AEI is
obligated to repay $3 million in order to fund the
County's bond payment obligations.(3)
(b) Guaranty Agreement dated April 1, 1991 between the
Company, Harrison County, Mississippi and the State of
Mississippi.(3)
4.5 Instruments relating to the Company's $36.25 million
Industrial Revenue Refunding Bond Series 1994 Financing.
(a) Refunding Agreement dated April 1, 1994 between the
Company and the Board of Commissioners of the Port of
New Orleans, Exhibit A and First Preferred Vessel
Mortgage thereto.(7)
(b) Trust Indenture dated April 1, 1994 between the Board
of Commissioners of the Port of New Orleans and First
National Bank of Commerce.(7)
(c) Form of Industrial Revenue Refunding Bond Series
1994.(7)
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 $17,780,000.00 of United States Government
Guaranteed Ship Financing Bonds.(6)
(b) Title XI Reserve Fund and Financial Agreement dated
February 9, 1995, by and between the Company and the
United States of America.(6)
(c) Form of 8.16% Sinking Bond Fund, 2010 Series.(6)
10.1 Contracts With The United States Navy
(a) Agreement dated June 28, 1985, by and between the
Company and the United States of America (Contract No.
N00024-85-C-2131) for the construction of T-AO 187
Class Oiler Ships and various modifications thereto(4)
including modification P00005 thereto entered into on
June 16, 1988, and the related Acknowledgement of
Transfer and Transfer Agreement relating to the
Company's agreement to assume certain of the rights and
obligations to build two such vessels under an
Agreement dated May 6, 1985, by and between
Pennsylvania Shipbuilding Co. and the United States of
America.(8)
(b) Agreement dated June 20, 1988, by and between the
<PAGE>
Company and the United States of America (Contract No.
N00024-88-C-2050) for the construction of T-AO 187
Class Oiler Ships and various modifications thereto(8)
and modification P00036 thereto.(5)
(c) Agreement dated November 21, 1983, by and between the
Company and the United States of America (Contract No.
N00024-84-C-2027) for the construction of LSD-41 Class
Landing Ship Dock vessels and various modifications
thereto.(4)
(d) Agreement dated June 17, 1988, by and between the
Company and the United States of America (Contract No.
N00024-88-C-2048) for the construction of LSD-41 Class
Landing Ship Dock vessels and modification nos. P00001
and P00002(8), modification nos. P00008 and P00013
thereto(3) and modification P00029 thereto.(5)
(e) Agreement dated July 15, 1988, by and between the
Company and the United States of America (Contract No.
N00024-88-C-2221) for the conversion of AO-177 Class
Oilers to AO-177 Jumbo Class and various modifications
thereto.(8)
(f) Agreement dated December 13, 1988, by and between AGM
and the United States of America (Contract No. N00024-
89-C-2110) for the construction of three LCACs.(8)
(g) Agreement dated July 1, 1987, by and between Lockheed
Shipbuilding Company and the United States of America
(Contract No. N00024-87-C-2089) for the construction of
seven LCACs (assumed by AGM in 1988).(8)
(h) Agreement dated October 3, 1989, by and between the
Company and the United States of America (Contract No.
N00024-89-C-2162) for the construction of one MHC Class
51 ship and various modifications thereto(9),
modification no. P00020(5) and modification no. P00027
thereto.
(i) Agreement dated August 2, 1990, by and between the
Company and the United States of America (Contract
N00024-90-C-2304) for the construction of one MHC Class
51 ship,(3) and modification nos. P00002(5),
P00013(5) and modification no. P00020 thereto.
(j) Agreement dated November 30, 1990, by and between the
Company and the United States of America (Contract No.
N00024-90-C-2307) for the construction of one T-AGS 45
ship and various modifications thereto.(3)
(k) Agreement dated July 15, 1993, by and between the
Company and the United States of America (Contract No.
N00024-93-C-2300) for the construction of one WAGB 20
Coast Guard Polar Icebreaker ship, amendment 0001 and
modification nos. P0001 and P00013 thereto.(1)
(l) Agreement dated September 3, 1993, by and between the
<PAGE>
Company and the United States of America (Contract No.
N00024-93-C-2205) for the construction of one T-AKR 300
Class Strategic Sealift ship, various amendments and
modifications nos. P00001, and P00003 and P00004
thereto(5) and modification P00007 thereto.(7)
(m) Agreement dated October 12, 1993, by and between the
Company and the United States of America (Contract No.,
N00024-94-C-2200) for the construction of one LSD 41
Class Landing Ship Dock.(5)
10.2 Other Operating Contracts
(a) Agreement dated July 10, 1991 by and between Crawford
Technical Services, Inc. and the Dallas Area Rapid
Transit Authority, and the supplement thereto, relating
to providing operational and maintenance services for
paratransit van services for the Dallas, Texas
metropolitan area.(5)
(b) Agreement dated January 28, 1991, by and between
Crawford Technical Services, Inc. and the United States
of America and various modifications thereto (Contract
No. FO3602-91-C0007) relating to providing maintenance
services with respect to family housing units located
in a Little Rock, Arkansas air force base.(5)
(c) Agreement dated January 12, 1994 by and between the
Company and Belle of Orleans, L.L.C. for the
construction of a 350-foot-long paddlewheel gaming
vessel, various exhibits and Amendment nos. 1, 2 and 3
thereto.(7)
(d) Agreement dated May 12, 1995 by and between the Company
and American Heavy Lift Shipping Company for the
construction of one ocean-going product tanker, S/S
King.(2)
(e) Agreement dated May 12, 1995 by and between the Company
and American Heavy Lift Shipping Company for the
construction of one ocean-going product tanker, S/S
Knight.(2)
(f) Agreement dated May 12, 1995 by and between the Company
and American Heavy Lift Shipping Company for the
construction of one ocean-going product tanker, S/S
Solar.(2)
(g) Agreement dated May 12, 1995 by and between the Company
and American Heavy Lift Shipping Company for the
construction of one ocean-going product tanker, S/S
Spray.(2)
10.3 Employee Benefit Plans
(a) The Company's Amended and Restated Performance Share
Plan dated April 24, 1989(10), as amended by Amendment
No. 1 adopted December 5, 1994.(7)
(b) The Company's Amended and Restated Stock Appreciation
Plan and attachments thereto dated April 24, 1989(10),
as amended by Amendment No. 1 adopted December 5,
1994.(7)
<PAGE>
(c) The Company's Amended and Restated Employee Stock
Ownership Plan and the Related Trust Agreement(4), as
amended and restated on December 5, 1994(7), as further
amended by Amendment No. 1 adopted April 5, 1995(6) and
as further amended by Amendment No. 2 adopted June 16,
1995.(2)
(d) The Company's Pension Plan as Amended and Restated(7)
as further amended by Amendment No. 1 adopted June 16,
1995.(2)
(e) The Company's Amended and Restated Supplemental Pension
Plan(4), as amended by Amendment Nos. 1 and 2
thereto(3).
(f) The Company's Excess Retirement Plan.(3)
(g) Executive Group Insurance Benefits Plan specifying the
excess insurance benefits provided to the Company's
executive officers and certain other key personnel, and
a summary description of health, accidental death and
dismemberment, disability and life insurance benefits
made available to employees of Avondale Services
Corporation(3), as amended on March 25, 1994.(7)
(h) The Company's Directors' Deferred Compensation Plan.(3)
(i) Avondale Industries, Inc. Management Incentive Plan.(6)
(j) Form of the Company's 401(k) Plan and related Trust
effective January 1, 1996.
10.4 Employment Agreements
(a) Employment Agreement dated September 27, 1985, by and
between the Company and Albert L. Bossier, Jr.(4) the
term of which has been extended such that its current
term extends through December 31, 1997.(7)
(b) Employment Agreement dated June 18, 1987, by and
between the Company and Thomas M. Kitchen(4) the term
of which has been extended such that its current term
extends through December 31, 1997.(7)
(c) Employment Agreement dated June 18, 1987, by and
between the Company and Kenneth B. Dupont(4) the term
of which has been extended such that its current term
extends through December 31, 1997.(7)
10.5 Avondale/Ogden Letter Agreement.(11)
10.6 Acquisition and Disposition Agreements
<PAGE>
(a) Asset Purchase Agreement dated January 27, 1987 by and
between the Company and Connell Industries, L.P.(4)
(b) Purchase Agreement dated June 22, 1988, by and between
AGM, Lockheed Shipbuilding Company and Lockheed
Corporation.(8)
(c) Stock Purchase Agreement dated February 15, 1991, by
and between Avondale Technical Services, Inc. and
Oliver R. Crawford relating to the purchase of Crawford
Technical Services, Inc.(3)
(d) Asset Purchase Agreement dated November 20, 1992
between the Company and Bollinger Machine Shop &
Shipyard, Inc., a Louisiana corporation (without
exhibits).(5)
10.7 Lease Agreements
(a) Lease Agreement dated June 24, 1988, by and between the
Company and the Board of Commissioners of the Port of
New Orleans.(8)
(b) Lease Agreement dated June 4, 1979, by and between the
Company and Marrero Land and Improvement Association,
Ltd.(8)
(c) Adoption Agreement dated July 22, 1988, by and between
the Company and Missouri Pacific Railroad Company, as
supplemented on the date thereof.(8)
(d) Lease of Commercial Property dated July 1, 1970 by and
between the Company and Metal Building Products Co.,
Inc.(3)
10.8 Other Material Agreements
(a) Registration Rights Agreement between the Company and
the ESOP as Annex I of the Common Stock Purchase
Agreement dated as of September 27, 1985, by and
between Ogden American Corporation and the trustees of
the Avondale Industries, Inc., Employee Stock Ownership
Trust.(4)
(b) Registration Rights Agreement between the Company and
the participants in the Amended and Restated
Performance Share Plan (included in Exhibit 10.3(a)).
(c) License dated October 13, 1989 by and between the
Company and Intermarine S.p.A. relating to the license
of molded, glass-reinforced polyester hull construction
technology.(3)
(d) Stockholder Protection Rights Agreement dated as of
September 26, 1994 between Avondale Industries, Inc.
and Boatmen's Trust Company, as Rights Agent.(12)
10.9 Revolving Credit Agreement dated as of May 10, 1994 among
<PAGE>
Avondale Industries, Inc., various financial institutions
signatory thereto (the "Banks") and Continental Bank N.A. as
the Agent for the Banks, and Amendment Nos. 1 and 2
thereto.(7)
(a) Third Amendment, Waiver and Consent to Revolving Credit
Agreement, dated May 10, 1995.
(b) Fourth Amendment and Consent to Revolving Credit
Agreement, dated September 1, 1995.
(c) Fifth Amendment to Revolving Credit Agreement, dated
November 17, 1995.
21 List of subsidiaries of the Company
23 Consent of Deloitte & Touche LLP
27 Financial Data Schedule
99 Additional Exhibits
(a) Subscription to Combustion, Inc. litigation preliminary
settlement agreement setting forth specific terms of
the settlement between Avondale and the Plaintiff
Class.
__________
(1) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1993.
(2) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1995.
(3) Incorporated by reference from the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1991, as amended by Form 10-
K/A.
(4) Incorporated by reference from the Company's Registration Statement on
Form S-1 (Registration No. 33-20145) filed with the Commission on
February 16, 1988.
(5) Incorporated by reference from the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1993.
(6) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 1995.
(7) Incorporated by reference from the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1994.
(8) Incorporated by reference from the Company's Registration Statement on
Form S-1 (Registration No. 33-27342) filed with the Commission on
March 6, 1989.
(9) Incorporated by reference from the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1990.
<PAGE>
(10) Incorporated by reference from the Company's Registration Statement on
Form S-8 and Form S-3 (Registration No. 33-31984) filed with the
Commission on November 8, 1989.
(11) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 1994.
(12) Incorporated by reference from the Company's Current Report on Form 8-
K filed with the Commission on September 30, 1994.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three month period
ended December 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on January 19,1996.
AVONDALE INDUSTRIES, INC.
By: /s/Albert L. Bossier, Jr.
-------------------------
Albert L. Bossier, Jr.
Chairman of the Board,
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant and on the dates indicated.
Signature Title Date
----------------------------------------------------------------------
/s/Albert L. Bossier, Jr. Chairman of the Board, January 19, 1996
------------------------- President and Chief
Albert L. Bossier, Jr. Executive Officer
/s/Thomas M. Kitchen Vice President, Chief January 19, 1996
-------------------------- Financial Officer
Thomas M. Kitchen Corporate Secretary and
a Director
/s/Kenneth B. Dupont Vice President and a January 19, 1996
-------------------------- Director
Kenneth B. Dupont
<PAGE>
/s/Anthony J. Correro, III Director January 19, 1996
--------------------------
Anthony J. Correro, III
/s/Francis R. Donovan Director January 19, 1996
--------------------------
Francis R. Donovan
/s/William A. Harmeyer Director January 19, 1996
--------------------------
William A. Harmeyer
/s/Hugh A. Thompson Director January 19, 1996
--------------------------
Hugh A. Thompson
/s/Bruce L. Hicks Vice President & January 19, 1996
-------------------------- Controller
Bruce L. Hicks
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------------
| 1. CONTRACT ID CODE | PAGE OF PAGES
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT | L | 1 | 7
- --------------------------------------------------------------------------------------------------------------------------------
2. AMENDMENT/MODIFICATION NO. | 3. EFFECTIVE DATE | 4. REQUISITION/PURCHASE REG. NO. 5. PROJ NO. (if applicable)
P00027 | SEE BLK 16C. | N0002496MR20706 2-0292-20706
- ----------------------------------------|--------------------|------------------------------------------------------------------
ISSUED BY CODE | N00024 | 7. ADMINISTERED BY (if other than Item 6) CODE | N63124
BUYER/SYMBOL: L. NEWTON SEA 02223 SUPSHIP, New Orleans
2531 JEFFERSON DAVIS HWY Bldg. 16, Naval Support Activity
ARLINGTON, VA 22242-5160 New Orleans, LA 70142-5700
PHONE: Area Code 703/602-3102 Ext 226
- --------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, State and ZIP Code) |----|9A. AMENDMENT OF SOLICITATION NO.
CEC NO: 60004899F | |
| |----------------------------------------
| |% DATED (SEE ITEM 11)
| |
Avondale Industries, Inc. |----|----------------------------------------
GRP Division | |10A. MODIFICATION OF CONTRACT/ORDER NO.
P.O. Box 2309 | X |
Gulfport, MS 39505 | | N00024-89-C-2162
| |-----------------------------------------
- ----------------------------------------------------------------------------------| |10B. DATED (SEE ITEM 13)
CAGE CODE ICC97 | FACILITY CODE | | 89OCT03
- ---------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
| The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers __
- ------ is extended, __ is not extended.
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation as amended, by one of the
following methods: (a) By completing Items 8 and 15, and returning __ copies of the amendment; (b) By acknowledging receipt of this
amendment on each copy of the offer submitted; or (c) By separate letter or telegram which incudes a reference to the solicitation
and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE
HOUR AND DATE SPECIFIED MAY RESULLT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already
submitted, such change may be made by telegram or letter; provided each telegram or letter makes reference to the solicitation and
this amendment, and is received prior to the opening hour and date specified.
- ---------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATE (If required)
See Attached Financial Accounting Data Sheet
- ---------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATINS AND CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ---------------------------------------------------------------------------------------------------------------------------------
| A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
- ------| ORDER NO. IN ITEM 10A.
- ------|--------------------------------------------------------------------------------------------------------------------------
| B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMISTRATIVE CHANGES (such as changes in paying office,
| appropriation data, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b)
- ------|--------------------------------------------------------------------------------------------------------------------------
| C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
X | Special Contract Requirement H-16 entitled Documentation of Request For Equitable Adjustment
- ------|--------------------------------------------------------------------------------------------------------------------------
| D. OTHER (Specify type of modification and authority)
- ---------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor ( ) is not, (X) is required to sign this document and return 2 copies to the issuing office.
- ---------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where
feasible.)
SEE ATTACHED
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- -----------------------------------------------------|---------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) |16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
A.L. BOSSIER, JR. | John Kimener
Chairman, President & Chief Executive Officer | Contracting Officer
- ---------------------------------|-------------------|------------------------------------------|---------------------------------
15B. CONTRACTOR/OFFEROR | 15C. DATE SIGNED | 16B. UNITED STATES OF AMERICA | 16C. DATE SIGNED
[SIGNATURE APPEARS HERE] | 12-28-95 | [SIGNATURE APPEARS HERE] |
- ------------------------------------------------------------------------------------------------|
(Signature of person authorized to sign) (Signature of Contracting Officer) |
- ---------------------------------------------------------------------------------------------------------------------------------
NSN 7540-01-152-8070 STANDARD FORM 30 (REV 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
FAR (48 CFR) 53.243
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
N00024-89-C-2162
P00027
Page 2 of 7
WHEREAS, Avondale Industries, Inc. (AII) (the Contractor) has submitted a
Request for Equitable Adjustable (REA) dated 15 November 1994 seeking price and
delivery schedule adjustments, damages, and/or other relief under and/or
relating to Contracts N00024-89-C-2162 (MHC 53) and N00024-90-C-2304 (MHC
54,56,57), as updated and supplemented by additional submissions and
representations at various times; and
WHEREAS, the Contractor has certified its REA and all supporting data in
accordance with the requirements of the Truth in Negotiations Act, 10 U.S.C.
2306a, Section (c)(1) of the Contract Disputes Act of 1978, 41 U.S.C.
605(c)(1), and P.L. 95-485, Section 813; and
WHEREAS, Modification A00198 established a maximum price increase for a period
of fourteen (14) days of proposed compensable delay based on a 50/50 sharing
of the costs of said delay resulting from FMR 204; and
WHEREAS, the Contractor has also asserted its entitlement to equitable
adjustments to the contract price(s) and/or delivery schedule(s) of Contracts
N00024-89-C-2162 and N00024-90-C-2304, to damages, and/or to other relief under
or relating to those contracts, in connection with: defects in Government
furnished test instrumentation used during MHC 54 Builder's trials; extension of
vendor warranties; lack of buffering on M/SCS signal outputs; calibration of
test equipment; EMI conductive paint; accepted mass properties estimates for
full load displacement and subcontractor delays, inter alia (see Attachment A
hereto); and
WHEREAS, the parties hereto desire to effect a full and final settlement of the
Contractor's entitlement to price adjustments, damages, and other relief from
the Government pursuant to its REA, and also to effect the full and final
settlement of any and all other actual and potential entitlement of the
Contractor to price and/or schedule adjustments, damages, and/or other relief
under and/or relating to Contracts N00024-89-C-2162 and N00024-90-C-2304, any
and all other Government contracts, and any and all contracts between the
Contractor and any third party, caused by Covered Events except as specifically
reserved below; and
WHEREAS, the parties have reached agreement as to an appropriate resolution of
all matters raised by the Contractor in its REA, and all other matters relating
to or in any manner connected with Contracts N00024-89-C-2162 and
N00024-90-C-2304, any other Government contract, or any contract between the
Contractor and any third party, which actually do or potentially could give
rise to Contractor entitlement against the Government to price and/or
<PAGE>
N00024-89-C-2162
P00027
Page 3 of 7
schedule adjustments, damages, and/orother relief under or in any connection
with this contract; and
WHEREAS, funds are not currently available for this modification; and
WHEREAS, the parties therefore acknowledge and agree that their rights and
obligations hereunder are contingent upon the availability of appropriated funds
from which payments for purposes of this modification can be made, and that no
legal liability on the part of the Government for any payment may arise until:
(a) funds are made available to the Contracting Officer for this modification;
and (b) the Contractor receives notice that such funds have been made available,
said notice to be provided by the Contracting Officer in writing.
NOW THEREFORE, in consideration of the foregoing and of the mutual covenants
herein contained, the parties agree as follows:
1. The parties hereto have negotiated this modification on the basis that all
matters, which actually do or potentially could give rise to Contractor
entitlement to price and/or schedule adjustments, damages (including but not
limited to money and other damages for breach of contract), and/or relief, which
are known to or should have been known to the Contractor, whether or not
actually discussed by the parties, and whether or not included in any claim,
REA, or other request or demand, have been included and incorporated into this
agreement. This modification accounts for all price, schedule and other
adjustments, and for all damages and other relief, appropriate for all such
matters, except for those specifically reserved below in paragraph 3.d of this
modification.
2. As a result of this modification, the actual adjustment in target cost,
target price and ceiling price for CLIN 0001 for the fourteen days of delay
identified in Modification A00198 dated 14 September 1995 is as follows:
CLIN 0001 Target Cost: $0.00
Target Profit: $0.00
Target Price: $0.00
Ceiling Price: $0.00
<PAGE>
N00024-89-C-2162
P00027
Page 4 of 7
The contract is hereby modified as follows:
a. Under SECTION B: SUPPLIES OR SERVICES AND PRICES, the target costs, target
profits and target prices and ceiling prices are increased as follows:
CLIN 0001 Target Cost: $19,871,959
Target Profit: 0
Target Price: $19,871,959
Ceiling Price: $19,871,959
b. Under SECTION C: DESCRIPTION/SPECIFICATION/WORK STATEMENT, for CLIN 0001
and 0021 add the following paragraph:
As a result of this settlement the Contractor agrees to take all necessary and
appropriate actions to correct the MHC 53 Acceptance trial cards listed in
Attachment B screened for Contractor Action (KA) and identified to the
Contractor prior to 1 December 1995. The trial cards which are listed in
Attachment C to this modification are not included as part of this settlement.
Additionally, the Contractor agrees to promptly take all necessary actions to
comply with the contract requirements stated in the following Letters of
Direction:
(i) SUPSHIP New Orleans letter serial 421.4/08246 dated 22 Nov 95 Subj: LACK
OF BUFFERING ON M/SCS SIGNAL OUTPUTS
(ii) SUPSHIP New Orleans letter serial 421.4/07896 dated 6 Oct 94 Subj:
CALIBRATION OF TEST EQUIPMENT
c. Under SECTION F--DELIVERIES OR PERFORMANCE, the contract delivery date
for MHC 53 is 11 August 1995.
d. Under SECTION H--SPECIAL CONTRACT REQUIREMENTS, CLAUSE-57 entitled MASS
PROPERTIES CONTROL, paragraph (a) change the Full Load Displacement value from
885 metric tons to 907 metric tons.
<PAGE>
N00024-89-C-2162
P00027
Page 5 of 7
3. RELEASE
a. As used in this paragraph 3:
(1) "Events" refer to any contract modification, any Government breach, any
Government tort, any change order, any stop work order, any suspension of work,
any acceleration order, any Government action or omission pertaining to
Government property or information, and any other occurrence, action, or
omission (whether fortuitous or accidental, of or by the Government, contractor
or third party) to the extent included or depicted in the REA and/or REA
Supplements.
(2) "Covered Events" refer to "Events" occurring on or before the effective
date of this modification, whether formal or constructive, which were known or
should have been known by the Contractor on the effective date of this
modification, whether or not such events were discussed between the parties,
all of which events: (I) arise out of or under or are in any way related to this
contract and affect this contract, or (ii) arise out of or under or are in any
way related to this contract and affect any other contract between the
Contractor and the Government, or (iii) arise out of or under or are any way
related to any other contract between the Contractor and the Government or the
Contractor and any third party and affect this contract but only to the extent
of the effect on this contract.
(3) "Costs" includes, but is not limited to, any or all:
(i) direct performance (hardcore) and material costs;
(ii) indirect costs;
(iii) delay and disruption costs including local, cumulative, and any other
type;
(iv) overhead costs;
(v) costs associated with dislocation, accelerations, and inefficiencies in
performance;
(vi) interest costs and other consideration for financing;
(viii) costs for preparing proposals, claims, and requests for equitable
adjustments; and
(viii) subcontract costs.
<PAGE>
N00024-89-C-2162
P00027
Page 6 of 7
b. In consideration for the provisions of this modification, the Contractor,
for itself, its successors, assigns, vendors, suppliers, and subcontractors
hereby remises, releases, and forever discharges the Government, its officers,
agents, and employees from (i) any or all actual or potential entitlement of the
Contractor to an equitable adjustment of the price and/or delivery schedule of
this contract by reason of Covered Events, or the impact of Covered Events, (ii)
any or all actual or potential liabilities to the Contractor for money damages
and/or other relief for Covered Events or the impact of Covered Events upon this
contract, (iii) any and all actual or potential entitlement of the Contractor to
an equitable adjustment of the price and/or delivery schedule of any other
Government contract or any contract between the Contractor and any third party
by reason of Covered Events or the impact of Covered Events, and (iv) any and
all actual or potential liabilities to the Contractor for money damages and/or
other relief under or relating to any other Government contract or any contract
between the Contractor and any third party for Covered Events, or for the impact
of Covered Events, arising under or related to this contract. By this release,
the Contractor does not release claims under any other Government contract for
Covered Events solely arising under, or relating to, such other Government
contract to the extent they do not affect this contract.
c. The Contractor hereby confirms and acknowledges that in agreeing to the
terms of this modification, it is releasing all rights to any entitlement for
any and all costs under, and any and all impacts upon this contract or any other
contract by reason of Covered Events, whether or not such costs and impacts of
Covered Events are known or should have been known or should have been
foreseeable as of the effective date of this modification, whether or not such
costs and impacts of Covered Events have been discussed with, or for any reason
reserved for future discussion with the Government, or have been made the basis
for other assertions of claims or requests for equitable adjustment, whether or
not such costs or impacts of Covered Event were, or are, incurred and
sustained, respectively, before, on, or after the effective date of this
modification, and whether or not such costs and impacts of Covered Events are
caused directly by, indirectly by, cumulatively by, or in consequence of any of
the Covered Events.
<PAGE>
N00024-89-C-2162
P00027
Page 7 of 7
d. Except for the items listed in Attachment c and pending change orders, the
Contractor's release set forth in this provision is complete and final, no
rights are reserved under this modification and, in any event, any and all such
rights shall be deemed to have been waived without exception. Nothing set forth
herein shall in any way affect or operate to reserve any item covered by another
release executed by the Contractor either prior to, concurrent with, or
subsequent to the date of the execution of this modification nor shall anything
set forth herein in any way affect the operation of any statute, including but
not limited to 10 USC 2405.
4. The parties agree that the retentions against this contract shall be the
current amount plus one and one half percent (1.5%) of the amount increased as
result of this modification.
5. Nothing set forth herein shall in any manner affect or operate to reserve any
event or item covered by any other release executed by the Contractor prior to,
contemporaneous with, or subsequent to the effective date of this modification.
6. Funds are not currently available for this modification. The Government's
obligation under this modification is contingent upon the availability of
appropriated funds from which payments for purposes of this modification can be
made. No legal liability on the part of the Government for any payment may arise
until funds are made available to the Contracting Officer for this modification
and until the Contractor receives notice of such availability, to be provided by
the Contracting Officer in writing.
7. Except as modified herein all other terms and conditions of this contract
remain unchanged and in full force and effect.
<PAGE>
N00024-89-C-2162
P00027
ATTACHMENT "A"
1. Request for Equitable Adjustment dated 15 November 1994
2. Modification A00198 dated 14 September 1995
3. Avondale Letter serial MHC53/10692WDJ dated 27 Jun 94
Subj: Insurance Claim EMI COnductive Paint Casualty Loss
4. SUPSHIP New Orleans letter serial 421.4/08246 dated 22 Nov 95
Subj: LACK OF BUFFERING ON M/SCS SIGNAL OUTPUTS
5. SUPSHIP New Orleans letter serial 421.4/07896 dated 6 Oct 94
Subj: CALIBRATION OF TEST EQUIPMENT
6. Avondale subcontractor delay claims from General Marine Industries Inc.,
Jamestown Metal Inc. and Loral Defense Systems East
<PAGE>
N00024-89-C-2162
P00027
ATTACHMENT B
MHC 53 ACCEPTANCE TRIAL CARDS
1. 1 015 AX 01
2. 2 087 AX 01
3. 2 094 AX 01
4. 2 128 AX 01
5. 1 024 EL 01
6. 1 024 EL 02
7. 1 024 EL 03
8. 1 024 EL 04
9. 2 038 EL 01 *
10. 2 006 HB 02
11. 1 027 MP 01
12. 2 069 MP 01 *
13. 2 072 MP 01
* Based on approval of pending deviations
<PAGE>
ATTACHMENT B
2 097 AX 01
2 098 AX 01
2 099 AX 01
2 101 AX 01
2 106 AX 01
2 027 CC 01
2 044 CC 01
2 044 CC 02
2 044 CC 03
2 044 CC 04
2 044 CC 05
1 024 DC 01
2 095 MP 01
2 126 MP 01
2 032 WP 01
2 044 WP 01
2 044 WP 02
THE PARTIES AGREE TO NEGOTIATE IN GOOD FAITH TO REACH AGREEMENT ON THE ABOVE
ITEMS WITHIN SIXTY (60) DAYS OF THE EFFECTIVE DATE OF THIS MODIFICATION.
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------------
| 1. CONTRACT ID CODE | PAGE OF PAGES
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT | L | 1 | 7
- --------------------------------------------------------------------------------------------------------------------------------
2. AMENDMENT/MODIFICATION NO. | 3. EFFECTIVE DATE | 4. REQUISITION/PURCHASE REG. NO. 5. PROJ NO. (if applicable)
P00020 | SEE BLK 16C. | N0002496MR20707 2-0292-20707
- ----------------------------------------|--------------------|------------------------------------------------------------------
ISSUED BY CODE | N00024 | 7. ADMINISTERED BY (if other than Item 6) CODE | N63124
NAVAL SEA SYSTEMS COMMAND ---------------------| |---------------
BUYER/SYMBOL: L. NEWTON SEA 02223 SUPSHIP, New Orleans
2531 JEFFERSON DAVIS HWY Bldg. 16, Naval Support Activity
ARLINGTON, VA 22242-5160 New Orleans, LA 70142-5700
PHONE: Area Code 703/602-3102 Ext 226
- --------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, State and ZIP Code) |----|9A. AMENDMENT OF SOLICITATION NO.
CEC NO: 60004899F | |
| |----------------------------------------
| |% DATED (SEE ITEM 11)
| |
Avondale Industries, Inc. |----|----------------------------------------
GRP Division | |10A. MODIFICATION OF CONTRACT/ORDER NO.
P.O. Box 2309 | X |
Gulfport, MS 39505 | | N00024-90-C-2304
| |-----------------------------------------
- ----------------------------------------------------------------------------------| |10B. DATED (SEE ITEM 13)
CAGE CODE ICC97 | FACILITY CODE | | 90AUG02
- ---------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
| The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers __
- ------ is extended, __ is not extended.
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation as amended, by one of the
following methods: (a) By completing Items 8 and 15, and returning __ copies of the amendment; (b) By acknowledging receipt of this
amendment on each copy of the offer submitted; or (c) By separate letter or telegram which incudes a reference to the solicitation
and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE
HOUR AND DATE SPECIFIED MAY RESULLT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already
submitted, such change may be made by telegram or letter; provided each telegram or letter makes reference to the solicitation and
this amendment, and is received prior to the opening hour and date specified.
- ---------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATE (If required)
See Attached Financial Accounting Data Sheet
- ---------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATINS AND CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ---------------------------------------------------------------------------------------------------------------------------------
| A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
- ------| ORDER NO. IN ITEM 10A.
- ------|--------------------------------------------------------------------------------------------------------------------------
| B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMISTRATIVE CHANGES (such as changes in paying office,
| appropriation data, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b)
- ------|--------------------------------------------------------------------------------------------------------------------------
| C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
X | Special Contract Requirement H-16 entitled Documentation of Request For Equitable Adjustment
- ------|--------------------------------------------------------------------------------------------------------------------------
| D. OTHER (Specify type of modification and authority)
- ---------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor ( ) is not, (X) is required to sign this document and return 2 copies to the issuing office.
- ---------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where
feasible.)
SEE ATTACHED
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- -----------------------------------------------------|---------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) |16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
A.L. BOSSIER, JR. | John Kimener
Chairman, President & Chief Executive Officer | Contracting Officer
- ---------------------------------|-------------------|------------------------------------------|---------------------------------
15B. CONTRACTOR/OFFEROR | 15C. DATE SIGNED | 16B. UNITED STATES OF AMERICA | 16C. DATE SIGNED
[SIGNATURE APPEARS HERE] | 12-28-95 | [SIGNATURE APPEARS HERE] |
- ------------------------------------------------------------------------------------------------|
(Signature of person authorized to sign) (Signature of Contracting Officer) |
- ---------------------------------------------------------------------------------------------------------------------------------
NSN 7540-01-152-8070 STANDARD FORM 30 (REV 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
FAR (48 CFR) 53.243
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
N00024-90-C-2304
P00020
Page 2 of 7
WHEREAS, Avondale Industries, Inc. (AII) (the Contractor) has submitted a
Request for Equitable Adjustable (REA) dated 15 November 1994 seeking price and
delivery schedule adjustments, damages, and/or other relief under and/or
relating to Contracts N00024-89-C-2162 (MHC 53) and N00024-90-C-2304 (MHC
54,56,57), as updated and supplemented by additional submissions and
representations at various times; and
WHEREAS, the Contractor has certified its REA and all supporting data in
accordance with the requirements of the Truth in Negotiations Act, 10 U.S.C.
2306a, Section (c)(1) of the Contract Disputes Act of 1978, 41 U.S.C.
605(c)(1), and P.L. 95-485, Section 813; and
WHEREAS, the Contractor has also asserted its entitlement to equitable
adjustments to the contract price(s) and/or delivery schedule(s) of Contracts
N00024-89-C-2162 and N00024-90-C-2304, to damages, and/or to other relief under
or relating to those contracts, in connection with: defects in Government
furnished test instrumentation used during MHC 54 Builder's trials; extension of
vendor warranties; lack of buffering on M/SCS signal outputs; calibration of
test equipment; EMI conductive paint; accepted mass properties estimates for
full load displacement and subcontractor delays, inter alia (see Attachment A
hereto); and
WHEREAS, the parties hereto desire to effect a full and final settlement of the
Contractor's entitlement to price adjustments, damages, and other relief from
the Government pursuant to its REA, and also to effect the full and final
settlement of any and all other actual and potential entitlement of the
Contractor to price and/or schedule adjustments, damages, and/or other relief
under and/or relating to Contracts N00024-89-C-2162 and N00024-90-C-2304, any
and all other Government contracts, and any and all contracts between the
Contractor and any third party, caused by Covered Events except as specifically
reserved below; and
WHEREAS, the parties have reached agreement as to an appropriate resolution of
all matters raised by the Contractor in its REA, and all other matters relating
to or in any manner connected with Contracts N00024-89-C-2162 and
N00024-90-C-2304, any other Government contract, or any contract between the
Contractor and any third party, which actually do or potentially could give
rise to Contractor entitlement against the Government to price and/or schedule
adjustments, damages, and/or other relief under or in any connection with this
contract; and
WHEREAS, funds are not currently available for this modification; and
<PAGE>
N00024-90-C-2304
P00020
Page 3 of 7
WHEREAS, the parties therefore acknowledge and agree that their rights and
obligations hereunder are contingent upon the availability of appropriated funds
from which payments for purposes of this modification can be made, and that no
legal liability on the part of the Government for any payment may arise until:
(a) funds are made available to the Contracting Officer for this modification;
and (b) the Contractor receives notice that such funds have been made available,
said notice to be provided by the Contracting Officer in writing.
NOW THEREFORE, in consideration of the foregoing and of the mutual covenants
herein contained, the parties agree as follows:
1. The parties hereto have negotiated this modification on the basis that all
matters, which actually do or potentially could give rise to Contractor
entitlement to price and/or schedule adjustments, damages (including but not
limited to money and other damages for breach of contract), and/or relief, which
are known to or should have been known to the Contractor, whether or not
actually discussed by the parties, and whether or not included in any claim,
REA, or other request or demand, have been included and incorporated into this
agreement. This modification accounts for all price, schedule and other
adjustments, and for all damages and other relief, appropriate for all such
matters, except for those specifically reserved below in paragraph 3.d of this
modification.
2. The contract is hereby modified as follows:
a. Under SECTION B: SUPPLIES OR SERVICES AND PRICES, the target costs, target
profits and target prices and ceiling prices are increased as follows:
CLIN 0001 Target Cost: $2,799,538
Target Profit: 419,931
Target Price: $3,219,469
Ceiling Price: $3,359,446
CLIN 0021AA Target Cost: $2,583,584
Target Profit: 387,537
Target Price: $2,971,121
Ceiling Price: $3,100,300
CLIN 0021AB Target Cost: $2,416,417
Target Profit: $ 362,482
Target Price: $2,778,899
Ceiling Price: $2,899,700
<PAGE>
N00024-90-C-2304
P00020
Page 4 of 7
b. Under SECTION C: DESCRIPTION/SPECIFICATION/WORK STATEMENT, for CLIN 0001
and 0021 add the following paragraph:
As a result of this settlement the Contractor agrees to take all necessary and
appropriate actions to correct the MHC 54 Builders trial cards screened for
Contractor Action (KA) and identified to the Contractor prior to 1 December
1995, except for those trial cards which are listed in Attachment B to this
modification. The Contractor also agrees to promptly take such actions with
respect to MHCs 56 and 57 as may be necessary and appropriate to correct,
prevent or otherwise address such Contractor responsible deficiencies identified
in the aforesaid MHC 54 Builder's trial cards. Additionally, the Contractor
agrees to promptly take all necessary actions to comply with the contract
requirements stated in the following Letters of Direction:
(i) SUPSHIP New Orleans letter serial 421.4/08246 dated 22 Nov 95 Subj: LACK
OF BUFFERING ON M/SCS SIGNAL OUTPUTS
(ii) SUPSHIP New Orleans letter serial 421.4/07896 dated 6 Oct 94 Subj:
CALIBRATION OF TEST EQUIPMENT
c. Under SECTION F--DELIVERIES OR PERFORMANCE, the contract delivery dates
revised as follows:
MHC 54 9 February 1996
----------------
MHC 56 9 August 1996
----------------
MHC 57 3 January 1997
----------------
d. Under SECTION H--SPECIAL CONTRACT REQUIREMENTS, CLAUSE-57 entitled MASS
PROPERTIES CONTROL, paragraph (a) change the Full Load Displacement value from
885 metric tons to 907 metric tons.
<PAGE>
N00024-90-C-2304
P00020
Page 5 of 7
3. RELEASE
a. As used in this paragraph 3:
(1) "Events" refer to any contract modification, any Government breach, any
Government tort, any change order, any stop work order, any suspension of work,
any acceleration order, any Government action or omission pertaining to
Government property or information, and any other occurrence, action, or
omission (whether fortuitous or accidental, of or by the Government, contractor
or third party) to the extent included or depicted in the REA and/or REA
Supplements.
(2) "Covered Events" refer to "Events" occurring on or before the effective
date of this modification, whether formal or constructive, which were known or
should have been known by the Contractor on the effective date of this
modification, whether or not such events were discussed between the parties,
all of which events: (I) arise out of or under or are in any way related to this
contract and affect this contract, or (ii) arise out of or under or are in any
way related to this contract and affect any other contract between the
Contractor and the Government, or (iii) arise out of or under or are any way
related to any other contract between the Contractor and the Government or the
Contractor and any third party and affect this contract but only to the extent
of the effect on this contract.
(3) "Costs" includes, but is not limited to, any or all:
(i) direct performance (hardcore) and material costs;
(ii) indirect costs;
(iii) delay and disruption costs including local, cumulative, and any other
type;
(iv) overhead costs;
(v) costs associated with dislocation, accelerations, and inefficiencies in
performance;
(vi) interest costs and other consideration for financing;
(viii) costs for preparing proposals, claims, and requests for equitable
adjustments; and
(viii) subcontract costs.
<PAGE>
N00024-90-C-2304
P00020
Page 6 of 7
b. In consideration for the provisions of this modification, the Contractor,
for itself, its successors, assigns, vendors, suppliers, and subcontractors
hereby remises, releases, and forever discharges the Government, its officers,
agents, and employees from (i) any or all actual or potential entitlement of the
Contractor to an equitable adjustment of the price and/or delivery schedule of
this contract by reason of Covered Events, or the impact of Covered Events, (ii)
any or all actual or potential liabilities to the Contractor for money damages
and/or other relief for Covered Events or the impact of Covered Events upon this
contract, (iii) any and all actual or potential entitlement of the Contractor to
an equitable adjustment of the price and/or delivery schedule of any other
Government contract or any contract between the Contractor and any third party
by reason of Covered Events or the impact of Covered Events, and (iv) any and
all actual or potential liabilities to the Contractor for money damages and/or
other relief under or relating to any other Government contract or any contract
between the Contractor and any third party for Covered Events, or for the impact
of Covered Events, arising under or related to this contract. By this release,
the Contractor does not release claims under any other Government contract for
Covered Events solely arising under, or relating to, such other Government
contract to the extent they do not affect this contract.
c. The Contractor hereby confirms and acknowledges that in agreeing to the
terms of this modification, it is releasing all rights to any entitlement for
any and all costs under, and any and all impacts upon this contract or any other
contract by reason of Covered Events, whether or not such costs and impacts of
Covered Events are known or should have been known or should have been
foreseeable as of the effective date of this modification, whether or not such
costs and impacts of Covered Events have been discussed with, or for any reason
reserved for future discussion with the Government, or have been made the basis
for other assertions of claims or requests for equitable adjustment, whether or
not such costs or impacts of Covered Event were, or are, incurred and
sustained, respectively, before, on, or after the effective date of this
modification, and whether or not such costs and impacts of Covered Events are
caused directly by, indirectly by, cumulatively by, or in consequence of any of
the Covered Events.
<PAGE>
N00024-90-C-2304
P00020
Page 7 of 7
d. Except for the items listed in Attachment B and pending change orders, the
Contractor's release set forth in this provision is complete and final, no
rights are reserved under this modification and, in any event, any and all such
rights shall be deemed to have been waived without exception. Nothing set forth
herein shall in any way affect or operate to reserve any item covered by another
release executed by the Contractor either prior to, concurrent with, or
subsequent to the date of the execution of this modification nor shall anything
set forth herein in any way affect the operation of any statute, including but
not limited to 10 USC 2405.
4. The parties agree that the retentions against this contract shall be the
current amount plus five percent (5%) of the amount increased as result of this
modification.
5. Nothing set forth herein shall in any manner affect or operate to reserve any
event or item covered by any other release executed by the Contractor prior to,
contemporaneous with, or subsequent to the effective date of this modification.
6. Funds are not currently available for this modification. The Government's
obligation under this modification is contingent upon the availability of
appropriated funds from which payments for purposes of this modification can be
made. No legal liability on the part of the Government for any payment may arise
until funds are made available to the Contracting Officer for this modification
and until the Contractor receives notice of such availability, to be provided by
the Contracting Officer in writing.
7. Except as modified herein all other terms and conditions of this contract
remain unchanged and in full force and effect.
<PAGE>
N00024-90-C-2304
P00020
ATTACHMENT "A"
1. Request for Equitable Adjustment dated 15 November 1994
2. Avondale letter serial MHC 54-1261-JMS dated 20 NOV 95
Subj: Notification of Change: Government Furnished Test Instrumentation
Extending Builders's Trials of MHC-54
3. All Avondale vendor warranty extension costs related to the delivery
schedule(s) established in this modification
4. SUPSHIP New Orleans letter serial 421.4/08246 dated 22 Nov 95
Subj: LACK OF BUFFERING ON M/SCS SIGNAL OUTPUTS
5. SUPSHIP New Orleans letter serial 421.4/07896 dated 6 Oct 94
Subj: CALIBRATION OF TEST EQUIPMENT
6. Avondale subcontractor delay claims from General Marine Industries Inc.,
Jamestown Metal Inc. and Loral Defense Systems East
<PAGE>
ATTACHMENT B
AX-2098.1
AX-2156
AX-2002
AX-2003
AX-2004
AX-2005
AX-2006
AX-2007
AX-2008
AX-2009
EL-1004
EL-1082
EL-1165
EL-1194
EL-1195
EL-1210
EL-1217
THE PARTIES AGREE TO NEGOTIATE IN GOOD FAITH TO REACH AGREEMENT ON THE ABOVE
ITEMS WITHIN SIXTY (60) DAYS OF THE EFFECTIVE DATE OF THIS MODIFICATION.
AVONDALE INDUSTRIES, INC.
401(k)
SAVINGS PLAN
(Effective January 1, 1996)
<PAGE>
PREAMBLE
Effective January 1, 1996, Avondale Industries, Inc. hereby
establishes a 401(k) (the "Plan") governed by the provisions of
this Plan document and any amendments hereto. The Plan and its
related Trust are intended to qualify as a profit-sharing plan
and a cash-or-deferred arrangement under Sections 401(a), 501(a),
401(k) and 401(m) of the Internal Revenue Code of 1986, as
amended. Any ambiguity shall be resolved by giving effect to
these intentions.
The purpose of this Plan is to encourage Employees to save
and invest systematically a portion of their current compensation
in order that they may have an additional source of income upon
their retirement or disability. The benefits provided by the
Plan are paid from the Trust Fund established by the Employer and
are in addition to the benefits Employees are entitled to receive
under any other programs of the Employer and the United States
Social Security Administration.
The Plan and the Trust forming a part hereof are maintained
for the exclusive benefit of the Participants and their
Beneficiaries.
ARTICLE I
DEFINITIONS
All capitalized terms used in this Plan shall have the
meaning set forth in this Article I, unless a different meaning
is plainly required by the context:
2 Accounts shall mean each of a Participant's Employee-
Deferral Account, Employer Contribution Account and Rollover
Contribution Account (including subaccounts established from time
to time under each such Account) established and maintained to
record the interest of a Participant in the Trust Fund as more
fully described in Sections 1.15, 1.18 and 1.35.
2.1 Active Participant shall mean an Eligible Employee who
is employed by a Participating Employer through the last payroll
period ending within the Plan Year.
2.2 Affiliated Company means the Company and all other
entities required to be aggregated with the Company under
Sections 414(b), (c), (m) or (o) of the Code.
2.3 Beneficiary shall mean the person or persons
designated by a Participant to receive the amount, if any,
payable under the Plan in the event of a Participant's death.
Each Beneficiary designation shall be in the form prescribed by
the Committee.
If the Participant is married and designates someone other
than his legal spouse, his Beneficiary designation must include
the written consent of his spouse at the time the designation is
<PAGE>
made. Such written consent must approve the Beneficiary
designated and acknowledge the effect of such designation and
must be notarized by a notary public. If it is established to
the satisfaction of the Committee that the Participant has no
spouse or that the spouse's consent cannot be obtained because
the spouse cannot be located, or because of such other
circumstances as may be prescribed in regulations issued pursuant
to Section 417 of the Code, such written consent shall not be
required.
If no valid Beneficiary designation is in effect at the time
of the Participant's death, then, to the extent, if any, benefits
are payable under the Plan after such death, Beneficiary shall
mean the Participant's legal spouse, if he is married at the time
of his death, otherwise the Participant's estate.
2.4 Board of Directors shall mean the Board of Directors
of Avondale Industries, Inc.
2.5 Code shall mean the Internal Revenue Code of 1986, as
amended from time to time. Reference to any Section of the Code
shall include any successor provision thereto.
2.6 Committee shall mean the 401(k) Administrative
Committee designated by the Company to administer the Plan in
accordance with Section 12.2 or a person or entity designated by
the 401(k) Administrative Committee.
2.7 Company shall mean Avondale Industries, Inc. and any
successor company that may continue the Plan.
2.8 Compensation. The term "Compensation" as modified
below, has the following meaning for each respective purpose
under the Plan:
(a)Plan Compensation. For purposes of determining
contributions to the Plan, Plan Compensation means base pay plus
overtime, bonuses and short-term Disability payments, if any, and
shall exclude permanent Disability payments and any other extra
compensation in any form paid to the Employee by the Employer
during the Plan Year. Plan Compensation will include any amount
which is contributed by the Employer pursuant to a salary
reduction agreement and which is not includible in the gross
income of an Employee under Sections 125 or 402(e)(3).
(a)Section 415 Compensation. For the purpose of
applying the limitations of Section 415 of the Code, Section 415
Compensation means the Participant's wages, within the meaning of
Section 3401(a) of the Code and all other payments of
compensation to the Participant by the Employer (in the course of
the Employer's trade or business) for which the Employer is
required to furnish the Participant a written statement under
Sections 6041(d) and 6051(a)(3) of the Code.
(a)Total Compensation means Section 415 Compensation
plus all amounts contributed by an Employer on behalf of the
Participant pursuant to a salary reduction agreement which are
not includible in the gross income of the Participant under
Sections 125, 402(e)(3), and 402(h)(1)(B) of the Code.
<PAGE>
The amount of a Participant's annual Compensation that can
be taken into account under any of Subparagraphs (a) - (c) for
any Plan Year shall not exceed $150,000, as adjusted from time to
time in accordance with Section 401(a)(17) of the Code. In
determining the Compensation of a Participant for purposes of
this limitation, the rules of Code Section 414(q)(6) shall apply,
except in applying these rules, "family" will include only the
Participant's spouse and any lineal descendants of the
Participant who have not attained age 19 before the close of the
year. If, as a result of the application of these rules, the
adjusted $150,000 limit is exceeded then the limit will be
prorated among the affected individuals determined under this
section before this limit is applied.
2.9 Disability of a Participant shall mean the total and
permanent incapacity of a Participant to engage in any
substantial gainful employment, as determined by the Committee
and which qualifies him for commencement of benefits for
permanent and total disability under Federal Old Age and Survivor
Insurance.
2.10 Disability Retirement Date shall have the meaning set
forth in Section 9.2.
2.11 Eligible Employee is defined at Section 2.1.
2.12 Employee shall mean a person employed by an Employer,
excluding any employee who is included in a unit of employees
covered by a negotiated collective bargaining agreement which
does not provide for his participation in the Plan. A leased
employee, as described in Section 414(n)(2) of the Code, shall
not be considered an Employee; provided, however, that any leased
employee who subsequently becomes an Employee shall have his
previous service as a leased employee used in calculating his
Years of Service under the Plan.
2.13 Employee-Deferral or Employee-Deferral Contribution
shall mean the amount contributed by the Employer on behalf of a
Participant in accordance with Article III.
2.14 Employee-Deferral Account shall mean the Account
maintained for a Participant to record the Employee-Deferrals
under Article III, and any contributions under Section 4.6,
contributed by the Employer on such Participant's behalf.
2.15 Employee-Deferral Agreement shall mean the agreement
described in Article III.
2.16 Employer shall mean a Participating Employer or a Non-
Participating Employer.
2.17 Employer Contribution means any (a) Matching
Contributions, (b) Employer Discretionary Contributions and (c)
contributions required on account of a Top-Heavy Plan Year.
2.18 Employer Contribution Account shall mean the account
established for a Participant which is funded by Employer
Contributions.
2.19 Employer Discretionary Contribution shall mean a
<PAGE>
contribution by an Employer to the Trust Fund as described in
Article V.
2.20 Entry Date shall mean February 1, 1996 and the first
day of each month thereafter and any other date during the Plan
Year specified by the Committee.
2.21 ERISA shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time. References
to any section of ERISA include any successor provision thereto.
2.22 Highly Compensated Employee shall mean any highly
compensated active Employee and any highly compensated former
Employee as described in this Section 1.23.
A highly compensated active Employee includes any Employee
who performs service for the Employer during the determination
year and who, during the look-back year: (i) received Total
Compensation from the Employer in excess of $75,000 (as adjusted
pursuant to section 415(d) of the Code); (ii) received Total
Compensation from the Employer in excess of $50,000 (as adjusted
pursuant to section 415(d) of the Code) and was a member of the
top-paid group for such year; or (iii) was an officer of the
Employer and received Total Compensation during such year that is
greater than 50 percent of the dollar limitation in effect under
section 415(b)(1)(A) of the Code. The term Highly Compensated
Employee also includes: (i) Employees who are both described in
the preceding sentence if the term "determination year" is
substituted for the term "look-back year" and the Employee is one
of the 100 Employees who received the most Total Compensation
from the Employer during the determination year; and
(ii) Employees who are 5 percent owners at any time during the
look-back year or determination year.
If no officer has satisfied the compensation requirement of
(iii) above during either a determination year or look-back year,
the highest paid officer for such year shall be treated as a
Highly Compensated Employee.
For purposes of this Section 1.23, the determination year
shall be the Plan Year. The look-back year shall be the twelve-
month period immediately preceding the determination year.
A Highly Compensated former Employee includes any Employee
who separated from service (or was deemed to have separated)
prior to the determination year, performs no service for the
Employer during the determination year, and was a highly
compensated active Employee for either the separation year or any
determination year ending on or after the Employee's 55th
birthday.
If an Employee is, during a determination year or look-back
year, a family member of either a five percent (5%) owner who is
an active or former Employee or a Highly Compensated Employee who
is one of the ten (10) most Highly Compensated Employees ranked
on the basis of Total Compensation paid by the Employer during
such year, then the family member and the five percent (5%) owner
or top-ten Highly Compensated Employee shall be aggregated. In
such case, the family member and five percent (5%) owner or top-
<PAGE>
ten (10) Highly Compensated Employee shall be treated as a single
Employee receiving compensation and Plan contributions or
benefits equal to the sum of such compensation and contributions
or benefits of the family member and five percent (5%) owner or
top-ten Highly Compensated Employee. For purposes of this
Section 1.23, family member includes the spouse, lineal
ascendants and descendants of the Employee or former Employee and
the spouses of such lineal ascendants and descendants.
The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of
Employees in the top-paid group, the top one hundred (100)
Employees, and number of Employees treated as officers and the
compensation that is considered, will be made in accordance with
Section 414(q) of the Code and the Regulations thereunder.
2.23 Hour of Service shall mean:
(a)Each hour for which an Employee is directly or
indirectly paid or entitled to payment by a Participating
Employer or Non-Participating Employer for the performance of
duties, including periods of vacation and holidays;
(b)Each hour for which an Employee is directly or
indirectly paid or entitled to payment by a Participating
Employer or Non-Participating Employer (including payments made
or due from a trust fund or insurer to which the Participating
Employer or Non-Participating Employer contributes or pays
premiums) on account of a period of time during which no duties
are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military
duty, or leave of absence, provided that:
(i)no more than 501 Hours of Service shall be
credited under this paragraph (b) to an Employee on account of
any single continuous period during which the Employee performs
no duties; and
(ii)Hours of Service shall not be credited under
this paragraph (b) to an Employee for a payment which solely
reimburses the Employee for medically-related expenses incurred
by the Employee or which is made or due under a plan maintained
solely for the purpose of complying with applicable worker's
compensation, unemployment compensation or disability insurance
laws;
(c)Each hour not already included under this Section
1.24 above for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by such Employer,
provided that crediting of Hours of Service under this Section
1.24 with respect to periods described in this Section 1.24 above
shall be subject to the limitation therein set forth; and
(d)Solely for purposes of determining whether a Break
in Service, as defined in Section 1.29, for participation and
vesting purposes has occurred in a computation period, if an
Employee is away from work on a Parental Absence, he shall
receive credit for the Hours of Service which would otherwise
<PAGE>
have been credited to such individual but for such absence, or in
any case in which such hours cannot be determined, 8 Hours of
Service per day of such absence. The Hours of Service credited
under this Section 1.24(d) shall be credited (1) in the
computation period in which the absence begins if the crediting
is necessary to prevent a Break in Service in that period, or
(2) in all other cases, in the following computation period.
To the extent not credited above, Hours of Service will also
be credited based on the customary work week of the Employee for
periods of military duty (as required by applicable law) and
approved leaves of absence.
The number of Hours of Service to be credited under this
Section 1.24 above on account of a period during which an
Employee performs no duties, and the Plan Years to which Hours of
Service shall be credited under this Section 1.24 above shall be
determined by the Committee in accordance with Sections
2530.200b-2(b) and (c) of the Regulations of the U.S. Department
of Labor.
2.24 Matching Contribution shall mean a contribution by an
Employer to the Trust Fund as described in Article IV.
2.25 Non-Highly Compensated Employee shall mean an Employee
who is not a Highly Compensated Employee.
2.26 Non-Participating Employer shall mean an Affiliated
Company which is not a Participating Employer.
2.27 Normal Retirement Date shall have the meaning set
forth in Section 9.1. Normal Retirement Age means the
Participant's sixty-fifth (65th) birthday.
2.28 One-Year Break-in-Service or Break in Service shall
mean a twelve-month consecutive period following an Employee's
Service Termination Date, as defined in Section 1.36, during
which the Employee fails to be credited with an Hour of Service.
2.29 Parental Absence shall mean an Employee's absence from
work for any of the following reasons: (i) the pregnancy of the
Employee, (ii) the birth of the Employee's child, (iii) the
adoption of a child by the Employee, or (iv) the need to care for
the Employee's child immediately following its birth or adoption;
provided, however, that the Committee, in its sole discretion,
may require evidence that any absence is on account of a reason
enumerated herein and evidence as to the duration of such
absence.
2.30 Participant shall mean (i) any Eligible Employee for
whom Employee-Deferral Contributions have been made or (ii) any
former Eligible Employee on whose behalf an Account continues to
be maintained in the Plan pursuant to Article II. An Eligible
Employee remains a Participant as long as he has an Account
balance, as provided in Section 2.2.
2.31 Participating Employer shall mean the Company,
Avondale Services Corporation, and any Affiliated Company that
adopts this Plan pursuant to authorization by the Board of
Directors of the Company and the board of directors of the newly-
<PAGE>
adopting entity.
By authorizing the adoption of this Plan, the governing body
of any Participating Employer expressly recognizes and delegates
to the Company and its Board of Directors the right to exercise
on the behalf of the Participating Employer all power and
authority conferred by the Plan to the Company or its Board of
Directors.
2.32 Plan shall mean the Avondale Industries, Inc. 401(k)
Savings Plan, as set forth in this document and as amended from
time to time.
2.33 Plan Year shall mean the calendar year.
2.34 Rollover Contribution Account shall mean the Account
maintained for a Participant to record his rollover contribution
made pursuant to Section 3.8.
2.35 Service Termination Date shall mean the earlier of the
following:
(a)the date on which by reason of an Employee's
resignation, discharge, retirement or death the Employee is no
longer employed by any Employer; or
(b)the first anniversary of the date on which an
Employee is laid off, starts an authorized leave of absence, or
is absent from work for any other reason (other than those
instances covered under paragraphs (a) and (c)), including
holidays, paid vacations, sick leaves and absence on account of
disability.
2.36 Trust or Trust Agreement shall mean the agreement and
any and all amendments and supplements thereto entered into
between the Company and the Trustee. The Trust Agreement shall
be deemed to be part of this Plan as if all the terms and
provisions were fully set forth herein.
2.37 Trustee shall mean the person or persons appointed by
the Board of Directors to be Trustee under the Trust Agreement.
2.38 Trust Fund shall mean all assets held by the Trustee
in accordance with the Trust Agreement.
2.39 Valuation Date shall mean the last day of each quarter
during the Plan Year or any other date or dates during the Plan
Year specified by the Committee upon which the assets of the
Trust Fund are valued as described in Article VIII. The Annual
Valuation Date shall mean the last day of the Plan Year.
2.40 Vested Interest shall mean the portion of a
Participant's Accounts which has become vested and
nonforfeitable, under Section 6.3.
2.41 Year of Service shall mean a 12-month period
commencing on the first day on which an Employee is credited with
an Hour of Service (or commencing on such Employee's date of
rehire in the case of an Employee who has not previously become
<PAGE>
an Eligible Employee and who has incurred five or more
consecutive One Year Breaks in Service) or anniversary thereof
during which he is continuously employed by an Employer, provided
that:
(a)An Employee shall be credited with one Year of
Service for each 12 complete months of employment, whether or not
consecutive.
(b)An Employee shall cease accruing Years of Service
on his Service Termination Date; except that if such Employee
performs an Hour of Service within the 12-month period commencing
on his Service Termination Date, his period of absence shall be
treated as employment.
(c)Years of Service shall include any one or more of
the following:
(i)any period of absence because of service in
the military forces of the United States, provided the Employee
returns to work within 90 days after first becoming eligible for
discharge from active duty;
(ii) any period of layoff not in excess of one
year in duration;
(iii) any period while the Employee is on an
approved leave of absence with or without pay (including any
leave of absence for maternity or paternity reasons);
(iv) any other period of absence approved by an
Employer including paid holidays, paid vacations and sick leaves;
(v) any other period of absence provided the
Employee returns to work with an Employer within the one-year
period after his Service Termination Date;
(vi) to the extent not otherwise credited above,
the first 12 months of a Parental Absence if the Employee
provides the Committee with any evidence it may reasonably
require to determine that the absence is on account of such
Parental Absence.
Except as otherwise specifically provided under this Section
1.42, a partial Year of Service shall be determined by dividing
the number of days of employment, whether or not consecutive, by
the number of days in the calendar year. All of an Employee's
Years of Service with the Employer shall be taken into account
for purposes of satisfying the Plan's eligibility requirements
and for calculating a Participant's Vested Interest in his
Employer Contribution Account.
ARTICLE II
PARTICIPATION
2.1 Commencement of Participation. Each Employee shall
become an Eligible Employee as of the first Entry Date on which
he is employed by a Participating Employer and which coincides
with or immediately follows the date as of which such Employee
<PAGE>
has both (a) attained age 21 and (b) completed one Year of
Service.
2.2 Termination of Participation. An Eligible Employee or
Participant who (i) has a Service Termination Date (ii) becomes a
member of a group of employees covered by a negotiated collective
bargaining agreement which does not provide for participation in
the Plan or (iii) becomes an Employee of a Non-Participating
Employer shall no longer be an Eligible Employee but shall
continue as a Participant in the Plan entitled to share in the
earnings and losses of the Trust Fund and to exercise the rights
of a Participant hereunder until his Vested Interest has been
distributed and the non-vested portion of his Accounts, if any,
has been forfeited pursuant to Section 6.4.
The participation of any Participant shall end when (i) no
further benefits are payable to him or his Beneficiary under the
Plan and (ii) no further amounts are credited to his Accounts.
2.3 Participation Following Reemployment.
If an Employee has a Service Termination Date but is
reemployed before a One Year Break in Service occurs, he shall be
treated as if his employment was not broken.
If an Employee who had not had a Year of Service incurs a
One Year Break in Service and is later reemployed by an Employer,
he shall be treated as a new Employee for purposes of determining
eligibility to participate in the Plan.
If an Eligible Employee experiences a One-Year Break in
Service and is later reemployed by a Participating Employer, he
shall automatically become an Eligible Employee again and the
Committee shall allow him to elect to make Employee-Deferrals,
pursuant to Section 3.1.
ARTICLE III
EMPLOYEE-DEFERRALS
3.1 Employee-Deferrals. An Eligible Employee may enter
into an Employee-Deferral Agreement with his Employer on such
form or forms as the Committee shall prescribe or through a voice
response system after such Participant has entered his personal
identification number. In the Employee-Deferral Agreement the
Eligible Employee shall agree to accept a deferral of his Plan
Compensation expressed as a whole percentage no less than 1% and
no more than 13%. The Employee-Deferral Agreement shall remain
in effect until changed or discontinued as provided in Section
3.3. An Employee's election under this Section 3.1 can be made
when the Employee becomes an Eligible Employee effective on the
next calendar month following the date on which such election is
received by the Committee.
No Employee-Deferral may be paid to the Plan by the Employer
on behalf of a Participant after he ceases to be an Employee or
during any period when such Participant is not receiving Plan
Compensation from the Employer.
<PAGE>
3.2 Delivery of Employee-Deferral Contributions. The
Employee-Deferral made by the Employer on behalf of any
Participant shall be transmitted to the Trustee by the Employer
as soon as practicable after the close of the calendar month in
which the Employee-Deferral occurs; provided, however, that no
Employee-Deferral for any portion of a Plan Year shall be
delivered to the Trustee later than 90 days after the close of
the month in which the amount was deducted from Participant's
Plan Compensation.
3.3 Changes in and Discontinuance of Employee-Deferrals.
A Participant may change the rate of Employee-Deferrals or
discontinue Employee-Deferrals paid by his Employer to the Plan
on his behalf effective as of the next payroll period provided
the Participant has given the Committee advance notice of such
change in such form and within such time period preceding the
effective date of the change as the Committee may prescribe.
3.4 Dollar Limitation. In no event shall a Participant's
Employee-Deferral Contributions for a Participant's taxable year
exceed $9,500, or such larger amount as allowed under Code
Section 402(g) to reflect increases in the cost of living.
3.5 Return of Excess Deferral Amounts. If a Participant's
Employee-Deferral Contributions under the Plan should exceed the
dollar limitation under Section 3.4 for a Plan Year, the excess
amount and the earnings thereon shall be distributed to the
Participant no later than the April 15 following the calendar
year of the excess deferral. If a Participant notifies the
Committee in writing no later than March 1 following the calendar
year of the excess deferral that he was also a participant in a
plan of an unrelated employer governed by the Code Section 402(g)
dollar limitation described in Section 3.4, that the total
deferrals under the plans exceeded the dollar limitation
described in Section 3.4, and that he has allocated some or all
of the excess deferrals to this Plan, then the excess allocated
to this Plan (and the earnings thereon) shall be distributed to
the Participant no later than the following April 15.
Any returned excess deferrals must include income or loss
for the calendar year of the excess deferral, and must include
income or loss for the "gap period" between the end of that year
and the date of distribution. The gain or loss allocable to the
Excess Deferral Amount for the preceding calendar year shall be
determined by any reasonable method, provided that such method
does not violate Section 401(a)(4) of the Code, is consistently
applied, and is used for allocating income to Participants'
Accounts.
Any Matching Contributions attributable to returned
Employee-Deferrals shall be forfeited unless they can be deemed
to match previously unmatched Employee-Deferrals as provided in
Section 4.1. The amount of excess deferrals to be distributed
shall be reduced by Excess Contributions previously distributed
for the taxable year ending in the same Plan Year, as provided in
Section 3.7.
3.6 Non-Discrimination Rules
<PAGE>
(a)Definition. The term "Actual Deferral Percentage"
(hereinafter "ADP") as used in this Section 3.6 shall mean, for
each specified group of Eligible Employees for a Plan Year, the
average of the ratios (calculated separately for each Eligible
Employee in such group) of (1) the amount of Employee-Deferrals
actually delivered to the Trustee for the Eligible Employee for
the Plan Year to (2) the Eligible Employee's Total Compensation
for the portion of such Plan Year (during which) the Employee was
an Eligible Employee. The ADP shall be calculated separately for
the group consisting of Highly Compensated Employees and the
group consisting of Non-Highly Compensated Employees.
(b)An Eligible Employee who fails to make Employee-
Deferrals shall be included in the testing with a ratio of zero.
(c)The Tests. In each Plan Year the Plan must satisfy
one of the following tests:
(i)The ADP for Eligible Employees who are Highly
Compensated Employees for the Plan Year shall not exceed the ADP
for Eligible Employees who are Non-Highly Compensated Employees
for the same Plan Year multiplied by 1.25; or
(ii)The ADP for Eligible Employees who are Highly
Compensated Employees for the Plan Year shall not exceed the ADP
for Eligible Employees who are Non-Highly Compensated Employees
for the same Plan Year multiplied by 2.0, provided that the ADP
for Eligible Employees who are Highly Compensated Employees does
not exceed the ADP for Eligible Employees who are Non-Highly
Compensated Employees by more than two (2) percentage points.
(d)Special Rules in Connection with ADP Testing:
(i)The ADP for any Eligible Employee who is a
Highly Compensated Employee for the Plan Year and who is eligible
to have Employee-Deferrals allocated to his accounts under two or
more arrangements described in Code Section 401(k), that are
maintained by one or more Employers, shall be determined as if
such contributions were made under a single arrangement. If a
Highly Compensated Employee participates in two or more cash or
deferred arrangements that have different plan years, all cash or
deferred arrangements ending with or within the same calendar
year shall be treated as a single arrangement.
(ii)In the event that this Plan satisfies the
requirements of Code Sections 401(k), 401(a)(4), or 410(b) only
if aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of such Code Sections only
if aggregated with this Plan, then this Section 3.6 shall be
applied by determining the ADP of Employees as if all such plans
were a single plan.
(iii)For purposes of determining the ADP of an
Eligible Employee who is a five (5%) owner or one of the ten (10)
most highly-paid Highly Compensated Employees, the Employee-
Deferrals and Total Compensation of such Eligible Employee shall
include the Employee-Deferrals and Total Compensation for the
Plan Year of members of the Eligible Employee's Family (as
defined at Section 1.9). Family members with respect to such
<PAGE>
Highly Compensated Employees shall be disregarded as separate
Employees in determining the ADP both for Eligible Employees who
are Non-Highly Compensated Employees and for Eligible Employees
who are Highly Compensated Employees.
(iv)For purposes of determining the ADP test,
Employee-Deferrals shall be taken into account only if: paid to
the Trust before the last day of the twelve (12) month period
immediately following the Plan Year to which the contributions
relate; and which relate to Total Compensation which would have
been received by the Eligible Employee in the Plan Year (but for
the deferral election) or which is attributable to services
performed by the Eligible Employee in the Plan Year and would
have been received by the Eligible Employee within 2 1/2 months
after the close of the Plan Year (but for the deferral election).
(v)The determination and treatment of the ADP
amounts of any Eligible Employee shall satisfy such other
requirements as may be prescribed by the Secretary of the
Treasury.
(vi)In the event that the ADP of the Highly
Compensated Employees for the Plan Year determined as a date
prior to the last day of the Plan Year indicates that the Plan
for the year will not otherwise comply with either ADP test, the
Committee has the authority to reduce the Employee-Deferral rate
for the remainder of the Plan Year for all or a portion of the
Highly Compensated Employees in an equitable manner to increase
the likelihood that one of the ADP tests will be satisfied.
3.7 Return of Excess Contributions
(a)Definition. "Excess Contributions" shall mean,
with respect to any Plan Year, the excess of:
(i)The aggregate amount of Employee-Deferrals
actually taken into account in computing the ADP of Highly
Compensated Employees for such Plan Year, over
(ii)The maximum amount of such Deferrals permitted
by the ADP test (determined by reducing Deferrals made on behalf
of Highly Compensated Employees in order of the ADPs, beginning
with the highest of such percentages).
(b)Determination of Income or Loss. The income or
loss allocable to Excess Contributions shall be determined using
any reasonable method, provided that such method does not violate
Section 401(a)(4) of the Code, is consistently applied, and is
used for allocating income to Participants' Accounts. Earnings
must include income or loss for the "gap period" between the end
of the taxable year and the date of distribution.
(c)Distribution of Excess Contributions.
Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of the
Plan Year to Participants to whose accounts such Excess
Contributions were allocated for the preceding Plan Year. Such
distributions shall be made to Highly Compensated Employees on
the basis of the respective portions of the Excess Contributions
<PAGE>
attributable to each of such Employees. With respect to
Participants who are subject to the family member aggregation
rules of Code Section 414(q)(6), the ADP of such Participants
shall be reduced in accordance with the "leveling" method
described in the regulations and the Excess Contributions of such
Participants shall be allocated in the manner prescribed by the
regulations. Excess Contributions shall be treated as Annual
Additions under the Plan. The amount of Excess Contributions to
be distributed shall be reduced by excess deferrals previously
distributed for the same year pursuant to Section 3.5 and any
Matching Contributions with respect to such distributed Excess
Contributions (and the earnings thereon) shall be forfeited.
3.8 Rollover Contributions. A Participant who has entered
into an Employee-Deferral Agreement may contribute to the Plan
any amount distributed from the Participant's individual
retirement account, individual retirement annuity, or qualified
plan which qualifies under either of Code Sections 402(c) or
408(d)(3)(A)(ii), which is transferred within the required time,
and which meets all other requirements of law for a rollover to
the Plan. The Employer, the Committee, and the Trustee shall
rely upon the Participant's written certification that the
transfer is a permitted rollover meeting all the above
requirements. Such a contribution shall be held in a separate
Rollover Contribution Account for the Participant. If the
Committee should learn that the rollover did not meet all the
aforesaid requirements, the value of the Participant's Rollover
Contribution Account as of the preceding Valuation Date (or the
date of the rollover, if later) shall be returned to him.
ARTICLE IV
MATCHING CONTRIBUTIONS
4.1 Matching Contributions. The Board of Directors shall
annually determine the amount of a Matching Contribution, if any,
to be contributed for the Plan Year. The Matching Contribution
shall be allocated based on the ratio of each Active
Participant's Employee-Deferrals for the Plan Year to the total
of Employee-Deferrals made by all Active Participants for the
year. For purposes of this allocation, Participant Employee-
Deferrals in excess of 6% of each Participant's Plan Compensation
shall be disregarded.
4.2 Forfeitures. Forfeitures shall be allocated in the
same manner as Matching Contributions under Section 4.1.
4.3 Delivery of Contributions. An Employer's Matching
Contributions shall be delivered to the Trustee at such time as
the Employer determines, but in no event shall any contribution
for a Plan Year be made later than the deadline, including
extensions, for the filing of the Company's tax return for that
year.
4.4 Adjustments if Employee-Deferral Contributions
Adjusted. If under Section 3.5 or Section 3.7 a Participant's
Employee-Deferral Contributions are returned to him, and as a
result the net Employee-Deferral Contributions for the Plan Year
are a smaller percentage of Plan Compensation than the amount
<PAGE>
taken into account in making Matching Contributions, the amount
of the Matching Contributions shall be reduced accordingly. The
reduction in the Matching Contribution (and any earnings
attributable to the reduction) shall be treated as a Forfeiture
under the provisions of Section 4.2.
4.5 Discrimination Test - Matching Contributions.
(a)Definitions:
(i)"Average Contribution Percentage" or "ACP"
shall mean the average of the Contribution Percentages of the
Eligible Employees in a group.
(ii)"Contribution Percentage" shall mean the ratio
(expressed as a percentage) of an Eligible Employee's
Contribution Percentage Amounts to the Eligible Employee's Total
Compensation for the portion of the Plan Year in which he was
eligible to make Employee-Deferrals.
(iii)"Contribution Percentage Amounts" shall mean
the Matching Contributions under the Plan on behalf of the
Eligible Employee for the Plan Year. The Employer may elect to
use Employee-Deferrals in the Contribution Percentage Amounts so
long as the ADP test is met before the Employee-Deferrals are
used in the ACP test and continues to be met following the
exclusion of those Employee-Deferrals that are used to meet the
ACP test.
(b)The Tests. In each Plan Year the Plan must satisfy
one of the following tests:
(i)The ACP for Eligible Employees who are Highly
Compensated Employees for the Plan Year shall not exceed the ACP
for Eligible Employees who are Non-Highly Compensated Employees
for the same Plan Year multiplied by 1.25; or
(ii)The ACP for Eligible Employees who are Highly
Compensated Employees for the Plan Year shall not exceed the ACP
for Eligible Employees who are Non-Highly Compensated Employees
for the same Plan Year multiplied by two (2), provided that the
ACP for Eligible Employees who are Highly Compensated Employees
does not exceed the ACP for Eligible Employees who are Non-Highly
Compensated Employees by more than two (2) percentage points.
(c)Special Rules:
(i)(A)"Aggregate Limit" shall mean the greater of
(A) or (B) below:
(1)The sum of
a)one hundred twenty-five percent
(125%) of the greater of the ADP or the ACP of the Non-Highly
Compensated Employees in the same Plan Year, plus
b)Two (2) percentage points plus
the lesser of such ADP or ACP of Non-Highly Compensated Employees
in the same Plan Year, provided, however, that in no event shall
<PAGE>
this amount exceed two hundred percent (200%) of the lesser of
the ADP or the ACP of Non-Highly Compensated Employees, and
(2)The sum of
a)one hundred twenty-five percent
(125%) of the lesser of the ADP or the ACP of the Non-Highly
Compensated Employees in the same Plan Year, plus
b)Two (2) percentage points plus
the greater of the ADP or the ACP of Non-Highly Compensated
Employees in the same Plan Year, provided, however, that in no
event shall this amount exceed two hundred percent (200%) of the
greater of the ADP or the ACP of Non-Highly Compensated
Employees.
(B)Multiple Use: If the sum of the ADP and
ACP of the Highly Compensated Employees exceeds the Aggregate
Limit, then the ACP of the Highly Compensated Employees will be
reduced (beginning with the Highly Compensated Employee whose ACP
is the highest) so that the limit is not exceeded. If the
Employer elects to reduce the ACP of the Highly Compensated
Employee, the required reduction shall be treated as an Excess
Aggregate Contribution described below. If the Employer elects
to reduce the ADP of the Highly Compensated Employees, the
required reduction shall be treated as an Excess Contribution as
described in Section 3.7. The ADP and ACP of the Highly
Compensated Employees are determined after any corrections
required to meet the ADP and ACP tests. Multiple use does not
occur if both the ADP and ACP of the Highly Compensated Employees
does not exceed 1.25 multiplied by the ADP and ACP of the Non-
Highly Compensated Employees.
(ii)For purposes of this section, the Contribution
Percentage for any Eligible Employee who is a Highly Compensated
Employee and who is eligible to have Contribution Percentage
Amounts allocated to his account under two (2) or more plans
described in Code Section 401(a), or arrangements described in
Code Section 401(k) that are maintained by one or more Employers,
shall be determined as if the total of such Contribution
Percentage Amounts was made under each plan. If a Highly
Compensated Employee participates in two (2) or more cash or
deferred arrangements under Code Section 401(k) ("CODA"), that
have different plan years, all CODAs ending with or within the
same calendar year shall be treated as a single arrangement.
(iii)In the event that this Plan satisfies the
requirements of Code Sections 401(m), 401(a)(4) or 410(b) only if
aggregated with one or more other plans, or if one or more other
plans satisfy the requirements of such Code Sections only if
aggregated with this Plan, then this section shall be applied by
determining the Contribution Percentages of Eligible Employees as
if all such plans were a single plan.
(iv)For purposes of determining the Contribution
Percentage of an Eligible Employee who is a five percent (5%)
owner or one of the ten (10) most highly-paid Highly Compensated
Employees, the Contribution Percentage Amounts and Total
Compensation of such Eligible Employee shall include the
Contribution Percentage Amounts and Total Compensation for the
<PAGE>
Plan Year of Family members. Family members, with respect to
Highly Compensated Employees, shall be disregarded as separate
Employees in determining the Contribution Percentage both for
Eligible Employees who are Non-Highly Compensated Employees and
for Eligible Employees who are Highly Compensated Employees.
(v)For purposes of determining the Average
Contributions Percentage test, Employer Matching Contributions
will be considered made for a Plan Year only if (i) paid to the
trust no later than the end of the twelve (12) month period
beginning on the day after the close of the Plan Year and (ii)
made on account of the Employee's Employee-Deferral for the Plan
Year.
(d)Excess Aggregate Contributions. If the Plan fails
to satisfy the ACP Test, Excess Aggregate Contributions (the
excess of the aggregate amount of Matching Contributions actually
made on behalf of Highly Compensated Employees for such Plan
Year, over the maximum amount of such contributions permitted
under the limitations of Section 401(m)(2)(A) of the Code) and
income or loss allocable thereto for the Plan Year in which the
ACP Test is failed, shall be treated as follows:
(i)Disposition of Excess Aggregate Contributions.
Notwithstanding any other provision of this Plan, Excess
Aggregate Contributions, plus any income and minus any loss
allocable thereto, shall be distributed, no later than the last
day of each Plan Year, to Highly Compensated Employees or
forfeited, where otherwise appropriate, from the accounts of
Participants in which such Excess Aggregate Contributions were
allocated for the preceding Plan Year. Excess Aggregate
Contributions shall be allocated to Participants who are subject
to the family member aggregation rules of Code Section 414(q)(6),
the ACP of such Participants shall be reduced in accordance with
the "leveling" method described in the regulations and the Excess
Contributions of such Participants shall be allocated in the
manner prescribed by the regulations.
(ii)Determination of Income or Loss. Excess
Aggregate Contributions shall be adjusted for any income or loss
attributable thereto in the year in which the contribution was
made. The income or loss allocable to Excess Aggregate
Contributions shall be determined using any reasonable method,
provided that such method does not violate Section 401(a)(4) of
the Code, is consistently applied, and is used for allocating
income to Participants' Accounts.
(iii)Accounting for Excess Aggregate Contributions.
Excess Aggregate Contributions shall be distributed on a pro-rata
basis from the Participant's Employer Contribution Account (and,
if applicable, the Participant's Employee-Deferral Account).
4.6 Qualified Matching Contributions, Qualified
Nonelective Contributions. The Company may, in its sole
discretion, use the following contributions to enable the Plan to
satisfy the nondiscrimination requirements of Section 3.6 and/or
Section 4.5:
(a)Qualified Matching Contributions. A Qualified
<PAGE>
Matching Contribution may be made by the Employers with respect
to Employee-Deferrals made on behalf of the Employee. Such
Qualified Matching Contributions shall be nonforfeitable when
made and shall be subject to the same restrictions on
distribution that apply to Employee-Deferrals.
(b)Qualified Nonelective Contributions. A Qualified
Nonelective Contribution may be made by the Employer on the basis
of either a specified dollar amount or a specified percentage of
Plan Compensation. Such Qualified Nonelective Contributions
shall be nonforfeitable and shall be subject to the same
restrictions on distribution that apply to Employee-Deferrals.
(c)The use of contributions described above shall be
as provided in regulations under Section 401(k) and Section
401(m) of the Code.
ARTICLE V
EMPLOYER DISCRETIONARY CONTRIBUTIONS
5.1 Employer Discretionary Contributions. The Board of
Directors shall annually determine the amount of Employer
Discretionary Contributions, if any, to be contributed for the
Plan Year. The Company may contribute all or part of the entire
amount due on behalf of one or more Participating Employers and
charge the amount thereof to the Participating Employers
responsible therefor.
In no event shall the contribution, when added to the other
contributions under the Plan, exceed the maximum amount which may
be claimed as a deduction by the Company for federal income tax
purposes under Code Section 404(a)(3).
The contribution, if any, shall be delivered in one or more
installments to the Trustee no later than the due date (including
extensions) of the Company's federal income tax return for its
fiscal year ending with or during the Plan Year for which the
contribution is made.
5.2 Allocation of Employer Discretionary Contributions.
As of each Annual Valuation Date, the Employer Discretionary
Contribution, if any, shall be allocated to the Employer
Contribution Accounts of all Active Participants in the
proportion that each such Active Participant's Plan Compensation
bears to the Plan Compensation for all Active Participants for
such year.
5.3 Top-Heavy Contributions. As of the end of any Plan
Year in which the Plan is Top-Heavy, the Employer shall
contribute to the Employer Contribution Account of each
Participant who is a Non-Key Employee the amount required under
Article XV.
ARTICLE VI
VESTING
6.1 Employee-Deferral Account. The interest of a
Participant in his Employee-Deferral Account shall be fully
<PAGE>
vested and nonforfeitable at all times.
6.2 Rollover Contribution Account. The interest of a
Participant in his Rollover Contribution Account shall be fully
vested and nonforfeitable at all times.
6.3 Employer Contribution Account. The interest of a
Participant in his Employer Contribution Account shall be fully
vested and nonforfeitable upon such Participant's death prior to
termination of employment, attainment of the Normal Retirement
Age while still employed, or termination of employment by reason
of Disability. When a Participant's employment is terminated for
any other reason, the vested and nonforfeitable interest of such
Participant shall be determined in accordance with the following
schedule:
---------------------------------------------
Years Vested %
of Service
0
Less than 5 years 100
5 years or more
6.4 Forfeitures.
(a)For purposes of this Section 6.4, if a
Participant's account is 0% vested upon his Service Termination
Date, he shall be deemed to have received a distribution of his
account balance (and therefore a forfeiture results) as of the
end of the Plan Year in which the Service Termination Date
occurred.
(b)The forfeitures shall be applied in accordance with
Section 4.2.
(c)A Participant can have a forfeiture restored after
reemployment, but only under the circumstances described in
Section 6.6.
6.5 Reemployment Before Break in Service. If an Employee
has a Service Termination Date and is reemployed before a One-
Year Break in Service occurs, he will be treated for vesting
purposes as if the termination had not occurred.
6.6 Reemployment After Break in Service. The following
special rules apply if an Employee has a One-Year Break in
Service and is later reemployed by an Employer.
(a)His Years of Service prior to the Break in Service
shall be taken into account for purposes of determining the
vested portion of such Participant's Employer Contribution
Account funded after reemployment (i) if any portion of the
Participant's Employer Contribution Account is vested at the time
of the Break in Service, or (ii) if he incurs fewer than five
consecutive one-year Breaks in Service.
(b)His Years of Service which accrue after the Break
in Service shall be taken into account for purposes of
determining the vested portion of such Participant's Employer
<PAGE>
Contribution Account funded prior to the Break in Service,
provided such Participant is reemployed by the Employer before he
receives a distribution or incurs five (5) consecutive one-year
Breaks in Service.
(c)(i)If a Participant has a Service Termination Date
and receives a distribution of the balance of his Employer
Contribution Account, he will be credited with the full value of
his forfeited account balance, determined as of the date of the
distribution, provided the Participant repays the amount of the
distribution before the earlier of (1) five (5) years after the
first day on which an Employee is subsequently reemployed by the
Employer, or (2) the close of the first period of five (5)
consecutive Breaks in Service. Any Participant who terminates
employment with zero vesting shall be credited with the full
value of his Employer Contribution Account determined as of the
date of the deemed distribution under Paragraph 6.4(a) if the
Participant is reemployed before he incurs five (5) consecutive
One-Year Breaks in Service.
(ii)If any credit is required under this Paragraph
(c), the credit shall be made at the close of the Plan Year in
which occurs the later of the reemployment or the repayment. The
credit shall be satisfied first from Forfeitures, second from
Employer Discretionary Contributions.
ARTICLE VII
ALLOCATIONS
7.1 Allocation of Contributions. Contributions to the
Plan shall be allocated in the following manner:
(a)Employee-Deferral Contributions shall be allocated
to the Employee-Deferral Account of each Participant in
accordance with the provisions of Article III.
(b)Employer Discretionary Contributions shall be
allocated to the Employer Contribution Account of each
Participant in accordance with the provisions of Article V.
(c)Matching Contributions shall be allocated to the
Employer Contribution Account of each Participant in accordance
with the provisions of Article IV.
(d)Qualified Matching Contributions and Qualified
Nonelective Contributions shall be allocated to the Employee-
Deferral Account of each Participant in accordance with the
provisions of Section 4.6.
7.2 Definitions. For purposes of this Article VII, the
term Accounts shall mean a Participant's Employee-Deferral
Account and Employer Contribution Account.
The term Annual Addition shall mean, for any Limitation
Year, the sum of (a) Matching Contributions, (b) Employee-
Deferral Contributions, (c) Employer Discretionary Contributions,
Qualified Matching Contributions, Qualified Non-elective
Contributions and (d) forfeitures.
<PAGE>
The term Defined Benefit Plan Fraction shall mean, for any
year, a fraction (a) the numerator of which is the projected
annual benefit of the Participant under any defined benefit plan
maintained by the Employer (determined as of the close of the
Plan Year), and (b) the denominator of which is the lesser of
(i) the product of 1.25 multiplied by the maximum dollar
limitation in effect under Code Section 415(b)(1)(A) for such
year, or (ii) the product of 1.4 multiplied by the amount which
may be taken into account under Code Section 415(b)(1)(B) for
such year.
The term Defined Contribution Plan Fraction shall mean, for
any year, a fraction (a) the numerator of which is the sum of the
Annual Additions to the Participant's Accounts as of the close of
the Plan Year, and (b) the denominator of which is the sum of the
lesser of the following amounts determined for such year and each
prior year of service with a Employer: (i) the product of 1.25
multiplied by the dollar limitation in effect under Code Section
415(c)(1)(A) for such year (determined without regard to Code
Section 415(c)(6)), or (ii) the product of 1.4 multiplied by the
amount which may be taken into account under Code Section
415(c)(1)(B) for such year.
The term Employer includes the group of Employers, if any,
which constitute a controlled group of corporations, trades or
businesses under common control (within the meaning of Code
Sections 1563(a) or 414(b) as modified by 415(h) and 414(c)), or
an affiliated service group (within the meaning of Code Sections
414(m) and 318) with an Employer. All such Employers shall be
treated as a single Employer for purposes of applying the Code
Section 415 limitations.
The term Limitation Year shall mean the Plan Year or any
other twelve-month period designated by the Board of Directors.
7.3 Annual Additions. No contribution or forfeiture shall
be allocated to the Accounts of an Employee for a Limitation Year
in excess of an amount which, when expressed as an Annual
Addition to such Employee's Accounts, is equal to the lesser of
(a) $30,000 or such larger amount equal to 1/4 of the defined
benefit dollar limitation as adjusted for cost-of-living
increases pursuant to Code Sections 415(c)(1), 415(d)(1) and
415(d)(3), or (b) twenty-five percent of such Employee's Section
415 Compensation for such limitation.
7.4 Limitation for Other Defined Contribution Plans. In
the event that the Annual Addition which would otherwise be made
to an Employee's accounts under all defined contribution plans
maintained by the Employer for any Limitation Year exceeds the
limitations set forth in this Article VII, the excess Annual
Addition shall be attributed first to the Plan, and the Employer
shall treat such excess as follows:
(a)First, the Employee-Deferral Contributions in
excess of six percent of Plan Compensation shall be returned to
the Employee to the extent necessary.
(b)Second, the portion of the excess consisting of
<PAGE>
Matching Contributions shall be allocated and reallocated to the
Employer Contribution Accounts of other Participants in
accordance with Section 4.1 to the extent such allocations would
not cause Annual Additions to each Participant's Accounts to
exceed the limitations of this Section 7.4
(c)Third, the portion of the excess consisting of
Employer Discretionary Contributions shall be allocated and
reallocated to the Employer Contribution Accounts of other
Participants in accordance with Section 5.2 to the extent such
allocations would not cause Annual Additions to each
Participant's Accounts to exceed the limitation of this Section
7.4.
(d)If treated in accordance with subparagraphs (a)
through (c) above, the excess amounts shall not be deemed Annual
Additions in that limitation year if the excess amounts are a
result of the allocation of forfeitures, a reasonable error in
estimating a Participant's annual Plan Compensation, a reasonable
error in determining the amount of elective deferrals (within the
meaning of Section 402(g)(3)) that may be made with respect to
any individual under the limits of Section 415 or under other
limited facts and circumstances that the Commissioner finds
justify the availability of the rules set forth in this
subparagraph.
(e)To the extent excess Annual Additions exist after
the distributions described in subparagraphs (a) through (c),
such excess amounts shall be allocated to a Section 415 Suspense
Account. All amounts in the Section 415 Suspense Account must be
used to reduce Matching Contributions, contributions required on
account of a Top-Heavy Plan Year, or Employer Discretionary
Contributions in succeeding Limitation Years. In the event of
termination of the Plan, the balance of the Section 415 Suspense
Account shall revert to the Company to the extent it may not then
be allocated to any Participants' Accounts.
7.5 Limitation for Defined Benefit Plan. If an Employee is
also a Participant in one or more defined benefit plans
maintained by the Employer (or an Employee was a Participant in
any defined benefit plan previously maintained by an Employer),
the sum of such Employee's Defined Benefit Plan Fraction and
Defined Contribution Plan Fraction (as determined pursuant to
Code Section 415(e)) for any Limitation Year may not exceed 1.0.
In the event that the sum of an Employee's Defined
Contribution Plan and Defined Benefit Plan Fractions would
otherwise exceed 1.0 for any Limitation Year, the benefit accrual
which would otherwise be made under all applicable defined
benefit plans for such Employee shall be considered not to have
accrued, to the extent necessary, so that the sum of such
fractions does not exceed 1.0. If after all such adjustments the
sum of the fractions would still exceed 1.0, then the annual
addition which would otherwise be made with respect to such
Employee shall be reduced in this Plan pursuant to Section 7.4
and finally under any applicable defined contribution plan to the
extent necessary so that the sum does not exceed 1.0.
<PAGE>
ARTICLE VIII
TRUST FUND
8.1 Plan Assets. Avondale Industries, Inc. and the
Trustee have entered into a Trust Agreement, which agreement
provides for the establishment of a single Trust for the purpose
of holding and administering all amounts contributed to Accounts
under the Plan. All contributions, and the earnings on such
amounts, shall be delivered to the Trustee and held and
administered pursuant to the provisions of the Plan and the Trust
Agreement.
8.2 Separate Accounts. A separate Employee-Deferral
Account and Employer Contribution Account and Rollover
Contribution Account shall be maintained by the Trustee or a
recordkeeping agent appointed by the Plan Administrator for each
Participant.
8.3 Valuation. The fair market value of the assets
comprising the Trust shall be determined as of each Valuation
Date, in accordance with generally-accepted valuation methods and
accounting practices.
As of each Valuation Date, the value of each Account shall
be adjusted to reflect the effect on each sub-account of any
change in the value of each Investment Fund since the preceding
Valuation Date, as well as the effect of any deposits,
withdrawals, distributions, or other transactions occurring since
the last Valuation Date. The Committee shall provide to each
Participant, Beneficiary and alternate payee as of the end of
each calendar quarter a statement of the value of each Account in
which such person has an interest.
8.4 Investment Funds.
(a)The Committee shall determine what investment funds
to offer under the Plan and may, from time to time, change the
investment funds offered hereunder. As of the Effective Date of
this Plan, the investment funds are Merrill Lynch Retirement
Preservation Trust, Merrill Lynch Capital Fund, Merrill Lynch
Corporate Bond Fund Investment Grade, AIM Constellation Fund, AIM
Value Fund, and Templeton Growth Fund.
(b)As of each Valuation Date, the Trustee shall
perform a valuation of each Investment Fund in order to determine
the value of each Investment Fund and to reconcile the Investment
Funds from the prior Valuation Date. Such valuation shall
recognize any appreciation or depreciation in the fair market
value of all securities or other property held by each respective
Investment Fund, any cash and accrued earnings and shall take
into account any accrued expenses and proper charges against the
Investment Fund as of such Valuation Date.
8.5 Investment of Contributions.
(a)A Participant may direct that his Employee-Deferral
Contributions, Employer Contributions and Rollover Contributions,
if any, be allocated to one or more of the Investment Funds then
available, in multiples of one percent (1%), by providing voice
consent after such Participant has accessed a voice response
<PAGE>
system by entering his personal identification number in
accordance with limitations reasonably determined by the
Committee, or in writing on a form acceptable to the Committee.
The total of all such allocations shall equal one hundred percent
of the Participant's interest in his Accounts. The Committee
will provide, upon Participant's request, a written confirmation
of his written investment instructions.
(b)If no investment direction exists the Participant's
affected interest shall automatically be invested in a short term
income fund until adequate instructions are received through a
voice response system or in writing on an acceptable form;
provided that such investment will not result in violation of
ERISA.
(c)Each Participant must consent to the allocation of
his contributions among the Investment Funds. Such direction
shall continue in effect until such time as the Participant
consents to a different allocation. The investment of future
contributions may be changed daily, provided such change is
received by the Committee within such time period preceding the
effective date as shall be prescribed by the Committee.
8.6 Transfer of Amounts Among Investment Funds
(a)A Participant may elect to transfer amounts from
one Investment Fund to another in increments of one percent (1%).
Any such change shall be by providing voice consent after the
Participant has accessed a voice response system by entering his
personal identification number, or in writing on a form
acceptable to the Committee. Such election shall be effective on
the business day transacted if requested via the voice response
system before 3 p.m. Eastern Standard Time or as soon as
administratively feasible if requested on a written form.
Transfers out of an investment fund can be processed in terms of
dollars, shares, or percentages. Dollar and percent transfers
will be converted into shares, traded based on the previous
night's price, and processed based on the current night's price.
(b)In the event an acceptable form is not received by
the Committee for all or any portion of a Participant's Accounts,
the current investment direction shall continue in effect until
adequate instructions are received through a voice response
system or in writing on an acceptable form.
(c)The timing and frequency of transfers among
investment options may be further restricted if such restrictions
are required by the institution handling or providing the
investment fund.
8.7 Liability for Investment Decisions. This Plan is
intended to constitute a plan described in Section 404(c) of
ERISA, and Title 29 of the Code of Federal Regulations Section
2550.404c-1. Fiduciaries of the Plan may be relieved of
liability for any losses which are the direct and necessary
result of investment instructions given by each Participant or
Beneficiary. Neither the Employer, the Trustee nor the Committee
shall be responsible for any loss which may result from a
Participant's exercise of control over the investment of his
Accounts.
<PAGE>
Each Participant shall have exclusive responsibility for and
control over the investment of amounts allocated to his Accounts.
Neither the Employers, the Trustee nor the Committee shall have
any duty, responsibility or right to question a Participant's
investment directions or to advise a Participant with respect to
the investment of his accounts.
The Committee will be obligated to follow the Participant's
investment directions except when the instructions:
(a)are not in accordance with this Plan document and
instruments governing this Plan insofar as such documents and
instruments are consistent with the provisions of Title I of
ERISA;
(b)would result in a prohibited transaction described
in ERISA section 406 or Code section 4975 that is not otherwise
exempted by statute or regulation;
(c)would generate income that would be taxable to this
Plan;
(d)would cause a fiduciary to maintain the indicia of
ownership of any assets of the Plan outside the jurisdiction of
the district courts of the United States other than as permitted
by section 404(b) of ERISA and related regulations;
(e)would jeopardize the Plan's tax qualified status
under the Code; or
(f)could result in a loss in excess of the Account
balance.
8.8 Accounting Procedures. The Committee shall establish
such equitable accounting procedures as may be required to make
(a) allocations, (b) valuations, and (c) adjustments to Partici-
pants' accounts in accordance with the provisions of the Plan.
The Plan Administrator may modify its accounting procedures, from
time to time, for the purpose of achieving equitable and non-
discriminatory allocations.
ARTICLE IX
BENEFITS
9.1 Normal Retirement Date. The Normal Retirement Date
shall be the later of (a) the Participant's Normal Retirement Age
or (b) the first day of the month coincident with or next
following a Participant's fourth anniversary of commencement of
participation in the Plan. Any Participant who remains an
Employee beyond Normal Retirement Date, or becomes a Participant
after such date, shall participate in the contributions and
benefits of the Plan in the same manner as any other Participant.
9.2 Disability Retirement Date. Any Participant who has
incurred a Disability, as determined by the Committee, may retire
on a Disability Retirement Date by making written application to
the Committee specifying a Disability Retirement Date which is
the first day of a month not more than 90 days following the date
<PAGE>
of the filing of the application. Former Employees shall not be
eligible for Disability Retirement unless the Disability was
determined to have occurred during the course of such former
Employee's employment with the Employer. Subject to Section 12.6
the determination of the Committee as to whether a Participant
has a Disability and the date of such Disability shall be final,
binding and conclusive.
9.3 Nonalienation of Benefits. Except with respect to
federal income tax withholding and federal tax levies, benefits
payable under this Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution or levy of any kind,
either voluntary or involuntary, including any such liability
which is for alimony or other payments for the support of a
spouse or former spouse or for any other relative of the
Employee, prior to actually being received by the person entitled
to the benefit under the terms of the Plan; and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber,
charge or otherwise dispose of any right to benefits payable
hereunder, shall be void. The Trust Fund shall not in any manner
be liable for, or subject to, the debts, contracts, liabilities,
engagements or torts of any person entitled to benefits
hereunder.
Notwithstanding the above, the Committee shall direct the
Trustee to comply with a qualified domestic relations order
described in Section 9.4.
9.4 Qualified Domestic Relations Order. All rights and
benefits, including election rights, provided to Participants
pursuant to this Plan, are subject to the rights afforded to any
"alternate payee" pursuant to a "qualified domestic relations
order," as those terms are defined below.
Payment to an "alternate payee" pursuant to a "qualified
domestic relations order" shall be made at such time as
determined pursuant to the qualified domestic relations order,
based on the value of the alternate payee's interest in the
account as of the Valuation Date preceding the date the payment
is made. No payment to an alternate payee can be made later than
when the Participant's benefit is paid to him as a result of his
termination of employment. If the Participant has a loan as an
investment of his account, such Participant will continue to be
responsible for the entire loan. The Plan Administrator is
authorized to establish any additional rules necessary to
determine the rights of alternate payees under qualified domestic
relations orders.
Pursuant to the provisions of Section 414(p) of the Code, a
"qualified domestic relations order" shall mean a judgment,
decree or order (including approval of a property settlement
agreement) made pursuant to a state domestic relations law
(including a community property law) that relates to the
provision of child support, alimony payments, or marital property
rights to a spouse, former spouse, child or other dependent of a
Participant ("alternate payee") and which:
<PAGE>
(a)creates or recognizes the existence of an alternate
payee's right to, or assigns to an alternate payee the right to,
receive all or a portion of the benefits payable to a Participant
under this Plan; and
(b)specifies (i) the name and last known mailing
address (if any) of the Participant and each alternate payee
covered by the order, (ii) the amount or percentage of the
Participant's benefits under the Plan to be paid to each such
alternate payee, or the manner in which such amount or percentage
is to be determined and, (iii) the number of payments or the
period to which the order applies; and
(c)does not require this Plan to:
(i)provide any type or form of benefit, or any
option, not otherwise provided hereunder;
(ii)pay any benefits to any alternate payee prior
to the earlier of:
(A)the earliest date benefits are payable
hereunder to a Participant, or
(B)the later of the date the Participant
attains age 50 or the earliest date on which the Participant
could obtain a distribution under the Plan if the Participant
terminated employment;
(iii)pay any benefits which are not vested under
the Plan;
(iv)provide increased benefits; or
(v)pay benefits to an alternate payee which are
required to be paid to another alternate payee under a prior
qualified domestic relations order.
Upon receipt of any judgment, decree or order (including
approval of a property settlement agreement) relating to the
provision of payment by the Plan to an alternate payee pursuant
to a state domestic relations law, the Committee shall promptly
notify the affected Participant and any person identified in the
document as an alternate payee of the receipt of such judgment,
decree order and shall notify the affected Participant and any
such designated alternate payee of the Committee's procedure for
determining whether or not the judgment, decree or order is a
qualified domestic relations order.
The Committee shall establish procedures to determine the
status of a judgment, decree or order as a qualified domestic
relations order and to administer Plan distributions in
accordance with any such qualified domestic relations order. Such
procedures shall be in writing, shall include provisions
specifying the notification requirements enumerated in the
preceding paragraph, shall permit an alternate payee to designate
a representative for receipt of communications from the
Committee, and shall include such other provisions as the
<PAGE>
Committee shall determine, including such provisions required
under Treasury Regulations.
In the event that the Committee is informed in writing of a
claim by a person (a "Claimant") that may result in the rendering
of a qualified domestic relations order with respect to a
Participant's Accounts in the Plan, the Committee is authorized
to suspend any payments from those Accounts until receipt of a
judgment, decree or order setting forth the rights of Claimant as
an alternate payee, or upon receipt of an order or written
release by the Claimant evidencing that the Claimant has no
further claim to the Participant's interest in the Plan.
If the judgment, decree or order is determined to be a
qualified domestic relations order within the 18-month period
following the receipt by the Committee of the qualified domestic
relations order, then payment of the amount shall be paid to the
appropriate alternate payee at the time and in the form specified
in such order. If such a determination is not made within the
18-month period, the amount shall be returned to the
Participant's Accounts under the Plan and shall be paid at the
time and in the manner provided under the Plan as if no order,
judgment or decree had been received by the Committee.
ARTICLE X
PAYMENT OF BENEFITS
10.1 Time of Payment. A Participant shall be eligible to
receive a distribution of his Vested Interest when he has had a
Service Termination Date.
Such a Participant shall be entitled to receive his Vested
Interest at any time, provided that payment cannot be made sooner
than 30 days following his Service Termination Date and no later
than the later of the Participant's Normal Retirement Age or his
Service Termination Date. A distribution is based upon the value
of the Participant's Vested Interest as of the Valuation Date
coincident with or immediately preceding the date of
distribution.
The foregoing notwithstanding:
(a)If the value of a Participant's Vested Interest is
less than $3,500, the Vested Interest will be distributed as soon
as administratively practicable following the Service Termination
Date;
(b)If the value of a Participant's Vested Interest is
greater than $3,500, the Participant must consent to the
distribution;
(c)Notwithstanding (b) above, if an Employee is
employed on the March 31 following the year in which he attains
age 70 1/2, the payment of his Vested Interest shall be made no
later than that date.
In no event shall a distribution occur while a Participant
<PAGE>
remains in the employ of an Employer, except in the event of a
withdrawal by reason of Financial Hardship or after age 59 1/2, as
described in Sections 11.1 and 11.2, below.
The distribution rules that apply to an "alternate payee"
pursuant to a "qualified domestic relations order" are stated in
Section 9.4 herein.
10.2 Death Benefit. If a Participant dies with a balance
in his Accounts, the interest of such Participant shall be
distributed to the Participant's Beneficiary in a single-sum
payment as soon as administratively practicable after 90 days
from the Participant's death.
10.3 Form of Distribution. Distributions shall be made in
a single-sum payment.
10.4 Temporary Non-Payment of Benefits.
(a)Unless the Participant elects otherwise in writing,
the payment of his Vested Interest shall commence no later than
the sixtieth (60th) day after the close of the Plan Year in which
the last of the following occurs:
(i)the Participant achieves Normal Retirement
Age, or
(ii)the Participant terminates his service with
the Employer, whichever is the latest.
(b)If a Participant or Beneficiary fails to furnish
information reasonably requested by the Committee which is
necessary to determine whether such Participant or Beneficiary
has satisfied all requirements for payment of benefits, the
Committee shall delay payment of benefits until the requested
information is furnished and shall make reasonable efforts to
obtain such information.
10.5 Direct Rollover Rules. Notwithstanding any provision
of the Plan to the contrary that would otherwise limit a
Distributee's election under this Article, the Distributee may
elect, at the time and in the manner prescribed by the Committee,
to have any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the
Distributee in a Direct Rollover. Definitions are as follows:
(a)The term Eligible Rollover Distribution means any
distribution of all or any portion of the balance to the credit
of the Distributee, except that an Eligible Rollover Distribution
does not include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of
the Distributee and the Distributee's designated beneficiary, or
for a specified period of ten years or more; any distribution to
the extent such distribution is required under Section 401(a)(9)
of the Code; and the portion of any distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
employer securities).
<PAGE>
(b)An Eligible Retirement Plan includes an individual
retirement account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b) of the
Code, an annuity plan described in Section 403(a) of the Code, or
a qualified trust described in Section 401(a) of the Code, that
accepts the Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to the
surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(c)The term Distributee includes an employee or former
employee. In addition, the employee's or former employee's
surviving spouse and the employee's or former employee's spouse
or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in Section 414(p) of the
Code, are Distributees with regard to the interest of the spouse
or former spouse.
(d)The term Direct Rollover means a payment by the
plan to the eligible retirement plan specified by the
Distributee.
10.6 Notice. The notice required by section 1.411(a)-11(c)
of the Income Tax Regulations must be provided to a Participant
no less than 30 days and no more than 90 days before the date of
distribution. The notice explains a Participant's right to defer
receipt of the distribution if his Vested Interest exceeds
$3,500. A Participant will also receive an explanation of his
distribution options no less than 30 days and no more than 90
days before the date of distribution. The distribution may
commence no less than 30 days after the notice required under
section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that:
(a)the Committee clearly informs the Participant that
the Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not
to elect a distribution, and
(b)the Participant, after receiving the notice,
affirmatively elects a distribution.
ARTICLE XI
IN-SERVICE DISTRIBUTION AND LOANS
11.1 Distribution after Attaining Age 59 1/2. A
Participant who is still an Employee and has attained age 59 1/2
shall be entitled to make withdrawal(s) from his Employee-
Deferral Account, Rollover Account and the vested portion of the
Participant's Employer Contribution Account by notifying the
Committee.
11.2 Financial Hardship. Prior to a Participant's
termination of employment or age 59 1/2 he may apply to the
Committee for a withdrawal of funds held in his Rollover
Contribution Account and Employee-Deferral Account on account of
a Financial Hardship. The total of such withdrawals from a
Participant's Employee-Deferral Account shall not exceed the
<PAGE>
total of his Employee-Deferral Contributions. The withdrawal
shall be made only under the following conditions:
(a)The withdrawal may be made only to meet one of the
following needs:
(i)Medical expenses described in Code Section
213(d), incurred by the Participant, the Participant's spouse, or
any dependent (as defined in Code Section 152) of the
Participant;
(ii)Purchase (excluding mortgage payments) of a
principal residence for the Participant;
(iii)Payment for all or a portion of the next
twelve (12) months of post-secondary education for the
Participant, his spouse, children, or dependents;
(iv)To prevent the eviction of the Participant
from his principal residence or foreclosure on the mortgage of
the Participant's principal residence; or
(v)Any other need permitted under Code Section
401(k) and the regulations issued thereunder and authorized by
the Committee.
(b)The Participant provides to the Committee a letter
containing the following:
(i)A statement of the amount needed and the
purpose for which it is needed;
(ii)A representation that the expense will not be
paid for by insurance or other source specific to the expense,
that the Participant and his spouse (and the Participant's minor
child, if the expense is for the child's benefit) have no assets
he can liquidate to pay for the expense without creating a new
hardship, and that ceasing Employee Deferrals will not suffice to
satisfy the needs;
(iii)A representation that the Participant has not
been able to borrow from commercial sources on reasonable
commercial terms in an amount sufficient to satisfy the need; and
(iv)A promise that the funds will be used only for
the specified purpose.
(c)The withdrawal cannot exceed the amount necessary
to satisfy the need described at paragraph (a), plus any amounts
necessary to pay federal or state income taxes or penalties
reasonably anticipated to result from the distribution.
(d)The Participant has obtained all distributions,
other than hardship distributions, and all non-taxable loans
currently available under all "plans" (as contemplated by U.S.
Treasury Regulation Section 1.401(k)-1(d)(2)(iii)), maintained by
the Employer.
(e)The Participant shall not be allowed to make
<PAGE>
Employee-Deferral Contributions until the Entry Date next
following the 12-month anniversary of the withdrawal.
(f)The Participant's limit on Employee-Deferral
Contributions in the year immediately following the year of the
withdrawal shall be the limit under Section 3.4 for that year,
less the amount of the Participant's Employee-Deferral
Contributions made in the year of the hardship withdrawal.
11.3 Loans to Participant. A Participant who is an
Employee may make a loan from the Plan, subject to the following
rules and limitations:
(a)The total amount of a Participant's loan when added
to the outstanding balance of all the Participant's prior loans
from the Plan during the one year period ending the day before
the loan is made shall not exceed $50,000, nor shall the total
amount of the loan when added to the outstanding balance of the
Participant's loans under the Plan exceed one-half the
Participant's Vested Interest under the Plan. Amounts set aside
for an alternate payee shall not be included. The Plan
Administrator can establish uniform nondiscriminatory policies
further limiting the amount or frequency of Employee loans.
(b)Each loan shall be deemed an investment of the
account of the Participant receiving the loan. Loan
disbursements shall be pro rated across all funds.
(c)Each loan shall bear a reasonable rate of interest
as determined by the Trustee.
(d)A Participant can have no more than two (2) loans
outstanding at anytime if a Participant makes a final payment on
one of two outstanding loans, a new loan can be obtained after a
30-day delay following that final payment.
(e)Each loan may not be less than $1,000.
(f)The Plan Administrator shall provide each loan
applicant with a clear statement of the charges with respect to
each loan transaction. Such statement shall include the dollar
amount and annual interest rate or the finance charge.
(g)The term of a loan shall be determined by the
Participant but shall not be less than 12 months or exceed five
years.
(h)A loan made pursuant to this Article XI shall be
repaid in accordance with a schedule established by the Committee
which schedule shall call for payments of interest and amortized
payments of principal over the term of the loan.
(i)Each loan shall be evidenced by the Participant's
promissory note for the amount of the loan, including interest,
payable to the order of the Trust, and each loan shall be secured
by collateral. The collateral shall consist of the assignment of
the Participant's right, title and interest in the Participant's
Vested Interest in the Trust.
(j)During paid employment each loan shall be repaid by
<PAGE>
withholding from the Participant's pay. Upon termination of
employment, the Participant has 90 days to pay the loan in full.
If the Participant terminates employment and receives an
immediate lump sum distribution, any promissory note held by the
Plan for his account shall be distributed to him. While on an
unpaid leave, the Participant shall pay to the Trustee all
amounts due on the repayment frequency on which the loan is
amortized. Payments must be made by certified or bank check.
Except as provided in this Paragraph, the failure to make timely
payment of any one payment causes the full amount of the note to
become due, and if permitted by law the note shall be distributed
to the Participant.
(k)Repayments shall be credited to the Participant's
accounts out of which the loan was made, and allocated among the
Investment Funds pursuant to the Participant's most recent
allocation election.
ARTICLE XII
ADMINISTRATION
12.1 Board of Directors. The Board of Directors shall have
the following duties and responsibilities in connection with the
administration of the Plan:
(a)making decisions with respect to contributions to
the Plan;
(b)making decisions with respect to amending or
terminating the Plan;
(c)making decisions with respect to the selection,
retention and removal of the Trustee and the members of the
Committee;
(d)periodically reviewing the performance of the
Trustee and the members of the Committee; and
(e)performing such additional duties as are imposed by
law.
The Board of Directors will have all powers and authority
necessary or appropriate to carry out its duties and
responsibilities with respect to the administration of the Plan.
The Board of Directors may by written resolution allocate its
duties and responsibilities to one or more of its members or
delegate such duties and responsibilities to any other persons,
provided, however, that any such allocation or delegation shall
be terminable upon such notice as the Board of Directors deems
reasonable and prudent under the circumstances.
12.2 401(k) Administrative Committee. The 401(k)
Administrative Committee (the "Committee") shall administer the
Plan and is designated as the "administrator" within the meaning
of Section 3(16) of ERISA. The Committee shall have not less
than three nor more than five members, who shall be appointed by
<PAGE>
the Board of Directors and who may be removed by the Board of
Directors at any time with or without cause. A Committee member
may resign at any time by filing his written resignation with the
Board of Directors.
All members of the Committee are designated as agents of the
Plan for the service of legal process.
The Company will notify the Trustee in writing of each
Committee member's appointment, and the Trustee may assume such
appointment continues in effect until written notice to the
contrary is given by the Company.
12.3 Committee's Duties and Responsibilities. The
Committee shall have the following duties and responsibilities in
connection with the administration of the Plan:
(a)interpreting and construing the provisions of the
Plan;
(b)determining all questions of eligibility to
participate, eligibility for benefits, the allocation of
contributions, and the status and rights of Participants,
Beneficiaries and alternate payees;
(c)complying with the reporting and disclosure
requirements established by ERISA;
(d)determining and deciding any dispute arising under
the Plan and administering the Plan's claims procedures;
(e)directing the Trustee concerning all payments to be
made out of the Trust in accordance with the provisions of the
Plan;
(f)establishing procedures for withholding of federal
income tax from distributions;
(g)establishing procedures to prevent the Plan from
engaging in transactions described in Section 406 of ERISA and
transactions described in Section 4975(c) of the Code;
(h)establishing equitable accounting methods and
designating additional Valuation Dates;
(i)communicating with Participants, Beneficiaries and
alternate payee;
(j)reviewing the investment performance of the
Trustee;
(k)reviewing the performance of any advisors appointed
by the Committee;
(l)selecting and reviewing selected investment funds;
(m)making recommendations to the Board of Directors
with respect to the amendment or termination of the Plan; and
(n)keeping minutes to record its proceedings, acts and
decisions pertaining to the administration of the Plan.
<PAGE>
12.4 Committee's Powers. The Committee will have all
powers and authority necessary or appropriate to carry out its
duties and responsibilities with respect to the operation and
administration of the Plan. It shall interpret and apply all
provisions of the Plan and may supply any omission or reconcile
any inconsistency or ambiguity in such manner as it deems
advisable, including the adoption of interpretative memoranda.
All determinations and any actions of the Committee will be
conclusive and binding upon all persons, except as otherwise
provided herein or by law; provided, however, that the Committee
may revoke or modify a determination or action previously made in
error. The Committee shall exercise all powers and authority
given to it in a nondiscriminatory manner, and will apply uniform
administrative rules of general application in order to assure
similar treatment to persons in similar circumstances.
The Committee may delegate to any such agent or any sub-
committee or member of the Committee its authority to perform any
duty or responsibility specified in Section 12.3, including those
matters involving the exercise of discretion, provided that such
delegation shall be subject to revocation at any time at the
discretion of the Committee. Any member of the Committee, any
sub-committee or agent to whom the Committee delegates any
authority, and any other person or group of persons, may serve in
more than one fiduciary capacity (including service as both
Committee member and Trustee) with respect to the Plan.
Any action or decision concurred in by a majority of the
Committee members, either at a meeting or in writing without a
meeting, will constitute an action or decision of the Committee.
The Committee may adopt and amend such rules for the conduct of
its business and administration of the Plan as it deems
advisable.
12.5 Chairman of the Committee. The Committee shall elect
any Committee member to serve as Chairman, and may remove him at
any time. The Chairman, or a majority of the Committee members
then in office, will have the authority to execute all
instruments or memoranda necessary or appropriate to carry out
the actions and decisions of the Committee; and any person may
rely upon any instrument or memoranda so executed as evidence of
the Committee's action or decision indicated thereby.
12.6 Claims Review Procedure. If a Participant
(Beneficiary or alternate payee) believes a benefit or
distribution is due under the Plan, he may request the
distribution of such benefit, in writing, on forms acceptable to
the Committee. At such time, the Participant (or Beneficiary)
will be given the information and materials necessary to complete
any request for the distribution of a benefit.
If the request for distribution is disputed or denied, the
following action shall be taken:
(a)First, the Participant (or Beneficiary) will be
notified, in writing, of the dispute or denial as soon as
possible (but no later than 90 days) after receipt of the request
for a distribution. The notice will set forth the specific
reasons for the denial, including any relevant provisions of the
<PAGE>
Plan. The notice will also explain the claims review procedure
of the Plan.
(b)Second, the Participant (or Beneficiary) shall be
entitled to a full review of his request for a distribution. A
Participant (or Beneficiary) desiring a review of the dispute or
denial must request such a review, in writing, no later than 60
days after notification of the dispute or denial is received.
During the review, the Participant (or Beneficiary) may be
represented and will have the right to inspect all documents
pertaining to the dispute or denial. Any such review may include
a hearing for the Participant or his designated representative.
(c)The Committee shall render its decision within 60
days after receipt of the request for the review. In the event
special circumstances require an extension of time, the Committee
shall notify the Participant (or Beneficiary), and the decision
will be rendered no later than 120 days after the receipt of the
request. The decision of the Committee shall be in writing. The
decision shall include specific reasons for the action taken and
specific references to the Plan provisions on which the decision
is based.
12.7 Information from Participants, Beneficiaries and
Alternate Payees. Each Participant, Beneficiary and alternate
payee shall be required to furnish to the Committee, in the form
prescribed by it, such personal data, affidavits, authorization
to obtain information, and other information as the Committee may
deem appropriate for the proper administration of the Plan.
12.8 Actions. Any action taken by the Plan Administrator
or Committee on matters within its discretion shall be final and
binding on the parties and on all Participants, Beneficiaries or
other persons claiming any right or benefit under the Plan, in
the Trust, or in the administration of the Plan.
All decisions of the Plan Administrator or Committee shall
be uniform and made in a nondiscriminatory manner.
12.9 Bond. The Company shall purchase a bond for the Plan
Administrator or Committee and any other fiduciaries of the Plan
in accordance with the requirements of the Code and ERISA.
12.10 Indemnification. The Company shall defend and
indemnify to the full extent permitted by law (including ERISA),
which indemnification shall include, but not be limited to,
attorney's fees and any tax imposed as a result of a claim
asserted by any person, persons or entity (including a
governmental entity), any individual serving as a member of the
Committee made or threatened to be made a part to any action,
suit or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that such individual is or
was a member of the Committee.
ARTICLE XIII
AMENDMENT OF THE PLAN
13.1 Right to Amend or Suspend Contributions. Subject to
<PAGE>
the provisions of Section 13.3, the Board of Directors reserves
the right to amend the Plan or Trust or suspend contributions to
the Plan, in whole or in part, at any time and for any reason
without the consent of any Participating Employer, Participant,
Beneficiary, or alternate payee. Each amendment of the Plan
shall be in writing, executed by order of the Board of Directors
and shall be effective on the date specified therein. Notice of
any amendment, modification or suspension of contributions to the
Plan shall be given by the Board of Directors to the Committee,
the Trustee, and to all Participating Employers.
13.2 Amendment by Committee. Notwithstanding Section 13.1
the Committee may adopt any amendment which may be necessary or
appropriate to facilitate the administration, management and
interpretation of the Plan or to conform the Plan thereto, or to
qualify or maintain the Plan and Trust as a plan and trust
meeting the requirements of Sections 401(a), 501(a), 401(k) and
401(m) of the Code or any other applicable section of law and the
Regulations issued thereunder, provided said amendment does not
have any material effect on the currently estimated cost to the
Employer maintaining the Plan. Such amendment shall be in
writing, executed by a majority of the Committee members and
shall be effective on the date specified therein. Notice of any
amendment by the Committee shall be given to the Board of
Directors, the Trustee and to all Participating Employers within
a reasonable time.
13.3 Restriction on Amendment. No amendment under Sections
13.1 or 13.2 shall:
(a)authorize or permit any part of the Plan assets
(other than such part as is required to pay taxes, if any, and
administrative expenses as provided in Section 16.16) to be used
for or diverted to purposes other than for the exclusive benefit
of the Participants and that Beneficiaries and alternate payees
under the Plan prior to the satisfaction of all liabilities of
the Plan; and
(b)deprive a Participant of his nonforfeitable right
to benefits accrued as of the date of such amendment. If the
vesting schedule of the Plan is amended in such a way that an
Employee might in any Plan Year have less vesting credit under
the new schedule than under the schedule prior to the amendment,
each Employee with at least three Years of Service may elect to
have his nonforfeitable percentage computed without regard to
such amendment. The period during which such election may be
made shall commence with the date the amendment is adopted and
shall end on the later of (i) sixty days after the amendment is
adopted, (ii) sixty days after the amendment becomes effective,
or (iii) sixty days after the Employee or Participant is provided
with written notice of the amendment.
13.4 Retroactivity. Any amendment or modification of any
provisions of the Plan may be made retroactively if necessary or
appropriate to qualify or maintain the Plan or the Trust as a
plan and trust meeting the requirements of Section 401(a),
501(a), 401(k), or 401(m) of the Code or any other applicable
section of law (including ERISA) and the Regulations issued
thereunder.
<PAGE>
13.5 Merger. The Plan may be merged or consolidated with,
or its assets and liabilities may be transferred to any other
plan only if the benefits which would be received by a
Participant in the event of a termination of the Plan immediately
after such transfer, merger or consolidation are at least equal
to the benefit such Participant would have received if the Plan
had terminated immediately prior to the transfer, merger or
consolidation.
ARTICLE XIV
TERMINATION OF THE PLAN
14.1 Events Constituting Termination. It is expressly
declared to be the desire and intention of each Participating
Employer to continue the Plan in existence for an indefinite
period of time. However, circumstances not now anticipated or
foreseeable may arise in the future, as a result of which a
Participating Employer may deem it impractical or unwise to
continue the Plan established hereunder, and each Participating
Employer therefore reserves the right to terminate the Plan at
any time insofar as it affects its Employees. Any Participating
Employer may terminate its participation in the Plan by action of
its board of directors. Such termination shall be evidenced by
an instrument of termination executed by an officer of the
Participating Employer pursuant to authorization by its board of
directors and shall be delivered to the Board of Directors, the
Committee and to each other Participating Employer. To the
maximum extent permitted by ERISA, the termination of the Plan as
to any Participating Employer shall not in any way affect any
other Participating Employer's participation in the Plan.
With respect to any Participating Employer which has adopted
the Plan, its adjudication of bankruptcy or insolvency by any
court of competent jurisdiction, its making of a general
assignment for the benefit of creditors, its dissolution, merger,
consolidation, other reorganization or discontinuance of
business, unless coverage for its Employees under the Plan is
continued by a successor company, or its complete discontinuance
of contributions, shall operate to terminate the Plan with
respect to such Participating Employer.
The Committee may require any Participating Employer to
withdraw from the Plan for failure of the Participating Employer
to make proper contributions or to comply with any other
provision of the Plan.
14.2 Partial Termination. Upon the withdrawal of one or
more Participating Employers or upon the termination of active
participation of a group of Employees, the Committee shall
determine, upon the advice of counsel to the Plan and under
applicable law, whether a partial termination has occurred with
respect to a group of Participants.
14.3 Disposition of Accounts After a Termination. Upon
termination or partial termination of the Plan or upon complete
discontinuance of contributions, the Accounts of all affected
Participants shall become fully vested and nonforfeitable. Upon
the termination or partial termination or upon complete
<PAGE>
discontinuance of contributions, the Committee shall continue to
administer the Plan, the Trustee shall continue to administer the
Trust Fund, and all payments to Participants shall continue in
accordance with the provisions of Article X; provided, however,
that in the event of a partial termination the Committee may
direct the Trustee to segregate the assets attributable to the
Accounts of the affected Participants and apply such segregated
assets for the benefit of such Participants.
After a Plan termination, the assets of the Plan shall be
distributed to the Participants (and others for whose benefits
accounts are then maintained) at such time as the Committee
determines. No distribution shall be made of Employee-Deferral
Account balances as a result of a termination of the Plan unless
the Plan is terminated without the establishment or maintenance
of another defined contribution plan, as provided in Code
Sections 401(k)(2)(B)(i)(II) and 401(k)(10)(A)(i).
Notwithstanding the foregoing paragraph, upon or after the
termination of the Plan, the Board of Directors shall have the
power to terminate the Trust.
14.4 Internal Revenue Service Approval for Distribution.
In the event that the Committee applies to the Internal Revenue
Service for a determination that the termination of the Plan does
not disqualify it, no person shall have any right or claim to any
assets of the Trust Fund before the Internal Revenue Service
shall determine that the Plan is qualified through the proposed
distribution of assets under this Article XIV.
ARTICLE XV
STAND-BY TOP-HEAVY PROVISIONS
15.1 Top Heavy Plan. The Plan will be considered a Top
Heavy Plan for any Plan Year if it is determined to be a Top
Heavy Plan as of the last day of the preceding Plan Year.
Notwithstanding any other provisions in the Plan, the provisions
of this Article XV shall apply and supersede all other provisions
in the Plan with respect to a Plan Year for which the Plan is a
Top Heavy Plan.
15.2 Definitions. For purposes of this Article XV and as
otherwise used in this Plan, the following terms shall have the
meanings set forth below:
(a)"Aggregation Group" shall mean the group composed
of each qualified retirement plan of a Participating Employer or
an Affiliated Company in which a Key Employee is a Participant
and each other qualified retirement plan of a Participating
Employer or an Affiliated Company which enables a plan of a
Participating Employer or an Affiliated Company in which a Key
Employee is a Participant to satisfy Sections 401(a)(4) or 410 of
the Code. In addition, the Company may choose to treat any other
qualified retirement plan as a member of the Aggregation Group if
such Aggregation Group will continue to satisfy Sections
401(a)(4) and 410 of the Code with such plan being taken into
account.
(b)"Key Employee" shall mean a "Key Employee" as
<PAGE>
defined in Section 416(i)(1) and (5) of the Code or Regulations.
For purposes of determining which employee is a Key Employee,
compensation shall mean "compensation" as defined in Section
1.415-2(d) of the Regulations but including employer
contributions made pursuant to a salary reduction arrangement.
(c)This Plan shall be a "Top Heavy Plan" for any Plan
Year if, as of the Determination Date (as defined in paragraph
(d) below), the aggregate of the Accounts under the Plan for
Participants who are Key Employees (as defined in paragraph (b),
above) exceeds 60% of the aggregate of the Accounts of all
Participants or if this Plan is required to be in an Aggregation
Group (as defined in paragraph (a), above) which for such Plan
Year is a top-heavy group.
(d)"Determination Date" means for any Plan Year the
last day of the immediately preceding Plan Year.
15.3 Vesting. If the Plan is a Top Heavy Plan with respect
to any Plan Year, the Vested Interest of each Participant who has
performed one Hour of Service on or after the date the Plan
becomes a Top Heavy Plan shall not be less than the percentage
determined in accordance with the following vesting schedule:
---------------------------------------------
Years of Service Vested Interest
Less than 2 years 0%
2 years but less than 3 20%
3 years but less than 4 40%
4 years but less than 5 60%
5 years but less than 6 80%
6 years or more 100%
15.4 Minimum Contribution. For each Plan Year that the
Plan is a Top Heavy Plan, the Employer Contribution (including
forfeitures but excluding rollovers pursuant to Section 3.8)
allocable to the Accounts of each Participant who has performed
an Hour of Service at the end of the Plan Year and who is not a
Key Employee, shall not be less than the lesser of (i) 3% of such
Participant's compensation, within the meaning of Section 415 of
the Code, or (ii) the percentage at which contributions and
forfeitures for such Plan Year are made and allocated on behalf
of the Key Employee for whom such percentage is the highest.
Such allocation shall be made for each Participant who is not a
Key Employee and who is employed by the Employer through the last
payroll period ending within the Plan Year. For the purpose of
determining the appropriate percentage under clause (i), all
defined contribution plans required to be included in an
Aggregation Group shall be treated as one plan. Clause (ii)
shall not be applicable if the Plan is required to be included in
an Aggregation Group which enables a defined benefit plan also
required to be included in said Aggregation Group to satisfy
Sections 401(a)(4) or 410 of the Code. Compensation, for
<PAGE>
purposes of determining a minimum contribution, is Section 415
Compensation.
15.5 Limitations on Contributions. For each Plan Year that
the Plan is a Top Heavy Plan, 1.0 shall be substituted for 1.25
as the multiplicand of the dollar limitation in determining the
denominator of the defined benefit plan fraction and of the
defined contribution plan fraction for purposes of Section 415(e)
of the Code. If, after substituting 90 percent for 60 percent
wherever the latter appears in Section 416(g) of the Code, the
Plan is not determined to be a Top Heavy Plan, the provisions of
this Section 15.5 shall not be applicable if the minimum Employer
Contribution (including forfeitures) allocable to the Accounts of
any Participant who is not a Key Employee is determined by
substituting "4" for "3". If the Participant is a participant in
both a defined contribution plan and a defined benefit plan, the
benefit from the defined contribution plan minimum shall be
comparable to a 3% defined benefit plan benefit.
15.6 Other Plans. The Committee shall, to the extent
permitted by the Code and in accordance with the Regulations,
apply the provisions of this Article XV by taking into account
the benefits payable and the contributions made under any other
plans maintained by a Participating Employer or Affiliated
Company which are qualified under Section 401(a) of the Code to
prevent inappropriate omissions or required duplication of
minimum benefits or contributions by making a comparability
analysis to prove that the defined contribution plan is providing
a benefit at least equal to the minimum benefit under the defined
benefit plan.
ARTICLE XVI
GENERAL PROVISIONS
16.1 Plan Voluntary. Although it is intended that the Plan
shall be continued indefinitely, this Plan is entirely voluntary
on the part of the Participating Employers and the continuance of
this Plan and the payment of contributions hereunder are not to
be regarded as contractual obligations of the Participating
Employers. The Plan shall not be deemed to constitute a contract
between a Participating Employer and any Employee or to be a
consideration for, or an inducement for, the employment of an
Employee by an Employer. Nothing contained in the Plan shall be
deemed to give any Employee the right to be retained in the
service of an Employer or to interfere with the right of an
Employer to discharge or to terminate the service of any Employee
at any time without regard to the effects such discharge or
termination may have on any rights under the Plan.
16.2 Payments to Minors and Incompetents. If a
Participant, Beneficiary or alternate payee entitled to receive
any benefits hereunder is a minor or is deemed by the Committee,
or is adjudged, to be legally incapable of giving valid receipt
and discharge for such benefits, such benefits will be paid to
such person or institution as the Committee may designate or to
the duly appointed guardian. Such payment shall, to the extent
made, be deemed a complete discharge of any liability for such
<PAGE>
payment under the Plan.
16.3 Missing Payee. The Committee shall retain the address
of each Participant, Beneficiary or alternate payee. Any notice
sent to the last address filed with the Plan Administrator or for
the last address indicated on an Employer's records will be
binding upon a Participant or Beneficiary.
16.4 Required Information. Each Participant shall file
with the Committee such pertinent information concerning himself,
his spouse and his Beneficiary as the Committee may specify, and
no Participant, or Beneficiary, or other person shall have any
rights or be entitled to any benefits under the Plan unless and
until such information is filed by or with respect to him.
16.5 Subject to Trust Agreement. Any and all rights or
benefits accruing to any persons under the Plan shall be subject
to the terms of the Trust Agreement.
16.6 Communications to Committee. All elections,
designations, requests, notices, instructions, and other
communications from an Employee, a Participant, Beneficiary, or
alternate payee to the Committee required or permitted under the
Plan (i) shall be in such form as is prescribed from time to time
by the Committee, (ii) shall be mailed by first-class mail or
delivered to such location as shall be specified by the
Committee, and (iii) shall be deemed to have been given and
delivered only upon actual receipt thereof by the Committee at
such location.
16.7 Communications from Employer or Committee. All
notices, statements, reports and other communications from an
Employer or the Committee to any Employee, Participant,
Beneficiary or alternate payee shall be deemed to have been duly
given when delivered to, or when mailed by first-class mail,
postage prepaid and addressed to, such Employee, Participant,
Beneficiary or alternate payee at his address last appearing on
the records of the Committee or Company, or when posted by the
Company or the Committee as permitted by law.
16.8 Action. Except as may be specifically provided
herein, any action required or permitted to be taken by an
Employer may be taken on behalf of the Employer by any authorized
officer of the Employer.
16.9 Liability for Benefits. Neither the Trustee, the
Employers, the Committee nor the Plan Administrator guarantee the
Trust from loss or depreciation, nor do they guarantee any
payment to any person. The liability of the Trustee, the
Employers, the Committee and the Plan Administrator to make any
payment is limited to the available assets of the Trust.
16.10 Named Fiduciary. The "named fiduciaries" of the Plan
within the meaning of ERISA Section 403 shall be (a) the
Employer, (b) the Plan Administrator, (c) the Trustee, and
(d) the Committee.
<PAGE>
16.11 Gender. Whenever used in the Plan the masculine
gender includes the feminine.
16.12 Captions. The captions preceding the sections of the
Plan have been inserted solely as a matter of convenience and in
no way define or limit the scope or intent of any provisions of
the Plan.
16.13 Applicable Law. The Plan and all rights thereunder
shall be governed by and construed in accordance with ERISA and
the laws of the State of Louisiana.
16.14 Reversion of Employer Contributions. In no event
shall the assets of the Plan revert to the benefit of the
Employer. Notwithstanding any provision of the Plan to the
contrary, however, all contributions by Employers are conditioned
upon the deductibility of such contribution under Code Section
404. To the extent that a deduction is disallowed for an
Employer's contribution, the Trustee shall return the principal
amount of such contribution upon the demand of the Employee. Any
such demand shall be made within one year following the final
determination of the disallowance.
Further, notwithstanding any provision of the Plan to the
contrary, any contribution which is made by the Employer on
account of a good faith mistake of fact may be returned to the
Employer. The Employer shall notify the Trustee, in writing, of
such mistake within one year of the contribution. The Trustee
shall return the principal amount of the Employer Contribution as
soon as possible, but in any event within 60 days after written
notification by the Employer.
The maximum amount that may be returned to an Employer in
the case of a mistake of fact or the disallowance of a deduction
is the excess of (a) the amount contributed, over, as relevant,
(b)(i) the amount that would have been contributed had no mistake
of fact occurred, or (ii) the amount that would have been
contributed had the contribution been limited to the amount that
is deductible after any disallowance by the Internal Revenue
Service. Earnings attributable to the excess contribution may
not be returned to the Employer, but losses attributable thereto
must reduce the amount to be so returned. Furthermore, if the
withdrawal of the amount attributable to the mistaken or
nondeductible contribution would cause the balance of the
individual account of any Participant to be reduced to less than
the balance which would have been in the account had the mistaken
or nondeductible amount not been contributed, then the amount to
be returned to the Employer must be limited so as to avoid such
reduction.
16.15 Expenses. All expenses of administration shall be
paid from the Trust unless paid directly by the Employer. The
Employer may reimburse the Trust for any administrative expense
paid by the Trust; such reimbursement shall not be treated as an
Employer Contribution under the terms of the Plan.
EXECUTED in multiple originals in New Orleans, Louisiana,
effective as of the _____ day of ______________________, 1995.
<PAGE>
WITNESSES: AVONDALE INDUSTRIES, INC.
BY:
AVONDALE GULFPORT MARINE INC.
BY:
AVONDALE INDUSTRIES OF
NEW YORK, INC.
BY:
AVONDALE SERVICES CORP.
BY:
AVONDALE SHIPYARDS OF TEXAS,
INC.
BY:
AVONDALE TRANSPORTATION
COMPANY, INC.
BY:
AVONDALE ENTERPRISES, INC.
BY:
AVONDALE CONSTRUCTION MANAGEMENT,INC.
BY:
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared _________________________, who being by me sworn did
depose and state that he signed the foregoing Avondale
Industries, Inc. 401(k) Savings Plan as a free act and deed on
behalf of Avondale Industries, Inc. for the purposes therein set
forth.
BY:
Print Name:
Title:
SWORN TO AND SUBSCRIBED
BEFORE ME THIS _____ DAY
OF _______________, 1995.
NOTARY PUBLIC
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared _________________________, who being by me sworn did
depose and state that he signed the foregoing Avondale
Industries, Inc. 401(k) Savings Plan as a free act and deed on
behalf of Avondale Gulfport Marine, Inc. for the purposes therein
set forth.
BY:
Print Name:
Title:
SWORN TO AND SUBSCRIBED
BEFORE ME THIS _____ DAY
OF _______________, 1995.
NOTARY PUBLIC
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared _________________________, who being by me sworn did
depose and state that he signed the foregoing Avondale
Industries, Inc. 401(k) Savings Plan as a free act and deed on
behalf of Avondale Industries of New York, Inc. for the purposes
therein set forth.
BY:
Print Name:
Title:
SWORN TO AND SUBSCRIBED
BEFORE ME THIS _____ DAY
OF _______________, 1995.
NOTARY PUBLIC
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared _________________________, who being by me sworn did
depose and state that he signed the foregoing Avondale
Industries, Inc. 401(k) Savings Plan as a free act and deed on
behalf of Avondale Services Corporation for the purposes therein
set forth.
BY:
Print Name:
Title:
SWORN TO AND SUBSCRIBED
BEFORE ME THIS _____ DAY
OF _______________, 1995.
NOTARY PUBLIC
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared _________________________, who being by me sworn did
depose and state that he signed the foregoing Avondale
Industries, Inc. 401(k) Savings Plan as a free act and deed on
behalf of Avondale Shipyards of Texas, Inc. for the purposes
therein set forth.
BY:
Print Name:
Title:
SWORN TO AND SUBSCRIBED
BEFORE ME THIS _____ DAY
OF _______________, 1995.
NOTARY PUBLIC
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared _________________________, who being by me sworn did
depose and state that he signed the foregoing Avondale
Industries, Inc. 401(k) Savings Plan as a free act and deed on
behalf of Avondale Transportation Company, Inc. for the purposes
therein set forth.
BY:
Print Name:
Title:
SWORN TO AND SUBSCRIBED
BEFORE ME THIS _____ DAY
OF _______________, 1995.
NOTARY PUBLIC
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared _________________________, who being by me sworn did
depose and state that he signed the foregoing Avondale
Industries, Inc. 401(k) Savings Plan as a free act and deed on
behalf of Avondale Enterprises, Inc. for the purposes therein set
forth.
BY:
Print Name:
Title:
SWORN TO AND SUBSCRIBED
BEFORE ME THIS _____ DAY
OF _______________, 1995.
NOTARY PUBLIC
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared _________________________, who being by me sworn did
depose and state that he signed the foregoing Avondale
Industries, Inc. 401(k) Savings Plan as a free act and deed on
behalf of Avondale Construction Management, Inc. for the purposes
therein set forth.
BY:
Print Name:
Title:
SWORN TO AND SUBSCRIBED
BEFORE ME THIS _____ DAY
OF _______________, 1995.
NOTARY PUBLIC
<PAGE>
AVONDALE INDUSTRIES, INC.
401(k)
SAVINGS PLAN
TABLE OF CONTENTS
Article Contents Section
I. DEFINITIONS
Accounts 1.1
Active Participant 1.2
Affiliated Company 1.3
Beneficiary 1.4
Board of Directors 1.5
Code 1.6
Committee 1.7
Company 1.8
Compensation 1.9
Plan Compensation
Section 415 Compensation
Total Compensation
Disability 1.10
Disability Retirement Date 1.11
Eligible Employee 1.12
Employee 1.13
Employee-Deferral or Employee-Deferral
Contribution 1.14
Employee-Deferral Account 1.15
Employee-Deferral Agreement 1.16
Employer 1.17
Employer Contribution 1.18
Employer Contribution Account 1.19
Employer Discretionary Contribution 1.20
Entry Date 1.21
ERISA 1.22
Highly Compensated Employee 1.23
Hour of Service 1.24
Matching Contribution 1.25
Non-Highly Compensated Employee 1.26
Non-Participating Employer 1.27
Normal Retirement Date
and Normal Retirement Age 1.28
One-Year Break-in-Service 1.29
Parental Absence 1.30
Participant 1.31
Participating Employer 1.32
Plan 1.33
Plan Year 1.34
Rollover Contribution Account 1.35
Service Termination Date 1.36
Trust or Trust Agreement 1.37
Trustee 1.38
Trust Fund 1.39
Valuation Date 1.40
Vested Interest 1.41
Year of Service 1.42
<PAGE>
II. PARTICIPATION
Commencement of Participation 2.1
Termination of Participation 2.2
Participation Following Reemployment 2.3
III. EMPLOYEE-DEFERRALS
Employee-Deferrals 3.1
Delivery of Employee-Deferral
Contributions 3.2
Changes in and Discontinuance of
Employee-Deferrals 3.3
Dollar Limitation 3.4
Return of Excess Deferral Amounts 3.5
Non-Discrimination Rules 3.6
Return of Excess Contributions 3.7
Rollover Contributions 3.8
IV. MATCHING CONTRIBUTIONS
Matching Contributions 4.1
Forfeitures 4.2
Delivery of Contributions 4.3
Adjustments if Employee-Deferral
Contributions Adjusted 4.4
Discrimination
Test-Matching Contributions 4.5
Qualified Matching Contributions, Qualified
Nonelective Contributions 4.6
V. EMPLOYER DISCRETIONARY CONTRIBUTIONS
Employer Discretionary Contributions 5.1
Allocation of Employer Discretionary
Contributions 5.2
Top-Heavy Contributions 5.3
VI. VESTING
Employee-Deferral Account 6.1
Rollover Contribution Account 6.2
Employer Contribution Account 6.3
Forfeitures 6.4
Reemployment Before Break in Service 6.5
Reemployment After Break in Service 6.6
VII. ALLOCATIONS
Allocation of Contributions 7.1
Definitions 7.2
Annual Additions 7.3
Limitation for Other Defined
Contribution Plans 7.4
Limitation for Defined Benefit Plan 7.5
VIII. TRUST FUND
Plan Assets 8.1
Separate Accounts 8.2
Valuation 8.3
Investment Funds 8.4
Investment of Contributions 8.5
Transfer of Amounts Among
Investment Funds 8.6
Liability for Investment Decisions 8.7
Accounting Procedures 8.8
<PAGE>
IX. BENEFITS
Normal Retirement Date 9.1
Disability Retirement Date 9.2
Nonalienation of Benefits 9.3
Qualified Domestic Relations Order 9.4
X. PAYMENT OF BENEFITS
Time of Payment 10.1
Death Benefit 10.2
Form of Distribution 10.3
Temporary Non-Payment of Benefits 10.4
Direct Rollover Rules 10.5
Notice 10.6
XI. IN-SERVICE DISTRIBUTION AND LOANS
Distribution after Attaining
Age 59 1/2 11.1
Financial Hardship 11.2
Loans to Participant 11.3
XII. ADMINISTRATION
Board of Directors 12.1
401(k) Administrative Committee 12.2
Committee's Duties and Responsibilities 12.3
Committee's Powers 12.4
Chairman of the Committee 12.5
Claims Review Procedure 12.6
Information from Participants
Beneficiaries and Alternate Payees 12.7
Actions 12.8
Bond 12.9
Indemnification 12.10
XIII. AMENDMENT OF THE PLAN
Right to Amend or Suspend Contributions 13.1
Amendment by Committee 13.2
Restriction on Amendment 13.3
Retroactivity 13.4
Merger 13.5
XIV. TERMINATION OF THE PLAN
Events Constituting Termination 14.1
Partial Termination 14.2
Disposition of Accounts After a
Termination 14.3
Internal Revenue Service Approval
for Distribution 14.4
XV. STAND-BY TOP-HEAVY PROVISIONS
Top Heavy Plan 15.1
Definitions 15.2
Vesting 15.3
Minimum Contribution 15.4
Limitation on Contributions 15.5
Other Plans 15.6
XVI. GENERAL PROVISIONS
Plan Voluntary 16.1
Payments to Minors and Incompetents 16.2
Missing Payee 16.3
<PAGE>
Required Information 16.4
Subject to Trust Agreement 16.5
Communications to Committee 16.6
Communications from Employer or
Committee 16.7
Action 16.8
Liability for Benefits 16.9
Named Fiduciary 16.10
Gender 16.11
Captions 16.12
Applicable Law 16.13
Reversion of Employer Contributions 16.14
Expenses 16.15
THIRD AMENDMENT, WAIVER AND CONSENT TO REVOLVING CREDIT AGREEMENT
THIS THIRD AMENDMENT, WAIVER AND CONSENT TO REVOLVING
CREDIT AGREEMENT (this "Amendment") is entered into as of May 10,
1995, by and among AVONDALE INDUSTRIES, INC., a Louisiana
corporation (the "Company"), the various financial institutions
signatory hereto (collectively, the "Banks," and, individually, a
"Bank"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as LC Issuer and as successor agent to BANK OF
AMERICA ILLINOIS (successor-in-interest to CONTINENTAL BANK), as
agent for the Banks (the "Agent"). Words and phrases having
defined meanings in the Credit Agreement referred to below shall
have the same respective meanings when used herein, unless
otherwise expressly defined herein.
WITNESSETH:
WHEREAS, the parties hereto have entered into a
Revolving Credit Agreement, dated as of May 10, 1994 as amended
by that certain First Amendment and Waiver to Revolving Credit
Agreement dated as of May 31, 1994 and that certain Second
Amendment to Revolving Credit Agreement dated as of February 9,
1995 (collectively, the "Existing Agreement" and as amended by
this Amendment, the "Credit Agreement"), relating to a revolving
credit facility in an amount not to exceed $35,000,000 for the
Company's ongoing working capital and general corporate needs;
WHEREAS, the Company, the Banks and the Agent desire
(i) to amend and waive certain provisions of the Existing
Agreement to permit the Company to extend certain financial
accommodations to or for the benefit of American Heavy Lift
Shipping Company, Inc., a Delaware corporation ("American Heavy
Lift") in connection with the Company's construction of four (4)
product tankers to be flagged under the United States flag for
use in the United States coastwise trade and that comply with the
requirements of the Oil Pollution Act of 1990 (collectively, the
"AHL Tankers") and (ii) to increase the amount of the revolving
credit facility to $42,500,000, in each case, on the terms and
conditions set forth herein; and
WHEREAS, Bank of America National Trust and Savings
Association has succeeded to the rights and duties of the Agent
under the Credit Agreement and the other Loan Documents;
WHEREAS, the Company has delivered to the Agent and the
Agent has delivered to the Banks an Extension Notice in which the
Company requested that the Expiration Date of the Existing
Agreement be extended for one additional year;
NOW THEREFORE, in consideration of the premises and the
mutual agreements set forth herein and for other consideration
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows;
1. Amendments to the Existing Agreement. Subject to
<PAGE>
and conditioned upon the fulfillment of each of the conditions
precedent set forth in Section 4 hereof, the Existing Agreement
is hereby amended as follows:
(a) The definition of "LC Issuer" is hereby amended to
delete the terms thereof in their entirety and to insert the
following therefor:
"LC Issuer" shall mean Bank of America Illinois
and/or Bank of America National Trust and Savings
Association in its individual capacity and not as Agent and,
with the consent of the Agent, the Company and Bank of
America National Trust and Savings Association, any Bank.
With respect to Letters of Credit issued by the LC Issuer,
the LC Issuer shall have the benefits of each provision of
this Agreement as if it were a Bank, and provisions of this
Agreement and the other Loan Documents which are for "the
benefit of the Banks" shall also be for the benefit of the
LC Issuer. If there shall be more than one LC Issuer at any
time, to the extent relevant, the term "LC Issuer" shall
mean both LC Issuers.
(b) The definition of "Line of Credit" is hereby
amended to delete the terms thereof in their entirety and to
insert the following therefor:
"Line of Credit" shall mean the aggregate
revolving credit line extended by the Banks to the Company
for Loans and Letters of Credit pursuant to and in
accordance with the terms of this Agreement, in the amount
of $42,500,000.00 as such amount may be reduced from time to
time in accordance with Section 2.5 or Section VIII.
(c) Section 2.2(a) is hereby amended to delete the
terms thereof in their entirety and to insert the following
therefor:
The Loans made by each Bank pursuant hereto shall be
evidenced by a promissory note of the Company substantially
in the form of Exhibit J (as amended, supplemented, amended
and restated, or otherwise modified, each a "Revolving Note"
and collectively the "Revolving Notes"), made payable to the
order of such Bank in a principal amount equal to such
Bank's Commitment as of the Effective Date (or such other
amount as may otherwise be relevant as a result of any
assignments permitted by this Agreement).
(d) Section 10.2 is hereby amended to delete the terms
of the first sentence of the second paragraph thereof in its
entirety and to insert the following therfor:
Notwithstanding the foregoing, without the consent of any
Bank or the LC Issuer, the Agent, upon the request of the
Company, shall release its Lien, or enter into intercreditor
and/or subordination agreements with lenders to the
Company's and any Subsidiary Guarantor's customers
subordinating the Agent's Lien, on certain Inventory which
shall constitute or form a part of work-in-process with
<PAGE>
respect to which both title thereto has passed to customers
of the Company or any Subsidiary Guarantor pursuant to the
terms of the applicable contract with such customers and for
which an Account has arisen (whether or not such Account has
been billed).
(e) Schedule I is hereby amended to delete the terms
thereof in their entirety and to insert Exhibit A attached hereto
therefor.
2. Waiver Relating to American Heavy Lift Contract.
Subject to and conditioned upon the fulfillment of each of the
conditions precedent set forth in Section 4 hereof, and effective
as of the date of this Amendment, the Required Banks hereby (i)
waive the provisions of Sections 7.3 and 7.13 of the Existing
Agreement to the extent, and solely to the extent, necessary to
permit the Company to extend financial accommodations to American
Heavy Lift (in the form of a guarantee) in connection with the
Company's construction of the AHL Tankers in an aggregate
principal amount not to exceed $6,000,000 for all such extensions
and (ii) waive the provisions of Section 7.9 of the Existing
Agreement to permit the Company to purchase the sterns of the AHL
Tankers for consideration not to exceed $20,000,000 in the
aggregate, which sterns shall be simultaneously resold to
American Heavy Lift for consideration in the same amount and of
the same type as that paid by the Company therefor. The
documentation pursuant to which such extensions of credit are
made and governed shall be substantially in the form of that
documentation delivered to each of the Banks prior to the date of
this Amendment, with any material changes thereto requiring the
further consent of the Required Banks.
3. Acknowledgment Relating to Existing DOL Letter of
Credit. Each of the Banks hereby acknowledges that Bank of
America National Trust and Savings Association ("BofA") and Bank
of America Illinois ("BAI") in their respective capacities as LC
Issuers are contemplating the substitution of the current
$20,000,000 Letter of Credit issued by BAI in favor of the United
States Department of Labor (the "DOL") (the "BAI Letter of
Credit") with a $20,000,000 Letter of Credit issued by BofA in
favor of the DOL (the "BofA Letter of Credit"). In order to
facilitate such exchange the BofA Letter of Credit will be
delivered to the DOL prior to the surrender of the BAI Letter of
Credit to BAI. Each of the Banks acknowledges and agrees that it
shall continue to have a participation interest in both the BAI
Letter of Credit and the BofA Letter of Credit notwithstanding
the limitations on their respective commitments set forth in the
Credit Agreement. Upon BAI's actual receipt of the BAI Letter
of Credit the BAI Letter of Credit shall be cancelled and the
Agent shall notify each of the Banks of such cancellation.
4. Conditions Precedent to Effectiveness of
Amendments, Waiver and Consent. The amendments and modifications
set forth in Section 1 hereof and the waivers and consents set
forth in Sections 2 hereof shall become effective upon, and are
expressly conditioned upon, the fulfillment of each of the
following conditions precedent on or prior to June 1, 1995:
<PAGE>
(a) Amendment. The Agent shall have received this
Amendment, duly executed and delivered by an authorized officer
of the Company and each of the Banks.
(b) Subsidiary Guarantor Consent. The Agent shall
have received (with a copy for each of the other Banks) from each
of the Subsidiary Guarantors a reaffirmation of the Subsidiary
Guarantee executed by it.
(c) Material Adverse Change. In the opinion of the
Banks (as evidenced by their execution of this Amendment), no
event or condition shall have occurred or exist which could
reasonably be expected to have a Material Adverse Effect.
(d) MARAD Approval. The Agent shall have received
copies of MARAD documentation approving the increase in the Line
of Credit and the amendment to the 900 Foot Floating Drydock
Mortgage reflecting such increase.
(e) Legal Opinion. The Agent shall have received the
favorable opinion of Jones, Walker, Waechter, Poitevent, Carrere
& Denegre, Louisiana counsel to the Company, addressed to the
Agent, the LC Issuer and the Banks in form and substance
satisfactory to the Agent and its counsel.
(f) Revised Revolving Notes. The Agent shall have
received an Amended and Restated Revolving Note (or an amendment
to the existing Revolving Notes) for each of the Banks evidencing
the increase in each Bank's Commitment as contemplated by this
Amendment.
(g) Fee. The Agent shall have received a fee equal to
0.25% of the $7,500,000 increase in the Line of Credit (which fee
shall be paid to the Banks (including Bank of America Illinois as
a Bank) pro rata based upon the respective increases in their
Commitments), and an amendment processing fee for its own account
pursuant to a separate letter agreement with the Company.
(h) American Heavy Lift Documentation. The Agent
shall have received copies of all documentation relating to
American Heavy Lift's issuance of bonds guaranteed by MARAD and
the Company's related guarantees and such documents shall be in
form and substance satisfactory to Agent and its counsel.
(i) Extension Documentation. The Agent shall have
received a duly executed Consent Notice satisfactory to Agent
from each of the Banks agreeing to extend the Expiration Date for
one additional year (to May 10, 1997).
(j) Other Documents. The Agent shall have received
such other documents, instruments and agreements as it shall have
reasonably requested in connection with the transactions
contemplated by this Amendment.
5. Representations, Warranties and Covenants. In
order to induce the Agent and the Banks to enter into this
Amendment, the Company hereby represents, warrants and covenants
to the Agent and the Banks as follows:
<PAGE>
(a) The execution, delivery and performance by
the Company of this Amendment (i) are within the Company's
corporate powers, (ii) have been duly authorized by all
necessary corporate action, (iii) require no action by or in
respect of, or filing with, any governmental body, agency or
official, (iv) do not contravene, or constitute a default
under, any provision of any applicable law, statute,
ordinance, regulation, rule, order or other governmental
restriction or of the Certificate or Articles of
Incorporation or By-Laws of the Company, (v) do not
contravene, or constitute a default under, any agreement,
judgment, injunction, order, decree, indenture, contract,
lease, instrument or other commitment to which the Company
is a party or by which the Company or any of its assets are
bound and (vi) will not result in the creation or imposition
of any Lien upon any asset of the Company under any existing
indenture, mortgage, deed of trust, loan or credit agreement
or other agreement or instrument to which the Company is a
party or by which it or any of its assets may be bound or
affected.
(b) This Amendment and the Credit Agreement are
the legal, valid and binding obligations of the Company, and
are enforceable against the Company in accordance with their
terms.
(c) The representations and warranties contained
in the Credit Agreement and the other Loan Documents are
true and correct in all material respects on and as of the
date hereof as though made on the date hereof, except to the
extent that such representations expressly relate solely to
an earlier date (in which case such representations and
warranties were true and accurate on and as of such earlier
date).
(d) No Default or Event of Default has occurred
and is continuing.
(e) On or prior to May 31, 1995 the Company shall
cause to be delivered to the Agent the favorable opinion of
Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
Louisiana counsel to the Company, addressed to the Agent,
the LC Issuer and the Banks in form and substance
satisfactory to the Agent and its counsel with respect to
the amendment to the 900 Foot Floating Drydock Mortgage
reflecting the increase in the Commitments contemplated by
this Amendment.
(f) The Company will not, without the prior
written consent of the Required Banks, amend or otherwise
modify (or agree to amend or otherwise modify) any provision
of (i) those certain Credit Support Agreements, dated on or
about the date hereof, by and between the Company and
American Heavy Lift or (ii) any promissory notes, mortgages,
security agreements or similar instruments or agreements
executed pursuant to or in connection with such Credit
Support Agreements.
6. Reference to and Effect Upon the Credit Agreement.
<PAGE>
Upon the effectiveness of this Amendment, each reference in the
Existing Agreement to "the Agreement", "hereunder", "hereof",
"herein", or words of like import, shall mean and be a reference
to the Credit Agreement, as amended hereby and each reference to
the Existing Agreement in any other Loan Document shall mean and
be a reference to the Credit Agreement, as amended hereby.
7. Reaffirmation; Expenses. The Company hereby
reaffirms to the Agent and each of the Banks that, except as
modified hereby, the Credit Agreement and all of the Loan
Documents remain in full force and effect and have not been
otherwise waived, modified or amended. Except as expressly
modified hereby, all of the terms and conditions of the Credit
Agreement shall remain unaltered and in full force and effect.
The Company acknowledges that all reasonable legal expenses of
the Agent related to this Amendment shall be paid by the Company.
8. Confirmation of Collateral Documents. The Company
hereby (i) ratifies and confirms its obligations under the
Collateral Documents and acknowledges and agrees that the
Collateral Documents to which the Company is a party are the
legal, valid and binding obligations of the Company, enforceable
against it in accordance with their terms; and (ii) agrees that
the Obligations (for purposes of each of such Collateral
Documents) shall include, without limitation, the Obligations
under and as defined in the Credit Agreement as amended by this
Amendment.
9. Choice of Law. THIS AMENDMENT SHALL BE GOVERNED
BY AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ILLINOIS
AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANY,
THE SUBSIDIARIES, THE AGENT AND THE BANKS IN CONNECTION WITH THIS
AMENDMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS
AND DECISIONS OF THE STATE OF ILLINOIS.
10. Counterparts. This Amendment may be executed in
one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument. One or more counterparts of this Amendment may
be delivered by telecopier, with the intention that they shall
have the same effect as an original counterpart thereof.
IN WITNESS WHEREOF, the parties hereto have caused
their duly authorized officers to execute and deliver this
Agreement as of the date first above written.
AVONDALE INDUSTRIES, INC.
By: /s/ THOMAS M. KITCHEN
---------------------
Name: Thomas M. Kitchen
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
<PAGE>
By: /s/ DANIEL G. FARTHING
----------------------
Name: Daniel G. Farthing
Title: Vice President
THE BANKS:
BANK OF AMERICA ILLINOIS, successor-
in-interest to CONTINENTAL BANK,
as a Bank and as LC Issuer
By: /s/ THOMAS BARNETT
------------------
Name: Thomas Barnett
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as LC Issuer
By: /s/ THOMAS BARNETT
------------------
Name: Thomas Barnett
Title: Vice President
WHITNEY NATIONAL BANK
By: /s/ ELMER H. HEMPHILL, JR.
Name: Elmer H. Hemphill, Jr.
Title: Senior Vice President
FIRST INTERSTATE BANK OF TEXAS,N.A.
By: /s/ FRANK W. SCHAGEMAN
----------------------
Name: Frank W. Schageman
Title: Vice President
FIRST NATIONAL BANK OF COMMERCE
By: /s/ DAVID A. DOHERTY
--------------------
Name: David A. Doherty
Title: VIce President
<PAGE>
EXHIBIT A
SCHEDULE I TO
AVONDALE INDUSTRIES, INC.
REVOLVING CREDIT AGREEMENT
Commitments Amount Percentage
Bank of America Illinois $18,200,000 42.8235295%
Whitney National Bank $12,150,000 28.5882353%
First National Bank of Commerce $ 6,075,000 14.2941176%
First Interstate Bank $ 6,075,000 14.2941176%
Total $42,500,000 100.0000000%
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Third Amendment, Waiver and Consent to Revolving Credit
Agreement and acknowledges the continued validity, enforceability
and effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
AVONDALE GULFPORT MARINE, INC.
By /s/ THOMAS M. KITCHEN
---------------------
Thomas M. Kitchen
Title:
Dated: May 10, 1995
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Third Amendment, Waiver and Consent to Revolving Credit
Agreement and acknowledges the continued validity, enforceability
and effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
AVONDALE TECHNICAL SERVICES, INC.
By /s/ THOMAS M. KITCHEN
---------------------
Thomas M. Kitchen
Title:
Dated: May 10, 1995
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Third Amendment, Waiver and Consent to Revolving Credit
Agreement and acknowledges the continued validity, enforceability
and effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
CRAWFORD TECHNICAL SERVICES, INC.
By \S\ B. L. HICKS
--------------
B. L. Hicks
Title:
Dated: May 10, 1995
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Third Amendment, Waiver and Consent to Revolving Credit
Agreement and acknowledges the continued validity, enforceability
and effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
GENCO INDUSTRIES, INC.
By /s/ THOMAS M. KITCHEN
---------------------
Thomas M. Kitchen
Title:
Dated: May 10, 1995
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of February 9, 1995
(the "Guarantee"), the undersigned (the "Guarantor") guaranteed
to the Secured Parties (as defined therein), subject to the
terms, conditions and limitations set forth therein, the prompt
payment and performance of all of the Obligations (as defined
therein). The Guarantor consents to the Company's execution of
the foregoing Third Amendment, Waiver and Consent to Revolving
Credit Agreement and acknowledges the continued validity,
enforceability and effectiveness of the Guarantee with respect to
all loans, advances and extensions of credit to the Company,
whether heretofore or hereafter made, together with all interest
thereon and all expenses in connection therewith.
AVONDALE PROPERTIES, INC.
By /s/ THOMAS M. KITCHEN
---------------------
Thomas M. Kitchen
Title:
Dated: May 10, 1995
<PAGE>
By Subsidiary Guarantee dated as of February 9, 1995
(the "Guarantee"), the undersigned (the "Guarantor") guaranteed
to the Secured Parties (as defined therein), subject to the
terms, conditions and limitations set forth therein, the prompt
payment and performance of all of the Obligations (as defined
therein). The Guarantor consents to the Company's execution of
the foregoing Third Amendment, Waiver and Consent to Revolving
Credit Agreement and acknowledges the continued validity,
enforceability and effectiveness of the Guarantee with respect to
all loans, advances and extensions of credit to the Company,
whether heretofore or hereafter made, together with all interest
thereon and all expenses in connection therewith.
AVONDALE LAND MANAGEMENT COMPANY,
a Louisiana general partnership
By Avondale Industries, Inc.,
a general partner
By /s/ THOMAS M. KITCHEN
---------------------
Name: Thomas M. Kitchen
Title:
By Avondale Properties, Inc.,
a general partner
By /s/ THOMAS M. KITCHEN
---------------------
Name: Thomas M. Kitchen
Title:
Dated: May 10, 1995
FOURTH AMENDMENT AND CONSENT TO REVOLVING CREDIT AGREEMENT
THIS FOURTH AMENDMENT AND CONSENT TO REVOLVING CREDIT
AGREEMENT (this "Amendment") is entered into as of September 1,
1995, by and among AVONDALE INDUSTRIES, INC., a Louisiana
corporation (the "Company"), the various financial institutions
signatory hereto (collectively, the "Banks," and, individually, a
"Bank"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as LC Issuer and as successor agent to BANK OF
AMERICA ILLINOIS (successor-in-interest to CONTINENTAL BANK), as
agent for the Banks (the "Agent"). Words and phrases having
defined meanings in the Credit Agreement referred to below shall
have the same respective meanings when used herein, unless
otherwise expressly defined herein.
WITNESSETH:
WHEREAS, the parties hereto have entered into a
Revolving Credit Agreement, dated as of May 10, 1994 as amended
by that certain First Amendment and Waiver to Revolving Credit
Agreement dated as of May 31, 1994, that certain Second Amendment
to Revolving Credit Agreement dated as of February 9, 1995 and
that certain Third Amendment, Waiver and Consent to Revolving
Credit Agreement dated as of May 10, 1995 (collectively, the
"Existing Agreement" and as amended by this Amendment, the
"Credit Agreement"), relating to a revolving credit facility in
an amount not to exceed $42,500,000 for the Company's ongoing
working capital and general corporate needs;
WHEREAS, the Company intends to submit certain bids to
construct (i) an ocean roll on, roll off passenger ferry for the
State of Alaska for a sale price of approximately $150,000,000
(the "Alaskan Ferry Project") and (ii) a Steel Hulled Barracks
Craft, APL-61 Series, for the Naval Sea Systems Command (the "APL
Project");
WHEREAS, in connection with its bid for the Alaskan
Ferry Project, the Company must submit certain assurances in the
form of a bid bond and payment and performance bonds in favor of
the State of Alaska and in connection with its bid for the APL
Project, the Company must submit certain assurances in the form
of a bid and payment and performance bonds in favor of the Naval
Sea Systems Command;
WHEREAS, in connection with the Alaskan Ferry Project,
the Company has arranged with the State of Louisiana through the
Department of Economic Development and the Commission of
Administration, to provide a bid bond in an amount not to exceed
$5,000,000 and payment and performance bonds not to exceed
$33,000,000 each (for an aggregate bonding of $71,000,000 of
which no more than $66,000,000 shall be outstanding at any one
time; all such bonds being hereinafter referred to as the
"Alaskan Ferry Bonds");
WHEREAS, in connection with the APL Project, the
Company has arranged with United States Fidelity and Guaranty
Company to provide a bid bond in an amount not to exceed
<PAGE>
$3,000,000, a payment bond in an amount not to exceed $3,000,000
and a performance bond in an amount not to exceed $5,000,000 (for
an aggregate bonding of $11,000,000 of which no more than
$8,000,000 shall be outstanding at any one time; all such bonds
being hereinafter referred to as the "APL Bonds");
WHEREAS, as a condition precedent to providing the
Alaskan Ferry Bonds, the State of Louisiana has required the
Company to secure its reimbursement obligations with respect
thereto with (i) a lien on the vessel to be constructed by the
Company as part of the Alaskan Ferry Project, (ii) the related
construction contract, (iii) all receivables arising therefrom
and (iv) all proceeds and products of the foregoing
(collectively, the "Alaskan Ferry Collateral");
WHEREAS, the Company has requested that the Banks waive
and amend certain provisions of the Existing Agreement to (i)
allow the Company to obtain the Alaskan Ferry Bonds and the APL
Bonds, (ii) secure the Company's reimbursement obligations with
respect to the Alaskan Ferry Bonds with the Alaskan Ferry
Collateral and (iii) permit the Agent to subordinate any lien it
has on the Alaskan Ferry Collateral;
NOW THEREFORE, in consideration of the premises and the
mutual agreements set forth herein and for other consideration
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows;
1. Amendments to the Existing Agreement. Subject to
and conditioned upon the fulfillment of each of the conditions
precedent set forth in Section 4 hereof, the Existing Agreement
is hereby amended as follows:
(a) Section 1.1 of the Existing Agreement is hereby
amended to add the following definitions thereto in proper
alphabetical order:
"Alaskan Ferry Bonds" means, collectively, (i) a bid
bond in an amount not to exceed $5,000,000 and (ii) payment
and performance bonds not to exceed $33,000,000 each issued
by the State of Louisiana through the Department of Economic
Development and the Commission of Administration for the
account of the Company in connection with the Alaskan Ferry
Project.
"Alaskan Ferry Collateral" means, collectively, (i) the
vessel to be constructed by the Company as part of the
Alaskan Ferry Project, (ii) the related construction
contract, (iii) all receivables arising therefrom, and (iv)
all proceeds and products of the foregoing, but only to the
extent such proceeds and products do not otherwise
constitute Collateral.
"Alaskan Ferry Liens" means those Liens granted by the
Company on the Alaskan Ferry Collateral to secure the
Company's obligations to the State of Louisiana in
connection with the Alaskan Ferry Bonds.
"Alaskan Ferry Project" means the Company's bid to
<PAGE>
construct, and the construction of, an ocean roll on, roll
off passenger ferry for the State of Alaska, which bid is to
be made by the Company during September 1995.
"APL Bonds" means, collectively, (i) a bid bond in an
amount not to exceed $3,000,000, (ii) a payment bond in an
amount not to exceed $3,000,000 and (iii) a performance bond
in an amount not to exceed $5,000,000 each issued by United
States Fidelity and Guaranty Company for the account of the
Company.
"APL Project" means the Company's bid to construct, and
the construction of, a Steel Hulled Barracks Craft, APL-61
Series, for the Naval Sea Systems Command.
(b) Section 1.1 of the Existing Credit Agreement is
hereby further amended to add the following sentence at the end
of the definition of "Contingent Obligation" contained therein:
In no event shall the "Contingent Obligations" of the
Company include its contingent reimbursement obligations to
the State of Louisiana under or with respect to the Alaskan
Ferry Bonds or its contingent reimbursement obligations to
United States Fidelity and Guaranty Company under or with
respect to the APL Bonds.
(c) Section VII of the Existing Agreement is hereby
amended by adding the following new Section 7.23 thereto:
Section 7.23 Commingling of Alaskan Ferry Collateral
with Collateral; Limitation on Alaskan Ferry Bonds;
Limitation on APL Bonds. The Company shall not deposit, nor
shall it permit to be deposited, into any bank or depositary
account in which the Agent has been granted a security
interest or in which any proceeds of and Collateral are
deposited, including, without limitation, the Control
Accounts (as defined in the Security Agreement (Company))
any monies constituting Alaskan Ferry Collateral. At no
time shall the aggregate outstanding amount of the Alaskan
Ferry Bonds exceed $66,000,000. At no time shall the
aggregate outstanding amount of the APL Bonds exceed
$8,000,000.
(d) Section 7.2 of the Existing Agreement is hereby
amended to delete clause (m) thereof in its entirety and to
insert the following therefor:
(m) the MARAD Financing Liens and the Alaskan Ferry
Liens;
2. Consent Relating to Subordination of Liens in the
Alaskan Ferry Collateral. Notwithstanding anything to the
contrary set forth in Section 10.2 of the Existing Agreement,
without any further consent of any Bank or the LC Issuer, the
Agent, upon the request of the Company, shall subordinate its
Lien (if any) on the Alaskan Ferry Collateral in favor of the
State of Louisiana. Any such subordination shall be made
pursuant to an agreement in form and substance satisfactory to
the Majority Banks in their sole discretion.
<PAGE>
3. Conditions Precedent to Effectiveness of
Amendments and Consent. The amendments and modifications set
forth in Section 1 hereof and the consents set forth in Sections
2 hereof shall become effective upon, and are expressly
conditioned upon, the fulfillment of each of the following
conditions precedent on or prior to October 1, 1995:
(a) Amendment. The Agent shall have received this
Amendment, duly executed and delivered by an authorized officer
of the Company and each of the Banks.
(b) Subsidiary Guarantor Consent. The Agent shall
have received (with a copy for each of the other Banks) from each
of the Subsidiary Guarantors a reaffirmation of the Subsidiary
Guarantee executed by it in the forms attached hereto.
(c) Material Adverse Change. In the opinion of the
Banks (as evidenced by their execution of this Amendment), no
event or condition shall have occurred or exist which could
reasonably be expected to have a Material Adverse Effect.
(d) Legal Opinion. The Agent shall have received the
favorable opinion of Jones, Walker, Waechter, Poitevent, Carrere
& Denegre, Louisiana counsel to the Company, addressed to the
Agent, the LC Issuer and the Banks in form and substance
satisfactory to the Agent and its counsel.
(e) Alaskan Ferry Project and APL Project
Documentation. The Agent shall have received copies of all
documentation relating to the Alaskan Ferry Project and the
issuance of the Alaskan Ferry Bonds and the APL Project and the
issuance of the APL Bonds and such documents shall be in form and
substance satisfactory to the Majority Banks as evidenced by
their execution hereof.
(f) Other Documents. The Agent shall have received
such other documents, instruments and agreements as it shall have
reasonably requested in connection with the transactions
contemplated by this Amendment.
4. Representations, Warranties and Covenants. In
order to induce the Agent and the Banks to enter into this
Amendment, the Company hereby represents, warrants and covenants
to the Agent and the Banks as follows:
(a) The execution, delivery and performance by
the Company of this Amendment (i) are within the Company's
corporate powers, (ii) have been duly authorized by all
necessary corporate action, (iii) require no action by or in
respect of, or filing with, any governmental body, agency or
official, (iv) do not contravene, or constitute a default
under, any provision of any applicable law, statute,
ordinance, regulation, rule, order or other governmental
restriction or of the Certificate or Articles of
Incorporation or By-Laws of the Company, (v) do not
contravene, or constitute a default under, any agreement,
judgment, injunction, order, decree, indenture, contract,
lease, instrument or other commitment to which the Company
is a party or by which the Company or any of its assets are
<PAGE>
bound and (vi) will not result in the creation or imposition
of any Lien upon any asset of the Company under any existing
indenture, mortgage, deed of trust, loan or credit agreement
or other agreement or instrument to which the Company is a
party or by which it or any of its assets may be bound or
affected.
(b) This Amendment and the Credit Agreement are
the legal, valid and binding obligations of the Company, and
are enforceable against the Company in accordance with their
terms.
(c) The representations and warranties contained
in the Credit Agreement and the other Loan Documents are
true and correct in all material respects on and as of the
date hereof as though made on the date hereof, except to the
extent that such representations expressly relate solely to
an earlier date (in which case such representations and
warranties were true and accurate on and as of such earlier
date).
(d) No Default or Event of Default has occurred
and is continuing.
5. Reference to and Effect Upon the Credit Agreement.
Upon the effectiveness of this Amendment, each reference in the
Existing Agreement to "the Agreement", "hereunder", "hereof",
"herein", or words of like import, shall mean and be a reference
to the Credit Agreement, as amended hereby and each reference to
the Existing Agreement in any other Loan Document shall mean and
be a reference to the Credit Agreement, as amended hereby.
6. Reaffirmation; Expenses. The Company hereby
reaffirms to the Agent and each of the Banks that, except as
modified hereby, the Credit Agreement and all of the Loan
Documents remain in full force and effect and have not been
otherwise waived, modified or amended. Except as expressly
modified hereby, all of the terms and conditions of the Credit
Agreement shall remain unaltered and in full force and effect.
The Company acknowledges that all reasonable legal fees and
expenses of the Agent related to this Amendment shall be paid by
the Company.
7. Confirmation of Collateral Documents. The Company
hereby (i) ratifies and confirms its obligations under the
Collateral Documents and acknowledges and agrees that the
Collateral Documents to which the Company is a party are the
legal, valid and binding obligations of the Company, enforceable
against it in accordance with their terms; and (ii) agrees that
the Obligations (for purposes of each of such Collateral
Documents) shall include, without limitation, the Obligations
under and as defined in the Credit Agreement as amended by this
Amendment.
8. Choice of Law. THIS AMENDMENT SHALL BE GOVERNED
BY AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ILLINOIS
AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANY,
<PAGE>
THE SUBSIDIARIES, THE AGENT AND THE BANKS IN CONNECTION WITH THIS
AMENDMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS
AND DECISIONS OF THE STATE OF ILLINOIS.
9. Counterparts. This Amendment may be executed in
one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument. One or more counterparts of this Amendment may
be delivered by telecopier, and if so delivered shall be deemed
to be delivered with the intention that they shall have the same
effect as an original counterpart hereof. Any party delivering
any such counterpart by telecopy shall promptly forward to the
Agent an original counterpart hereof.
IN WITNESS WHEREOF, the parties hereto have caused
their duly authorized officers to execute and deliver this
Agreement as of the date first above written.
AVONDALE INDUSTRIES, INC.
By: /s/ THOMAS M. KITCHEN
---------------------
Name: Thomas M. Kitchen
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By: /s/ DANIEL G. FARTHING
----------------------
Name: Daniel G. Farthing
Title: Vice President
THE BANKS:
BANK OF AMERICA ILLINOIS, successor-
in-interest to CONTINENTAL BANK,
as a Bank and as LC Issuer
By: /s/ W. THOMAS BARNETT
---------------------
Name: W. Thomas Barnett
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as LC Issuer
By: /s/ W. THOMAS BARNETT
---------------------
Name: Thomas Barnett
Title: Vice President
<PAGE>
WHITNEY NATIONAL BANK
By: /s/ ELMER H. HEMPHILL, JR.
--------------------------
Name: Elmer H. Hemphill, Jr.
Title: Senior Vice President
FIRST INTERSTATE BANK OF TEXAS,N.A.
By: /s/ FRANK W. SCHAGEMAN
----------------------
Name: Frank W. Schageman
Title: Vice President
FIRST NATIONAL BANK OF COMMERCE
By: /s/ DAVID A. DOHERTY
--------------------
Name: David A. Doherty
Title: Vice President
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Fourth Amendment and Consent to Revolving Credit
Agreement and acknowledges the continued validity, enforceability
and effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
AVONDALE GULFPORT MARINE, INC.
By /s/ THOMAS M. KITCHEN
---------------------
Thomas M. Kitchen
Title: Vice President, Secretary &
Treasurer
Dated: September 1, 1995
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Fourth Amendment and Consent to Revolving Credit
Agreement and acknowledges the continued validity, enforceability
and effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
AVONDALE TECHNICAL SERVICES, INC.
By /s/ B. L. HICKS
---------------
B. L. Hicks
Title: Secretary/Treasurer
Dated: September 1, 1995
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Fourth Amendment and Consent to Revolving Credit
Agreement and acknowledges the continued validity, enforceability
and effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
CRAWFORD TECHNICAL SERVICES, INC.
By /s/ B. L. HICKS
---------------
B. L. Hicks
Title: Secretary/Treasurer
Dated: September 1, 1995
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Fourth Amendment and Consent to Revolving Credit
Agreement and acknowledges the continued validity, enforceability
and effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
GENCO INDUSTRIES, INC.
By /s/ B. L. HICKS
---------------
B. L. Hicks
Title: Secretary/Treasurer
Dated: September 1, 1995
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of February 9, 1995
(the "Guarantee"), the undersigned (the "Guarantor") guaranteed
to the Secured Parties (as defined therein), subject to the
terms, conditions and limitations set forth therein, the prompt
payment and performance of all of the Obligations (as defined
therein). The Guarantor consents to the Company's execution of
the foregoing Fourth Amendment and Consent to Revolving Credit
Agreement and acknowledges the continued validity, enforceability
and effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
AVONDALE PROPERTIES, INC.
By /s/ THOMAS M. KITCHEN
---------------------
Thomas M. Kitchen
Title: Vice President & Secretary
Dated: September 1, 1995
<PAGE>
By Subsidiary Guarantee dated as of February 9, 1995
(the "Guarantee"), the undersigned (the "Guarantor") guaranteed
to the Secured Parties (as defined therein), subject to the
terms, conditions and limitations set forth therein, the prompt
payment and performance of all of the Obligations (as defined
therein). The Guarantor consents to the Company's execution of
the foregoing Fourth Amendment and Consent to Revolving Credit
Agreement and acknowledges the continued validity, enforceability
and effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
AVONDALE LAND MANAGEMENT COMPANY,
a Louisiana general partnership
By Avondale Industries, Inc.,
a general partner
By /s/ THOMAS M. KITCHEN
---------------------
Name: Thomas M. Kitchen
Title: Vice President & CFO &
Secretary
By Avondale Properties, Inc.,
a general partner
By /s/ THOMAS M. KITCHEN
---------------------
Name: Thomas M. Kitchen
Title: Vice President & CFO &
Secretary
Dated: September 1, 1995
FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT
(this "Amendment") is entered into as of November 17, 1995, by
and among AVONDALE INDUSTRIES, INC., a Louisiana corporation (the
"Company"), the various financial institutions signatory hereto
(collectively, the "Banks," and, individually, a "Bank"), and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as LC
Issuer and as successor agent to BANK OF AMERICA ILLINOIS
(successor-in-interest to CONTINENTAL BANK), as agent for the
Banks (the "Agent"). Words and phrases having defined meanings
in the Credit Agreement referred to below shall have the same
respective meanings when used herein, unless otherwise expressly
defined herein.
WITNESSETH:
WHEREAS, the parties hereto have entered into a
Revolving Credit Agreement, dated as of May 10, 1994 as amended
by that certain First Amendment and Waiver to Revolving Credit
Agreement dated as of May 31, 1994, that certain Second Amendment
to Revolving Credit Agreement dated as of February 9, 1995, that
certain Third Amendment, Waiver and Consent to Revolving Credit
Agreement dated as of May 10, 1995 and that certain Fourth
Amendment and Consent to Revolving Credit Agreement dated as of
September 1, 1995 (collectively, the "Existing Agreement" and as
amended by this Amendment, the "Credit Agreement"), relating to a
revolving credit facility in an amount not to exceed $42,500,000
for the Company's ongoing working capital and general corporate
needs; and
WHEREAS, the Company has requested that the Banks agree
to certain amendments and modifications to the terms of the
Existing Agreement;
NOW THEREFORE, in consideration of the premises and the
mutual agreements set forth herein and for other consideration
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows;
1. Amendments to the Existing Agreement. Subject to
and conditioned upon the fulfillment of each of the conditions
precedent set forth in Section 2 hereof, the Existing Agreement
is hereby amended as follows:
(a) Section 1.1 of the Existing Agreement is hereby
amended to delete the definition of Applicable Margin set forth
therein and to insert the following therefor:
"Applicable Margin" shall mean in respect of any
Eurodollar Rate Loan, one and one-half percent (1.5%).
(b) Section 1.1 of the Existing Agreement is hereby
further amended to delete clause (iii) of the definition of Cash
Equivalent Investments and to insert the following therefor
<PAGE>
(iii) repurchase agreements or reverse repurchase
agreements with terms of not more than thirty (30) days
from the date acquired, for securities of the type
described in clause (i) above and entered into only
with commercial banks having the qualifications
described in clause (ii) above;
(c) Section 1.1 of the Existing Agreement is hereby
amended to delete clause (i) of the definition of Eligible Billed
Commercial Receivables thereof in its entirety and to insert the
following therefor:
(i) with respect to such Account, no Account Debtor is
(i) incorporated in or primarily conducting
business in any jurisdiction located outside the United
States unless (A) such sale is either on an irrevocable
letter of credit acceptable to the Agent or acceptance
terms acceptable to the Agent or (B) such Account and
the related Account Debtor is otherwise approved by the
Agent in writing; provided that, the provisions of this
clause (i) shall not apply (1) to the extent that such
Account Debtor is British Petroleum or any of its
Subsidiaries to the extent such Account is guaranteed
by British Petroleum, or Holland America or any of its
Subsidiaries to the extent such Account is guaranteed
by Holland America or (2) to Primorsk Shipping
Corporation (or an Affiliate thereof) with respect to
the Primorsk Tanker Accounts to the extent, and only to
the extent, that amounts are either on deposit with
MARAD or guaranteed by MARAD and available for
disbursement to pay such Accounts and no event has
occurred or condition exists which allows MARAD not to
disburse, or not to authorize disbursement of, such
amounts in payment of such Accounts, or which allows a
third party lender not to disburse such amounts in
payment of such Accounts
(ii) an Affiliate of the Company or any of its
Subsidiaries,
(iii) a foreign government or any agency,
department or instrumentality thereof unless such sale
is on an irrevocable letter of credit acceptable to the
Agent or acceptance terms acceptable to the Agent;
provided that, the provisions of this clause (iii)
shall not apply to Primorsk Shipping Corporation (or an
Affiliate thereof) with respect to the Primorsk Tanker
Accounts to the extent, and only to the extent, that
amounts are either on deposit with MARAD or guaranteed
by MARAD and available for disbursement to pay such
Accounts and no event has occurred or condition exists
which allows MARAD not to disburse, or authorize the
disbursement of, such amounts in payment of such
Accounts, or which allows a third party lender not to
disburse such amounts in payment of such Accounts,
(iv) the subject of any reorganization,
bankruptcy, debt arrangement, receivership,
<PAGE>
custodianship, insolvency or other case or proceeding
under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding (and
such Account Debtor has not become insolvent or
generally failed to pay, or admitted in writing its
inability or unwillingness to pay, debts as they become
due), or
(v) an agency, department or instrumentality of
the United States or any state or local governmental
authority in the United States;
(d) Section 1.1 of the Existing Agreement is hereby
further amended to delete the definition of Letter of Credit
Commission set forth therein and to insert the following
therefor:
"Letter of Credit Commission" shall mean seven-
eighths percent (0.875%) per annum.
(e) Section 1.1 of the Existing Agreement is hereby
amended to add the following definition thereto in appropriate
alphabetical order:
"Primorsk Tanker Accounts" means the Accounts
owing to the Company by Primorsk Shipping Corporation (or an
Affiliate thereof) in connection with Company's construction
of up to seven 42,000 ton tankers for an aggregate purchase
price equal to approximately $320 million pursuant to the
terms of that certain contract dated August 7, 1995 between
the Company and Primorsk Shipping Corporation, the
construction of which is to be financed by MARAD.
(f) Section 2.6 of the Existing Agreement is hereby
amended by deleting the first sentence thereof in its entirety
and inserting the following therefor:
The Company may, from time to time, on any Business Day,
prepay the Base Rate Loans, in whole or in part, without
premium or penalty, upon irrevocable written notice to the
Agent by the Company no later than 10:00 a.m. Chicago time
on the date of such prepayment which notice shall specify
the date and amount of the prepayment.
(g) Section 6.2(e) of the Existing Agreement is hereby
amended by deleting the phrase "within 90 days" set forth therein
and inserting the phrase "within 95 days" therefor.
(h) Section 6.9 of the Existing Agreement is hereby
amended to delete the terms thereof in their entirety and to
insert the following therefor:
6.9 [Intentionally Omitted.]
2. Conditions Precedent to Effectiveness of
Amendments and Consent. The amendments and modifications set
forth in Section 1 hereof shall become effective upon, and are
expressly conditioned upon, the fulfillment of each of the
following conditions precedent on or prior to December 1, 1995:
<PAGE>
(a) Amendment. The Agent shall have received this
Amendment, duly executed and delivered by an authorized officer
of the Company and each of the Banks.
(b) Subsidiary Guarantor Consent. The Agent shall
have received (with a copy for each of the Banks) from each of
the Subsidiary Guarantors a reaffirmation of the Subsidiary
Guarantee executed by it in the form attached hereto.
(c) Material Adverse Change. In the opinion of the
Banks (as evidenced by their execution of this Amendment), no
event or condition shall have occurred or exist which could
reasonably be expected to have a Material Adverse Effect.
(d) Legal Opinion. The Agent shall have received the
favorable opinion of Jones, Walker, Waechter, Poitevent, Carrere
& Denegre, Louisiana counsel to the Company, addressed to the
Agent, the LC Issuer and the Banks in form and substance
satisfactory to the Agent and its counsel.
(e) Other Documents. The Agent shall have received
such other documents, instruments and agreements as it shall have
reasonably requested in connection with the transactions
contemplated by this Amendment.
3. Additional Condition to Eligibility of the Primorsk
Tanker Accounts. The Company, the Agent and the Banks agree that
the Primorsk Tanker Accounts shall not constitute Eligible Billed
Commercial Receivables unless and until the documentation
relating to the financing of such Accounts is reviewed and
consented to by Bank of America Illinois (in its capacity as a
Bank), which consent is hereby authorized by each of, and may be
given without further direction from any of, the other Banks.
4. Representations, Warranties and Covenants. In
order to induce the Agent and the Banks to enter into this
Amendment, the Company hereby represents, warrants and covenants
to the Agent and the Banks as follows:
(a) The execution, delivery and performance by
the Company of this Amendment (i) are within the Company's
corporate powers, (ii) have been duly authorized by all
necessary corporate action, (iii) require no action by or in
respect of, or filing with, any governmental body, agency or
official, (iv) do not contravene, or constitute a default
under, any provision of any applicable law, statute,
ordinance, regulation, rule, order or other governmental
restriction or of the Certificate or Articles of
Incorporation or By-Laws of the Company, (v) do not
contravene, or constitute a default under, any agreement,
judgment, injunction, order, decree, indenture, contract,
lease, instrument or other commitment to which the Company
is a party or by which the Company or any of its assets are
bound and (vi) will not result in the creation or imposition
of any Lien upon any asset of the Company under any existing
indenture, mortgage, deed of trust, loan or credit agreement
or other agreement or instrument to which the Company is a
party or by which it or any of its assets may be bound or
<PAGE>
affected.
(b) This Amendment and the Credit Agreement are
the legal, valid and binding obligations of the Company, and
are enforceable against the Company in accordance with their
terms.
(c) The representations and warranties contained
in the Credit Agreement and the other Loan Documents are
true and correct in all material respects on and as of the
date hereof as though made on the date hereof, except to the
extent that such representations expressly relate solely to
an earlier date (in which case such representations and
warranties were true and accurate on and as of such earlier
date).
(d) No Default or Event of Default has occurred
and is continuing.
5. Reference to and Effect Upon the Credit Agreement.
Upon the effectiveness of this Amendment, each reference in the
Existing Agreement to "the Agreement", "hereunder", "hereof",
"herein", or words of like import, shall mean and be a reference
to the Credit Agreement, as amended hereby and each reference to
the Existing Agreement in any other Loan Document shall mean and
be a reference to the Credit Agreement, as amended hereby.
6. Reaffirmation; Expenses. The Company hereby
reaffirms to the Agent and each of the Banks that, except as
modified hereby, the Credit Agreement and all of the Loan
Documents remain in full force and effect and have not been
otherwise waived, modified or amended. Except as expressly
modified hereby, all of the terms and conditions of the Credit
Agreement shall remain unaltered and in full force and effect.
The Company acknowledges that all reasonable legal fees and
expenses of the Agent related to this Amendment shall be paid by
the Company.
7. Confirmation of Collateral Documents. The Company
hereby (i) ratifies and confirms its obligations under the
Collateral Documents and acknowledges and agrees that the
Collateral Documents to which the Company is a party are the
legal, valid and binding obligations of the Company, enforceable
against it in accordance with their terms; and (ii) agrees that
the Obligations (for purposes of each of such Collateral
Documents) shall include, without limitation, the Obligations
under and as defined in the Credit Agreement as amended by this
Amendment.
8. Choice of Law. THIS AMENDMENT SHALL BE GOVERNED
BY AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ILLINOIS
AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANY,
THE SUBSIDIARIES, THE AGENT AND THE BANKS IN CONNECTION WITH THIS
AMENDMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS
AND DECISIONS OF THE STATE OF ILLINOIS.
<PAGE>
9. Counterparts. This Amendment may be executed in
one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument. One or more counterparts of this Amendment may
be delivered by telecopier, and if so delivered shall be deemed
to be delivered with the intention that they shall have the same
effect as an original counterpart hereof. Any party delivering
any such counterpart by telecopy shall promptly forward to the
Agent an original counterpart hereof.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
their duly authorized officers to execute and deliver this
Agreement as of the date first above written.
AVONDALE INDUSTRIES, INC.
By: /s/ THOMAS M. KITCHEN
---------------------
Name: Thomas M. Kitchen
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By: /s/ DANIEL G. FARTHING
----------------------
Name: Daniel G. Farthing
Title: Vice President
THE BANKS:
BANK OF AMERICA ILLINOIS, successor-
in-interest to CONTINENTAL BANK, as
a Bank and as LC Issuer
By: /s/ W. THOMAS BARNETT
---------------------
Name: W. Thomas Barnett
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as LC Issuer
By: /s/ W. THOMAS BARNETT
---------------------
Name: Thomas Barnett
Title: Vice President
WHITNEY NATIONAL BANK
By: /s/ ELMER H. HEMPHILL, JR.
--------------------------
Name: Elmer H. Hemphill, Jr.
Title: Senior Vice President
FIRST INTERSTATE BANK OF TEXAS,N.A.
By: /s/ RANDALL L. WALKER
---------------------
Name: Randall L. Walker
Title: Senior Vice President
<PAGE>
FIRST NATIONAL BANK OF COMMERCE
By: /s/ DAVID A. DOHERTY
--------------------
Name: David A. Doherty
Title: Vice President
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Fifth Amendment to Revolving Credit Agreement and
acknowledges the continued validity, enforceability and
effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
AVONDALE GULFPORT MARINE, INC.
By /s/ THOMAS M. KITCHEN
----------------------
Title: Vice President
Dated: November 17, 1995
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Fifth Amendment to Revolving Credit Agreement and
acknowledges the continued validity, enforceability and
effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
AVONDALE TECHNICAL SERVICES, INC.
By /s/ THOMAS M. KITCHEN
---------------------
Title: President
Dated: November 17, 1995
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Fifth Amendment to Revolving Credit Agreement and
acknowledges the continued validity, enforceability and
effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
CRAWFORD TECHNICAL SERVICES, INC.
By /s/ B. L. HICKS
---------------
B. L. Hicks
Title: Secretary
Dated: November 17, 1995
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Fifth Amendment to Revolving Credit Agreement and
acknowledges the continued validity, enforceability and
effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
GENCO INDUSTRIES, INC.
By /s/ B. L. HICKS
---------------
B. L. Hicks
Title: Secretary
Dated: November 17, 1995
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of February 9, 1995
(the "Guarantee"), the undersigned (the "Guarantor") guaranteed
to the Secured Parties (as defined therein), subject to the
terms, conditions and limitations set forth therein, the prompt
payment and performance of all of the Obligations (as defined
therein). The Guarantor consents to the Company's execution of
the foregoing Fifth Amendment to Revolving Credit Agreement and
acknowledges the continued validity, enforceability and
effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
AVONDALE PROPERTIES, INC.
By /s/ THOMAS M. KITCHEN
----------------------
Title: Vice President
Dated: November 17, 1995
<PAGE>
By Subsidiary Guarantee dated as of February 9, 1995
(the "Guarantee"), the undersigned (the "Guarantor") guaranteed
to the Secured Parties (as defined therein), subject to the
terms, conditions and limitations set forth therein, the prompt
payment and performance of all of the Obligations (as defined
therein). The Guarantor consents to the Company's execution of
the foregoing Fifth Amendment to Revolving Credit Agreement and
acknowledges the continued validity, enforceability and
effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest thereon
and all expenses in connection therewith.
AVONDALE LAND MANAGEMENT COMPANY,
a Louisiana general partnership
By Avondale Industries, Inc.,
a general partner
By /s/ THOMAS M. KITCHEN
---------------------
Name: Thomas M. Kitchen
Title: Vice President & CFO
By Avondale Properties, Inc.,
a general partner
By /s/ THOMAS M. KITCHEN
---------------------
Name: Thomas M. Kitchen
Title: Vice President & CFO
Dated: November 17, 1995
Avondale Properties, Inc.
Avondale Services Corporation
Avondale Transportation Company, Inc.
Avondale Shipyard of Texas, Inc.
Avondale Construction Management, Inc.
Avondale Gulfport Marine, Inc.
Avondale Industries of New York, Inc.
Avondale Enterprises, Inc.
Avondale Technical Services, Inc.
Crawford Technical Services, Inc.
Genco Industries, Inc.
M & D Steel Fabrication, Inc.
AAA Quality Construction, Inc.
Genco Industries of Lufkin, Inc.
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 33-65267 of Avondale Industries, Inc. on Form S-3 and in
Registration Statement No. 33-31984 of Avondale Industries, Inc. on
Forms S-8 and S-3 of our report dated January 19, 1996, appearing in
this Annual Report on Form 10-K of Avondale Industries, Inc. for the
year ended December 31, 1995.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
January 24, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AVONDALE
INDUSTRIES, INC.'S ANNUAL REPORT FILED ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 38,524
<SECURITIES> 0
<RECEIVABLES> 93,184
<ALLOWANCES> 0
<INVENTORY> 15,289
<CURRENT-ASSETS> 173,593
<PP&E> 251,699
<DEPRECIATION> (121,661)
<TOTAL-ASSETS> 316,727
<CURRENT-LIABILITIES> 92,605
<BONDS> 58,593
0
0
<COMMON> 15,927
<OTHER-SE> 135,131
<TOTAL-LIABILITY-AND-EQUITY> 316,727
<SALES> 576,308
<TOTAL-REVENUES> 576,308
<CGS> 517,637
<TOTAL-COSTS> 517,637
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,842
<INCOME-PRETAX> 23,780
<INCOME-TAX> (4,400)
<INCOME-CONTINUING> 28,180
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,180
<EPS-PRIMARY> 1.95
<EPS-DILUTED> 1.95
</TABLE>
SUBSCRIPTION TO COMBUSTION LITIGATION PRELIMINARY
SETTLEMENT AGREEMENT SETTING FORTH SPECIFIC TERMS OF
THE SETTLEMENT BETWEEN AVONDALE AND THE PLAINTIFF CLASS
1. Avondale Industries, Inc. ("Avondale") has agreed to fully and
completely settle all claims by the Plaintiff Class for the sum of $24,000,000,
plus interest at the rate of 8% per annum from date of entry of judgment until
paid, payable as detailed below and subject to the limitations described below.
For purposes of this addendum and the Preliminary Settlement Agreement ("PSA")
itself, the term "Related Parties" shall mean any and all of Avondale's
representatives, agents, parent or subsidiary companies or corporations,
affiliated companies or corporations as defined in 15 U.S.C. 80a-2, all brother
or sister corporations (that is, all such entities that share a common parent
with Avondale), predecessors in interest, successors in interest, and all of
their employees, officers, shareholders, and directors, and any other person,
firm, corporation or entity not heretofore named in this proceeding as a
defendant or third-party defendant for which Avondale may be liable concerning
the subject matter of the Combustion Litigation. The term Related Parties shall
not include any party presently named as a defendant or third party defendant in
these proceedings who is not a Compromising Party. Notwithstanding the
definition of "Related Parties" contained in the PSA, for purposes of the PSA
(insofar as it pertains to Avondale) and this addendum, the term "Related
Parties" shall not include the insurers of Avondale or its Related Parties.
By execution of this Subscription and attachment to the Preliminary
Settlement Agreement, Avondale stipulates to entry of judgment ("the judgment")
granting judgment in favor of the Plaintiff Class and against Avondale
Industries, Inc., in the sum of $24,000,000, plus interest at the rate of 8% per
annum from date of entry of judgment until paid, subject to the terms of the
PSA, all exhibits to the PSA, and all judgments or orders of any Court in the
Combustion Litigation approving and incorporating the PSA and subject to the
terms of this Subscription, and in accordance with the following terms:
A. Avondale will pay the sum of $4,000,000 cash or check into the
Settlement Fund established by the PSA within thirty (30) days of
the Court's preliminary approval thereof.
B. Avondale will execute a note in favor of the Plaintiff Class,
payable through the Settlement Fund and in the form attached
hereto, in the sum of $2,000,000 bearing interest at the rate of 8%
per annum, due 18 months from the Court's preliminary
approval of the PSA, to be delivered to the escrow agent of the
Settlement Fund within thirty (30) days of the preliminary approval
of the PSA.
C. Avondale assigns, pledges and transfers to the Plaintiff Class all of
Avondale's rights, titles and interests in the proceeds of any and all
primary, excess and umbrella insurance policies that may provide
coverage to Avondale for the tort claims asserted in the Combustion
Litigation. Except as specifically set forth in subparagraph D(2) or
D(3) below, the balance of the $24,000,000, plus interest at the rate
of 8% per annum from date of entry of judgment until paid, shall be
paid and payable solely out of the proceeds of the litigation against
Avondale's insurers connected to the tort claims made in the
Combustion Litigation, whether by way of the assignment, pledge and
transfer contained herein, the direct action that has been filed by
the PSC and the Plaintiff Class, or otherwise (hereinafter sometimes
<PAGE>
referred to as "the litigation against Avondale's insurers"). The
Plaintiff Class will be paid first, through the escrow agent of the
Settlement Fund, all amounts recovered from Avondale's insurers
(whether by way of the principal judgment or interest thereon) up to
and including the sum of $18,000,000 plus the interest carry as
defined below, and any recovery from Avondale's insurers (whether by
way of the principal judgment or interest thereon) in excess of $18
million plus the interest carry as defined below will be paid 50% to
the Plaintiff Class, through the escrow agent of the Settlement Fund,
and 50% to Avondale. Except as specifically provided herein, neither
Avondale, the Related Parties to Avondale, nor the Plaintiff Class
will be liable to the others for interest on the obligations set forth
in this subparagraph C. The term "interest carry" shall mean an amount
equal to interest computed at the rate of 8% per annum on the sum of
$6 million, with said interest computed from the date of preliminary
approval of the PSA.
Nothing in this subscription shall affect, and Avondale expressly
retains and reserves all rights, titles and interests in and to the
claims, causes of action and proceeds of any and all of these policies
that may provide coverage to Avondale for the costs incurred by
Avondale associated with the remediation of the Combustion Site
and/or the CERCLA cost recovery claims asserted in the Combustion
Litigation.
Neither Avondale nor the Related Parties to Avondale shall have any
responsibility for payment of any costs and/or legal fees associated
with the litigation against Avondale's insurers incurred subsequent to
the date of the Preliminary Settlement Agreement. However, nothing
herein shall cause the PSC or the Plaintiff Class to become liable for
the payment of legal fees incurred independently and exclusively by
Avondale in pursuit of its right to recover for the costs incurred by
Avondale associated with the remediation of the Combustion Site and/or
CERCLA cost recovery claims asserted in the Combustion Litigation.
D. (1) Despite the assignment, pledge and transfer by Avondale to the
Plaintiff Class of its rights to the proceeds of its applicable
insurance policies for the tort claims, Avondale nevertheless remains
liable for the remaining sum of $18,000,000 necessary to satisfy the
full judgment of $24,000,000. However, in consideration of the above
agreements and promises, it is stipulated and covenanted that the
Plaintiff Class will not execute on the judgement against Avondale and
will not execute on the judgment against any of the Related Parties to
Avondale if the sums detailed in subparagraphs 1.A. and 1.B. above are
paid and if the litigation against Avondale's insurers results in a
judgment (including judicial interest) or settlement equal to or
greater than $6,000,000 plus interest at the rate of 8% per annum from
the date of preliminary approval of the PSA, in which event neither
the PSC nor the Plaintiff Class shall execute on its judgment. Any
settlement with Avondale's insurers related to the claims made in the
litigation against Avondale's insurers or any other settlement with
Avondale's insurers related to the tort claims asserted in the
Combustion Litigation that is in excess of $6,000,000 plus interest at
the rate of 8% per annum from the date of preliminary approval of the
PSA may be entered into at the sole discretion of the Plaintiffs'
Steering Committee and the Plaintiff Class without Avondale's prior
consent or agreement, and Avondale grants to the Plaintiffs' Steering
Committee and the Plaintiff Class full authority and consent to enter
into any such settlement with its insurers.
<PAGE>
(2) If the litigation against Avondale's insurers results in a
judgment (including judicial interest) of less than $6,000,000 plus
interest at the rate of 8% per annum from the date of preliminary
approval of the PSA, then he Plaintiff Class may execute on its
judgment only to the extent necessary to obligate Avondale to pay the
Plaintiff Class, in addition to those sums set forth in Subparagraphs
1.A. and 1.B. above, the difference between $6,000,000 plus interest
at the rate of 8% per annum from the date of preliminary approval of
the PSA and the amount of the judgment (including judicial interest).
(3) If the litigation against Avondale's insurers results in a
settlement for less than $6,000,000 plus interest at the rate of 8%
per annum from the date of preliminary approval of the PSA, which
settlement may not be entered into without Avondale's expressly stated
written approval, then the Plaintiff Class may execute on its judgment
only to the extent necessary to obligate Avondale to pay the Plaintiff
Class the difference between $6,000,000 plus interest at the rate of
8% per annum from the date of preliminary approval of the PSA and the
amount of the settlement. If the Plaintiff Class settles the
litigation against Avondale's insurers for less than $6,000,000 plus
interest at the rate of 8% per annum from the date of preliminary
approval of the PSA without Avondale's expressly stated written
approval, then the Plaintiff Class may not execute on the judgment,
and neither Avondale nor the Related Parties to Avondale shall have
any further obligation to the Plaintiff Class.
(4) In no event shall the PSC or the Plaintiff Class execute on the
judgment without giving Avondale reasonable advance notice of its
intention to do so.
E. It is understood and agreed that Avondale shall have no personal
obligation to fund the payment of any amount to the Plaintiff Class
other than the amounts specifically set forth in subparagraphs 1.A.,
1.B., and, if required by the terms of this subscription, subparagraph
1.D.(2) or 1.D.(3), the intention of the covenant by the PSC and the
Plaintiff Class not to execute on the judgment being that, while
Avondale remains liable for all amounts, it will have no personal
obligation to pay (and its assets, other than the insurance rights
specifically assigned, transferred and pledged herein, shall not be
used to satisfy or be subject to execution for satisfaction of) any
amount in excess of the amounts specifically set forth in
subparagraphs 1.A., 1.B., and, if required by the terms of this
subscription, subparagraph 1.D.(2) or 1.D.(3). That is, Avondale shall
not be obligated, either conditionally or unconditionally, to fund
payments to the Plaintiff Class other than the $4,000,000 cash payment
set forth in subparagraph 1.A., the $2,000,000 note set forth in
subparagraph 1.B., and the conditional $6,000,000. Any other payment
obligations to the Plaintiff Class shall be payable solely out of the
proceeds of a recovery from Avondale's insurers for the tort claims,
with no further contribution from Avondale. More specifically, without
limitation, Avondale shall not be obligated to pay for or fill in any
gaps in the excess insurance coverage, and the Class and the Class
members will not attempt to execute or to collect any judgment or any
portion of any judgment against Avondale's insurers to the extent and
in the manner that the execution or collection of the judgment or any
portion thereof would create in the judgment debtor any right to
recover from Avondale or its Related Parties in such a manner as to
cause Avondale to fund any amount in excess of the specific funding
<PAGE>
obligations set forth in subparagraphs 1.A., 1.B., and, if required
by the terms of this subscription, subparagraph 1.D.(2) or 1.D.(3).
2. In furtherance of this agreement and after a diligent, good faith
review of its records and other information reasonably available to it, Avondale
has by separate correspondence identified to the PSC the insurance policies that
Avondale believes were in force and effect during the time periods pertinent to
the Combustion Litigation. However, the identification and listing of those
policies, or the failure to list or identify any policy or policies, is not
intended to modify or limit the broad language of the assignment contained
herein. Avondale makes no warranty or representation whatsoever as to the
nature, extent or amount of the coverage provided by any policies, it being
expressly understood and agreed that the Plaintiff Class and the PSC have relied
exclusively upon the analysis and opinions of their own attorneys and experts to
evaluate the coverage provided by the listed policies.
3. Avondale warrants that it has duly placed its insurers on notice of
the claims of the Plaintiff Class and has placed the insurers on notice of the
proposed settlement, and has recommended that the settlement of $24,000,000,
plus interest at the rate of 8% per annum from date of entry of judgment until
paid, is a fair, reasonable and just settlement, but that the insurers have
declined to participate in settlement.
4. Now in further consideration of this subscription to the Preliminary
Settlement Agreement, Avondale hereby assigns, pledges and transfers to the
Plaintiff Class all of its rights, titles and interests in and to the proceeds
which may be derived from any policies of insurance in Avondale's favor for the
time periods in question with respect to the tort claims asserted in the
Combustion Litigation and assigns, pledges and transfers to the Plaintiff Class
all further claims, demands and causes of action of whatever nature or kind
which Avondale has or may have against its insurers (primary, excess or
umbrella) arising out of or related to or connected with the tort claims
asserted in the Combustion Litigation and/or the referenced policies of
insurance, including claims for penalties, interest and attorney's fees, but
expressly excluding any claims related to or arising out of the costs incurred
by Avondale associated with the remediation of the Combustion Site and/or CERCLA
or LEQA cost recovery litigation related thereto.
5. In light of the insurers' refusal to provide coverage and/or to
participate in settlement, it may become necessary to file declaratory judgment
actions, third party claims and/or other suits or claims against the insurers.
It is agreed that the prosecution of such a declaratory judgment action, third
party claim or other claim or suit against Avondale's insurers, whether in the
United States District Court for the Western District of Louisiana, or in any
other court or proceeding, may be pursued in the name of Avondale, at the cost
of the Plaintiff Class. Avondale agrees to provide reasonable cooperation in the
pursuit of such claims, including but not limited to making witnesses available,
providing documents and otherwise assisting and consulting with the Plaintiffs'
Steering Committee. The Plaintiffs' Steering Committee agrees that it will
consult reasonably with Avondale with regard to strategy decisions affecting the
course of any litigation pursued in the name of Avondale.
Avondale agrees that subject to prior notification to it, the
Plaintiff Class may file and pursue any such tort claims or suits against
Avondale's insurers in the name of Avondale. To the extent that such
representation of Avondale by the Plaintiffs' Steering Committee may present an
actual or potential conflict of interest, the parties hereto expressly waive any
objection to any such conflict of interest.
<PAGE>
6. In the event of a settlement with Avondale's insurers made in
accordance with the terms of this subscription, Avondale agrees to release and
dismiss with prejudice its tort claims and suits against its insurers and, in
order to effect such settlement, Avondale agrees to execute any necessary
settlement agreements, receipts, releases and motions of dismissal that
reasonably may be necessary to effectuate the terms of the settlement.
Except as specifically set forth in this subscription and subject to the other
terms of this subscription, any and all proceeds obtained through such
settlement with Avondale's insurers connected with the tort claims asserted in
the Combustion Litigation and resulting from the litigation against Avondale's
insurers (except as set forth below) shall be the exclusive property of the
Plaintiff Class, as is provided in the above pledge, assignment and transfer of
its insurance proceeds by Avondale to the Plaintiff Class. Settlement of the
tort claims by the Plaintiff Class shall not affect Avondale's CERCLA cost
recovery claims in any manner and the proceeds of any settlement of the CERCLA
cost recovery claims shall be the exclusive property of Avondale, as is provided
in subparagraph 1.C.
7. Avondale and the Plaintiffs' Steering Committee hereby warrant, agree and
stipulate that this subscription to the Preliminary Settlement Agreement is in
fact a good faith settlement.
8. The PSC and the Plaintiff Class agree to diligently pursue the litigation
contemplated by this subscription, and agree that they shall neither move
to dismiss (except in connection with a settlement made in accordance with the
foregoing) or abandon such litigation without first notifying Avondale and
obtaining Avondale's written consent. If, after receiving such notice Avondale
so requests, the Plaintiff Class shall assign, pledge, and transfer to Avondale
the rights, titles and interests assigned herein by Avondale to the Plaintiff
Class.
9. Provided that Avondale makes the payments set forth in subparagraphs 1.A.
and 1.B. above, neither the PSC nor the Class shall record or cause to be
recorded any judgment contemplated by this subscription or by the PSA in such a
manner as to create a mortgage or lien affecting Avondale or its Related Parties
or any of their respective properties or other assets. If, notwithstanding this
provision, such a mortgage or lien is created, the Plaintiff Class is
irrevocably obligated to execute such releases or other instruments as may be
prepared and presented by Avondale or its Related Parties in order to release or
terminate such mortgage or lien, and the Plaintiff Class hereby irrevocably
appoints Liaison Counsel for the PSC, Calvin C.Fayard, Jr., or any successor
Liaison Counsel for the PSC that may be appointed by the Court, as agent and
attorney for the PSC to execute such releases or other instruments.
10. Upon request of Avondale, after satisfaction of the obligations
undertaken by Avondale, whether by payment or by way of settlement with or
judgment against Avondale's insurers, as set forth in this subscription, the
PSC, through its Liaison Counsel, Calvin C. Fayard, Jr., or any successor
Liaison Counsel for the PSC that may be appointed by the Court, shall
execute a motion for issuance by the Clerk of Court of a Satisfaction of
Judgment with regard to Avondale.
<PAGE>
This subscription to the Combustion Litigation Preliminary Settlement
Agreement has been executed on the date indicated below by the duly authorized
representative of Avondale Industries, Inc. subject to and in accordance with
the terms and conditions of the Preliminary Settlement Agreement.
AVONDALE INDUSTRIES, INC.
BY: /s/ R. DEAN CHURCH
------------------
R. Dean Church
Date: 7/21/95
----------------
This subscription to the Combustion Litigation Preliminary Settlement
Agreement is accepted subject to and in accordance with the Preliminary
Settlement Agreement.
THE PLAINTIFFS' STEERING COMMITTEE
BY: /s/ CALVIN C. FAYARD, JR.
-------------------------
Calvin C. Fayard, Jr.
Date: July 24, 1995
-----------------------
