SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
AVONDALE INDUSTRIES, INC.
(Name of Registrant as Specified In Its Charter)
Board of Directors of Avondale Industries, Inc.
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(Set forth amount on which the
filing fee is calculated and state how it was determined.):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form of Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
Avondale Industries, Inc.
5100 River Road
Avondale, Louisiana 70094
______________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
______________________________
TO THE SHAREHOLDERS OF AVONDALE INDUSTRIES, INC.:
The Annual Meeting of Shareholders of Avondale Industries,
Inc. (the "Company") will be held at 10:00 a.m. local time on
Friday, June 12, 1998, at the main conference room on the second
floor of the Company's Administration Building, 5100 River Road,
Avondale, Louisiana, to elect two directors, to consider such of
the three shareholder proposals described in the proxy statement
as may be presented at the Annual Meeting, and to transact such
other business as may properly come before the meeting or any
adjournment thereof.
Only holders of record of common stock of the Company at the
close of business on April 23, 1998 (the "Record Date") are
entitled to notice of, to vote at, and to attend the Annual
Meeting.
All shareholders of record on the Record Date are cordially
invited to attend the meeting in person. However, if you are
unable to attend in person and wish to have your stock voted,
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
IN THE ACCOMPANYING POSTPAID ENVELOPE AS PROMPTLY AS POSSIBLE.
Your proxy may be revoked by appropriate notice to the Secretary
of the Company at any time prior to the voting thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Thomas M. Kitchen
Thomas M. Kitchen
Secretary
Avondale, Louisiana
April 30, 1998
Avondale Industries, Inc.
5100 River Road
Avondale, Louisiana 70094
April 30, 1998
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of
Avondale Industries, Inc. (the "Company") in connection with the
solicitation on behalf of the Board of Directors of proxies for
use at the Annual Meeting of Shareholders of the Company
scheduled to be held on Friday, June 12, 1998, at the main
conference room on the second floor of the Company's
Administration Building, 5100 River Road, Avondale, Louisiana,
and at any adjournment thereof (the "Annual Meeting").
Only holders of record of shares of common stock of the
Company ("Common Stock") at the close of business on April 23,
1998 are entitled to notice of, to vote at, and to attend the
Annual Meeting. On that date, the Company had outstanding
14,493,211 shares of Common Stock, each of which is entitled to
one vote with respect to each matter considered at the Annual
Meeting.
The enclosed proxy may be revoked by a shareholder at any
time prior to its exercise by filing with the Secretary of the
Company a written revocation or duly executed proxy bearing a
later date. The proxy will also be deemed revoked if the share-
holder votes in person at the Annual Meeting.
This Proxy Statement is first being mailed to shareholders
on or about April 30, 1998, and the Company will bear the cost of
soliciting proxies hereunder. In addition to the use of the
mails, proxies may be solicited by personal interview, telephone,
telegraph, facsimile or e-mail. Banks, brokerage houses and
other institutions, nominees and fiduciaries will be requested to
forward the soliciting material to their principals and to obtain
authorization for the execution of proxies, and the Company will,
upon request, reimburse them for their expenses in so acting. In
addition, proxies will be solicited by Georgeson & Company, Inc.,
an investor relations firm that will be paid the sum of $8,000
plus its out-of-pocket expenses to assist the Company in the
solicitation of proxies.
ELECTION OF DIRECTORS
(Item 1 on the accompanying proxy card)
The Company's Articles of Incorporation and By-laws provide
for a Board of Directors of six persons allocated among three
classes of directors who serve three-year staggered terms, with
one class elected at each annual shareholders' meeting. The term
of one class of two directors expires at the Annual Meeting.
Accordingly, proxies cannot be voted for more than two persons.
Unless authority to vote for the election of directors is
withheld, the persons named in the enclosed proxy will vote all
shares represented by the proxies received by them for the
election of each of the below-named persons who have been
proposed for election by the Board of Directors. In accordance
with the Company's By-laws, if any of these nominees should
decline or become unable to serve for any reason, votes will be
cast instead for a substitute nominee designated by the Board of
Directors or, if none is designated, the number of authorized
directors will be automatically reduced by the total number of
nominees withdrawn from consideration. Directors are elected by
plurality vote.
The following table sets forth certain information relating
to the directors of the Company and certain information
concerning the beneficial ownership of shares of Common Stock by
(i) each director and nominee, (ii) each executive officer named
in the Summary Compensation Table and (iii) all directors and
executive officers of the Company as a group, all as of April 1,
1998, as determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934 (the "Exchange Act"). Unless
otherwise indicated, (i) each director has been engaged in the
principal occupation shown for more than the past five years and
(ii) the shares shown as being beneficially owned are held with
sole voting and investment power.
<TABLE>
<CAPTION>
Proposed Nominees for Election:
Number of
Name, Age, Principal Occupation Nominated Shares
and Directorships in For Term Director Beneficially
Other Public Corporations Expiring Since Owned(1)
-------------------------------- ----------- --------- -------------
<S> <C> <C> <C>
Thomas M. Kitchen, 50 2001 1987 67,052(3)
Corporate Vice President,
Chief Financial Officer and
Secretary of the Company(2)
Francis R. Donovan, 63 2001 1994 266(5)
President, Designers and
Planners, Inc.(4); Vice
Admiral, U.S. Navy (retired)
</TABLE>
The Board of Directors recommends a vote
FOR each of the proposed nominees.
Other Directors and Executive Officers:
<TABLE>
<CAPTION>
Name, Age, Principal Occupation Number of
and Directorships in Serving Shares
Other Public Corporations Term Director Beneficially
Expiring Since Owned(1)
-------------------------------- ----------- --------- -------------
<S> <C> <C> <C>
Albert L. Bossier, Jr., 65 2000 1985 141,104(6)
Chairman of the Board, Chief
Executive Officer, and
President of the Company(2)
Hugh A. Thompson, 63 2000 1988 2,766(8)
Retired(7)
Anthony J. Correro, III, 56 1999 1988 766(10)
Partner, Correro Fishman
Haygood Phelps Weiss Walmsley
& Casteix, L.L.P. (law
firm)(9)
Kenneth B. Dupont, 59 1999 1987 24,392(11)
Corporate Vice President
- Commercial and Offshore
Programs of the
Company;(2)
Edmund C. Mortimer, 63 --- --- 5,037(12)
Corporate Vice President
- Government Programs of
the Company;(2)
R. Dean Church, 55 --- --- 6,342(13)
Corporate Vice President
-Chief Administrative
Officer of the
Company;(2)
All directors and executive 259,804
officers as a group (11 persons)
</TABLE>
________________
(1) None of the proposed nominees, directors or executive
officers beneficially owns in excess of one percent of the
Common Stock. The 259,804 shares of Common Stock
beneficially owned by all of the Company's directors and
executive officers as a group constitute approximately 1.8%
of the outstanding Common Stock.
(2) Messrs. Bossier, Kitchen, Dupont, Mortimer, and Church are
the executive officers of the Company for whom compensation
information is disclosed in this Proxy Statement.
(3) Includes 4,462 shares allocated to Mr. Kitchen's Avondale
Employee Stock Ownership Plan ("ESOP") account and 9,765
shares that he has the right to acquire under stock options
that are exercisable within 60 days.
(4) Since September 1992, Mr. Donovan has served as a consultant
to various companies on maritime issues, and from November
1994 to June 1996 he was employed as Strategic Mobility
Coordinator, PRC Inc., an information technology company.
Since July 1996 he has served as President of Designers and
Planners, Inc., a marine engineering, naval architecture and
environmental planning firm.
(5) Consists of shares Mr. Donovan has the right to acquire
under stock options that are exercisable within 60 days.
(6) Includes 8,815 shares allocated to Mr. Bossier's ESOP
account and 20,870 shares that he has the right to acquire
under stock options that are exercisable within 60 days.
(7) From 1991 to 1996, Dr. Thompson was a Professor of
Engineering at, and from 1976 to 1991 Dr. Thompson was the
Dean of, the School of Engineering of Tulane University,
from which he retired in 1996.
(8) Includes 266 shares Dr. Thompson has the right to acquire
under stock options that are exercisable within 60 days.
(9) For more than five years prior to June 1994, Mr. Correro was
a partner in the law firm of Jones, Walker, Waechter,
Poitevent, Carrere & Denegre, L.L.P. Mr. Correro is also a
director of Campo Electronics, Appliances and Computers,
Inc.
(10) Includes 266 shares Mr. Correro has the right to acquire
under stock options that are exercisable within 60 days.
(11) Includes 3,867 shares allocated to Mr. Dupont's ESOP account
and 7,321 shares that he has the right to acquire under
stock options that are exercisable within 60 days.
(12) Includes 481 shares allocated to Mr. Mortimer's ESOP account
and 4,556 shares that he has the right to acquire under
stock options that are exercisable within 60 days.
(13) Includes 2,426 shares allocated to Mr. Church's ESOP account
and 3,916 shares that he has the right to acquire under
stock options that are exercisable within 60 days.
______________________
During 1997, the Board of Directors held six regular
meetings and one special meeting. Each director of the Company
attended at least 75% of the aggregate number of meetings held
during 1997 of the Board and any committees of which he was a
member. Members of the Board who are not officers receive an
annual fee of $12,000 and an additional fee of $1,500 for each
meeting of the Board or committee thereof attended, all or a
portion of which they are permitted to defer under a Directors'
Deferred Compensation Plan. Deferred fees earn interest at a
rate of 8.5% per annum compounded annually, and are payable in
five equal installments or a lump sum upon the earliest of the
director's resignation, removal, attainment of age 65, or death.
The provisions of the plan, including the interest rate payable
on deferred fees, may be amended at any time by the Board of
Directors. In addition to the foregoing directors' fees, each
director is reimbursed for expenses incurred in attending
meetings, and also receives options to acquire 1,065 shares of
Common Stock on the day following the annual meeting for each
year that the 1997 Stock Incentive Plan remains in effect and
shares of Common Stock are available for grant under such plan on
such date.
The Board has an Audit Committee, of which Messrs. Correro
and Thompson are members, that coordinates communications between
non-committee directors and the Company's management, independent
public accountants and internal auditors with respect to
financial accounting, reporting, and controls, assists the Board
in fulfilling its fiduciary responsibilities as to accounting
policies and reporting practices and the sufficiency of auditing
procedures relative to the Company, and ensures the independence
of the Company's independent accountants, the integrity of
management and the adequacy of disclosure to shareholders. The
Audit Committee met twice during 1997. The Board also has a
Compensation Committee, of which Mr. Donovan and Dr. Thompson are
members, that determines the general compensation policies of the
Company, determines the compensation to be paid to the executive
officers and other employees of the Company and administers the
Company's Stock Appreciation Plan and 1997 Stock Incentive Plan.
The Compensation Committee met four times during 1997.
The Board of Directors does not have a nominating committee.
Any shareholder desiring to nominate persons for election to the
Board must comply with the procedures set forth in the Company's
Articles of Incorporation and By-laws. Such nominations must be
made by written notice delivered to the Company's Secretary at
its principal executive offices, 5100 River Road, Avondale,
Louisiana 70094, and generally must be received no later than
the close of business on the tenth day following the date on
which notice of the annual meeting is mailed; provided that if
notice or public disclosure of the date of the meeting is given
or made to shareholders more than 55 days prior to the meeting,
such nominations must be delivered to the Company's Secretary not
less than 45 days nor more than 90 days prior to the meeting.
The notice must include the following information with respect to
each person the shareholder proposes to nominate: (i) the name,
age, business address and residential address of such person,
(ii) the principal occupation or employment of such person, (iii)
the class and number of shares of capital stock of the Company of
which such person is the beneficial owner (determined in
accordance with Article VA. of the Company's Articles of
Incorporation), and (iv) any other information relating to such
person that would be required to be disclosed in solicitations of
proxies for election of directors, or would be otherwise
required, in each case pursuant to Regulation 14A under the
Exchange Act. The notice must also include the following
information with respect to the shareholder giving the notice:
(i) the name and address of such shareholder and (ii) the class
and number of shares of capital stock of the Company of which
such shareholder is the beneficial owner (determined in
accordance with Article VA. of the Company's Articles of
Incorporation).
PRINCIPAL SHAREHOLDERS
The following persons are, to the knowledge of the Company,
the only persons that beneficially owned, as of April 1, 1998,
more than five percent of the Common Stock, calculated in
accordance with Rule 13d-3 under the Exchange Act. Unless
otherwise indicated, all shares indicated as beneficially owned
are held with sole voting and investment power.
Number of Shares
Name and Address Beneficially Percent of
Owned Class
-------------------------- ------------------ -----------
Blanche S. Barlotta 2,835,131(1) 19.6%
R. Dean Church and
Rodney J. Duhon, Jr.,
as Trustees of the
Avondale
Employee Stock Ownership Trust
P. O. Box 50280
New Orleans, Louisiana 70150
Mellon Bank Corporation 1,338,278(2) 9.2%
One Mellon Bank Center
Pittsburg,
Pennsylvania 15258
____________
(1) The right to vote shares allocated to an ESOP participant's
account is passed through to the participant. There are
currently no unallocated shares other than a nominal number
of shares that have been forfeited by participants since
January 1, 1998. Voting rights of unallocated shares are
exercised by the ESOP Trustees at the direction of the ESOP
Administrative Committee, the members of which are the three
ESOP Trustees and two other officers of the Company, Ernest
F. Griffin, Jr. and Eugene E. Blanchard, Jr. Investment
power over the ESOP shares is exercised by the ESOP Trustees
at the direction of the ESOP Administrative Committee,
provided the ESOP Trustees determine such direction to be
consistent with their fiduciary duties.
(2) Based solely upon information contained in Schedule 13G
filed on January 15, 1998 by Mellon Bank Corporation. Mellon
Bank Corporation shares dispositive power with respect to
82,200 of the shares reported.
______________________
EXECUTIVE COMPENSATION
Summary of Executive Compensation
The following table sets forth certain information regarding
the compensation paid to the Company's Chief Executive Officer
and to each of the four most highly compensated executive
officers of the Company whose annual compensation exceeded
$100,000 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
-------------
Annual Number of
Compensation Shares
Name and ------------------ Underlying All Other
Principal Positions Year Salary(2) Bonus Stock Options Compensation
------------------------- ---- -------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Albert L. Bossier, Jr. 1997 $682,822 $166,475 41,739 $10,342(3)
Chairman of the 1996 684,821 173,870 10,702
Board, Chief 1995 643,632 216,453 10,820
Executive Officer
and President
Thomas M. Kitchen 1997 319,480 77,891 19,529 7,610(4)
Corporate Vice 1996 320,415 81,351 7,660
President - Chief 1995 301,152 101,277 8,595
Financial Officer
and Secretary
Kenneth B. Dupont 1997 239,530 58,399 14,642 7,069(5)
Corporate Vice 1996 240,231 60,993 6,423
President - 1995 225,768 75,926 5,785
Commercial and
Offshore
Programs
Edmund C. Mortimer 1997 149,051 36,339 9,111 5,602(6)
Corporate Vice
President -
Government
Programs(1)
R. Dean Church 1997 131,019 37,638 7,832 4,630(7)
Corporate Vice
President - Chief
Administrative
Officer(1)
</TABLE>
________________
(1) Named an Executive Officer effective December 1, 1997.
(2) Includes lump sum payments of 2.5% and 2.8% of salary made
to all employees in 1997 and 1996, respectively.
(3) Consists of $1,542 in medical expense reimbursement and
$8,800 in group life and disability insurance premiums.
(4) Consists of $510 in medical expense reimbursement and $7,100
in group life and disability insurance premiums.
(5) Consists of $1,669 in medical expense reimbursement and
$5,400 in group life and disability insurance premiums.
(6) Consists of $1,402 in medical expense reimbursement and
$4,200 in group life and disability insurance premiums.
(7) Consists of $430 in medical expense reimbursement and $4,200
in group life and disability insurance premiums.
Stock Options and Stock Appreciation Rights
The following table sets forth certain information
concerning the grant of stock options during 1997.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL YEAR 1997
Total Potential
Percent Options Realizable
Number of Granted Value at
of to Assumed Rates
Securities Employees of Stock Price
Underlying in Appreciation for
Options Fiscal Exercise Expiration Option Term
Name Granted Year Price Date 5% 10%
---------------- ---------- --------- --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Albert L. 27,826 10.12% $19.625 05/23/07 $343,512 $870,258
Bossier, Jr. 13,913 5.06% 22.94 08/04/07 200,765 508,659
---------------- ---------- --------- --------- ---------- --------- --------
Thomas M. 13,019 4.74% 19.625 05/23/07 160,720 407,169
Kitchen 6,510 2.37% 22.94 08/04/07 93,939 238,006
---------------- ---------- --------- --------- ---------- --------- --------
Kenneth B. 9,761 3.55% 19.625 05/23/07 120,500 305,275
Dupont 4,881 1.78% 22.94 08/04/07 70,433 178,449
---------------- ---------- --------- --------- ---------- --------- --------
Edmund C. 6,074 2.21% 19.625 05/23/07 74,984 189,964
Mortimer 3,037 1.10% 22.94 08/04/07 43,824 111,033
---------------- ---------- --------- --------- ---------- --------- --------
R. Dean Church 5,221 1.90% 19.625 05/23/07 64,453 163,287
2,611 0.95% 22.94 08/04/07 37,677 95,458
---------------- ---------- --------- --------- ---------- --------- --------
</TABLE>
The following table sets forth certain information
concerning the exercise of options and stock appreciation rights
during 1997 and unexercised options and stock appreciation rights
on December 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of securities Value of Unexercised
Shares underlying unexercised In-the-Money/Options/SARs
acquired Value options/SARs at 12/31/97 at 12/31/97
Name on exercise realized Exercisable Unexercisable Exercisable Unexercisable
---------------------- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Albert L. Bossier, Jr. 129,251 $839,163 20,870 20,869 $163,918 $209,994
Thomas M. Kitchen 59,160 $506,841 9,765 9,764 76,696 98,250
Kenneth B. Dupont 17,000 $103,675 7,321 7,321 57,499 73,668
R. Dean Church 4,437 $ 19,385 3,916 3,916 30,756 39,405
Edmund C. Mortimer --- --- 4,556 4,555 35,785 45,835
_________________________
</TABLE>
Pension Plans
Messrs. Bossier, Kitchen, Dupont, Mortimer and Church
participate in a qualified defined-benefit pension plan (the
"Qualified Pension Plan") and a non-qualified supplemental
pension plan (the "Supplemental Pension Plan"). Messrs. Bossier,
Kitchen and Dupont also participate in a non-qualified executive
excess retirement plan (the "Excess Retirement Plan").
The following table reflects the aggregate annual benefits
under the Qualified Pension Plan, Supplemental Pension Plan and
Excess Retirement Plan that an executive officer with the years
of service and average annual earnings (as calculated in
accordance with the Qualified Pension Plan and Supplemental
Pension Plan) indicated can expect to receive under the plans
upon retirement at age 65. The benefits under the Qualified
Pension Plan and the Excess Retirement Plan are not subject to
reduction for Social Security but are offset by the actuarially
equivalent value of the shares of Common Stock and other assets
allocated to the ESOP account of each participant. This offset
is not reflected in the table below.
Avondale Industries, Inc.
Estimated Annual Retirement Benefits
(Before Reduction for ESOP Benefits)
Average Years of Service
Annual -------------------------------------------------------
Earnings 15 years 20 years 25 years 30 years 35 years 40 years
-------- -------- -------- -------- -------- -------- --------
$150,000 $56,250 $67,500 $70,750 $90,000 $101,250 $112,500
200,000 75,000 90,000 105,000 120,000 135,000 150,000
250,000 93,750 112,500 131,250 150,000 168,750 187,500
300,000 112,500 135,000 157,500 180,000 202,500 225,000
350,000 131,250 157,500 183,750 210,000 236,250 262,500
400,000 150,000 180,000 210,000 240,000 270,000 300,000
450,000 168,750 202,500 236,250 270,000 303,750 337,500
500,000 187,500 225,000 262,500 300,000 337,500 375,000
550,000 206,250 247,500 288,750 330,000 371,250 412,500
600,000 225,000 270,000 315,000 360,000 405,000 450,000
650,000 243,750 292,500 341,250 390,000 438,750 487,500
700,000 262,500 315,000 367,500 420,000 472,500 525,000
750,000 281,250 337,500 393,750 450,000 506,250 562,500
800,000 300,000 360,000 420,000 480,000 540,000 600,000
850,000 318,750 382,500 446,250 510,000 573,750 637,500
900,000 337,500 405,000 472,500 540,000 607,500 675,000
950,000 356,250 427,500 498,750 570,000 641,250 712,500
Compensation covered by the plans consists of
salary, bonus and an automobile allowance. Covered
compensation for Messrs. Bossier, Kitchen, Dupont,
Mortimer and Church equals the amount reported in the
Summary Compensation Table under the heading "Annual
Compensation" plus the automobile allowance. Messrs.
Bossier, Kitchen, Dupont, Mortimer and Church have 41,
20, 34, 9 and 32 years of service, respectively, under
each of the plans.
Employment and Change of Control Agreements
The Company has entered into Employment Agreements
and Change of Control Agreements with each of the Named
Executive Officers. The Employment Agreements provide
for base salaries and for annual bonuses as determined
by the Board of Directors. Under the Employment
Agreements, base salaries may be increased but not
decreased by the Board. The Employment Agreements
expire on December 31, 2000. After December 31, 2000,
the employment of each executive officer continues from
year to year, subject to the right of the Company or
the employee to terminate such employment without cause
at December 31, 2000 or on any subsequent December 31
(a "normal termination date"), by giving at least 60
days prior written notice to the other. Termination of
employment that is properly effected by either party
with respect to a normal termination date is not a
breach of the Employment Agreement.
Under the Employment Agreements, if the employment
of an executive officer is terminated by the executive
officer for certain specified reasons or by the Company
(at any time other than a normal termination date) for
any reason other than cause (as defined therein), the
executive officer is entitled to a lump sum severance
payment equal to three times the sum of his annual
salary and annual bonus, which amount is reduced if the
executive officer's employment is terminated after age
62. The severance benefits payable under the
Employment Agreements also include the continuation of
health and insurance benefits, and supplemental lump
sum pension benefits. These supplemental pension
benefits are based upon compensation and are reduced by
benefits earned under the Qualified Pension Plan. If
supplemental pension benefits are paid as part of an
executive officer's severance benefits under an
Employment Agreement, benefits otherwise payable to him
under the Excess Retirement Plan are reduced.
Each of the Named Executive Officers is also a
beneficiary of a Change of Control Agreement with the
Company. The agreements provide for the payment of
certain benefits upon an involuntary or constructive
termination of the officers' employment, except for
cause, within three years following a change of
control. Benefits payable under the change in control
agreements include (i) a cash payment in an amount
equal to three times salary plus bonus, (ii) continued
health and life insurance benefits for three years
after termination, (iii) a cash payment in the amount
of the value of the additional benefits that the
officer would have become entitled to under the Pension
Plan if he had been employed for an additional three
years, (iv) accelerated vesting and payout under the
Company's supplemental retirement plans and (v) a "tax
gross-up" if excise taxes are imposed upon certain
payments received by the officers. To the extent
payments are made under these change of control
agreements, no severance payments will be made under
the Employment Agreements.
Compensation Committee Interlocks and Insider
Participation
The members of the Compensation Committee of the
Board of Directors are Dr. Thompson and Mr. Donovan,
neither of whom is, or was formerly, an officer or
employee of the Company or any of its subsidiaries, nor
has or has had any other significant relationship with
the Company. No executive officer of the Company
served in the last fiscal year as a director or member
of the compensation committee of another entity, one of
whose executive officers served as a director or on the
Compensation Committee of the Company.
Compensation Committee Report on Executive Compensation
The Compensation Committee (the "Committee") of
the Board of Directors furnished the following report
with respect to compensation paid to the executive
officers of the Company in 1997:
Under the By-laws of the Company, the Committee,
which is required to be made up of outside independent
directors, determines the general compensation policies
of the Company, determines the compensation to be paid
to the executive officers and other employees of the
Company and administers the Company's Stock
Appreciation Plan and 1997 Stock Incentive Plan.
As disclosed under the heading "Executive
Compensation - Employment and Change of Control
Agreements," each of the Company's executive officers
has an employment agreement with the Company that may
not be terminated prior to December 31, 2000 and that
provides among other things, that the Board of
Directors has only the authority to increase, and not
decrease, each executive officer's base salary as
compared to the amount paid during the immediately
preceding year. The decision by the Committee in
December 1997 to extend the contracts with Messrs.
Bossier, Kitchen and Dupont and to enter into
Employment Agreements with the other executive officers
recognized such persons' significant contributions to
the improvement in the Company's financial position and
performance during 1997, evidenced by the Company's
record income before taxes, the expansion of the
commercial shipbuilding business, continued strong
earnings and the substantial increase in shareholder
value during 1997. The Committee also believes that
the extension of the Employment Agreements will assure
that the Company will continue to benefit from this
management group's experience in order to meet future
challenges and opportunities in the shipbuilding
industry.
Compensation paid to the executive officers during
1997 essentially consisted of four components, annual
salary, a lump sum payment of 2.5% of salary made to
all employees, a performance-based cash bonus payable
pursuant to a Management Incentive Plan adopted by the
Committee in early 1995 in which the executive officers
participate and stock option grants. The performance-
based bonuses paid to the executive officers were
calculated as a percentage of base salary in accordance
with a formula established by the Committee at the
beginning of 1997. The formula for 1997 was based on
the Company achieving certain targets with respect to
the following criteria (in order of weight given by the
Committee): operating profit less interest charges,
major contract profit estimates at completion, direct
man hour estimates at completion, and operating costs
incurred in completing the major contracts. The
formula called for the bonus to be earned by the
executive officers in increments of 1% of their base
salary based on their degree of success in achieving
these goals. It was anticipated that if all of the
targets established at the beginning of 1997 were
achieved that the bonuses payable to the executive
officers would have been 25% of their respective base
salaries. Application of the formula resulted in a
bonus paid of 24.86% of their respective base salaries.
For future years, the Committee may establish different
performance goals, criteria and formulas for
calculation of the bonus.
At the Company's 1997 annual meeting, the
shareholders overwhelmingly approved a new stock
incentive plan under which stock options and various
other stock based incentives may be granted to key
personnel. In 1997, the Committee granted stock
options to each of the executive officers, reflecting
the Committee's goal of strengthening the relationship
between executive compensation and increases in the
market price of the Common Stock, thereby better
aligning the executive officers' financial interests
with those of the Company's shareholders. The size of
the option grant to each officer was tied to salary
level, with the intention being to create greater
opportunities for stock ownership for those officers
with greater responsibilities and duties. The
Committee also considered information furnished by its
consultants regarding stock option practices among
comparable companies and overall Company performance.
Under Section 162(m) of the Internal Revenue Code,
publicly held companies may be prohibited from
deducting as compensation expense for federal income
tax purposes total compensation paid in a single year
to certain executive officers that is in excess of $1
million. No executive officer was paid compensation in
1997 that reached the $1 million threshold.
Compensation that qualifies as "performance-based"
compensation under Section 162(m) is excluded from the
$1 million limit. The stock options granted to
executive officers have been structured to be
"performance-based," such that any gains realized upon
the exercise of such options will not be counted toward
the $1 million limit. When making its future
compensation decisions, the Compensation Committee
intends to consider the effects of Section 162(m) on
the Company.
Hugh A. Thompson Francis R. Donovan
Performance Graph
The graph and corresponding table below compare
the cumulative total shareholder return on the
Company's Common Stock from December 31, 1992 to
December 31, 1997 with the cumulative total return on a
NASDAQ index and a peer group index, in each case
assuming the investment of $100 on December 31, 1992 at
the closing price on that date and reinvestment of
dividends. Through December 31, 1996, the peer group
index consisted of Bethlehem Steel Co., General
Dynamics Corp., Litton Industries, Inc., McDermott
International Inc., Tenneco Inc., Todd Shipyards Corp.
and Trinity Industries Inc., and the returns of each
issuer were weighted according to its stock market
capitalization at the beginning of each period for
which a return is indicated. For 1997, Bethlehem Steel
has been eliminated because it has terminated
shipbuilding operations, and Halter Marine Group and
Newport News Shipbuilding Inc. have been added as they
represent the newly created shipbuilding operations
which have been spun off by Trinity Industries Inc. and
Tenneco, respectively.
[Performance Graph Omitted]
Cumulative Total Shareholder Return
December 31,
-----------------------------------------------------
Index 1992 1993 1994 1995 1996 1997
--------- ------ ------ ------ ------- --------
The Company 100.00 310.53 326.32 610.53 905.26 1250.00
Peer Group 100.00 159.30 143.67 174.72 195.84 264.50
NASDAQ 100.00 119.95 125.94 163.35 202.95 248.30
-----------------------------------------------------
CERTAIN TRANSACTIONS
The law firm of Blue Williams, L.L.P., of which a
son of Mr. Albert L. Bossier, Jr., a director and the
chief executive officer of the Company, is one of the
partners, was paid $855,756 in 1997 by the Company for
legal services rendered.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Exchange Act requires the
Company's directors, executive officers and 10%
shareholders to file with the Securities and Exchange
Commission initial reports of beneficial ownership, and
changes in beneficial ownership, of the Common Stock of
the Company. Three officers and directors of the
Company and three members of the administrative
committee of the Company's ESOP exercised stock
appreciation rights during 1997. These exercises were
required to be reported currently on Form 4, but were
not reported until the end of the year on Form 5.
Albert L. Bossier, Jr., an officer and director, was
delinquent in filing one Form 4 to report one stock
appreciation right exercise; Thomas M. Kitchen, an
officer and director, was delinquent in filing two
reports on Form 4 to report two stock appreciation
right exercises; Kenneth B. Dupont, an officer and
director, was delinquent in filing one report on Form 4
to report one stock appreciation right exercise; and
Ronald D. Church, Ernest F. Griffin, Jr. and Eugene E.
Blanchard, all members of the administrative committee
of the ESOP, were each delinquent in filing one report
on Form 4 to report one stock appreciation right
exercise. Two other members of the ESOP administrative
committee, Rodney J. Duhon, Jr. and Blanche Barlotta,
were each delinquent in filing a report on Form 4 of
one sale of shares of Company Common Stock that each
received as a distribution from the ESOP, following
retirement.
SHAREHOLDER PROPOSALS
(Items 2-4 on the accompanying proxy card)
Set forth under this heading are three
shareholder proposals, all of which are unanimously
opposed by the Company's Board of Directors. As noted
in further detail below all of these proposals were
submitted to the Company pursuant to Rule 14a-8 of the
Exchange Act, and therefore, in accordance with such
rule, each of those proposals is set forth in full
below and is accompanied by the proponent's statement
in support thereof. Your Board of Directors
unanimously recommends a vote AGAINST each of the
shareholder proposals.
STATEMENT BY THE BOARD OF DIRECTORS IN
OPPOSITION TO ALL THREE SHAREHOLDER PROPOSALS
The proposals submitted under Rule 14a-8 (the
"Rule 14a-8 Proposals"), and the statements in support
thereof, were submitted by three individuals, Messrs.
Angus Fountain, Steve Rodriguez and Roger McGee, Sr.,
each of whom holds his shares of the Company's Common
Stock as a participant in Avondale's ESOP. All three
of the proposals submitted for the 1998 Annual Meeting
are substantially identical to proposals submitted by
the same nominal proponents for the 1995, 1996 and 1997
Annual Meetings (and two of them are also substantially
identical to proposals submitted by a "Shareholders
Committee" for the 1994 Annual Meeting), and all were
rejected by the Company's shareholders at the 1994,
1995, 1996 and 1997 Annual Meetings. The Board
believes that, as in prior years, the submission of
these three proposals is a continuation of the
"corporate campaign" waged against the Company by the
United Brotherhood of Carpenters and Joiners of America
(the "UBC") and its affiliate, the Metal Trades
Department, AFL-CIO (the "AFL-CIO", and collectively
with the UBC, the "Union"), and follows upon similar
campaigns sponsored by the Union during the Company's
last four Annual Meetings.
The Board of Directors unanimously opposes each
of the three shareholder proposals that is described
below. The specific "corporate governance" reasons for
the Board's opposition to these proposals are set forth
under the heading "Board of Directors' Statement in
Opposition" that follows each of the proposals. Each
of these proposals attempts to undermine the authority
of the Board of Directors to manage the Company, and
thereby diminish the ability of the Board to deal
resolutely with the Union. The Board believes that it
is the Union's hope that success in obtaining support
for any of the three proposals will demonstrate a lack
of confidence by the Company's shareholders in the
Board of Directors and Avondale's management.
It is apparent to your Board of Directors that
the proposals and the Union's corporate campaign are
not in any sense motivated by a legitimate desire to
advance the best interests of the Company's
shareholders. Instead, the Union's tactics are a
misguided effort to pressure management to accede to
the Union's demands as well as to give to the Company's
employees the appearance that the Union is actively
working on their behalf. The Board of Directors asks
for your vote against each of the three shareholder
proposals in order to discourage the Union from
continuing to employ its abusive tactics. However, in
addition to objecting to these proposals because the
Board believes they are Union-sponsored, the Board of
Directors and management also believe that each of the
proposals should be rejected by the shareholders for
the reasons set forth under the Company's specific
"Statements in Opposition" which immediately follow
each of the three proposals and the proponent's
statement in support thereof.
SHAREHOLDER PROPOSALS
The following three shareholder proposals were
submitted by Messrs. Angus Fountain, Steve Rodriguez
and Roger McGee, Sr., respectively, each of whom has
notified the Company that he is the beneficial owner of
more than $1,000 of the Company's Common Stock and
intends to remain a beneficial holder of these shares
through the date of the 1998 Annual Meeting.
Information regarding the addresses of each of these
shareholders will be furnished by the Company to any
person, orally or in writing as requested, promptly
upon the receipt of any oral or written request
therefor. For the reasons set forth in its Statement
in Opposition above and its individual Statements in
Opposition immediately following each proposal, none of
these proposals is supported by the Board of Directors
and the Board of Directors unanimously urges you to
vote AGAINST each of the three proposals.
A. Shareholder Proposal Regarding Shareholder
Rights Plan
(Item 2 on the accompanying Proxy Card)
The resolution submitted by Mr. Fountain is as
follows:
RESOLVED: That the shareholders of
Avondale Industries, Inc. ("Company") urge the
Board of Directors to redeem the rights issued
pursuant to the Stockholder Protection Rights
Plan (unilaterally adopted by the Board of
Directors on September 26, 1994) unless a
majority of voting shares approve of these
rights at a meeting of shareholders held as
soon as is practical.
Shareholder's Supporting Statement
This proposal received a near majority of the
vote last year. Avondale's Stockholder Protection
Rights Plan, commonly referred to as a "poison pill,"
is an extremely powerful anti-takeover device that
effectively prevents a buyout or replacement of the
board of directors without the prior approval of the
incumbent board of directors. The purpose of
Avondale's "poison pill" is to force shareholders
interested in purchasing the Company to negotiate with
the board of directors instead of making a tender offer
directly to shareholders that would allow them to
receive an above-market price in exchange for their
shares.
Under Avondale's Stockholder Protection Rights
Plan, the board of directors may designate a
shareholder owning 15% or more of the Company's stock a
"hostile bidder" and trigger the "poison pill." Once
triggered, all shareholders, except the shareholder
designated a "hostile bidder," can purchase one new
share at half the market price for each share
previously owned. Triggering a "poison pill" would
largely deplete the retained earnings of the Company
and reduce the value of the potential bidder's
investment in Avondale by half. It is this draconian
financial penalty that forces a potential bidder to
negotiate with the board.
We believe "poison pills" hurt long-term
shareholder value in two ways:
1. We believe a "poison pill" is a powerful
anti-takeover defense that makes it
extremely difficult to replace a board of
directors and senior management team whose
performance is deemed inadequate by
shareholders.
2. We believe "poison pills" force potential
buyers to work through the board, making
it more difficult to prepare an offer to
shareholders. We believe this added
obstacle reduces the probability that a
potential buyer will make an offer to
shareholders to buy the Company.
We strongly believe that it is the shareholders
(who are the owners of the Company), not the directors
and managers (who merely act as agents for the owners),
who should have the right to decide what is or is not a
fair price for their shareholdings. "Poison pills"
take this decision away from shareholders by forcing
potential acquirers to negotiate with management
through the threat of severe dilution.
In the past five years, precatory shareholder
proposals to redeem or allow shareholder votes on
"poison pills" have received majority support at over
two dozen U.S. publicly-traded companies including
Advanced Micro Devices, Community Psychiatric Centers,
Intel, Ryder and Wellman. Furthermore, since 1990
Philip Morris, Time Warner, United Technologies,
Lockheed and La Quinta Inns have voluntarily redeemed
their "poison pills." None of these companies have
experienced coercive or abusive takeover tactics after
the redemption of the "poison pills."
Board of Directors' Statement in Opposition
The Board preliminarily notes that, of the
total number of outstanding shares of the Company's
Common Stock, less than 38% voted in favor of this
proposal at the 1997 Annual Meeting.
The Company's Shareholder Protection Rights
Plan (the "Rights Plan") is intended to protect the
interests of the Company and all shareholders. The
Rights Plan is designed to protect against attempts to
acquire the Company for an inadequate price and other
abusive practices that do not treat all shareholders
equally. Because the federal securities laws do not
require a shareholder vote on cash tender offers, prior
to the development of rights plans it was commonplace
for acquirors to structure their acquisitions as
coercive two-tiered takeover bids where shareholders
had little choice but to sell or risk receiving an even
lower price from the acquiror in the second step of the
transaction. Such practices can, and are often
intended to, pressure shareholders into tendering their
shares prior to realizing the full value of such
shares. Rights plans are intended to correct this flaw
by strengthening a company's (and therefore its
shareholders') negotiating power and allowing time for
other bidders to surface. The Rights Plan creates an
incentive for a potential acquiror to negotiate in good
faith with the Board. The Rights Plan does not prevent
unsolicited, non-abusive offers to acquire the Company
at a fair price. The Rights Plan merely strengthens
the ability of the Board to discharge appropriately its
fiduciary responsibilities to the Company's
shareholders by providing the Board with the
opportunity to evaluate the fairness of any unsolicited
offer and the credibility of the bidder. Of course, in
deciding whether to redeem the rights in connection
with any unsolicited offer, the Board will be bound by
its fiduciary obligations to act in the best interests
of the Company and its shareholders.
The Board of Directors adopted the Rights Plan
in September 1994 following its review of comprehensive
analytical materials presented to the Board by a well-
regarded independent investment banking firm and
special outside legal counsel and a face-to-face
presentation made by such investment banking firm and
legal counsel to the Board. Based on such review and
the respective advice of such firms, the Board believes
that the adoption and continuing existence of the
Rights Plan is in the best interests of the Company and
shareholders and will not deter a suitably-financed
offer that is made at a fair price to all shareholders.
According to a study released by Georgeson & Company
Inc. in November 1997, shareholders of companies with
poison pills received $13 billion in additional
takeover premiums during the five year period from 1992
to 1996 and shareholders of companies without poison
pills surrendered up to $14.5 billion in potential
value. The study also found that (i) premiums paid to
target companies with poison pills averaged 8% higher
than premiums paid for target companies without poison
pills, (ii) the presence of a poison pill did not
increase the likelihood of the defeat of a hostile
takeover bid nor the withdrawal of a friendly bid, and
(iii) poison pills did not reduce the likelihood that a
company would become a takeover target.
More than 1,000 U.S. corporations, including
other companies engaged in businesses similar to the
Company's, have adopted shareholder protection plans
similar to the Rights Plan, including Western Atlas,
Inc., Litton Industries Inc., McDermott International
Inc., McDonnell Douglas Corporation, Reebok
International, Inc., Philip Morris Companies Inc.,
Georgia Pacific Corporation, General Dynamics
Corporation, Lockheed Corp., Martin Marietta
Corporation, Tenneco, Inc. and Walt Disney Co.
Under Louisiana law, the Board has the
responsibility to manage and direct the Company's
business and affairs, and the Board believes that the
adoption of the Rights Plan was a valid and proper
exercise of that responsibility. The Board believes
that the decision to redeem the rights should be made
in the context of a specific acquisition proposal. To
do so at this time would be to deny the Company's
shareholders protection in the event of an unsolicited
offer and, in the Board's view, potentially reduce the
long-term value for all shareholders.
The Board of Directors unanimously recommends a
vote AGAINST this shareholder proposal.
B. Shareholder Proposal Regarding Confidential
Voting
(Item 3 on the accompanying Proxy Card)
The resolution submitted by Mr. Rodriguez
is as follows:
RESOLVED: To amend Section 2.7 of
Avondale Industries, Inc.'s ("Corporation") by-
laws by adding the following language after the
existing language:
The voting of all proxies, consents and
authorizations be secret, and no such document
shall be available for examination nor shall
the vote or identity of any shareholder be
disclosed except to the extent necessary to
meet the legal requirements, if any, of the
Corporation's state of incorporation. Further,
the receipt, certification and tabulation of
such votes shall be performed by independent
election inspectors.
Shareholder's Supporting Statement
It is the proponent's belief that it is vitally
important that a system of confidential proxy voting be
established at our Corporation. Confidential balloting
is a basic tenet of our political electorial process
that ensures its integrity. The integrity of corporate
board elections should also be protected against
potential abuses given the importance of corporate
policies and practices to corporate owners and our
national economy.
The implementation of a confidential voting
system would enhance shareholder rights in several
ways.
First, absent confidential voting, incumbent
managers and directors have the power to review
incoming proxies prior to a tabulation of votes and
resolicit proxies from shareholders voting against
management. Independent board candidates and
shareholders submitting advisory proposals or by-law
changes are not allowed to see proxy votes. This non-
confidential system provides an unfair advantage to
incumbents.
Second, in protecting the confidentiality of
the corporate ballot, shareholders would feel free to
oppose management nominees and issue positions without
fear of retribution. This is especially important for
professional money managers whose business
relationships can be jeopardized by their voting
positions.
Finally, it is our belief that the enhancement
of the proxy voting process would change the system
where too often shareholders vote "with their feet,"
not with their ballots. This change would help to
develop a long-term investment perspective where
corporate assets could be deployed, and used in a more
effective and efficient manner.
Confidential voting is gaining popularity.
Approximately 156 major U.S. publicly-traded companies
had adopted confidential proxy voting procedures for
corporate elections. The list of Fortune 500 companies
with confidential voting includes AT&T, US West,
American Express, American Brands, Coca Cola, CitiCorp,
Gillette, Exxon, Sara Lee, JP Morgan, Bear Stearns,
General Electric, General Mills, General Motors,
Colgate-Palmolive, American Home Products, Honeywell,
Avon Products, 3M, Du Pont, Boeing, Lockheed, Rockwell
International, Amoco, Mobil, Eastman Kodak, IBM, Xerox
and many others. It's time for our Corporation to do
the same.
For the reasons outlined above, we urge you to
VOTE FOR THIS PROPOSAL.
Board of Directors' Statement in Opposition
The Board of Directors believes that a
confidential voting policy would limit the
effectiveness of the proxy solicitation process as a
communication tool for both management and shareholders
without significantly adding to the confidentiality
already available to shareholders through the use of
nominee ownership.
A confidential voting policy would greatly
hinder the Company's ability to contact shareholders
during the proxy season. When an issue critical to the
success of the Company is involved, the Board needs to
be informed of shareholder opinions so that they may
argue effectively for a position that they believe is
in the best interest of the Company and its
shareholders. Especially in the case of a contested
election, the party conducting the solicitation may not
be acting in the best interest of all shareholders,
though such party would have the ability to communicate
with other shareholders with few restrictions. In
addition, the Company may need to contact shareholders
who have not returned their proxies to assure a quorum,
or to contact those whose proxy cards contain errors or
deficiencies so that such shareholders may correct
their proxies and cast their votes as intended.
A confidential voting policy would also
effectively eliminate a convenient, cost-efficient
method for shareholders to communicate with the
Company. Many shareholders use the proxy card with its
postage-prepaid return envelope to communicate with the
Company on various matters of concern to them, such as
changes of address, or lost or stolen stock
certificates, as well as matters relating to the
Company's business. These shareholders, at least,
intend and expect the Company to be able to identify
them from the proxy card. The Company appreciates all
opportunities to communicate with its shareholders.
The Board believes that the Company's existing
proxy solicitation system protects the interests of
both those shareholders who desire anonymity and those
who wish to be identifiable. Under the Company's
existing proxy solicitation system, shareholders who
wish to keep their votes confidential can register
their shares in the name of a nominee, such as a bank,
stockbroker or other fiduciary. Since nominee holders
do not disclose the names of beneficial owners without
permission, confidentiality is assured. Thus,
shareholders can choose whether their votes will be
identifiable, rather than having this decision imposed
on them by a confidential voting policy.
Additionally, employees who own shares through
the ESOP already vote confidentially, with their votes
tabulated by an independent auditing firm. The
participant's voting cards are returned directly to the
auditing firm and no information regarding how
individual participants vote is provided to the
Company's management. Employees can place non-ESOP
shares in the name of a nominee if they desire
confidentiality as to those shares as well.
More than 80% of the Company's shareholders
currently enjoy confidential voting because they own
common stock through the ESOP or use a nominee form of
stock ownership. As noted above, if confidential
voting is important to the remaining shareholders, who
hold less than 20% of the outstanding shares, they can
choose to register their shares in the name of a
nominee.
The Board of Directors unanimously recommends a
vote AGAINST this shareholder proposal.
C. Shareholder Proposal Regarding Board
Declassification
(Item 4 on the accompanying Proxy Card)
The resolution submitted by Mr. McGee, Sr., is
as follows:
RESOLVED: To amend Section 3.3 of
Avondale Industries, Inc.'s ("Company") bylaws
by replacing existing language with the
following:
All directors shall stand for election
annually.
Shareholder's Supporting Statement
Avondale Industries currently divides its board
into three classes. Each class of directors has three
year terms and the terms are staggered so that only
one-third of the board of directors is elected at any
given time.
The election of corporate directors is the
primary avenue in the American corporate governance
system for shareholders to influence corporate affairs
and exert accountability on management. We strongly
believe that our Company's financial performance is
closely linked to its corporate governance policies and
procedures, and the level of management accountability
they impose. Therefore, as shareholders concerned
about the value of our investment, we are very
disturbed by our Company's current system of electing
only one-third of the board of directors each year. We
believe this staggering of director terms prevents
shareholders from annually registering their views on
the performance of the board collectively and each
director individually.
Concerns that the annual election of all
directors would leave our Company without experienced
Board members in the event that all incumbents are
voted out is unfounded. If the owners should choose to
replace the entire board, it would be obvious that the
incumbent directors' contributions were not valued.
Most alarming is that the staggered Board can
help insulate directors and senior executives from the
consequences of poor performance by denying
shareholders the opportunity to replace an entire Board
which is pursuing failed policies. Regardless of
whether you believe the current Board and management
team is performing satisfactorily or not, we believe it
is clearly in the best interest of the Company and its
shareholders that a process be in place that allows
shareholders to take definitive action if they believe
the Board is failing to realize the full potential of
the Company's assets.
We believe that allowing shareholders to
annually register their views on the performance of the
Board collectively and each director individually is
one of the best methods to insure that our Company will
be managed in the best interests of the shareholders.
We urge you to VOTE FOR THIS RESOLUTION.
Board of Directors' Statement in Opposition
The Board notes that this provision of the
Company's Articles of Incorporation was approved by the
Company's shareholders in 1990 when they voted upon the
re-incorporation of the Company in Louisiana. The
Board believes the election of directors by classes is
advantageous to the Company and its shareholders
because it enhances the likelihood of continuity and
stability in the composition of the Board of Directors
and in the policies formulated by the Board, a
stability that has been fundamental in the Company's
restored financial health. A stable, experienced Board
permits more effective long-term strategic planning. A
classified board also helps the Company to attract and
retain prominent and well-qualified individuals who are
able to commit the time and resources to understand the
Company and its operations, which creates long-term
value for the shareholders.
Board classification also makes it more likely
that a potential acquiror of the Company would offer a
full and fair price to the shareholders because a
classified board makes it more difficult for any person
seeking to acquire control of the Company to initiate
such action through a surprise proxy contest designed
to result in a change of control of the Company in a
single election, without fairly compensating the
Company's shareholders. The classified board does not
preclude unsolicited acquisition proposals but, by
eliminating the threat of imminent removal, puts the
incumbent Board in a position to act to maximize value
to all shareholders. In addition, the Board does not
believe that directors elected for staggered terms are
any less accountable to shareholders than they would be
if elected annually, since the same standards of
performance apply regardless of the term of service.
Stability and continuity at the Board level
also permits the Board to represent more effectively
the interests of all shareholders, including responding
to circumstances created by demands or actions of a
single shareholder or a small group of shareholders.
The Board believes that a classified board benefits the
Company, its shareholders and all who do business with
it by providing consistency and continuity of corporate
policy, while at the same time, through annual
elections in which a third of the Board is elected each
year, giving shareholders a regular opportunity to
renew and reinvigorate corporate decision making.
Finally, the Board notes that this provision is
contained not only in the Company's By-laws but also in
its Articles of Incorporation and that the shareholder
proposal, by seeking only an amendment to the Company's
By-laws, would result in a direct conflict between the
Company's Articles of Incorporation and By-laws which
would be unlawful under the Louisiana Business
Corporation Law.
The Board of Directors unanimously recommends a
vote AGAINST this shareholder proposal.
OTHER MATTERS
Quorum and Voting of Proxies
The presence, in person or by proxy, of a
majority of the outstanding shares of Common Stock of
the Company is necessary to constitute a quorum. If a
quorum is present,
(a) directors will be elected by
plurality vote;
(b) the Shareholder Proposals proposing
amendments to the Company's By-laws with respect to:
(i) Confidential Voting (Item 3);
and
(ii) Board Declassification (Item 4)
must receive the affirmative vote of 80% of the total
outstanding shares of Common Stock; and
(c) (i) the Shareholder Proposal urging
the Board of Directors to redeem
the Shareholder Rights Plan
(Item 2); and
(ii) any other matters properly
brought before such meeting
must receive the approval of a majority of the shares
of Common Stock present or represented at the Annual
Meeting.
If a quorum is not present, those shareholders
present may adjourn the meeting to such time and place
as they may determine; however, with respect to the
election of directors, the meeting may be adjourned
only from day to day until such directors are elected.
Those shareholders who attend the second of such
adjourned meetings will constitute a quorum for the
purpose of electing directors.
All proxies in the form enclosed that are
received by the Board of Directors will be voted as
specified and, in the absence of instructions to the
contrary, will be voted for the election of the
nominees named above and against each of the three
shareholder proposals.
Shares as to which proxy authority to vote for
any nominee for election as a director is withheld by a
shareholder and shares that have not been voted by
brokers who hold shares on behalf of the beneficial
owner ("broker non-votes") will not be counted as voted
for any affected nominees, or any of the Shareholder
Proposals. With respect to each of the Shareholder
Proposals identified as Items 3 and 4, that require the
affirmative vote of 80% of the outstanding Common Stock
in order to be adopted, abstentions and broker non-
votes will have the effect of a vote against the
proposal, and with respect to the Shareholder Proposal
identified as Item 2 and any other matter other than
the election of directors that is properly before the
Annual Meeting, abstentions will have the effect of a
vote against the proposal and broker non-votes will be
counted as not present with respect to the proposal and
therefore will not have an effect on the outcome of the
vote with respect to such proposals.
The Board of Directors does not know of any
matters to be presented at the Annual Meeting other
than the election of directors, and the three
Shareholder Proposals. However, if any other matters
properly come before the meeting or any adjournment
thereof, it is the intention of the persons named in
the enclosed proxy to vote the shares represented by
them in accordance with their best judgment.
Independent Public Auditors
The Board of Directors has appointed Deloitte &
Touche LLP as independent auditors of the Company for
the fiscal year ended December 31, 1998. Deloitte &
Touche LLP and its predecessors have served as the
Company's auditors since 1987. Representatives of
Deloitte & Touche LLP are expected to be present at the
Annual Meeting, and will have the opportunity to make a
statement if they desire to do so and be available to
respond to appropriate questions.
Shareholder Proposals for 1998 Annual Meeting
Any shareholder who desires to present a
proposal qualified for inclusion in the Company's proxy
materials relating to the 1999 annual shareholders'
meeting must forward the proposal to the Secretary of
the Company at the address shown on the first page of
this Proxy Statement in time to arrive at the Company
prior to December 31, 1998. The Company's By-laws also
require any shareholder who desires to present a
proposal before the 1999 annual shareholders' meeting
to notify the Secretary of the Company of such intent
no later than December 31, 1998.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Thomas M. Kitchen
Thomas M. Kitchen
Secretary
Avondale, Louisiana
April 30, 1998
AVONDALE INDUSTRIES, INC.
POST OFFICE BOX 50280
AVONDALE, LOUISIANA 70150
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF AVONDALE
INDUSTRIES, INC.
The undersigned hereby appoints Eugene K. Simon, Jr., Kenneth G. Myers,
Jr. and Ronald E. Bailey, or either of them, as proxies, each with full power
of substitution, and hereby authorizes each of them to represent and to vote,
as designated below, all shares of common stock of Avondale Industries, Inc.
held of record by the undersigned on April 23, 1998 at the annual meeting of
shareholders to be held on June 12, 1998, or any adjournment thereof.
- -------------------------------------------------------------------------------
COMPANY PROPOSALS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR BOTH OF THE NOMINEES LISTED BELOW:
1. Election of Directors
[ ] FOR all nominees listed below (except [ ]WITHHOLD AUTHORITY
as marked to the contrary below) to vote for all nominees
listed below
INSTRUCTIONS: To withhold authority to vote for any nominee, strike a line
through the nominee's name listed below.
Thomas M. Kitchen Francis R. Donovan
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST SHAREHOLDER PROPOSALS 2
THROUGH 4, BY CHECKING THE BOX MARKED "AGAINST."
2. Shareholder Rights Plan Proposal
[ ] AGAINST [ ] FOR [ ] ABSTAIN
3. Confidential Voting Proposal
[ ] AGAINST [ ] FOR [ ] ABSTAIN
4. Board of Directors Declassification Proposal
[ ] AGAINST [ ] FOR [ ] ABSTAIN
- -------------------------------------------------------------------------------
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTIONS ARE GIVEN, THIS PROXY WILL
BE VOTED FOR BOTH OF THE DIRECTOR NOMINEES NAMED ABOVE AND AGAINST PROPOSALS
2 THROUGH 4. THE PROXY HOLDERS NAMED ABOVE WILL VOTE IN THEIR DISCRETION ON ANY
OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING.
Date: ____________________, 1998
-------------------------------------------
Signature of Shareholder
-------------------------------------------
Additional Signature, if held jointly
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON.
WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
GIVE FULL TITLE AS SUCH. IF A CORPORATION,
PLEASE SIGN FULL CORPORATE NAME BY PRESIDENT
OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME
BY AUTHORIZED PERSON.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
