FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark One)
[ X ]Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _______________________
to________________________
For Quarter Ended March 31, 1996
Commission File Number 0-16572
AVONDALE INDUSTRIES, INC.
Louisiana 39-1097012
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 50280, New Orleans, Louisiana 70150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 504/436-2121
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to file such filing requirements
for the past 90 days. YES X NO .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Class Outstanding at March 31, 1996
Common stock, par value $1.00 per share 14,464,175 shares
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AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I.Financial Information
Item 1.Financial Statements
Independent Accountants' Report
Consolidated Balance Sheets -
December 31, 1995 and March 31, 1996
Consolidated Statements of Operations -
Three Months Ended March 31, 1995 and 1996
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1995 and 1996
Notes to Consolidated Financial Statements
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II.Other Information
Item 1.Legal Proceedings
Item 2.Changes in Securities
Item 3.Defaults Upon Senior Securities
Item 4.Submission of Matters to a Vote of Security Holders
Item 5.Other Information
Item 6.Exhibits and Reports on Form 8-K
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
Avondale Industries, Inc.
We have reviewed the condensed consolidated financial statements of
Avondale Industries, Inc. and subsidiaries, as listed in the
accompanying index, as of March 31, 1996 and for the three-month
periods ended March 31, 1996 and 1995. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and of making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to such condensed consolidated financial
statements for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Avondale
Industries, Inc. and subsidiaries as of December 31, 1995, and the
related consolidated statements of operations, shareholders' equity,
and cash flows for the year then ended (not presented herein); and in
our report dated January 19, 1996, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1995 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from
which it has been derived.
DELOITTE & TOUCHE LLP
May 10, 1996
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(UNAUDITED)
December 31, March 31,
1995 1996
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<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 38,524 $ 64,366
Restricted short-term investments 383 189
Receivables (Note 2):
Accounts receivable........ 39,753 15,720
Contracts in progress...... 53,431 59,507
Inventories:
Goods held for sale........ 7,409 6,312
Materials and supplies..... 7,880 8,027
Deferred tax assets ......... 23,650 20,950
Prepaid expenses and
other current assets ....... 2,563 2,817
------- -------
Total current assets....... 173,593 177,888
------- -------
Property, Plant and Equipment:
Land......................... 9,161 9,161
Construction in progress..... 4,665 7,299
Buildings and improvements... 55,326 55,284
Machinery and equipment...... 182,547 183,018
------- -------
Total........................ 251,699 254,762
Less accumulated depreciation (121,661) (124,130)
------- -------
Property, plant and equipment - net 130,038 130,632
Goodwill - net................. 8,637 8,496
Funds held for construction.... 185
Other assets................... 4,274 4,402
------- -------
Total assets............... $ 316,727 $ 321,418
======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(UNAUDITED)
December 31, March 31,
1995 1996
----------- ---------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 5,062 $ 7,062
Accounts payable............. 65,517 62,858
Accrued employee compensation 10,777 12,483
Other........................ 11,249 12,492
------- -------
Total current liabilities 92,605 94,895
Long-term debt ................ 60,593 58,205
Other liabilities and deferred credits 12,471 12,524
Total liabilities............ 165,669 165,624
------- -------
Commitments and contingencies (Note 4)
Shareholders' Equity:
Common stock, $1.00 par value,
authorized 30,000,000 shares;
issued - 15,927,191 shares
in 1995 and 1996........... 15,927 15,927
Additional paid-in capital... 373,911 373,911
Accumulated deficit.......... (226,924) (222,188)
------- -------
Total...................... 162,914 167,650
Treasury stock (common: 1,463,016
shares in 1995 and 1996) at cost ( 11,856) ( 11,856)
------- -------
Total shareholders' equity... 151,058 155,794
------- -------
Total........................ $ 316,727 $ 321,418
======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
1995 1996
-------- --------
<S> <C> <C>
Net sales.................... $ 133,575 $ 156,496
Cost of sales................ 120,171 139,210
------- -------
Gross profit................. 13,404 17,286
Selling, general and
administrative expenses.... 7,663 9,033
------- -------
Income from operations....... 5,741 8,253
Interest expense............. ( 1,279) ( 1,386)
Other - net.................. 332 569
------- -------
Income before income taxes... 4,794 7,436
Income taxes ................ ( 1,750) ( 2,700)
------- -------
Net income................... $ 3,044 $ 4,736
======= =======
Net income per share of common stock $ 0.21 $ 0.33
======= =======
Weighted average number of
shares outstanding......... 14,464 14,464
======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(In thousands)
(UNAUDITED)
1995 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 3,044 $ 4,736
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities:
Depreciation and amortization.... 2,418 2,676
Deferred income taxes............ 1,750 2,700
Changes in operating assets
and liabilities:
Receivables.................... (12,917) 17,957
Inventories.................... 157 950
Prepaid expenses .............. 2,670 ( 254)
Accounts payable............... ( 4,746) ( 2,659)
Accrued employee compensation.. ( 1,162) 1,706
Other - net.................... 563 1,403
------- -------
Net Cash (Used for) Provided by
Operating Activities........... (8,223) 29,215
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............... (6,251) (3,179)
Change in restricted short-term
investments - net .............. (16,212) 194
------- -------
Net Cash Used for Investing Activities (22,463) (2,985)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term borrowings.... (478) (388)
Proceeds from long-term borrowings. 17,780 -
------- -------
Net Cash Provided by (Used for)
Financing Activities............. 17,302 (388)
------- -------
Net (decrease) increase
in cash and cash equivalents....... (13,384) 25,842
Cash and cash equivalents at
beginning of period................ 15,414 38,524
------- -------
Cash and cash equivalents
at end of period................... $ 2,030 $64,366
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest............................. $ 574 $ 176
======= =======
Income taxes paid.................... - $ 960
======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
include the accounts of Avondale Industries, Inc. and its wholly-
owned subsidiaries ("Avondale" or the "Company"). In the opinion
of the management of the Company, all adjustments (such
adjustments consisting only of a normal recurring nature)
necessary for a fair presentation of the operating results for
the interim periods presented have been included in the interim
financial statements. These interim financial statements should
be read in conjunction with the December 31, 1995 audited
financial statements and related notes filed on Form 10-K for the
year ended December 31, 1995 (the "1995 Form 10-K").
The financial statements required by Rule 10-01 of Regulation S-X
have been reviewed by independent public accountants as stated in
their report included herein.
2. RECEIVABLES
The following information presents the elements of receivables at
December 31, 1995 and March 31, 1996 (in thousands):
<TABLE>
1995 1996
------- -------
<S> <C> <C>
Long-term contracts:
U.S. Government:
Amounts billed.............. $ 30,151 $ 6,826
Unbilled costs and estimated
profits on contracts in
progress................. 41,119 52,976
------- -------
Total....................... 71,270 59,802
Commercial:
Amounts billed.............. 4,364 3,059
Unbilled costs and estimated
profits on contracts in
progress................. 12,312 6,531
------- -------
Total from long-term contracts 87,946 69,392
Trade and other current receivables 5,238 5,835
------- -------
Total............................. $ 93,184 $ 75,227
======= =======
</TABLE>
Unbilled costs and estimated profits on contracts in progress
were not billable to customers at the balance sheet dates under
terms of the respective contracts. As discussed in Note 2 of the
Company's Annual Report included in the 1995 Form 10-K, the
Company settled in December, 1995 its Request for Equitable
Adjustment ("Minehunter REA") filed with the U.S. Navy in
connection with the Company's contract to construct four MHC-51
Coastal Minehunters. As a result of this settlement, the
<PAGE>
Company in December 1995 submitted to the U.S. Navy invoices
totalling $30.7 million, the payment of which was received by the
Company by March 31, 1996.
3. FINANCING ARRANGEMENTS
In the first quarter of 1996 the Company reached an agreement to
extend to May 1998 the terms of its revolving credit agreement
with various financial institutions. There have been no
borrowings in 1996 under the revolving credit agreement.
4. COMMITMENTS AND CONTINGENCIES
Litigation
As discussed in further detail in Note 10 of the Company's Annual
Report included in the 1995 Form 10-K, the Company was advised in
1986 that it was a potentially responsible party ("PRP") with
respect to an oil reclamation site operated by an unaffiliated
company in Walker, Louisiana. To date, the Company and certain
of the other PRPs for the site have funded the cost of the site's
remediation under a preliminary cost-sharing agreement. At March
31, 1996, clean-up costs totalled $17.7 million, of which the
Company has contributed $3.7 million. Additional work scheduled
for the site includes the completion of studies in 1996, and if
required by the results of these studies, subsequent remediation.
Following completion of such 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, such settlement subject
to appeal following the issuance of the final written order. In
the first quarter of 1996, the Federal District Court issued the
written order confirming its earlier bench ruling. The period
for filing appeals expired on April 7, 1996 at which time no
appeals had been filed to the court approved settlement. Under
the terms of the court approved settlement 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
<PAGE>
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 numerous other lawsuits and proceedings arising in
the ordinary course of business, some of which involve
substantial damage claims.
The Company has established accruals as appropriate for certain
of the matters discussed above. While the ultimate outcome of
lawsuits and proceedings against the Company cannot be predicted
with certainty, management believes, based on current facts and
circumstances and after review with counsel, that the eventual
resolution of these matters will not 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 such as to secure the
payment of workers' compensation and insurance obligations.
Additionally, under certain contracts the Company may be required
to provide letters of credit to secure certain performance
obligations of the Company thereunder. Outstanding letters of
credit relating to these business activities amounted to
approximately $5.7 million at March 31, 1996; the Company issued
an additional $5.0 million letter of credit in early April 1996.
Outstanding letters of credit amounted to approximately $24.5
million at December 31, 1995.
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction with the
Company's unaudited consolidated financial statements for the periods
ended March 31, 1996 and 1995 and Management's Discussion and
Analysis of Financial Condition and Results of Operations included
under Item 7 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (the "1995 Form 10-K").
<PAGE>
Overview
The Company's operating results for the first quarter of 1996
continued the improvement shown in 1995. Net sales for the first
quarter of 1996 were 17% above the level in the prior year's first
quarter. Income before income taxes was 55% higher than the prior
year period while net income increased 56% over the first quarter of
1995.
The Company's backlog at March 31, 1996 was $1.3 billion exclusive of
unexercised options aggregating $485 million held by the U.S. Navy
for additional ship orders. Also not included in the backlog at
March 31, 1996 is a contract announced in the fourth quarter of 1995
for the construction of four 42,000 DWT product carriers. The
contract is subject to the receipt of a Title XI financing guarantee
from the U.S. Maritime Administration and to the satisfaction of
certain other conditions. Shortly after the end of the first
quarter of 1996, the Company announced that at the request of the
customer the delivery date of the four product carriers was extended
from 1998 to the year 2000.
During the first quarter of 1996, the Company delivered a third
Landing Ship Dock - Cargo Variant ("LSD-CV") and a MHC-51 Class
Coastal Minehunter ("MHC") to the U.S. Navy. Other planned U.S. Navy
deliveries for the rest of 1996 include a double-hulled T-AO Oiler,
representing the last of 16 built by the Company, and the third MHC
in the contract for four which was begun in 1989. Commercial
deliveries in 1996 are expected to include two of the four double-
hulled product carrier forebodies the Company is retrofitting and the
remainder of the series of 100 river hopper barges some of which were
delivered in the fourth quarter of 1995.
The Company continues to pursue the U.S. Navy's program for the LPD
17, the Navy's new class of amphibious transport dock vessel, through
its previously disclosed alliance formed with Bath Iron Works
Corporation, Hughes Aircraft Company and Intergraph Corporation. The
first construction contract award in what is anticipated to be a
multi-ship project is forecasted for the third quarter of 1996. If
the alliance is successful in securing the contract, Avondale would
be the prime contractor with ships constructed in both the Avondale
and Bath yards. Hughes Aircraft will be responsible for the total
ship system integration while the team will utilize Intergraph
equipment for the design and manufacture of the ship. The alliance
will be further strengthened by the technical staff of the Electric
Boat Division of General Dynamics Corporation which recently acquired
Bath Iron Works.
In addition to the LPD-17, there are several other anticipated U.S.
Navy programs that may offer shipbuilding opportunities to Avondale.
This would include 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 (a class of auxiliary vessels
designed to deliver fuel, ammunition and other supplies to the U.S
Navy fleet with capabilities similar to the T-AOs currently under
construction at Avondale), and the SC-21, which represents the next
generation of surface combatant vessels. With a substantial portion
of Avondale's current firm backlog scheduled for completion by 1998,
it is important that Avondale be a successful bidder for all or a
substantial portion of the LPD-17 vessels or other U.S. Navy or
<PAGE>
commercial work if it is to maintain its current level of
shipbuilding activity beyond 1998.
As previously disclosed, certain of the Company's operations were
closed in 1994 upon the completion of their respective contracts.
Two of these facilities are currently offered for sale while the
Company continues to seek alternative uses for these facilities.
With respect to environmental matters, the Company currently is not
aware of any material liabilities to be incurred for site
restoration, post closure, monitoring commitments, or other exit
costs that may occur or result from the sale, disposal or abandonment
of any of these properties.
Results of Operations
The Company recorded net income of $4.7 million, or $0.33 per share,
for the first quarter of 1996 compared to $3.0 million, or $0.21 per
share, for the first quarter of 1995, representing a 56% increase in
net income over the first quarter of 1995.
The Company's operating results in the current period primarily
reflect operating profits recognized on the LSD-CV 52 and seven T-AO
contracts. The Company also recorded a partial reversal of a
previously recognized loss which was recorded in prior years on the
contract to construct three LSD-CVs and a provision for a loss on the
contract to construct river hopper barges representing costs incurred
in connection with the Company's entry into this competitive market.
The Company has experienced a higher than expected level of cost at
the inception of this contract, and, as a result, recorded the
foregoing provision. Also contributing to the 1996 operating results
were profits recorded by the Company's marine repair, wholesale steel
and modular steel construction operations.
Net sales for the first quarter of 1996 reflected an increase of
$22.9 million, or 17%, compared to the same period in the prior year.
The increase was primarily due to increased net sales revenues
recorded on the contracts to construct the Strategic Sealift ships,
the Coast Guard Icebreaker ship, the forebodies for the four product
carriers and the contract to construct the river hopper barges.
These increases were partially offset by reduced net sales revenues
recorded on the contracts to construct the LSD-CV 52, three LSD-CVs
and the seven T-AOs, as these contracts are in the advanced stages of
completion, and by reduced net sales revenues recorded on the paddle-
wheeled gaming vessels (the last of which was delivered in the second
quarter of 1995).
Gross profit for the first quarter of 1996 increased $3.9 million, or
29%, compared to the same period in 1995 due primarily to increased
profits recognized on the contract to construct the seven T-AOs and a
partial reversal of a previously recognized loss on three LSD-CVs (as
discussed above).
Selling, general and administrative ("SG&A") expenses increased $1.4
million, or 18%, in the first quarter of 1996 compared to the first
quarter of 1995. The increase is due primarily to indirect labor
expenses incurred in association with the preparation of the LPD-17
proposal (discussed above).
Interest expense increased $107,000, or 8%, for the first quarter of
1996 compared to the same period in the prior year. The increase
was due primarily to interest costs associated with the $17.8 million
Title XI financing completed in February 1995, interest costs
associated with a note issued in 1995 as part of a litigation
settlement and less interest being capitalized on assets under
construction due to the completion of the yard-wide modernization
program. These increases were partially offset by a decrease in
interest expense associated with a note issued in 1994 to the
Company's former corporate parent, the terms of which required
<PAGE>
partial payment of the note in June 1995.
The operating results for the first quarter of 1996 included an
income tax provision of $2.7 million, or $0.19 per share, compared to
an income tax provision of $1.8 million, or $0.12 per share, for the
same period in the prior year. The current period income tax
provision essentially represents a non-cash charge due primarily to
the utilization of net operating loss carry forwards previously
recognized as a deferred tax asset in the financial statements.
Liquidity and Capital Resources
The Company's cash and cash equivalents totaled $64.4 million at
March 31, 1996 as compared to $38.5 million at December 31, 1995.
Included in the cash balance at March 31, 1996 are amounts collected
as a result of the settlement of the Company's Request for Equitable
Adjustment ("Minehunter REA") filed with the U.S. Navy related to the
four MHCs currently under contract (as discussed in further detail in
Note 2 of the Company's Annual Report included in the 1995 Form 10-
K). The Company's sources of cash thus far in 1996 consisted of
$29.2 million of funds provided by operations (including the amounts
collected under the Minehunter REA discussed above) while the
Company's primary uses of cash in the current year consisted of
capital expenditures of $3.2 million and payment of long term
borrowings of $388,000.
In the first quarter of 1996, the terms of the Company's $42.5
million revolving credit agreement were extended to May, 1998. At
March 31, 1996, there were approximately $5.7 million of letters of
credit issued against the credit facility, with an additional $5.0
million letter of credit issued in early April, 1996, leaving
approximately $31.8 million of liquidity available to Avondale for
operations and other purposes. Continuing access to the credit
facility is conditioned upon the Company remaining in compliance with
the covenants of the agreement, including the maintenance of certain
financial ratios. At March 31, 1996 the Company was in compliance
with the covenants contained therein. The Company believes that its
capital resources will be sufficient to finance current and projected
operations.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation of the Company(1).
3.2 Bylaws of the Company(2).
10.3 Employee Benefit Plans
(c) The Company's Amended and Restated Employee
Stock Ownership Plan(3), as further amended by
Amendment No. 1 adopted April 5, 1995(4), as
further amended by Amendment No. 2 adopted
June 16, 1995(5) and as further amended by
Amendment No. 3 adopted February 5, 1996; and
the related Amended and Restated Trust
Agreement.
(j) The Company's 401(k) Plan and related Trust
effective January 1, 1996.
(k) The Company's Executive Retirement Trust.
10.4 Employment Agreements
(d) Amended and Restated Change of Control
Agreement dated January 19, 1996 by and
between the Company and Albert L. Bossier, Jr.
(e) Amended and Restated Change of Control
<PAGE>
Agreement dated January 19, 1996 by and
between the Company and Thomas M. Kitchen.
(f) Amended and Restated Change of Control
Agreement dated January 19, 1996 by and
between the Company and Kenneth B. Dupont.
(g) The Company's Severance Pay Plan and Summary
Plan Description adopted March 1, 1996.
15 Letter re: unaudited interim financial information.
27 Financial Data Schedule
(b) Reports on Form 8-K:
Not applicable.
_______________
(1) Incorporated by reference from the Company's 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 September
30, 1995.
(3) Incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994.
(4) Incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31,
1995.
(5) Incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30,
1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
AVONDALE INDUSTRIES, INC.
Date: May 14, 1996 By:/s/ ALBERT L. BOSSIER, JR.
Albert L. Bossier, Jr.
Chairman, President &
Chief Executive Officer
Date: May 14, 1996 By:/s/ THOMAS M. KITCHEN
Thomas M. Kitchen
Vice President &
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Number Description
3.1 Articles of Incorporation of the Company(1).
3.2 Bylaws of the Company(2).
10.3 Employee Benefit Plans
(c) The Company's Amended and Restated Employee Stock
Ownership Plan(3), as further amended by Amendment No. 1
adopted April 5, 1995(4), as further amended by
Amendment No. 2 adopted June 16, 1995(5) and as further
amended by Amendment No. 3 adopted February 5, 1996; and
the related Amended and Restated Trust Agreement.
(j) The Company's 401(k) Plan and related Trust effective
January 1, 1996.
(k) The Company's Executive Retirement Trust.
10.4 Employment Agreements
(d) Amended and Restated Change of Control Agreement dated
January 19, 1996 by and between the Company and
Albert L. Bossier, Jr.
(e) Amended and Restated Change of Control Agreement dated
January 19, 1996 by and between the Company and
Thomas M. Kitchen.
(f) Amended and Restated Change of Control Agreement dated
January 19, 1996 by and between the Company and
Kenneth B. Dupont.
(g) The Company's Severance Pay Plan and Summary Plan
Description adopted March 1, 1996.
15 Letter re: unaudited interim financial information.
27 Financial Data Schedule
_______________
(1) Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1993.
(2) Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1995.
(3) Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.
<PAGE>
EXHIBIT INDEX
(4) Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1995.
(5) Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1995.
<PAGE>
AMENDMENT NUMBER THREE
TO
AVONDALE INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, Avondale Industries, Inc., a corporation organized
and existing under the laws of the State of Louisiana, adopted
the Avondale Industries, Inc. Employee Stock Ownership Plan (the
"Plan") effective September 1, 1985; said Plan has been amended
from time to time; said Plan was amended and restated effective
January 1, 1989 and executed December 28, 1994;
WHEREAS, Avondale Industries, Inc. reserved the right to
amend the Plan by resolution of the Board of Directors;
WHEREAS, it is desirable to amend the Plan to separate the
Plan into an employee stock ownership plan portion and a stock
bonus plan portion; to comply with the Family and Medical Leave
Act of 1993; and to clarify the distribution provisions;
NOW, THEREFORE, as authorized by Section 11.1, the Plan is
hereby amended, effective January 1, 1996, unless stated
otherwise as follows:
I.
The second and third paragraphs of the Preamble to the Plan
are amended and restated in their entirety to read as follows:
The purpose of the Plan is to encourage
employees to make and continue careers with
Avondale Industries, Inc. and certain related
employers by allowing employees to obtain
beneficial interests in the common stock of
Avondale Industries, Inc., to provide an
effective means for employees to accumulate
funds for their own retirement, and to enable
employees to share in the appreciation and
depreciation of the common stock of Avondale
Industries, Inc. and other assets accumulated
by the Plan. The Plan shall be divided into
two portions, the employee stock ownership
plan portion and the stock bonus plan
portion. The employee stock ownership plan
portion of the Plan is designed to invest
primarily in common stock of Avondale
Industries, Inc. and the stock bonus plan
portion of the Plan is designed to invest in
a diversified portfolio.
<PAGE>
The Plan and its related Trust are intended
to qualify as a stock bonus plan and as an
employee stock ownership plan and trust under
Sections 401(a), 501(a) and 4975(e)(7) of the
Internal Revenue Code of 1986, as amended.
The stock bonus plan portion of the Plan will
be separately accounted for and administered
from the employee stock ownership plan
portion of the Plan. The stock bonus plan
portion of the Plan will be subject to all
provisions of the Plan except Section 8.5
regarding Exempt Loans.
II.
The first paragraph of Article V, Section 5.1, Participant
Accounts, is amended and restated to read as follows:
The Committee shall maintain (i) a Company
Stock Account and (ii) an Investment Account
for each Participant. The Company Stock
Account will constitute the employee stock
ownership plan portion of the Plan. One
subaccount of the Company Stock Account will
consist solely of shares of Company Stock.
Another subaccount of the Company Stock
Account will consist of other investments
held for liquidity and other administrative
purposes. The Investment Account will
constitute the stock bonus plan portion of
the Plan. Each Participant's Investment
Account will consist of investments as
determined by the Committee. The Committee
may establish a subaccount under the
Investment Account to hold Company Stock.
The Committee may, in its discretion and from
time to time, establish one or more
investment funds for the non-Company Stock
portion of any Account or invest such funds
in a single commingled investment portfolio.
III.
Article V, Section 5.2, is amended, effective August 5,
1993, to add the following sentence at the end of the first
paragraph:
A Participant on paid or unpaid leave
pursuant to the Family and Medical Leave Act
of 1993 shall be deemed to be employed on the
date which is the end of the last payroll
period ending within the Plan Year.
IV.
Article VII, Section 7.7(b) is amended to add the following
<PAGE>
sentence at the end:
If the distribution is made in cash, the
Participant shall receive the value of his
Investment Account and the value of the non-
Company Stock portion of his Company Stock
Account determined as of the last trading day
of the month prior to the distribution.
V.
Section 8.2 of Article VIII, is amended and restated to read
as follows:
8.2 Investment of Trust Fund. The Trust
Fund shall be divided into an employee stock
ownership plan portion and a stock bonus plan
portion. The Committee shall have discretion
from time to time to determine which portion
of the Trust Fund is allocated to the
employee stock ownership plan portion and
which portion of the Trust Fund is allocated
to the stock bonus plan portion. In
addition, the Committee shall have discretion
to instruct the Trustee to sell shares of
Company Stock and, except to the extent the
Committee determines to hold proceeds in the
employee stock ownership plan portion for
liquidity and other administrative purposes,
to direct that the proceeds of such sale be
allocated to the stock bonus plan portion of
the Plan.
The employee stock ownership plan portion of
the Trust Fund shall be invested primarily in
Company Stock; provided that the Trustee may
also invest the employee stock ownership plan
portion of the Trust Fund in cash, cash
equivalents, certificates of deposit, money
market funds, guaranteed investment
contracts, short term securities, bonds,
stocks and other investments at the direction
of, or in accordance with the investment
policy established by, the Committee or an
authorized Investment Manager.
Neither the Employer nor the Committee nor
the Trustee shall have any responsibility or
duty to time any transaction involving
Company Stock in order to anticipate market
conditions or changes in stock value, nor
shall the Employer, the Committee or the
Trustee have any responsibility or duty to
sell shares of Company Stock held in the
employee stock ownership plan portion of the
Trust Fund (or otherwise to provide
investment management for Company Stock held
in the employee stock ownership plan portion
<PAGE>
of the Trust Fund) in order to maximize
return or minimize loss. Company
contributions made in cash, and other cash
received by the Trustee, may be used to
acquire Shares from shareholders of the
Company or directly from the Company.
The stock bonus plan portion of the Trust
Fund shall be invested in a diversified
portfolio consisting of cash, cash
equivalents, certificates of deposit, money
market funds, guaranteed investment
contracts, short-term securities, bonds,
stocks and other investments at the
discretion of, or in accordance with the
investment policy established by, the
Committee or an authorized Investment
Manager. The Committee may at its discretion
and from time to time use funds in the stock
bonus plan portion of the Plan to purchase
shares of Company Stock.
The Committee shall have the discretion at
any time and from time to time, to direct the
Trustee to transfer amounts from the employee
stock ownership plan portion of the Trust
Fund to the stock bonus plan portion of the
Trust Fund.
For purposes of the Avondale Industries, Inc.
Pension Plan, the Trust Fund shall be
considered one account.
VI.
Article VIII, the first sentence of Section 8.5, Exempt
Loans, is amended and restated to read as follows:
The Committee may direct the Trustee to have
the employee stock ownership plan portion of
the Plan to enter into one or more Exempt
Loans to finance the acquisition of Company
Stock.
VII.
Article IX, Section 9.3, Committee's Duties and
Responsibilities, is amended to add paragraphs (o)- (w) to read
as follows:
(o) directing the Trustee to sell Company
Stock and allocating the shares sold as
among Post-1986 Company Stock and other
Company Stock;
(p) Allocating the proceeds of sales of
Company Stock among the employee stock
ownership plan portion and the stock
<PAGE>
bonus plan portion of the Plan;
(q) directing the Trustee to acquire Company
Stock from any shareholder or the
Company;
(r) determining and deciding the
requirements, for liquidity and other
administrative purposes, of the employee
stock ownership plan portion of the Plan
and Trust;
(s) determining and deciding the amount of
Company Stock and other investments to
hold in the employee stock ownership
portion of the Plan and Trust;
(t) determining and deciding the amount of
assets to hold in the stock bonus plan
portion of the Plan and Trust and
directing the Trustee to invest such
assets in a diversified portfolio;
(u) determining and deciding the amount of
Company Stock to hold in the stock bonus
plan portion of the Plan and Trust;
(v) appointing and removing one or more
Investment Managers in accordance with
the provisions of the Trust;
(w) establishing investment objectives,
guidelines and restrictions with respect
to assets of the Trust other than
Company Stock;
EXECUTED in multiple originals in Avondale, Louisiana, this
5th day of February, 1996.
---
AVONDALE INDUSTRIES, INC
BY: /s/ THOMAS M. KITCHEN
---------------------
Thomas M. Kitchen, Secretary
ATTEST
/s/ B. L. HICKS, ASSISTANT SECRETARY
------------------------------------
(Corporate Seal)
<PAGE>
ACKNOWLEDGMENT
--------------
STATE OF LOUISIANA
PARISH OF JEFFERSON
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did depose
and state that he signed the foregoing Amendment Number Three to
the Avondale Industries, Inc. Employee Stock Ownership Plan as a
free act and deed on behalf of Avondale Industries, Inc. for the
purposes therein set forth.
/s/ THOMAS M. KITCHEN
---------------------
Thomas M. Kitchen
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 5th DAY
---
OF FEBRUARY, 1996.
/s/ A. BLOMKALNS
----------------
NOTARY PUBLIC
<PAGE>
AVONDALE INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP TRUST
(Amended and Restated as of January 1, 1996)
<PAGE>
AVONDALE INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP TRUST
Avondale Industries, Inc. (the "Company"), a corporation
organized and existing under the laws of the State of Louisiana,
originally adopted the Avondale Industries, Inc. Employee Stock
Ownership Trust (the "Trust") effective September 1, 1985, which
Trust has been amended from time to time. The Trust as amended
and restated effective as of January 1, 1996 is entered into by
and between the Company and Blanche S. Barlotta, R. Dean Church
and Rodney J. Duhon, Jr. (collectively the Trustee).
WHEREAS, effective as of September 1, 1985 the Company
established an employee stock ownership plan called the Avondale
Industries, Inc. Employee Stock Ownership Plan, which plan, has
been amended from time to time, and most recently amended
effective January 1, 1989 is hereinafter referred to as the
"Plan";
WHEREAS, the Plan was established by Avondale Industries,
Inc. to encourage Employees to make and continue careers with
Avondale Industries, Inc., and other Participating Companies, by
allowing Participants to obtain beneficial interests in the stock
of Avondale Industries, Inc., all as set forth in the Plan;
WHEREAS, the Plan provides for the establishment of a Trust
to which contributions to the Plan are to be made by the Company
and Participating Companies, and under which such contributions
are to be held by the Trustee and invested as set forth in the
Plan, all in accordance with the provisions of the Plan and such
Trust;
WHEREAS, the Plan and Trust are intended to qualify as a
stock bonus plan and trust under Section 401(a) of the Code and
as an employee stock ownership plan as defined in Section
4975(e)(7) of the Code, with the employee stock ownership plan
portion being designed to invest primarily in stock of the
Company and the stock bonus plan portion being designed to invest
in a diversified portfolio, and the Trust is intended to be
exempt from taxation under Section 501(a) of the Code;
WHEREAS, the ESOP Administrative Committee (the
"Committee"), the members of which are "named fiduciaries" as
defined in the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") has general responsibility for the
administration and interpretation of the Plan and shall establish
investment standards and policies and communicate the same to the
Trustee;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the Company, the Trustee and the Committee
declare and agree as follows:
<PAGE>
ARTICLE I
Title and Definitions
1.1 Title. The Trust shall be known as the Avondale
Industries, Inc. Employee Stock Ownership Trust
1.2 Incorporation of Plan Definitions. Definitions set
forth in the Plan shall have the same meaning wherever used in
the Trust unless the context clearly indicates otherwise.
1.3 Named Fiduciary. The Committee shall be the named
fiduciary of the Trust for purposes of Section 402 of ERISA,
except that each Participant shall be a named fiduciary with
respect to the exercise of voting and tender offer rights for
Company Stock held as part of the Trust Fund to the extent that
such Participant exercises such rights pursuant to Sections 10.4
and 10.5 of the Plan and Article XI of the Trust. The Committee
shall, upon request of the Trustee, furnish the Trustee with
whatever information is reasonably necessary for the Trustee to
carry out their fiduciary responsibilities under ERISA.
1.4 Custodian. "Custodian" shall mean the entity, if any,
appointed from time to time by the Committee to hold, but not
invest or otherwise manage or control, some or all of the assets
of the Trust. The terms and provisions of any agreement with a
Custodian are hereby incorporated by reference.
ARTICLE II
Trust Fund
2.1 Contributions to and Investment of the Trust Fund. All
Participating Company contributions shall be paid to the Trustee
from time to time in accordance with the Plan. All such
contributions and all investments thereof, together with all
accumulations, accruals, earnings and income with respect
thereto, shall be held by the Trustee in Trust hereunder or by
one or more Custodians or both by the Trustee and by one or more
Custodians. Notwithstanding the foregoing, the Trust shall
constitute a single trust for purposes of investment and
administration. All Trust assets shall be invested, reinvested,
managed, administered and distributed by the Trustees upon the
written instructions of the Committee pursuant to the provisions
of the Plan and Trust. Except as may otherwise be required under
Sections 5.2 and 5.3, the Trustee shall not be responsible for
the administration of the Plan, for maintaining any records of
Participants' Accounts under the Plan, or for computation or
collection of Participating company contributions. The Trustee
shall hold, invest, reinvest, manage, administer and distribute
the Trust Assets, solely as directed by the Committee and as
provided herein, for the exclusive benefit of Participants and
their Beneficiaries.
2.2 Claims against the Trust Fund. Subject to the claims
procedure provided under the Plan (or the grievance procedure
provided in any applicable collective bargaining agreement), the
Committee shall have complete control and authority to determine
the existence, nonexistence, nature and amount of the rights and
interests of all persons in or to the Trust or under the Plan.
<PAGE>
Except as otherwise required by ERISA, the Trustee shall have no
duty to question or to examine any determination made by the
Committee or direction given by the Committee to the Trustee in
respect of such matters.
ARTICLE III
Investment of Trust Assets
3.1 General Powers. Upon the written instructions of the
Committee, the Trustee shall invest and reinvest the assets of
the employee stock ownership plan portion of the Trust Fund
primarily in Company Stock, except for other investments held:
a. for the limited purpose of making Plan
distributions to Participants,
b. pending the investment of contributions or other
cash receipts in Company Stock,
c. pending use to repay an Exempt Loan, or
d. for liquidity or other administrative purposes of
the Plan.
Upon the direction of the Committee, the Trustee may cause the
employee stock ownership portion of the Plan to enter into one or
more Exempt Loans to finance the acquisition of Company Stock.
Upon the written instructions of the Committee or one or more
Investment Managers appointed by the Committee, the stock bonus
plan portion of the Trust Fund shall be invested in a diversified
portfolio.
3.2 Other Investments. Upon the written instructions of
the Committee, the Trustee may also invest and reinvest the
assets of the Trust Fund; in interest-bearing accounts or
certificates of deposit offered by any bank (including the
Trustee or the Custodian) or savings and loan association; real
estate, stocks, notes, debentures, shares or obligations of
corporations or of unincorporated associations or trusts or
investment companies; any kind of investment fund (including any
pooled investment fund maintained by the Trustee or the
Custodian); or in such other property, real, personal or mixed,
without regard to whether such investment is an authorized or
appropriate investment for trustees under any state laws; or the
assets of the Trust may be held in cash for a reasonable period
of time.
3.3 Restricted Securities. In the event the Trustee
invests any Trust assets in Company Stock, and the Trustee
thereafter disposes of such Company Stock or any part thereof,
under circumstances which require registration of the Company
Stock under the Securities Act of 1933 or qualification of the
securities under the Blue Sky laws of any state, or both, then
the Company at its own expense, will take or cause to be taken
any and all such action as may be necessary or appropriate to
effect such registration or qualification, or both.
<PAGE>
3.4 Liability of Trustee. To the maximum extent permitted
by law, the Trustee shall not be liable for the acquisition,
retention or disposition of any assets of the Trust or for any
loss to or diminution of such assets unless due to their own
willful misconduct or failure to act in good faith.
3.5 Investment Manager.
a. The Committee may appoint one or more investment
managers ("Investment Managers") which shall be
(a) registered under the Investment Advisors Act
of 1940, (b) a bank, or (c) an insurance company,
which shall have the power to manage, acquire or
dispose of any asset of, or all or such portions
of the Trust Fund as the Committee shall specify
in writing in such notice (the "Managed Account").
The Committee and the Investment Manager shall
execute a written Investment Management Agreement
governing the terms of the Investment Manager's
duties and responsibilities pursuant to which the
Investment Manager shall acknowledge that it is a
fiduciary with respect to the Plan and the Trust
and in which the Managed Account shall be
described. The Committee shall from time to time
direct the Trustee in writing with respect to the
portion of the assets of the Trust Fund which
shall be the Managed Account. The Committee may
authorize an Investment Manager to give written
instructions to the Trustee with respect to the
acquisition, retention, management and disposition
of the Managed Account, and the Trustee shall
follow such instructions and shall be under no
duty to review the Managed Account so held or to
make any recommendation with respect to the
investment or reinvestment thereof or to determine
whether any direction received from the Investment
Manager is proper or within the terms of this
Trust Agreement. To the extent authorized in
writing by the Committee, an Investment Manager
shall have the power and authority to be exercised
in its sole discretion at any time and from time
to time to issue orders for the purchase or sale
of securities directly to a broker. Written
notification of the issuance of each such order
shall be given promptly to the Trustee by the
Investment Manager, and the execution of each such
order shall be confirmed to the Trustee by the
broker. Such notification shall be authority for
the Trustee to pay for securities purchased or to
deliver securities sold against payment therefor,
as the case may be. The Trustee and the
Investment manager shall agree as to how the
transactions shall be effected in accord with this
Article. Upon the direction of the Investment
Manager, the Trustee will execute and deliver
appropriate trading authorizations, but no such
authorization shall be deemed to increase the
liability or responsibility of the Trustee under
this Trust Agreement. An Investment Manager so
<PAGE>
appointed shall furnish the Trustee with the name
and specimen signature of each individual who is
authorized to act on behalf of the Investment
Manager. Except as modified in this Article, the
Trustee's powers and duties with respect to the
managed Account shall be the same as its powers
and duties with respect to other assets of the
Trust Fund. The fees and expenses of an
Investment Manager, except to the extent paid by
an Employer, shall be paid from the Trust Fund.
b. Upon the appointment of any such Investment
Manager, the Committee shall furnish the Trustee a
list of the assets in the Managed Account of such
Investment Manager, whereupon the Trustee:
i. shall establish and maintain an accurate and
detailed account for the Managed Account,
showing all investments, receipts,
disbursements and other transactions, and the
written account to be filed by the Trustee
shall include a separate account for such
Managed Account;
ii. shall comply with all instructions received
from a certified representative of such
Investment Manager as to the purchase or sale
of securities for or from such Investment
Manager's Managed Account or the delivery of
or payment for securities caused by such
Investment Manger to be sold from or
purchased for such Managed Account; and
iii. shall furnish to the Committee and to such
persons as the Committee shall designate,
such periodic statements of receipts and
disbursements regarding such Investment
Manager's Managed Account as may be requested
in writing by the Committee.
c. The Trustee, without obtaining prior approval or
direction from an Investment Manager, unless
otherwise directed by the Investment Manager,
shall (1) invest Managed Assets cash balances held
by it from time to time in short term cash
equivalents having ready marketability, including,
but not limited to, United States Treasury Bills,
commercial paper (including such forms of
commercial paper as may be available through the
Trustee's Trust Department), bankers' acceptances
and certificates of deposit and similar securities
and undivided interests or participations therein,
with a maturity not to exceed two years and (2)
sell such short term investments as may be
necessary to carry out the instructions of an
Investment Manager regarding more permanent
investments and directed disbursements.
d. In order to permit an Investment Manager to make
<PAGE>
timely and informed decisions regarding the
management of those assets of the Trust Fund
subject to its control the Trustee shall forward
to each Investment Manager for appropriate action
any and all proxies, proxy statements, notices,
requests, advice or other communications received
by the Trustee (or its nominee) as the record
owner of such assets, except as from time to time
the Investment Manager and the Trustee shall in
writing otherwise agree.
e. The Investment Manager shall discharge its duties
in accordance with such investment objectives,
guidelines and restrictions as the Committee may
from time to time provide.
ARTICLE IV
Trustee's Powers
4.1 Trustee's Powers. The Trustee shall have the authority
and power to:
a. Contract or otherwise enter into transactions
between themselves as Trustee and the Company, its
subsidiaries and affiliates, or any shareholders
of the Company upon the written instructions of
the Committee for the acquisition or sale of
Company Stock, subject to paragraph (l) below;
b. Sell, transfer, mortgage, pledge, lease or
otherwise dispose of, or grant options with
respect to, any Trust assets, including Company
Stock, at public or private sale;
c. Borrow from any lender (including the Company or
any shareholder of the Company) pursuant to an
Exempt Loan (as defined in Section 4.2) to acquire
Company Stock as authorized by the Trust upon the
written instructions of the Committee by entering
into lending agreements upon any terms (including
reasonable interest and security for the loan) as
may be necessary or appropriate;
d. Borrow money from any lender other than pursuant
to an Exempt Loan upon the written instructions of
the Committee, to the extent and upon such terms
and conditions as the Committee deems advisable or
proper to carry out the purposes of the Trust and
as are permitted by the Regulations;
e. Vote any stocks, bonds or other securities held in
the Trust, including Company Stock which shall be
voted in accordance with Article XI of the Trust;
f. Purchase or offer to purchase any security,
including Company Stock, from any individual or
entity either on an established market or directly
from such individual or entity, without regard to
any prevailing market price upon the written
<PAGE>
instruction of the Committee;
g. Give general or specific proxies or powers of
attorney with or without powers of substitution;
h. Except as provided in Article XI, participate in,
oppose, or consent to, reorganizations,
recapitalizations, consolidations, mergers,
liquidations and similar transactions with respect
to any corporation, company or association, or to
the sale or pledge of the property of any
corporation, company or association any of the
securities of which may at any time be held in the
Trust Fund, and to do any act with reference
thereto, including the exercise of options, the
making of agreements or subscriptions which may be
deemed necessary or advisable in connection
therewith, and to hold and retain any securities
or other property which it may so acquire;
provided, however, that the Trustee may exercise
this power and authority only to the extent not
inconsistent with the provisions of the Plan and
Trust and further provided that the Trustee shall
make demand upon the Participating Companies, and
the Participating Companies shall pay its
proportionate share of any expenses or assessments
in connection with the exercise of such power by
the Trustee;
i. Deposit such Company Stock or other securities in
any voting trust, or with any protective,
reorganization or like committee, or with a
trustee or with depositories designated thereby
and delegate discretionary power to any such
committee upon the written instructions of the
Committee; provided, however, that the Trustee
shall make demand upon the Participating
Companies, and each Participating Company shall
pay its proportionate share of the expenses and
compensation of any such committee and any
assessments levied with respect to any property so
deposited;
j. Exercise any conversion privilege or subscription
right available in connection with any property
held by the Trust upon the written instructions of
the Committee;
k. Commence or defend suits or legal proceedings and
to represent the Trust in all suits or legal
proceedings; to settle, compromise or submit to
arbitration any claims, debts or damages due or
owing to or from the Trust; provided, however,
that the Trustee except in the case of a suit,
legal proceeding or claim involving solely the
Trustee's actions or omissions to act, shall
obtain the written consent of the Company before
settling, compromising or submitting to binding
arbitration any claim, suit or legal proceeding of
<PAGE>
any nature whatsoever arising under ERISA;
l. Perform all acts which the Trustee deems necessary
or appropriate and exercise any and all powers and
authority of the Trustee under the Trust;
provided, however, that the Trustee shall not
engage in any "prohibited transaction," as that
term is used in ERISA, the Code or the
Regulations;
m. Exercise any of the powers of an owner, with
respect to such Company Stock and other securities
or other property comprising the Trust, pursuant
to the written instructions of the Committee and
to the extent consistent with the Plan and
paragraphs (a), (d) and (g) of this Article IV;
n. Form or incorporate and own or maintain any entity
including but not limited to a partnership,
corporation or trust;
o. Transfer assets of the Trust Fund to a successor
trustee as provided for in Section 5.7;
p. Make, execute and deliver, as Trustee, any and all
notes, bonds, guarantees, conveyances, contracts,
waivers, releases or other instruments in writing
necessary or proper for the accomplishment of any
of the foregoing powers; and
q. Exercise, generally, any of the powers which an
individual owner might exercise in connection with
property either real, personal or mixed held by
the Trust Fund, and to do all other acts that the
Trustee may deem necessary or proper to carry out
any of the powers set forth in this Article IV or
otherwise in the best interests of the Trust.
4.2 Exempt Loans.
a. An Exempt Loan shall be made only from the
employee stock ownership plan portion of the Trust
Fund and the terms of any Exempt Loan shall comply
with each of the following requirements:
i. The terms shall be as favorable to the Plan
as the terms of a comparable loan from arms-
length negotiations between independent
parties;
ii. The interest rate shall be no more than a
reasonable interest rate considering all
relevant factors including the amount and
duration of the Exempt Loan, the security and
guarantee involved, the credit standing of
the Plan and the guarantor of the Exempt Loan
and the interest rate prevailing for
comparable loans;
<PAGE>
iii. The Exempt Loan shall be without recourse
against the Plan;
iv. The Exempt Loan must be for a specific term;
v. The Exempt Loan may not be payable at the
demand of any person except in the case of
default;
vi. The only assets of the Trust that may be
given as collateral on the Exempt Loan are
Company Stock acquired with the proceeds of
the same Exempt Loan or Company Stock used as
collateral on a prior Exempt Loan and repaid
with the proceeds of the same Exempt Loan;
vii. No person entitled to payment under the
Exempt Loan shall have any right to assets of
the Trust other than collateral given for
that Exempt Loan, contributions made to the
Plan to enable it to meet its obligations
under that Exempt Loan and earnings
attributable to such collateral and such
contributions;
viii.The value of Trust assets transferred in
satisfaction of the Exempt Loan upon an event
of default shall not exceed the amount of the
default;
ix. If the lender is a "disqualified person" (as
such term is defined in Section 4975(e) of
the Code), Trust assets may be transferred
upon default only upon and to the extent of
the failure of the Plan to meet the payment
schedule of the Exempt Loan;
x. Upon payment of any portion of the balance
due on the Exempt Loan, the assets pledged as
collateral for such portion shall be released
from encumbrance;
xi. The Exempt Loan shall be repaid only from (i)
amounts contributed to the Plan by the
Employer in the form of cash to meet its
obligations under the loan and from amounts
earned on Trust investments and (ii) the
proceeds of an Exempt Loan, and (iii) from
collateral given for the Exempt Loan,
including earnings on such collateral, such
as Dividends on Company Stock. Such
contributions and earnings shall be accounted
for separately in the books of accounts of
the Plan maintained by the Committee. The
payments made with respect to an Exempt Loan
by the Plan during a Plan Year must not
exceed an amount equal to the sum of such
contributions and earnings received during or
prior to the year less any payments in prior
<PAGE>
years.
b. Any Exempt Loan must be primarily for the benefit
of Participants and their beneficiaries.
c. Notwithstanding any other provision of the Plan,
all proceeds of an Exempt Loan shall be used,
within a reasonable time after receipt by the
Trust, for the following purposes:
i. To acquire Company Stock;
ii. To repay the same Exempt Loan; or
iii. To repay any previous Exempt Loan.
ARTICLE V
The Trustee
5.1 Nominees. The Trustee may register any security or
other property held by them hereunder in their own name or in the
name of their nominees, including any Custodian and the nominee
of any system for the central handling of securities, with or
without the addition or words indicating that such securities are
held in a fiduciary capacity, and to deposit or arrange for the
deposit of any such securities with such a system. The Trustee,
if permitted by ERISA, may hold any securities in bearer form and
combine certificates representing investments with certificates
of the same issue held by the Trustee in other fiduciary
capacities, but the books and records of the Trustee shall at all
times show that all such investments are part of the Trust.
Notwithstanding the above, the Trustee shall at all times remain
responsible for the safe custody and disposition of the Trust.
5.2 Records. The Trustee shall keep accurate and detailed
accounts of all investments, receipts and disbursements and other
transactions hereunder, and all accounts, books and records
relating thereto shall be open to inspection by any person
designated by the Company at all reasonable times. The Trustee
shall maintain such records with respect to the Trust as may be
reasonably required in the administration of the Trust, but the
Trustee shall not be required to perform ministerial acts other
than those set forth in the Trust.
5.3 Reports. Within 60 days after each Valuation Date, or
the removal or resignation of the Trustee or the termination of
the Plan or the Trust, and as of any other date specified by the
Board of Directors or the Committee, the Trustee shall file a
report with the Board of Directors. This report shall show all
purchases, sales, receipts, disbursements, and other transactions
effected by the Trustee during the year or period for which the
report is filed, and shall contain an exact description, the cost
as shown on the Trustee's books, and the fair market value as of
the end of such period, of every item held in the Trust and the
amount and nature of every obligation owed by the Trust. For
purposes of this Section 5.3, the Trustee may rely on any
determination by the Committee of the fair market value of any
Trust assets, including the opinion of one or more independent
<PAGE>
investment advisors or appraisers relied upon by the Committee.
Upon the expiration of 90 days from the date of filing such
annual or other account, the Trustee shall to the maximum extent
permitted by ERISA be forever released and discharged from all
liability and accountability with respect to the propriety of its
acts and transactions shown in such account except with respect
to any such acts or transactions as to which the Committee shall
within such 90-day period file with the Trustee written
objections.
5.4 Distributions. The Trustee shall make distributions of
a Participant's Vested Interest from the Trust to or for the
benefit of the person entitled thereto under the Plan and at such
times and in such form as may be required or permitted under the
Plan. Any undistributed part of a Participant's Vested Interest
shall be retained in the Trust until distribution. Where
distribution is required to be made in Company Stock, or where
the Committee directs such distribution, the Trustee shall cause
the Company to issue an appropriate stock certificate for the
person entitled thereto, and the Trustee shall deliver such
certificate to such person; provided, however, that the Trustee
shall comply with the provisions of the Plan relating to
repurchase of such Company Stock by the Company. Any portion of
a Participant's Vested Interest to be distributed in cash or
property other than Company Stock shall be paid by the Trustee to
the Participant or Beneficiary entitled thereto. Company Stock
distributed by the Trustee may include such legend restrictions
on transferability as the Company may reasonably require in order
to insure compliance with the Plan and with applicable Federal or
state securities laws.
5.5 Instructions. All communications required hereunder
from the Company or the Committee to the Trustee shall be in
writing signed by an officer of the Company or by a member of the
Committee authorized to sign on its behalf. The Committee shall
authorize one or more of its members to sign on its behalf all
communications required hereunder between the Committee and the
Trustee. At all times during which communications between the
Committee and the Trustee are required hereunder, the Company and
the Committee shall keep the Trustee advised of the names and
specimen signatures of all members of the Committee and the
individuals authorized to sign on behalf of the Committee. The
Trustee shall be fully protected in relying on any such
communication and any letter, notice, certificate, report,
statement, instrument or document and upon any telephone,
telegraph, cable, wireless, radio or other message from any
party, if believed to be genuine, and shall not be required to
verify the accuracy or validity thereof unless they have
reasonable grounds to doubt the authenticity of any signature.
If after request the Trustee does not receive instructions from
the Committee on any matter for which instructions are required
hereunder, the Trustee shall act or refrain from acting as it may
determine.
5.6 Hiring of Agents and Related Expenses. The Trustee and
the Committee may employ suitable agents and counsel who may be
counsel for the Company or an Affiliate. The reasonable expenses
incurred by the Trustee, any individual who is a trustee, and the
Committee in the performance of their duties hereunder and all
<PAGE>
other proper charges, expenses and disbursements of the Trustee,
any individual who is a trustee, or the Committee (including the
Trustee's compensation) shall be paid out of the Trust unless the
Company pays such expenses directly. However, no person serving
as a Trustee or individual serving as a member of the Committee
who already receives full-time pay from the Company shall receive
compensation from this Trust, except for reimbursement of
expenses properly and actually incurred.
5.7 Resignation and Removal of Trustee. The Trustee, or
any individual who is a trustee, may resign at any time by
delivering to the Committee a written notice of resignation, to
take effect at a date specified therein, which shall not take
effect in less than 60 days after the delivery thereof, unless
such notice is be waived by the Committee.
The Board of Directors shall have the right to remove
the Trustee, or any individual who is a trustee, at any time with
or without cause, by delivering to the Trustee, or individual who
is a trustee, a written notice of removal, to take effect at a
date specified therein, which shall not take effect in less than
60 days after the delivery thereof, unless such notice is waived
by the Trustee.
In the event the Trustee, or any individual who is a
trustee, notifies the Committee of its intention to resign, or
the Committee removes the Trustee, or any individual who is a
trustee, in accordance with the foregoing provisions of this
Section 5.7, the Board of Directors shall appoint a successor
trustee, which successor trustee shall accept such appointment by
an instrument in writing delivered to the Committee and the
Trustee. The Trustee, or individual who is a trustee, resigning
or removed hereunder shall thereupon deliver to the successor
trustee all assets of the Trust held by such Trustee, or
individual who is a trustee, together with such records as may be
reasonably required to enable the successor trustee to properly
administer the Trust, and all rights and privileges under the
Plan and the Trust theretofore vested in the Trustee, or
individual who is a trustee, shall vest in the successor trustee
where applicable, and thereupon all future liability of such
Trustee, or individual who is a trustee, shall terminate;
provided, however, that the Trustee, or individual who is a
trustee, shall execute, acknowledge and deliver all documents and
written instruments which are necessary to transfer and convey
his right, title and interest in the Trust, and all rights and
privileges, to the successor trustee.
In the case of the resignation or removal of the
Trustee, or any individual who is a trustee, said Trustee, or
individual who is a trustee, shall duly file with the Committee a
written report as provided in Section 5.3 above for the period
since the last previous annual accounting, and if written
objections to such account are not filed as provided in Section
5.3, the Trustee's liability and accountability with respect to
the propriety of their acts and transactions shown in such
account shall be governed by the terms of this Trust.
5.8 Hold Harmless. The Company shall defend and indemnify
to the full extent permitted by law (including ERISA), which
<PAGE>
indemnification shall include, but not be limited to, attorney's
fees and any tax imposed as a result of a claim asserted by any
person, persons or entity (including a governmental entity), the
Trustee, or any individual who is a trustee, made or threatened
to be made a part to any action, suit or proceeding, whether
criminal, civil, administrative or investigative, by reason of
the fact that such entity or individual is or was a Trustee. The
Trustee, or individual who is a trustee, shall be entitled to
collect on the Company's indemnity under this Section 5.8 only
from the Company and shall not be entitled to payment directly or
indirectly from the Trust.
5.9 Acceptance. The Trustee hereby accepts the Trust and
agrees to hold the Trust, and all additions and accretions
thereto, except to the extent such assets, additions and
accretions are held by a Custodian, subject to all the terms and
conditions of the Trust, which shall be interpreted and construed
under the laws of the State of Louisiana to the extent such laws
are not superseded by laws of the United States. In the event
any provisions of the Trust are held illegal or invalid for any
reason, the illegality or invalidity shall not affect the
remaining provisions of the Trust, but shall be fully severable
and the Trust shall be construed and enforced as if the illegal
or invalid provision had never been inserted herein.
5.10 Third Parties. A third party dealing with the Trustee,
or any individual who is a trustee, shall not be required to make
inquiry as to the authority of the Trustee, or any individual who
is a trustee, to take any action nor be under any obligation to
follow the proper application by the Trustee, or any individual
who is a trustee, of the proceeds of sale of any property sold by
the Trustee, or any individual who is a trustee, or to inquire
into the validity or propriety of any act of the Trustee, or any
individual who is a trustee, except as may be required of such
third party under ERISA.
5.11 Tax Returns. In addition to any returns required of
the Trustee by law, the Trustee shall prepare and file such tax
reports and other returns as they may from time to time deem
appropriate.
5.12 Judicial Accounting. To the maximum extent consistent
with ERISA, nothing contained in the Trust or in the Plan shall
be construed as depriving the Trustee or the Company of the right
to have a judicial settlement of the Trustee's accounts, and upon
any proceeding for a judicial settlement of the Trustee's
accounts or for instructions the only necessary parties thereto
shall be the Trustee and the Committee.
5.13 Legal Proceeding. Subject to Section 5.12, in any
action or proceeding affecting the Trust the only necessary
parties shall be the Company and the Trustee and, except as
otherwise required by ERISA, no other person shall be entitled to
any notice or service of process. Any judgment entered in such
an action or proceeding shall to the maximum extent permitted by
ERISA be binding and conclusive on all persons having or claiming
to have any interest in the Trust.
<PAGE>
ARTICLE VI
Relationship of Fiduciaries
It is the intent of all fiduciaries under the Plan and Trust
that each fiduciary be solely responsible for their own acts or
omissions. Except to the extent such an obligation is imposed by
ERISA or the Code, no fiduciary shall have the duty to question
whether any other fiduciary is fulfilling the responsibilities
imposed upon such other fiduciary by the Plan and Trust or by
ERISA or by any regulations or rulings issued thereunder. To the
maximum extent permitted by law, no fiduciary shall have any
liability for a breach of fiduciary responsibility of another.
Except as provided in Article XIII, no fiduciary shall permit any
part of the Trust to be diverted for purposes other than for the
exclusive benefit of Participants and their Beneficiaries.
However, the Committee may, by written notice to the Trustee,
direct that all or part of the assets of the Trust be transferred
to a successor trustee under a trust instrument which is for the
exclusive benefit of such Participants and their beneficiaries,
and which satisfies the applicable requirements for qualification
and exemption from taxation under Sections 401(a) and 501(a) of
the Code, and thereupon the assets of the Trust or any part
thereof, subject to any outstanding debts of the Trust, shall be
paid over, transferred or assigned to said successor trustee free
from the Trust created hereunder.
ARTICLE VII
Termination
7.1 Procedures Upon Termination. The Trust shall continue
for such time as may be necessary to accomplish the purpose for
which it was created, but the Board of Directors may terminate
the Trust at any time upon 30 days' notice in writing to the
Trustee, subject to any applicable contribution or loan
agreement. Upon receipt by the Trustee of such notice of
termination of the Trust, the Trustee shall, with reasonable
promptness after receipt of any such notice, arrange for the
orderly distribution of the Trust property in accordance with the
written instructions of the Committee which shall be given in
conformity with the provisions of the Plan and ERISA. Such
instructions may, but need not, provide for the continued
payments from the Trust pursuant to Section 5.4 of this Trust to
provide the benefits under the Plan until the Trust is exhausted.
The Committee shall remain in existence and all of the provisions
of the Plan which in the opinion of the Committee are necessary
for the execution of the Plan and the administration,
distribution, transfer or other disposition of the assets of the
Trust shall remain in force. The Trust shall terminate when all
such payments are made.
7.2 Termination With Respect to Less Than All Participants.
If the Plan is terminated with respect to a group of persons
under the Plan, the portion of the Trust attributable to such
group shall be held and disposed of in accordance with the
written instructions of the Committee which shall be given in
conformity with the provisions of the Plan and ERISA.
<PAGE>
ARTICLE VIII
Amendment
8.1 Right to Amend. The Board of Directors may any time
and from time to time amend or modify, in whole or in part and
without the consent of any Participating Company or any
Participant or beneficiary, any or all of the provisions of this
Trust by an instrument in writing delivered to the Trustee. No
such amendment shall be made which affects the duties or
responsibilities of the Trustee without their consent thereto in
writing.
8.2 Execution. The Committee and the Trustee shall execute
such supplements to, or amendments of, this Trust as shall be
necessary to give effect to any such amendment or modification.
8.3 Retroactivity. Any such amendment or modification of
this Trust may be retroactive if necessary or appropriate to
qualify or maintain the Trust as a part of a plan and trust
exempt from Federal income taxation under Sections 401(a) and
501(a) of the Code, the provisions of ERISA, or any other
applicable provisions of Federal or state law, as now in effect
or hereafter amended or adopted, and any Regulations issued
thereunder.
ARTICLE IX
Communications
9.1 Company's and Committee's Address. Communications to
the Company or the Committee shall be addressed to or in care of
the Company, at 5100 River Road, Avondale, Louisiana 70094;
provided, however, that upon the Company's or the Committee's
written request, such communications shall be sent to such other
address as the Company or the Committee, as the case may be, may
specify.
9.2 Trustee's Address. Communications to the Trustee shall
be addressed to them at Avondale Industries, Inc., 5100 River
Road, Avondale, Louisiana 70094; provided, however, that upon
the written request of the Trustee, such communications shall be
sent to such other address or addresses as the Trustee may
specify.
9.3 Binding Upon Receipt. No communication shall be
binding on the Trustee, Company or Committee until it is received
by such party.
9.4 Communications in Writing. Any action of the Company
or the Committee pursuant to this Trust, including all orders,
requests, directions, instructions, approvals and objections of
the Company or the Committee to the Trustee, shall be in writing
signed on behalf of the Company or the Committee by any duly
authorized officer of the Company or member of the Committee,
respectively. The Trustee shall be governed by such action and,
to the maximum extent permitted by ERISA, be fully protected in
relying thereon.
<PAGE>
ARTICLE X
Non-Alienation
Except insofar as applicable law may otherwise require or
pursuant to a Qualified Domestic Relations Order (as defined in
Section 6.5 of the Plan), no economic interest, expectancy,
benefit, payment, claim or right of any Participant or
Beneficiary under the Plan and the Trust shall be subject in any
manner to any claims of any creditor of any Participant or
Beneficiary, nor to alienation by anticipation, sale, transfer,
assignment, bankruptcy, pledge, attachment, charge or encumbrance
of any kind. If any person attempts to take any action contrary
to this Article X, such action shall be null and void and of no
effect, and the Trustee shall disregard such action and shall not
in any manner be bound thereby and shall suffer no liability on
account of their disregard thereof.
ARTICLE XI
Voting Rights
11.1 Pass Through of Voting Rights. The Trustee shall vote
all Company Stock held in the Trust as directed by the Committee,
or, in accordance with the following provisions, by the
Participants:
a. If the Company has a registration-type class of
securities (as defined in Section 409(e)(4) of the
Code or any successor statute thereto), then with
respect to all corporate matters, all Company
Stock allocated to the Accounts of Participants
shall be voted in accordance with the directions
of such Participants as given to the Committee and
communicated in turn by the Committee to the
Trustee. Each Participant shall be entitled to
direct the voting only of the Company Stock
allocated to his Company Stock Account.
b. If Company Stock is not a registration-type class
of securities (as defined in Section 409(3)(4) of
the Code), each Participant shall be entitled to
direct Trustee as to the exercise of voting rights
attributable to Company Stock allocated to her or
her Accounts concerning any corporate matter which
involves the voting of Company Stock with respect
to the approval or disapproval of any corporate
merger or consolidation, recapitalization,
reclassification, liquidation, dissolution, sale
of substantially all the assets of a trade or
business, or such similar transactions as may be
prescribed in Regulations.
11.2 Instructions on Voting. Prior to any meeting of the
stockholders of the Company, the Committee shall determine the
number of shares of Company Stock (including fractional shares)
allocated to each Participant which the Participant shall be
entitled to vote. Within a reasonable time before any
shareholder meeting, the Committee shall provide the Participant
with a form necessary to indicate his vote as to any specific or
<PAGE>
general matter to be considered by the stockholders at such
meeting. In addition, the Committee shall provide the
Participants with all information distributed to shareholders by
the Committee for the exercise of such voting rights. The
Committee shall not make any recommendations regarding the manner
of exercising any voting rights. If a Participant shall fail, or
refuse, to give the Committee timely and adequate instructions as
to how to vote any Company Stock, the Committee shall not
exercise its power to vote those shares of Company Stock. The
Committee shall be entitled to hire an independent third party to
tabulate votes in order to ensure the confidentiality of such
vote.
Each Participant or, in the event of the Participant's
death, the Participant's Beneficiary is, for purposes of voting
the Company Stock allocated to his Company Stock Account, hereby
designated as "named fiduciary" within the meaning of Section
403(a)(1) of ERISA.
11.3 Voting of Unallocated Company Stock. With respect to
Company Stock not allocated to Participants' Accounts, the
Committee shall instruct the Trustee, in writing, how to vote
such shares.
11.4 Tender Offers. The Trustee shall notify each
Participant of a tender or exchange offer and utilize its best
efforts to distribute to Participants in a timely manner all
information distributed to shareholders of the Company in
connection with any such tender or exchange offer. Each
Participant shall have the right from time to time to instruct
the Trustee in writing as to the manner in which to respond to
any tender or exchange offer with respect to Company Stock
allocated to his Company Stock Account which shall be pending or
which may be made in the future for all Company Stock or any
portion thereof. A Participant's instructions shall remain in
force until superseded in writing by the Participant. The
Participant shall have the right to determine confidentially
whether shares allocated to a Participant's account are tendered
or exchanged and the Trustee and Committee shall establish
procedures to ensure such confidentiality.
Unless and until a Participant's Company Stock is
tendered or exchanged, the individual instructions received by
the Trustee from the Participant shall be held by the Trustee in
strict confidence and shall not be divulged or released to any
person, including officers of the Company; provided, however,
that the Trustee shall advise the Company, at any time, upon
request, of the total number of shares not subject to
instructions to tender or exchange.
With respect to (a) Company Stock not allocated to
Participants' Accounts or (b) Company Stock allocated to
Participants' Accounts for which proper directions have not been
received from Participants, such stock shall be tendered or
exchanged by the Trustee in accordance with directions received
from the Committee. The Committee shall instruct the Trustee in
response to the tender offer in accordance with ERISA's fiduciary
duties to act as a prudent person would act in a similar
situation and to act solely in the interests of the Participants
<PAGE>
and their Beneficiaries. In exercising its fiduciary
responsibility, the Committee shall consider (to the extent
permitted by Department of Labor or Internal Revenue Service
Regulations or announcements) not only the potential increase in
value if any of the Participants' Accounts as a result of the
tender or exchange offer, but also the impact of any change in
the managerial control of the Company on the status of the
Participants as Employees in the long-run, including but not
limited to whether they will receive larger or smaller employee
benefits than at present under the Plan.
Each Participant or, in the event of the Participant's
death, the Participant's Beneficiary is, for purposes of
responding to any tender or exchange offer with respect to
Company Stock allocated to his Company Stock Account, hereby
designated as "named fiduciary" within the meaning of Section
403(a)(1) of ERISA.
ARTICLE XII
Participating Companies
12.1 Other Participating Companies. With the consent of the
Company, any entity designated a Participating Company under the
Plan may at any time join in the Trust. The Participating
Company shall file with the Company and the Trustee a duly
executed instrument approved by the Committee and the Trustee.
Any such action shall become effective upon the delivery to the
Trustee of such instrument duly executed by the Participating
Company and the Company, and upon receipt of such instrument the
Trustee shall be deemed to accept such Participating Company as a
party to this Trust without further action by the Trustee. Each
such Participating Company may then contribute under the Plan to
the Trust. The contributions which may be made by the Company or
any other Participating Company, and the income therefrom, shall
be held by the Trustee as part of a single Trust without
allocation to the Company or any other Participating Company
until the Company shall notify the Trustee of the withdrawal of
any Participating Company from the Plan pursuant to Section 12.3
herein.
12.2 Committee Appointed Exclusive Agent. Any Participating
Company which joins in the Trust as provided in Section 12.1
shall be deemed to thereby appoint the Board of Directors and the
Committee its exclusive agent to exercise on its behalf all of
the powers and authority conferred upon the Board of Directors
and the Committee by the terms of the Trust including, but not by
way of limitation, the power to amend the Trust and to terminate
the Trust. The authority of the Board of Directors and the
Committee to act as such agent shall continue with respect to all
funds contributed by each Participating Company and the income
therefrom until and unless the amount of such funds and income
has been distributed by the Trustee as hereinafter provided in
this Article XII.
12.3 Withdrawal of Participating Company. The Committee
shall notify the Trustee in writing of the withdrawal of any
Participating Company from the Plan, and the Trustee shall not
accept any further contributions under the Plan from such
<PAGE>
Participating Company and shall set aside in a separate account
such part of the Trust as the Committee shall, pursuant to
Section 12.4, determine to be held for the benefit of eligible
employees of the Participating Company and their beneficiaries as
of the last day of the Plan Year during which such Participating
Company's withdraw from the Plan.
12.4 Establishment of Segregated Fund. The Committee shall
give written directions to the Trustee with respect to the part
of the Trust segregated in a separate account pursuant to Section
12.3. Such directions shall specify the amount to be segregated
and shall be in accordance with generally accepted accounting
principles, the terms of the Plan and any applicable loan
agreement, and, to the maximum extent consistent with ERISA, the
determination of the fair market value of the assets in the Trust
in the manner provided in Section 5.3 shall be conclusive for the
purpose of such segregation. The Trustee shall follow such
directions of the Committee which shall constitute a conclusive
determination of the amounts which should be segregated for the
benefit of the eligible employees of such Participating Company
and their beneficiaries.
12.5 Distribution of Segregated Fund. The Trust shall
continue as to any Participating Company, despite receipt by the
Trustee of notice of withdrawal from the Plan as to such
Participating Company, for such time as may be necessary to
effect such withdrawal. Upon receipt by the Trustee from the
Committee of notice of withdrawal from the Plan as to such
Participating Company, the Trustee shall, with reasonable
promptness after receipt of such notice, arrange, in accordance
with the written instructions of the Committee which shall be
given in conformity with the provisions of the Plan and ERISA,
for the orderly distribution of the Trust properly segregated
with respect to such Participating Company pursuant to Sections
12.4 and 12.5.
ARTICLE XIII
Miscellaneous
13.1 Exclusive Benefit. In no event shall any part of the
funds of the Plan be used for or diverted to any purposes other
than for the exclusive benefit of Participants and their
Beneficiaries under the Plan except as permitted under Section
403(c) of ERISA. Upon the transfer by a Participating Company of
any money to the Trustee, all interest of the Participating
Company therein shall cease and terminate.
13.2 Mistake of Fact. Notwithstanding any other provisions
herein contained, if any contribution is made by a mistake of
fact, such contribution shall upon the direction of the Committee
be returned in conformity with Section 3.5 of the Plan, without
liability to any person.
13.3 Qualification of Plan. Notwithstanding any other
provisions herein contained, the Trust is entered into on the
condition that the Plan and the Trust are by the IRS as a
qualified and exempt plan and trust under the provisions of the
Code and Regulations so that contributions to the Trust may be
<PAGE>
deducted for Federal income tax purposes, within the limits of
the Code and Regulations, and to be non-taxable to Participants
when contributed. If such approval should be denied for any
reason (including failure to comply with any conditions for such
approval imposed by the IRS), contributions made after the
execution of the Trust and prior to such denial shall be returned
to the Company, without any liability to any person, within one
year after the date of denial of such approval and any assets
received by the Trust pursuant to a plan-to-plan transfer from a
qualified defined benefit plan maintained by the Company or
Company Stock purchased with such assets shall be directly
returned to the qualified defined benefit plan, to the extent
permissible by law, or to the Company, without any liability,
within one year after denial of such approval. All remaining
assets in the Trust shall be returned to the Company.
13.4 Deductibility of Contributions. Notwithstanding any
other provisions herein contained, all contributions are hereby
expressly conditioned upon their deductibility under Section 404
of the Code and Regulations, as amended from time to time, and if
the deduction for any contribution is disallowed in whole or in
part, then such contribution (to the extent the deduction is
disallowed) shall be returned upon direction of the Committee,
which shall be given in conformity with the provisions of ERISA,
without liability to any person.
13.5 Expenses. The expenses of administering the Plan
including (i) the fees and expenses of the Trustee for the
performance of its duties under the Trust, (ii) the expenses
incurred by the members of the Committee in the performance of
their duties under the Plan (including reasonable compensation
for services rendered in respect of the Plan by legal counsel,
certified public accountants, appraisers or others employed by
the Committee), and (iii) all other proper charges and
disbursements of the Company, Trustee or the members of the
Committee (including settlements of claims or legal actions
approved by counsel to the Plan) are to be paid out of the Trust
unless the Company pays such expenses directly. In estimating
costs under the Plan, administrative costs may be anticipated.
13.6 Titles for Convenience Only. Titles to the Sections of
the Trust are included for convenience only and shall not control
the meaning or interpretation of any provision of the Trust.
13.7 Executed Counterparts. The Trust may be executed in
any number of counterparts, each of which shall be deemed to be
the original although the others shall not be produced.
<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused
the Trust to be executed this 12th day of February, 1996.
----
WITNESSES: AVONDALE INDUSTRIES, INC.
/s/ MICHAEL JOHNSON By: /s/ THOMAS M. KITCHEN
------------------- ---------------------
/s/ CATHERINE M. MUCKERMAN Thomas M. Kitchen, Secretary
--------------------------
TRUSTEES OF THE AVONDALE
INDUSTRIES, INC. EMPLOYEE STOCK
OWNERSHIP PLAN TRUST
/s/ KENNETH DRAKE /s/ BLANCHE S. BARLOTTA
----------------- -----------------------
/s/ MARGUERITE A. NOONAN Blanche S. Barlotta, Trustee
------------------------
/s/ KENNETH DRAKE /s/ R. DEAN CHURCH
----------------- ------------------
/s/ MARGUERITE A. NOONAN R. Dean Church, Trustee
------------------------
/s/ KENNETH DRAKE /s/ RODNEY J. DUHON, JR.
----------------- ------------------------
/s/ MARGUERITE A. NOONAN Rodney J. Duhon, Trustee
------------------------
<PAGE>
WITNESSES: ADMINISTRATIVE COMMITTEE OF THE
AVONDALE INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
/s/ KENNETH DRAKE /s/ BLANCHE S. BARLOTTA
----------------- -----------------------
/s/ MARGUERITE A. NOONAN Blanche S. Barlotta, Member
------------------------
/s/ KENNETH DRAKE /s/ EUGENE E. BLANCHARD, JR.
----------------- ----------------------------
/s/ MARGUERITE A. NOONAN Eugene E. Blanchard, Member
------------------------
/s/ KENNETH DRAKE /s/ R. DEAN CHURCH
----------------- ------------------
/s/ MARGUERITE A. NOONAN R. Dean Church, Member
------------------------
/s/ KENNETH DRAKE /s/ RODNEY J. DUHON, JR.
----------------- ------------------------
/s/ MARGUERITE A. NOONAN Rodney J. Duhon, Jr., Member
------------------------
/s/ KENNETH DRAKE /s/ ERNEST F. GRIFFIN, JR.
----------------- --------------------------
/s/ MARGUERITE A. NOONAN Ernest F. Griffin, Jr. Member
------------------------
-1-
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did depose
and state that he is the duly elected Secretary of Avondale
Industries, Inc. and that in such capacity he executed the
foregoing Amended and Restated Avondale Industries, Inc. Employee
Stock Ownership Trust, as a free act and deed on behalf of
Avondale Industries, Inc. for the purposes therein set forth.
WITNESSES:
/s/ MICHAEL JOHNSON /s/ THOMAS M. KITCHEN
------------------- ---------------------
/s/ CATHERINE M. MUCKERMAN Thomas M. Kitchen
--------------------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 12th DAY
----
OF FEBRUARY, 1996.
/s/ RUDOLPH H. RAMELLI
----------------------
NOTARY PUBLIC
RUDOLPH R. RAMELLI
NOTARY PUBLIC
ORLEANS PARISH
LOUISIANA
MY COMMISSION IS FOR LIFE
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Blanche S. Barlotta, who being by me sworn did
depose and state that she executed the foregoing Amended and
Restated Avondale Industries, Inc. Employee Stock Ownership Trust
Agreement, as the undersigned's free act and deed for the
purposes therein set forth.
WITNESSES:
/s/ KENNETH DRAKE /s/ BLANCHE S. BARLOTTA
----------------- -----------------------
/s/ MARGUERITE A. NOONAN Blanche S. Barlotta
------------------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 12th DAY
----
OF FEBRUARY, 1996.
/s/ RUDOLPH H. RAMELLI
----------------------
NOTARY PUBLIC
RUDOLPH R. RAMELLI
NOTARY PUBLIC
ORLEANS PARISH
LOUISIANA
MY COMMISSION IS FOR LIFE
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Eugene E. Blanchard, who being by me sworn did
depose and state that he executed the foregoing Amended and
Restated Avondale Industries, Inc. Employee Stock Ownership Trust
Agreement, as the undersigned's free act and deed for the
purposes therein set forth.
WITNESSES:
/s/ KENNETH DRAKE /s/ EUGENE E. BLANCHARD, JR.
----------------- ----------------------------
/s/ MARGUERITE A. NOONAN Eugene E. Blanchard, Jr.
------------------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 12th DAY
----
OF FEBRUARY, 1996.
/s/ RUDOLPH H. RAMELLI
----------------------
NOTARY PUBLIC
RUDOLPH R. RAMELLI
NOTARY PUBLIC
ORLEANS PARISH
LOUISIANA
MY COMMISSION IS FOR LIFE
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared R. Dean Church, who being by me sworn did depose and
state that he executed the foregoing Amended and Restated
Avondale Industries, Inc. Employee Stock Ownership Trust
Agreement, as the undersigned's free act and deed for the
purposes therein set forth.
WITNESSES:
/s/ KENNETH DRAKE /s/ R. DEAN CHURCH
----------------- ------------------
/s/ MARGUERITE A. NOONAN R. Dean Church
------------------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 12th DAY
----
OF FEBRUARY, 1996.
/s/ RUDOLPH H. RAMELLI
----------------------
NOTARY PUBLIC
RUDOLPH R. RAMELLI
NOTARY PUBLIC
ORLEANS PARISH
LOUISIANA
MY COMMISSION IS FOR LIFE
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Rodney J. Duhon, Jr., who being by me sworn did
depose and state that he executed the foregoing Amended and
Restated Avondale Industries, Inc. Employee Stock Ownership Trust
Agreement, as the undersigned's free act and deed for the
purposes therein set forth.
WITNESSES:
/s/ KENNETH DRAKE /s/ RODNEY J. DUHON, JR.
----------------- ------------------------
/s/ MARGUERITE A. NOONAN Rodney J. Duhon, Jr.
------------------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 12th DAY
----
OF FEBRUARY, 1996.
/s/ RUDOLPH H. RAMELLI
----------------------
NOTARY PUBLIC
RUDOLPH R. RAMELLI
NOTARY PUBLIC
ORLEANS PARISH
LOUISIANA
MY COMMISSION IS FOR LIFE
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Ernest F. Griffin, Jr., who being by me sworn did
depose and state that he executed the foregoing Amended and
Restated Avondale Industries, Inc. Employee Stock Ownership Trust
Agreement, as the undersigned's free act and deed for the
purposes therein set forth.
WITNESSES:
/s/ KENNETH DRAKE /s/ ERNEST F. GRIFFIN, JR.
----------------- --------------------------
/s/ MARGUERITE A. NOONAN Ernest F. Griffin, Jr.
------------------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 12th DAY
----
OF FEBRUARY, 1996.
/s/ RUDOLPH H. RAMELLI
----------------------
NOTARY PUBLIC
RUDOLPH R. RAMELLI
NOTARY PUBLIC
ORLEANS PARISH
LOUISIANA
MY COMMISSION IS FOR LIFE
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
Less than 5 years 0
5 years or more 100
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.
<PAGE>
EXECUTED in multiple originals in New Orleans, Louisiana,
effective as of the 20th day of December, 1995.
---- --------
WITNESSES: AVONDALE INDUSTRIES, INC.
/s/ JACKIE H. WALKER BY: /s/ THOMAS M. KITCHEN
-------------------- ----------------------
/s/ BRUCE L. HICKS
------------------
AVONDALE GULFPORT MARINE INC.
/s/ JACKIE H. WALKER BY: /s/ THOMAS M. KITCHEN
-------------------- ----------------------
/s/ BRUCE L. HICKS
------------------
AVONDALE INDUSTRIES OF
NEW YORK, INC.
/s/ JACKIE H. WALKER BY: /s/ THOMAS M. KITCHEN
-------------------- ----------------------
/s/ BRUCE L. HICKS
------------------
AVONDALE SERVICES CORP.
/s/ JACKIE H. WALKER BY: /s/ THOMAS M. KITCHEN
-------------------- ----------------------
/s/ BRUCE L. HICKS
------------------
AVONDALE SHIPYARDS OF TEXAS,
INC.
/s/ JACKIE H. WALKER BY: /s/ THOMAS M. KITCHEN
-------------------- ----------------------
/s/ BRUCE L. HICKS
------------------
AVONDALE TRANSPORTATION
COMPANY, INC.
/s/ JACKIE H. WALKER BY: /s/ THOMAS M. KITCHEN
-------------------- ----------------------
/s/ BRUCE L. HICKS
------------------
AVONDALE ENTERPRISES, INC.
/s/ JACKIE H. WALKER BY: /s/ THOMAS M. KITCHEN
-------------------- ----------------------
/s/ BRUCE L. HICKS
------------------
AVONDALE CONSTRUCTION MANAGEMENT,INC.
/s/ JACKIE H. WALKER BY: /s/ THOMAS M. KITCHEN
-------------------- ----------------------
/s/ BRUCE L. HICKS
------------------
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
-----------------
depose and state that he signed the foregoing Avondale
Industries, Inc. 401(k) Savings Plan as a free act and deed on
behalf of Avondale Industries, Inc. for the purposes therein set
forth.
BY: /s/ THOMAS M. KITCHEN
---------------------
Print Name: Thomas M. Kitchen
-----------------
Title: Vice President & CFO
--------------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 20th DAY
----
OF December, 1995.
--------
/s/ RUDOLPH R. RAMELLI
----------------------
NOTARY PUBLIC
RUDOLPH R. RAMELLI
NOTARY PUBLIC
ORLEANS PARISH
LOUISIANA
MY COMMISSION IS FOR LIFE
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
-----------------
depose and state that he signed the foregoing Avondale
Industries, Inc. 401(k) Savings Plan as a free act and deed on
behalf of Avondale Gulfport Marine, Inc. for the purposes therein set
forth.
BY: /s/ THOMAS M. KITCHEN
---------------------
Print Name: Thomas M. Kitchen
-----------------
Title: Vice President, Secretary &
---------------------------
Treasurer
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 20th DAY
----
OF December, 1995.
--------
/s/ RUDOLPH R. RAMELLI
----------------------
NOTARY PUBLIC
RUDOLPH R. RAMELLI
NOTARY PUBLIC
ORLEANS PARISH
LOUISIANA
MY COMMISSION IS FOR LIFE
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
-----------------
depose and state that he signed the foregoing Avondale
Industries, Inc. 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: /s/ THOMAS M. KITCHEN
---------------------
Print Name: Thomas M. Kitchen
-----------------
Title: Vice President, Treasurer &
---------------------------
Secretary
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 20th DAY
----
OF December, 1995.
--------
/s/ RUDOLPH R. RAMELLI
----------------------
NOTARY PUBLIC
RUDOLPH R. RAMELLI
NOTARY PUBLIC
ORLEANS PARISH
LOUISIANA
MY COMMISSION IS FOR LIFE
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
-----------------
depose and state that he signed the foregoing Avondale
Industries, Inc. 401(k) Savings Plan as a free act and deed on
behalf of Avondale Services Corporation for the purposes therein set
forth.
BY: /s/ THOMAS M. KITCHEN
---------------------
Print Name: Thomas M. Kitchen
-----------------
Title: Vice President & Secretary
--------------------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 20th DAY
----
OF December, 1995.
--------
/s/ RUDOLPH R. RAMELLI
----------------------
NOTARY PUBLIC
RUDOLPH R. RAMELLI
NOTARY PUBLIC
ORLEANS PARISH
LOUISIANA
MY COMMISSION IS FOR LIFE
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
-----------------
depose and state that he signed the foregoing Avondale
Industries, Inc. 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: /s/ THOMAS M. KITCHEN
---------------------
Print Name: Thomas M. Kitchen
-----------------
Title: Vice President & Secretary
--------------------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 20th DAY
----
OF December, 1995.
--------
/s/ RUDOLPH R. RAMELLI
----------------------
NOTARY PUBLIC
RUDOLPH R. RAMELLI
NOTARY PUBLIC
ORLEANS PARISH
LOUISIANA
MY COMMISSION IS FOR LIFE
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
-----------------
depose and state that he signed the foregoing Avondale
Industries, Inc. 401(k) Savings Plan as a free act and deed on
behalf of Avondale Transportation Company, Inc. for the purposes
therein set forth.
BY: /s/ THOMAS M. KITCHEN
---------------------
Print Name: Thomas M. Kitchen
-----------------
Title: Vice President & Secretary
--------------------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 20th DAY
----
OF December, 1995.
--------
/s/ RUDOLPH R. RAMELLI
----------------------
NOTARY PUBLIC
RUDOLPH R. RAMELLI
NOTARY PUBLIC
ORLEANS PARISH
LOUISIANA
MY COMMISSION IS FOR LIFE
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
-----------------
depose and state that he signed the foregoing Avondale
Industries, Inc. 401(k) Savings Plan as a free act and deed on
behalf of Avondale Enterprises, Inc. for the purposes therein set
forth.
BY: /s/ THOMAS M. KITCHEN
---------------------
Print Name: Thomas M. Kitchen
-----------------
Title: Vice President, Secretary &
---------------------------
Treasurer
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 20th DAY
----
OF December, 1995.
--------
/s/ RUDOLPH R. RAMELLI
----------------------
NOTARY PUBLIC
RUDOLPH R. RAMELLI
NOTARY PUBLIC
ORLEANS PARISH
LOUISIANA
MY COMMISSION IS FOR LIFE
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
-----------------
depose and state that he signed the foregoing Avondale
Industries, Inc. 401(k) Savings Plan as a free act and deed on
behalf of Avondale Construction Management, Inc. for the purposes
therein set forth.
BY: /s/ THOMAS M. KITCHEN
---------------------
Print Name: Thomas M. Kitchen
-----------------
Title: Vice President & Secretary
--------------------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 20th DAY
----
OF December, 1995.
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/s/ RUDOLPH R. RAMELLI
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NOTARY PUBLIC
RUDOLPH R. RAMELLI
NOTARY PUBLIC
ORLEANS PARISH
LOUISIANA
MY COMMISSION IS FOR LIFE
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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
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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
<PAGE>
TRUST AGREEMENT
between
MERRILL LYNCH TRUST COMPANY (s/CR) as the Trustee
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and
Avondale Industries, Inc., as the Employer
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Trust Agreement entered into as of January l, 1996 by and between
the above-named employer (the "Employer") and Merrill Lynch Trust
Company (s/CR), a (s/CR) corporation (the "Trustee"), with
------------ -------------
respect to a trust ("Trust") forming part of the Avondale Industries,
Inc. 401(k) Savings Plan (the "Plan").
The Empioyer and the Trustee hereby agree as follows:
ARTICLE I
STATUS OF TRUST AND APPOINTMENT
AND ACCEPTANCE OF TRUSTEE
1.01 Status of Trust. The Trust is intended to be a qualified
trust under section 401(a) of the Intemal Revenue Code of 1986, as
amended from time to time (the "Code"), and exempt from taxation
pursuant to section 501 (a) of the Code.
1.02 Appointment of Trustee. The Employer represents that all
necessary action has been taken for the appointment of the Trustee as
trustee of the Trust and that the Trust Agreement constitutes a legal,
valid and binding obligation of the Employer.
1.03 Acceptance of Appointment. The Trustee accepts its
appointment as trustee of the Trust.
1.04 Title of Trust. The Trust shall be known as the Avondale
Industries, Inc 401(k) Savinqs Plan Trust.
1.05 Effectiveness. This Trust Agreement shall not become
effective until executed and delivered by both the Employer and the
Trustee.
ARTICLE II
ADMINISTRATIVE AND INVESTMENT FIDUCIARIES
2.01 Named Administrative and Investment Fiduciaries For
purposes of this Trust Agreement, the term "Named Administrative
Fiduciary" refers to the person named or provided for in the Plan as
responsible for the administration and operation of the Plan, and the
term "Named Investment Fiduciary" refers to the person provided for in
the Plan as responsible for the investment and management of Plan
assets to the extent provided for in this Trust Agreement. The Named
Administrative Fiduciary and the Named Investment Fiduciary may be the
same person. If any such person is not named or provided for in the
Plan or if so named or provided for, is not then serving, the Employer
<PAGE>
shall be the Named Administrative Fiduciary or the Named Investment
Fiduciary or both, as the case may be.
2.02 Identification of Named Fiduciaries and Designees. The Named
Administrative Fiduciary and the Named Investment Fiduciary under the
Plan shall each be identified to the Trustee in writing by the
Employer, and specimen signatures of each, or of each member thereof,
as appropnate, shall be provided to the Trustee by the Employer. The
Employer shall promptly give written notice to the Trustee of a change
in the identity either of the Named Administrative Fiduciary or the
Named Investment Fiduciary, or any member thereof, as appropnate, and
until such notice is received by the Trustee, the Trustee shall be
fully protected in assuming that the identity of the Named
Administrative Fiduciary or Named Investment Fiduciary, and the
members thereof, as appropnate, is unchanged. Each person authorized
in accordance with the Plan to give a direction to the Trustee on
behalf of the Named Administrative Fiduciary or the Named Investment
Fiduciary shall be identified to the Trustee by written notice from
the Employer or the Named Administrative Fiduciary or the Named
Investment Fiduciary, as the case may be, and such notice shall
contain a specimen of the signature. The Trustee shall be entitled to
rely upon each such written notice as evidence of the identity and
authority of the persons appointed until a written cancellation of the
appointment, or the written appointment of a successor, is received by
the Trustee from the Employer, the Named Administrative Fiduciary or
the Named Investment Fiduciary, as the case may be.
ARTICLE III
RECEIPTS AND TRUST FUND
3.01 Receipt by Trustee. The Trustee shall receive in cash or
other assets acceptable to the Trustee all contnbutions paid or
delivered to it which are allocable under the Plan and to the Trust
and all transfers paid or delivered under the Plan to the Trust from a
predecessor trustee or another trust (including a trust forming part
of another plan qualified under section 401(a) of the Code), provided
that the Trustee shall not be obligated to receive any such
contribution or transfer unless prior thereto or coincident therewith,
as the Trustee may specify, the Trustee has received such
reconciliation, allocation, investment or other information concerning,
or such direction, contribution or representation with respect to, the
contribution or transfer or the source thereof as the Trustee may
require. The Trustee shall have no duty or authority to (a) require any
contributions or transfers to be made under the Plan or to the Trustee,
(b) compute any amount to be contributed or transferred under the Plan
to the Trustee, or (c) determine whether amounts received by the
Trustee comply with the Plan.
3.02 Trust Fund. For purposes of this Trust Agreement, the "Trust
Fund" consists of all money and other property received by the Trustee
pursuant to Section 3.01 hereof, increased by any income or gains on or
increment in such assets and decreased by any investment loss or
expense, benefit or disbursement paid pursuant to this Trust Agreement.
The Trustee shall hold the Trust Fund, without distinction between
principal and income, as a nondiscretionary trustee pursuant to the
terms of this Trust Agreement. Assets of the Trust may, in the
Trustee's discretion, be held in an account with an affiliate of the
<PAGE>
Trustee.
ARTICLE IV
PAYMENTS, ADMINISTRATIVE DIRECTIONS
AND EXPENSES
4.01 Payments by Trustee. Payments of money or property from the
Trust Fund shall be made by the Trustee upon direction from the Named
Administrative Fiduciary or its designee. Payments by the Trustee shall
be transmitted to the Named Administrative Fiduciary or its designee
for delivery to the proper payees or to payee addresses supplied by the
Named Administrative Fiduciary or its designee, and the Trustee's
obligation to make such payments shall be satisfied upon such
transmittal. The Trustee shall have no obligation to determine the
identity of persons entitled to payments under the Plan or their
addresses.
4.02 Named Administrative Fiduciary's Directions. Directions from
or on behalf of the Named Administrative Fiduciary or its designee
shall be communicated to the Trustee or the Trustee's designee only in
a manner and in accordance with procedures acceptable to the Trustee.
The Trustee's designee shall not, however, be empowered to implement
any such directions except in accordance with procedures acceptable to
the Trustee. The Trustee shall have no liability for following any such
directions or failing to act in the absence of any such directions. The
Trustee shall have no liability for the acts or omissions of any person
making or failing to make any direction under the Plan or this Trust
Agreement nor any duty or obligation to review any such direction, act
or omission.
4.03 Disputed Payments. If a dispute arises over the propriety of
the Trustee making any payment from the Trust Fund, the Trustee may
withhold the payment until the dispute has been resolved by a court of
competent jurisdiction or settled by the parties to the dispute. The
Trustee may consult legal counsel and shall be fully protected in
acting upon the advice of counsel.
4.04 Trustee's Compensation and Expenses. If the Employer so
elects in a manner satisfactory to the Trustee, the Employer shall
(a) pay the Trustee compensation for its services under this Trust
Agreement in accordance with the Trustee's fee schedule in effect and
applicable at the time such compensation becomes payable, and (b) pay
or reimburse the Trustee for all expenses incurred by the Trustee in
connection with or relating to the performance of its duties under this
Trust Agreement or its status as Trustee, including reasonable
attorneys fees. If the Employer does not so elect, such compensation
and expenses shall be charged against and withdrawn from the Trust Fund
as provided below.
Until paid by the Employer or charged against and
withdrawn from the Trust Fund, as the case may be, the Trustee's
compensation and expenses shall be a lien upon the Trust Fund. The
Trustee is authorized to charge the Trust Fund for and withdraw from
the Trust Fund, without direction from the Named Administrative
Fiduciary or any other person, the amount of any such fees or expenses
which the Employer has not elected to pay and the amount of any such
fees or expenses which the Employer has so elected to pay but which
<PAGE>
remain unpaid for a period of 60 days after presentation of a statement
for such amount to the Employer. Trust Fund assets shall be applied to
pay such fees and expenses in the following priority by asset category
to the extent thereof held at the time of withdrawal in the Trust Fund
subfund or account to which the fee or expense is allocated:
(i) uninvested cash balances: (ii) shares of any money market fund or
funds held in the Trust Fund; and (iii) any other Trust Fund assets.
The Trustee is authorized to allocate its fees and expenses among these
subfunds or accounts to which the fees or expenses pertains in such
manner as the Trustee deems appropnate under the circumstances unless
prior to such allocation the Employer or the Named Administrative
Fiduciary specifies the manner in which the allocation is to be made.
The Trustee is also authorized but not required to sell any shares or
other assets referred to above to the extent necessary for the purpose.
4.05 Taxes. The Trustee is authorized, with or without direction
from the Named Administrative Fiduciary or any other person, to
withdraw from the Trust Fund and pay any federal, state or local taxes,
charges or assessments of any kind levied or assessed against the Trust
or assets thereof. Until paid, such taxes shall be a lien against the
Trust Fund. The Trustee shall give notice to the Named Administrative
Fiduciary of its receipt of a demand for any such taxes, charges or
assessments. The Trustee shall not be personally liable for any such
taxes, charges or assessments.
4.06 Expenses of Administration. Expenses incurred by the
Employer, the Named Administrative Fiduciary, the Named Investment
Fiduciary, any Investment Manager designated pursuant to Section 5.02
or any other persons designated to act on behalf of the Employer, the
Named Administrative Fiduciary or the Named Investment Fiduciary,
including reimbursement for expenses incurred in the performance of
their respective duties, shall be the obligation of the Employer or
other person specified in the Plan. Such expenses, however, may be paid
from the Trust Fund upon the written direction to the Trustee of the
Named Administrative Fiduciary.
4.07 Restriction on Alienation. Except as provided in Section
4.08 or under section 401(a)(13) of the Code, the interest of any Plan
participant or beneficiary in the Trust Fund shall not be subject to
the claims of such person's creditors and may not be assigned, sold,
transferred, alienated or encumbered. Any attempt to do so shall be
void; and the Trustee shall disregard any attempt. Trust assets shall
not in any manner be liable for or subject to debts, contracts,
liabilities, engagement or torts of any Plan participant or
beneficiary, and benefits shall not be considered an asset of any such
a person in the event of the person's insolvency or bankruptcy.
4.08 Payment on Court Order. The Trustee is authorized to make
any payments directed by court order in any action in which the Trustee
is a party or pursuant to a "qualified domestic relations order" under
section 414(p) of the Code; provlded that the Trustee shall not make
such payment if the Trustee is indemnified and held harmless by the
Employer in a manner satisfactory to the Trustee against all
consequences of such failure to pay. The Trustee is not obligated to
defend actions in which the Trustee is named but shall notify the
Employer or Named Administrative Fiduciary of any such action and may
tender defense of the action to the Employer, the Named Administrative
Fiduciary or the participant or beneficiary whose interest is affected.
The Trustee may in its discretion defend any action in which the
<PAGE>
Trustee is named and any expenses, including reasonable attorneys fees,
incurred by the Trustee in that connection shall be paid or reimbursed
in accordance with Section 4.04 hereof.
ARTICLE V
INVESTMENTS
5.01 Investment Management. The Named Investment Fiduciary shall
manage the investment of the Trust Fund except insofar as (a) a person
(an "Investment Manager") who meets the requirements of section 3(38)
of the Employee Retirement Income Security Act of 1974, as amended from
time to time ("ERISA"), has authority to manage Trust assets as
referred to in Section 5.02 hereof or (b) the Plan provides for
participant or beneficiary direction of the investment of assets
allocable under the Plan to the accounts of such participants and
beneficiaries and the Trustee notifies the Employer that such
directions will be acceptable. In the latter situation, a list of the
participants and beneficiaries and such information concerning them as
the Trustee may specify shall be provided by the Employer or the Named
Administrative Fiduciary to the Trustee and/or such person(s) as are
necessary for the implementation of the directions in accordance with
the procedure acceptable to the Trustee. Except as required by ERISA,
the Trustee shall invest the Trust Fund as directed by the Named
Investment Fiduciary, an Investment Manager or a Plan participant or
beneficiary, as the case may be, and the Trustee shall have no
discretionary control over, nor any other discretion regarding, the
investment or reinvestment of any asset of the Trust. The Trustee may
limit the categories of assets in which the Trust Fund may be invested.
It is understood that the Trustee may, from time to time, have on
hand funds which are received as contributions or transfers to the
Trust which are awaiting investment or funds from the sale of Trust
assets which are awaiting reinvestment. Absent receipt by the Trustee
of a direction from the proper person for the investment or
reinvestment of such funds or otherwise prior to the application of
funds in implementation of such a direction, the Trustee shall in
accordance with the Trustee's normal procedures in this regard cause
such funds to be invested in shares of the money market fund acceptable
to the Trustee as the Employer or Named Investment Fiduciary may in
writing to the Trustee specify for this purpose from time to time. Any
such fund may be sponsored, managed or distributed by an affiliate of
the Trustee. The Employer or the Named Investment Fiduciary, as the
case may be, hereby acknowledges that prior to any such specification
it has read or will have read the then current prospectus for the
specified fund.
5.02 Investment Managers. If so allowed pursuant to the Plan, the
Employer or the Named Investment Fiduciary may appoint one or more
Investment Managers who may be an affiliate of the Trustee, to direct
the Trustee in the investment of all or a specified portion of the
assets of the Trust. Any such Investment Manager shall be directed by
the Employer or the Named Investment Fiduciary, as the case may be, to
act in accordance with the procedures referred to in Section 5.04. The
Named Investment Fiduciary shall notify the Trustee in writing before
the effectiveness of the appointment or removal of any Investment
Manager.
<PAGE>
If there is more than one Investment Manager whose appointment is
effective under the Plan at any one time, the Trustee shall, upon
written instructions from the Employer or the Named Investment
Fiduciary, establish separate funds for control by each such Investment
Manager. The funds shall consist of those Trust assets designated by
the Employer or the Named Investment Fiduciary.
5.03 Direction of Voting and Other Rights. The voting and other
rights in securities or other assets held in the Trust shall be
exercised by the Trustee as directed by the Named Investment Fiduciary
or other person who at the time has the right as referred to in Section
5.01 hereof to direct the investment or reinvestment of the security or
other asset involved, provided that notwithstanding any provision of
the Plan to the contrary, (a) except as provided in clause (b) of this
Section, such voting and other rights in any such security or other
asset selected by the Employer or the Named Investment Fiduciary shall
be exercised by the Named Investment Fiduciary and (b) such voting and
other rights in any "employer security" with respect to the Plan within
the meaning of Section 407(d)(1) of ERISA ("Employer Securities") which
is held in an account under the Plan over which a Plan participant or
beneficiary has control as to specific assets to be held therein or
which is held in an account which consists solely or primarily of
Employer Securities shall be exercised by the participants or
beneficiaries having interests in that account. Notwithstanding any
provision hereof or of the Plan to the contrary, (i) in the event a
Plan participant or beneficiary or an Investment Manager with the right
to direct a voting or other decision with respect to any security or
other asset held in the Trust does not communicate any decision on the
matter to the Trustee or the Trustee's designee by the time prescribed
by the Trustee or the Trustee's designee for that purpose or if the
Trustee notifies the Named Investment Fiduciary either that it does not
have precise information as to the secunties or other assets involved
allocated on the applicable record date to the accounts of all
participants and beneficiaries or that time constraints make it
unlikely that participant, beneficiary or Investment Manager direction,
as the case may be, can be received on a timely basis, the decision
shall be the responsibility of the Named Investment Fiduciary and shall
be communicated to the Trustee on a timely basis, and (ii) in the event
the Named Investment Fiduciary with any right under the Plan or
hereunder to direct a voting or other decision with respect to any
security or other asset held in the Trust, including any such right
under clause (a) or clause (i) of this Section, does not communicate
any decision on the matter to the Trustee or the Trustee's designee by
the time prescribed by the Trustee for that purpose, the Trustee may,
at the cost of the Employer, obtain advice from a bank, insurance
company, investment adviser or other investment professional
(including any affiliate of the Trustee) or retain an Investment
Manager with full discretion to make the decision. Except as required
by ERISA, the Trustee shall (a) follow all directions above-referred to
in this Section and (b) shall have no duty to exercise voting or other
rights relating to any such security or other asset.
5.04 Investment Directions. Directions for the investment or
reinvestment of Trust assets or of a type referred to in Section 5.03
from the Employer, the Named Investment Fiduciary, an Investment
Manager or a Plan participant or beneficiary, as the case may be,
shall, in a manner and in accordance with procedures acceptable to the
Trustee, be communicated to and implemented by, as the case may be, the
Trustee the Trustee's designee or, with the Trustee's consent, broker/
<PAGE>
dealer designated for the purpose by the Employer or the Named
Investment Fiduciary. Communication of any such direction to such a
designee or broker/dealer shall conclusively be deemed an authorization
to the designee or broker/dealer to implement the direction even though
coming from a person other than the Trustee. The Trustee shall have no
liability for its or any other person's following such directions or
failing to act in the absence of any such directions. The Trustee shall
have no liability for the acts or omissions of any person directing the
investment or reinvestment of Trust Fund assets or making or failing to
make any direction referred to in Section 5.03. Neither shall the
Trustee have any duty or obligation to review any such investment or
other direction, act or omission or, except upon receipt of a proper
direction, to invest or otherwise manage any asset of the Trust which
is subject to the control of any such person or to exercise any voting
or other right referred to in Section 5.03.
5.05 Communication of Proxy and Other Materials. The Employer or
Named Administrative Fiduciary shall establish a procedure acceptable
to the Trustee for the timely dissemination to each person entitled to
direct the Trustee or its designee as to a voting or other decision
called for thereby or referred to therein of all proxy and other
materials bearing on the decision. In the case of Employer Securities,
at such time as proxy or other materials bearing thereon are
disseminated generally to owners of Employer Securities in accordance
with applicable law, the Employer shall cause a copy of such proxy or
other materials to be delivered directly to the Trustee and,
thereafter, shall promptly deliver to the Trustee such number of
additional copies of the proxy or other materials as the Trustee may
request.
5.06 Common and Collective Trust Funds. Any person authorized to
direct the investment of Trust assets may, if the Trustee and the Named
Investment Fiduciary so permit, direct the Trustee to invest such
assets in a common or collective trust maintained by the Trustee for
the investment of assets of qualified trusts under section 401(a) of
the Code, individual retirement accounts under section 408(a) of the
Code and plans or govemmental units described in section 818(a)(6) of
the Code. The documents governing any such common or collective trust
fund maintained by the Trustee, and in which Trust assets have been
invested, are hereby incorporated into this Trust Agreement by
reference.
ARTICLE VI
RESPONSIBILITIES AND INDEMNITY
6.01 Relationship of Fiduciaries. Each fiduciary of the Plan and
this Trust shall be solely responsible for its own acts or omissions.
The Trustee shall have no duty to question any other Plan fiduciary's
performance of fiduciary duties allocated to such other fiduciary
pursuant to the Plan. The Trustee shall not be responsible for the
breach of responsibility by any other Plan fiduciary except as provided
for in ERISA.
6.02 Benefit of Participants. Each fiduciary shall, within the
meaning of the Code and ERISA, discharge its duties with respect to the
Trust solely in the interest of participants in the Plan and their
beneficiaries and for the exclusive purpose of providing benefits to
such participants and beneficiaries and defraying reasonable expenses
<PAGE>
of administering the Plan.
6.03 Status of Trustee. The Trustee acknowledges its status as a
"fiduciary" of the Plan within the meaning of ERISA.
6.04 Location of Indicia of Ownership. Except as pemmitted by
ERISA, the Trustee shall not maintain the indicia of ownership of any
assets of the Trust outside the jurisdiction of the district courts of
the United States.
6.05 Trustee's Reliance. The Trustee shall have no duty to
inquire whether directions by the Employer, the Named Administrative
Fiduciary, the Named Investment Fiduciary or any other person conform
to the Plan, and the Trustee shall be fully protected in relying on any
such direction communicated in accordance with procedures acceptable to
the Trustee from any person who the Trustee reasonably believes is a
proper person to give the direction. The Trustee shall have no
liability to any participant, any beneficiary or any other person for
payments made, any failure to make payments, or any discontinuance of
payments, on direction of the Named Administrative Fiduciary, the Named
Investment Fiduciary or any designee of either of them or for any
failure to make payments in the absence of directions from the Named
Administrative Fiduciary or any person responsible for or purporting
to be responsible for directing the investment of Trust assets. The
Trustee shall have no obligation to request proper directions from any
person. The Trustee may request instructions from the Named
Administrative Fiduciary or the Named Investment Fiduciary and shall
have no duty to act or liability for failure to act if such
instructions are not forthcoming. The Trustee shall have no
responsibility to determine whether the Trust Fund is sufficient to
meet the liabilities under the Plan, and shall not be liable for
payments or Plan liabilities in excess of the Trust Fund.
6.06 Indemnification. The Employer hereby indemnifies the Trustee
against, and shall hold the Trustee harmless from, any and all loss,
claims, liability, and expense, including reasonable attorneys fees,
imposed upon the Trustee or incurred by the Trustee as a result of any
acts taken, or any failure to act, in accordance with the directions
from the Named Administrative Fiduciary, Named Investment Fiduciary,
Investment Manager or any other person specified in Article IV or V
hereof, or any designee of any such person, or by reason of the
Trustee's good faith execution of its duties with respect to the Trust,
including, but not limited to. its holding of assets of the Trust as
provided for in Section 3.02, the Employer's obligations in the
foregoing regard to be satisfied promptly on request by the Trustee,
provided that in the event that the loss, claim, liability or expense
involved is determined by a no longer appealable final judgment entered
in a lawsuit or proceeding to have resulted from the gross negligence
or willful misconduct of the Trustee, the Trustee shall promptly
thereafter return to the Employer any amount previously received by the
Trustee under this Section with respect to such loss, claim, liability
or expense.
6.07 Protection of Designees. To the extent that any designee of
the Trustee is performing a function of the Trustee under this Trust
Agreement, the designee shall have the benefit of all of the applicable
limitations on the scope of the Trustee's duties and liabilities, all
applicable rights of indemnification granted hereunder to the Trustee
and all other applicable protections of any nature afforded to the
<PAGE>
Trustee.
ARTICLE VII
POWERS OF TRUSTEE
7.01 Nondiscretionary Investment Powers. At the direction of the
person authorized to direct such action as referred to in Article V
hereof, but limited to those assets or categories of assets acceptable
to the Trustee as referred to in Section 5.01, the Trustee, or the
Trustee's designee or a broker/dealer as referred to in Section 5.04,
is authorized and empowered:
(a) To invest and reinvest the Trust Fund, together with the
income therefrom, in common stock, preferred stock, convertible
preferred stock, bonds, debentures, convertible debentures and bonds,
mortgages, notes, commercial paper and other evidences of indebtedness
(including those issued by the Trustee), shares of mutual funds (which
funds may be sponsored, managed or offered by an affiliate of the
Trustee), guaranteed investment contracts, bank investment contracts,
other securities, policies of life insurance, annuity contracts,
options, options to buy or sell securities or other assets, and all
other property of any type (personal, real or mixed, and tangible or
intangible);
(b) To deposit or invest all or any part of the assets of the
Trust in savings accounts or certificates of deposit or other deposits
in a bank or savings and loan association or other depository
institution, including the Trustee or any of its affiliates, provided
with respect to such deposits with the Trustee or an affiliate the
deposits bear a reasonable interest rate:
(c) To hold, manage, improve, repair and control all property,
real or personal, forming part of the Trust Fund; to sell, convey,
transfer, exchange, partition, lease for any term, even extending
beyond the duration of this Trust, and otherwise dispose of the same
from time to time:
(d) To have, respecting securities, all the rights, powers
and pnvileges of an owner, including the power to give proxies, pay
assessments and other sums deemed by the Trustee necessary for the
protection of the Trust Fund; to vote any corporate stock either in
person or by proxy, with or without power of substitution for any
purpose; to participate in voting trusts, pooling agreements,
foreclosures, reorganizations, consolidations, mergers and
liquidations, and in connection therewith to deposit securities with
or transfer title to any protective or other committee; to exercise or
sell stock subscriptions or conversion rights; and, regardless of any
limitation elsewhere in this instrument relative to investments by the
Trustee, to accept and retain as an investment any securities or other
property received through the exercise of any of the foregoing powers;
(e) Subject to Section 5.01 hereof, to hold in cash, without
liability for interest, such portion of the Trust Fund which it is
directed to so hold pending investments, or payment of expenses, or the
distribution of benefits;
(f) To take such actions as may be necessary or desirable to
<PAGE>
protect the Trust from loss due to the default on mortgages held in the
Trust including the appointment of agents or trustees in such other
jurisdictions as may seem desirable, to transfer property to such
agents or trustees, to grant to such agents such powers as are
necessary or desirable to protect the Trust Fund, to direct such agent
or trustee, or to delegate such power to direct, and to remove such
agent or trustee;
(g) To settle, compromise or abandon all claims and demands in
favor of or against the Trust Fund;
(h) To invest in any common or collective trust fund of the type
referred to in Section 5.06 hereof maintained by the Trustee;
(i) To exercise all of the further rights, powers, options and
privileges granted, provided for, or vested in trustees generally under
the laws of the state in which the Trustee is incorporated as set forth
above, so that the powers conferred upon the Trustee herein shall not
be in limitation of any authority conferred by law, but shall be in
addition thereto;
(j) To borrow money from any source and to execute promissory
notes, mortgages or other obligations and to pledge or mortgage any
trust assets as security, subject to applicable requirements of the
Code and ERISA; and
(k) To maintain accounts at, execute transactions through, and
lend on an adequately secured basis stocks, bonds or other securities
to, any brokerage or other firm, including any firm which is an
affiliate of the Trustee.
7.02 Additional Powers of Trustee. To the extent necessary or
which it deems appropriate to implement its powers under Section 7.01
or otherwise to fulfill any of its duties and responsibilities as
trustee of the Trust Fund, the Trustee shall have the following
additional powers and authority:
(a) to register securities. or any other property, in its name or
in the name of any nominee, including the name of any affiliate or the
nominee name designated by any affiliate, with or without indication of
the capacity in which property shall be held, or to hold securities in
bearer form and to deposit any securities or other property in a
depository or clearing corporation;
(b) to designate and engage the services of, and to delegate
powers and responsibilities to, such agents, representatives, advisers,
counsel and accountants as the Trustee considers necessary or
appropriate, any of whom may be an affiliate of the Trustee or a person
who renders services to such an affiliate, and, as a part of its
expenses under this Trust Agreement, to pay their reasonable expenses
and compensation;
(c) to make, execute and deliver, as Trustee, any and all deeds,
leases, mortgages, conveyances, waivers, releases or other instruments
in writing necessary or appropriate for the accomplishment of any of
the powers listed in this Trust Agreement; and
<PAGE>
(d) generally to do all other acts which the Trustee deems
necessary or appropnate for the protection of the Trust Fund.
ARTICLE VIII
RECORDS, ACCOUNTINGS AND VALUATIONS
8.01 Records. The Trustee shall maintain or cause to be
maintained accurate records and accounts of all Trust transactions and
assets. The records and accounts shall be available at reasonable times
during normal business hours for inspection or audit by the Named
Administrative Fiduciary and the Named Investment Fiduciary or any
person designated for the purpose by either of them.
8.02 Accountings. Within 90 days following the close of each
fiscal year of the Plan or the effective date of the removal or
resignation of the Trustee, the Trustee shall file with the Named
Administrative Fiduciary a written accounting setting forth all
transactions since the end of the period covered by the last previous
accounting. The accounting shall include a listing of the assets of the
Trust showing the value of such assets at the close of the period
covered by the accounting. On direction of the Named Administrative
Fiduciary, and if previously agreed to by the Trustee, the Trustee
shall submit to the Named Administrative Fiduciary interim valuations,
reports or other information pertaining to the Trust.
The Named Administrative Fiduciary may approve the accounting by
written approval delivered to the Trustee or by failure to deliver
written objections to the Trustee within 60 days after receipt of the
accounting. Any such approval shall be binding on the Employer, the
Named Administrative Fiduciary, the Named Investment Fiduciary and,
to the extent permitted by ERISA, all other persons.
8.03 Valuation. The assets of the Trust shall be valued as of
each valuation date under the Plan at fair market value as determined
by the Trustee based upon such sources of information as it may deem
reliable, including, but not limited to, stock market quotations,
statistical evaluation services, newspapers of general circulation,
financial publications, advice from investment counselors or brokerage
firms, or any combination of sources. The reasonable costs incurred in
establishing values of the Trust Fund shall be a charge against the
Trust Fund, unless paid by the Employer.
When the Trustee is unable to arrive at a value based upon
information from independent sources, it may rely upon information from
the Employer, Named Administrative Fiduciary, Named Investment
Fiduciary, appraisers, or other sources, and shall not incur any
liability for inaccurate valuation based in good faith upon such
information.
8.04 Loans. In the event that participant loans are available
under the Plan, the Trustee shall reflect one aggregate balance for
participant loans under the Plan and shall reflect changes thereto only
as directed by the Employer or Named Administrative Fiduciary. The
Trustee has no responsibility with respect to maintenance of promissory
notes or monitoring of loan amortization schedules.
<PAGE>
ARTICLE IX
RESIGNATION AND REMOVAL OF TRUSTEE
9.01 Resignation. The Trustee may resign at any time upon at
least 30 days' written notice to the Employer.
9.02 Removal. The Employer may remove the Trustee upon at least
30 days' written notice to the Trustee.
9.03 Appointment of a Successor. Upon resignation or removal of
the Trustee, the Employer shall appoint a successor trustee. Upon
failure of the Employer to appoint, or the failure of the effectiveness
of the appointment by the Employer of, a successor trustee by the
effective date of the resignation or removal, the Trustee may apply to
any court of competent jurisdiction for the appointment of a successor.
Promptly after receipt by the Trustee of notice of the
effectiveness of the appointment of the successor trustee, the Trustee
shall deliver to the successor trustee such records as may be
reasonably requested to enable the successor trustee to properly
administer the Trust Fund and all property of the Trust after deducting
therefrom such amounts as the Trustee deems necessary to provide for
expenses, taxes, compensation or other amounts due to or by the Trustee
pursuant to Sections 4.04 or 5.03 hereof not paid by the Employer prior
to the delivery.
9.04 Settlement of Account. Upon resignation or removal of the
Trustee, the Trustee shall have the right to a settlement of its
account, which settlement shall be made, at the Trustee's option,
either by an agreement of settlement between the Trustee and the
Employer or by a judicial settlement in an action instituted by the
Trustee. The Employer shall bear the cost of any such judicial
settlement, including reasonable attorneys fees.
9.05 Expenses and Compensation. The Trustee shall not be
obligated to transfer Trust assets until the Trustee is provided
assurance by the Employer satisfactory to the Trustee that all fees and
expenses reasonably anticipated will be paid.
9.06 Termination of Responsibility and Liability. Upon settlement
of the account and transfer of the Trust Fund to the successor trustee,
all rights and privileges under this Trust Agreement shall vest in the
successor trustee and all responsibility and liability of the Trustee
with respect to the Trust and assets thereo shall, except as otherwise
required by ERISA, terminate subject only to the requirement that the
Trustee execute all necessary documents to transfer the Trust assets to
the successor trustee.
ARTICLE X
AMENDMENT AND TERMINATION
10.01 Amendment. The Employer reserves the right to amend this
Trust Agreement, provided that no amendment of this Trust Agreement or
the Plan shall be effective which would (a) cause any assets of the
Trust Fund to be used for, or diverted to, purposes other than the
exclusive benefit of Plan participants or their beneficiaries other
<PAGE>
than an amendment permissible under the Code and ERISA, or (b) affect
the rights, duties, responsibilities, obligations or liabilities of
the Trustee without the Trustee's written consent. The Employer shall
amend this Trust Agreement as requested by the Trustee to reflect
changes in law which counsel for the Trustee advises the Trustee
require such changes. Amendments to the Trust Agreement or a certified
copy of the amendments shall be delivered to the Trustee promptly after
adoption and if practicable under the circumstances, any proposed
amendment under consideration by the Employer shall be communicated to
the Trustee to permit the Trustee to review and comment thereon in due
course before the Employer acts on the proposed amendment.
10.02 Termination. The Trust may be terminated by the Employer
upon at least 60 days' written notice to the Trustee. Upon such
termination, and subject to Section 11.01 hereof, the Trust Fund shall
be distributed as directed by the Named Administrative Fiduciary.
ARTICLE XI
MISCELLANEOUS
11.01 Exclusive Benefit Rule. Except as provided in Section
11.02, or as otherwise permitted as required by ERISA or the Code, no
asset of this Tnust shall be used for, or diverted to, purposes other
than the exclusive benefit of Plan participants or their beneficiaries
or for the reasonable expenses of administering the Plan and Trust
until all liabilities for benefits due Plan participants or their
beneficianes have been satisfied.
11.02 Refunds to Employer. The Trustee shall, upon the wntten
direction of the Named Administrative Fiduciary which shall include a
certification that such action is proper under the Plan, ERISA and the
Code specifying any relevant sections thereof, return to the Employer
any amount referred to in section 403(c)(2) of ERISA.
11.03 Authorized Action. Any action to be taken under this Trust
Agreement by an Employer or other person which is: (a) a corporation
shall be taken by the board of directors of the corporation or any
person or persons duly empowered by the board of directors to take the
action involved, (b) a partnership shall be taken by an authorized
general partner of the partnership, and (c) a sole propnetorship by
the sole proprietor.
11.04 Text of Plan. The Employer represents that prior to the
execution of this Trust Agreement by both parties it delivered to the
Trustee the text of the Plan as in effect as of the date of this Trust
Agreement. The Employer shall deliver to the Trustee promptly after
adoption thereof a certified copy of each other amendment of the Plan.
11.05 Conflict with Plan. The rights, duties, responsibilities,
obligations and liabilities of the Trustee are as set forth in this
Trust Agreement, and no provision of the Plan or any other document
shall be deemed to affect such rights, duties, responsibilities,
obligations and liabilities. If there is a conflict between provisions
of the Plan and this Trust Agreement with respect to any subject
involving the Trustee, including but not limited to the
responsibility, authority or powers of the Trustee, the provisions of
this Trust Agreement shall be controlling.
<PAGE>
11.06 Failure to Maintain Qualification. If the Trust fails to
qualify as a qualified trust under section 401(a) of the Code, or loses
its status as such a qualified trust, the Employer shall immediately so
notify the Trustee, and the Trustee shall, without further notice or
direction, remove the Trust assets from any common or collective trust
fund maintained by the Trustee for investments by qualified trusts.
11.07 Governing Law and Construction. This Trust Agreement and
the Trust shall be construed, administered and governed under ERISA and
other pertinent federal law, and to the extent that federal law is
inapplicable, under the laws of the state in which the Trustee is
incorporated as set forth above. If any provision of this Trust
Agreement is susceptible to more than one interpretation, the
interpretation to be given is that which is consistent with the Trust
being a qualified trust under section 401(a) of the Code. If any
provision of this Trust Agreement is held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions
shall continue to be fully effective to the extent possible under the
circumstances.
11.08 Successors and Assigns. This Trust Agreement shall inure to
the benefit of and be binding upon the parties hereto and their
respective successors and assigns.
11.09 Gender. As used in this Trust Agreement, the masculine
gender shall include the feminine and the neuter genders and the
singular shall include the plural and the plural the singular as the
context requires.
11.10 Headings. Headings and subheadings in this Trust Agreement
are for convenience of reference only and are not to be considered in
the construction of the provisions of the Trust Agreement.
11.11 Counterparts. This Trust Agreement may be executed in
several counterparts, each of which shall be deemed an onginal, and
these counterparts shall constitute one and the same instrument which
may be sufficiently evidenced by any one counterpart.
IN WITNESS WHEREOF, the Employer and the Trustee have executed
this Trust Agreement each by action of a duly authorized person.
MERRILL LYNCH TRUST COMPANY [Employer]
By /s/ CHRIS ROSEN By /s/ THOMAS M. KITCHEN
---------------- ---------------------
Name: /s/ Chris Rosen Name /s/ Thomas M. Kitchen
--------------- ---------------------
Title: Vice President Title Vice President & CFO
-------------- --------------------
WITNESSES TO TRUSTEE'S SIGNATURE WITNESSES TO EMPLOYER'S SIGNATURE
/s/ B.L. HICKS
--------------
/s/ JACKIE. H WALKER
--------------------
e: \wolf\document\ges-ta95.doc 6/21/95
<PAGE>
ACKNOWLEDGMENT
--------------
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came and
appeared Thomas M. Kitchen , who being by me sworn did depose and state
-----------------
that he signed the foregoing Trust Agreement between Merrill Lynch
Trust Company of Florida, as the Trustee, and Avondale Industries,
Inc., as the Employer, as a free act and deed on behalf of Merrill
Lynch Trust Company of Florida for the purposes therein set forth.
BY /s/ THOMAS M. KITCHEN
---------------------
Print Name: Thomas M. Kitchen
-----------------
Title: Vice President & CF0
--------------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 20th DAY
----
OF December, 1995.
--------
/s/ RUDOLPH R. RAMELLI
----------------------
NOTAY PUBLIC
RUDOLPH R. RAMELLI
NOTARY PUBLIC
ORLEANS PARISH
LOUISIANA
MY COMMISSION IS FOR LIFE
TAX\33476. 1
AVONDALE INDUSTRIES, INC.
EXECUTIVE RETIREMENT TRUST
March 1996
TAX\31022.3
<PAGE>
AVONDALE INDUSTRIES, INC.
EXECUTIVE RETIREMENT TRUST
TABLE OF CONTENTS
SECTION 1: ESTABLISHMENT OF TRUST...........................1
SECTION 2: PAYMENTS TO PLAN PARTICIPANTS AND THEIR
BENEFICIARIES...............................2
SECTION 3: TRUSTEE RESPONSIBILITY REGARDING PAYMENTS
TO TRUST BENEFICIARY WHEN COMPANY
IS INSOLVENT................................3
SECTION 4: PAYMENTS TO COMPANY..............................4
SECTION 5: INVESTMENT AUTHORITY.............................4
SECTION 6: DISPOSITION OF INCOME............................4
SECTION 7: ACCOUNTING BY TRUSTEE............................4
SECTION 8: RESPONSIBILITY OF TRUSTEE........................5
SECTION 9: COMPENSATION AND EXPENSES OF TRUSTEE.............6
SECTION 10:RESIGNATION AND REMOVAL OF TRUSTEE...................6
SECTION 11:APPOINTMENT OF SUCCESSOR.............................7
SECTION 12:AMENDMENT OR TERMINATION.............................7
SECTION 13:CHANGE IN CONTROL....................................7
SECTION 14:MISCELLANEOUS........................................8
SECTION 15:ACCEPTANCE BY TRUSTEE................................9
-i-
<PAGE>
AVONDALE INDUSTRIES, INC.
EXECUTIVE RETIREMENT TRUST
Avondale Industries, Inc. (the "Company"), acting through
its undersigned authorized officer and by authority of its Board
of Directors, hereby adopts that certain trust known as the
Avondale Industries, Inc. Executive Retirement Trust (the
"Trust").
WHEREAS, Company has adopted the following non-qualified
deferred compensation plans for the benefit of its employees:
the Avondale Industries, Inc. Restated Supplemental Pension Plan
(the "Supplemental Plan") and the Avondale Industries, Inc.
Executive Excess Retirement Plan (the "Excess Plan", collectively
with the Supplemental Plan, the "Plans").
WHEREAS, the Company has incurred or expects to incur
liability under the terms of such Plans with respect to the
individuals participating in such Plans;
WHEREAS, the Company wishes to establish a trust and to
contribute to the Trust assets that shall be held therein,
subject to the claims of Company's creditors in the event of
Company's Insolvency, as herein defined, until paid to Plan
participants and their beneficiaries in such manner and at such
times as specified in the Plans;
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded arrangement and shall not affect the
status of the Plans as unfunded plans maintained for the purpose
of providing deferred compensation for a select group of
management or highly compensated employees for purposes of Title
I of the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of the Company to make
contributions to the Trust to provide itself a source of funds to
assist it in the meeting of its liabilities under the Plans;
NOW, THEREFORE, the parties do hereby establish the Trust
and agree that the Trust shall be comprised, held and disposed of
as follows:
SECTION 1. ESTABLISHMENT OF TRUST
(a) The Company may, in its discretion, make deposits with
Trustee in trust to provide for its benefit obligations under the
Plans, which shall become the principal of the Trust to be held,
administered and disposed of by Trustee as provided in this Trust
Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which
the Company (and any subsidiary of Company whose employees are
participants in the Plans) is the grantor, within the meaning of
subpart E, part I, subchapter J, chapter 1, subtitle A of the
Internal Revenue Code of 1986, as amended, and shall be construed
accordingly.
<PAGE>
(d) The principal of the Trust, and any earnings thereon
shall be held separate and apart from other funds of the Company
and shall be used exclusively for the uses and purposes of Plan
participants and general creditors as herein set forth. Plan
participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of
the Trust. Any rights created under the Plans and this Trust
Agreement shall be mere unsecured contractual rights of Plan
participants and their beneficiaries against the Company. Any
assets held by the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the
event of Insolvency, as defined in Section 3(a) herein.
(e) Company, in its sole discretion, may at any time, or
from time to time, make additional deposits of cash or other
property in trust with Trustee to augment the principal to be
held, administered and disposed of by Trustee as provided in this
Trust Agreement. Neither Trustee nor any Plan participant or
beneficiary shall have any right to compel such additional
deposits.
(f) Upon a Change of Control, Company shall, as soon as
possible, but in no event longer than 90 days following the
Change of Control, as defined herein, make an irrevocable
contribution to the Trust in an amount that is sufficient to pay
each Plan participant or beneficiary the benefits to which Plan
participants or their beneficiaries would be entitled pursuant to
the terms of the Plans as of the date on which the Change of
Control occurred.
(g) All capitalized terms not defined in this Trust
Agreement shall have the same meaning as they have under the
Plans.
(h) Any ambiguities or gaps in this Trust Agreement shall
be resolved by reference to the Plan document, but only if
consistent with the purposes set forth in this Trust.
(i) The Trustee shall account separately for monies and
other property contributed pursuant to the Supplemental Plan and
earnings thereon and for monies contributed pursuant to the
Excess Plan and earnings thereon and shall keep separate
bookkeeping accounts for that purpose, to be known as the
Supplemental Account and the Excess Account. Except as otherwise
provided herein, the Trustee may collectively invest some or all
of the funds credited to the Supplemental Account and the Excess
Account so long as separate bookkeeping records are maintained.
Only benefits under the Supplemental Plan shall be paid from the
Supplemental Account, and only benefits under the Excess Plan
shall be paid from the Excess Account.
SECTION 2.PAYMENTS TO PLAN PARTICIPANTS AND THEIR
BENEFICIARIES
(a) Company shall deliver to Trustee a schedule (the
"Payment Schedule") that indicates the amounts payable in respect
of each Plan participant (and his or her beneficiaries), that
provides a formula or other instructions acceptable to Trustee
for determining the amounts so payable, the form in which such
<PAGE>
amount is to be paid (as provided for or available under the
Plan), and the time of commencement for payment of such amounts.
Except as otherwise provided herein, Trustee or such entity as
designated by the Company shall make payments to the Plan
participants and their beneficiaries in accordance with such
Payment Schedule. The Trustee shall make provisions for the
withholding of any federal, state or local taxes that may be
required to be withheld with respect to the payment of benefits
pursuant to the terms of the Plan and shall pay such amounts to
the Company. It being understood among the parties hereto that
(1) Company shall on a timely basis provide Trustee specific
information as to the amount of taxes to be withheld and
(2) Company shall be obligated to receive such withheld taxes
from Trustee and properly pay and report such amounts to the
appropriate taxing authorities.
(b) The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plans shall be determined by
Company or such party as it shall designate under the Plans, and
any claim for such benefits shall be considered and reviewed
under the procedures set out in the Plans.
(c) Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the
terms of the Plans. Company shall notify Trustee of a decision
to make payment of benefits directly prior to the time amounts
are payable to participants or their beneficiaries. In addition,
if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the
terms of the Plans, Company shall make the balance of each such
payment as it falls due. Trustee shall notify Company where
principal and earnings are not sufficient.
(d) All distributions shall be in the form of cash.
SECTION 3.TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO
TRUST BENEFICIARY WHEN COMPANY IS INSOLVENT
(a) Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company (or any
subsidiary of Company whose employees are participants in the
Plans) is Insolvent. Company (or such subsidiary) shall be
considered "Insolvent" for purposes of this Trust Agreement if
(i) Company (or such subsidiary) is unable to pay its debts as
they become due, or (ii) Company (or such subsidiary) is subject
to a pending proceeding as a debtor under the United States
Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of the
Trust shall be subject to claims of general creditors of Company
(or such subsidiary) under federal and state law as set forth
below.
(1) The Board of Directors and the Chief Executive
Officer of Company shall have the duty to inform Trustee in
writing of Company's (or such subsidiary's) Insolvency. If a
person claiming to be a creditor of Company (or such subsidiary)
alleges in writing to Trustee that Company (or such subsidiary)
<PAGE>
has become Insolvent, Trustee shall determine whether Company (or
such subsidiary) is Insolvent and, pending such determination,
Trustee shall discontinue payment of benefits to Plan
participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of Company's
(or such subsidiary's) Insolvency, or has received notice from
Company (or such subsidiary) or a person claiming to be a
creditor alleging that Company (or such subsidiary) is Insolvent,
Trustee shall have no duty to inquire whether Company (or such
subsidiary) is Insolvent. Trustee may in all events rely on such
evidence concerning Company's (or such subsidiary's) solvency as
may be furnished to Trustee and that provides Trustee with a
reasonable basis for making a determination concerning Company's
(or such subsidiary's) solvency.
(3) If at any time Trustee has determined that Company
(or such subsidiary) is Insolvent, Trustee shall discontinue
payments to Plan participants or their beneficiaries and shall
hold the assets of such Trust for the benefit of Company's (or
such subsidiary's) general creditors. Nothing in this Trust
Agreement shall in any way diminish any rights of Plan
participants or their beneficiaries to pursue their rights as
general creditors of Company (or such subsidiary) with respect to
benefits due under the Plans or otherwise.
(4) Trustee shall resume the payment of benefits to
Plan participants or their beneficiaries in accordance with
Section 2 of this Trust Agreement only after Trustee has
determined that Company (or such subsidiary) is not Insolvent (or
is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to
Section 3(b) hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the
aggregate amount of all payments due to Plan participants or
their beneficiaries under the terms of the Plans for the period
of such discontinuance, less the aggregate amount of any payments
made to Plan participants or their beneficiaries by Company in
lieu of the payments provided for hereunder during any such
period of discontinuance.
SECTION 4. PAYMENTS TO COMPANY
Except as provided in Section 3 hereof, the Company shall
have no right or power to direct Trustee to return to the Company
or to divert to others any of the Trust assets before all payment
of benefits have been made to Plan participants and their
beneficiaries pursuant to the terms of the Plans.
SECTION 5. INVESTMENT AUTHORITY
The Trustee shall have the authority to invest funds held in
the Trust within the guidelines determined by the Plan
Administrator or in its own discretion in the absence of such
guidelines. In no event may Trustee invest in securities
(including stock or rights to acquire stock) or obligations
issued by Company, other than a de minimis amount held in common
<PAGE>
investment vehicles in which Trustee invests. The Plan
Administrator upon notice to the Trustee, may appoint an
investment manager to direct investment of all or a portion of
trust assets. All rights associated with assets of the Trust
shall be exercised by the Trustee or the person designated by
Trustee, and shall in no event be exercisable by or vest with
Plan participants.
SECTION 6. DISPOSITION OF INCOME
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and
reinvested and used to fund benefits under the Plans.
SECTION 7. ACCOUNTING BY TRUSTEE
Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
agreed upon in writing between Company and Trustee. Within 45
days following the close of each calendar year and within 45 days
after removal or resignation of Trustee, Trustee shall deliver to
the Plan Administrator a written account of its administration of
the Trust during such year or during the period from the close of
the last preceding year to the date of such removal or
resignation, setting forth all investments, receipts,
disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued
interest paid or receivable being shown separately), and showing
all cash, securities and other property held in the Trust at the
end of such year or as of the date of such removal or
resignation, as the case may be. Trustee may satisfy its
obligation under this Section 7 by rendering to the Plan
Administrator monthly statements setting forth the information
required by this Section separately for the month covered by the
statement.
SECTION 8. RESPONSIBILITY OF TRUSTEE
(a) Trustee shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent
person acting in like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and
with like aims, provided, however, that Trustee shall incur no
liability to any person for any action taken pursuant to a
direction, request or approval given by Company, the Plan
Administrator, or the Board of Directors, which is contemplated
by, and in conformity with, the terms of the Plan and this Trust
and is given in writing by Company. Trustee shall also incur no
liability to any person for failure to act in the absence of
direction, request or approval from Company which is contemplated
by, and in conformity with, the terms of this Trust. In the
event of a dispute between Company and a party, Trustee may apply
to a court of competent jurisdiction to resolve the dispute.
(b) Company hereby indemnifies, to extent allowed by
applicable law, Trustee and each of its affiliates (collectively,
the "Indemnified Parties") against, and shall hold them harmless
<PAGE>
from, any and all loss, claims, liability and expense, including
reasonable attorneys' fees, imposed upon or incurred by any
Indemnified Party as a result of any acts taken, or any failure
to act, in accordance with the directions from Company or any
designee of Company, or by reason of the Indemnified Party's good
faith execution of its duties with respect to the Trust,
including, but not limited to, its holding of assets of the
Trust, Company's obligations in the foregoing regard to be
satisfied promptly by Company, provided that in the event the
loss, claim, liability or expense involved is determined by a no
longer appealable final judgment entered in a lawsuit or
proceeding to have resulted from the gross negligence or willful
misconduct of Trustee, Trustee shall promptly on request
thereafter return to Company any amount previously received by
Trustee under this Section with respect to such loss, claim,
liability or expense.
(c) Trustee may consult with legal counsel (who may also be
counsel for Company generally) with respect to any of its duties
or obligations hereunder.
(d) Trustee (after consultation with the Company) may hire
agents, accountants, actuaries, investment advisers, financial
consultants or other professionals to assist it in performing any
of its duties or obligations hereunder.
(e) Trustee shall have, without exclusion, all powers
conferred on Trustee by applicable law, unless expressly provided
otherwise herein, provided, however, that if an insurance policy
is held as an asset of the Trust, Trustee shall have no power to
name a beneficiary of the policy other than the Trust, to assign
the policy (as distinct from conversion of the policy to a
different form) other than to a successor Trustee, or to loan to
any person the proceeds of any borrowing against such policy.
(f) All communications from the Company, Plan
Administrator, or Board of Directors shall be made in writing
signed by any member of the Plan Administrator or the Board of
Directors or a person designated by the Plan Administrator or the
Board of Directors. The Trustee shall be fully protected in
relying on any such communications, and the Trustee shall not be
required to verify the accuracy or validity of such communication
unless it has reasonable ground to doubt the authenticity of any
signature. If the Trustee does not receive instructions after a
request, the Trustee shall act or refrain from acting as it may
determine to be appropriate or necessary. The Trustee shall have
no obligation to ascertain the correctness of any information it
receives from the Company, the Plan Administrator or the Board of
Directors that any instructions it receives from any such body
are consistent with the Plan.
(g) Notwithstanding any powers granted to Trustee pursuant
to this Trust Agreement or to applicable law, Trustee shall not
have any power that could give this Trust the objective of
carrying on a business and dividing the gains therefrom, within
the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal
Revenue Code.
<PAGE>
SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE
Trustee is authorized, unless otherwise agreed by Trustee,
to withdraw from the Trust without direction from Company the
amount of its fees in accordance with the fee schedule agreed to
by Company and Trustee. Company shall pay all administrative
expenses, but if not so paid, the expenses shall be paid from the
Trust.
SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE
(a) Trustee may resign at any time by written notice to
Company, which shall be effective 30 days after receipt of such
notice unless Company and Trustee agree otherwise.
(b) Trustee may be removed by the Board of Directors of the
Company on 30 days notice or upon shorter notice accepted by
Trustee.
(c) Upon resignation or removal of Trustee and appointment
of a successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be
completed within 60 days after receipt of notice of resignation,
removal or transfer, unless Company extends the time limit,
provided that Trustee is provided assurance by Company
satisfactory to Trustee that all fees and expenses reasonably
anticipated will be paid.
(d) If Trustee resigns or is removed, a successor shall be
appointed in accordance with Section 11 hereof, by the effective
date or resignation or removal under paragraph(s) (a) or (b) of
this Section. If no such appointment has been made, Trustee may
apply to a court of competent jurisdiction for appointment of a
successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative
expenses of the Trust.
(e) Upon settlement of the account and transfer of the
Trust assets to the successor Trustee, all rights and privileges
under this Trust Agreement shall vest in the successor Trustee
and all responsibility and liability of Trustee with respect to
the Trust and assets thereof shall terminate subject only to the
requirement that Trustee execute all necessary documents to
transfer the Trust assets to the successor Trustee.
SECTION 11. APPOINTMENT OF SUCCESSOR
(a) If Trustee resigns or is removed in accordance with
Section 10(a) or (b) hereof, Company may appoint any third party,
such as a bank trust department or other party that may be
granted corporate trustee powers under state law, as a successor
to replace Trustee upon resignation or removal. The appointment
shall be effective when accepted in writing by the new Trustee,
who shall have all of the rights and powers of the former
Trustee, including ownership rights in the Trust assets. The
former Trustee shall execute any instrument necessary or
reasonably requested by Company or the successor Trustee to
evidence the transfer.
<PAGE>
(b) The successor Trustee need not examine the records and
act of any prior Trustee and may retain or dispose of existing
Trust assets, subject to Sections 7 and 8 hereof. The successor
Trustee shall not be responsible for and Company shall indemnify
and defend the successor Trustee from any claim or liability
resulting from any action or inaction of any prior Trustee or
from any other past event, or any condition existing at the time
it becomes successor Trustee.
SECTION 12. AMENDMENT OR TERMINATION
(a) Amendment. Except as restricted in Section 12, the
provisions of this Trust document may be amended by the Board of
Directors of the Company from time to time and at any time in
whole or in part, provided that no amendment shall operate to
deprive any participant or beneficiary of any rights or benefits
accrued to them under the Plan and Trust prior to such amendment.
(b) Termination. While it is the Company's intention to
continue the Trust in operation indefinitely, the right is
nevertheless expressly reserved by the Company, through its Board
of Directors, to terminate the Trust in whole or in part or to
discontinue contributions. Upon a termination by the Company,
the assets of the Trust shall be distributed to the Plan
participants and their beneficiaries as directed by the Plan
Administrator, provided that the provisions of Section 3 are not
applicable at that time. Any assets remaining after payment of
all Plan benefits to Plan participants and beneficiaries and
payment of all Trustee's fees and expenses shall be returned to
Company.
SECTION 13. CHANGE OF CONTROL
(a) Overriding Provisions. To the extent inconsistent with
the provisions of other paragraph of this Trust document, the
provisions of this Section 13 shall govern.
(b) Definition. For purposes of this Trust Agreement, a
"Change of Control" shall mean:
(1) the acquisition by an individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 of beneficial ownership
within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than 25% of the outstanding shares of
the Company's Common Stock, $1.00 par value per share (the
"Common Stock"); provided, however, that for purposes of
this subsection (1) the following acquisitions shall not
constitute a Change of Control:
(i) any acquisition of Common Stock directly
from the Company,
(ii) any acquisition of Common Stock by the
Company,
(iii) any acquisition of Common Stock by an
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
<PAGE>
by the Company, or
(iv) any acquisition of Common Stock by any
corporation pursuant to a transaction that complied
with clauses (i), (ii) and (iii) of subsection (3) of
this definition; or
(2) individuals who, as of January 19, 1996 (the
"Change of Control Agreement Date"), constitute the Board of
Directors of the Company (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board of
Directors; provided, however, that any individual becoming a
director subsequent to the Change of Control Agreement Date
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall
be considered a member of the Incumbent Board, unless such
individual's initial assumption of office occurs as a result
of an actual or threatened election contest with respect to
the election or removal of directors of other actual or
threatened solicitation of proxies or consents by or on
behalf of a person other than the Incumbent Board; or
(3) consummation of a reorganization, merger or
consolidation, or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination,
(i) all or substantially all of the individuals
and entities who were the beneficial owners of the
Company's outstanding common stock and the Company's
voting securities entitled to vote generally in the
election of directors immediately prior to such
Business Combination have direct or indirect beneficial
ownership, respectively, of more than 50% of the then
outstanding shares of common stock, and more than 50%
of the combined voting power of the then outstanding
voting securities entitled to vote generally in the
election of directors, of the corporation resulting
from such Business Combination (which, for purposes of
this paragraph (i) and paragraphs (ii) and (iii), shall
include a corporation which as a result of such
transaction controls the Company or all or
substantially all of the Company's assets either
directly or through one or more subsidiaries), and
(ii) except to the extent that such ownership
existed prior to the Business Combination, no person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan or related
trust of the Company or such corporation resulting from
such Business Combination) beneficially owns, directly
or indirectly, 20% or more of the then outstanding
shares of common stock of the corporation resulting
from such Business Combination or 20% or more of the
combined voting power of the then outstanding voting
securities of such corporation, and
<PAGE>
(iii) at least a majority of the members of the
board of directors of the corporation resulting from
such Business Combination were members of the Incumbent
Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for
such Business Combination; or
(4) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
(c) Effect. Upon the occurrence of a Change of Control of
the Company and the Company's failure following the Change of
Control to ratify the Plan and contribute to the Trust according
to its terms, this Trust shall terminate, and funds accumulated
in the Trust as of the date of the Change of Control (and after
the contribution required pursuant to Section 1(f)) shall,
provided the provisions of Section 3 do not become applicable, be
used solely for the obligations of the Plan, and distributed to
the Plan participants and beneficiaries under the Plan, as of the
date of the Change of Control, until such time as all such
obligations have been paid in full. The Trustee shall pay such
obligations to such Plan participants and beneficiaries as soon
as practicably possible following a Change of Control.
SECTION 14. MISCELLANEOUS
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(b) Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed
in accordance with the laws of Louisiana.
(d) All taxes levied against the Trust or its income or
assets shall be paid by Company. Notwithstanding the foregoing,
the Company shall not be liable for any taxes assessed against
Plan participants or their beneficiaries as a result of their
coverage under or receipt of benefits from this Trust.
SECTION 15. ACCEPTANCE BY TRUSTEE
Whitney National Bank accepts its appointment as Trustee
under the Trust and shall be referred to herein as the Trustee.
Thus done and signed on this 5th day of March, 1996 in the
--- -----
presence of the undersigned and competent witnesses who
hereunto signed their names with the said appearers after reading
of the whole.
<PAGE>
WITNESSES:
AVONDALE INDUSTRIES, INC.
/s/ JACKIE H. WALKER By: /s/ THOMAS M. KITCHEN
-------------------- ---------------------
/s/ B.L. HICKS Thomas M. Kitchen, Secretary
--------------
TRUSTEE
/s/ (ILLEGIBLE) By: /s/ DENISE PATTERSON
--------------- --------------------
/s/ PAMELA C. ELLIOTT Denise Patterson, Trust Officer
---------------------
-i-
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did depose
and state that he is the duly elected Secretary of Avondale
Industries, Inc. and that in such capacity he executed the
foregoing Avondale Industries, Inc. Executive Retirement Trust as
a free act and deed on behalf of Avondale Industries, Inc. for
the purposes therein set forth.
WITNESSES:
/s/ JACKIE H. WALKER /s/ THOMAS M. KITCHEN
-------------------- ---------------------
/s/ B. L. HICKS Thomas M. Kitchen
---------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 5th DAY
---
OF March, 1996.
-----
/s/ RUDOLPH H. RAMELLI
----------------------
NOTARY PUBLIC
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came
and appeared Denise Patterson, who being by me sworn did
-----------------
depose and state that he/she is the duly
appointed Trust Officer of Whitney National Bank and that in
-------------------------
such capacity he/she executed the foregoing Avondale Industries,
Inc. Executive Retirement Trust as a free act and deed on behalf
of Whitney National Bank for the purposes therein set forth.
WITNESSES:
/s/ (ILLEGIBLE) By: /s/ DENISE PATTERSON
--------------- --------------------
/s/ PAMELA C. ELLIOTT
---------------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 7th DAY
---
OF March, 1996.
-----
/s/ (ILLEGIBLE)
---------------
NOTARY PUBLIC
AMENDED AND RESTATED
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement ("the Agreement") between
Avondale Industries, Inc., a Louisiana corporation (the
"Company"), and Albert L. Bossier, Jr. (the "Employee") is dated
effective as of January 19, 1996 (the "Change of Control
Agreement Date").
ARTICLE I
DEFINITIONS
1.1 Employment Agreement Defined. Notwithstanding any
provision thereof, after a Change of Control (defined below),
this Agreement supersedes the Employment Agreement dated as of
September 27, 1985 or any subsequent employment agreement between
Employee and the Company that so provides (the "Employment
Agreement").
1.2 Company Defined. As used in this Agreement, "Company"
shall mean the Company as defined above and any successor to or
assignee of (whether direct or indirect, by purchase, merger,
consolidation or otherwise) all or substantially all of the
assets or business of the Company.
1.3 Change of Control Defined. "Change of Control" shall
mean:
(a) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than 25% of the outstanding shares of
the Company's Common Stock, $1.00 par value per share (the
"Common Stock"); provided, however, that for purposes of
this subsection (a), the following acquisitions shall not
constitute a Change of Control:
(i) any acquisition of Common Stock directly from
the Company,
(ii) any acquisition of Common Stock by the
Company,
(iii)any acquisition of Common Stock by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
by the Company, or
(iv) any acquisition of Common Stock by any
corporation pursuant to a transaction that complies
with clauses (i), (ii) and (iii) of subsection (c) of
this Section 1.3; or
<PAGE>
(b) individuals who, as of the Change of Control
Agreement Date, constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a
director subsequent to the Change of Control Agreement Date
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall
be considered a member of the Incumbent Board, unless such
individual's initial assumption of office occurs as a result
of an actual or threatened election contest with respect to
the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on
behalf of a person other than the Incumbent Board; or
(c) consummation of a reorganization, merger or
consolidation, or sale or other disposition of all of
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination,
(i) all or substantially all of the individuals
and entities who were the beneficial owners of the
Company's outstanding common stock and the Company's
voting securities entitled to vote generally in the
election of directors immediately prior to such
Business Combination have direct or indirect beneficial
ownership, respectively, of more than 50% of the then
outstanding shares of common stock, and more than 50%
of the combined voting power of the then outstanding
voting securities entitled to vote generally in the
election of directors, of the corporation resulting
from such Business Combination (which, for purposes of
this paragraph (i) and paragraphs (ii) and (iii), shall
include a corporation which as a result of such
transaction controls the Company or all or
substantially all of the Company's assets either
directly or through one or more subsidiaries), and
(ii) except to the extent that such ownership
existed prior to the Business Combination, no person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan or related
trust of the Company or such corporation resulting from
such Business Combination) beneficially owns, directly
or indirectly, 20% or more of the then outstanding
shares of common stock of the corporation resulting
from such Business Combination or 20% or more of the
combined voting power of the then outstanding voting
securities of such corporation, and
(iii)at least a majority of the members of the
board of directors of the corporation resulting from
such Business Combination were members of the Incumbent
Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for
such Business Combination; or
(d) approval by the shareholders of the Company of a
<PAGE>
complete liquidation or dissolution of the Company.
1.4 Affiliate Defined. "Affiliate" or "affiliated
companies" shall mean any company controlled by, controlling, or
under common control with, the Company.
1.5 Cause Defined. "Cause" shall mean:
(a) the willful and continued failure of the
Employee to perform substantially the Employee's duties
with the Company or its affiliates (other than any such
failure resulting from incapacity due to physical or
mental illness), after a written demand for substantial
performance is delivered to the Employee by the Board
of the Company which specifically identifies the manner
in which the Board believes that the Employee has not
substantially performed the Employee's duties, or
(b) the willful engaging by the Employee in
illegal conduct or gross misconduct.
For purposes of this provision, no act or failure to act, on the
part of the Employee, shall be considered "willful" unless it is
done, or omitted to be done, by the Employee in bad faith or
without reasonable belief that the Employee's action or omission
was in the best interests of the Company or its Affiliates. Any
act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of
a senior officer of the Company or based upon the advice of
counsel for the Company or its Affiliates shall be conclusively
presumed to be done, or omitted to be done, by the Employee in
good faith and in the best interests of the Company or its
Affiliates. The cessation of employment of the Employee shall
not be deemed to be for Cause unless and until there shall have
been delivered to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is
provided to the Employee and the Employee is given an
opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the
Employee is guilty of the conduct described in subparagraph (a)
or (b) above, and specifying the particulars thereof in detail.
1.6 Disability Defined. "Disability" shall mean a
condition that would entitle the Employee to receive benefits
under the Company's long-term disability insurance policy in
effect at the time either because he is Totally Disabled or
Partially Disabled, as such terms are defined in the Company's
policy in effect as of the date of this Agreement or as similar
terms are defined in any successor policy. If the Company has no
long-term disability plan in effect, "Disability" shall occur if
(a) the Employee is rendered incapable because of physical or
mental illness of satisfactorily discharging his duties and
responsibilities to the Company for a period of 90 consecutive
days, (b) a duly qualified physician chosen by the Company and
acceptable to the Employee or his legal representatives so
certifies in writing, and (c) the Board determines that the
Employee has become disabled.
<PAGE>
1.7 Good Reason Defined. "Good Reason" shall mean:
(a) Any failure of the Company or its Affiliates to
provide the Employee with the position, authority, duties
and responsibilities at least commensurate in all material
respects with the most significant of those held, exercised
and assigned at any time during the 120-day period
immediately preceding the Change of Control. Employee's
position, authority, duties and responsibilities after a
Change of Control shall not be considered commensurate in
all material respects with Employee's position, authority,
duties and responsibilities prior to a Change of Control
unless after the Change of Control Employee holds (i) an
equivalent position in the Company or, (ii) if the Company
is controlled or will after the transaction be controlled by
another company (directly or indirectly), an equivalent
position in the ultimate parent company.
(b) The assignment to the Employee of any duties
inconsistent in any material respect with Employee's
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 2.1(b) of this Agreement, or any
other action that results in a diminution in such position,
authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action
not taken in bad faith that is remedied within 10 days after
receipt of written notice thereof from the Employee to the
Company;
(c) Any failure by the Company or its Affiliates to
comply with any of the provisions of this Agreement, other
than an isolated, insubstantial and inadvertent failure not
occurring in bad faith that is remedied within 10 days after
receipt of written notice thereof from the Employee to the
Company;
(d) The Company or its Affiliates requiring the
Employee to be based at any office or location other than as
provided in Section 2.1(b)(ii) hereof or requiring the
Employee to travel on business to a substantially greater
extent than required immediately prior to the Change of
Control;
(e) Any purported termination of the Employee's
employment otherwise than as expressly permitted by this
Agreement; or
(f) Any failure by the Company to comply with and
satisfy Sections 3.1(c) and (d) of this Agreement.
ARTICLE II
CHANGE OF CONTROL BENEFIT
2.1 Employment Term and Capacity after Change of Control.
(a) If a Change of Control occurs on or before December 31, 2000,
then the Employee's employment term (the "Employment Term") shall
<PAGE>
continue through the third anniversary of the Change of Control,
subject to any earlier termination of Employee's status as an
employee pursuant to this Agreement.
(b) After a Change of Control and during the Employment
Term, (i) the Employee's position (including status, offices,
titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately
preceding the Change of Control and (ii) the Employee's service
shall be performed during normal business hours at the location
where the Employee was employed immediately preceding the Change
of Control or any office or location less than 35 miles from such
location. Employee's position, authority, duties and
responsibilities after a Change of Control shall not be
considered commensurate in all material respects with Employee's
position, authority, duties and responsibilities prior to a
Change of Control unless after the Change of Control Employee
holds (x) an equivalent position in the Company or, (y) if the
Company is controlled or will after the transaction be controlled
by another company (directly or indirectly), an equivalent
position in the ultimate parent company. Employee shall devote
himself to his employment responsibilities with the Company (or,
if applicable, the ultimate parent entity) as provided in the
Employment Agreement.
2.2 Compensation and Benefits. During the Employment Term,
Employee shall be entitled to the following compensation and
benefits:
(a) Base Salary. The Employee shall receive an annual
base salary ("Base Salary"), which shall be paid at a
monthly rate, at least equal to 12 times the highest monthly
base salary paid or payable, including any base salary which
has been earned but deferred by the Employee, by the Company
and its affiliated companies in respect of the 12-month
period immediately preceding the month in which the Change
of Control occurs. During the Employment Term, the Base
Salary shall be reviewed no more than 12 months after the
last salary increase awarded to the Employee prior to the
Change of Control and thereafter at least annually and shall
be first increased no more than 12 months after the last
salary increase awarded to the Employee prior to the Change
of Control and thereafter at least annually in an amount
equal to the percentage increase (excluding promotional
increases) in base salary generally awarded to peer
executives of the Company and its affiliated companies for
the year of determination. Any increase in Base Salary
shall not serve to limit or reduce any other obligation to
the Employee under this Agreement. Base Salary shall not be
reduced after any such increase and the term Base Salary as
utilized in this Agreement shall refer to Base Salary as so
increased.
(b) Annual Bonus. In addition to Base Salary, the
Employee shall be awarded, for each fiscal year ending
during the Employment Term, an annual bonus (the "Bonus") in
cash at least equal to the executive's target bonus under
<PAGE>
the Company's Management Incentive Plan, or any comparable
bonus under a successor plan, for the last full fiscal year
prior to the Change of Control. Each such Bonus shall be
paid no later than the end of the third month of the fiscal
year next following the fiscal year for which the Bonus is
awarded, unless the Employee shall elect to defer the
receipt of such Bonus.
(c) Fringe Benefits. The Employee shall be entitled
to fringe benefits (including, but not limited to,
automobile allowance, reimbursement for membership dues, and
first class air travel) in accordance with the most
favorable agreements, plans, practices, programs and
policies of the Company and its affiliated companies in
effect for the Employee at any time during the 120-day
period immediately preceding the Change of Control or, if
more favorable to the Employee, as in effect generally at
any time thereafter with respect to other peer employees of
the Company and its affiliated companies.
(d) Expenses. The Employee shall be entitled to
receive prompt reimbursement for all reasonable expenses
incurred by the Employee in accordance with the most
favorable agreements, policies, practices and procedures of
the Company and its affiliated companies in effect for the
Employee at any time during the 120-day period immediately
preceding the Change of Control or, if more favorable to the
Employee, as in effect generally at any time thereafter with
respect to other peer employees of the Company and its
affiliated companies.
(e) Incentive, Savings and Retirement Plans. The
Employee shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and
programs applicable generally to other peer employees of the
Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the
Employee with incentive opportunities (measured with respect
to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable),
savings opportunities and retirement benefit opportunities,
in each case, less favorable than the most favorable of
those provided by the Company and its affiliated companies
for the Employee under any agreements, plans, practices,
policies and programs as in effect at any time during the
120-day period immediately preceding the Change of Control
or, if more favorable to the Employee, those provided
generally at any time after the Change of Control to other
peer employees of the Company and its affiliated companies.
(f) Welfare Benefit Plans. The Employee and/or the
Employee's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies
(including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental
death and travel accident insurance plans and programs) to
the extent applicable generally to other peer employees of
<PAGE>
the Company and its affiliated companies, but in no event
shall such plans, practices, policies and programs provide
the Employee with benefits, in each case, less favorable
than the most favorable of any agreements, plans, practices,
policies and programs in effect for the Employee at any time
during the 120-day period immediately preceding the Change
of Control or, if more favorable to the Employee, those
provided generally at any time after the Change of Control
to other peer employees of the Company and its affiliated
companies.
(g) Office and Support Staff. The Employee shall be
entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive
personal secretarial and other assistance, at least equal to
the most favorable of the foregoing provided to the Employee
by the Company and its affiliated companies at any time
during the 120-day period immediately preceding the Change
of Control or, if more favorable to the Employee, as
provided generally at any time thereafter with respect to
other peer employees of the Company and its affiliated
companies.
(h) Vacation. The Employee shall be entitled to paid
vacation in accordance with the most favorable agreements,
plans, policies, programs and practices of the Company and
its affiliated companies as in effect for the Employee at
any time during the 120-day period immediately preceding the
Change of Control or, if more favorable to the Employee, as
in effect generally at any time thereafter with respect to
other peer employees of the Company and its affiliated
companies.
2.3 Obligations upon Termination after a Change of Control.
(a) Termination by Company for Reasons other than
Death, Disability or Cause or by Employee for Good Reason.
If, after a Change of Control and during the Employment
Term, the Company terminates the Employee's employment other
than for Cause, death or Disability, or the Employee
terminates employment for Good Reason,
(i) the Company shall pay to the Employee in a
lump sum in cash within 30 days of the date of
termination an amount equal to three times the sum of
(i) the amount of Base Salary in effect at the date of
termination, plus (ii) the greater of (x) the highest
annual Bonus paid or to be paid to the Employee with
respect to the last three fiscal years or (y) the
target Bonus for which the Employee is eligible for the
12-month period in which the date of termination
occurs;
(ii) for a period of thirty-six (36) months
following the date of termination of employment (the
"Continuation Period"), the Company shall at its
expense continue on behalf of the Employee and his
dependents and beneficiaries the life insurance,
disability, medical, dental and hospitalization
<PAGE>
benefits provided (x) to the Employee at any time
during the 90-day period prior to the Change in Control
or at any time thereafter or (y) to other similarly
situated executives who continue in the employ of the
Company during the Continuation Period. The coverage
and benefits (including deductibles and costs) provided
in this Section 2.3(a)(ii) during the Continuation
Period shall be no less favorable to the Employee and
his dependents and beneficiaries, than the most
favorable of such coverages and benefits during any of
the periods referred to in clauses (x) or (y) above.
The Company's obligation hereunder with respect to the
foregoing benefits shall be limited to the extent that
the Employee obtains any such benefits pursuant to a
subsequent employer's benefit plans, in which case the
Company may reduce the coverage of any benefits it is
required to provide the Employee hereunder as long as
the aggregate coverages and benefits of the combined
benefit plans is no less favorable to the Employee than
the coverages and benefits required to be provided
hereunder. The Employee will be eligible for coverage
under the Consolidated Omnibus Budget Reconciliation
Act at the end of the Continuation Period or earlier
cessation of the Company's obligation hereunder.
(iii)the Employee shall immediately become fully
(100%) vested in his benefit under each supplemental or
excess retirement plan of the Company in which the
Employee was a participant, including, but not limited
to the Avondale Industries, Inc. Supplemental Pension
Plan and the Avondale Industries, Inc. Executive Excess
Retirement Plan and any successor plans;
(iv) the Company shall pay to the Employee in a
lump sum in cash within 30 days of the date of
termination an amount equal to the then present value
of the actuarial equivalent of the additional benefits,
if any, to which the Employee would be entitled under
the Avondale Industries, Inc. Pension Plan,
Supplemental Pension Plan, Executive Excess Retirement
Plan and any other qualified or non-qualified defined
benefit plan maintained by the Company and covering the
Employee if the Employee had continued to be employed
by the Company until the third anniversary of the
Change of Control, assuming Employee were fully vested
thereunder, without regard to any amendment to such
plans made after the Change of Control but prior to
Employee's date of termination of employment, which
amendment adversely affects in any manner the
computation of retirement benefits under such plans.
(b) Death. If, after a Change of Control and during
the Employment Term, the Employee's status as an employee is
terminated by reason of the Employee's death, this Agreement
shall terminate without further obligation to the Employee's
legal representatives (other than those already accrued to
the Employee), other than the obligation to make any
payments due pursuant to employee benefit plans maintained
<PAGE>
by the Company or its affiliated companies.
(c) Disability. If, after a Change of Control and
during the Employment Term, Employee's status as an employee
is terminated by reason of Employee's Disability, this
Agreement shall terminate without further obligation to the
Employee (other than those already accrued to the Employee),
other than the obligation to make any payments due pursuant
to employee benefit plans maintained by the Company or its
affiliated companies.
(d) Cause. If, after a Change of Control and during
the Employment Term, the Employee's status as an employee is
terminated by the Company for Cause, this Agreement shall
terminate without further obligation to the Employee other
than for obligations imposed by law and obligations imposed
pursuant to any employee benefit plan maintained by the
Company or its affiliated companies.
(e) Voluntary Termination. If, after a Change of
Control and during the Employment Term, the Employee
voluntarily terminates his employment with the Company other
than for Good Reason, this Agreement shall terminate without
further obligation to the Employee other than for
obligations imposed by law and obligations imposed pursuant
to any employee benefit plan maintained by the Company or
its affiliated companies.
2.4 Accrued Obligations and Other Benefits. It is the
intent of this Agreement that upon termination of employment for
any reason the Employee be entitled to receive promptly, and in
addition to any other benefits specifically provided, (a) the
Employee's Base Salary through the date of termination to the
extent not theretofore paid, (b) any accrued vacation pay, to the
extent not theretofore paid, and (c) any other amounts or
benefits required to be paid or provided or which the Employee is
entitled to receive under any plan, program, policy practice or
agreement of the Company.
2.5 Stock Options. The foregoing benefits are intended to
be in addition to the value of any options to acquire Common
Stock of the Company the exercisability of which is accelerated
pursuant to the terms of any stock option, incentive or other
similar plan heretofore or hereafter adopted by the Company.
2.6 Protection of Benefits. To the extent permitted by
applicable law, the Company shall take all reasonable steps to
ensure that the Employee is not, by reason of a Change of
Control, deprived of the economic value (including any value
attributable to the Change of Control transaction) of (a) any
options to acquire Common Stock of the Company or (b) any Common
Stock of the Company beneficially owned by the Employee.
2.7 Certain Additional Payments. If after a Change of
Control Employee is subjected to an excise tax as a result of the
"excess parachute payment" provisions of section 4999 of the
Internal Revenue Code of 1986, as amended, whether by virtue of
the benefits of this Agreement or by virtue of any other benefits
provided to Employee in connection with a Change of Control
<PAGE>
pursuant to Company plans, policies or agreements (including the
value of any options to acquire Common Stock of the Company the
exercisability of which is accelerated pursuant to the terms of
any stock option, incentive or similar plan heretofore or
hereafter adopted by the Company), the Company shall pay to
Employee (whether or not his employment has terminated) such
amounts as are necessary to place Employee in the same position
after payment of federal income and excise taxes as he would have
been if such provisions had not been applicable to him.
2.8 Legal Fees. The Company agrees to pay as incurred, to
the full extent permitted by law, all legal fees and expenses
which the Employee may reasonably incur as a result of any
contest (regardless of the outcome thereof) by the Company, the
Employee or others of the validity or enforceability of, or
liability under, any provision of this Agreement (including as a
result of any contest by the Employee about the amount or timing
of any payment pursuant to this Agreement.)
2.8 Set-Off; Mitigation. After a Change of Control, the
Company's and its Affiliates' obligations to make the payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which the Company or its Affiliates may have against the Employee
or others; except that to the extent the Employee accepts other
employment in connection with which he is provided health
insurance benefits, the Company shall only be required to provide
health insurance benefits to the extent the benefits provided by
the Employee's employer are less favorable than the benefits to
which he would otherwise be entitled hereunder. It is the intent
of this Agreement that in no event shall the Employee be
obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Employee under
any of the provisions of this Agreement.
2.9 Outplacement Assistance. Upon any termination of
employment of the Employee other than for Cause within three
years following a Change of Control, the Company shall provide to
the Employee outplacement assistance by a reputable firm
specializing in such services for the period beginning with the
termination of employment and ending three years following the
Change of Control.
ARTICLE III
MISCELLANEOUS
3.1 Binding Effect; Successors.
(a) This Agreement shall be binding upon and inure to
the benefit of the Company and any of its successors or assigns.
(b) This Agreement is personal to the Employee and
shall not be assignable by the Employee without the consent of
the Company (there being no obligation to give such consent)
other than such rights or benefits as are transferred by will or
the laws of descent and distribution.
<PAGE>
(c) The Company shall require any successor to or
assignee of (whether direct or indirect, by purchase, merger,
consolidation or otherwise) all or substantially all of the
assets or businesses of the Company (i) to assume unconditionally
and expressly this Agreement and (ii) to agree to perform or to
cause to be performed all of the obligations under this Agreement
in the same manner and to the same extent as would have been
required of the Company had no assignment or succession occurred,
such assumption to be set forth in a writing reasonably
satisfactory to the Employee.
(d) The Company shall also require all entities that
control or that after the transaction will control (directly or
indirectly) the Company or any such successor or assignee to
agree to cause to be performed all of the obligations under this
Agreement, such agreement to be set forth in a writing reasonably
satisfactory to the Employee.
3.2 Notices. All notices hereunder must be in writing and
shall be deemed to have been given upon receipt of delivery by:
(a) hand (against a receipt therefor), (b) certified or
registered mail, postage prepaid, return receipt requested, (c) a
nationally recognized overnight courier service (against a
receipt therefor) or (d) telecopy transmission with confirmation
of receipt. All such notices must be addressed as follows:
If to the Company, to:
Avondale Industries, Inc.
5100 River Road
New Orleans, Louisiana 70150
Attn: Thomas M. Kitchen
If to the Employee, to:
Albert L. Bossier, Jr.
Avondale Industries, Inc.
5100 River Road
New Orleans, LA 70150
or such other address as to which any party hereto may have
notified the other in writing.
3.3 Governing Law. This Agreement shall be construed and
enforced in accordance with and governed by the internal laws of
the State of Louisiana without regard to principles of conflict
of laws.
3.4 Withholding. The Employee agrees that the Company has
the right to withhold, from the amounts payable pursuant to this
Agreement, all amounts required to be withheld under applicable
income and/or employment tax laws, or as otherwise stated in
documents granting rights that are affected by this Agreement.
3.5 Amendment, Waiver. No provision of this Agreement may
be modified, amended or waived except by an instrument in writing
signed by both parties.
<PAGE>
3.6 Severability. If any term or provision of this Agree-
ment, or the application thereof to any person or circumstance,
shall at any time or to any extent be invalid, illegal or
unenforceable in any respect as written, Employee and the Company
intend for any court construing this Agreement to modify or limit
such provision so as to render it valid and enforceable to the
fullest extent allowed by law. Any such provision that is not
susceptible of such reformation shall be ignored so as to not
affect any other term or provision hereof, and the remainder of
this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held
invalid, illegal or unenforceable, shall not be affected thereby
and each term and provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
3.7 Waiver of Breach. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach thereof.
3.8 Remedies Not Exclusive. No remedy specified herein
shall be deemed to be such party's exclusive remedy, and
accordingly, in addition to all of the rights and remedies
provided for in this Agreement, the parties shall have all other
rights and remedies provided to them by applicable law, rule or
regulation.
3.9 Company's Reservation of Rights. Employee acknowledges
and understands that the Employee serves at the pleasure of the
Board and that the Company has the right at any time to terminate
Employee's status as an employee of the Company, or to change or
diminish his status during the Employment Term, subject to the
rights of the Employee to claim the benefits conferred by this
Agreement.
<PAGE>
3.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the Company and the Employee have caused
this Agreement to be executed as of the Change of Control
Agreement Date.
AVONDALE INDUSTRIES, INC.
By: /s/ HUGH A. THOMPSON
--------------------
Hugh A. Thompson
Compensation Committee Chairman
EMPLOYEE: /s/ ALBERT L. BOSSIER, JR.
--------------------------
Albert L. Bossier, Jr.
COR\40076.1
AMENDED AND RESTATED
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement ("the Agreement") between
Avondale Industries, Inc., a Louisiana corporation (the
"Company"), and Thomas M. Kitchen (the "Employee") is dated
effective as of January 19, 1996 (the "Change of Control
Agreement Date").
ARTICLE I
DEFINITIONS
1.1 Employment Agreement Defined. Notwithstanding any
provision thereof, after a Change of Control (defined below),
this Agreement supersedes the Employment Agreement dated as of
June 18, 1987 or any subsequent employment agreement between
Employee and the Company that so provides (the "Employment
Agreement").
1.2 Company Defined. As used in this Agreement, "Company"
shall mean the Company as defined above and any successor to or
assignee of (whether direct or indirect, by purchase, merger,
consolidation or otherwise) all or substantially all of the
assets or business of the Company.
1.3 Change of Control Defined. "Change of Control" shall
mean:
(a) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than 25% of the outstanding shares of
the Company's Common Stock, $1.00 par value per share (the
"Common Stock"); provided, however, that for purposes of
this subsection (a), the following acquisitions shall not
constitute a Change of Control:
(i) any acquisition of Common Stock directly from
the Company,
(ii) any acquisition of Common Stock by the
Company,
(iii)any acquisition of Common Stock by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
by the Company, or
(iv) any acquisition of Common Stock by any
corporation pursuant to a transaction that complies
with clauses (i), (ii) and (iii) of subsection (c) of
this Section 1.3; or
(b) individuals who, as of the Change of Control
Agreement Date, constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a
<PAGE>
director subsequent to the Change of Control Agreement Date
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall
be considered a member of the Incumbent Board, unless such
individual's initial assumption of office occurs as a result
of an actual or threatened election contest with respect to
the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on
behalf of a person other than the Incumbent Board; or
(c) consummation of a reorganization, merger or
consolidation, or sale or other disposition of all of
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination,
(i) all or substantially all of the individuals
and entities who were the beneficial owners of the
Company's outstanding common stock and the Company's
voting securities entitled to vote generally in the
election of directors immediately prior to such
Business Combination have direct or indirect beneficial
ownership, respectively, of more than 50% of the then
outstanding shares of common stock, and more than 50%
of the combined voting power of the then outstanding
voting securities entitled to vote generally in the
election of directors, of the corporation resulting
from such Business Combination (which, for purposes of
this paragraph (i) and paragraphs (ii) and (iii), shall
include a corporation which as a result of such
transaction controls the Company or all or
substantially all of the Company's assets either
directly or through one or more subsidiaries), and
(ii) except to the extent that such ownership
existed prior to the Business Combination, no person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan or related
trust of the Company or such corporation resulting from
such Business Combination) beneficially owns, directly
or indirectly, 20% or more of the then outstanding
shares of common stock of the corporation resulting
from such Business Combination or 20% or more of the
combined voting power of the then outstanding voting
securities of such corporation, and
(iii)at least a majority of the members of the
board of directors of the corporation resulting from
such Business Combination were members of the Incumbent
Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for
such Business Combination; or
(d) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
1.4 Affiliate Defined. "Affiliate" or "affiliated
companies" shall mean any company controlled by, controlling, or
<PAGE>
under common control with, the Company.
1.5 Cause Defined. "Cause" shall mean:
(a) the willful and continued failure of the
Employee to perform substantially the Employee's duties
with the Company or its affiliates (other than any such
failure resulting from incapacity due to physical or
mental illness), after a written demand for substantial
performance is delivered to the Employee by the Board
of the Company which specifically identifies the manner
in which the Board believes that the Employee has not
substantially performed the Employee's duties, or
(b) the willful engaging by the Employee in
illegal conduct or gross misconduct.
For purposes of this provision, no act or failure to act, on the
part of the Employee, shall be considered "willful" unless it is
done, or omitted to be done, by the Employee in bad faith or
without reasonable belief that the Employee's action or omission
was in the best interests of the Company or its Affiliates. Any
act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of
a senior officer of the Company or based upon the advice of
counsel for the Company or its Affiliates shall be conclusively
presumed to be done, or omitted to be done, by the Employee in
good faith and in the best interests of the Company or its
Affiliates. The cessation of employment of the Employee shall
not be deemed to be for Cause unless and until there shall have
been delivered to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is
provided to the Employee and the Employee is given an
opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the
Employee is guilty of the conduct described in subparagraph (a)
or (b) above, and specifying the particulars thereof in detail.
1.6 Disability Defined. "Disability" shall mean a
condition that would entitle the Employee to receive benefits
under the Company's long-term disability insurance policy in
effect at the time either because he is Totally Disabled or
Partially Disabled, as such terms are defined in the Company's
policy in effect as of the date of this Agreement or as similar
terms are defined in any successor policy. If the Company has no
long-term disability plan in effect, "Disability" shall occur if
(a) the Employee is rendered incapable because of physical or
mental illness of satisfactorily discharging his duties and
responsibilities to the Company for a period of 90 consecutive
days, (b) a duly qualified physician chosen by the Company and
acceptable to the Employee or his legal representatives so
certifies in writing, and (c) the Board determines that the
Employee has become disabled.
1.7 Good Reason Defined. "Good Reason" shall mean:
(a) Any failure of the Company or its Affiliates to
provide the Employee with the position, authority, duties
<PAGE>
and responsibilities at least commensurate in all material
respects with the most significant of those held, exercised
and assigned at any time during the 120-day period
immediately preceding the Change of Control. Employee's
position, authority, duties and responsibilities after a
Change of Control shall not be considered commensurate in
all material respects with Employee's position, authority,
duties and responsibilities prior to a Change of Control
unless after the Change of Control Employee holds (i) an
equivalent position in the Company or, (ii) if the Company
is controlled or will after the transaction be controlled by
another company (directly or indirectly), an equivalent
position in the ultimate parent company.
(b) The assignment to the Employee of any duties
inconsistent in any material respect with Employee's
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 2.1(b) of this Agreement, or any
other action that results in a diminution in such position,
authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action
not taken in bad faith that is remedied within 10 days after
receipt of written notice thereof from the Employee to the
Company;
(c) Any failure by the Company or its Affiliates to
comply with any of the provisions of this Agreement, other
than an isolated, insubstantial and inadvertent failure not
occurring in bad faith that is remedied within 10 days after
receipt of written notice thereof from the Employee to the
Company;
(d) The Company or its Affiliates requiring the
Employee to be based at any office or location other than as
provided in Section 2.1(b)(ii) hereof or requiring the
Employee to travel on business to a substantially greater
extent than required immediately prior to the Change of
Control;
(e) Any purported termination of the Employee's
employment otherwise than as expressly permitted by this
Agreement; or
(f) Any failure by the Company to comply with and
satisfy Sections 3.1(c) and (d) of this Agreement.
ARTICLE II
CHANGE OF CONTROL BENEFIT
2.1 Employment Term and Capacity after Change of Control.
(a) If a Change of Control occurs on or before December 31, 2000,
then the Employee's employment term (the "Employment Term") shall
continue through the third anniversary of the Change of Control,
subject to any earlier termination of Employee's status as an
employee pursuant to this Agreement.
(b) After a Change of Control and during the Employment
<PAGE>
Term, (i) the Employee's position (including status, offices,
titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately
preceding the Change of Control and (ii) the Employee's service
shall be performed during normal business hours at the location
where the Employee was employed immediately preceding the Change
of Control or any office or location less than 35 miles from such
location. Employee's position, authority, duties and
responsibilities after a Change of Control shall not be
considered commensurate in all material respects with Employee's
position, authority, duties and responsibilities prior to a
Change of Control unless after the Change of Control Employee
holds (x) an equivalent position in the Company or, (y) if the
Company is controlled or will after the transaction be controlled
by another company (directly or indirectly), an equivalent
position in the ultimate parent company. Employee shall devote
himself to his employment responsibilities with the Company (or,
if applicable, the ultimate parent entity) as provided in the
Employment Agreement.
2.2 Compensation and Benefits. During the Employment Term,
Employee shall be entitled to the following compensation and
benefits:
(a) Base Salary. The Employee shall receive an annual
base salary ("Base Salary"), which shall be paid at a
monthly rate, at least equal to 12 times the highest monthly
base salary paid or payable, including any base salary which
has been earned but deferred by the Employee, by the Company
and its affiliated companies in respect of the 12-month
period immediately preceding the month in which the Change
of Control occurs. During the Employment Term, the Base
Salary shall be reviewed no more than 12 months after the
last salary increase awarded to the Employee prior to the
Change of Control and thereafter at least annually and shall
be first increased no more than 12 months after the last
salary increase awarded to the Employee prior to the Change
of Control and thereafter at least annually in an amount
equal to the percentage increase (excluding promotional
increases) in base salary generally awarded to peer
executives of the Company and its affiliated companies for
the year of determination. Any increase in Base Salary
shall not serve to limit or reduce any other obligation to
the Employee under this Agreement. Base Salary shall not be
reduced after any such increase and the term Base Salary as
utilized in this Agreement shall refer to Base Salary as so
increased.
(b) Annual Bonus. In addition to Base Salary, the
Employee shall be awarded, for each fiscal year ending
during the Employment Term, an annual bonus (the "Bonus") in
cash at least equal to the executive's target bonus under
the Company's Management Incentive Plan, or any comparable
bonus under a successor plan, for the last full fiscal year
prior to the Change of Control. Each such Bonus shall be
paid no later than the end of the third month of the fiscal
year next following the fiscal year for which the Bonus is
<PAGE>
awarded, unless the Employee shall elect to defer the
receipt of such Bonus.
(c) Fringe Benefits. The Employee shall be entitled
to fringe benefits (including, but not limited to,
automobile allowance, reimbursement for membership dues, and
first class air travel) in accordance with the most
favorable agreements, plans, practices, programs and
policies of the Company and its affiliated companies in
effect for the Employee at any time during the 120-day
period immediately preceding the Change of Control or, if
more favorable to the Employee, as in effect generally at
any time thereafter with respect to other peer employees of
the Company and its affiliated companies.
(d) Expenses. The Employee shall be entitled to
receive prompt reimbursement for all reasonable expenses
incurred by the Employee in accordance with the most
favorable agreements, policies, practices and procedures of
the Company and its affiliated companies in effect for the
Employee at any time during the 120-day period immediately
preceding the Change of Control or, if more favorable to the
Employee, as in effect generally at any time thereafter with
respect to other peer employees of the Company and its
affiliated companies.
(e) Incentive, Savings and Retirement Plans. The
Employee shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and
programs applicable generally to other peer employees of the
Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the
Employee with incentive opportunities (measured with respect
to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable),
savings opportunities and retirement benefit opportunities,
in each case, less favorable than the most favorable of
those provided by the Company and its affiliated companies
for the Employee under any agreements, plans, practices,
policies and programs as in effect at any time during the
120-day period immediately preceding the Change of Control
or, if more favorable to the Employee, those provided
generally at any time after the Change of Control to other
peer employees of the Company and its affiliated companies.
(f) Welfare Benefit Plans. The Employee and/or the
Employee's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies
(including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental
death and travel accident insurance plans and programs) to
the extent applicable generally to other peer employees of
the Company and its affiliated companies, but in no event
shall such plans, practices, policies and programs provide
the Employee with benefits, in each case, less favorable
than the most favorable of any agreements, plans, practices,
policies and programs in effect for the Employee at any time
<PAGE>
during the 120-day period immediately preceding the Change
of Control or, if more favorable to the Employee, those
provided generally at any time after the Change of Control
to other peer employees of the Company and its affiliated
companies.
(g) Office and Support Staff. The Employee shall be
entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive
personal secretarial and other assistance, at least equal to
the most favorable of the foregoing provided to the Employee
by the Company and its affiliated companies at any time
during the 120-day period immediately preceding the Change
of Control or, if more favorable to the Employee, as
provided generally at any time thereafter with respect to
other peer employees of the Company and its affiliated
companies.
(h) Vacation. The Employee shall be entitled to paid
vacation in accordance with the most favorable agreements,
plans, policies, programs and practices of the Company and
its affiliated companies as in effect for the Employee at
any time during the 120-day period immediately preceding the
Change of Control or, if more favorable to the Employee, as
in effect generally at any time thereafter with respect to
other peer employees of the Company and its affiliated
companies.
2.3 Obligations upon Termination after a Change of Control.
(a) Termination by Company for Reasons other than
Death, Disability or Cause or by Employee for Good Reason.
If, after a Change of Control and during the Employment
Term, the Company terminates the Employee's employment other
than for Cause, death or Disability, or the Employee
terminates employment for Good Reason,
(i) the Company shall pay to the Employee in a
lump sum in cash within 30 days of the date of
termination an amount equal to three times the sum of
(i) the amount of Base Salary in effect at the date of
termination, plus (ii) the greater of (x) the highest
annual Bonus paid or to be paid to the Employee with
respect to the last three fiscal years or (y) the
target Bonus for which the Employee is eligible for the
12-month period in which the date of termination
occurs;
(ii) for a period of thirty-six (36) months
following the date of termination of employment (the
"Continuation Period"), the Company shall at its
expense continue on behalf of the Employee and his
dependents and beneficiaries the life insurance,
disability, medical, dental and hospitalization
benefits provided (x) to the Employee at any time
during the 90-day period prior to the Change in Control
or at any time thereafter or (y) to other similarly
situated executives who continue in the employ of the
Company during the Continuation Period. The coverage
<PAGE>
and benefits (including deductibles and costs) provided
in this Section 2.3(a)(ii) during the Continuation
Period shall be no less favorable to the Employee and
his dependents and beneficiaries, than the most
favorable of such coverages and benefits during any of
the periods referred to in clauses (x) or (y) above.
The Company's obligation hereunder with respect to the
foregoing benefits shall be limited to the extent that
the Employee obtains any such benefits pursuant to a
subsequent employer's benefit plans, in which case the
Company may reduce the coverage of any benefits it is
required to provide the Employee hereunder as long as
the aggregate coverages and benefits of the combined
benefit plans is no less favorable to the Employee than
the coverages and benefits required to be provided
hereunder. The Employee will be eligible for coverage
under the Consolidated Omnibus Budget Reconciliation
Act at the end of the Continuation Period or earlier
cessation of the Company's obligation hereunder.
(iii)the Employee shall immediately become fully
(100%) vested in his benefit under each supplemental or
excess retirement plan of the Company in which the
Employee was a participant, including, but not limited
to the Avondale Industries, Inc. Supplemental Pension
Plan and the Avondale Industries, Inc. Executive Excess
Retirement Plan and any successor plans;
(iv) the Company shall pay to the Employee in a
lump sum in cash within 30 days of the date of
termination an amount equal to the then present value
of the actuarial equivalent of the additional benefits,
if any, to which the Employee would be entitled under
the Avondale Industries, Inc. Pension Plan,
Supplemental Pension Plan, Executive Excess Retirement
Plan and any other qualified or non-qualified defined
benefit plan maintained by the Company and covering the
Employee if the Employee had continued to be employed
by the Company until the third anniversary of the
Change of Control, assuming Employee were fully vested
thereunder, without regard to any amendment to such
plans made after the Change of Control but prior to
Employee's date of termination of employment, which
amendment adversely affects in any manner the
computation of retirement benefits under such plans.
(b) Death. If, after a Change of Control and during
the Employment Term, the Employee's status as an employee is
terminated by reason of the Employee's death, this Agreement
shall terminate without further obligation to the Employee's
legal representatives (other than those already accrued to
the Employee), other than the obligation to make any
payments due pursuant to employee benefit plans maintained
by the Company or its affiliated companies.
(c) Disability. If, after a Change of Control and
during the Employment Term, Employee's status as an employee
is terminated by reason of Employee's Disability, this
<PAGE>
Agreement shall terminate without further obligation to the
Employee (other than those already accrued to the Employee),
other than the obligation to make any payments due pursuant
to employee benefit plans maintained by the Company or its
affiliated companies.
(d) Cause. If, after a Change of Control and during
the Employment Term, the Employee's status as an employee is
terminated by the Company for Cause, this Agreement shall
terminate without further obligation to the Employee other
than for obligations imposed by law and obligations imposed
pursuant to any employee benefit plan maintained by the
Company or its affiliated companies.
(e) Voluntary Termination. If, after a Change of
Control and during the Employment Term, the Employee
voluntarily terminates his employment with the Company other
than for Good Reason, this Agreement shall terminate without
further obligation to the Employee other than for
obligations imposed by law and obligations imposed pursuant
to any employee benefit plan maintained by the Company or
its affiliated companies.
2.4 Accrued Obligations and Other Benefits. It is the
intent of this Agreement that upon termination of employment for
any reason the Employee be entitled to receive promptly, and in
addition to any other benefits specifically provided, (a) the
Employee's Base Salary through the date of termination to the
extent not theretofore paid, (b) any accrued vacation pay, to the
extent not theretofore paid, and (c) any other amounts or
benefits required to be paid or provided or which the Employee is
entitled to receive under any plan, program, policy practice or
agreement of the Company.
2.5 Stock Options. The foregoing benefits are intended to
be in addition to the value of any options to acquire Common
Stock of the Company the exercisability of which is accelerated
pursuant to the terms of any stock option, incentive or other
similar plan heretofore or hereafter adopted by the Company.
2.6 Protection of Benefits. To the extent permitted by
applicable law, the Company shall take all reasonable steps to
ensure that the Employee is not, by reason of a Change of
Control, deprived of the economic value (including any value
attributable to the Change of Control transaction) of (a) any
options to acquire Common Stock of the Company or (b) any Common
Stock of the Company beneficially owned by the Employee.
2.7 Certain Additional Payments. If after a Change of
Control Employee is subjected to an excise tax as a result of the
"excess parachute payment" provisions of section 4999 of the
Internal Revenue Code of 1986, as amended, whether by virtue of
the benefits of this Agreement or by virtue of any other benefits
provided to Employee in connection with a Change of Control
pursuant to Company plans, policies or agreements (including the
value of any options to acquire Common Stock of the Company the
exercisability of which is accelerated pursuant to the terms of
any stock option, incentive or similar plan heretofore or
hereafter adopted by the Company), the Company shall pay to
<PAGE>
Employee (whether or not his employment has terminated) such
amounts as are necessary to place Employee in the same position
after payment of federal income and excise taxes as he would have
been if such provisions had not been applicable to him.
2.8 Legal Fees. The Company agrees to pay as incurred, to
the full extent permitted by law, all legal fees and expenses
which the Employee may reasonably incur as a result of any
contest (regardless of the outcome thereof) by the Company, the
Employee or others of the validity or enforceability of, or
liability under, any provision of this Agreement (including as a
result of any contest by the Employee about the amount or timing
of any payment pursuant to this Agreement.)
2.8 Set-Off; Mitigation. After a Change of Control, the
Company's and its Affiliates' obligations to make the payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which the Company or its Affiliates may have against the Employee
or others; except that to the extent the Employee accepts other
employment in connection with which he is provided health
insurance benefits, the Company shall only be required to provide
health insurance benefits to the extent the benefits provided by
the Employee's employer are less favorable than the benefits to
which he would otherwise be entitled hereunder. It is the intent
of this Agreement that in no event shall the Employee be
obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Employee under
any of the provisions of this Agreement.
2.9 Outplacement Assistance. Upon any termination of
employment of the Employee other than for Cause within three
years following a Change of Control, the Company shall provide to
the Employee outplacement assistance by a reputable firm
specializing in such services for the period beginning with the
termination of employment and ending three years following the
Change of Control.
ARTICLE III
MISCELLANEOUS
3.1 Binding Effect; Successors.
(a) This Agreement shall be binding upon and inure to
the benefit of the Company and any of its successors or assigns.
(b) This Agreement is personal to the Employee and
shall not be assignable by the Employee without the consent of
the Company (there being no obligation to give such consent)
other than such rights or benefits as are transferred by will or
the laws of descent and distribution.
(c) The Company shall require any successor to or
assignee of (whether direct or indirect, by purchase, merger,
consolidation or otherwise) all or substantially all of the
assets or businesses of the Company (i) to assume unconditionally
and expressly this Agreement and (ii) to agree to perform or to
<PAGE>
cause to be performed all of the obligations under this Agreement
in the same manner and to the same extent as would have been
required of the Company had no assignment or succession occurred,
such assumption to be set forth in a writing reasonably
satisfactory to the Employee.
(d) The Company shall also require all entities that
control or that after the transaction will control (directly or
indirectly) the Company or any such successor or assignee to
agree to cause to be performed all of the obligations under this
Agreement, such agreement to be set forth in a writing reasonably
satisfactory to the Employee.
3.2 Notices. All notices hereunder must be in writing and
shall be deemed to have been given upon receipt of delivery by:
(a) hand (against a receipt therefor), (b) certified or
registered mail, postage prepaid, return receipt requested, (c) a
nationally recognized overnight courier service (against a
receipt therefor) or (d) telecopy transmission with confirmation
of receipt. All such notices must be addressed as follows:
If to the Company, to:
Avondale Industries, Inc.
5100 River Road
New Orleans, Louisiana 70150
Attn: Albert L. Bossier, Jr.
If to the Employee, to:
Thomas M. Kitchen
Avondale Industries, Inc.
5100 River Road
Avondale, LA 70150
or such other address as to which any party hereto may have
notified the other in writing.
3.3 Governing Law. This Agreement shall be construed and
enforced in accordance with and governed by the internal laws of
the State of Louisiana without regard to principles of conflict
of laws.
3.4 Withholding. The Employee agrees that the Company has
the right to withhold, from the amounts payable pursuant to this
Agreement, all amounts required to be withheld under applicable
income and/or employment tax laws, or as otherwise stated in
documents granting rights that are affected by this Agreement.
3.5 Amendment, Waiver. No provision of this Agreement may
be modified, amended or waived except by an instrument in writing
signed by both parties.
3.6 Severability. If any term or provision of this Agree-
ment, or the application thereof to any person or circumstance,
shall at any time or to any extent be invalid, illegal or
unenforceable in any respect as written, Employee and the Company
intend for any court construing this Agreement to modify or limit
<PAGE>
such provision so as to render it valid and enforceable to the
fullest extent allowed by law. Any such provision that is not
susceptible of such reformation shall be ignored so as to not
affect any other term or provision hereof, and the remainder of
this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held
invalid, illegal or unenforceable, shall not be affected thereby
and each term and provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
3.7 Waiver of Breach. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach thereof.
3.8 Remedies Not Exclusive. No remedy specified herein
shall be deemed to be such party's exclusive remedy, and
accordingly, in addition to all of the rights and remedies
provided for in this Agreement, the parties shall have all other
rights and remedies provided to them by applicable law, rule or
regulation.
3.9 Company's Reservation of Rights. Employee acknowledges
and understands that the Employee serves at the pleasure of the
Board and that the Company has the right at any time to terminate
Employee's status as an employee of the Company, or to change or
diminish his status during the Employment Term, subject to the
rights of the Employee to claim the benefits conferred by this
Agreement.
<PAGE>
3.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the Company and the Employee have caused
this Agreement to be executed as of the Change of Control
Agreement Date.
AVONDALE INDUSTRIES, INC.
By: /s/ HUGH A. THOMPSON
--------------------
Hugh A. Thompson
Compensation Committee Chairman
EMPLOYEE: /s/ THOMAS M. KITCHEN
---------------------
Thomas M. Kitchen
COR\40075.1
AMENDED AND RESTATED
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement ("the Agreement") between
Avondale Industries, Inc., a Louisiana corporation (the
"Company"), and Kenneth B. (/s/KBD) Dupont (the "Employee") is dated
effective as of January 19, 1996 (the "Change of Control
Agreement Date").
ARTICLE I
DEFINITIONS
1.1 Employment Agreement Defined. Notwithstanding any
provision thereof, after a Change of Control (defined below),
this Agreement supersedes the Employment Agreement dated as of
June 18, 1987 or any subsequent employment agreement between
Employee and the Company that so provides (the "Employment
Agreement").
1.2 Company Defined. As used in this Agreement, "Company"
shall mean the Company as defined above and any successor to or
assignee of (whether direct or indirect, by purchase, merger,
consolidation or otherwise) all or substantially all of the
assets or business of the Company.
1.3 Change of Control Defined. "Change of Control" shall
mean:
(a) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than 25% of the outstanding shares of
the Company's Common Stock, $1.00 par value per share (the
"Common Stock"); provided, however, that for purposes of
this subsection (a), the following acquisitions shall not
constitute a Change of Control:
(i) any acquisition of Common Stock directly from
the Company,
(ii) any acquisition of Common Stock by the
Company,
(iii)any acquisition of Common Stock by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
by the Company, or
(iv) any acquisition of Common Stock by any
corporation pursuant to a transaction that complies
with clauses (i), (ii) and (iii) of subsection (c) of
this Section 1.3; or
<PAGE>
(b) individuals who, as of the Change of Control
Agreement Date, constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a
director subsequent to the Change of Control Agreement Date
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall
be considered a member of the Incumbent Board, unless such
individual's initial assumption of office occurs as a result
of an actual or threatened election contest with respect to
the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on
behalf of a person other than the Incumbent Board; or
(c) consummation of a reorganization, merger or
consolidation, or sale or other disposition of all of
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination,
(i) all or substantially all of the individuals
and entities who were the beneficial owners of the
Company's outstanding common stock and the Company's
voting securities entitled to vote generally in the
election of directors immediately prior to such
Business Combination have direct or indirect beneficial
ownership, respectively, of more than 50% of the then
outstanding shares of common stock, and more than 50%
of the combined voting power of the then outstanding
voting securities entitled to vote generally in the
election of directors, of the corporation resulting
from such Business Combination (which, for purposes of
this paragraph (i) and paragraphs (ii) and (iii), shall
include a corporation which as a result of such
transaction controls the Company or all or
substantially all of the Company's assets either
directly or through one or more subsidiaries), and
(ii) except to the extent that such ownership
existed prior to the Business Combination, no person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan or related
trust of the Company or such corporation resulting from
such Business Combination) beneficially owns, directly
or indirectly, 20% or more of the then outstanding
shares of common stock of the corporation resulting
from such Business Combination or 20% or more of the
combined voting power of the then outstanding voting
securities of such corporation, and
(iii)at least a majority of the members of the
board of directors of the corporation resulting from
such Business Combination were members of the Incumbent
Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for
such Business Combination; or
(d) approval by the shareholders of the Company of a
<PAGE>
complete liquidation or dissolution of the Company.
1.4 Affiliate Defined. "Affiliate" or "affiliated
companies" shall mean any company controlled by, controlling, or
under common control with, the Company.
1.5 Cause Defined. "Cause" shall mean:
(a) the willful and continued failure of the
Employee to perform substantially the Employee's duties
with the Company or its affiliates (other than any such
failure resulting from incapacity due to physical or
mental illness), after a written demand for substantial
performance is delivered to the Employee by the Board
of the Company which specifically identifies the manner
in which the Board believes that the Employee has not
substantially performed the Employee's duties, or
(b) the willful engaging by the Employee in
illegal conduct or gross misconduct.
For purposes of this provision, no act or failure to act, on the
part of the Employee, shall be considered "willful" unless it is
done, or omitted to be done, by the Employee in bad faith or
without reasonable belief that the Employee's action or omission
was in the best interests of the Company or its Affiliates. Any
act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of
a senior officer of the Company or based upon the advice of
counsel for the Company or its Affiliates shall be conclusively
presumed to be done, or omitted to be done, by the Employee in
good faith and in the best interests of the Company or its
Affiliates. The cessation of employment of the Employee shall
not be deemed to be for Cause unless and until there shall have
been delivered to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is
provided to the Employee and the Employee is given an
opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the
Employee is guilty of the conduct described in subparagraph (a)
or (b) above, and specifying the particulars thereof in detail.
1.6 Disability Defined. "Disability" shall mean a
condition that would entitle the Employee to receive benefits
under the Company's long-term disability insurance policy in
effect at the time either because he is Totally Disabled or
Partially Disabled, as such terms are defined in the Company's
policy in effect as of the date of this Agreement or as similar
terms are defined in any successor policy. If the Company has no
long-term disability plan in effect, "Disability" shall occur if
(a) the Employee is rendered incapable because of physical or
mental illness of satisfactorily discharging his duties and
responsibilities to the Company for a period of 90 consecutive
days, (b) a duly qualified physician chosen by the Company and
acceptable to the Employee or his legal representatives so
certifies in writing, and (c) the Board determines that the
Employee has become disabled.
<PAGE>
1.7 Good Reason Defined. "Good Reason" shall mean:
(a) Any failure of the Company or its Affiliates to
provide the Employee with the position, authority, duties
and responsibilities at least commensurate in all material
respects with the most significant of those held, exercised
and assigned at any time during the 120-day period
immediately preceding the Change of Control. Employee's
position, authority, duties and responsibilities after a
Change of Control shall not be considered commensurate in
all material respects with Employee's position, authority,
duties and responsibilities prior to a Change of Control
unless after the Change of Control Employee holds (i) an
equivalent position in the Company or, (ii) if the Company
is controlled or will after the transaction be controlled by
another company (directly or indirectly), an equivalent
position in the ultimate parent company.
(b) The assignment to the Employee of any duties
inconsistent in any material respect with Employee's
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 2.1(b) of this Agreement, or any
other action that results in a diminution in such position,
authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action
not taken in bad faith that is remedied within 10 days after
receipt of written notice thereof from the Employee to the
Company;
(c) Any failure by the Company or its Affiliates to
comply with any of the provisions of this Agreement, other
than an isolated, insubstantial and inadvertent failure not
occurring in bad faith that is remedied within 10 days after
receipt of written notice thereof from the Employee to the
Company;
(d) The Company or its Affiliates requiring the
Employee to be based at any office or location other than as
provided in Section 2.1(b)(ii) hereof or requiring the
Employee to travel on business to a substantially greater
extent than required immediately prior to the Change of
Control;
(e) Any purported termination of the Employee's
employment otherwise than as expressly permitted by this
Agreement; or
(f) Any failure by the Company to comply with and
satisfy Sections 3.1(c) and (d) of this Agreement.
ARTICLE II
CHANGE OF CONTROL BENEFIT
2.1 Employment Term and Capacity after Change of Control.
(a) If a Change of Control occurs on or before December 31, 2000,
then the Employee's employment term (the "Employment Term") shall
continue through the third anniversary of the Change of Control,
<PAGE>
subject to any earlier termination of Employee's status as an
employee pursuant to this Agreement.
(b) After a Change of Control and during the Employment
Term, (i) the Employee's position (including status, offices,
titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately
preceding the Change of Control and (ii) the Employee's service
shall be performed during normal business hours at the location
where the Employee was employed immediately preceding the Change
of Control or any office or location less than 35 miles from such
location. Employee's position, authority, duties and
responsibilities after a Change of Control shall not be
considered commensurate in all material respects with Employee's
position, authority, duties and responsibilities prior to a
Change of Control unless after the Change of Control Employee
holds (x) an equivalent position in the Company or, (y) if the
Company is controlled or will after the transaction be controlled
by another company (directly or indirectly), an equivalent
position in the ultimate parent company. Employee shall devote
himself to his employment responsibilities with the Company (or,
if applicable, the ultimate parent entity) as provided in the
Employment Agreement.
2.2 Compensation and Benefits. During the Employment Term,
Employee shall be entitled to the following compensation and
benefits:
(a) Base Salary. The Employee shall receive an annual
base salary ("Base Salary"), which shall be paid at a
monthly rate, at least equal to 12 times the highest monthly
base salary paid or payable, including any base salary which
has been earned but deferred by the Employee, by the Company
and its affiliated companies in respect of the 12-month
period immediately preceding the month in which the Change
of Control occurs. During the Employment Term, the Base
Salary shall be reviewed no more than 12 months after the
last salary increase awarded to the Employee prior to the
Change of Control and thereafter at least annually and shall
be first increased no more than 12 months after the last
salary increase awarded to the Employee prior to the Change
of Control and thereafter at least annually in an amount
equal to the percentage increase (excluding promotional
increases) in base salary generally awarded to peer
executives of the Company and its affiliated companies for
the year of determination. Any increase in Base Salary
shall not serve to limit or reduce any other obligation to
the Employee under this Agreement. Base Salary shall not be
reduced after any such increase and the term Base Salary as
utilized in this Agreement shall refer to Base Salary as so
increased.
(b) Annual Bonus. In addition to Base Salary, the
Employee shall be awarded, for each fiscal year ending
during the Employment Term, an annual bonus (the "Bonus") in
cash at least equal to the executive's target bonus under
the Company's Management Incentive Plan, or any comparable
bonus under a successor plan, for the last full fiscal year
<PAGE>
prior to the Change of Control. Each such Bonus shall be
paid no later than the end of the third month of the fiscal
year next following the fiscal year for which the Bonus is
awarded, unless the Employee shall elect to defer the
receipt of such Bonus.
(c) Fringe Benefits. The Employee shall be entitled
to fringe benefits (including, but not limited to,
automobile allowance, reimbursement for membership dues, and
first class air travel) in accordance with the most
favorable agreements, plans, practices, programs and
policies of the Company and its affiliated companies in
effect for the Employee at any time during the 120-day
period immediately preceding the Change of Control or, if
more favorable to the Employee, as in effect generally at
any time thereafter with respect to other peer employees of
the Company and its affiliated companies.
(d) Expenses. The Employee shall be entitled to
receive prompt reimbursement for all reasonable expenses
incurred by the Employee in accordance with the most
favorable agreements, policies, practices and procedures of
the Company and its affiliated companies in effect for the
Employee at any time during the 120-day period immediately
preceding the Change of Control or, if more favorable to the
Employee, as in effect generally at any time thereafter with
respect to other peer employees of the Company and its
affiliated companies.
(e) Incentive, Savings and Retirement Plans. The
Employee shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and
programs applicable generally to other peer employees of the
Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the
Employee with incentive opportunities (measured with respect
to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable),
savings opportunities and retirement benefit opportunities,
in each case, less favorable than the most favorable of
those provided by the Company and its affiliated companies
for the Employee under any agreements, plans, practices,
policies and programs as in effect at any time during the
120-day period immediately preceding the Change of Control
or, if more favorable to the Employee, those provided
generally at any time after the Change of Control to other
peer employees of the Company and its affiliated companies.
(f) Welfare Benefit Plans. The Employee and/or the
Employee's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies
(including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental
death and travel accident insurance plans and programs) to
the extent applicable generally to other peer employees of
the Company and its affiliated companies, but in no event
shall such plans, practices, policies and programs provide
the Employee with benefits, in each case, less favorable
<PAGE>
than the most favorable of any agreements, plans, practices,
policies and programs in effect for the Employee at any time
during the 120-day period immediately preceding the Change
of Control or, if more favorable to the Employee, those
provided generally at any time after the Change of Control
to other peer employees of the Company and its affiliated
companies.
(g) Office and Support Staff. The Employee shall be
entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive
personal secretarial and other assistance, at least equal to
the most favorable of the foregoing provided to the Employee
by the Company and its affiliated companies at any time
during the 120-day period immediately preceding the Change
of Control or, if more favorable to the Employee, as
provided generally at any time thereafter with respect to
other peer employees of the Company and its affiliated
companies.
(h) Vacation. The Employee shall be entitled to paid
vacation in accordance with the most favorable agreements,
plans, policies, programs and practices of the Company and
its affiliated companies as in effect for the Employee at
any time during the 120-day period immediately preceding the
Change of Control or, if more favorable to the Employee, as
in effect generally at any time thereafter with respect to
other peer employees of the Company and its affiliated
companies.
2.3 Obligations upon Termination after a Change of Control.
(a) Termination by Company for Reasons other than
Death, Disability or Cause or by Employee for Good Reason.
If, after a Change of Control and during the Employment
Term, the Company terminates the Employee's employment other
than for Cause, death or Disability, or the Employee
terminates employment for Good Reason,
(i) the Company shall pay to the Employee in a
lump sum in cash within 30 days of the date of
termination an amount equal to three times the sum of
(i) the amount of Base Salary in effect at the date of
termination, plus (ii) the greater of (x) the highest
annual Bonus paid or to be paid to the Employee with
respect to the last three fiscal years or (y) the
target Bonus for which the Employee is eligible for the
12-month period in which the date of termination
occurs;
(ii) for a period of thirty-six (36) months
following the date of termination of employment (the
"Continuation Period"), the Company shall at its
expense continue on behalf of the Employee and his
dependents and beneficiaries the life insurance,
disability, medical, dental and hospitalization
benefits provided (x) to the Employee at any time
during the 90-day period prior to the Change in Control
or at any time thereafter or (y) to other similarly
<PAGE>
situated executives who continue in the employ of the
Company during the Continuation Period. The coverage
and benefits (including deductibles and costs) provided
in this Section 2.3(a)(ii) during the Continuation
Period shall be no less favorable to the Employee and
his dependents and beneficiaries, than the most
favorable of such coverages and benefits during any of
the periods referred to in clauses (x) or (y) above.
The Company's obligation hereunder with respect to the
foregoing benefits shall be limited to the extent that
the Employee obtains any such benefits pursuant to a
subsequent employer's benefit plans, in which case the
Company may reduce the coverage of any benefits it is
required to provide the Employee hereunder as long as
the aggregate coverages and benefits of the combined
benefit plans is no less favorable to the Employee than
the coverages and benefits required to be provided
hereunder. The Employee will be eligible for coverage
under the Consolidated Omnibus Budget Reconciliation
Act at the end of the Continuation Period or earlier
cessation of the Company's obligation hereunder.
(iii)the Employee shall immediately become fully
(100%) vested in his benefit under each supplemental or
excess retirement plan of the Company in which the
Employee was a participant, including, but not limited
to the Avondale Industries, Inc. Supplemental Pension
Plan and the Avondale Industries, Inc. Executive Excess
Retirement Plan and any successor plans;
(iv) the Company shall pay to the Employee in a
lump sum in cash within 30 days of the date of
termination an amount equal to the then present value
of the actuarial equivalent of the additional benefits,
if any, to which the Employee would be entitled under
the Avondale Industries, Inc. Pension Plan,
Supplemental Pension Plan, Executive Excess Retirement
Plan and any other qualified or non-qualified defined
benefit plan maintained by the Company and covering the
Employee if the Employee had continued to be employed
by the Company until the third anniversary of the
Change of Control, assuming Employee were fully vested
thereunder, without regard to any amendment to such
plans made after the Change of Control but prior to
Employee's date of termination of employment, which
amendment adversely affects in any manner the
computation of retirement benefits under such plans.
(b) Death. If, after a Change of Control and during
the Employment Term, the Employee's status as an employee is
terminated by reason of the Employee's death, this Agreement
shall terminate without further obligation to the Employee's
legal representatives (other than those already accrued to
the Employee), other than the obligation to make any
payments due pursuant to employee benefit plans maintained
by the Company or its affiliated companies.
(c) Disability. If, after a Change of Control and
<PAGE>
during the Employment Term, Employee's status as an employee
is terminated by reason of Employee's Disability, this
Agreement shall terminate without further obligation to the
Employee (other than those already accrued to the Employee),
other than the obligation to make any payments due pursuant
to employee benefit plans maintained by the Company or its
affiliated companies.
(d) Cause. If, after a Change of Control and during
the Employment Term, the Employee's status as an employee is
terminated by the Company for Cause, this Agreement shall
terminate without further obligation to the Employee other
than for obligations imposed by law and obligations imposed
pursuant to any employee benefit plan maintained by the
Company or its affiliated companies.
(e) Voluntary Termination. If, after a Change of
Control and during the Employment Term, the Employee
voluntarily terminates his employment with the Company other
than for Good Reason, this Agreement shall terminate without
further obligation to the Employee other than for
obligations imposed by law and obligations imposed pursuant
to any employee benefit plan maintained by the Company or
its affiliated companies.
2.4 Accrued Obligations and Other Benefits. It is the
intent of this Agreement that upon termination of employment for
any reason the Employee be entitled to receive promptly, and in
addition to any other benefits specifically provided, (a) the
Employee's Base Salary through the date of termination to the
extent not theretofore paid, (b) any accrued vacation pay, to the
extent not theretofore paid, and (c) any other amounts or
benefits required to be paid or provided or which the Employee is
entitled to receive under any plan, program, policy practice or
agreement of the Company.
2.5 Stock Options. The foregoing benefits are intended to
be in addition to the value of any options to acquire Common
Stock of the Company the exercisability of which is accelerated
pursuant to the terms of any stock option, incentive or other
similar plan heretofore or hereafter adopted by the Company.
2.6 Protection of Benefits. To the extent permitted by
applicable law, the Company shall take all reasonable steps to
ensure that the Employee is not, by reason of a Change of
Control, deprived of the economic value (including any value
attributable to the Change of Control transaction) of (a) any
options to acquire Common Stock of the Company or (b) any Common
Stock of the Company beneficially owned by the Employee.
2.7 Certain Additional Payments. If after a Change of
Control Employee is subjected to an excise tax as a result of the
"excess parachute payment" provisions of section 4999 of the
Internal Revenue Code of 1986, as amended, whether by virtue of
the benefits of this Agreement or by virtue of any other benefits
provided to Employee in connection with a Change of Control
pursuant to Company plans, policies or agreements (including the
value of any options to acquire Common Stock of the Company the
exercisability of which is accelerated pursuant to the terms of
<PAGE>
any stock option, incentive or similar plan heretofore or
hereafter adopted by the Company), the Company shall pay to
Employee (whether or not his employment has terminated) such
amounts as are necessary to place Employee in the same position
after payment of federal income and excise taxes as he would have
been if such provisions had not been applicable to him.
2.8 Legal Fees. The Company agrees to pay as incurred, to
the full extent permitted by law, all legal fees and expenses
which the Employee may reasonably incur as a result of any
contest (regardless of the outcome thereof) by the Company, the
Employee or others of the validity or enforceability of, or
liability under, any provision of this Agreement (including as a
result of any contest by the Employee about the amount or timing
of any payment pursuant to this Agreement.)
2.8 Set-Off; Mitigation. After a Change of Control, the
Company's and its Affiliates' obligations to make the payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which the Company or its Affiliates may have against the Employee
or others; except that to the extent the Employee accepts other
employment in connection with which he is provided health
insurance benefits, the Company shall only be required to provide
health insurance benefits to the extent the benefits provided by
the Employee's employer are less favorable than the benefits to
which he would otherwise be entitled hereunder. It is the intent
of this Agreement that in no event shall the Employee be
obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Employee under
any of the provisions of this Agreement.
2.9 Outplacement Assistance. Upon any termination of
employment of the Employee other than for Cause within three
years following a Change of Control, the Company shall provide to
the Employee outplacement assistance by a reputable firm
specializing in such services for the period beginning with the
termination of employment and ending three years following the
Change of Control.
ARTICLE III
MISCELLANEOUS
3.1 Binding Effect; Successors.
(a) This Agreement shall be binding upon and inure to
the benefit of the Company and any of its successors or assigns.
(b) This Agreement is personal to the Employee and
shall not be assignable by the Employee without the consent of
the Company (there being no obligation to give such consent)
other than such rights or benefits as are transferred by will or
the laws of descent and distribution.
(c) The Company shall require any successor to or
assignee of (whether direct or indirect, by purchase, merger,
consolidation or otherwise) all or substantially all of the
<PAGE>
assets or businesses of the Company (i) to assume unconditionally
and expressly this Agreement and (ii) to agree to perform or to
cause to be performed all of the obligations under this Agreement
in the same manner and to the same extent as would have been
required of the Company had no assignment or succession occurred,
such assumption to be set forth in a writing reasonably
satisfactory to the Employee.
(d) The Company shall also require all entities that
control or that after the transaction will control (directly or
indirectly) the Company or any such successor or assignee to
agree to cause to be performed all of the obligations under this
Agreement, such agreement to be set forth in a writing reasonably
satisfactory to the Employee.
3.2 Notices. All notices hereunder must be in writing and
shall be deemed to have been given upon receipt of delivery by:
(a) hand (against a receipt therefor), (b) certified or
registered mail, postage prepaid, return receipt requested, (c) a
nationally recognized overnight courier service (against a
receipt therefor) or (d) telecopy transmission with confirmation
of receipt. All such notices must be addressed as follows:
If to the Company, to:
Avondale Industries, Inc.
5100 River Road
New Orleans, Louisiana 70150
Attn: Thomas M. Kitchen
If to the Employee, to:
Kenneth P. Dupont
Avondale Industries, Inc.
5100 River Road
Avondale, LA 70150
or such other address as to which any party hereto may have
notified the other in writing.
3.3 Governing Law. This Agreement shall be construed and
enforced in accordance with and governed by the internal laws of
the State of Louisiana without regard to principles of conflict
of laws.
3.4 Withholding. The Employee agrees that the Company has
the right to withhold, from the amounts payable pursuant to this
Agreement, all amounts required to be withheld under applicable
income and/or employment tax laws, or as otherwise stated in
documents granting rights that are affected by this Agreement.
3.5 Amendment, Waiver. No provision of this Agreement may
be modified, amended or waived except by an instrument in writing
signed by both parties.
3.6 Severability. If any term or provision of this Agree-
ment, or the application thereof to any person or circumstance,
shall at any time or to any extent be invalid, illegal or
<PAGE>
unenforceable in any respect as written, Employee and the Company
intend for any court construing this Agreement to modify or limit
such provision so as to render it valid and enforceable to the
fullest extent allowed by law. Any such provision that is not
susceptible of such reformation shall be ignored so as to not
affect any other term or provision hereof, and the remainder of
this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held
invalid, illegal or unenforceable, shall not be affected thereby
and each term and provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
3.7 Waiver of Breach. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach thereof.
3.8 Remedies Not Exclusive. No remedy specified herein
shall be deemed to be such party's exclusive remedy, and
accordingly, in addition to all of the rights and remedies
provided for in this Agreement, the parties shall have all other
rights and remedies provided to them by applicable law, rule or
regulation.
3.9 Company's Reservation of Rights. Employee acknowledges
and understands that the Employee serves at the pleasure of the
Board and that the Company has the right at any time to terminate
Employee's status as an employee of the Company, or to change or
diminish his status during the Employment Term, subject to the
rights of the Employee to claim the benefits conferred by this
Agreement.
<PAGE>
3.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the Company and the Employee have caused
this Agreement to be executed as of the Change of Control
Agreement Date.
AVONDALE INDUSTRIES, INC.
By: /s/ HUGH A. THOMPSON
--------------------
Hugh A. Thompson
Compensation Committee Chairman
EMPLOYEE: /s/ KENNETH B. DUPONT
---------------------
Kenneth B. (/s/KBD) Dupont
COR\40077.1
AVONDALE INDUSTRIES, INC.
SEVERANCE PAY PLAN AND SUMMARY PLAN DESCRIPTION
In order to recognize and encourage the continued employment
of employees of Avondale Industries, Inc. (the "Company"), and to
alleviate concerns about a possible loss of employment upon a
change of control (as defined below) of the Company, the Company
has adopted a Severance Pay Plan (the "Plan") having the
following terms and conditions. This document also constitutes
the Plan's Summary Plan Description, as described in Section 102
of the Employee Retirement Income Security Act of 1974 ("ERISA").
ARTICLE I
DEFINITIONS
1.1 Company Defined. As used in this Plan, "Company" shall
mean the Company as defined above and any successor to or
assignee of (whether direct or indirect, by purchase, merger,
consolidation or otherwise) all or substantially all of the
assets or business of the Company.
1.2 Change of Control Defined. "Change of Control" shall
mean:
(a) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 (the "Exchange Act") of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of more than 25% of the
outstanding shares of the Company's Common Stock, $1.00 par
value per share (the "Common Stock"); provided, however,
that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control:
(i) any acquisition of Common Stock directly from
the Company,
(ii) any acquisition of Common Stock by the
Company,
(iii)any acquisition of Common Stock by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
by the Company, or
(iv) any acquisition of Common Stock by any
corporation pursuant to a transaction that complies
with clauses (i), (ii) and (iii) of subsection (c) of
this Section 1.2; or
(b) individuals who, as of the date this Plan is
executed (the "Plan Effective Date") constitute the Board
(the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the Plan
Effective Date whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the
Incumbent Board shall be considered a member of the
Incumbent Board, unless such individual's initial assumption
of office occurs as a result of an actual or threatened
<PAGE>
election contest with respect to the election or removal of
directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a person other than
the Incumbent Board; or
(c) consummation of a reorganization, merger or
consolidation, or sale or other disposition of all of
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination,
(i) all or substantially all of the individuals
and entities who were the beneficial owners of the
Company's outstanding common stock and the Company's
voting securities entitled to vote generally in the
election of directors immediately prior to such
Business Combination have direct or indirect beneficial
ownership, respectively, of more than 50% of the then
outstanding shares of common stock, and more than 50%
of the combined voting power of the then outstanding
voting securities entitled to vote generally in the
election of directors, of the corporation resulting
from such Business Combination (which, for purposes of
this paragraph (i) and paragraphs (ii) and (iii), shall
include a corporation which as a result of such
transaction controls the Company or all or
substantially all of the Company's assets either
directly or through one or more subsidiaries), and
(ii) except to the extent that such ownership
existed prior to the Business Combination, no person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan or related
trust of the Company or such corporation resulting from
such Business Combination) beneficially owns, directly
or indirectly, 20% or more of the then outstanding
shares of common stock of the corporation resulting
from such Business Combination or 20% or more of the
combined voting power of the then outstanding voting
securities of such corporation, and
(iii)at least a majority of the members of the
board of directors of the corporation resulting from
such Business Combination were members of the Incumbent
Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for
such Business Combination; or
(d) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
1.3 Affiliate Defined. "Affiliate" or "affiliated
companies" shall mean any company controlled by, controlling, or
under common control with, the Company.
1.4 Cause Defined. "Cause" shall mean:
(a) the willful and continued failure of the
Participant to perform substantially the Participant's
<PAGE>
duties with the Company or its affiliates (other than
any such failure resulting from incapacity due to
physical or mental illness), after a written demand for
substantial performance is delivered to the Participant
by the Board of the Company which specifically
identifies the manner in which the Board believes that
the Participant has not substantially performed the
Participant's duties, or
(b) the willful engaging by the Participant in
illegal conduct or gross misconduct.
For purposes of this provision, no act or failure to act, on the
part of the Participant, shall be considered "willful" unless it
is done, or omitted to be done, by the Participant in bad faith
or without reasonable belief that the Participant's action or
omission was in the best interests of the Company or its
Affiliates. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or upon
the instructions of a senior officer of the Company or based upon
the advice of counsel for the Company or its Affiliates shall be
conclusively presumed to be done, or omitted to be done, by the
Participant in good faith and in the best interests of the
Company or its Affiliates. The cessation of employment of the
Participant shall not be deemed to be for Cause unless and until
there shall have been delivered to the Participant a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable
notice is provided to the Participant and the Participant is
given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board,
the Participant is guilty of the conduct described in
subparagraph (a) or (b) above, and specifying the particulars
thereof in detail.
1.5 Disability Defined. "Disability" shall mean a
condition that would entitle the Participant to receive benefits
under the Company's long-term disability insurance policy in
effect at the time either because he is Totally Disabled or
Partially Disabled, as such terms are defined in the Company's
policy in effect as of the Plan Effective Date or as similar
terms are defined in any successor policy. If the Company has no
long-term disability plan in effect, "Disability" shall occur if
(a) the Participant is rendered incapable because of physical or
mental illness of satisfactorily discharging his duties and
responsibilities to the Company for a period of 90 consecutive
days, (b) a duly qualified physician chosen by the Company and
acceptable to the Participant or his legal representatives so
certifies in writing, and (c) the Board determines that the
Participant has become disabled.
1.6 Good Reason Defined. "Good Reason" shall mean:
(a) Any failure of the Company or its Affiliates to
provide the Participant with the position, authority, duties
and responsibilities at least commensurate in all material
respects with the most significant of those held, exercised
and assigned at any time during the 120-day period
<PAGE>
immediately preceding the Change of Control.
(b) The assignment to the Participant of any duties
inconsistent in any material respect with Participant's
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 2.1(b) of this Plan, or any other
action that results in a diminution in such position,
authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action
not taken in bad faith that is remedied within 10 days after
receipt of written notice thereof from the Participant to
the Company;
(c) Any failure by the Company or its Affiliates to
comply with any of the provisions of this Plan, other than
an isolated, insubstantial and inadvertent failure not
occurring in bad faith that is remedied within 10 days after
receipt of written notice thereof from the Participant to
the Company;
(d) Any purported termination of the Participant's
employment otherwise than as expressly permitted by this
Plan; or
(e) Any failure by the Company to comply with and
satisfy Sections 3.1(a) and (b) of this Plan.
1.7 Participant Defined. "Participant" shall mean an
officer of the Company or a subsidiary designated by the
Compensation Committee of the Board of Directors of the Company
as a participant in the Plan.
ARTICLE II
CHANGE OF CONTROL BENEFIT
2.1 Employment Term and Capacity after Change of Control.
(a) If a Change of Control occurs on or before December 31, 2000
at a time that the Participant continues to be employed by the
Company or a subsidiary, then the Participant's employment term
(the "Employment Term") shall continue through the first
anniversary of the Change of Control, subject to any earlier
termination of Participant's status as an employee pursuant to
this Plan.
(b) After a Change of Control and during the Employment
Term, (i) the Participant's position (including status, offices,
titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately
preceding the Change of Control and (ii) the Participant's
service shall be performed during normal business hours at the
location where the Participant was employed immediately preceding
the Change of Control or any office or location less than 35
miles from such location.
2.2 Compensation and Benefits. During the Employment Term,
<PAGE>
Participant shall be entitled to the following compensation and
benefits:
(a) Base Salary. The Participant shall receive an
annual base salary ("Base Salary"), which shall be paid at a
monthly rate, at least equal to 12 times the highest monthly
base salary paid or payable, including any base salary which
has been earned but deferred by the Participant, by the
Company and its affiliated companies in respect of the 12-
month period immediately preceding the month in which the
Change of Control occurs. During the Employment Term, the
Base Salary shall be reviewed no more than 12 months after
the last salary increase awarded to the Participant prior to
the Change of Control and shall be increased no more than 12
months after the last salary increase awarded to the
Participant prior to the Change of Control in an amount
equal to the percentage increase (excluding promotional
increases) in base salary generally awarded to peer
employees of the Company and its affiliated companies for
the year of determination. Any increase in Base Salary
shall not serve to limit or reduce any other obligation to
the Participant under this Plan. Base Salary shall not be
reduced after any such increase and the term Base Salary as
utilized in this Plan shall refer to Base Salary as so
increased.
(b) Annual Bonus. In addition to Base Salary, the
Participant shall be awarded, for the fiscal year ending
during the Employment Term, an annual bonus (the "Bonus") in
cash at least equal to the Participant's target bonus under
the Company's Management Incentive Plan, or any comparable
bonus under a successor plan, for the last full fiscal year
prior to the Change of Control. Each such Bonus shall be
paid no later than the end of the third month of the fiscal
year next following the fiscal year for which the Bonus is
awarded, unless the Participant shall elect to defer the
receipt of such Bonus.
(c) Fringe Benefits. The Participant shall be
entitled to fringe benefits (including, but not limited to,
automobile allowance, reimbursement for membership dues, and
first class air travel) in accordance with the most
favorable agreements, plans, practices, programs and
policies of the Company and its affiliated companies in
effect for the Participant at any time during the 120-day
period immediately preceding the Change of Control or, if
more favorable to the Participant, as in effect generally at
any time thereafter with respect to other peer employees of
the Company and its affiliated companies.
(d) Expenses. The Participant shall be entitled to
receive prompt reimbursement for all reasonable expenses
incurred by the Participant in accordance with the most
favorable agreements, policies, practices and procedures of
the Company and its affiliated companies in effect for the
Participant at any time during the 120-day period
immediately preceding the Change of Control or, if more
favorable to the Participant, as in effect generally at any
time thereafter with respect to other peer employees of the
<PAGE>
Company and its affiliated companies.
(e) Incentive, Savings and Retirement Plans. The
Participant shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies
and programs applicable generally to other peer employees of
the Company and its affiliated companies, but in no event
shall such plans, practices, policies and programs provide
the Participant with incentive opportunities (measured with
respect to both regular and special incentive opportunities,
to the extent, if any, that such distinction is applicable),
savings opportunities and retirement benefit opportunities,
in each case, less favorable than the most favorable of
those provided by the Company and its affiliated companies
for the Participant under any agreements, plans, practices,
policies and programs as in effect at any time during the
120-day period immediately preceding the Change of Control
or, if more favorable to the Participant, those provided
generally at any time after the Change of Control to other
peer employees of the Company and its affiliated companies.
(f) Welfare Benefit Plans. The Participant and/or the
Participant's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies
(including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental
death and travel accident insurance plans and programs) to
the extent applicable generally to other peer employees of
the Company and its affiliated companies, but in no event
shall such plans, practices, policies and programs provide
the Participant with benefits, in each case, less favorable
than the most favorable of any agreements, plans, practices,
policies and programs in effect for the Participant at any
time during the 120-day period immediately preceding the
Change of Control or, if more favorable to the Participant,
those provided generally at any time after the Change of
Control to other peer employees of the Company and its
affiliated companies.
(g) Vacation. The Participant shall be entitled to
paid vacation in accordance with the most favorable
agreements, plans, policies, programs and practices of the
Company and its affiliated companies as in effect for the
Participant at any time during the 120-day period
immediately preceding the Change of Control or, if more
favorable to the Participant, as in effect generally at any
time thereafter with respect to other peer employees of the
Company and its affiliated companies.
2.3 Obligations upon Termination after a Change of Control.
(a) Termination by Company for Reasons other than
Death, Disability or Cause or by Participant for Good
Reason. If, after a Change of Control and during the
Employment Term, the Company terminates the Participant's
employment other than for Cause, death or Disability, or the
Participant terminates employment for Good Reason,
<PAGE>
(i) the Company shall pay to the Participant in a
lump sum in cash within 30 days of the date of
termination an amount equal to the sum of (i) the
amount of Base Salary in effect at the date of
termination, plus (ii) the greater of (x) the annual
Bonus paid or to be paid to the Participant for the
last fiscal year or (y) the target Bonus for which the
Participant is eligible for the 12-month period in
which the date of termination occurs;
(ii) for a period of twelve (12) months following
the date of termination of employment (the
"Continuation Period"), the Company shall at its
expense continue on behalf of the Participant and his
dependents and beneficiaries the life insurance,
disability, medical, dental and hospitalization
benefits provided (x) to the Participant at any time
during the 90-day period prior to the Change in Control
or at any time thereafter or (y) to other similarly
situated executives who continue in the employ of the
Company during the Continuation Period. The coverage
and benefits (including deductibles and costs) provided
in this Section 2.3(a)(ii) during the Continuation
Period shall be no less favorable to the Participant
and his dependents and beneficiaries, than the most
favorable of such coverages and benefits during any of
the periods referred to in clauses (x) or (y) above.
The Company's obligation hereunder with respect to the
foregoing benefits shall be limited to the extent that
the Participant obtains any such benefits pursuant to a
subsequent employer's benefit plans, in which case the
Company may reduce the coverage of any benefits it is
required to provide the Participant hereunder as long
as the aggregate coverages and benefits of the combined
benefit plans is no less favorable to the Participant
than the coverages and benefits required to be provided
hereunder. The coverage during the Continuation Period
will run concurrently with the coverage provided under
the Consolidated Omnibus Budget Reconciliation Act; and
(iii)the Participant shall immediately become
fully (100%) vested in his benefit under each
supplemental or excess retirement plan of the Company
in which the Participant was a participant, including,
but not limited to the Avondale Industries, Inc.
Supplemental Pension Plan and the Avondale Industries,
Inc. Executive Excess Retirement Plan.
(b) Death. If, after a Change of Control and during
the Employment Term, the Participant's status as an employee
is terminated by reason of the Participant's death, there
shall be no further obligation under this Plan to the
Participant's legal representatives (other than those
already accrued to the Participant), other than the
obligation to make any payments due pursuant to employee
benefit plans maintained by the Company or its affiliated
companies.
(c) Disability. If, after a Change of Control and
<PAGE>
during the Employment Term, Participant's status as an
employee is terminated by reason of Participant's
Disability, there shall be no further obligation under this
Plan to the Participant (other than those already accrued to
the Participant), other than the obligation to make any
payments due pursuant to employee benefit plans maintained
by the Company or its affiliated companies.
(d) Cause. If, after a Change of Control and during
the Employment Term, the Participant's status as an employee
is terminated by the Company for Cause, there shall be no
further obligation under this Plan to the Participant other
than for obligations imposed by law and obligations imposed
pursuant to any employee benefit plan maintained by the
Company or its affiliated companies.
(e) Voluntary Termination. If, after a Change of
Control and during the Employment Term, the Participant
voluntarily terminates his employment with the Company other
than for Good Reason, there shall be no further obligation
under this Plan to the Participant other than for
obligations imposed by law and obligations imposed pursuant
to any employee benefit plan maintained by the Company or
its affiliated companies.
2.4 Accrued Obligations and Other Benefits. It is the
intent of this Plan that upon termination of employment for any
reason the Participant be entitled to receive promptly, and in
addition to any other benefits specifically provided, (a) the
Participant's Base Salary through the date of termination to the
extent not theretofore paid, (b) any accrued vacation pay, to the
extent not theretofore paid, and (c) any other amounts or
benefits required to be paid or provided or which the Participant
is entitled to receive under any plan, program, policy practice
or agreement of the Company.
2.5 Stock Options. The foregoing benefits are intended to
be in addition to the value of any options to acquire Common
Stock of the Company the exercisability of which is accelerated
pursuant to the terms of any stock option, incentive or other
similar plan heretofore or hereafter adopted by the Company.
2.6 Protection of Benefits. To the extent permitted by
applicable law, the Company shall take all reasonable steps to
ensure that the Participant is not, by reason of a Change of
Control, deprived of the economic value (including any value
attributable to the Change of Control transaction) of (a) any
options to acquire Common Stock of the Company or (b) any Common
Stock of the Company beneficially owned by the Participant.
2.7 Legal Fees. The Company agrees to pay as incurred, to
the full extent permitted by law and to the extent that legal
fees and expenses are not recoverable under the provisions of the
Employee Retirement Income Security Act of 1974, all legal fees
and expenses which the Participant may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the
Company, the Participant or others of the validity or
enforceability of, or liability under, any provision of this Plan
(including as a result of any contest by the Participant about
the amount or timing of any payment pursuant to this Plan.)
<PAGE>
2.8 Set-Off; Mitigation. After a Change of Control, the
Company's and its Affiliates' obligations to make the payments
provided for in this Plan and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which the Company or its Affiliates may have against the
Participant or others; except that to the extent the Participant
accepts other employment in connection with which he is provided
health insurance benefits, the Company shall only be required to
provide health insurance benefits to the extent the benefits
provided by the Participant's employer are less favorable than
the benefits to which he would otherwise be entitled hereunder.
It is the intent of this Plan that in no event shall the
Participant be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the
Participant under any of the provisions of this Plan.
2.9 Outplacement Assistance. Upon any termination of
employment of the Participant other than for Cause following a
Change of Control and during the Employment Term, the Company
shall provide to the Participant outplacement assistance by a
reputable firm specializing in such services for the period
beginning with the termination of employment and ending at the
end of the Employment Term.
ARTICLE III
MISCELLANEOUS
3.1 Successors. (a)The Company shall require any successor
to or assignee of (whether direct or indirect, by purchase,
merger, consolidation or otherwise) all or substantially all of
the assets or businesses of the Company (i) to assume uncondi-
tionally and expressly this Plan and (ii) to agree to perform or
to cause to be performed all of the obligations under this Plan
in the same manner and to the same extent as would have been
required of the Company had no assignment or succession occurred,
such assumption to be set forth in a writing reasonably
satisfactory to the Participant.
(b) The Company shall also require all entities that
control or that after the transaction will control (directly or
indirectly) the Company or any such successor or assignee to
agree to cause to be performed all of the obligations under this
Plan, such agreement to be set forth in a writing reasonably
satisfactory to the Participant.
3.2 Funding. The Plan is funded solely through general
assets of the Company that employs the Participant and no
employee contributions are taken nor are any funds held in trust.
3.3 Plan Amendment or Termination. The Company reserves
the right to amend or terminate this Plan at any time and without
advance notice. An amendment shall be made in writing, executed
by an officer of the Company, as authorized by the Company's
Board of Directors. The Board of Directors may delegate its
authority under this Section 3.3 to the Compensation Committee of
the Board of Directors. No benefits will be paid to anyone whose
employment is terminated after the Plan is terminated or amended
to exclude that Participant.
<PAGE>
3.4 Applicable Laws. The Plan shall be governed by the
laws of the State of Louisiana to the extent not preempted by
ERISA.
3.5 Administration of the Plan. The Plan shall be
administered by Avondale Industries, Inc. (the "Plan
Administrator"). The Plan Administrator's address is: 5100 River
Road, New Orleans, LA 70150. The Plan Administrator shall have
the exclusive right to interpret the Plan and all such
interpretation shall be binding on all affected parties. The
Avondale Industries, Inc. Severance Pay Plan Document is a legal
document that controls the operation of the Plan. Its provisions
cover all situations relating to benefits and its provision will
be final authority.
3.6 Company's Reservation of Rights. A Participant serves
at the pleasure of the Board and the Company has the right at any
time to terminate the Participant's status as an employee of the
Company, or to change or diminish his status during the
Employment Term, subject to the rights of the Participant to
claim the benefits conferred by the Plan.
3.7 Type of Plan. This Plan is intended to be a severance
welfare benefit plan under the Employee Retirement Income
Security Act of 1974 ("ERISA"). In no event shall benefits
payable to any Participant under this Plan exceed twice the
Participant's "Annual Compensation" (as defined in ERISA
regulation S2510.3-2(b)(2)) during the year immediately preceding
the year of termination.
ARTICLE IV
CLAIMS FOR BENEFITS
4.1 Claims Procedure. Claims for benefits may be made to
the Plan Administrator at the above address. Payments of the
amounts provided in this Plan shall ordinarily be made without
the need for demand at the discretion of the Company.
Nevertheless, a Participant who claims entitlement to a benefit
can file a written claim for benefits with the Plan Administrator
within 90 days after the Participant's employment is terminated.
The Plan Administrator shall accept or reject the claim within 30
days of its receipt. If the claim is denied, the Plan
Administrator shall give the reason for denial in a written
notice calculated to be understood by the claimant, referring to
the Plan provisions that provide the basis for the denial. If
any additional information or material is necessary to perfect
the claim, the Plan Administrator shall identify these items and
explain why such additional material is necessary. If the Plan
Administrator neither accepts nor rejects the claim within 30
days, the claim shall be deemed to be denied.
4.2 Claim Denial and Appeal. Upon denial of the claim, the
claimant may file a written request for review of the denied
claim to the Plan Administrator within 60 days of the denial.
The claimant shall have the opportunity to be represented by
counsel and may request to be heard at a hearing. The claimant
shall have the opportunity to review the pertinent documents and
the opportunity to submit written reasons opposing the denial.
The decision upon the appeal will be made within 60 days of
<PAGE>
receipt of the requested review unless special circumstances
(such as a need to hold a hearing) require an extension of time
for processing, in which case a decision will be made as soon as
possible, but no later than 120 days after receipt of a request
for review. If such extension of time for review is required,
because of special circumstances, written notice of the extension
will be furnished to the claimant prior to the commencement of
the extension. If the appeal is denied, the denial shall be in
writing.
ARTICLE V
ERISA RIGHTS
On Labor Day of 1974 a new law was enacted to protect the
interests of workers in pension and welfare benefits connected
with their jobs. Its title is "Employee Retirement Income
Security Act of 1974" but it is often referred to by its initials
- ERISA. Some of the benefits provided by the Plan may be
subject to ERISA. Therefore, each Participant under the Plan has
certain rights and protection under ERISA.
ERISA provides that all Plan Participants shall be entitled
to:
i. Examine, without charge, at the Plan
Administrator's office and at other specified
locations, such as work sites, all Plan documents,
including any Plan documents filed by the Plan
Administrator with the U.S. Department of Labor.
ii. Obtain copies of all Plan documents and other Plan
information upon written request to the Plan
Administrator. The Plan Administrator may make a
reasonable charge for the copies.
In addition to creating rights for Participants, ERISA imposes
duties upon the people who are responsible for the operation of
the Plan. The people who operate the Plan, called "fiduciaries"
of the Plan, have a duty to do so prudently and in the interest
of the Plan Participants. No one, including the Company or any
other person, may terminate a Participant's employment or
otherwise discriminate against a Participant in any way to
prevent the Participant from obtaining a welfare benefit or
exercising his or her rights under ERISA. If a claim for a
benefit is denied in whole or in part, the claimant must receive
a written explanation of the reason for the denial. A claimant
has the right to have the Plan Administrator review and
reconsider the claim. Under ERISA, there are steps a Participant
can take to enforce the above rights. For instance, if a
Participant requests certain materials from the Plan
Administrator and does not receive them within 30 days, he or she
may file suit in a federal court. In such a case, the court may
require the Plan Administrator to provide the materials and pay
the Participant up to $100 a day until the Participant receives
the materials, unless the materials were not sent because of
reasons beyond the control of the Plan Administrator. If a claim
for benefits is denied or ignored, in whole or in part, the
claimant may file suit in a state or federal court. If it should
<PAGE>
happen that a Participant is discriminated against for asserting
his or her rights, he or she may seek assistance from the U.S.
Department of Labor, or may file suit in a federal court. The
court will decide who should pay court costs and legal fees. If
the Participant is successful, the court may order the person
sued to pay these costs and fees. If the Participant loses, the
court may order the Participant to pay these costs and fees, for
example, if it finds that the claim is frivolous. If a
Participant has any questions about the Plan, he or she should
contact the Director of Human Resources at the above address. If
a Participant has any questions about this paragraph or about his
or her rights under ERISA, he or she should contact the nearest
Area Office of the U.S. Labor-Management Services Administration,
Department of Labor.
This Plan was executed in New Orleans, Louisiana, this 1st
---
day of March, 1996.
-----
WITNESSES: AVONDALE INDUSTRIES, INC.
/s/ ROBIN L. DEMPSEY BY: /s/ THOMAS M. KITCHEN
-------------------- ---------------------
Name: Thomas M. Kitchen
-----------------
Title: VP & CFO
--------
COR\39607.2
May 10, 1996
Avondale Industries, Inc.
Post Office Box 50280
New Orleans, Louisiana 70150
We have made a review, in accordance with standards established by
the American Institute of Certified Public Accountants, of the
unaudited interim financial information of Avondale Industries, Inc.
and subsidiaries for the periods ended March 31, 1996 and 1995, as
indicated in our report dated May 10, 1996; because we did not
perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in
your Quarterly Report on Form 10-Q for the quarter ended March 31,
1996 is incorporated by reference in Registration Statement No. 33-
31984 on Forms S-8 and S-3.
We also are aware that the aforementioned report, pursuant to Rule
436(c) under the Securities Act of 1933, is not considered a part of
the Registration Statement prepared or certified by an accountant or
a report prepared or certified by an accountant within the meaning of
Sections 7 and 11 of that Act.
/s/ DELOITTE & TOUCHE LLP
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AVONDALE
INDUSTRIES, INC.'S QUARTERLY REPORT FILED ON FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 64,366
<SECURITIES> 0
<RECEIVABLES> 75,227
<ALLOWANCES> 0
<INVENTORY> 14,339
<CURRENT-ASSETS> 177,888
<PP&E> 254,762
<DEPRECIATION> (124,130)
<TOTAL-ASSETS> 321,418
<CURRENT-LIABILITIES> 94,895
<BONDS> 58,205
0
0
<COMMON> 15,927
<OTHER-SE> 139,867
<TOTAL-LIABILITY-AND-EQUITY> 321,418
<SALES> 156,496
<TOTAL-REVENUES> 156,496
<CGS> 139,210
<TOTAL-COSTS> 139,210
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,386
<INCOME-PRETAX> 7,436
<INCOME-TAX> 2,700
<INCOME-CONTINUING> 4,736
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<EXTRAORDINARY> 0
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<NET-INCOME> 4,736
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.33
</TABLE>
