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, 1998
[ ]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, 1998
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, 1998
--------------------------------------- ------------------------------
Common stock, par value $1.00 per share 14,493,211 shares
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
<PAGE>
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Independent Accountants' Report 1
Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997 2
Consolidated Statements of Operations -
Three Months Ended March 31, 1998 and 1997 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II. Other Information 14
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, 1998 and for the three-month
periods ended March 31, 1998 and 1997. 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, 1997, and the
related consolidated statements of operations, shareholders' equity,
and cash flows for the year then ended (not presented herein); and in
our report dated February 20, 1998, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated balance
sheet as of December 31, 1997 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it
has been derived.
/S/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
April 22, 1998
<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)
March 31, December 31,
1998 1997
--------- ---------
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ASSETS
Current Assets:
Cash and cash equivalents........................ $ 101,060 $ 81,752
Receivables (Note 2):
Accounts receivable............................ 19,369 13,162
Contracts in progress.......................... 74,951 88,584
Inventories:
Goods held for sale............................ 10,704 14,915
Materials and supplies......................... 8,660 8,311
Deferred tax assets.............................. 18,728 23,253
Prepaid expenses................................. 4,451 2,891
--------- ---------
Total current assets........................... 237,923 232,868
--------- ---------
Property, Plant and Equipment:
Land............................................. 7,989 7,843
Buildings and improvements....................... 56,231 55,917
Machinery and equipment.......................... 204,629 200,777
--------- ---------
Total.......................................... 268,849 264,537
Less accumulated depreciation.................... (136,565) (134,481)
--------- ---------
Property, plant and equipment - net............ 132,284 130,056
--------- ---------
Goodwill - net..................................... 5,258 5,357
Other assets....................................... 7,270 7,334
--------- ---------
Total assets................................... $ 382,735 $ 375,615
========= =========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(UNAUDITED)
March 31, December 31,
1998 1997
--------- ---------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt................ $ 3,047 $ 3,047
Accounts payable................................. 54,461 59,548
Accrued employee compensation.................... 15,916 13,198
Other............................................ 14,780 11,851
--------- ---------
Total current liabilities...................... 88,204 87,644
Long-term debt..................................... 50,838 51,819
Deferred income taxes.............................. 13,400 13,400
Other liabilities and deferred credits............. 13,939 13,775
--------- ---------
Total liabilities................................ 166,381 166,638
--------- ---------
Commitments and contingencies (Note 5)
Shareholders' Equity:
Common stock, $1.00 par value,
authorized 30,000,000 shares; issued -
15,956,227 shares in 1998 and 1997............. 15,956 15,956
Additional paid-in capital....................... 374,173 374,173
Accumulated deficit.............................. (161,919) (169,296)
--------- ---------
Total.......................................... 228,210 220,833
Treasury stock (common: 1,463,016 shares
in 1998 and 1997) at cost...................... (11,856) (11,856)
--------- ---------
Total shareholders' equity....................... 216,354 208,977
--------- ---------
Total liabilities and shareholders' equity....... $ 382,735 $ 375,615
========= =========
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,
1998 1997
--------- ---------
<S> <C> <C>
Net sales........................................ $ 184,625 $ 139,513
Cost of sales.................................... 164,497 120,880
--------- ---------
Gross profit..................................... 20,128 18,633
Selling, general and administrative expenses..... 8,313 8,334
--------- ---------
Income from operations........................... 11,815 10,299
Interest expense................................. (1,137) (1,217)
Other - net...................................... 1,224 609
--------- ---------
Income before income taxes....................... 11,902 9,691
Income taxes..................................... 4,525 3,400
--------- ---------
Net income....................................... $ 7,377 $ 6,291
========= =========
Income per share of common stock (Note 4):
Net income per share of common stock - basic..... $ 0.51 $ 0.43
========= =========
Weighted average number of
shares outstanding - basic..................... 14,493 14,483
========= =========
Net income per share of common stock - diluted... $ 0.51 $ 0.43
========= =========
Weighted average number of
shares outstanding - diluted................... 14,575 14,500
========= =========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(In thousands)
(UNAUDITED)
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................... $ 7,377 $ 6,291
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 2,183 2,853
Deferred income taxes.......................... 4,525 3,400
Changes in operating assets and liabilities:
Receivables.................................. 7,426 10,141
Inventories.................................. 3,862 (2,359)
Prepaid expenses and other assets............ (1,496) 1,050
Accounts payable............................. (5,087) (20,059)
Accrued employee compensation
and other liabilities...................... 5,811 1,776
Other - net.................................. - 291
--------- ---------
Net Cash Provided by
Operating Activities......................... 24,601 3,384
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................. (4,312) (1,610)
--------- ---------
Net Cash Used for Investing Activities........... (4,312) (1,610)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term borrowings.................. (981) (2,981)
--------- ---------
Net Cash Used for Financing Activities........... (981) (2,981)
--------- ---------
Net increase (decrease) in cash
and cash equivalents............................. 19,308 (1,207)
Cash and cash equivalents at beginning of period... 81,752 48,944
--------- ---------
Cash and cash equivalents at end of period......... $ 101,060 $ 47,737
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest........................................... $ 776 $ 1,058
========= =========
Income taxes....................................... $ 1,300 $ 100
========= =========
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, 1997 audited financial statements and related notes
filed on Form 10-K for the year ended December 31, 1997 (the "1997
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
March 31, 1998 and December 31, 1997 (in thousands):
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Long-term contracts:
U.S. Government:
Amounts billed............................. $ 3,481 $ 967
Unbilled costs, including retentions, and
estimated profits on contracts in
progress................................. 65,403 80,041
--------- ---------
Total.................................... 68,884 81,008
Commercial:
Amounts billed............................. 6,288 4,180
Unbilled costs, including retentions, and
estimated profits on contracts in
progress................................. 9,548 8,543
--------- ---------
Total from long-term contracts............... 84,720 93,731
Trade and other current receivables............ 9,600 8,015
--------- ---------
Total.......................................... $ 94,320 $ 101,746
========= =========
</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.
<PAGE>
3. FINANCING ARRANGEMENTS
The Company's $65 million revolving credit agreement ("the
agreement") provides liquidity for working capital purposes, capital
expenditures and letters of credit. At March 31, 1998, there were
approximately $11.3 million of letters of credit issued against the
agreement leaving approximately $53.7 million of liquidity available
to Avondale for operations and other purposes. There have been no
borrowings under the agreement since its inception in 1994.
Continuing access to the agreement is conditioned upon the Company
remaining in compliance with the covenants contained therein. At
March 31, 1998, the Company is currently in compliance with such
covenants.
4.EARNINGS PER SHARE
In accordance with Statement of Financial Accounting Standards
Number 128, "Earnings Per Share", the Company changed its method of
calculating earnings per share ("EPS") during 1997. The number of
weighted average shares outstanding for "basic" EPS was 14,493,211
and 14,482,799 for the three months ended March 31, 1998 and 1997,
respectively. The number of weighted average shares outstanding for
"diluted" EPS was 14,575,258 and 14,499,510 for the three months
ended March 31, 1998 and 1997, respectively. The difference in
weighted average shares outstanding of 82,047 and 16,711 for 1998 and
1997, respectively, relate to stock appreciation rights and options.
5.COMMITMENTS AND CONTINGENCIES
Litigation
As discussed in Note 9 of the Notes to Consolidated Financial
Statements included in the 1997 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 (the "Funding Group") for the site have funded the site's
remediation expenses, PRP identification expenses and related costs
for the participating parties. As of March 31, 1998 such costs
totaled approximately $19.0 million, of which the Company has funded
approximately $4.0 million. Since 1988, the Funding Group filed
petitions to add a number of companies as third-party defendants with
regard to the remedial action. The Funding Group has agreed to
settle with the majority of these companies. All funds collected are
placed in escrow to fund future expenses. At March 31, 1998, the
balance of the escrow was $8.5 million, which is to be used to fund
any ongoing remediation expenses. The Company will not owe any
future assessments until the balance in escrow is depleted. There
are additional settlements being negotiated which should add to the
balance in escrow.
<PAGE>
Additional remedial work scheduled for the site includes completion
of studies and if required by the results of these studies,
subsequent remediation. Following completion of any such required
additional remediation, it will be necessary to obtain Environmental
Protection Agency approval to close the site, which consent may
require subsequent post-closure activities such as groundwater
monitoring and site maintenance for many years. The Company is not
able to estimate the final costs for any such additional remedial
work or post-closure costs that may be required; however, the Company
believes that its proportionate share of expenditures for any
additional work will not have a material impact on the Company's
financial statements. In addition, the Company and other members of
the Funding Group have entered into a final cost sharing agreement
under which all parties have agreed that there would be no re-
allocation of previous remediation costs, but that future remediation
costs would be established by a formula. Under this agreement, the
Company's share of future costs will not exceed 17.5%.
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 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 consolidated financial statements.
<PAGE>
Guarantee
Pursuant to agreements related to the University of New Orleans
("UNO")/Avondale Maritime Technology Center of Excellence ("the
Center"), the Company has agreed to guarantee indebtedness with a
principal amount not to exceed $40 million expected to be incurred by
the UNO Research and Technology Foundation, Inc. (the "Foundation")
for the construction of the facility and the acquisition of
technology. Under the terms of a Cooperative Endeavor Agreement, the
State of Louisiana made a non-binding commitment to appropriate $40
million, plus interest, in installments over a period from 1997
through 2007 for donation to the Foundation for purposes of funding
the Center. Avondale and the Foundation anticipate that
appropriations by the State will be sufficient for the Foundation to
service its debt. However, if the State's appropriations are
insufficient, Avondale will ultimately be required to repay the debt.
The Company's guarantee is unsecured. As of March 31, 1998, the
Foundation had incurred $21.7 million of cost to construct and equip
the Center. In connection with its non-binding commitment, the State
appropriated and paid $3.8 million during 1997, representing the
first installment to the Foundation.
Letters of Credit
In the normal course of its business activities, the Company is
required to provide letters of credit to secure the payment of
workers' compensation obligations, other insurance obligations and to
provide a debt service reserve fund related to $35.4 million of
Series 1994 industrial revenue bonds. 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 $11.3 million at March 31, 1998 and
December 31, 1997.
6. RECENT ACCOUNTING PRONOUNCEMENTS
During 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards Number 131 "Disclosures
about Segments of an Enterprise and Related Information" ("SFAS
131"). SFAS 131 establishes standards for disclosure of operating
segments, products, services, geographic areas and major customers.
The Company is required to adopt this standard for fiscal 1998.
Management believes that the implementation of SFAS 131 will not have
a material impact on the presentation of the Company's financial
statements but may require additional disclosure.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction with the
Company's unaudited consolidated financial statements for the periods
ended March 31, 1998 and 1997 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, 1997 (the "1997 Form 10-K").
Overview
The trend of improvement in the Company's operating results continued
in the first quarter ended March 31, 1998. Income from operations
and net income increased by 15% and 17%, respectively, for the first
quarter of 1998 compared to the same period in the prior year.
The Company's firm backlog at March 31, 1998 was approximately $1.7
billion (including estimated contract escalation) exclusive of
unexercised options aggregating approximately $1.1 billion held by
the U.S. Navy (the "Navy") (including estimated contract escalation)
and approximately $500 million held by a commercial customer for
additional ship orders. In February 1998, the Navy exercised a
portion of its option for a seventh Strategic Sealift vessel relating
to approximately $24 million for long lead time materials. The
balance of this option is exercisable by the Navy during the first
quarter of 1999. During the first quarter of 1998, the Company
delivered the LSD-CV 52 to the Navy representing the fourth and final
ship of this class constructed by the Company under two contracts.
Other ships expected to be completed during 1998 include the first
two of a contract to construct six Strategic Sealift ships.
<PAGE>
As previously disclosed, in December 1996 the Navy awarded, and in
April 1997 the General Accounting Office affirmed, a $641 million
contract to a Company-led alliance, which includes Bath Iron Works
("Bath") and Raytheon Company ("Raytheon"), to design and construct
the first of an anticipated 12 ships under the Navy's LPD-17 program.
The contract award provides for options exercisable by the Navy for
two additional LPD-17 class ships to be built by the alliance.
Under the terms of an agreement between the alliance members, the
Company will build the ship covered under the December 1996 contract,
and, if the Navy exercises the two options, the Company would
construct the second while Bath would construct the third of the
three LPD-17 class ships to be built under the initial contract.
Raytheon is responsible for total ship integration and the alliance
is using an advanced three-dimensional ship design and product
modeling technology for the design and manufacture of the ship. As
the prime contractor under the LPD-17 contract, the Company is
required to report in its financial statements as sales and cost of
sales the entire contract amount for each vessel in the LPD-17
program constructed by the alliance. Under the subcontracting
agreements entered into between the Company and each of Bath and
Raytheon, the award fees that can be earned under the LPD-17 contract
are distributable among the alliance members in proportion to each
member's performance and participation in the construction of the
vessel for which the award was granted. To the extent that the
Company's revenues include costs incurred and award fees paid to the
other alliance members, such revenues will be recorded with no gross
profit margin.
Results of Operations
The Company recorded net income for the first quarter of 1998 of $7.4
million, or $0.51 per share basic and diluted, compared to $6.3
million, or $0.43 per share basic and diluted, for the first quarter
of 1997. Income from operations increased 15% in the first quarter
of 1998 to $11.8 million compared with $10.3 million in the first
quarter of 1997.
The improvement in the Company's operating results for the first
three months of 1998 compared to the prior year period primarily
reflect operating profits recognized on the contracts to construct
the six Strategic Sealift ships, the Icebreaker and the LSD-CV 52.
Also contributing to the first quarter 1998 operating results were
profits recorded by the Company's wholesale steel, modular
construction and marine repair operations.
<PAGE>
Net sales for the first quarter of 1998 increased $45.1 million, or
32%, to $184.6 million compared to $139.5 million for the first
quarter of 1997. The increase in net sales in the current quarter is
primarily a result of increased costs associated with contracts in
the initial stages of construction. The Company recorded increased
net sales on the contracts to construct the six Strategic Sealift
ships (the last two of which are expected to be delivered in 2000),
the two 125,000 DWT double-hulled crude oil carriers (both of which
are scheduled for delivery in 2000) and the LPD-17 (expected to be
delivered in 2002). These contracts are in the initial stages of
construction resulting in significant engineering design and material
acquisition costs. The increases noted above were partially offset
by decreased net sales recorded on the contracts that are at or near
completion. The Company recorded decreased net sales on the contract
to retrofit four single-hulled commercial tankers with new double
hulls (the last of which was delivered in September 1997) and the
contracts to construct the LSD-CV 52 (delivered in February 1998),
the 100 river hopper barges (the last of which was delivered in
November 1997) and the four coastal MHCs (the last of which was
delivered in January 1997).
Gross profit for the first quarter of 1998 increased $1.5 million, or
8%, compared to the same period in 1997 while the gross profit margin
decreased approximately 2.5%. The decrease in gross profit margin is
primarily attributable to the fact that the LPD-17 and the two
double-hulled crude oil carriers are in the initial stages of
contract performance which result in significant engineering design
and material acquisition costs recorded as net sales without
corresponding gross profit margins. The Company does not begin
profit recognition until final results can be estimated with
reasonable accuracy. Refer to the 1997 Form 10-K for a discussion of
the Company's policies and procedures for revenue recognition. In
addition, the Company includes costs incurred and award fees paid to
other members of the alliance in the LPD-17 program as sales and cost
of sales with no gross profit margin.
Selling, general and administrative ("SG&A") and interest expenses
were consistent with the same period of prior year. The improvement
in other income, which doubled to approximately $1.2 million, is
primarily attributable to an increase in interest income resulting
from significantly higher cash and cash equivalents available for
investment during the first quarter of 1998.
During 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards Number 131 "Disclosures
about Segments of an Enterprise and Related Information" ("SFAS
131"). SFAS 131 establishes standards for disclosure of operating
segments, products, services, geographic areas and major customers.
The Company is required to adopt this standard for fiscal 1998.
Management believes that the implementation of SFAS 131 will not have
a material impact on the presentation of the Company's financial
statements but may require additional disclosure.
<PAGE>
In accordance with the U.S. Securities and Exchange Commission's
Staff Legal Bulletin No. 5, the Company has assessed both the cost of
addressing and the costs or the consequences of incomplete or
untimely resolution of the Year 2000 issue and has determined that it
is not material to the Company's business, operations or financial
condition.
In addition, the Company is in the process of initiating
communications with its significant suppliers and large customers to
determine the extent to which the Company is vulnerable to those
third parties' failure to remediate their own Year 2000 issues. The
Company can give no assurance that the systems of other companies on
which the Company relies will be converted on time or that failure to
convert by another company would not have a material adverse effect
on the Company.
Liquidity and Capital Resources
The Company's cash and cash equivalents totaled $101.1 million at
March 31, 1998 as compared to $81.8 million at December 31, 1997.
The Company's operations generated approximately $24.6 million of
cash during the quarter ended March 31, 1998. The Company's primary
uses of cash in the current year consisted of capital expenditures of
$4.3 million and payments on long-term borrowings of approximately
$981,000.
The Company's $65 million revolving credit agreement ("the
agreement") provides liquidity for working capital purposes, capital
expenditures and letters of credit. At March 31, 1998, there were
approximately $11.3 million of letters of credit issued against the
agreement leaving approximately $53.7 million of liquidity available
to Avondale for operations and other purposes. There have been no
borrowings under the agreement since its inception in 1994.
Continuing access to the agreement is conditioned upon the Company
remaining in compliance with the covenants contained therein. At
March 31, 1998, the Company was in compliance with such covenants.
The Company believes that its capital resources will be sufficient to
finance current and projected operations.
<PAGE>
In order to comply with the terms of the LPD-17 contract, the Company
was required to make significant capital improvements, including
enhancing its computer-aided design and product modeling
capabilities. As a result, the Company teamed with the University of
New Orleans (the "University" or "UNO"), the University of New
Orleans Research and Technology Foundation, Inc. (the "Foundation")
and the State of Louisiana in a cooperative effort. Pursuant to
terms of various agreements, the Foundation is purchasing hardware
and software required to implement the extensive three-dimensional
ship design and Integrated Product Data Environment teaming
technology and is constructing a 200,000 square foot building on
property donated to the University by the Company and located
adjacent to the Company's main shipyard. This facility is expected
to be completed during the second quarter of 1998. The initial $40
million investment in this new technology and facility, which will be
known as the "UNO/Avondale Maritime Technology Center of Excellence"
(the "Center"), is being financed by the Foundation using third-party
debt and lease financing, both of which are guaranteed by the
Company. The Company has entered into a long-term lease for the
Center requiring a nominal annual lease payment. The Company will
provide access to the technology and a portion of the Center to the
University for its use in research and the development of educational
curricula related to naval architecture and marine engineering.
During the remainder of 1998, the Company expects to spend additional
amounts in order to complete the customization of the design software
to comply with the LPD-17 requirements.
The Foundation is the borrower on all indebtedness incurred to
construct and equip the Center. Under the terms of a Cooperative
Endeavor Agreement, the State of Louisiana made a non-binding
commitment to appropriate $40 million, plus interest, in installments
over a period from 1997 through 2007 for donation to the Foundation
for purposes of funding the Center. Avondale and the Foundation
anticipate that appropriations by the State will be sufficient for
the Foundation to service its debt. However, if the State's
appropriations are insufficient, Avondale will ultimately be required
to repay the debt. The Company's guarantee is unsecured. As of
March 31, 1998, the Foundation had incurred $21.7 million of cost to
construct and equip the Center. Also, as of March 31, 1998, the
State has appropriated and paid $3.8 million, representing the first
installment to the Foundation, pursuant to the terms of the
Cooperative Endeavor Agreement.
<PAGE>
Cautionary Statement for Purposes of "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
Certain statements, other than statements of historical fact,
contained in this Quarterly Report on Form 10-Q are forward-looking
statements as defined in the Private Securities Litigation Reform Act
of 1995. These forward-looking statements are generally accompanied
by such terms and phrases as "anticipates," "estimates," "expects,"
"believes," "should," "projects," or "scheduled," or similar
statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations will prove to have been
correct. Important factors that could cause the Company's results to
differ materially from the results discussed in such forward-looking
statements include the Company's reliance on U.S. Navy contracts,
including its ability to replenish its backlog by securing additional
contracts from the U.S. Navy, profit recognition on government
contracts, the importance of obtaining commercial contracts, the
Company's ability to complete its contracts within its cost
estimates, intense competition for government and commercial
contracts and labor, regulatory and other risks in the shipbuilding
and marine construction industries. All forward-looking statements
in this Form 10-Q are expressly qualified in their entirety by the
cautionary statements in this paragraph.
<PAGE>
PART II - OTHER INFORMATION
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
(g) The Amended and Restated Avondale Services
Corporation Executive Group Insurance Benefits
Plan and Summary Plan Description specifying
the excess insurance benefits provided to the
Company's executive officers and certain other
key personnel, and a summary description of
health, accidental death and dismemberment,
disability and life insurance benefits made
available to employees dated October 14,
1997(2) as amended by Amendment No. 1 dated
March 23, 1998.
10.4 Employment Agreements
(a) Employment Agreement dated March 23, 1998, by
and between the Company and Albert L. Bossier,
Jr. the term of which extends through December
31, 2000.
(b) Employment Agreement dated March 23, 1998, by
and between the Company and Thomas M. Kitchen
the term of which extends through December 31,
2000.
(c) Employment Agreement dated March 23, 1998, by
and between the Company and Kenneth B. Dupont
the term of which extends through December 31,
2000.
(d) Amended and Restated Change of Control
Agreement dated January 19, 1996, by and
between the Company and Albert L. Bossier,
Jr.(3) as amended by Amendment No. 1 dated
March 23, 1998.
(e) Amended and Restated Change of Control
Agreement dated January 19, 1996, by and
between the Company and Thomas M. Kitchen(3)
as amended by Amendment No. 1 dated March 23,
1998.
<PAGE>
(f) Amended and Restated Change of Control
Agreement dated January 19, 1996, by and
between the Company and Kenneth B. Dupont(3)
as amended by Amendment No. 1 dated March 23,
1998.
(h) Employment Agreement dated March 5, 1998, by
and between the Company and R. Dean Church the
term of which extends through December 31,
2000.
(I) Employment Agreement dated March 23, 1998, by
and between the Company and Thomas H. Doussan
the term of which extends through December 31,
2000.
(j) Employment Agreement dated March 23, 1998, by
and between the Company and Ronald J. McAlear
the term of which extends through December 31,
2000.
(k) Employment Agreement dated March 23, 1998, by
and between the Company and Edmund C. Mortimer
the term of which extends through December 31,
2000.
(l) Change of Control Agreement dated March 5,
1998, by and between the Company and R. Dean
Church.
(m) Change of Control Agreement dated March 23,
1998, by and between the Company and Thomas H.
Doussan.
(n) Change of Control Agreement dated March 23,
1998, by and between the Company and Ronald J.
McAlear.
(o) Change of Control Agreement dated March 23,
1998, by and between the Company and Edmund C.
Mortimer.
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.
<PAGE>
(2) Incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997.
(3) Incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31,
1996.
<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 4, 1998 By: /s/ ALBERT L. BOSSIER, JR.
----------- ---------------------------
Albert L. Bossier, Jr.
Chairman, President &
Chief Executive Officer
Date: May 4, 1998 By: /s/ THOMAS M. KITCHEN
----------- ---------------------
Thomas M. Kitchen
Corporate 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
(g) The Amended and Restated Avondale Services Corporation
Executive Group Insurance Benefits Plan and Summary Plan
Description specifying the excess insurance benefits
provided to the Company's executive officers and certain
other key personnel, and a summary description of
health, accidental death and dismemberment, disability
and life insurance benefits made available to employees
dated October 14, 1997(2) as amended by Amendment No. 1
dated March 23, 1998.
10.4 Employment Agreements
(a) Employment Agreement dated March 23, 1998, by and
between the Company and Albert L. Bossier, Jr. the term
of which extends through December 31, 2000.
(b) Employment Agreement dated March 23, 1998, by and
between the Company and Thomas M. Kitchen the term of
which extends through December 31, 2000.
(c) Employment Agreement dated March 23, 1998, by and
between the Company and Kenneth B. Dupont the term of
which extends through December 31, 2000.
(d) Amended and Restated Change of Control Agreement dated
January 19, 1996, by and between the Company and Albert
L. Bossier, Jr.(3) as amended by Amendment No. 1 dated
March 23, 1998.
(e) Amended and Restated Change of Control Agreement dated
January 19, 1996, by and between the Company and Thomas
M. Kitchen(3) as amended by Amendment No. 1 dated March
23, 1998.
(f) Amended and Restated Change of Control Agreement dated
January 19, 1996, by and between the Company and Kenneth
B. Dupont(3) as amended by Amendment No. 1 dated March
23, 1998.
(h) Employment Agreement dated March 5, 1998, by and
between the Company and R. Dean Church the term of which
extends through December 31, 2000.
<PAGE>
(i) Employment Agreement dated March 23, 1998, by and
between the Company and Thomas H. Doussan the term of
which extends through December 31, 2000.
(j) Employment Agreement dated March 23, 1998, by and
between the Company and Ronald J. McAlear the term of
which extends through December 31, 2000.
(k) Employment Agreement dated March 23, 1998, by and
between the Company and Edmund C. Mortimer the term of
which extends through December 31, 2000.
(l) Change of Control Agreement dated March 5, 1998, by and
between the Company and R. Dean Church.
(m) Change of Control Agreement dated March 23, 1998, by and
between the Company and Thomas H. Doussan.
(n) Change of Control Agreement dated March 23, 1998, by and
between the Company and Ronald J. McAlear.
(o) Change of Control Agreement dated March 23, 1998, by and
between the Company and Edmund C. Mortimer.
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 Annual Report on
Form 10-K for the fiscal year ended December 31, 1997.
(3) Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1996.
AMENDMENT NO. 1
TO THE
AMENDED AND RESTATED AVONDALE SERVICES CORPORATION
EXECUTIVE GROUP INSURANCE BENEFIT PLAN
AND
SUMMARY PLAN DESCRIPTION
PREAMBLE
Avondale Services Corporation (the "Company") maintains the
Avondale Services Corporation Executive Group Insurance Benefit
Plan pursuant to a plan document effective October 1, 1997 (the
"Plan").
The Board of Directors of Avondale Services Corporation
hereby desires to clarify and amend the Plan in the following
respect:
I.
The following paragraph is added to Article II under the
description of Employee Life:
If a Participant is still employed upon
reaching age 70, such Participant's life insurance
coverage shall be reduced by 1/2.
II.
The coverage for Dependent Life in Article II is limited to
a Participant's spouse. The following paragraph is added to the
description of Dependent Life:
Coverage shall be reduced by 1/2 upon a
Participant's spouse reaching age 70 and shall
terminate when the Participant ceases to be
employed by the Company.
Executed in Avondale, Louisiana this 23rd day of March,
1998.
WITNESSES: AVONDALE SERVICES CORPORATION
/s/ Jackie H. Walker By: /s/ Thomas M. Kitchen
-------------------- ---------------------
/s/ Joy T. Rinaldi Thomas M. Kitchen
--------------------
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 23rd day of March,
1998, by and between AVONDALE INDUSTRIES, INC., a Louisiana corporation
maintaining its principal office at 5100 River Road, Avondale, Louisiana
70094 (the "Company") and A. L. Bossier, Jr. now residing at 17 Chateau
Palmer, Kenner, Louisiana 70065 (hereinafter called the "Employee").
W I T N E S S E T H
WHEREAS, the Employee is employed by the Company in an executive
capacity, and the Company desires to ensure that the Employee will be
available to provide executive services to the Company in the future, which
services are significant to the Company's long range prospects;
WHEREAS, the Company and Employee desire, among other things, to
prohibit Employee from disclosing or utilizing, outside the scope and term
of his employment, any non-public, confidential or proprietary information,
knowledge and data relating to the business and operations of the Company
or its subsidiaries received by Employee during the course of his
employment, and to restrict the ability of Employee to compete with the
Company or its subsidiaries for a limited period of time; and
WHEREAS, to induce the Employee to agree to provide such services on
the terms provided herein, the Company is offering to provide the Employee
with the compensation, benefits and security provided for in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements
herein contained, the parties hereto agree as follows:
1. EMPLOYMENT/CAPACITY/TERM. The Company agrees to and does hereby
employ the Employee, and the Employee agrees to be employed by the Company
upon the terms and conditions set forth in this Agreement. Such employment
shall be in a managerial and executive capacity in the operation of the
business of the Company and/or a subsidiary, subject to the supervision of
the Board of Directors of the Company. Such employment shall commence on
the date hereof and shall continue through December 31, 2000, and from year
to year thereafter subject to the right of the Employee or the Company to
terminate such employment as of December 31, 2000, or any subsequent
December 31, by written notice given to the other party at least sixty (60)
days prior to such termination date stating an intention to so terminate
such employment. Termination by either party, in accordance with the
provisions of the preceding sentence, shall not require a statement of the
reason or cause for such termination and shall not be deemed a breach or
violation of this Agreement by the party giving such notice. As used in
this Agreement, the phrase "term of this Agreement" shall be deemed to
include the period subsequent to the date hereof and prior to termination
of this Agreement; however, such phrase shall not be construed as limiting
the enforceability by either party of any rights which survive termination
of this Agreement.
<PAGE>
2. TIME AND EFFORT/ABSENCES. During the term of this Agreement, the
Employee shall devote his entire time and attention during normal business
hours to the business of the Company, and its subsidiaries, subject to the
supervision of the Board of Directors of the Company, and he shall not
engage in any other business activity whether or not such business activity
is pursued for gain, profit or other pecuniary advantage, but this
restriction shall not be construed to restrict the Employee (i) from
performing services as a member of the Board of Directors, Board of
Trustees or the like for any non-profit or for profit entity whether or not
the Employee receives compensation therefor, provided that, such services
do not unreasonably interfere with the ability of the Employee to perform
the services and discharge the responsibilities required of him under this
Agreement (it generally being agreed and understood that the quantity and
quality of the services heretofore performed by the Employee for non-profit
and for profit entities would not constitute a violation of the aforesaid
restriction), and (ii) from investing his assets in such form or manner as
will not require any services on the part of the Employee in the operation
of the business of the entity in which such investments are made. The
employee shall be excused from rendering his services during reasonable
vacation periods and during other reasonable temporary absences, all as
authorized from time to time by the Board of Directors of the Company. At
the date hereof, the Employee maintains his residence at 17 Chateau Palmer,
Kenner, Louisiana 70065 and performs services for the Company in New
Orleans, Louisiana; it is understood that, without his consent, the
Employee will not be required to relocate to a different location to
discharge his responsibilities under this Agreement.
3. CORPORATE OFFICES. If elected, the Employee will serve, without
additional compensation, as a director of the Company or as an officer or
director of any subsidiary of the Company.
4. SALARY/BONUS/OTHER BENEFITS. In consideration of the services
and duties to be rendered and performed by the Employee during the term of
this Agreement, including the assumption of the duties and responsibilities
of an executive officer of the Company, the Company agrees to pay and
provide for the Employee the compensation and benefits described below:
(a) An annual salary, payable in equal monthly installments, in
the amount of Six Hundred Ninety Thousand One Hundred Sixty-Eight Dollars
and 00/100 ($690,168) or in such greater amount as may from time to time be
fixed by the Board of Directors or the Compensation Committee of the Board
of Directors of the Company. The Employee's annual salary shall never be
reduced.
(b) An annual incentive bonus in such amount as may from time to
time be fixed by the Board of Directors or the Compensation Committee of
the Board of Directors, provided that, the annual incentive bonus for any
period of less than twelve (12) months (other than for the period from the
date hereof through December 31, 1998) shall be prorated. The annual
incentive bonus shall be paid to the Employee (or to his personal
representative in the event of his death) in a lump sum prior to the
expiration of the period for which such bonus is payable or within 45 days
following the expiration of such period.
<PAGE>
(c) OTHER BENEFITS. All other payments and/or benefits
described or provided for in this Agreement, including the Appendices
hereto. It is intended that such payments and/or benefits shall provide
the Employee and/or his personal representative(s) and/or beneficiaries, as
the case may be, with benefits which will be at least as favorable as the
benefits which on December 31, 1997 were provided for the Employee by the
Company. In addition, the Employee shall also be eligible for and shall
participate in any other employee benefit plan, including, any pension,
supplemental pension, retirement, supplemental retirement, profit-sharing,
thrift, bonus, incentive, deferred compensation, stock option or stock
appreciation or other employee benefit plan, including any life insurance,
accident, medical, disability, health or relocation plan or policy (all of
which are included by reference to the term "Plan") maintained by the
Company for its employees, generally, or for its senior executives, in
particular, on the same basis and subject to the same requirements and
limitations as may be made applicable to other senior executive employees
of the Company, provided that participation in and the terms of any
participation in the Avondale Industries, Inc. 1997 Stock Incentive Plan or
any successor plan shall be at the discretion of the Compensation Committee
as provided in such plans. The benefit plan structure and benefits which
shall be provided for the Employee and other senior executive employees of
the Company are described in Appendix A hereto. Nothing herein, however,
shall be construed as limiting the right of the Employee to additional or
other and greater benefits than are described in said Appendix A, if the
provisions of this Agreement obligate the Company to provide such other or
greater benefits, and in particular, but without limitation by the
specification hereof, the benefits described in Paragraphs 6, 7, 8 and 9
hereof and Appendices B, C and D hereto. In addition, the Company agrees
that where credited service of the Employee for the Company is relevant in
determining eligibility for or benefits under any Plan, the Employee's
credited service for the Company shall be determined to include service for
any parent, subsidiary or affiliate of the Company or for a predecessor of
the Company.
5. EXPENSES. The Employee shall be reimbursed for out-of-pocket
expenses incurred from time to time on behalf of the Company or any
subsidiary or in the performance of his duties under this Agreement, upon
the presentation of such supporting documents and forms as the Company
shall reasonably request.
6. DISABILITY/DISABILITY BENEFIT. In the event that the Employee is
incapable because of physical or mental illness of rendering services of
the character contemplated hereby, for a period of six (6) consecutive
months, the Board of Directors of the Company may determine that the
Employee has become disabled. In the event of such a determination of
disability, the Company shall have the continuing right and option while
such disability continues by notice in writing to the Employee to terminate
this Agreement effective thirty (30) days after such notice of termination
is so given, unless within such thirty (30) day period, the Employee
resumes rendering full-time services of the character contemplated hereby.
The incapacity due to physical or mental illness to render the services of
the character contemplated hereby, shall not constitute a breach of this
Agreement by the Employee. If this Agreement is terminated by the Company
as a result of a determination of disability, as aforesaid, the Company
shall be obligated to pay to the Employee the disability benefits described
in Appendix B hereto.
<PAGE>
7. DEATH/DEATH BENEFIT. In the event of the death of the Employee
during the term of this Agreement, this Agreement will terminate and the
Employee's then rate of annual salary and an annual incentive bonus,
(prorated in accordance with subparagraph 4(b) hereof) shall be paid to the
Employee's personal representative through the last day of the month in
which such death occurs. In addition, the Company shall be obligated to
provide the Employee, his personal representative(s) and/or his
beneficiaries with the death benefits described in Appendix C hereto.
8. SEVERANCE PAY. If the employment of the Employee is terminated
at any time during the period that this Agreement is in effect (i) by the
Employee for Good Reason (as defined in Paragraph 9 hereof) or (ii) by the
Company for any reason other than for Cause (as hereafter defined) or other
than in accordance with Paragraph 6 hereof on account of the disability of
the Employee, the Company shall be obligated to pay to the Employee the
severance pay and benefits described in Appendix D attached hereto.
Termination of the Employee's employment on account of his death or
Retirement (as hereafter defined) will not be considered a termination of
the Employee's employment by the Company and will not require the Company
to pay and provide any severance pay or benefits pursuant to Appendix D.
Accordingly, the Company acknowledges that if the employment of the
Employee is terminated by it for any reason during the period that this
Agreement is in effect other than for Cause or other than on account of the
disability of the Employee in accordance with Paragraph 6 hereof, the
Company will be obligated to pay and provide the severance pay and benefits
described in Appendix D, in order to reinforce and encourage the continued
loyalty, attention, and dedication of the Employee to the Company's
business and affairs without the concerns which normally arise from the
possibility of a loss of employment security. As used herein, the terms
"Retirement" and "Cause" shall have the following meanings, respectively:
(a) RETIREMENT. Termination of the Employee's employment
"Retirement" shall mean termination on the Employee's normal retirement
date in accordance with the terms of the Avondale Industries, Inc. Pension
Plan (or any successor or substitute plan or plans of the Company or of any
subsidiary of the Company under which the Employee may be a participant);
and
<PAGE>
(b) CAUSE. Termination by the Company of the Employee's
employment for "Cause" shall mean termination as a result of (i) the
willful and continued failure by the Employee to perform substantially the
services contemplated by this Agreement (other than any such failure
resulting from the Employee's incapacity due to physical or mental illness)
after a written demand for substantial performance is delivered to the
Employee by a member or representative of the Board of Directors of the
Company which specifically identifies the manner in which it is alleged
that the Employee has not substantially performed such services, or (ii)
the willful engaging by the Employee in gross misconduct which is
materially and demonstrably injurious to the Company; provided that, no
act, or failure to act, on the Employee's part shall be considered
"willful" unless done, or omitted to be done, in bad faith and without
reasonable belief that such action or omission was in, or not opposed to,
the best interests of the Company. It is also expressly understood that
the Employee's attention to or engagement in matters not directly related
to the business of the Company shall not provide a basis for termination
for Cause if such attention or engagement is authorized by the terms of
this Agreement or has otherwise been approved by the Board of Directors of
the Company. Anything in this Agreement to the contrary notwithstanding,
the Employee's employment may not be terminated 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 the purpose (after reasonable notice to the Employee and an opportunity
for the Employee, together with his counsel, to be heard before the Board),
finding that in the good faith opinion of the Board the Employee was guilty
of the conduct set forth in clause (i) or (ii) of this subparagraph (b) and
specifying the particulars thereof in detail.
9. TERMINATION BY THE EMPLOYEE FOR GOOD REASON. The termination by
the Employee of his employment for "Good Reason" shall be deemed a
justifiable termination of his employment and shall excuse the Employee
from the obligation to render services as provided in Paragraph 2 hereof.
In that event (i) the full amount of the Employee's annual salary and
annual incentive bonus, together with all other benefits required to be
provided under this Agreement, shall be continued until the next succeeding
December 31st as of which the Company could have terminated the Employee's
employment pursuant to Paragraph 1 hereof without such termination
constituting a breach or violation of this Agreement; and (ii) the
Employee's employment shall be deemed to terminate on such December 31st.
As used herein, the term "Good Reason" shall mean:
(a) a change in the Employee's status, title or position(s) as
an officer of the Company which, in his reasonable judgment, does not
represent a promotion from or enhancement of his status, title and position
as an executive officer, or the assignment by the Board of Directors of the
Company to the Employee of any duties or responsibilities which, in his
reasonable judgment, are inconsistent with such status, title or position,
or any removal of the Employee from or any failure to reappoint or reelect
him to such position, except in connection with a justifiable termination
by the Company of the Employee's employment for Cause or on account of
disability, the Retirement or death of the Employee or the termination by
the Employee of his employment other than for Good Reason;
<PAGE>
(b) a reduction in the Employee's annual salary or a failure by
the Company to pay to the Employee any installment of the annual salary
and/or the annual incentive bonus required pursuant to Paragraph 4 hereof,
which failure continues for a period of 20 days after written notice
thereof is given by the Employee to the Company;
(c) the failure by the Company to adopt, continue or maintain in
effect, any Plan or benefit which is required to be provided by the Company
pursuant to this Agreement (unless the Company provides the Employee with
the equivalent or at least substantially similar benefits under one or more
other Plans) other than as a result of the normal expiration of such Plan;
or the taking of any action or the failure to act by the Company, which
could adversely affect the Employee's continued participation in any such
Plan(s) or the ability of the Employee to enjoy or realize upon any
material benefit intended, or which could materially reduce the Employee's
benefits under any such Plan(s) or deprive him of any material benefit then
enjoyed by the Employee;
(d) the Company's requiring the Employee to be based anywhere
other than the New Orleans, Louisiana metropolitan area, except for
required travel on the Company's business to an extent substantially
consistent with the business travel obligations which the Employee
undertook on behalf of the Company prior to such required change;
(e) the failure by the Company to obtain the assumption of this
Agreement by any successor of the Company (other than by merger or
consolidation); provided, however, that upon a Change of Control of the
Company, as defined in the Change of Control Agreement between the Employee
and the Company (the "Change of Control Agreement"), the obligations of a
successor hereunder shall be limited to the obligations of the Company
hereunder through the date of the Change of Control after which date the
Change of Control Agreement shall govern.
(f) any purported termination by the Company of the Employee's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Paragraph 10 hereof, or which is not
justified as a termination of the Employee's employment based on Cause; and
for purposes of this Agreement, no such purported termination shall be
effective; or
(g) any refusal by the Company to allow the Employee to attend
to matters or engage in activities not directly related to the business of
the Company which is permitted by this Agreement or which, prior thereto,
was permitted by the Board of Directors of the Company.
10. NOTICE OF TERMINATION. Any purported notice of termination of
the Employee's employment (other than a Notice given by either pursuant to
Paragraph 1 hereof) shall be communicated in a writing delivered to the
other party as provided in Paragraph 14 hereof, (hereinafter a "Notice of
Termination"). For purposes of this Agreement a "Notice of Termination"
shall mean a notice which specifies the termination provision relied upon
by the party giving such notice and shall set forth in detail such facts
and circumstances claimed by said party to provide a justified basis for
termination of the Employee's employment under the provision(s) so
indicated.
<PAGE>
11. NONDISCLOSURE, NONCOMPETITION AND PROPRIETARY RIGHTS.
(a) CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
(i) "Company Business" means the design, construction and
overhaul of both military and commercial ships.
(ii) "Confidential Information" means any information,
knowledge or data of any nature and in any form (including information that
is electronically transmitted or stored on any form of magnetic or
electronic storage media) relating to the past, current or prospective
business or operations of the Company and its subsidiaries, that at the
time or times concerned is not generally known to persons engaged in
businesses similar to those conducted or contemplated by the Company and
its subsidiaries (other than information known by such persons through a
violation of an obligation of confidentiality to the Company), whether
produced by the Company and its subsidiaries or any of their consultants,
agents or independent contractors or by Employee, and whether or not marked
confidential, including without limitation information relating to the
Company's or its subsidiaries' products and services, business plans,
business acquisitions, processes, product or service research and
development methods or techniques, training methods and other operational
methods or techniques, quality assurance procedures or standards, operating
procedures, files, plans, specifications, proposals, drawings, charts,
graphs, support data, trade secrets, supplier lists, supplier information,
purchasing methods or practices, distribution and selling activities,
consultants' reports, marketing and engineering or other technical studies,
maintenance records, employment or personnel data, marketing data,
strategies or techniques, financial reports, budgets, projections, cost
analyses, price lists, formulae and analyses, employee lists, customer
records, customer lists, customer source lists, proprietary computer
software, and internal notes and memoranda relating to any of the
foregoing.
(b) NONDISCLOSURE OF CONFIDENTIAL INFORMATION. During the term
of this Agreement, Employee shall hold in a fiduciary capacity for the
benefit of the Company all Confidential Information which shall have been
obtained by Employee during Employee's employment (whether prior to or
after the date of this Agreement) and shall use such Confidential
Information solely within the scope of his employment with and for the
exclusive benefit of the Company. For a period of three years after the
date of termination of Employee's employment by the Company, Employee
agrees (i) not to communicate, divulge or make available to any person or
entity (other than the Company) any such Confidential Information, except
upon the prior written authorization of the Company or as may be required
by law or legal process, and (ii) to deliver promptly to the Company any
Confidential Information in his possession, including any duplicates
thereof and any notes or other records Employee has prepared with respect
thereto. In the event that the provisions of any applicable law or the
order of any court would require Employee to disclose or otherwise make
available any Confidential Information, Employee shall give the Company
prompt prior written notice of such required disclosure and an opportunity
to contest the requirement of such disclosure or apply for a protective
order with respect to such Confidential Information by appropriate
proceedings.
<PAGE>
(c) LIMITED COVENANT NOT TO COMPETE. During the term of this
Agreement and for a period of two years thereafter, commencing with the
date of termination of employment by the Employee for Good Reason, by the
Company for any reason other than for Cause, or by the Company for Cause if
the Company chooses to extend to Employee upon termination for Cause the
severance benefits provided in Paragraph 8 hereof and Appendix D hereto,
Employee agrees that, with respect to each State of the United States or
other jurisdiction, or specified portions thereof, in which the Employee
regularly (i) makes contact with customers of the Company or any of its
subsidiaries, (ii) conducts the business of the Company or any of its
subsidiaries or (iii) supervises the activities of other employees of the
Company or any of its subsidiaries, which states and jurisdictions or
portions thereof are identified in Appendix E attached hereto and forming a
part of this Agreement, and in which the Company or any of its subsidiaries
engages in the Company Business on the Date of Termination (collectively,
the "Subject Areas"), Employee will restrict his activities within the
Subject Areas as follows:
(i) Employee will not, directly or indirectly, for himself
or others, own, manage, operate, control, be employed in an executive,
managerial or supervisory capacity by, or otherwise engage or participate
in or allow his skill, knowledge, experience or reputation to be used in
connection with, the ownership, management, operation or control of, any
company or other business enterprise engaged in the Company Business within
any of the Subject Areas; provided, however, that nothing contained herein
shall prohibit Employee from making passive investments as long as Employee
does not beneficially own more than 10% of the equity interests of a
business enterprise engaged in the Company Business within any of the
Subject Areas. For purposes of this paragraph, "beneficially own" shall
have the same meaning ascribed to that term in Rule 13d-3 under the
Securities Exchange Act of 1934.
(ii) Employee will not call upon any customer of the Company
or its subsidiaries for the purpose of soliciting, diverting or enticing
away the business of such person or entity, or otherwise disrupting any
previously established relationship existing between such person or entity
and the Company or its subsidiaries;
(iii) Employee will not solicit, induce, influence or
attempt to influence any supplier, lessor, licensor, potential acquiree or
any other person who has a business relationship with the Company or its
subsidiaries, or who on the date of termination of employment of Employee
is engaged in discussions or negotiations to enter into a business
relationship with the Company or its subsidiaries, to discontinue or reduce
the extent of such relationship with the Company or its subsidiaries; and
(iv) Employee will not make contact with any of the
employees of the Company or its subsidiaries with whom he had contact
during the course of his employment with the Company for the purpose of
soliciting such employee for hire, whether as an employee or independent
contractor, or otherwise disrupting such employee's relationship with the
Company or its subsidiaries.
<PAGE>
(v) Employee further agrees that, for a period of one year
from and after the date of termination of employment, Employee will not
hire, on behalf of himself or any company engaged in the Company Business
with which Employee is associated, any employee of the Company or its
subsidiaries as an employee or independent contractor, whether or not such
engagement is solicited by Employee; provided, however, that the
restriction contained in this subsection (v) shall not apply to Company
employees who reside in, or are hired by Employee to perform work in any
Subject Areas located within the State of Virginia.
Employee agrees that he will from time to time upon the Company's
request promptly execute any supplement, amendment, restatement or other
modification of Appendix E as may be necessary or appropriate to correctly
reflect the jurisdictions which, at the time of such modification, should
be covered by Appendix E and this Paragraph 11(c). Furthermore, Employee
agrees that all references to Appendix E in this Agreement shall be deemed
to refer to Appendix E as so supplemented, amended, restated or otherwise
modified from time to time. Enforcement of this Paragraph 11(c) is subject
to the provisions of Paragraph 11(e) hereof.
(d) CERTAIN PROPRIETARY RIGHTS. Employee agrees to and hereby
does assign to the Company all his interest in and to all inventions,
whether or not patentable, which are made or conceived solely or jointly by
him:
(i) At any time during the term of his employment by the
Company in an executive, managerial, planning, technical research or
engineering capacity (including development, manufacturing, systems,
applied science and sales), or
(ii) During the course of or in connection with his duties
during the term of this Agreement, or
(iii) With the use of time or materials of the Company.
Employee agrees to communicate to the Company or its representatives
all facts known to him concerning such inventions, to sign all rightful
papers, make all rightful oaths and generally to do everything possible to
aid the Company in obtaining and enforcing proper patent protection for all
such inventions in all countries and in vesting title to such inventions
and patents in the Company. For the purpose of this Agreement, the
subject matter of any application for patent naming Employee as a sole or
joint inventor filed during the course of employment or within one year
subsequent to the termination thereof shall be deemed to be an invention
made or conceived by him during the course of his employment by the Company
and assignable to the Company hereunder, unless the Employee establishes by
a preponderance of the evidence that such invention was made or conceived
by him subsequent to termination of his employment hereunder. At the
Company's request (during or after the term of this Agreement) and expense,
the Employee will promptly execute a specific assignment of title to the
Company, and perform any other acts reasonably necessary to implement the
foregoing assignment.
<PAGE>
(e) INJUNCTIVE RELIEF; OTHER REMEDIES. Employee acknowledges
that a breach by Employee of Paragraph 11(b), (c) or (d) would cause
immediate and irreparable harm to the Company for which an adequate
monetary remedy does not exist; hence, Employee agrees that, in the event
of a breach or threatened breach by Employee of the provisions of Paragraph
11(b), (c) or (d) during or after the Employment Term, the Company shall be
entitled to injunctive relief restraining Employee from such violation
without the necessity of proof of actual damage or the posting of any bond,
except as required by non-waivable, applicable law. Nothing herein,
however, shall be construed as prohibiting the Company from pursuing any
other remedy at law or in equity to which the Company may be entitled under
applicable law in the event of a breach or threatened breach of this
Agreement by Employee, including without limitation the recovery of damages
and/or costs and expenses, such as reasonable attorneys' fees, incurred by
the Company as a result of any such breach. It shall be a condition to the
enforceability by the Company of the provisions of this Paragraph 11(c),
however, that the Company pays to and provides for the Employee the full
amount of severance pay and benefits described in Appendix D. Unless the
Company notifies the Employee in the Notice of Termination for Cause that
it intends to enforce the provisions of Paragraph 11(c) and agrees to pay
the Employee the full amount of severance pay and benefits described in
Appendix D, it shall be conclusively presumed for all purposes of this
Agreement that the Company has elected to waive the right to enforce the
provisions of this Paragraph 11(c). Employee acknowledges that the
payments provided under Paragraph 8 and Appendix D are conditioned upon
Employee fulfilling any noncompetition and nondisclosure agreements
contained in Paragraph 11. In the event Employee shall at any time
materially breach any noncompetition or nondisclosure agreements contained
in Paragraph 11, the Company may suspend or eliminate payments under
Paragraph 8 and Appendix D during the period of such breach. Employee
acknowledges that any such suspension or elimination of payments would be
an exercise of the Company's right to suspend or terminate its performance
hereunder upon Employee's breach of this Agreement; such suspension or
elimination of payments would not constitute, and should not be
characterized as, the imposition of liquidated damages.
(f) REQUESTS FOR WAIVER IN CASES OF UNDUE HARDSHIP. In the
event that Employee should find any of the limitations of Paragraph 11(c)
(including without limitation the geographic restrictions of Appendix E) to
impose a severe hardship on Employee's ability to secure other employment,
Employee may make a request to the Company for a waiver of the designated
limitations before accepting employment that otherwise would be a breach of
Employee's promises and obligations under this Agreement. Such request
must be in writing and clearly set forth the name and address of the
organization with that employment is sought and the location, position and
duties that Employee will be performing. The Company will consider the
request and, in its sole discretion, decide whether and on what conditions
to grant such waiver.
<PAGE>
(g) GOVERNING LAW OF THIS PARAGRAPH 11; CONSENT TO JURISDICTION.
Any dispute regarding the reasonableness of the covenants and agreements
set forth in this Paragraph 11, or the territorial scope or duration
thereof, or the remedies available to the Company upon any breach of such
covenants and agreements, shall be governed by and interpreted in
accordance with the laws of the State of the United States or other
jurisdiction in which the alleged prohibited competing activity or
disclosure occurs, and, with respect to each such dispute, the Company and
Employee each hereby irrevocably consent to the exclusive jurisdiction of
the state and federal courts sitting in the relevant State for resolution
of such dispute, and agree to be irrevocably bound by any judgment rendered
thereby in connection with such dispute, and further agree that service of
process may be made upon him or it in any legal proceeding relating to this
Paragraph 11 and/or Appendix E by any means allowed under the laws of such
jurisdiction. Each party irrevocably waives any objection he or it may
have as to the venue of any such suit, action or proceeding brought in such
a court or that such a court is an inconvenient forum. It is the desire
and intent of the parties that the provisions of this Agreement be enforced
to the fullest extent permitted under applicable law, whether now or
hereafter in effect and, therefore, to the extent permitted by applicable
law, the parties hereto waive any provision of applicable law that would
render any provision of this Paragraph 11 invalid or unenforceable.
12. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of:
(a) The Company, and any successors or assigns of the Company,
except that in the event of a Change of Control of the Company as defined
in the Change of Control Agreement, this Agreement shall be superseded by
the Change of Control Agreement. In the event of the assignment by the
Company of this Agreement, the Company shall nevertheless remain liable and
obligated to the Employee in accordance with the terms hereof; and
(b) The Employee, his estate, his executors, administrators,
heirs and beneficiaries.
13. EXPENSES RELATING TO ENFORCEMENT OF RIGHTS. If either party
shall successfully seek to enforce any provision of this Agreement or to
collect any amount claimed to be due hereunder, such successful party shall
be entitled to be reimbursed by the other party for any and all out-of-
pocket expenses, including reasonable attorneys' fees, incurred in
connection with such enforcements and/or collection.
<PAGE>
14. SEVERABILITY. If any term or provision of this Agreement
(including without limitation those contained in an Appendix hereto), 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 temporally, spatially or
otherwise 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.
15. NOTICES. Any notice or other communication required under this
Agreement shall be in writing, shall be deemed to have been given and
received when delivered in person, or, if mailed, shall be deemed to have
been given when deposited in the United States mail, first class,
registered and certified, return receipt requested, with proper postage
prepaid, and shall be deemed to have been received on the third business
day thereafter, and shall be addressed as follows:
If to the Company, addressed to:
Avondale Industries, Inc.
5100 River Road
Avondale, Louisiana 70094
If to the Employee, addressed to:
A. L. Bossier, Jr.
17 Chateau Palmer
Kenner, Louisiana 70065
or such other address as to which any party hereto may have notified
the other in writing.
16. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Louisiana without
regard to the principles of conflict of laws, except as expressly provided
in Paragraph 11(g) above with respect to the resolution of disputes arising
under, or the Company's enforcement of Paragraph 11 of this Agreement.
17. ENTIRE AGREEMENT. This document contains or refers to the entire
arrangement or understanding between the parties relating to the employment
of the Employee by the Company prior to a Change of Control of the Company,
as defined in the Change of Control Agreement. This Agreement, including
Appendices A through E, inclusive, all of which are herein incorporated by
reference and made a part hereof, contains or refers to the entire
arrangement or understanding between the Employee and the Company relating
to the employment of the Employee by the Company. No provision of the
Agreement, including the Appendices, may be modified or amended except by
an instrument in writing signed by or for both parties hereto.
<PAGE>
AVONDALE INDUSTRIES, INC.
By: /s/ Hugh A. Thompson
------------------------
Hugh A. Thompson
Chairman, Compensation Committee
/s/ A. L. Bossier, Jr.
--------------------------
A. L. Bossier, Jr.
<PAGE>
LIST OF APPENDICES
DESCRIPTION NUMBER OF PAGES
Appendix A Benefit Plan Structure 5
Appendix B Disability Benefits 1
Appendix C Death Benefits 1
Appendix D Severance Benefits 3
Appendix E Subject Areas under Limited 1
Covenant Not to Compete
<PAGE>
APPENDIX "A"
AVONDALE INDUSTRIES, INC.
AVONDALE SERVICES CORPORATION
EXECUTIVE GROUP
Effective Date: 1-1-98
COVERAGE DESCRIPTION
EMPLOYEE LIFE Two times base salary and bonus
Optional Coverage - additional one or two times base
salary and bonus
Maximum Coverage - Two million dollars
DEPENDENT LIFE $2,000.00 Spouse - Optional $100,000.00
$1,000.00 Dependent (over six months old)
$100.00 Dependent (less than six months old)
Accidental Death and Death - Same as Life (Employee Only)
DISMEMBERMENT Dismemberment - Benefit Schedule
Business According to rate of pay - Maximum $50,000.00
TRAVEL ACCIDENT
TRAVEL ACCIDENT (SALARIED) 5 Times Annual Salary - Maximum $500,000.00
RETIREE LIFE One-half of Life Insurance in force at time of
retirement
SHORT TERM DISABILITY Schedule based on length of service (see Page 2)
LONG TERM DISABILITY 60% of monthly base salary, after 180 day waiting
period.
Maximum $15,000 per month coordinated with Disability
Social Security Benefit.
<PAGE>
HEALTH CARE 100% Hospital - private room rate plus miscellaneous
expenses
100% Hospital Medical Expenses - (doctor's visits to
hospital)
100% Surgical Expenses
100% Laboratory and X-ray Expenses
100% Vision and Hearing Care Expenses
100% Dental and Orthodontia
100% Annual Physicals
100% Psychiatric and Nervous Care - expenses up to
$6,500.00 per year per individual
No Life-Time Maximum
Subject to applicable employee contribution requirement
<PAGE>
SHORT TERM DISABILITY
Benefits begin on first day absent due to a non-occupational injury or
illness. Original medical documentation required if absent five or more
consecutive working days.
Benefits will be reduced by any amount received from Social Security.
Successive periods of disability separated by less than two (2) weeks of
full-time work considered as one continuous period of disability, unless
later disability due to a different cause.
Benefits will be paid up to a maximum of twenty-six (26) weeks, based on
the following schedule:
YEARS OF SERVICE FULL SALARY UP TO HALF SALARY UP TO
Less than 1 Year 4 Weeks 0 Weeks
1 Year 4 Weeks 22 Weeks
2 Years 6 Weeks 20 Weeks
3 Years 8 Weeks 18 Weeks
4 Years 10 Weeks 16 Weeks
5 Years 12 Weeks 14 Weeks
6 Years 14 Weeks 12 Weeks
7 Years 16 Weeks 10 Weeks
8 Years 18 Weeks 8 Weeks
9 Years 20 Weeks 6 Weeks
10 Years 22 Weeks 4 Weeks
11 Years 24 Weeks 2 Weeks
12 Years or more 26 Weeks 0 Weeks
JURY DUTY
Pays difference between employee's base pay and jury pay received, not to
exceed eight hours pay per day.
BLOOD BANK
To be eligible, must be a participant in Group Health Insurance Program.
In joining the Blood Bank Program, the employee agrees to donate a unit of
blood as requested at irregular intervals. The Program provides the
employee and insured dependents with blood for as long as the employee
remains in the Program.
HOLIDAYS
Eight Paid Holidays - New Years Day, Mardi Gras, Good Friday, July Fourth,
Labor Day, Thanksgiving Day, Day After Thanksgiving and Christmas.
Eligible upon completion of thirty days service.
<PAGE>
VACATION
Vacation year is from January 1 to December 31. Upon completion of one
full year of service, eligible for two weeks of vacation. An employee
joining the Company after January 1 but prior to July 1 will be eligible
for one week's vacation the following January 1. Vacation time may not be
carried over from one vacation period to the next. Vacation time may be
taken in one-hour increments. Beginning with ten full years of service,
eligible for additional days of vacation, up to a maximum of five
additional days, based on the following schedule:
YEARS OF SERVICE ADDITIONAL DAYS OF VACATION
10 Years 1 Day
11 Years 2 Days
12 Years 3 Days
13 Years 4 Days
14 Years 5 Days
SICK/PERSONAL TIME
Eligible for twenty-four hours per calendar year. Time may be taken in
one-hour increments. Unused time may not be carried over to the next year.
FUNERAL LEAVE
None
TUITION ASSISTANCE
Eligible upon completion of one year's service. Only courses directly
related to employee's position and taken at an accredited institution will
be considered. Approval must be obtained prior to the start of the course.
Reimbursement will be made for the cost of tuition only, and will be based
on the following schedule:
COURSE LEVEL FINAL GRADE REIMBURSEMENT PERCENTAGE
Under-Graduate Not Lower Than "C" 100%
Post-Graduate Not Lower Than "B" 100%
AUTOMOBILE ALLOWANCE
$600 per month
RETIREMENT
Formula - 1.5% of final average compensation, multiplied by years of
credited service, less Massachusetts Mutual Annuity and equivalent
actuarial value of any shares in ESOP account.
Early Retirement Benefits available at age 55 with ten years service,
actuarially reduced by years and months early.
<PAGE>
SUPPLEMENTAL RETIREMENT PLAN
Vesting: 100% vesting upon completion of ten (10) years service
Formula: 15% of final average compensation.
Early Retirement Benefits available at Age 55 with ten (10) years service,
actuarially reduced by years and months early
EXECUTIVE EXCESS RETIREMENT PLAN
If designated as a participant by the Board of Directors.
Purpose of the plan is to reimburse participants for benefits not payable
under the Pension Plan and ESOP because of limitations in the Internal
Revenue Code and the Pension Plan.
Benefits paid upon attainment of age 75 or upon retirement, if earlier.
Benefit is unfunded.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
Plan Year - September 1 to August 31
Eligibility - 1st of month following one year of service
Compensation - Total salary, excluding severance pay, moving expenses and
non-cash contribution
Stock Allocation - Each year the Trustees divide the available shares of
stock among eligible participants, based on each participant's
compensation. These allocated shares are held in the participant's ESOP
account. Must be on payroll last pay period of each plan year to receive
allocation.
Distribution - (1) Retirement - Age 55 or later
(2) Total & Permanent Disability with Social Security Award
(3) Death
Vesting - Employees who were eligible to receive Special Shares were 100%
vested.
Vesting for Loan Shares is as follows:
Less than 4 years 0%
4 years but less than 5 40%
5 years but less than 6 50%
6 years but less than 7 60%
7 years but less than 8 70%
8 years but less than 9 80%
9years but less than 10 90%
10 years or more 100%
<PAGE>
APPENDIX B
DISABILITY BENEFIT
In the event of termination by the Company of the Employee's
employment on account of disability pursuant to Paragraph 6 of the
Agreement, the disability benefit to be provided to the Employee shall be
determined under this Appendix, unless a greater or more favorable benefit
is required to be provided pursuant to the provisions of Subparagraph 4(c)
of the Agreement and/or Appendix A.
1. CONTINUATION OF FULL ANNUAL SALARY: The full amount of the
Employee's annual salary (pursuant to paragraph 4(a) of this Agreement)
shall be continued according to the following formula:
(i) If the Employee's credited service for the Company totals
(5) five years or less his annual salary shall be continued for twelve (12)
months commencing with the month following such termination of employment;
and
(ii) If the Employee's credited service for the Company totals
more than five (5) years, the payment period referred to in (i) shall be
increased by two-tenths (2/10) of a year for each year of credited service
in excess of five (5) up to a maximum payment period of five (5) years.
Thus, if the Employee's employment is terminated on account of disability
at a time when he has twelve (12) years of credited service, the Employee's
full annual salary would be continued for 2.4 years following such
termination of employment and an Employee with twenty-five (25) or more
years of credited service as of the termination of his employment on
account of disability will receive his full annual salary for five (5)
years.
2. CONTINUATION OF PARTIAL ANNUAL SALARY. Following the expiration
of the period calculated pursuant to the preceding Paragraph 1, the
Employee will receive long term disability benefits equal to sixty percent
(60%) of his full annual salary subject to such limitations as are
contained in Appendix A.
3. LIMITATIONS. The disability benefit will in any event
discontinue and terminate upon the death of the Employee or upon the date
of his Retirement as defined in subparagraph 9(a) of the Agreement would
have occurred.
4. OTHER BENEFITS. Other benefits which may be provided or
continued for the Employee following the termination of his employment on
account of disability depend upon the terms of the Plan under which such
benefits are provided or required to be provided.
<PAGE>
APPENDIX C
DEATH BENEFITS
The death benefits to be provided by the Company subsequent to the
death of the Employee shall be determined by reference to the plan or plans
under which such benefits are provided. Reference is made to subparagraph
4(c) of the Agreement and to Appendix A.
<PAGE>
APPENDIX D
SEVERANCE BENEFITS
Upon the termination of the Employee's employment under any
circumstance requiring the Company to pay to and provide for the Employee
the severance pay and other benefits set forth in this Appendix D, the
Company shall be obligated to pay to and/or provide for the Employee the
following compensation and other benefits:
(a) PAYMENT IN LIEU OF COMPENSATION: The Company shall pay to the
Employee in cash an amount equal to the product of (i) and (ii); where (i)
shall equal the sum of (A) the Employee's annual salary and (B) the
Employee's annual incentive bonus during the twelve (12) month period
ending with the close of the month in which such termination of employment
occurs (the "Date of Termination") , divided by twelve (12) ; and where
(ii) shall be the lesser of (x) thirty-six (36), (y) six (6), plus two (2)
for each twelve (12) months of credited service of the Employee for the
Company (determined in accordance with subparagraph 4(c) of the Agreement)
through the Date of Termination, or (z) the number of months until the
Employee's normal retirement date, as defined in the Avondale Industries,
Inc. Pension Plan (or any successor, or substitute plan or plans of the
Company or of any subsidiary of the Company under which the Employee may be
a participant, hereinafter the "Pension Plan"). The number determined
under clause (ii) is sometimes herein referred to as the "Measuring
Period".
(b) ACCELERATION OF STOCK OPTIONS: Immediately following such Date
of Termination, all options and stock appreciation rights granted to
Employee under the 1997 Stock Incentive Plan or any other stock option or
similar plan before or after the date hereof (collectively referred to
herein as "Stock Option Plans") shall immediately become fully exercisable
and execution of this Agreement shall constitute an amendment to any stock
option agreement to so provide and an agreement and undertaking by the
Company to take such action as may be required to cause any and all options
or rights granted, or to be granted, to Employee thereunder to make them
consistent herewith.
(c) PAYMENT FOR NON-VESTED RETIREMENT BENEFIT: In addition to the
vested portion of the Employee's interest under any employee benefit plan
maintained by the Company as a qualified plan pursuant to Section 401(a) of
the Internal Revenue Code of 1986, as amended, to which the Company or any
subsidiary has made contributions for the Employee's account which are not
otherwise expressly provided for herein, if the Employee is not fully
vested under any such plan or plans, the Company shall pay to the Employee
in cash an amount equal to the then present value of the actuarial
equivalent (within the meaning of the following Paragraph (d)) of the non-
vested portion of the Employee's account, to the extent that such account
would have become vested based on additional credited service for the
Company, if the Employee had remained in the employ of the Company (or any
subsidiary) for an additional period of months equal to the Measuring
Period.
<PAGE>
(d) SUPPLEMENTAL RETIREMENT BENEFIT: In addition to any retirement
or severance benefit to which the Employee is entitled under the Pension
Plan, the Employee shall receive in cash, an amount equivalent of the
excess of (i) over (ii), where (i) equals the aggregate amount of the
retirement pension (calculated as a straight life annuity payable to
Employee on his normal retirement date) to which Employee would have been
entitled under the terms of the Pension Plan and any other qualified or
non-qualified defined benefit plan maintained by the Company and covering
the Employee, if Employee were fully vested thereunder (without regard to
(w) whether the Employee shall actually have completed the number of years
of credited service required to qualify for full vesting under such plans,
(x) any limitation on the amount of compensation used in the calculation of
the regular pension thereunder, (y) any offset thereunder for severance
allowances payable hereunder or (z) any amendment to such plans made prior
to the Employee's Date of Termination, which amendment adversely affects in
any manner the computation of retirement benefits under such plans) and had
accumulated an additional period of months of credited service after the
Date of Termination equal to the Measuring Period (but in no event shall
Employee be deemed to have accumulated an additional period of credited
service subsequent to Employee's sixty-fifth (65th) birthday), and, where
(ii) equals the amount of the retirement pension (calculated as a straight
1ife annuity payable to Employee on his normal retirement date),if any, to
which Employee is entitled pursuant to the provisions of the Pension Plan
and such other plans. For purposes of Clause (i) of this Paragraph (d),
the amount payable pursuant to Paragraph (a) of this Appendix D, shall be
deemed to represent the Employee's earnings for the period of months equal
to the Measuring Period, and for purposes of this Paragraph (d), "actuarial
equivalent" shall be determined using the same methods and assumptions
utilized under the Pension Plan immediately prior to the Date of
Termination. All other terms used in this Paragraph (d) shall have the
same meanings, respectively, as such terms have in the Pension Plan, unless
otherwise required by the context.
<PAGE>
(e) OTHER BENEFITS: The Company shall also maintain in full force
and effect, for the continued benefit of the Employee and his dependents,
for a period terminating on the earliest of (i) a period of months after
the Date of Termination equal to the Measuring Period; (ii) the
commencement date of equivalent benefits for the Employee from a new
employer; or (iii) the Employee's normal retirement date under the
Company's Pension Plan, after which the terms of the Pension Plan shall
govern; all insured and self-insured employee benefit plans in which the
Employee is entitled to participate immediately prior to the Date of
Termination; provided that the Employee's continued participation is
possible under the general terms and provisions of such Plans (and any
applicable funding media) and the Employee continues to pay an amount equal
to Employee's regular contribution for such participation. In the event
that the Employee participation in any such Plan is barred, the Company, at
its sole cost and expense, shall arrange to have issued for the benefit of
Employee and his dependents individual policies of insurance providing
benefits substantially similar (on an after-tax basis) to those which the
Employee would have been entitled to receive under such Plan or Plans
pursuant to this Paragraph (e) if such participation were not barred or, if
such insurance is not available at a reasonable cost to the Company, the
Company shall otherwise provide the Employee and his dependents with
equivalent benefits (on an after-tax basis) and the Employee shall not be
required to pay any premiums or other charges in an amount greater than
that which the Employee would have paid in order to participate in such
Plans. If, at the end of a period of months after the Date of Termination
equal to the Measuring Period, the Employee is not receiving equivalent
benefits from a new employer, the Company shall arrange, at its sole cost
and expense, to enable Employee to convert the Employee's and his
dependents' coverage under such Plans to individual policies or programs
upon the same terms as employees of the Company may apply for until the
Employee is able to receive equivalent benefits from a source other than
the Company.
(f) MITIGATION: The Employee shall not be required to mitigate the
amount of any payment or benefit provided for in this Appendix D by seeking
other employment or otherwise, nor (except as specifically provided in
Paragraph (e) above) shall the amount of any payment or benefit provided
for in this Appendix D be reduced by any compensation or benefit earned by
Employee as a result of employment by another employer after the Date of
Termination, or otherwise.
(g) MANNER OF PAYMENT: All payments which are required to be made in
cash under Paragraphs (a), (c) or (d), above, shall be paid on the Date of
Termination, or within five (5) business days thereafter, unless the
Employee has made a Deferred Payment Election with respect to such
payment(s) pursuant to the succeeding Paragraph (h).
<PAGE>
(h) ELECTION TO DEFER PAYMENT: Upon entering into this Agreement and
for a period of fourteen (14) days following each anniversary of the date
hereof (the "Election Period"), the Employee may, in writing, direct the
Company that any amounts which become payable to the Employee pursuant to
Paragraphs (a), (c) and (d), above, shall be paid to the Employee in three
(3) equal annual installments, with the first of such installments to be
paid not later than five (5) business days after the Date of Termination
and successive installments paid on the next two (2) succeeding
anniversaries of the Date of Termination or the next following business day
if such date is not a business day (the "Deferred Payment Election"). A
Deferred Payment election, once made, shall be irrevocable except during an
Election Period.
(i) EFFECT ON OTHER BENEFITS: Nothing contained in this Appendix D
shall be construed or interpreted as limiting any rights or benefits
payable to or for the Employee under any other provision of this Agreement.
<PAGE>
APPENDIX E
TO EMPLOYMENT AGREEMENT
BETWEEN AVONDALE INDUSTRIES, INC.
AND
A. L. BOSSIER, JR.
Jurisdictions In Which Competition
Is Restricted As Provided
In Paragraph 11(c)
A. STATES
1. LOUISIANA -- The following parishes in the State of Louisiana:
Orleans and Jefferson
2. MISSISSIPPI -- The following counties in the State of
Mississippi:
Harrison
as well as any other counties in the State of Mississippi in
which the Employee regularly (a) makes contact with customers of
the Company or any of its subsidiaries, (b) conducts the business
of the Company or any of its subsidiaries or (c) supervises the
activities of other employees of the Company or any of its
subsidiaries as of the date of termination of employment.
3. VIRGINIA-- The following counties in the State of Virginia:
Arlington
as well as any other counties in the State of Virginia in which
the Employee regularly (a) makes contact with customers of the
Company or any of its subsidiaries, (b) conducts the business of
the Company or any of its subsidiaries or (c) supervises the
activities of other employees of the Company or any of its
subsidiaries as of the date of termination of employment.
Agreed to and Accepted:
Avondale Industries, Inc. Employee
By: /s/ HUGH A. THOMPSON /s/ A. L. BOSSIER, JR.
-------------------- ------------------
Its: Compensation Committee Chairman A. L. Bossier, Jr.
Date: MARCH 23, 1998 Date: MARCH 23, 1998
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 23rd day of March,
1998, by and between AVONDALE INDUSTRIES, INC., a Louisiana corporation
maintaining its principal office at 5100 River Road, Avondale, Louisiana
70094 (the "Company") and Thomas M. Kitchen, now residing at 6627 Canal
Boulevard, New Orleans, Louisiana 70124 (hereinafter called the
"Employee").
W I T N E S S E T H
WHEREAS, the Employee is employed by the Company in an executive
capacity, and the Company desires to ensure that the Employee will be
available to provide executive services to the Company in the future, which
services are significant to the Company's long range prospects;
WHEREAS, the Company and Employee desire, among other things, to
prohibit Employee from disclosing or utilizing, outside the scope and term
of his employment, any non-public, confidential or proprietary information,
knowledge and data relating to the business and operations of the Company
or its subsidiaries received by Employee during the course of his
employment, and to restrict the ability of Employee to compete with the
Company or its subsidiaries for a limited period of time; and
WHEREAS, to induce the Employee to agree to provide such services on
the terms provided herein, the Company is offering to provide the Employee
with the compensation, benefits and security provided for in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements
herein contained, the parties hereto agree as follows:
1. EMPLOYMENT/CAPACITY/TERM. The Company agrees to and does hereby
employ the Employee, and the Employee agrees to be employed by the Company
upon the terms and conditions set forth in this Agreement. Such employment
shall be in a managerial and executive capacity in the operation of the
business of the Company and/or a subsidiary, subject to the supervision of
the Board of Directors of the Company. Such employment shall commence on
the date hereof and shall continue through December 31, 2000, and from year
to year thereafter subject to the right of the Employee or the Company to
terminate such employment as of December 31, 2000, or any subsequent
December 31, by written notice given to the other party at least sixty (60)
days prior to such termination date stating an intention to so terminate
such employment. Termination by either party, in accordance with the
provisions of the preceding sentence, shall not require a statement of the
reason or cause for such termination and shall not be deemed a breach or
violation of this Agreement by the party giving such notice. As used in
this Agreement, the phrase "term of this Agreement" shall be deemed to
include the period subsequent to the date hereof and prior to termination
of this Agreement; however, such phrase shall not be construed as limiting
the enforceability by either party of any rights which survive termination
of this Agreement.
<PAGE>
2. TIME AND EFFORT/ABSENCES. During the term of this Agreement, the
Employee shall devote his entire time and attention during normal business
hours to the business of the Company, and its subsidiaries, subject to the
supervision of the Board of Directors of the Company, and he shall not
engage in any other business activity whether or not such business activity
is pursued for gain, profit or other pecuniary advantage, but this
restriction shall not be construed to restrict the Employee (i) from
performing services as a member of the Board of Directors, Board of
Trustees or the like for any non-profit or for profit entity whether or not
the Employee receives compensation therefor, provided that, such services
do not unreasonably interfere with the ability of the Employee to perform
the services and discharge the responsibilities required of him under this
Agreement (it generally being agreed and understood that the quantity and
quality of the services heretofore performed by the Employee for non-profit
and for profit entities would not constitute a violation of the aforesaid
restriction), and (ii) from investing his assets in such form or manner as
will not require any services on the part of the Employee in the operation
of the business of the entity in which such investments are made. The
employee shall be excused from rendering his services during reasonable
vacation periods and during other reasonable temporary absences, all as
authorized from time to time by the Board of Directors of the Company. At
the date hereof, the Employee maintains his residence at 6627 Canal
Boulevard, New Orleans, Louisiana 70124 and performs services for the
Company in New Orleans, Louisiana; it is understood that, without his
consent, the Employee will not be required to relocate to a different
location to discharge his responsibilities under this Agreement.
3. CORPORATE OFFICES. If elected, the Employee will serve, without
additional compensation, as a director of the Company or as an officer or
director of any subsidiary of the Company.
4. SALARY/BONUS/OTHER BENEFITS. In consideration of the services
and duties to be rendered and performed by the Employee during the term of
this Agreement, including the assumption of the duties and responsibilities
of an executive officer of the Company, the Company agrees to pay and
provide for the Employee the compensation and benefits described below:
(a) An annual salary, payable in equal monthly installments, in
the amount of Three Hundred Twenty-Two Thousand Nine Hundred Nine and
00/100 ($322,909) or in such greater amount as may from time to time be
fixed by the Board of Directors or the Compensation Committee of the Board
of Directors of the Company. The Employee's annual salary shall never be
reduced.
(b) An annual incentive bonus in such amount as may from time to
time be fixed by the Board of Directors or the Compensation Committee of
the Board of Directors, provided that, the annual incentive bonus for any
period of less than twelve (12) months (other than for the period from the
date hereof through December 31, 1998) shall be prorated. The annual
incentive bonus shall be paid to the Employee (or to his personal
representative in the event of his death) in a lump sum prior to the
expiration of the period for which such bonus is payable or within 45 days
following the expiration of such period.
<PAGE>
(c) OTHER BENEFITS. All other payments and/or benefits
described or provided for in this Agreement, including the Appendices
hereto. It is intended that such payments and/or benefits shall provide
the Employee and/or his personal representative(s) and/or beneficiaries, as
the case may be, with benefits which will be at least as favorable as the
benefits which on December 31, 1997 were provided for the Employee by the
Company. In addition, the Employee shall also be eligible for and shall
participate in any other employee benefit plan, including, any pension,
supplemental pension, retirement, supplemental retirement, profit-sharing,
thrift, bonus, incentive, deferred compensation, stock option or stock
appreciation or other employee benefit plan, including any life insurance,
accident, medical, disability, health or relocation plan or policy (all of
which are included by reference to the term "Plan") maintained by the
Company for its employees, generally, or for its senior executives, in
particular, on the same basis and subject to the same requirements and
limitations as may be made applicable to other senior executive employees
of the Company, provided that participation in and the terms of any
participation in the Avondale Industries, Inc. 1997 Stock Incentive Plan or
any successor plan shall be at the discretion of the Compensation Committee
as provided in such plans. The benefit plan structure and benefits which
shall be provided for the Employee and other senior executive employees of
the Company are described in Appendix A hereto. Nothing herein, however,
shall be construed as limiting the right of the Employee to additional or
other and greater benefits than are described in said Appendix A, if the
provisions of this Agreement obligate the Company to provide such other or
greater benefits, and in particular, but without limitation by the
specification hereof, the benefits described in Paragraphs 6, 7, 8 and 9
hereof and Appendices B, C and D hereto. In addition, the Company agrees
that where credited service of the Employee for the Company is relevant in
determining eligibility for or benefits under any Plan, the Employee's
credited service for the Company shall be determined to include service for
any parent, subsidiary or affiliate of the Company or for a predecessor of
the Company.
5. EXPENSES. The Employee shall be reimbursed for out-of-pocket
expenses incurred from time to time on behalf of the Company or any
subsidiary or in the performance of his duties under this Agreement, upon
the presentation of such supporting documents and forms as the Company
shall reasonably request.
6. DISABILITY/DISABILITY BENEFIT. In the event that the Employee is
incapable because of physical or mental illness of rendering services of
the character contemplated hereby, for a period of six (6) consecutive
months, the Board of Directors of the Company may determine that the
Employee has become disabled. In the event of such a determination of
disability, the Company shall have the continuing right and option while
such disability continues by notice in writing to the Employee to terminate
this Agreement effective thirty (30) days after such notice of termination
is so given, unless within such thirty (30) day period, the Employee
resumes rendering full-time services of the character contemplated hereby.
The incapacity due to physical or mental illness to render the services of
the character contemplated hereby, shall not constitute a breach of this
Agreement by the Employee. If this Agreement is terminated by the Company
as a result of a determination of disability, as aforesaid, the Company
shall be obligated to pay to the Employee the disability benefits described
in Appendix B hereto.
<PAGE>
7. DEATH/DEATH BENEFIT. In the event of the death of the Employee
during the term of this Agreement, this Agreement will terminate and the
Employee's then rate of annual salary and an annual incentive bonus,
(prorated in accordance with subparagraph 4(b) hereof) shall be paid to the
Employee's personal representative through the last day of the month in
which such death occurs. In addition, the Company shall be obligated to
provide the Employee, his personal representative(s) and/or his
beneficiaries with the death benefits described in Appendix C hereto.
8. SEVERANCE PAY. If the employment of the Employee is terminated
at any time during the period that this Agreement is in effect (i) by the
Employee for Good Reason (as defined in Paragraph 9 hereof) or (ii) by the
Company for any reason other than for Cause (as hereafter defined) or other
than in accordance with Paragraph 6 hereof on account of the disability of
the Employee, the Company shall be obligated to pay to the Employee the
severance pay and benefits described in Appendix D attached hereto.
Termination of the Employee's employment on account of his death or
Retirement (as hereafter defined) will not be considered a termination of
the Employee's employment by the Company and will not require the Company
to pay and provide any severance pay or benefits pursuant to Appendix D.
Accordingly, the Company acknowledges that if the employment of the
Employee is terminated by it for any reason during the period that this
Agreement is in effect other than for Cause or other than on account of the
disability of the Employee in accordance with Paragraph 6 hereof, the
Company will be obligated to pay and provide the severance pay and benefits
described in Appendix D, in order to reinforce and encourage the continued
loyalty, attention, and dedication of the Employee to the Company's
business and affairs without the concerns which normally arise from the
possibility of a loss of employment security. As used herein, the terms
"Retirement" and "Cause" shall have the following meanings, respectively:
(a) RETIREMENT. Termination of the Employee's employment
"Retirement" shall mean termination on the Employee's normal retirement
date in accordance with the terms of the Avondale Industries, Inc. Pension
Plan (or any successor or substitute plan or plans of the Company or of any
subsidiary of the Company under which the Employee may be a participant);
and
<PAGE>
(b) CAUSE. Termination by the Company of the Employee's
employment for "Cause" shall mean termination as a result of (i) the
willful and continued failure by the Employee to perform substantially the
services contemplated by this Agreement (other than any such failure
resulting from the Employee's incapacity due to physical or mental illness)
after a written demand for substantial performance is delivered to the
Employee by a member or representative of the Board of Directors of the
Company which specifically identifies the manner in which it is alleged
that the Employee has not substantially performed such services, or (ii)
the willful engaging by the Employee in gross misconduct which is
materially and demonstrably injurious to the Company; provided that, no
act, or failure to act, on the Employee's part shall be considered
"willful" unless done, or omitted to be done, in bad faith and without
reasonable belief that such action or omission was in, or not opposed to,
the best interests of the Company. It is also expressly understood that
the Employee's attention to or engagement in matters not directly related
to the business of the Company shall not provide a basis for termination
for Cause if such attention or engagement is authorized by the terms of
this Agreement or has otherwise been approved by the Board of Directors of
the Company. Anything in this Agreement to the contrary notwithstanding,
the Employee's employment may not be terminated 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 the purpose (after reasonable notice to the Employee and an opportunity
for the Employee, together with his counsel, to be heard before the Board),
finding that in the good faith opinion of the Board the Employee was guilty
of the conduct set forth in clause (i) or (ii) of this subparagraph (b) and
specifying the particulars thereof in detail.
9. TERMINATION BY THE EMPLOYEE FOR GOOD REASON. The termination by
the Employee of his employment for "Good Reason" shall be deemed a
justifiable termination of his employment and shall excuse the Employee
from the obligation to render services as provided in Paragraph 2 hereof.
In that event (i) the full amount of the Employee's annual salary and
annual incentive bonus, together with all other benefits required to be
provided under this Agreement, shall be continued until the next succeeding
December 31st as of which the Company could have terminated the Employee's
employment pursuant to Paragraph 1 hereof without such termination
constituting a breach or violation of this Agreement; and (ii) the
Employee's employment shall be deemed to terminate on such December 31st.
As used herein, the term "Good Reason" shall mean:
(a) a change in the Employee's status, title or position(s) as
an officer of the Company which, in his reasonable judgment, does not
represent a promotion from or enhancement of his status, title and position
as an executive officer, or the assignment by the Board of Directors of the
Company to the Employee of any duties or responsibilities which, in his
reasonable judgment, are inconsistent with such status, title or position,
or any removal of the Employee from or any failure to reappoint or reelect
him to such position, except in connection with a justifiable termination
by the Company of the Employee's employment for Cause or on account of
disability, the Retirement or death of the Employee or the termination by
the Employee of his employment other than for Good Reason;
<PAGE>
(b) a reduction in the Employee's annual salary or a failure by
the Company to pay to the Employee any installment of the annual salary
and/or the annual incentive bonus required pursuant to Paragraph 4 hereof,
which failure continues for a period of 20 days after written notice
thereof is given by the Employee to the Company;
(c) the failure by the Company to adopt, continue or maintain in
effect, any Plan or benefit which is required to be provided by the Company
pursuant to this Agreement (unless the Company provides the Employee with
the equivalent or at least substantially similar benefits under one or more
other Plans) other than as a result of the normal expiration of such Plan;
or the taking of any action or the failure to act by the Company, which
could adversely affect the Employee's continued participation in any such
Plan(s) or the ability of the Employee to enjoy or realize upon any
material benefit intended, or which could materially reduce the Employee's
benefits under any such Plan(s) or deprive him of any material benefit then
enjoyed by the Employee;
(d) the Company's requiring the Employee to be based anywhere
other than the New Orleans, Louisiana metropolitan area, except for
required travel on the Company's business to an extent substantially
consistent with the business travel obligations which the Employee
undertook on behalf of the Company prior to such required change;
(e) the failure by the Company to obtain the assumption of this
Agreement by any successor of the Company (other than by merger or
consolidation); provided, however, that upon a Change of Control of the
Company, as defined in the Change of Control Agreement between the Employee
and the Company (the "Change of Control Agreement"), the obligations of a
successor hereunder shall be limited to the obligations of the Company
hereunder through the date of the Change of Control after which date the
Change of Control Agreement shall govern.
(f) any purported termination by the Company of the Employee's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Paragraph 10 hereof, or which is not
justified as a termination of the Employee's employment based on Cause; and
for purposes of this Agreement, no such purported termination shall be
effective; or
(g) any refusal by the Company to allow the Employee to attend
to matters or engage in activities not directly related to the business of
the Company which is permitted by this Agreement or which, prior thereto,
was permitted by the Board of Directors of the Company.
10. NOTICE OF TERMINATION. Any purported notice of termination of
the Employee's employment (other than a Notice given by either pursuant to
Paragraph 1 hereof) shall be communicated in a writing delivered to the
other party as provided in Paragraph 14 hereof, (hereinafter a "Notice of
Termination"). For purposes of this Agreement a "Notice of Termination"
shall mean a notice which specifies the termination provision relied upon
by the party giving such notice and shall set forth in detail such facts
and circumstances claimed by said party to provide a justified basis for
termination of the Employee's employment under the provision(s) so
indicated.
<PAGE>
11. NONDISCLOSURE, NONCOMPETITION AND PROPRIETARY RIGHTS.
(a) CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
(i) "Company Business" means the design, construction and
overhaul of both military and commercial ships.
(ii) "Confidential Information" means any information,
knowledge or data of any nature and in any form (including information that
is electronically transmitted or stored on any form of magnetic or
electronic storage media) relating to the past, current or prospective
business or operations of the Company and its subsidiaries, that at the
time or times concerned is not generally known to persons engaged in
businesses similar to those conducted or contemplated by the Company and
its subsidiaries (other than information known by such persons through a
violation of an obligation of confidentiality to the Company), whether
produced by the Company and its subsidiaries or any of their consultants,
agents or independent contractors or by Employee, and whether or not marked
confidential, including without limitation information relating to the
Company's or its subsidiaries' products and services, business plans,
business acquisitions, processes, product or service research and
development methods or techniques, training methods and other operational
methods or techniques, quality assurance procedures or standards, operating
procedures, files, plans, specifications, proposals, drawings, charts,
graphs, support data, trade secrets, supplier lists, supplier information,
purchasing methods or practices, distribution and selling activities,
consultants' reports, marketing and engineering or other technical studies,
maintenance records, employment or personnel data, marketing data,
strategies or techniques, financial reports, budgets, projections, cost
analyses, price lists, formulae and analyses, employee lists, customer
records, customer lists, customer source lists, proprietary computer
software, and internal notes and memoranda relating to any of the
foregoing.
(b) NONDISCLOSURE OF CONFIDENTIAL INFORMATION. During the term
of this Agreement, Employee shall hold in a fiduciary capacity for the
benefit of the Company all Confidential Information which shall have been
obtained by Employee during Employee's employment (whether prior to or
after the date of this Agreement) and shall use such Confidential
Information solely within the scope of his employment with and for the
exclusive benefit of the Company. For a period of three years after the
date of termination of Employee's employment by the Company, Employee
agrees (i) not to communicate, divulge or make available to any person or
entity (other than the Company) any such Confidential Information, except
upon the prior written authorization of the Company or as may be required
by law or legal process, and (ii) to deliver promptly to the Company any
Confidential Information in his possession, including any duplicates
thereof and any notes or other records Employee has prepared with respect
thereto. In the event that the provisions of any applicable law or the
order of any court would require Employee to disclose or otherwise make
available any Confidential Information, Employee shall give the Company
prompt prior written notice of such required disclosure and an opportunity
to contest the requirement of such disclosure or apply for a protective
order with respect to such Confidential Information by appropriate
proceedings.
<PAGE>
(c) LIMITED COVENANT NOT TO COMPETE. During the term of this
Agreement and for a period of two years thereafter, commencing with the
date of termination of employment by the Employee for Good Reason, by the
Company for any reason other than for Cause, or by the Company for Cause if
the Company chooses to extend to Employee upon termination for Cause the
severance benefits provided in Paragraph 8 hereof and Appendix D hereto,
Employee agrees that, with respect to each State of the United States or
other jurisdiction, or specified portions thereof, in which the Employee
regularly (i) makes contact with customers of the Company or any of its
subsidiaries, (ii) conducts the business of the Company or any of its
subsidiaries or (iii) supervises the activities of other employees of the
Company or any of its subsidiaries, which states and jurisdictions or
portions thereof are identified in Appendix E attached hereto and forming a
part of this Agreement, and in which the Company or any of its subsidiaries
engages in the Company Business on the Date of Termination (collectively,
the "Subject Areas"), Employee will restrict his activities within the
Subject Areas as follows:
(i) Employee will not, directly or indirectly, for himself
or others, own, manage, operate, control, be employed in an executive,
managerial or supervisory capacity by, or otherwise engage or participate
in or allow his skill, knowledge, experience or reputation to be used in
connection with, the ownership, management, operation or control of, any
company or other business enterprise engaged in the Company Business within
any of the Subject Areas; provided, however, that nothing contained herein
shall prohibit Employee from making passive investments as long as Employee
does not beneficially own more than 10% of the equity interests of a
business enterprise engaged in the Company Business within any of the
Subject Areas. For purposes of this paragraph, "beneficially own" shall
have the same meaning ascribed to that term in Rule 13d-3 under the
Securities Exchange Act of 1934.
(ii) Employee will not call upon any customer of the Company
or its subsidiaries for the purpose of soliciting, diverting or enticing
away the business of such person or entity, or otherwise disrupting any
previously established relationship existing between such person or entity
and the Company or its subsidiaries;
(iii) Employee will not solicit, induce, influence or
attempt to influence any supplier, lessor, licensor, potential acquiree or
any other person who has a business relationship with the Company or its
subsidiaries, or who on the date of termination of employment of Employee
is engaged in discussions or negotiations to enter into a business
relationship with the Company or its subsidiaries, to discontinue or reduce
the extent of such relationship with the Company or its subsidiaries; and
(iv) Employee will not make contact with any of the
employees of the Company or its subsidiaries with whom he had contact
during the course of his employment with the Company for the purpose of
soliciting such employee for hire, whether as an employee or independent
contractor, or otherwise disrupting such employee's relationship with the
Company or its subsidiaries.
<PAGE>
(v) Employee further agrees that, for a period of one year
from and after the date of termination of employment, Employee will not
hire, on behalf of himself or any company engaged in the Company Business
with which Employee is associated, any employee of the Company or its
subsidiaries as an employee or independent contractor, whether or not such
engagement is solicited by Employee; provided, however, that the
restriction contained in this subsection (v) shall not apply to Company
employees who reside in, or are hired by Employee to perform work in any
Subject Areas located within the State of Virginia.
Employee agrees that he will from time to time upon the Company's
request promptly execute any supplement, amendment, restatement or other
modification of Appendix E as may be necessary or appropriate to correctly
reflect the jurisdictions which, at the time of such modification, should
be covered by Appendix E and this Paragraph 11(c). Furthermore, Employee
agrees that all references to Appendix E in this Agreement shall be deemed
to refer to Appendix E as so supplemented, amended, restated or otherwise
modified from time to time. Enforcement of this Paragraph 11(c) is subject
to the provisions of Paragraph 11(e) hereof.
(d) CERTAIN PROPRIETARY RIGHTS. Employee agrees to and hereby
does assign to the Company all his interest in and to all inventions,
whether or not patentable, which are made or conceived solely or jointly by
him:
(i) At any time during the term of his employment by the
Company in an executive, managerial, planning, technical research or
engineering capacity (including development, manufacturing, systems,
applied science and sales), or
(ii) During the course of or in connection with his duties
during the term of this Agreement, or
(iii) With the use of time or materials of the Company.
Employee agrees to communicate to the Company or its representatives
all facts known to him concerning such inventions, to sign all rightful
papers, make all rightful oaths and generally to do everything possible to
aid the Company in obtaining and enforcing proper patent protection for all
such inventions in all countries and in vesting title to such inventions
and patents in the Company. For the purpose of this Agreement, the
subject matter of any application for patent naming Employee as a sole or
joint inventor filed during the course of employment or within one year
subsequent to the termination thereof shall be deemed to be an invention
made or conceived by him during the course of his employment by the Company
and assignable to the Company hereunder, unless the Employee establishes by
a preponderance of the evidence that such invention was made or conceived
by him subsequent to termination of his employment hereunder. At the
Company's request (during or after the term of this Agreement) and expense,
the Employee will promptly execute a specific assignment of title to the
Company, and perform any other acts reasonably necessary to implement the
foregoing assignment.
<PAGE>
(e) INJUNCTIVE RELIEF; OTHER REMEDIES. Employee acknowledges
that a breach by Employee of Paragraph 11(b), (c) or (d) would cause
immediate and irreparable harm to the Company for which an adequate
monetary remedy does not exist; hence, Employee agrees that, in the event
of a breach or threatened breach by Employee of the provisions of Paragraph
11(b), (c) or (d) during or after the Employment Term, the Company shall be
entitled to injunctive relief restraining Employee from such violation
without the necessity of proof of actual damage or the posting of any bond,
except as required by non-waivable, applicable law. Nothing herein,
however, shall be construed as prohibiting the Company from pursuing any
other remedy at law or in equity to which the Company may be entitled under
applicable law in the event of a breach or threatened breach of this
Agreement by Employee, including without limitation the recovery of damages
and/or costs and expenses, such as reasonable attorneys' fees, incurred by
the Company as a result of any such breach. It shall be a condition to the
enforceability by the Company of the provisions of this Paragraph 11(c),
however, that the Company pays to and provides for the Employee the full
amount of severance pay and benefits described in Appendix D. Unless the
Company notifies the Employee in the Notice of Termination for Cause that
it intends to enforce the provisions of Paragraph 11(c) and agrees to pay
the Employee the full amount of severance pay and benefits described in
Appendix D, it shall be conclusively presumed for all purposes of this
Agreement that the Company has elected to waive the right to enforce the
provisions of this Paragraph 11(c). Employee acknowledges that the
payments provided under Paragraph 8 and Appendix D are conditioned upon
Employee fulfilling any noncompetition and nondisclosure agreements
contained in Paragraph 11. In the event Employee shall at any time
materially breach any noncompetition or nondisclosure agreements contained
in Paragraph 11, the Company may suspend or eliminate payments under
Paragraph 8 and Appendix D during the period of such breach. Employee
acknowledges that any such suspension or elimination of payments would be
an exercise of the Company's right to suspend or terminate its performance
hereunder upon Employee's breach of this Agreement; such suspension or
elimination of payments would not constitute, and should not be
characterized as, the imposition of liquidated damages.
(f) REQUESTS FOR WAIVER IN CASES OF UNDUE HARDSHIP. In the
event that Employee should find any of the limitations of Paragraph 11(c)
(including without limitation the geographic restrictions of Appendix E) to
impose a severe hardship on Employee's ability to secure other employment,
Employee may make a request to the Company for a waiver of the designated
limitations before accepting employment that otherwise would be a breach of
Employee's promises and obligations under this Agreement. Such request
must be in writing and clearly set forth the name and address of the
organization with that employment is sought and the location, position and
duties that Employee will be performing. The Company will consider the
request and, in its sole discretion, decide whether and on what conditions
to grant such waiver.
<PAGE>
(g) GOVERNING LAW OF THIS PARAGRAPH 11; CONSENT TO JURISDICTION.
Any dispute regarding the reasonableness of the covenants and agreements
set forth in this Paragraph 11, or the territorial scope or duration
thereof, or the remedies available to the Company upon any breach of such
covenants and agreements, shall be governed by and interpreted in
accordance with the laws of the State of the United States or other
jurisdiction in which the alleged prohibited competing activity or
disclosure occurs, and, with respect to each such dispute, the Company and
Employee each hereby irrevocably consent to the exclusive jurisdiction of
the state and federal courts sitting in the relevant State for resolution
of such dispute, and agree to be irrevocably bound by any judgment rendered
thereby in connection with such dispute, and further agree that service of
process may be made upon him or it in any legal proceeding relating to this
Paragraph 11 and/or Appendix E by any means allowed under the laws of such
jurisdiction. Each party irrevocably waives any objection he or it may
have as to the venue of any such suit, action or proceeding brought in such
a court or that such a court is an inconvenient forum. It is the desire
and intent of the parties that the provisions of this Agreement be enforced
to the fullest extent permitted under applicable law, whether now or
hereafter in effect and, therefore, to the extent permitted by applicable
law, the parties hereto waive any provision of applicable law that would
render any provision of this Paragraph 11 invalid or unenforceable.
12. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of:
(a) The Company, and any successors or assigns of the Company,
except that in the event of a Change of Control of the Company as defined
in the Change of Control Agreement, this Agreement shall be superseded by
the Change of Control Agreement. In the event of the assignment by the
Company of this Agreement, the Company shall nevertheless remain liable and
obligated to the Employee in accordance with the terms hereof; and
(b) The Employee, his estate, his executors, administrators,
heirs and beneficiaries.
13. EXPENSES RELATING TO ENFORCEMENT OF RIGHTS. If either party
shall successfully seek to enforce any provision of this Agreement or to
collect any amount claimed to be due hereunder, such successful party shall
be entitled to be reimbursed by the other party for any and all out-of-
pocket expenses, including reasonable attorneys' fees, incurred in
connection with such enforcements and/or collection.
<PAGE>
14. SEVERABILITY. If any term or provision of this Agreement
(including without limitation those contained in an Appendix hereto), 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 temporally, spatially or
otherwise 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.
15. NOTICES. Any notice or other communication required under this
Agreement shall be in writing, shall be deemed to have been given and
received when delivered in person, or, if mailed, shall be deemed to have
been given when deposited in the United States mail, first class,
registered and certified, return receipt requested, with proper postage
prepaid, and shall be deemed to have been received on the third business
day thereafter, and shall be addressed as follows:
If to the Company, addressed to:
Avondale Industries, Inc.
5100 River Road
Avondale, Louisiana 70094
If to the Employee, addressed to:
Thomas M. Kitchen
6627 Canal Boulevard
New Orleans, Louisiana 70124
or such other address as to which any party hereto may have notified
the other in writing.
16. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Louisiana without
regard to the principles of conflict of laws, except as expressly provided
in Paragraph 11(g) above with respect to the resolution of disputes arising
under, or the Company's enforcement of Paragraph 11 of this Agreement.
17. ENTIRE AGREEMENT. This document contains or refers to the entire
arrangement or understanding between the parties relating to the employment
of the Employee by the Company prior to a Change of Control of the Company,
as defined in the Change of Control Agreement. This Agreement, including
Appendices A through E, inclusive, all of which are herein incorporated by
reference and made a part hereof, contains or refers to the entire
arrangement or understanding between the Employee and the Company relating
to the employment of the Employee by the Company. No provision of the
Agreement, including the Appendices, may be modified or amended except by
an instrument in writing signed by or for both parties hereto.
<PAGE>
AVONDALE INDUSTRIES, INC.
By: /s/ Hugh A. Thompson
------------------------
Hugh A. Thompson
Chairman, Compensation Committee
/s/ Thomas M. Kitchen
-------------------------
Thomas M. Kitchen
<PAGE>
LIST OF APPENDICES
DESCRIPTION NUMBER OF PAGES
Appendix A Benefit Plan Structure 5
Appendix B Disability Benefits 1
Appendix C Death Benefits 1
Appendix D Severance Benefits 3
Appendix E Subject Areas under Limited 1
Covenant Not to Compete
<PAGE>
APPENDIX "A"
AVONDALE INDUSTRIES, INC.
AVONDALE SERVICES CORPORATION
EXECUTIVE GROUP
Effective Date: 1-1-98
COVERAGE DESCRIPTION
EMPLOYEE LIFE Two times base salary and bonus
Optional Coverage - additional one or two times base
salary and bonus
Maximum Coverage - Two million dollars
DEPENDENT LIFE $2,000.00 Spouse - Optional $100,000.00
$1,000.00 Dependent (over six months old)
$100.00 Dependent (less than six months old)
Accidental Death and Death - Same as Life (Employee Only)
DISMEMBERMENT Dismemberment - Benefit Schedule
Business According to rate of pay - Maximum $50,000.00
TRAVEL ACCIDENT
TRAVEL ACCIDENT (SALARIED) 5 Times Annual Salary - Maximum $500,000.00
RETIREE LIFE One-half of Life Insurance in force at time of
retirement
SHORT TERM DISABILITY Schedule based on length of service (see Page 2)
LONG TERM DISABILITY 60% of monthly base salary, after 180 day waiting
period.
Maximum $15,000 per month coordinated with Disability
Social Security Benefit.
<PAGE>
HEALTH CARE 100% Hospital - private room rate plus miscellaneous
expenses
100% Hospital Medical Expenses - (doctor's visits to
hospital)
100% Surgical Expenses
100% Laboratory and X-ray Expenses
100% Vision and Hearing Care Expenses
100% Dental and Orthodontia
100% Annual Physicals
100% Psychiatric and Nervous Care - expenses up to
$6,500.00 per year per individual
No Life-Time Maximum
Subject to applicable employee contribution requirement
<PAGE>
SHORT TERM DISABILITY
Benefits begin on first day absent due to a non-occupational injury or
illness. Original medical documentation required if absent five or more
consecutive working days.
Benefits will be reduced by any amount received from Social Security.
Successive periods of disability separated by less than two (2) weeks of
full-time work considered as one continuous period of disability, unless
later disability due to a different cause.
Benefits will be paid up to a maximum of twenty-six (26) weeks, based on
the following schedule:
YEARS OF SERVICE FULL SALARY UP TO HALF SALARY UP TO
Less than 1 Year 4 Weeks 0 Weeks
1 Year 4 Weeks 22 Weeks
2 Years 6 Weeks 20 Weeks
3 Years 8 Weeks 18 Weeks
4 Years 10 Weeks 16 Weeks
5 Years 12 Weeks 14 Weeks
6 Years 14 Weeks 12 Weeks
7 Years 16 Weeks 10 Weeks
8 Years 18 Weeks 8 Weeks
9 Years 20 Weeks 6 Weeks
10 Years 22 Weeks 4 Weeks
11 Years 24 Weeks 2 Weeks
12 Years or more 26 Weeks 0 Weeks
JURY DUTY
Pays difference between employee's base pay and jury pay received, not to
exceed eight hours pay per day.
BLOOD BANK
To be eligible, must be a participant in Group Health Insurance Program.
In joining the Blood Bank Program, the employee agrees to donate a unit of
blood as requested at irregular intervals. The Program provides the
employee and insured dependents with blood for as long as the employee
remains in the Program.
HOLIDAYS
Eight Paid Holidays - New Years Day, Mardi Gras, Good Friday, July Fourth,
Labor Day, Thanksgiving Day, Day After Thanksgiving and Christmas.
Eligible upon completion of thirty days service.
<PAGE>
VACATION
Vacation year is from January 1 to December 31. Upon completion of one
full year of service, eligible for two weeks of vacation. An employee
joining the Company after January 1 but prior to July 1 will be eligible
for one week's vacation the following January 1. Vacation time may not be
carried over from one vacation period to the next. Vacation time may be
taken in one-hour increments. Beginning with ten full years of service,
eligible for additional days of vacation, up to a maximum of five
additional days, based on the following schedule:
YEARS OF SERVICE ADDITIONAL DAYS OF VACATION
10 Years 1 Day
11 Years 2 Days
12 Years 3 Days
13 Years 4 Days
14 Years 5 Days
SICK/PERSONAL TIME
Eligible for twenty-four hours per calendar year. Time may be taken in
one-hour increments. Unused time may not be carried over to the next year.
FUNERAL LEAVE
None
TUITION ASSISTANCE
Eligible upon completion of one year's service. Only courses directly
related to employee's position and taken at an accredited institution will
be considered. Approval must be obtained prior to the start of the course.
Reimbursement will be made for the cost of tuition only, and will be based
on the following schedule:
COURSE LEVEL FINAL GRADE REIMBURSEMENT PERCENTAGE
Under-Graduate Not Lower Than "C" 100%
Post-Graduate Not Lower Than "B" 100%
AUTOMOBILE ALLOWANCE
$600 per month
RETIREMENT
Formula - 1.5% of final average compensation, multiplied by years of
credited service, less Massachusetts Mutual Annuity and equivalent
actuarial value of any shares in ESOP account.
Early Retirement Benefits available at age 55 with ten years service,
actuarially reduced by years and months early.
<PAGE>
SUPPLEMENTAL RETIREMENT PLAN
Vesting: 100% vesting upon completion of ten (10) years service
Formula: 15% of final average compensation.
Early Retirement Benefits available at Age 55 with ten (10) years service,
actuarially reduced by years and months early
EXECUTIVE EXCESS RETIREMENT PLAN
If designated as a participant by the Board of Directors.
Purpose of the plan is to reimburse participants for benefits not payable
under the Pension Plan and ESOP because of limitations in the Internal
Revenue Code and the Pension Plan.
Benefits paid upon attainment of age 75 or upon retirement, if earlier.
Benefit is unfunded.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
Plan Year - September 1 to August 31
Eligibility - 1st of month following one year of service
Compensation - Total salary, excluding severance pay, moving expenses and
non-cash contribution
Stock Allocation - Each year the Trustees divide the available shares of
stock among eligible participants, based on each participant's
compensation. These allocated shares are held in the participant's ESOP
account. Must be on payroll last pay period of each plan year to receive
allocation.
Distribution - (1) Retirement - Age 55 or later
(2) Total & Permanent Disability with Social Security Award
(3) Death
Vesting - Employees who were eligible to receive Special Shares were 100%
vested.
Vesting for Loan Shares is as follows:
Less than 4 years 0%
4 years but less than 5 40%
5 years but less than 6 50%
6 years but less than 7 60%
7 years but less than 8 70%
8 years but less than 9 80%
9years but less than 10 90%
10 years or more 100%
<PAGE>
APPENDIX B
DISABILITY BENEFIT
In the event of termination by the Company of the Employee's
employment on account of disability pursuant to Paragraph 6 of the
Agreement, the disability benefit to be provided to the Employee shall be
determined under this Appendix, unless a greater or more favorable benefit
is required to be provided pursuant to the provisions of Subparagraph 4(c)
of the Agreement and/or Appendix A.
1. CONTINUATION OF FULL ANNUAL SALARY: The full amount of the
Employee's annual salary (pursuant to paragraph 4(a) of this Agreement)
shall be continued according to the following formula:
(i) If the Employee's credited service for the Company totals
(5) five years or less his annual salary shall be continued for twelve (12)
months commencing with the month following such termination of employment;
and
(ii) If the Employee's credited service for the Company totals
more than five (5) years, the payment period referred to in (i) shall be
increased by two-tenths (2/10) of a year for each year of credited service
in excess of five (5) up to a maximum payment period of five (5) years.
Thus, if the Employee's employment is terminated on account of disability
at a time when he has twelve (12) years of credited service, the Employee's
full annual salary would be continued for 2.4 years following such
termination of employment and an Employee with twenty-five (25) or more
years of credited service as of the termination of his employment on
account of disability will receive his full annual salary for five (5)
years.
2. CONTINUATION OF PARTIAL ANNUAL SALARY. Following the expiration
of the period calculated pursuant to the preceding Paragraph 1, the
Employee will receive long term disability benefits equal to sixty percent
(60%) of his full annual salary subject to such limitations as are
contained in Appendix A.
3. LIMITATIONS. The disability benefit will in any event
discontinue and terminate upon the death of the Employee or upon the date
of his Retirement as defined in subparagraph 9(a) of the Agreement would
have occurred.
4. OTHER BENEFITS. Other benefits which may be provided or
continued for the Employee following the termination of his employment on
account of disability depend upon the terms of the Plan under which such
benefits are provided or required to be provided.
<PAGE>
APPENDIX C
DEATH BENEFITS
The death benefits to be provided by the Company subsequent to the
death of the Employee shall be determined by reference to the plan or plans
under which such benefits are provided. Reference is made to subparagraph
4(c) of the Agreement and to Appendix A.
<PAGE>
APPENDIX D
SEVERANCE BENEFITS
Upon the termination of the Employee's employment under any
circumstance requiring the Company to pay to and provide for the Employee
the severance pay and other benefits set forth in this Appendix D, the
Company shall be obligated to pay to and/or provide for the Employee the
following compensation and other benefits:
(a) PAYMENT IN LIEU OF COMPENSATION: The Company shall pay to the
Employee in cash an amount equal to the product of (i) and (ii); where (i)
shall equal the sum of (A) the Employee's annual salary and (B) the
Employee's annual incentive bonus during the twelve (12) month period
ending with the close of the month in which such termination of employment
occurs (the "Date of Termination") , divided by twelve (12) ; and where
(ii) shall be the lesser of (x) thirty-six (36), (y) six (6), plus two (2)
for each twelve (12) months of credited service of the Employee for the
Company (determined in accordance with subparagraph 4(c) of the Agreement)
through the Date of Termination, or (z) the number of months until the
Employee's normal retirement date, as defined in the Avondale Industries,
Inc. Pension Plan (or any successor, or substitute plan or plans of the
Company or of any subsidiary of the Company under which the Employee may be
a participant, hereinafter the "Pension Plan"). The number determined
under clause (ii) is sometimes herein referred to as the "Measuring
Period".
(b) ACCELERATION OF STOCK OPTIONS: Immediately following such Date
of Termination, all options and stock appreciation rights granted to
Employee under the 1997 Stock Incentive Plan or any other stock option or
similar plan before or after the date hereof (collectively referred to
herein as "Stock Option Plans") shall immediately become fully exercisable
and execution of this Agreement shall constitute an amendment to any stock
option agreement to so provide and an agreement and undertaking by the
Company to take such action as may be required to cause any and all options
or rights granted, or to be granted, to Employee thereunder to make them
consistent herewith.
<PAGE>
(c) PAYMENT FOR NON-VESTED RETIREMENT BENEFIT: In addition to the
vested portion of the Employee's interest under any employee benefit plan
maintained by the Company as a qualified plan pursuant to Section 401(a) of
the Internal Revenue Code of 1986, as amended, to which the Company or any
subsidiary has made contributions for the Employee's account which are not
otherwise expressly provided for herein, if the Employee is not fully
vested under any such plan or plans, the Company shall pay to the Employee
in cash an amount equal to the then present value of the actuarial
equivalent (within the meaning of the following Paragraph (d)) of the non-
vested portion of the Employee's account, to the extent that such account
would have become vested based on additional credited service for the
Company, if the Employee had remained in the employ of the Company (or any
subsidiary) for an additional period of months equal to the Measuring
Period.
(d) SUPPLEMENTAL RETIREMENT BENEFIT: In addition to any retirement
or severance benefit to which the Employee is entitled under the Pension
Plan, the Employee shall receive in cash, an amount equivalent of the
excess of (i) over (ii), where (i) equals the aggregate amount of the
retirement pension (calculated as a straight life annuity payable to
Employee on his normal retirement date) to which Employee would have been
entitled under the terms of the Pension Plan and any other qualified or
non-qualified defined benefit plan maintained by the Company and covering
the Employee, if Employee were fully vested thereunder (without regard to
(w) whether the Employee shall actually have completed the number of years
of credited service required to qualify for full vesting under such plans,
(x) any limitation on the amount of compensation used in the calculation of
the regular pension thereunder, (y) any offset thereunder for severance
allowances payable hereunder or (z) any amendment to such plans made prior
to the Employee's Date of Termination, which amendment adversely affects in
any manner the computation of retirement benefits under such plans) and had
accumulated an additional period of months of credited service after the
Date of Termination equal to the Measuring Period (but in no event shall
Employee be deemed to have accumulated an additional period of credited
service subsequent to Employee's sixty-fifth (65th) birthday), and, where
(ii) equals the amount of the retirement pension (calculated as a straight
1ife annuity payable to Employee on his normal retirement date),if any, to
which Employee is entitled pursuant to the provisions of the Pension Plan
and such other plans. For purposes of Clause (i) of this Paragraph (d),
the amount payable pursuant to Paragraph (a) of this Appendix D, shall be
deemed to represent the Employee's earnings for the period of months equal
to the Measuring Period, and for purposes of this Paragraph (d), "actuarial
equivalent" shall be determined using the same methods and assumptions
utilized under the Pension Plan immediately prior to the Date of
Termination. All other terms used in this Paragraph (d) shall have the
same meanings, respectively, as such terms have in the Pension Plan, unless
otherwise required by the context.
<PAGE>
(e) OTHER BENEFITS: The Company shall also maintain in full force
and effect, for the continued benefit of the Employee and his dependents,
for a period terminating on the earliest of (i) a period of months after
the Date of Termination equal to the Measuring Period; (ii) the
commencement date of equivalent benefits for the Employee from a new
employer; or (iii) the Employee's normal retirement date under the
Company's Pension Plan, after which the terms of the Pension Plan shall
govern; all insured and self-insured employee benefit plans in which the
Employee is entitled to participate immediately prior to the Date of
Termination; provided that the Employee's continued participation is
possible under the general terms and provisions of such Plans (and any
applicable funding media) and the Employee continues to pay an amount equal
to Employee's regular contribution for such participation. In the event
that the Employee participation in any such Plan is barred, the Company, at
its sole cost and expense, shall arrange to have issued for the benefit of
Employee and his dependents individual policies of insurance providing
benefits substantially similar (on an after-tax basis) to those which the
Employee would have been entitled to receive under such Plan or Plans
pursuant to this Paragraph (e) if such participation were not barred or, if
such insurance is not available at a reasonable cost to the Company, the
Company shall otherwise provide the Employee and his dependents with
equivalent benefits (on an after-tax basis) and the Employee shall not be
required to pay any premiums or other charges in an amount greater than
that which the Employee would have paid in order to participate in such
Plans. If, at the end of a period of months after the Date of Termination
equal to the Measuring Period, the Employee is not receiving equivalent
benefits from a new employer, the Company shall arrange, at its sole cost
and expense, to enable Employee to convert the Employee's and his
dependents' coverage under such Plans to individual policies or programs
upon the same terms as employees of the Company may apply for until the
Employee is able to receive equivalent benefits from a source other than
the Company.
(f) MITIGATION: The Employee shall not be required to mitigate the
amount of any payment or benefit provided for in this Appendix D by seeking
other employment or otherwise, nor (except as specifically provided in
Paragraph (e) above) shall the amount of any payment or benefit provided
for in this Appendix D be reduced by any compensation or benefit earned by
Employee as a result of employment by another employer after the Date of
Termination, or otherwise.
(g) MANNER OF PAYMENT: All payments which are required to be made in
cash under Paragraphs (a), (c) or (d), above, shall be paid on the Date of
Termination, or within five (5) business days thereafter, unless the
Employee has made a Deferred Payment Election with respect to such
payment(s) pursuant to the succeeding Paragraph (h).
<PAGE>
(h) ELECTION TO DEFER PAYMENT: Upon entering into this Agreement and
for a period of fourteen (14) days following each anniversary of the date
hereof (the "Election Period"), the Employee may, in writing, direct the
Company that any amounts which become payable to the Employee pursuant to
Paragraphs (a), (c) and (d), above, shall be paid to the Employee in three
(3) equal annual installments, with the first of such installments to be
paid not later than five (5) business days after the Date of Termination
and successive installments paid on the next two (2) succeeding
anniversaries of the Date of Termination or the next following business day
if such date is not a business day (the "Deferred Payment Election"). A
Deferred Payment election, once made, shall be irrevocable except during an
Election Period.
(i) EFFECT ON OTHER BENEFITS: Nothing contained in this Appendix D
shall be construed or interpreted as limiting any rights or benefits
payable to or for the Employee under any other provision of this Agreement.
<PAGE>
APPENDIX E
TO EMPLOYMENT AGREEMENT
BETWEEN AVONDALE INDUSTRIES, INC.
AND
THOMAS M. KITCHEN
Jurisdictions In Which Competition
Is Restricted As Provided
In Paragraph 11(c)
A. STATES
1. LOUISIANA -- The following parishes in the State of Louisiana:
Orleans and Jefferson
2. MISSISSIPPI -- The following counties in the State of
Mississippi:
Harrison
as well as any other counties in the State of Mississippi in
which the Employee regularly (a) makes contact with customers of
the Company or any of its subsidiaries, (b) conducts the business
of the Company or any of its subsidiaries or (c) supervises the
activities of other employees of the Company or any of its
subsidiaries as of the date of termination of employment.
3. VIRGINIA-- The following counties in the State of Virginia:
Arlington
as well as any other counties in the State of Virginia in which
the Employee regularly (a) makes contact with customers of the
Company or any of its subsidiaries, (b) conducts the business of
the Company or any of its subsidiaries or (c) supervises the
activities of other employees of the Company or any of its
subsidiaries as of the date of termination of employment.
Agreed to and Accepted:
Avondale Industries, Inc. Employee
By: /S/ HUGH A. THOMPSON /S/ THOMAS M. KITCHEN
-------------------- ---------------------
Its: Compensation Committee Chairman Thomas M. Kitchen
Date: MARCH 23, 1998 Date: MARCH 23, 1998
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 23rd day of March,
1998, by and between AVONDALE INDUSTRIES, INC., a Louisiana corporation
maintaining its principal office at 5100 River Road, Avondale, Louisiana
70094 (the "Company") and Kenneth B. Dupont, whose mailing address is P. O.
Box 10860, Metairie, Louisiana 70002 (hereinafter called the "Employee").
W I T N E S S E T H
WHEREAS, the Employee is employed by the Company in an executive
capacity, and the Company desires to ensure that the Employee will be
available to provide executive services to the Company in the future, which
services are significant to the Company's long range prospects;
WHEREAS, the Company and Employee desire, among other things, to
prohibit Employee from disclosing or utilizing, outside the scope and term
of his employment, any non-public, confidential or proprietary information,
knowledge and data relating to the business and operations of the Company
or its subsidiaries received by Employee during the course of his
employment, and to restrict the ability of Employee to compete with the
Company or its subsidiaries for a limited period of time; and
WHEREAS, to induce the Employee to agree to provide such services on
the terms provided herein, the Company is offering to provide the Employee
with the compensation, benefits and security provided for in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements
herein contained, the parties hereto agree as follows:
1. EMPLOYMENT/CAPACITY/TERM. The Company agrees to and does hereby
employ the Employee, and the Employee agrees to be employed by the Company
upon the terms and conditions set forth in this Agreement. Such employment
shall be in a managerial and executive capacity in the operation of the
business of the Company and/or a subsidiary, subject to the supervision of
the Board of Directors of the Company. Such employment shall commence on
the date hereof and shall continue through December 31, 2000, and from year
to year thereafter subject to the right of the Employee or the Company to
terminate such employment as of December 31, 2000, or any subsequent
December 31, by written notice given to the other party at least sixty (60)
days prior to such termination date stating an intention to so terminate
such employment. Termination by either party, in accordance with the
provisions of the preceding sentence, shall not require a statement of the
reason or cause for such termination and shall not be deemed a breach or
violation of this Agreement by the party giving such notice. As used in
this Agreement, the phrase "term of this Agreement" shall be deemed to
include the period subsequent to the date hereof and prior to termination
of this Agreement; however, such phrase shall not be construed as limiting
the enforceability by either party of any rights which survive termination
of this Agreement.
<PAGE>
2. TIME AND EFFORT/ABSENCES. During the term of this Agreement, the
Employee shall devote his entire time and attention during normal business
hours to the business of the Company, and its subsidiaries, subject to the
supervision of the Board of Directors of the Company, and he shall not
engage in any other business activity whether or not such business activity
is pursued for gain, profit or other pecuniary advantage, but this
restriction shall not be construed to restrict the Employee (i) from
performing services as a member of the Board of Directors, Board of
Trustees or the like for any non-profit or for profit entity whether or not
the Employee receives compensation therefor, provided that, such services
do not unreasonably interfere with the ability of the Employee to perform
the services and discharge the responsibilities required of him under this
Agreement (it generally being agreed and understood that the quantity and
quality of the services heretofore performed by the Employee for non-profit
and for profit entities would not constitute a violation of the aforesaid
restriction), and (ii) from investing his assets in such form or manner as
will not require any services on the part of the Employee in the operation
of the business of the entity in which such investments are made. The
employee shall be excused from rendering his services during reasonable
vacation periods and during other reasonable temporary absences, all as
authorized from time to time by the Board of Directors of the Company. At
the date hereof, the Employee maintains his residence at in the New
Orleans, Louisiana metropolitan area and performs services for the Company
in New Orleans, Louisiana; it is understood that, without his consent, the
Employee will not be required to relocate to a different location to
discharge his responsibilities under this Agreement.
3. CORPORATE OFFICES. If elected, the Employee will serve, without
additional compensation, as a director of the Company or as an officer or
director of any subsidiary of the Company.
4. SALARY/BONUS/OTHER BENEFITS. In consideration of the services
and duties to be rendered and performed by the Employee during the term of
this Agreement, including the assumption of the duties and responsibilities
of an executive officer of the Company, the Company agrees to pay and
provide for the Employee the compensation and benefits described below:
(a) An annual salary, payable in equal monthly installments, in
the amount of Two Hundred Forty-Two Thousand One Hundred Twelve and 00/100
($242,112) or in such greater amount as may from time to time be fixed by
the Board of Directors or the Compensation Committee of the Board of
Directors of the Company. The Employee's annual salary shall never be
reduced.
(b) An annual incentive bonus in such amount as may from time to
time be fixed by the Board of Directors or the Compensation Committee of
the Board of Directors, provided that, the annual incentive bonus for any
period of less than twelve (12) months (other than for the period from the
date hereof through December 31, 1998) shall be prorated. The annual
incentive bonus shall be paid to the Employee (or to his personal
representative in the event of his death) in a lump sum prior to the
expiration of the period for which such bonus is payable or within 45 days
following the expiration of such period.
<PAGE>
(c) OTHER BENEFITS. All other payments and/or benefits
described or provided for in this Agreement, including the Appendices
hereto. It is intended that such payments and/or benefits shall provide
the Employee and/or his personal representative(s) and/or beneficiaries, as
the case may be, with benefits which will be at least as favorable as the
benefits which on December 31, 1997 were provided for the Employee by the
Company. In addition, the Employee shall also be eligible for and shall
participate in any other employee benefit plan, including, any pension,
supplemental pension, retirement, supplemental retirement, profit-sharing,
thrift, bonus, incentive, deferred compensation, stock option or stock
appreciation or other employee benefit plan, including any life insurance,
accident, medical, disability, health or relocation plan or policy (all of
which are included by reference to the term "Plan") maintained by the
Company for its employees, generally, or for its senior executives, in
particular, on the same basis and subject to the same requirements and
limitations as may be made applicable to other senior executive employees
of the Company, provided that participation in and the terms of any
participation in the Avondale Industries, Inc. 1997 Stock Incentive Plan or
any successor plan shall be at the discretion of the Compensation Committee
as provided in such plans. The benefit plan structure and benefits which
shall be provided for the Employee and other senior executive employees of
the Company are described in Appendix A hereto. Nothing herein, however,
shall be construed as limiting the right of the Employee to additional or
other and greater benefits than are described in said Appendix A, if the
provisions of this Agreement obligate the Company to provide such other or
greater benefits, and in particular, but without limitation by the
specification hereof, the benefits described in Paragraphs 6, 7, 8 and 9
hereof and Appendices B, C and D hereto. In addition, the Company agrees
that where credited service of the Employee for the Company is relevant in
determining eligibility for or benefits under any Plan, the Employee's
credited service for the Company shall be determined to include service for
any parent, subsidiary or affiliate of the Company or for a predecessor of
the Company.
5. EXPENSES. The Employee shall be reimbursed for out-of-pocket
expenses incurred from time to time on behalf of the Company or any
subsidiary or in the performance of his duties under this Agreement, upon
the presentation of such supporting documents and forms as the Company
shall reasonably request.
6. DISABILITY/DISABILITY BENEFIT. In the event that the Employee is
incapable because of physical or mental illness of rendering services of
the character contemplated hereby, for a period of six (6) consecutive
months, the Board of Directors of the Company may determine that the
Employee has become disabled. In the event of such a determination of
disability, the Company shall have the continuing right and option while
such disability continues by notice in writing to the Employee to terminate
this Agreement effective thirty (30) days after such notice of termination
is so given, unless within such thirty (30) day period, the Employee
resumes rendering full-time services of the character contemplated hereby.
The incapacity due to physical or mental illness to render the services of
the character contemplated hereby, shall not constitute a breach of this
Agreement by the Employee. If this Agreement is terminated by the Company
as a result of a determination of disability, as aforesaid, the Company
shall be obligated to pay to the Employee the disability benefits described
in Appendix B hereto.
<PAGE>
7. DEATH/DEATH BENEFIT. In the event of the death of the Employee
during the term of this Agreement, this Agreement will terminate and the
Employee's then rate of annual salary and an annual incentive bonus,
(prorated in accordance with subparagraph 4(b) hereof) shall be paid to the
Employee's personal representative through the last day of the month in
which such death occurs. In addition, the Company shall be obligated to
provide the Employee, his personal representative(s) and/or his
beneficiaries with the death benefits described in Appendix C hereto.
8. SEVERANCE PAY. If the employment of the Employee is terminated
at any time during the period that this Agreement is in effect (i) by the
Employee for Good Reason (as defined in Paragraph 9 hereof) or (ii) by the
Company for any reason other than for Cause (as hereafter defined) or other
than in accordance with Paragraph 6 hereof on account of the disability of
the Employee, the Company shall be obligated to pay to the Employee the
severance pay and benefits described in Appendix D attached hereto.
Termination of the Employee's employment on account of his death or
Retirement (as hereafter defined) will not be considered a termination of
the Employee's employment by the Company and will not require the Company
to pay and provide any severance pay or benefits pursuant to Appendix D.
Accordingly, the Company acknowledges that if the employment of the
Employee is terminated by it for any reason during the period that this
Agreement is in effect other than for Cause or other than on account of the
disability of the Employee in accordance with Paragraph 6 hereof, the
Company will be obligated to pay and provide the severance pay and benefits
described in Appendix D, in order to reinforce and encourage the continued
loyalty, attention, and dedication of the Employee to the Company's
business and affairs without the concerns which normally arise from the
possibility of a loss of employment security. As used herein, the terms
"Retirement" and "Cause" shall have the following meanings, respectively:
(a) RETIREMENT. Termination of the Employee's employment
"Retirement" shall mean termination on the Employee's normal retirement
date in accordance with the terms of the Avondale Industries, Inc. Pension
Plan (or any successor or substitute plan or plans of the Company or of any
subsidiary of the Company under which the Employee may be a participant);
and
<PAGE>
(b) CAUSE. Termination by the Company of the Employee's
employment for "Cause" shall mean termination as a result of (i) the
willful and continued failure by the Employee to perform substantially the
services contemplated by this Agreement (other than any such failure
resulting from the Employee's incapacity due to physical or mental illness)
after a written demand for substantial performance is delivered to the
Employee by a member or representative of the Board of Directors of the
Company which specifically identifies the manner in which it is alleged
that the Employee has not substantially performed such services, or (ii)
the willful engaging by the Employee in gross misconduct which is
materially and demonstrably injurious to the Company; provided that, no
act, or failure to act, on the Employee's part shall be considered
"willful" unless done, or omitted to be done, in bad faith and without
reasonable belief that such action or omission was in, or not opposed to,
the best interests of the Company. It is also expressly understood that
the Employee's attention to or engagement in matters not directly related
to the business of the Company shall not provide a basis for termination
for Cause if such attention or engagement is authorized by the terms of
this Agreement or has otherwise been approved by the Board of Directors of
the Company. Anything in this Agreement to the contrary notwithstanding,
the Employee's employment may not be terminated 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 the purpose (after reasonable notice to the Employee and an opportunity
for the Employee, together with his counsel, to be heard before the Board),
finding that in the good faith opinion of the Board the Employee was guilty
of the conduct set forth in clause (i) or (ii) of this subparagraph (b) and
specifying the particulars thereof in detail.
9. TERMINATION BY THE EMPLOYEE FOR GOOD REASON. The termination by
the Employee of his employment for "Good Reason" shall be deemed a
justifiable termination of his employment and shall excuse the Employee
from the obligation to render services as provided in Paragraph 2 hereof.
In that event (i) the full amount of the Employee's annual salary and
annual incentive bonus, together with all other benefits required to be
provided under this Agreement, shall be continued until the next succeeding
December 31st as of which the Company could have terminated the Employee's
employment pursuant to Paragraph 1 hereof without such termination
constituting a breach or violation of this Agreement; and (ii) the
Employee's employment shall be deemed to terminate on such December 31st.
As used herein, the term "Good Reason" shall mean:
(a) a change in the Employee's status, title or position(s) as
an officer of the Company which, in his reasonable judgment, does not
represent a promotion from or enhancement of his status, title and position
as an executive officer, or the assignment by the Board of Directors of the
Company to the Employee of any duties or responsibilities which, in his
reasonable judgment, are inconsistent with such status, title or position,
or any removal of the Employee from or any failure to reappoint or reelect
him to such position, except in connection with a justifiable termination
by the Company of the Employee's employment for Cause or on account of
disability, the Retirement or death of the Employee or the termination by
the Employee of his employment other than for Good Reason;
<PAGE>
(b) a reduction in the Employee's annual salary or a failure by
the Company to pay to the Employee any installment of the annual salary
and/or the annual incentive bonus required pursuant to Paragraph 4 hereof,
which failure continues for a period of 20 days after written notice
thereof is given by the Employee to the Company;
(c) the failure by the Company to adopt, continue or maintain in
effect, any Plan or benefit which is required to be provided by the Company
pursuant to this Agreement (unless the Company provides the Employee with
the equivalent or at least substantially similar benefits under one or more
other Plans) other than as a result of the normal expiration of such Plan;
or the taking of any action or the failure to act by the Company, which
could adversely affect the Employee's continued participation in any such
Plan(s) or the ability of the Employee to enjoy or realize upon any
material benefit intended, or which could materially reduce the Employee's
benefits under any such Plan(s) or deprive him of any material benefit then
enjoyed by the Employee;
(d) the Company's requiring the Employee to be based anywhere
other than the New Orleans, Louisiana metropolitan area, except for
required travel on the Company's business to an extent substantially
consistent with the business travel obligations which the Employee
undertook on behalf of the Company prior to such required change;
(e) the failure by the Company to obtain the assumption of this
Agreement by any successor of the Company (other than by merger or
consolidation); provided, however, that upon a Change of Control of the
Company, as defined in the Change of Control Agreement between the Employee
and the Company (the "Change of Control Agreement"), the obligations of a
successor hereunder shall be limited to the obligations of the Company
hereunder through the date of the Change of Control after which date the
Change of Control Agreement shall govern.
(f) any purported termination by the Company of the Employee's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Paragraph 10 hereof, or which is not
justified as a termination of the Employee's employment based on Cause; and
for purposes of this Agreement, no such purported termination shall be
effective; or
(g) any refusal by the Company to allow the Employee to attend
to matters or engage in activities not directly related to the business of
the Company which is permitted by this Agreement or which, prior thereto,
was permitted by the Board of Directors of the Company.
10. NOTICE OF TERMINATION. Any purported notice of termination of
the Employee's employment (other than a Notice given by either pursuant to
Paragraph 1 hereof) shall be communicated in a writing delivered to the
other party as provided in Paragraph 14 hereof, (hereinafter a "Notice of
Termination"). For purposes of this Agreement a "Notice of Termination"
shall mean a notice which specifies the termination provision relied upon
by the party giving such notice and shall set forth in detail such facts
and circumstances claimed by said party to provide a justified basis for
termination of the Employee's employment under the provision(s) so
indicated.
<PAGE>
11. NONDISCLOSURE, NONCOMPETITION AND PROPRIETARY RIGHTS.
(a) CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
(i) "Company Business" means the design, construction and
overhaul of both military and commercial ships.
(ii) "Confidential Information" means any information,
knowledge or data of any nature and in any form (including information that
is electronically transmitted or stored on any form of magnetic or
electronic storage media) relating to the past, current or prospective
business or operations of the Company and its subsidiaries, that at the
time or times concerned is not generally known to persons engaged in
businesses similar to those conducted or contemplated by the Company and
its subsidiaries (other than information known by such persons through a
violation of an obligation of confidentiality to the Company), whether
produced by the Company and its subsidiaries or any of their consultants,
agents or independent contractors or by Employee, and whether or not marked
confidential, including without limitation information relating to the
Company's or its subsidiaries' products and services, business plans,
business acquisitions, processes, product or service research and
development methods or techniques, training methods and other operational
methods or techniques, quality assurance procedures or standards, operating
procedures, files, plans, specifications, proposals, drawings, charts,
graphs, support data, trade secrets, supplier lists, supplier information,
purchasing methods or practices, distribution and selling activities,
consultants' reports, marketing and engineering or other technical studies,
maintenance records, employment or personnel data, marketing data,
strategies or techniques, financial reports, budgets, projections, cost
analyses, price lists, formulae and analyses, employee lists, customer
records, customer lists, customer source lists, proprietary computer
software, and internal notes and memoranda relating to any of the
foregoing.
(b) NONDISCLOSURE OF CONFIDENTIAL INFORMATION. During the term
of this Agreement, Employee shall hold in a fiduciary capacity for the
benefit of the Company all Confidential Information which shall have been
obtained by Employee during Employee's employment (whether prior to or
after the date of this Agreement) and shall use such Confidential
Information solely within the scope of his employment with and for the
exclusive benefit of the Company. For a period of three years after the
date of termination of Employee's employment by the Company, Employee
agrees (i) not to communicate, divulge or make available to any person or
entity (other than the Company) any such Confidential Information, except
upon the prior written authorization of the Company or as may be required
by law or legal process, and (ii) to deliver promptly to the Company any
Confidential Information in his possession, including any duplicates
thereof and any notes or other records Employee has prepared with respect
thereto. In the event that the provisions of any applicable law or the
order of any court would require Employee to disclose or otherwise make
available any Confidential Information, Employee shall give the Company
prompt prior written notice of such required disclosure and an opportunity
to contest the requirement of such disclosure or apply for a protective
order with respect to such Confidential Information by appropriate
proceedings.
<PAGE>
(c) LIMITED COVENANT NOT TO COMPETE. During the term of this
Agreement and for a period of two years thereafter, commencing with the
date of termination of employment by the Employee for Good Reason, by the
Company for any reason other than for Cause, or by the Company for Cause if
the Company chooses to extend to Employee upon termination for Cause the
severance benefits provided in Paragraph 8 hereof and Appendix D hereto,
Employee agrees that, with respect to each State of the United States or
other jurisdiction, or specified portions thereof, in which the Employee
regularly (i) makes contact with customers of the Company or any of its
subsidiaries, (ii) conducts the business of the Company or any of its
subsidiaries or (iii) supervises the activities of other employees of the
Company or any of its subsidiaries, which states and jurisdictions or
portions thereof are identified in Appendix E attached hereto and forming a
part of this Agreement, and in which the Company or any of its subsidiaries
engages in the Company Business on the Date of Termination (collectively,
the "Subject Areas"), Employee will restrict his activities within the
Subject Areas as follows:
(i) Employee will not, directly or indirectly, for himself
or others, own, manage, operate, control, be employed in an executive,
managerial or supervisory capacity by, or otherwise engage or participate
in or allow his skill, knowledge, experience or reputation to be used in
connection with, the ownership, management, operation or control of, any
company or other business enterprise engaged in the Company Business within
any of the Subject Areas; provided, however, that nothing contained herein
shall prohibit Employee from making passive investments as long as Employee
does not beneficially own more than 10% of the equity interests of a
business enterprise engaged in the Company Business within any of the
Subject Areas. For purposes of this paragraph, "beneficially own" shall
have the same meaning ascribed to that term in Rule 13d-3 under the
Securities Exchange Act of 1934.
(ii) Employee will not call upon any customer of the Company
or its subsidiaries for the purpose of soliciting, diverting or enticing
away the business of such person or entity, or otherwise disrupting any
previously established relationship existing between such person or entity
and the Company or its subsidiaries;
(iii) Employee will not solicit, induce, influence or
attempt to influence any supplier, lessor, licensor, potential acquiree or
any other person who has a business relationship with the Company or its
subsidiaries, or who on the date of termination of employment of Employee
is engaged in discussions or negotiations to enter into a business
relationship with the Company or its subsidiaries, to discontinue or reduce
the extent of such relationship with the Company or its subsidiaries; and
(iv) Employee will not make contact with any of the
employees of the Company or its subsidiaries with whom he had contact
during the course of his employment with the Company for the purpose of
soliciting such employee for hire, whether as an employee or independent
contractor, or otherwise disrupting such employee's relationship with the
Company or its subsidiaries.
<PAGE>
(v) Employee further agrees that, for a period of one year
from and after the date of termination of employment, Employee will not
hire, on behalf of himself or any company engaged in the Company Business
with which Employee is associated, any employee of the Company or its
subsidiaries as an employee or independent contractor, whether or not such
engagement is solicited by Employee; provided, however, that the
restriction contained in this subsection (v) shall not apply to Company
employees who reside in, or are hired by Employee to perform work in any
Subject Areas located within the State of Virginia.
Employee agrees that he will from time to time upon the Company's
request promptly execute any supplement, amendment, restatement or other
modification of Appendix E as may be necessary or appropriate to correctly
reflect the jurisdictions which, at the time of such modification, should
be covered by Appendix E and this Paragraph 11(c). Furthermore, Employee
agrees that all references to Appendix E in this Agreement shall be deemed
to refer to Appendix E as so supplemented, amended, restated or otherwise
modified from time to time. Enforcement of this Paragraph 11(c) is subject
to the provisions of Paragraph 11(e) hereof.
(d) CERTAIN PROPRIETARY RIGHTS. Employee agrees to and hereby
does assign to the Company all his interest in and to all inventions,
whether or not patentable, which are made or conceived solely or jointly by
him:
(i) At any time during the term of his employment by the
Company in an executive, managerial, planning, technical research or
engineering capacity (including development, manufacturing, systems,
applied science and sales), or
(ii) During the course of or in connection with his duties
during the term of this Agreement, or
(iii) With the use of time or materials of the Company.
Employee agrees to communicate to the Company or its representatives
all facts known to him concerning such inventions, to sign all rightful
papers, make all rightful oaths and generally to do everything possible to
aid the Company in obtaining and enforcing proper patent protection for all
such inventions in all countries and in vesting title to such inventions
and patents in the Company. For the purpose of this Agreement, the
subject matter of any application for patent naming Employee as a sole or
joint inventor filed during the course of employment or within one year
subsequent to the termination thereof shall be deemed to be an invention
made or conceived by him during the course of his employment by the Company
and assignable to the Company hereunder, unless the Employee establishes by
a preponderance of the evidence that such invention was made or conceived
by him subsequent to termination of his employment hereunder. At the
Company's request (during or after the term of this Agreement) and expense,
the Employee will promptly execute a specific assignment of title to the
Company, and perform any other acts reasonably necessary to implement the
foregoing assignment.
<PAGE>
(e) INJUNCTIVE RELIEF; OTHER REMEDIES. Employee acknowledges
that a breach by Employee of Paragraph 11(b), (c) or (d) would cause
immediate and irreparable harm to the Company for which an adequate
monetary remedy does not exist; hence, Employee agrees that, in the event
of a breach or threatened breach by Employee of the provisions of Paragraph
11(b), (c) or (d) during or after the Employment Term, the Company shall be
entitled to injunctive relief restraining Employee from such violation
without the necessity of proof of actual damage or the posting of any bond,
except as required by non-waivable, applicable law. Nothing herein,
however, shall be construed as prohibiting the Company from pursuing any
other remedy at law or in equity to which the Company may be entitled under
applicable law in the event of a breach or threatened breach of this
Agreement by Employee, including without limitation the recovery of damages
and/or costs and expenses, such as reasonable attorneys' fees, incurred by
the Company as a result of any such breach. It shall be a condition to the
enforceability by the Company of the provisions of this Paragraph 11(c),
however, that the Company pays to and provides for the Employee the full
amount of severance pay and benefits described in Appendix D. Unless the
Company notifies the Employee in the Notice of Termination for Cause that
it intends to enforce the provisions of Paragraph 11(c) and agrees to pay
the Employee the full amount of severance pay and benefits described in
Appendix D, it shall be conclusively presumed for all purposes of this
Agreement that the Company has elected to waive the right to enforce the
provisions of this Paragraph 11(c). Employee acknowledges that the
payments provided under Paragraph 8 and Appendix D are conditioned upon
Employee fulfilling any noncompetition and nondisclosure agreements
contained in Paragraph 11. In the event Employee shall at any time
materially breach any noncompetition or nondisclosure agreements contained
in Paragraph 11, the Company may suspend or eliminate payments under
Paragraph 8 and Appendix D during the period of such breach. Employee
acknowledges that any such suspension or elimination of payments would be
an exercise of the Company's right to suspend or terminate its performance
hereunder upon Employee's breach of this Agreement; such suspension or
elimination of payments would not constitute, and should not be
characterized as, the imposition of liquidated damages.
(f) REQUESTS FOR WAIVER IN CASES OF UNDUE HARDSHIP. In the
event that Employee should find any of the limitations of Paragraph 11(c)
(including without limitation the geographic restrictions of Appendix E) to
impose a severe hardship on Employee's ability to secure other employment,
Employee may make a request to the Company for a waiver of the designated
limitations before accepting employment that otherwise would be a breach of
Employee's promises and obligations under this Agreement. Such request
must be in writing and clearly set forth the name and address of the
organization with that employment is sought and the location, position and
duties that Employee will be performing. The Company will consider the
request and, in its sole discretion, decide whether and on what conditions
to grant such waiver.
<PAGE>
(g) GOVERNING LAW OF THIS PARAGRAPH 11; CONSENT TO JURISDICTION.
Any dispute regarding the reasonableness of the covenants and agreements
set forth in this Paragraph 11, or the territorial scope or duration
thereof, or the remedies available to the Company upon any breach of such
covenants and agreements, shall be governed by and interpreted in
accordance with the laws of the State of the United States or other
jurisdiction in which the alleged prohibited competing activity or
disclosure occurs, and, with respect to each such dispute, the Company and
Employee each hereby irrevocably consent to the exclusive jurisdiction of
the state and federal courts sitting in the relevant State for resolution
of such dispute, and agree to be irrevocably bound by any judgment rendered
thereby in connection with such dispute, and further agree that service of
process may be made upon him or it in any legal proceeding relating to this
Paragraph 11 and/or Appendix E by any means allowed under the laws of such
jurisdiction. Each party irrevocably waives any objection he or it may
have as to the venue of any such suit, action or proceeding brought in such
a court or that such a court is an inconvenient forum. It is the desire
and intent of the parties that the provisions of this Agreement be enforced
to the fullest extent permitted under applicable law, whether now or
hereafter in effect and, therefore, to the extent permitted by applicable
law, the parties hereto waive any provision of applicable law that would
render any provision of this Paragraph 11 invalid or unenforceable.
12. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of:
(a) The Company, and any successors or assigns of the Company,
except that in the event of a Change of Control of the Company as defined
in the Change of Control Agreement, this Agreement shall be superseded by
the Change of Control Agreement. In the event of the assignment by the
Company of this Agreement, the Company shall nevertheless remain liable and
obligated to the Employee in accordance with the terms hereof; and
(b) The Employee, his estate, his executors, administrators,
heirs and beneficiaries.
13. EXPENSES RELATING TO ENFORCEMENT OF RIGHTS. If either party
shall successfully seek to enforce any provision of this Agreement or to
collect any amount claimed to be due hereunder, such successful party shall
be entitled to be reimbursed by the other party for any and all out-of-
pocket expenses, including reasonable attorneys' fees, incurred in
connection with such enforcements and/or collection.
<PAGE>
14. SEVERABILITY. If any term or provision of this Agreement
(including without limitation those contained in an Appendix hereto), 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 temporally, spatially or
otherwise 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.
15. NOTICES. Any notice or other communication required under this
Agreement shall be in writing, shall be deemed to have been given and
received when delivered in person, or, if mailed, shall be deemed to have
been given when deposited in the United States mail, first class,
registered and certified, return receipt requested, with proper postage
prepaid, and shall be deemed to have been received on the third business
day thereafter, and shall be addressed as follows:
If to the Company, addressed to:
Avondale Industries, Inc.
5100 River Road
Avondale, Louisiana 70094
If to the Employee, addressed to:
Kenneth B. Dupont
P. O. Box 10860
New Orleans, Louisiana 70181
or such other address as to which any party hereto may have notified
the other in writing.
16. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Louisiana without
regard to the principles of conflict of laws, except as expressly provided
in Paragraph 11(g) above with respect to the resolution of disputes arising
under, or the Company's enforcement of Paragraph 11 of this Agreement.
17. ENTIRE AGREEMENT. This document contains or refers to the entire
arrangement or understanding between the parties relating to the employment
of the Employee by the Company prior to a Change of Control of the Company,
as defined in the Change of Control Agreement. This Agreement, including
Appendices A through E, inclusive, all of which are herein incorporated by
reference and made a part hereof, contains or refers to the entire
arrangement or understanding between the Employee and the Company relating
to the employment of the Employee by the Company. No provision of the
Agreement, including the Appendices, may be modified or amended except by
an instrument in writing signed by or for both parties hereto.
<PAGE>
AVONDALE INDUSTRIES, INC.
By: /s/ Hugh A. Thompson
------------------------
Hugh A. Thompson
Chairman, Compensation Committee
/s/ Kenneth B. Dupont
-------------------------
Kenneth B. Dupont
<PAGE>
LIST OF APPENDICES
DESCRIPTION NUMBER OF PAGES
Appendix A Benefit Plan Structure 5
Appendix B Disability Benefits 1
Appendix C Death Benefits 1
Appendix D Severance Benefits 3
Appendix E Subject Areas under Limited 1
Covenant Not to Compete
<PAGE>
APPENDIX "A"
AVONDALE INDUSTRIES, INC.
AVONDALE SERVICES CORPORATION
EXECUTIVE GROUP
Effective Date: 1-1-98
COVERAGE DESCRIPTION
EMPLOYEE LIFE Two times base salary and bonus
Optional Coverage - additional one or two times base
salary and bonus
Maximum Coverage - Two million dollars
DEPENDENT LIFE $2,000.00 Spouse - Optional $100,000.00
$1,000.00 Dependent (over six months old)
$100.00 Dependent (less than six months old)
Accidental Death and Death - Same as Life (Employee Only)
DISMEMBERMENT Dismemberment - Benefit Schedule
Business According to rate of pay - Maximum $50,000.00
TRAVEL ACCIDENT
TRAVEL ACCIDENT (SALARIED) 5 Times Annual Salary - Maximum $500,000.00
RETIREE LIFE One-half of Life Insurance in force at time of
retirement
SHORT TERM DISABILITY Schedule based on length of service (see Page 2)
LONG TERM DISABILITY 60% of monthly base salary, after 180 day waiting
period.
Maximum $15,000 per month coordinated with Disability
Social Security Benefit.
<PAGE>
HEALTH CARE 100% Hospital - private room rate plus miscellaneous
expenses
100% Hospital Medical Expenses - (doctor's visits to
hospital)
100% Surgical Expenses
100% Laboratory and X-ray Expenses
100% Vision and Hearing Care Expenses
100% Dental and Orthodontia
100% Annual Physicals
100% Psychiatric and Nervous Care - expenses up to
$6,500.00 per year per individual
No Life-Time Maximum
Subject to applicable employee contribution requirement
<PAGE>
SHORT TERM DISABILITY
Benefits begin on first day absent due to a non-occupational injury or
illness. Original medical documentation required if absent five or more
consecutive working days.
Benefits will be reduced by any amount received from Social Security.
Successive periods of disability separated by less than two (2) weeks of
full-time work considered as one continuous period of disability, unless
later disability due to a different cause.
Benefits will be paid up to a maximum of twenty-six (26) weeks, based on
the following schedule:
YEARS OF SERVICE FULL SALARY UP TO HALF SALARY UP TO
Less than 1 Year 4 Weeks 0 Weeks
1 Year 4 Weeks 22 Weeks
2 Years 6 Weeks 20 Weeks
3 Years 8 Weeks 18 Weeks
4 Years 10 Weeks 16 Weeks
5 Years 12 Weeks 14 Weeks
6 Years 14 Weeks 12 Weeks
7 Years 16 Weeks 10 Weeks
8 Years 18 Weeks 8 Weeks
9 Years 20 Weeks 6 Weeks
10 Years 22 Weeks 4 Weeks
11 Years 24 Weeks 2 Weeks
12 Years or more 26 Weeks 0 Weeks
JURY DUTY
Pays difference between employee's base pay and jury pay received, not to
exceed eight hours pay per day.
BLOOD BANK
To be eligible, must be a participant in Group Health Insurance Program.
In joining the Blood Bank Program, the employee agrees to donate a unit of
blood as requested at irregular intervals. The Program provides the
employee and insured dependents with blood for as long as the employee
remains in the Program.
HOLIDAYS
Eight Paid Holidays - New Years Day, Mardi Gras, Good Friday, July Fourth,
Labor Day, Thanksgiving Day, Day After Thanksgiving and Christmas.
Eligible upon completion of thirty days service.
<PAGE>
VACATION
Vacation year is from January 1 to December 31. Upon completion of one
full year of service, eligible for two weeks of vacation. An employee
joining the Company after January 1 but prior to July 1 will be eligible
for one week's vacation the following January 1. Vacation time may not be
carried over from one vacation period to the next. Vacation time may be
taken in one-hour increments. Beginning with ten full years of service,
eligible for additional days of vacation, up to a maximum of five
additional days, based on the following schedule:
YEARS OF SERVICE ADDITIONAL DAYS OF VACATION
10 Years 1 Day
11 Years 2 Days
12 Years 3 Days
13 Years 4 Days
14 Years 5 Days
SICK/PERSONAL TIME
Eligible for twenty-four hours per calendar year. Time may be taken in
one-hour increments. Unused time may not be carried over to the next year.
FUNERAL LEAVE
None
TUITION ASSISTANCE
Eligible upon completion of one year's service. Only courses directly
related to employee's position and taken at an accredited institution will
be considered. Approval must be obtained prior to the start of the course.
Reimbursement will be made for the cost of tuition only, and will be based
on the following schedule:
COURSE LEVEL FINAL GRADE REIMBURSEMENT PERCENTAGE
Under-Graduate Not Lower Than "C" 100%
Post-Graduate Not Lower Than "B" 100%
AUTOMOBILE ALLOWANCE
$600 per month
RETIREMENT
Formula - 1.5% of final average compensation, multiplied by years of
credited service, less Massachusetts Mutual Annuity and equivalent
actuarial value of any shares in ESOP account.
Early Retirement Benefits available at age 55 with ten years service,
actuarially reduced by years and months early.
<PAGE>
SUPPLEMENTAL RETIREMENT PLAN
Vesting: 100% vesting upon completion of ten (10) years service
Formula: 15% of final average compensation.
Early Retirement Benefits available at Age 55 with ten (10) years service,
actuarially reduced by years and months early
EXECUTIVE EXCESS RETIREMENT PLAN
If designated as a participant by the Board of Directors.
Purpose of the plan is to reimburse participants for benefits not payable
under the Pension Plan and ESOP because of limitations in the Internal
Revenue Code and the Pension Plan.
Benefits paid upon attainment of age 75 or upon retirement, if earlier.
Benefit is unfunded.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
Plan Year - September 1 to August 31
Eligibility - 1st of month following one year of service
Compensation - Total salary, excluding severance pay, moving expenses and
non-cash contribution
Stock Allocation - Each year the Trustees divide the available shares of
stock among eligible participants, based on each participant's
compensation. These allocated shares are held in the participant's ESOP
account. Must be on payroll last pay period of each plan year to receive
allocation.
Distribution - (1) Retirement - Age 55 or later
(2) Total & Permanent Disability with Social Security Award
(3) Death
Vesting - Employees who were eligible to receive Special Shares were 100%
vested.
Vesting for Loan Shares is as follows:
Less than 4 years 0%
4 years but less than 5 40%
5 years but less than 6 50%
6 years but less than 7 60%
7 years but less than 8 70%
8 years but less than 9 80%
9years but less than 10 90%
10 years or more 100%
<PAGE>
APPENDIX B
DISABILITY BENEFIT
In the event of termination by the Company of the Employee's
employment on account of disability pursuant to Paragraph 6 of the
Agreement, the disability benefit to be provided to the Employee shall be
determined under this Appendix, unless a greater or more favorable benefit
is required to be provided pursuant to the provisions of Subparagraph 4(c)
of the Agreement and/or Appendix A.
1. CONTINUATION OF FULL ANNUAL SALARY: The full amount of the
Employee's annual salary (pursuant to paragraph 4(a) of this Agreement)
shall be continued according to the following formula:
(i) If the Employee's credited service for the Company totals
(5) five years or less his annual salary shall be continued for twelve (12)
months commencing with the month following such termination of employment;
and
(ii) If the Employee's credited service for the Company totals
more than five (5) years, the payment period referred to in (i) shall be
increased by two-tenths (2/10) of a year for each year of credited service
in excess of five (5) up to a maximum payment period of five (5) years.
Thus, if the Employee's employment is terminated on account of disability
at a time when he has twelve (12) years of credited service, the Employee's
full annual salary would be continued for 2.4 years following such
termination of employment and an Employee with twenty-five (25) or more
years of credited service as of the termination of his employment on
account of disability will receive his full annual salary for five (5)
years.
2. CONTINUATION OF PARTIAL ANNUAL SALARY. Following the expiration
of the period calculated pursuant to the preceding Paragraph 1, the
Employee will receive long term disability benefits equal to sixty percent
(60%) of his full annual salary subject to such limitations as are
contained in Appendix A.
3. LIMITATIONS. The disability benefit will in any event
discontinue and terminate upon the death of the Employee or upon the date
of his Retirement as defined in subparagraph 9(a) of the Agreement would
have occurred.
4. OTHER BENEFITS. Other benefits which may be provided or
continued for the Employee following the termination of his employment on
account of disability depend upon the terms of the Plan under which such
benefits are provided or required to be provided.
<PAGE>
APPENDIX C
DEATH BENEFITS
The death benefits to be provided by the Company subsequent to the
death of the Employee shall be determined by reference to the plan or plans
under which such benefits are provided. Reference is made to subparagraph
4(c) of the Agreement and to Appendix A.
<PAGE>
APPENDIX D
SEVERANCE BENEFITS
Upon the termination of the Employee's employment under any
circumstance requiring the Company to pay to and provide for the Employee
the severance pay and other benefits set forth in this Appendix D, the
Company shall be obligated to pay to and/or provide for the Employee the
following compensation and other benefits:
(a) PAYMENT IN LIEU OF COMPENSATION: The Company shall pay to the
Employee in cash an amount equal to the product of (i) and (ii); where (i)
shall equal the sum of (A) the Employee's annual salary and (B) the
Employee's annual incentive bonus during the twelve (12) month period
ending with the close of the month in which such termination of employment
occurs (the "Date of Termination") , divided by twelve (12) ; and where
(ii) shall be the lesser of (x) thirty-six (36), (y) six (6), plus two (2)
for each twelve (12) months of credited service of the Employee for the
Company (determined in accordance with subparagraph 4(c) of the Agreement)
through the Date of Termination, or (z) the number of months until the
Employee's normal retirement date, as defined in the Avondale Industries,
Inc. Pension Plan (or any successor, or substitute plan or plans of the
Company or of any subsidiary of the Company under which the Employee may be
a participant, hereinafter the "Pension Plan"). The number determined
under clause (ii) is sometimes herein referred to as the "Measuring
Period".
(b) ACCELERATION OF STOCK OPTIONS: Immediately following such Date
of Termination, all options and stock appreciation rights granted to
Employee under the 1997 Stock Incentive Plan or any other stock option or
similar plan before or after the date hereof (collectively referred to
herein as "Stock Option Plans") shall immediately become fully exercisable
and execution of this Agreement shall constitute an amendment to any stock
option agreement to so provide and an agreement and undertaking by the
Company to take such action as may be required to cause any and all options
or rights granted, or to be granted, to Employee thereunder to make them
consistent herewith.
<PAGE>
(c) PAYMENT FOR NON-VESTED RETIREMENT BENEFIT: In addition to the
vested portion of the Employee's interest under any employee benefit plan
maintained by the Company as a qualified plan pursuant to Section 401(a) of
the Internal Revenue Code of 1986, as amended, to which the Company or any
subsidiary has made contributions for the Employee's account which are not
otherwise expressly provided for herein, if the Employee is not fully
vested under any such plan or plans, the Company shall pay to the Employee
in cash an amount equal to the then present value of the actuarial
equivalent (within the meaning of the following Paragraph (d)) of the non-
vested portion of the Employee's account, to the extent that such account
would have become vested based on additional credited service for the
Company, if the Employee had remained in the employ of the Company (or any
subsidiary) for an additional period of months equal to the Measuring
Period.
(d) SUPPLEMENTAL RETIREMENT BENEFIT: In addition to any retirement
or severance benefit to which the Employee is entitled under the Pension
Plan, the Employee shall receive in cash, an amount equivalent of the
excess of (i) over (ii), where (i) equals the aggregate amount of the
retirement pension (calculated as a straight life annuity payable to
Employee on his normal retirement date) to which Employee would have been
entitled under the terms of the Pension Plan and any other qualified or
non-qualified defined benefit plan maintained by the Company and covering
the Employee, if Employee were fully vested thereunder (without regard to
(w) whether the Employee shall actually have completed the number of years
of credited service required to qualify for full vesting under such plans,
(x) any limitation on the amount of compensation used in the calculation of
the regular pension thereunder, (y) any offset thereunder for severance
allowances payable hereunder or (z) any amendment to such plans made prior
to the Employee's Date of Termination, which amendment adversely affects in
any manner the computation of retirement benefits under such plans) and had
accumulated an additional period of months of credited service after the
Date of Termination equal to the Measuring Period (but in no event shall
Employee be deemed to have accumulated an additional period of credited
service subsequent to Employee's sixty-fifth (65th) birthday), and, where
(ii) equals the amount of the retirement pension (calculated as a straight
1ife annuity payable to Employee on his normal retirement date),if any, to
which Employee is entitled pursuant to the provisions of the Pension Plan
and such other plans. For purposes of Clause (i) of this Paragraph (d),
the amount payable pursuant to Paragraph (a) of this Appendix D, shall be
deemed to represent the Employee's earnings for the period of months equal
to the Measuring Period, and for purposes of this Paragraph (d), "actuarial
equivalent" shall be determined using the same methods and assumptions
utilized under the Pension Plan immediately prior to the Date of
Termination. All other terms used in this Paragraph (d) shall have the
same meanings, respectively, as such terms have in the Pension Plan, unless
otherwise required by the context.
<PAGE>
(e) OTHER BENEFITS: The Company shall also maintain in full force
and effect, for the continued benefit of the Employee and his dependents,
for a period terminating on the earliest of (i) a period of months after
the Date of Termination equal to the Measuring Period; (ii) the
commencement date of equivalent benefits for the Employee from a new
employer; or (iii) the Employee's normal retirement date under the
Company's Pension Plan, after which the terms of the Pension Plan shall
govern; all insured and self-insured employee benefit plans in which the
Employee is entitled to participate immediately prior to the Date of
Termination; provided that the Employee's continued participation is
possible under the general terms and provisions of such Plans (and any
applicable funding media) and the Employee continues to pay an amount equal
to Employee's regular contribution for such participation. In the event
that the Employee participation in any such Plan is barred, the Company, at
its sole cost and expense, shall arrange to have issued for the benefit of
Employee and his dependents individual policies of insurance providing
benefits substantially similar (on an after-tax basis) to those which the
Employee would have been entitled to receive under such Plan or Plans
pursuant to this Paragraph (e) if such participation were not barred or, if
such insurance is not available at a reasonable cost to the Company, the
Company shall otherwise provide the Employee and his dependents with
equivalent benefits (on an after-tax basis) and the Employee shall not be
required to pay any premiums or other charges in an amount greater than
that which the Employee would have paid in order to participate in such
Plans. If, at the end of a period of months after the Date of Termination
equal to the Measuring Period, the Employee is not receiving equivalent
benefits from a new employer, the Company shall arrange, at its sole cost
and expense, to enable Employee to convert the Employee's and his
dependents' coverage under such Plans to individual policies or programs
upon the same terms as employees of the Company may apply for until the
Employee is able to receive equivalent benefits from a source other than
the Company.
(f) MITIGATION: The Employee shall not be required to mitigate the
amount of any payment or benefit provided for in this Appendix D by seeking
other employment or otherwise, nor (except as specifically provided in
Paragraph (e) above) shall the amount of any payment or benefit provided
for in this Appendix D be reduced by any compensation or benefit earned by
Employee as a result of employment by another employer after the Date of
Termination, or otherwise.
(g) MANNER OF PAYMENT: All payments which are required to be made in
cash under Paragraphs (a), (c) or (d), above, shall be paid on the Date of
Termination, or within five (5) business days thereafter, unless the
Employee has made a Deferred Payment Election with respect to such
payment(s) pursuant to the succeeding Paragraph (h).
<PAGE>
(h) ELECTION TO DEFER PAYMENT: Upon entering into this Agreement and
for a period of fourteen (14) days following each anniversary of the date
hereof (the "Election Period"), the Employee may, in writing, direct the
Company that any amounts which become payable to the Employee pursuant to
Paragraphs (a), (c) and (d), above, shall be paid to the Employee in three
(3) equal annual installments, with the first of such installments to be
paid not later than five (5) business days after the Date of Termination
and successive installments paid on the next two (2) succeeding
anniversaries of the Date of Termination or the next following business day
if such date is not a business day (the "Deferred Payment Election"). A
Deferred Payment election, once made, shall be irrevocable except during an
Election Period.
(i) EFFECT ON OTHER BENEFITS: Nothing contained in this Appendix D
shall be construed or interpreted as limiting any rights or benefits
payable to or for the Employee under any other provision of this Agreement.
<PAGE>
APPENDIX E
TO EMPLOYMENT AGREEMENT
BETWEEN AVONDALE INDUSTRIES, INC.
AND
KENNETH B. DUPONT
Jurisdictions In Which Competition
Is Restricted As Provided
In Paragraph 11(c)
A. STATES
1. LOUISIANA -- The following parishes in the State of Louisiana:
Orleans and Jefferson
2. MISSISSIPPI -- The following counties in the State of
Mississippi:
Harrison
as well as any other counties in the State of Mississippi in
which the Employee regularly (a) makes contact with customers of
the Company or any of its subsidiaries, (b) conducts the business
of the Company or any of its subsidiaries or (c) supervises the
activities of other employees of the Company or any of its
subsidiaries as of the date of termination of employment.
3. VIRGINIA-- The following counties in the State of Virginia:
Arlington
as well as any other counties in the State of Virginia in which
the Employee regularly (a) makes contact with customers of the
Company or any of its subsidiaries, (b) conducts the business of
the Company or any of its subsidiaries or (c) supervises the
activities of other employees of the Company or any of its
subsidiaries as of the date of termination of employment.
Agreed to and Accepted:
Avondale Industries, Inc. Employee
By: /S/ HUGH A. THOMPSON /S/ KENNETH B. DUPONT
-------------------- ---------------------
Its: Compensation Committee Chairman Kenneth B. Dupont
Date: MARCH 23, 1998 Date: MARCH 12, 1998
AMENDMENT NO. 1
TO THE AMENDED AND RESTATED
CHANGE OF CONTROL AGREEMENT
WHEREAS, the Amended and Restated Change of Control Agreement (the
"Agreement") between A. L. Bossier, Jr. and Avondale Industries, Inc. (the
"Company") was entered into effective as of January 19, 1996; and
WHEREAS, the Board of Directors wishes to amend the Agreement to
provide for the accelerated payment of benefits under the Company's non-
qualified defined benefit plans in the event of the payment of other
benefits under the Agreement.
NOW THEREFORE, the Agreement is hereby amended as follows:
I.
Section 2.3(a)(iv) is hereby amended to read as follows:
(iv) notwithstanding any plan provision regarding the
payment of benefits following a change of control of the Company
which shall be superseded hereby, 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, and any other 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.
<PAGE>
II.
Section 2/3(a)(v) is hereby added to read as follows:
(v) notwithstanding any plan provision regarding the payment
of benefits following a change of control of the Company which
shall be superseded hereby, the Company shall pay to the Employee
in a lump sum in cash within 30 days of the date of termination
of employment an amount equal to the then present value of the
actuarial equivalent of the benefits to which the Employee would
be entitled under the Supplemental Pension Plan, the Executive
Excess Retirement Plan and any other non-qualified defined
benefit plan maintained by the Company and covering the Employee
if the Employee had an additional period of service to the
Company ending on the third anniversary of the Change of Control,
assuming the Employee were fully vested thereunder and assuming
retirement at age 55 if Employee is age 52 or younger at the time
of the Change of Control or assuming retirement at the age of the
Employee three years following the Change of Control if Employee
is over age 52 at the time of the Change of Control. Such
payment shall be made 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.
This amendment is effective this 23rd day of March, 1998.
AVONDALE INDUSTRIES, INC.
By: /s/ Hugh A. Thompson
------------------------
Hugh A. Thompson
Chairman, Compensation Committee
/s/ A. L. Bossier, Jr.
--------------------------
A. L. Bossier, Jr.
AMENDMENT NO. 1
TO THE AMENDED AND RESTATED
CHANGE OF CONTROL AGREEMENT
WHEREAS, the Amended and Restated Change of Control Agreement (the
"Agreement") between Thomas M. Kitchen and Avondale Industries, Inc. (the
"Company") was entered into effective as of January 19, 1996; and
WHEREAS, the Board of Directors wishes to amend the Agreement to
provide for the accelerated payment of benefits under the Company's non-
qualified defined benefit plans in the event of the payment of other
benefits under the Agreement.
NOW THEREFORE, the Agreement is hereby amended as follows:
I.
Section 2.3(a)(iv) is hereby amended to read as follows:
(iv) notwithstanding any plan provision regarding the
payment of benefits following a change of control of the Company
which shall be superseded hereby, 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, and any other 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.
<PAGE>
II.
Section 2/3(a)(v) is hereby added to read as follows:
(v) notwithstanding any plan provision regarding the payment
of benefits following a change of control of the Company which
shall be superseded hereby, the Company shall pay to the Employee
in a lump sum in cash within 30 days of the date of termination
of employment an amount equal to the then present value of the
actuarial equivalent of the benefits to which the Employee would
be entitled under the Supplemental Pension Plan, the Executive
Excess Retirement Plan and any other non-qualified defined
benefit plan maintained by the Company and covering the Employee
if the Employee had an additional period of service to the
Company ending on the third anniversary of the Change of Control,
assuming the Employee were fully vested thereunder and assuming
retirement at age 55 if Employee is age 52 or younger at the time
of the Change of Control or assuming retirement at the age of the
Employee three years following the Change of Control if Employee
is over age 52 at the time of the Change of Control. Such
payment shall be made 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.
This amendment is effective this 23rd day of March, 1998.
AVONDALE INDUSTRIES, INC.
By: /s/ Hugh A. Thompson
------------------------
Hugh A. Thompson
Chairman, Compensation Committee
/s/ Thomas M. Kitchen
-------------------------
Thomas M. Kitchen
AMENDMENT NO. 1
TO THE AMENDED AND RESTATED
CHANGE OF CONTROL AGREEMENT
WHEREAS, the Amended and Restated Change of Control Agreement (the
"Agreement") between Kenneth B. Dupont and Avondale Industries, Inc. (the
"Company") was entered into effective as of January 19, 1996; and
WHEREAS, the Board of Directors wishes to amend the Agreement to
provide for the accelerated payment of benefits under the Company's non-
qualified defined benefit plans in the event of the payment of other
benefits under the Agreement.
NOW THEREFORE, the Agreement is hereby amended as follows:
I.
Section 2.3(a)(iv) is hereby amended to read as follows:
(iv) notwithstanding any plan provision regarding the
payment of benefits following a change of control of the Company
which shall be superseded hereby, 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, and any other 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.
<PAGE>
II.
Section 2/3(a)(v) is hereby added to read as follows:
(v) notwithstanding any plan provision regarding the payment
of benefits following a change of control of the Company which
shall be superseded hereby, the Company shall pay to the Employee
in a lump sum in cash within 30 days of the date of termination
of employment an amount equal to the then present value of the
actuarial equivalent of the benefits to which the Employee would
be entitled under the Supplemental Pension Plan, the Executive
Excess Retirement Plan and any other non-qualified defined
benefit plan maintained by the Company and covering the Employee
if the Employee had an additional period of service to the
Company ending on the third anniversary of the Change of Control,
assuming the Employee were fully vested thereunder and assuming
retirement at age 55 if Employee is age 52 or younger at the time
of the Change of Control or assuming retirement at the age of the
Employee three years following the Change of Control if Employee
is over age 52 at the time of the Change of Control. Such
payment shall be made 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.
This amendment is effective this 23rd day of March, 1998.
AVONDALE INDUSTRIES, INC.
By: /s/ Hugh A. Thompson
------------------------
Hugh A. Thompson
Chairman, Compensation Committee
/s/ Kenneth B. Dupont
-------------------------
Kenneth B. Dupont
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 5th day of March,
1998, by and between AVONDALE INDUSTRIES, INC., a Louisiana corporation
maintaining its principal office at 5100 River Road, Avondale, Louisiana
70094 (the "Company") and R. Dean Church, now residing at 13 Michael Drive,
Luling, Louisiana 70070 (hereinafter called the "Employee").
W I T N E S S E T H
WHEREAS, the Employee is employed by the Company in an executive
capacity, and the Company desires to ensure that the Employee will be
available to provide executive services to the Company in the future, which
services are significant to the Company's long range prospects;
WHEREAS, the Company and Employee desire, among other things, to
prohibit Employee from disclosing or utilizing, outside the scope and term
of his employment, any non-public, confidential or proprietary information,
knowledge and data relating to the business and operations of the Company
or its subsidiaries received by Employee during the course of his
employment, and to restrict the ability of Employee to compete with the
Company or its subsidiaries for a limited period of time; and
WHEREAS, to induce the Employee to agree to provide such services on
the terms provided herein, the Company is offering to provide the Employee
with the compensation, benefits and security provided for in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements
herein contained, the parties hereto agree as follows:
1. EMPLOYMENT/CAPACITY/TERM. The Company agrees to and does hereby
employ the Employee, and the Employee agrees to be employed by the Company
upon the terms and conditions set forth in this Agreement. Such employment
shall be in a managerial and executive capacity in the operation of the
business of the Company and/or a subsidiary, subject to the supervision of
the Board of Directors of the Company. Such employment shall commence on
the date hereof and shall continue through December 31, 2000, and from year
to year thereafter subject to the right of the Employee or the Company to
terminate such employment as of December 31, 2000, or any subsequent
December 31, by written notice given to the other party at least sixty (60)
days prior to such termination date stating an intention to so terminate
such employment. Termination by either party, in accordance with the
provisions of the preceding sentence, shall not require a statement of the
reason or cause for such termination and shall not be deemed a breach or
violation of this Agreement by the party giving such notice. As used in
this Agreement, the phrase "term of this Agreement" shall be deemed to
include the period subsequent to the date hereof and prior to termination
of this Agreement; however, such phrase shall not be construed as limiting
the enforceability by either party of any rights which survive termination
of this Agreement.
<PAGE>
2. TIME AND EFFORT/ABSENCES. During the term of this Agreement, the
Employee shall devote his entire time and attention during normal business
hours to the business of the Company, and its subsidiaries, subject to the
supervision of the Board of Directors of the Company, and he shall not
engage in any other business activity whether or not such business activity
is pursued for gain, profit or other pecuniary advantage, but this
restriction shall not be construed to restrict the Employee (i) from
performing services as a member of the Board of Directors, Board of
Trustees or the like for any non-profit or for profit entity whether or not
the Employee receives compensation therefor, provided that, such services
do not unreasonably interfere with the ability of the Employee to perform
the services and discharge the responsibilities required of him under this
Agreement (it generally being agreed and understood that the quantity and
quality of the services heretofore performed by the Employee for non-profit
and for profit entities would not constitute a violation of the aforesaid
restriction), and (ii) from investing his assets in such form or manner as
will not require any services on the part of the Employee in the operation
of the business of the entity in which such investments are made. The
employee shall be excused from rendering his services during reasonable
vacation periods and during other reasonable temporary absences, all as
authorized from time to time by the Board of Directors of the Company. At
the date hereof, the Employee maintains his residence at 13 Michael Drive,
Luling, Louisiana 70070 and performs services for the Company in New
Orleans, Louisiana; it is understood that, without his consent, the
Employee will not be required to relocate to a different location to
discharge his responsibilities under this Agreement.
3. CORPORATE OFFICES. If elected, the Employee will serve, without
additional compensation, as a director of the Company or as an officer or
director of any subsidiary of the Company.
4. SALARY/BONUS/OTHER BENEFITS. In consideration of the services
and duties to be rendered and performed by the Employee during the term of
this Agreement, including the assumption of the duties and responsibilities
of an executive officer of the Company, the Company agrees to pay and
provide for the Employee the compensation and benefits described below:
(a) An annual salary, payable in equal monthly installments, in
the amount of One Hundred Fifty Thousand Six Hundred Seventy-Two and 00/100
($150,672) or in such greater amount as may from time to time be fixed by
the Board of Directors or the Compensation Committee of the Board of
Directors of the Company. The Employee's annual salary shall never be
reduced.
(b) An annual incentive bonus in such amount as may from time to
time be fixed by the Board of Directors or the Compensation Committee of
the Board of Directors, provided that, the annual incentive bonus for any
period of less than twelve (12) months (other than for the period from the
date hereof through December 31, 1998) shall be prorated. The annual
incentive bonus shall be paid to the Employee (or to his personal
representative in the event of his death) in a lump sum prior to the
expiration of the period for which such bonus is payable or within 45 days
following the expiration of such period.
<PAGE>
(c) OTHER BENEFITS. All other payments and/or benefits
described or provided for in this Agreement, including the Appendices
hereto. It is intended that such payments and/or benefits shall provide
the Employee and/or his personal representative(s) and/or beneficiaries, as
the case may be, with benefits which will be at least as favorable as the
benefits which on December 31, 1997 were provided for the Employee by the
Company. In addition, the Employee shall also be eligible for and shall
participate in any other employee benefit plan, including, any pension,
supplemental pension, retirement, supplemental retirement, profit-sharing,
thrift, bonus, incentive, deferred compensation, stock option or stock
appreciation or other employee benefit plan, including any life insurance,
accident, medical, disability, health or relocation plan or policy (all of
which are included by reference to the term "Plan") maintained by the
Company for its employees, generally, or for its senior executives, in
particular, on the same basis and subject to the same requirements and
limitations as may be made applicable to other senior executive employees
of the Company, provided that participation in and the terms of any
participation in the Avondale Industries, Inc. 1997 Stock Incentive Plan or
any successor plan shall be at the discretion of the Compensation Committee
as provided in such plans. The benefit plan structure and benefits which
shall be provided for the Employee and other senior executive employees of
the Company are described in Appendix A hereto. Nothing herein, however,
shall be construed as limiting the right of the Employee to additional or
other and greater benefits than are described in said Appendix A, if the
provisions of this Agreement obligate the Company to provide such other or
greater benefits, and in particular, but without limitation by the
specification hereof, the benefits described in Paragraphs 6, 7, 8 and 9
hereof and Appendices B, C and D hereto. In addition, the Company agrees
that where credited service of the Employee for the Company is relevant in
determining eligibility for or benefits under any Plan, the Employee's
credited service for the Company shall be determined to include service for
any parent, subsidiary or affiliate of the Company or for a predecessor of
the Company.
5. EXPENSES. The Employee shall be reimbursed for out-of-pocket
expenses incurred from time to time on behalf of the Company or any
subsidiary or in the performance of his duties under this Agreement, upon
the presentation of such supporting documents and forms as the Company
shall reasonably request.
6. DISABILITY/DISABILITY BENEFIT. In the event that the Employee is
incapable because of physical or mental illness of rendering services of
the character contemplated hereby, for a period of six (6) consecutive
months, the Board of Directors of the Company may determine that the
Employee has become disabled. In the event of such a determination of
disability, the Company shall have the continuing right and option while
such disability continues by notice in writing to the Employee to terminate
this Agreement effective thirty (30) days after such notice of termination
is so given, unless within such thirty (30) day period, the Employee
resumes rendering full-time services of the character contemplated hereby.
The incapacity due to physical or mental illness to render the services of
the character contemplated hereby, shall not constitute a breach of this
Agreement by the Employee. If this Agreement is terminated by the Company
as a result of a determination of disability, as aforesaid, the Company
shall be obligated to pay to the Employee the disability benefits described
in Appendix B hereto.
<PAGE>
7. DEATH/DEATH BENEFIT. In the event of the death of the Employee
during the term of this Agreement, this Agreement will terminate and the
Employee's then rate of annual salary and an annual incentive bonus,
(prorated in accordance with subparagraph 4(b) hereof) shall be paid to the
Employee's personal representative through the last day of the month in
which such death occurs. In addition, the Company shall be obligated to
provide the Employee, his personal representative(s) and/or his
beneficiaries with the death benefits described in Appendix C hereto.
8. SEVERANCE PAY. If the employment of the Employee is terminated
at any time during the period that this Agreement is in effect (i) by the
Employee for Good Reason (as defined in Paragraph 9 hereof) or (ii) by the
Company for any reason other than for Cause (as hereafter defined) or other
than in accordance with Paragraph 6 hereof on account of the disability of
the Employee, the Company shall be obligated to pay to the Employee the
severance pay and benefits described in Appendix D attached hereto.
Termination of the Employee's employment on account of his death or
Retirement (as hereafter defined) will not be considered a termination of
the Employee's employment by the Company and will not require the Company
to pay and provide any severance pay or benefits pursuant to Appendix D.
Accordingly, the Company acknowledges that if the employment of the
Employee is terminated by it for any reason during the period that this
Agreement is in effect other than for Cause or other than on account of the
disability of the Employee in accordance with Paragraph 6 hereof, the
Company will be obligated to pay and provide the severance pay and benefits
described in Appendix D, in order to reinforce and encourage the continued
loyalty, attention, and dedication of the Employee to the Company's
business and affairs without the concerns which normally arise from the
possibility of a loss of employment security. As used herein, the terms
"Retirement" and "Cause" shall have the following meanings, respectively:
(a) RETIREMENT. Termination of the Employee's employment
"Retirement" shall mean termination on the Employee's normal retirement
date in accordance with the terms of the Avondale Industries, Inc. Pension
Plan (or any successor or substitute plan or plans of the Company or of any
subsidiary of the Company under which the Employee may be a participant);
and
<PAGE>
(b) CAUSE. Termination by the Company of the Employee's
employment for "Cause" shall mean termination as a result of (i) the
willful and continued failure by the Employee to perform substantially the
services contemplated by this Agreement (other than any such failure
resulting from the Employee's incapacity due to physical or mental illness)
after a written demand for substantial performance is delivered to the
Employee by a member or representative of the Board of Directors of the
Company which specifically identifies the manner in which it is alleged
that the Employee has not substantially performed such services, or (ii)
the willful engaging by the Employee in gross misconduct which is
materially and demonstrably injurious to the Company; provided that, no
act, or failure to act, on the Employee's part shall be considered
"willful" unless done, or omitted to be done, in bad faith and without
reasonable belief that such action or omission was in, or not opposed to,
the best interests of the Company. It is also expressly understood that
the Employee's attention to or engagement in matters not directly related
to the business of the Company shall not provide a basis for termination
for Cause if such attention or engagement is authorized by the terms of
this Agreement or has otherwise been approved by the Board of Directors of
the Company. Anything in this Agreement to the contrary notwithstanding,
the Employee's employment may not be terminated 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 the purpose (after reasonable notice to the Employee and an opportunity
for the Employee, together with his counsel, to be heard before the Board),
finding that in the good faith opinion of the Board the Employee was guilty
of the conduct set forth in clause (i) or (ii) of this subparagraph (b) and
specifying the particulars thereof in detail.
9. TERMINATION BY THE EMPLOYEE FOR GOOD REASON. The termination by
the Employee of his employment for "Good Reason" shall be deemed a
justifiable termination of his employment and shall excuse the Employee
from the obligation to render services as provided in Paragraph 2 hereof.
In that event (i) the full amount of the Employee's annual salary and
annual incentive bonus, together with all other benefits required to be
provided under this Agreement, shall be continued until the next succeeding
December 31st as of which the Company could have terminated the Employee's
employment pursuant to Paragraph 1 hereof without such termination
constituting a breach or violation of this Agreement; and (ii) the
Employee's employment shall be deemed to terminate on such December 31st.
As used herein, the term "Good Reason" shall mean:
(a) a change in the Employee's status, title or position(s) as
an officer of the Company which, in his reasonable judgment, does not
represent a promotion from or enhancement of his status, title and position
as an executive officer, or the assignment by the Board of Directors of the
Company to the Employee of any duties or responsibilities which, in his
reasonable judgment, are inconsistent with such status, title or position,
or any removal of the Employee from or any failure to reappoint or reelect
him to such position, except in connection with a justifiable termination
by the Company of the Employee's employment for Cause or on account of
disability, the Retirement or death of the Employee or the termination by
the Employee of his employment other than for Good Reason;
<PAGE>
(b) a reduction in the Employee's annual salary or a failure by
the Company to pay to the Employee any installment of the annual salary
and/or the annual incentive bonus required pursuant to Paragraph 4 hereof,
which failure continues for a period of 20 days after written notice
thereof is given by the Employee to the Company;
(c) the failure by the Company to adopt, continue or maintain in
effect, any Plan or benefit which is required to be provided by the Company
pursuant to this Agreement (unless the Company provides the Employee with
the equivalent or at least substantially similar benefits under one or more
other Plans) other than as a result of the normal expiration of such Plan;
or the taking of any action or the failure to act by the Company, which
could adversely affect the Employee's continued participation in any such
Plan(s) or the ability of the Employee to enjoy or realize upon any
material benefit intended, or which could materially reduce the Employee's
benefits under any such Plan(s) or deprive him of any material benefit then
enjoyed by the Employee;
(d) the Company's requiring the Employee to be based anywhere
other than the New Orleans, Louisiana metropolitan area, except for
required travel on the Company's business to an extent substantially
consistent with the business travel obligations which the Employee
undertook on behalf of the Company prior to such required change;
(e) the failure by the Company to obtain the assumption of this
Agreement by any successor of the Company (other than by merger or
consolidation); provided, however, that upon a Change of Control of the
Company, as defined in the Change of Control Agreement between the Employee
and the Company (the "Change of Control Agreement"), the obligations of a
successor hereunder shall be limited to the obligations of the Company
hereunder through the date of the Change of Control after which date the
Change of Control Agreement shall govern.
(f) any purported termination by the Company of the Employee's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Paragraph 10 hereof, or which is not
justified as a termination of the Employee's employment based on Cause; and
for purposes of this Agreement, no such purported termination shall be
effective; or
(g) any refusal by the Company to allow the Employee to attend
to matters or engage in activities not directly related to the business of
the Company which is permitted by this Agreement or which, prior thereto,
was permitted by the Board of Directors of the Company.
10. NOTICE OF TERMINATION. Any purported notice of termination of
the Employee's employment (other than a Notice given by either pursuant to
Paragraph 1 hereof) shall be communicated in a writing delivered to the
other party as provided in Paragraph 14 hereof, (hereinafter a "Notice of
Termination"). For purposes of this Agreement a "Notice of Termination"
shall mean a notice which specifies the termination provision relied upon
by the party giving such notice and shall set forth in detail such facts
and circumstances claimed by said party to provide a justified basis for
termination of the Employee's employment under the provision(s) so
indicated.
<PAGE>
11. NONDISCLOSURE, NONCOMPETITION AND PROPRIETARY RIGHTS.
(a) CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
(i) "Company Business" means the design, construction and
overhaul of both military and commercial ships.
(ii) "Confidential Information" means any information,
knowledge or data of any nature and in any form (including information that
is electronically transmitted or stored on any form of magnetic or
electronic storage media) relating to the past, current or prospective
business or operations of the Company and its subsidiaries, that at the
time or times concerned is not generally known to persons engaged in
businesses similar to those conducted or contemplated by the Company and
its subsidiaries (other than information known by such persons through a
violation of an obligation of confidentiality to the Company), whether
produced by the Company and its subsidiaries or any of their consultants,
agents or independent contractors or by Employee, and whether or not marked
confidential, including without limitation information relating to the
Company's or its subsidiaries' products and services, business plans,
business acquisitions, processes, product or service research and
development methods or techniques, training methods and other operational
methods or techniques, quality assurance procedures or standards, operating
procedures, files, plans, specifications, proposals, drawings, charts,
graphs, support data, trade secrets, supplier lists, supplier information,
purchasing methods or practices, distribution and selling activities,
consultants' reports, marketing and engineering or other technical studies,
maintenance records, employment or personnel data, marketing data,
strategies or techniques, financial reports, budgets, projections, cost
analyses, price lists, formulae and analyses, employee lists, customer
records, customer lists, customer source lists, proprietary computer
software, and internal notes and memoranda relating to any of the
foregoing.
(b) NONDISCLOSURE OF CONFIDENTIAL INFORMATION. During the term
of this Agreement, Employee shall hold in a fiduciary capacity for the
benefit of the Company all Confidential Information which shall have been
obtained by Employee during Employee's employment (whether prior to or
after the date of this Agreement) and shall use such Confidential
Information solely within the scope of his employment with and for the
exclusive benefit of the Company. For a period of three years after the
date of termination of Employee's employment by the Company, Employee
agrees (i) not to communicate, divulge or make available to any person or
entity (other than the Company) any such Confidential Information, except
upon the prior written authorization of the Company or as may be required
by law or legal process, and (ii) to deliver promptly to the Company any
Confidential Information in his possession, including any duplicates
thereof and any notes or other records Employee has prepared with respect
thereto. In the event that the provisions of any applicable law or the
order of any court would require Employee to disclose or otherwise make
available any Confidential Information, Employee shall give the Company
prompt prior written notice of such required disclosure and an opportunity
to contest the requirement of such disclosure or apply for a protective
order with respect to such Confidential Information by appropriate
proceedings.
<PAGE>
(c) LIMITED COVENANT NOT TO COMPETE. During the term of this
Agreement and for a period of two years thereafter, commencing with the
date of termination of employment by the Employee for Good Reason, by the
Company for any reason other than for Cause, or by the Company for Cause if
the Company chooses to extend to Employee upon termination for Cause the
severance benefits provided in Paragraph 8 hereof and Appendix D hereto,
Employee agrees that, with respect to each State of the United States or
other jurisdiction, or specified portions thereof, in which the Employee
regularly (i) makes contact with customers of the Company or any of its
subsidiaries, (ii) conducts the business of the Company or any of its
subsidiaries or (iii) supervises the activities of other employees of the
Company or any of its subsidiaries, which states and jurisdictions or
portions thereof are identified in Appendix E attached hereto and forming a
part of this Agreement, and in which the Company or any of its subsidiaries
engages in the Company Business on the Date of Termination (collectively,
the "Subject Areas"), Employee will restrict his activities within the
Subject Areas as follows:
(i) Employee will not, directly or indirectly, for himself
or others, own, manage, operate, control, be employed in an executive,
managerial or supervisory capacity by, or otherwise engage or participate
in or allow his skill, knowledge, experience or reputation to be used in
connection with, the ownership, management, operation or control of, any
company or other business enterprise engaged in the Company Business within
any of the Subject Areas; provided, however, that nothing contained herein
shall prohibit Employee from making passive investments as long as Employee
does not beneficially own more than 10% of the equity interests of a
business enterprise engaged in the Company Business within any of the
Subject Areas. For purposes of this paragraph, "beneficially own" shall
have the same meaning ascribed to that term in Rule 13d-3 under the
Securities Exchange Act of 1934.
(ii) Employee will not call upon any customer of the Company
or its subsidiaries for the purpose of soliciting, diverting or enticing
away the business of such person or entity, or otherwise disrupting any
previously established relationship existing between such person or entity
and the Company or its subsidiaries;
(iii) Employee will not solicit, induce, influence or
attempt to influence any supplier, lessor, licensor, potential acquiree or
any other person who has a business relationship with the Company or its
subsidiaries, or who on the date of termination of employment of Employee
is engaged in discussions or negotiations to enter into a business
relationship with the Company or its subsidiaries, to discontinue or reduce
the extent of such relationship with the Company or its subsidiaries; and
(iv) Employee will not make contact with any of the
employees of the Company or its subsidiaries with whom he had contact
during the course of his employment with the Company for the purpose of
soliciting such employee for hire, whether as an employee or independent
contractor, or otherwise disrupting such employee's relationship with the
Company or its subsidiaries.
<PAGE>
(v) Employee further agrees that, for a period of one year
from and after the date of termination of employment, Employee will not
hire, on behalf of himself or any company engaged in the Company Business
with which Employee is associated, any employee of the Company or its
subsidiaries as an employee or independent contractor, whether or not such
engagement is solicited by Employee; provided, however, that the
restriction contained in this subsection (v) shall not apply to Company
employees who reside in, or are hired by Employee to perform work in any
Subject Areas located within the State of Virginia.
Employee agrees that he will from time to time upon the Company's
request promptly execute any supplement, amendment, restatement or other
modification of Appendix E as may be necessary or appropriate to correctly
reflect the jurisdictions which, at the time of such modification, should
be covered by Appendix E and this Paragraph 11(c). Furthermore, Employee
agrees that all references to Appendix E in this Agreement shall be deemed
to refer to Appendix E as so supplemented, amended, restated or otherwise
modified from time to time. Enforcement of this Paragraph 11(c) is subject
to the provisions of Paragraph 11(e) hereof.
(d) CERTAIN PROPRIETARY RIGHTS. Employee agrees to and hereby
does assign to the Company all his interest in and to all inventions,
whether or not patentable, which are made or conceived solely or jointly by
him:
(i) At any time during the term of his employment by the
Company in an executive, managerial, planning, technical research or
engineering capacity (including development, manufacturing, systems,
applied science and sales), or
(ii) During the course of or in connection with his duties
during the term of this Agreement, or
(iii) With the use of time or materials of the Company.
Employee agrees to communicate to the Company or its representatives
all facts known to him concerning such inventions, to sign all rightful
papers, make all rightful oaths and generally to do everything possible to
aid the Company in obtaining and enforcing proper patent protection for all
such inventions in all countries and in vesting title to such inventions
and patents in the Company. For the purpose of this Agreement, the
subject matter of any application for patent naming Employee as a sole or
joint inventor filed during the course of employment or within one year
subsequent to the termination thereof shall be deemed to be an invention
made or conceived by him during the course of his employment by the Company
and assignable to the Company hereunder, unless the Employee establishes by
a preponderance of the evidence that such invention was made or conceived
by him subsequent to termination of his employment hereunder. At the
Company's request (during or after the term of this Agreement) and expense,
the Employee will promptly execute a specific assignment of title to the
Company, and perform any other acts reasonably necessary to implement the
foregoing assignment.
<PAGE>
(e) INJUNCTIVE RELIEF; OTHER REMEDIES. Employee acknowledges
that a breach by Employee of Paragraph 11(b), (c) or (d) would cause
immediate and irreparable harm to the Company for which an adequate
monetary remedy does not exist; hence, Employee agrees that, in the event
of a breach or threatened breach by Employee of the provisions of Paragraph
11(b), (c) or (d) during or after the Employment Term, the Company shall be
entitled to injunctive relief restraining Employee from such violation
without the necessity of proof of actual damage or the posting of any bond,
except as required by non-waivable, applicable law. Nothing herein,
however, shall be construed as prohibiting the Company from pursuing any
other remedy at law or in equity to which the Company may be entitled under
applicable law in the event of a breach or threatened breach of this
Agreement by Employee, including without limitation the recovery of damages
and/or costs and expenses, such as reasonable attorneys' fees, incurred by
the Company as a result of any such breach. It shall be a condition to the
enforceability by the Company of the provisions of this Paragraph 11(c),
however, that the Company pays to and provides for the Employee the full
amount of severance pay and benefits described in Appendix D. Unless the
Company notifies the Employee in the Notice of Termination for Cause that
it intends to enforce the provisions of Paragraph 11(c) and agrees to pay
the Employee the full amount of severance pay and benefits described in
Appendix D, it shall be conclusively presumed for all purposes of this
Agreement that the Company has elected to waive the right to enforce the
provisions of this Paragraph 11(c). Employee acknowledges that the
payments provided under Paragraph 8 and Appendix D are conditioned upon
Employee fulfilling any noncompetition and nondisclosure agreements
contained in Paragraph 11. In the event Employee shall at any time
materially breach any noncompetition or nondisclosure agreements contained
in Paragraph 11, the Company may suspend or eliminate payments under
Paragraph 8 and Appendix D during the period of such breach. Employee
acknowledges that any such suspension or elimination of payments would be
an exercise of the Company's right to suspend or terminate its performance
hereunder upon Employee's breach of this Agreement; such suspension or
elimination of payments would not constitute, and should not be
characterized as, the imposition of liquidated damages.
(f) REQUESTS FOR WAIVER IN CASES OF UNDUE HARDSHIP. In the
event that Employee should find any of the limitations of Paragraph 11(c)
(including without limitation the geographic restrictions of Appendix E) to
impose a severe hardship on Employee's ability to secure other employment,
Employee may make a request to the Company for a waiver of the designated
limitations before accepting employment that otherwise would be a breach of
Employee's promises and obligations under this Agreement. Such request
must be in writing and clearly set forth the name and address of the
organization with that employment is sought and the location, position and
duties that Employee will be performing. The Company will consider the
request and, in its sole discretion, decide whether and on what conditions
to grant such waiver.
<PAGE>
(g) GOVERNING LAW OF THIS PARAGRAPH 11; CONSENT TO JURISDICTION.
Any dispute regarding the reasonableness of the covenants and agreements
set forth in this Paragraph 11, or the territorial scope or duration
thereof, or the remedies available to the Company upon any breach of such
covenants and agreements, shall be governed by and interpreted in
accordance with the laws of the State of the United States or other
jurisdiction in which the alleged prohibited competing activity or
disclosure occurs, and, with respect to each such dispute, the Company and
Employee each hereby irrevocably consent to the exclusive jurisdiction of
the state and federal courts sitting in the relevant State for resolution
of such dispute, and agree to be irrevocably bound by any judgment rendered
thereby in connection with such dispute, and further agree that service of
process may be made upon him or it in any legal proceeding relating to this
Paragraph 11 and/or Appendix E by any means allowed under the laws of such
jurisdiction. Each party irrevocably waives any objection he or it may
have as to the venue of any such suit, action or proceeding brought in such
a court or that such a court is an inconvenient forum. It is the desire
and intent of the parties that the provisions of this Agreement be enforced
to the fullest extent permitted under applicable law, whether now or
hereafter in effect and, therefore, to the extent permitted by applicable
law, the parties hereto waive any provision of applicable law that would
render any provision of this Paragraph 11 invalid or unenforceable.
12. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of:
(a) The Company, and any successors or assigns of the Company,
except that in the event of a Change of Control of the Company as defined
in the Change of Control Agreement, this Agreement shall be superseded by
the Change of Control Agreement. In the event of the assignment by the
Company of this Agreement, the Company shall nevertheless remain liable and
obligated to the Employee in accordance with the terms hereof; and
(b) The Employee, his estate, his executors, administrators,
heirs and beneficiaries.
13. EXPENSES RELATING TO ENFORCEMENT OF RIGHTS. If either party
shall successfully seek to enforce any provision of this Agreement or to
collect any amount claimed to be due hereunder, such successful party shall
be entitled to be reimbursed by the other party for any and all out-of-
pocket expenses, including reasonable attorneys' fees, incurred in
connection with such enforcements and/or collection.
<PAGE>
14. SEVERABILITY. If any term or provision of this Agreement
(including without limitation those contained in an Appendix hereto), 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 temporally, spatially or
otherwise 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.
15. NOTICES. Any notice or other communication required under this
Agreement shall be in writing, shall be deemed to have been given and
received when delivered in person, or, if mailed, shall be deemed to have
been given when deposited in the United States mail, first class,
registered and certified, return receipt requested, with proper postage
prepaid, and shall be deemed to have been received on the third business
day thereafter, and shall be addressed as follows:
If to the Company, addressed to:
Avondale Industries, Inc.
5100 River Road
Avondale, Louisiana 70094
If to the Employee, addressed to:
R. Dean Church
13 Michael Drive
Luling, Louisiana 70070
or such other address as to which any party hereto may have notified
the other in writing.
16. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Louisiana without
regard to the principles of conflict of laws, except as expressly provided
in Paragraph 11(g) above with respect to the resolution of disputes arising
under, or the Company's enforcement of Paragraph 11 of this Agreement.
17. ENTIRE AGREEMENT. This document contains or refers to the entire
arrangement or understanding between the parties relating to the employment
of the Employee by the Company prior to a Change of Control of the Company,
as defined in the Change of Control Agreement. This Agreement, including
Appendices A through E, inclusive, all of which are herein incorporated by
reference and made a part hereof, contains or refers to the entire
arrangement or understanding between the Employee and the Company relating
to the employment of the Employee by the Company. No provision of the
Agreement, including the Appendices, may be modified or amended except by
an instrument in writing signed by or for both parties hereto.
<PAGE>
AVONDALE INDUSTRIES, INC.
By: /s/ Hugh A. Thompson
------------------------
Hugh A. Thompson
Compensation Committee Chairman
/s/ R. Dean Church
----------------------
R. Dean Church
<PAGE>
LIST OF APPENDICES
DESCRIPTION NUMBER OF PAGES
Appendix A Benefit Plan Structure 5
Appendix B Disability Benefits 1
Appendix C Death Benefits 1
Appendix D Severance Benefits 3
Appendix E Subject Areas under Limited 1
Covenant Not to Compete
<PAGE>
APPENDIX "A"
AVONDALE INDUSTRIES, INC.
AVONDALE SERVICES CORPORATION
EXECUTIVE GROUP
Effective Date: 1-1-98
COVERAGE DESCRIPTION
EMPLOYEE LIFE Two times base salary and bonus
Optional Coverage - additional one or two times base
salary and bonus
Maximum Coverage - Two million dollars
DEPENDENT LIFE $2,000.00 Spouse - Optional $100,000.00
$1,000.00 Dependent (over six months old)
$100.00 Dependent (less than six months old)
Accidental Death and Death - Same as Life (Employee Only)
DISMEMBERMENT Dismemberment - Benefit Schedule
Business According to rate of pay - Maximum $50,000.00
TRAVEL ACCIDENT
TRAVEL ACCIDENT (SALARIED) 5 Times Annual Salary - Maximum $500,000.00
RETIREE LIFE One-half of Life Insurance in force at time of
retirement
SHORT TERM DISABILITY Schedule based on length of service (see Page 2)
LONG TERM DISABILITY 60% of monthly base salary, after 180 day waiting
period.
Maximum $15,000 per month coordinated with Disability
Social Security Benefit.
<PAGE>
HEALTH CARE 100% Hospital - private room rate plus miscellaneous
expenses
100% Hospital Medical Expenses - (doctor's visits to
hospital)
100% Surgical Expenses
100% Laboratory and X-ray Expenses
100% Vision and Hearing Care Expenses
100% Dental and Orthodontia
100% Annual Physicals
100% Psychiatric and Nervous Care - expenses up to
$6,500.00 per year per individual
No Life-Time Maximum
Subject to applicable employee contribution requirement
<PAGE>
SHORT TERM DISABILITY
Benefits begin on first day absent due to a non-occupational injury or
illness. Original medical documentation required if absent five or more
consecutive working days.
Benefits will be reduced by any amount received from Social Security.
Successive periods of disability separated by less than two (2) weeks of
full-time work considered as one continuous period of disability, unless
later disability due to a different cause.
Benefits will be paid up to a maximum of twenty-six (26) weeks, based on
the following schedule:
YEARS OF SERVICE FULL SALARY UP TO HALF SALARY UP TO
Less than 1 Year 4 Weeks 0 Weeks
1 Year 4 Weeks 22 Weeks
2 Years 6 Weeks 20 Weeks
3 Years 8 Weeks 18 Weeks
4 Years 10 Weeks 16 Weeks
5 Years 12 Weeks 14 Weeks
6 Years 14 Weeks 12 Weeks
7 Years 16 Weeks 10 Weeks
8 Years 18 Weeks 8 Weeks
9 Years 20 Weeks 6 Weeks
10 Years 22 Weeks 4 Weeks
11 Years 24 Weeks 2 Weeks
12 Years or more 26 Weeks 0 Weeks
JURY DUTY
Pays difference between employee's base pay and jury pay received, not to
exceed eight hours pay per day.
BLOOD BANK
To be eligible, must be a participant in Group Health Insurance Program.
In joining the Blood Bank Program, the employee agrees to donate a unit of
blood as requested at irregular intervals. The Program provides the
employee and insured dependents with blood for as long as the employee
remains in the Program.
HOLIDAYS
Eight Paid Holidays - New Years Day, Mardi Gras, Good Friday, July Fourth,
Labor Day, Thanksgiving Day, Day After Thanksgiving and Christmas.
Eligible upon completion of thirty days service.
<PAGE>
VACATION
Vacation year is from January 1 to December 31. Upon completion of one
full year of service, eligible for two weeks of vacation. An employee
joining the Company after January 1 but prior to July 1 will be eligible
for one week's vacation the following January 1. Vacation time may not be
carried over from one vacation period to the next. Vacation time may be
taken in one-hour increments. Beginning with ten full years of service,
eligible for additional days of vacation, up to a maximum of five
additional days, based on the following schedule:
YEARS OF SERVICE ADDITIONAL DAYS OF VACATION
10 Years 1 Day
11 Years 2 Days
12 Years 3 Days
13 Years 4 Days
14 Years 5 Days
SICK/PERSONAL TIME
Eligible for twenty-four hours per calendar year. Time may be taken in
one-hour increments. Unused time may not be carried over to the next year.
FUNERAL LEAVE
None
TUITION ASSISTANCE
Eligible upon completion of one year's service. Only courses directly
related to employee's position and taken at an accredited institution will
be considered. Approval must be obtained prior to the start of the course.
Reimbursement will be made for the cost of tuition only, and will be based
on the following schedule:
COURSE LEVEL FINAL GRADE REIMBURSEMENT PERCENTAGE
Under-Graduate Not Lower Than "C" 100%
Post-Graduate Not Lower Than "B" 100%
AUTOMOBILE ALLOWANCE
$600 per month
RETIREMENT
Formula - 1.5% of final average compensation, multiplied by years of
credited service, less Massachusetts Mutual Annuity and equivalent
actuarial value of any shares in ESOP account.
Early Retirement Benefits available at age 55 with ten years service,
actuarially reduced by years and months early.
<PAGE>
SUPPLEMENTAL RETIREMENT PLAN
Vesting: 100% vesting upon completion of ten (10) years service
Formula: 15% of final average compensation.
Early Retirement Benefits available at Age 55 with ten (10) years service,
actuarially reduced by years and months early
EXECUTIVE EXCESS RETIREMENT PLAN
If designated as a participant by the Board of Directors.
Purpose of the plan is to reimburse participants for benefits not payable
under the Pension Plan and ESOP because of limitations in the Internal
Revenue Code and the Pension Plan.
Benefits paid upon attainment of age 75 or upon retirement, if earlier.
Benefit is unfunded.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
Plan Year - September 1 to August 31
Eligibility - 1st of month following one year of service
Compensation - Total salary, excluding severance pay, moving expenses and
non-cash contribution
Stock Allocation - Each year the Trustees divide the available shares of
stock among eligible participants, based on each participant's
compensation. These allocated shares are held in the participant's ESOP
account. Must be on payroll last pay period of each plan year to receive
allocation.
Distribution - (1) Retirement - Age 55 or later
(2) Total & Permanent Disability with Social Security Award
(3) Death
Vesting - Employees who were eligible to receive Special Shares were 100%
vested.
Vesting for Loan Shares is as follows:
Less than 4 years 0%
4 years but less than 5 40%
5 years but less than 6 50%
6 years but less than 7 60%
7 years but less than 8 70%
8 years but less than 9 80%
9years but less than 10 90%
10 years or more 100%
<PAGE>
APPENDIX B
DISABILITY BENEFIT
In the event of termination by the Company of the Employee's
employment on account of disability pursuant to Paragraph 6 of the
Agreement, the disability benefit to be provided to the Employee shall be
determined under this Appendix, unless a greater or more favorable benefit
is required to be provided pursuant to the provisions of Subparagraph 4(c)
of the Agreement and/or Appendix A.
1. CONTINUATION OF FULL ANNUAL SALARY: The full amount of the
Employee's annual salary (pursuant to paragraph 4(a) of this Agreement)
shall be continued according to the following formula:
(i) If the Employee's credited service for the Company totals
(5) five years or less his annual salary shall be continued for twelve (12)
months commencing with the month following such termination of employment;
and
(ii) If the Employee's credited service for the Company totals
more than five (5) years, the payment period referred to in (i) shall be
increased by two-tenths (2/10) of a year for each year of credited service
in excess of five (5) up to a maximum payment period of five (5) years.
Thus, if the Employee's employment is terminated on account of disability
at a time when he has twelve (12) years of credited service, the Employee's
full annual salary would be continued for 2.4 years following such
termination of employment and an Employee with twenty-five (25) or more
years of credited service as of the termination of his employment on
account of disability will receive his full annual salary for five (5)
years.
2. CONTINUATION OF PARTIAL ANNUAL SALARY. Following the expiration
of the period calculated pursuant to the preceding Paragraph 1, the
Employee will receive long term disability benefits equal to sixty percent
(60%) of his full annual salary subject to such limitations as are
contained in Appendix A.
3. LIMITATIONS. The disability benefit will in any event
discontinue and terminate upon the death of the Employee or upon the date
of his Retirement as defined in subparagraph 9(a) of the Agreement would
have occurred.
4. OTHER BENEFITS. Other benefits which may be provided or
continued for the Employee following the termination of his employment on
account of disability depend upon the terms of the Plan under which such
benefits are provided or required to be provided.
<PAGE>
APPENDIX C
DEATH BENEFITS
The death benefits to be provided by the Company subsequent to the
death of the Employee shall be determined by reference to the plan or plans
under which such benefits are provided. Reference is made to subparagraph
4(c) of the Agreement and to Appendix A.
<PAGE>
APPENDIX D
SEVERANCE BENEFITS
Upon the termination of the Employee's employment under any
circumstance requiring the Company to pay to and provide for the Employee
the severance pay and other benefits set forth in this Appendix D, the
Company shall be obligated to pay to and/or provide for the Employee the
following compensation and other benefits:
(a) PAYMENT IN LIEU OF COMPENSATION: The Company shall pay to the
Employee in cash an amount equal to the product of (i) and (ii); where (i)
shall equal the sum of (A) the Employee's annual salary and (B) the
Employee's annual incentive bonus during the twelve (12) month period
ending with the close of the month in which such termination of employment
occurs (the "Date of Termination") , divided by twelve (12) ; and where
(ii) shall be the lesser of (x) thirty-six (36), (y) six (6), plus two (2)
for each twelve (12) months of credited service of the Employee for the
Company (determined in accordance with subparagraph 4(c) of the Agreement)
through the Date of Termination, or (z) the number of months until the
Employee's normal retirement date, as defined in the Avondale Industries,
Inc. Pension Plan (or any successor, or substitute plan or plans of the
Company or of any subsidiary of the Company under which the Employee may be
a participant, hereinafter the "Pension Plan"). The number determined
under clause (ii) is sometimes herein referred to as the "Measuring
Period".
(b) ACCELERATION OF STOCK OPTIONS: Immediately following such Date
of Termination, all options and stock appreciation rights granted to
Employee under the 1997 Stock Incentive Plan or any other stock option or
similar plan before or after the date hereof (collectively referred to
herein as "Stock Option Plans") shall immediately become fully exercisable
and execution of this Agreement shall constitute an amendment to any stock
option agreement to so provide and an agreement and undertaking by the
Company to take such action as may be required to cause any and all options
or rights granted, or to be granted, to Employee thereunder to make them
consistent herewith.
(c) PAYMENT FOR NON-VESTED RETIREMENT BENEFIT: In addition to the
vested portion of the Employee's interest under any employee benefit plan
maintained by the Company as a qualified plan pursuant to Section 401(a) of
the Internal Revenue Code of 1986, as amended, to which the Company or any
subsidiary has made contributions for the Employee's account which are not
otherwise expressly provided for herein, if the Employee is not fully
vested under any such plan or plans, the Company shall pay to the Employee
in cash an amount equal to the then present value of the actuarial
equivalent (within the meaning of the following Paragraph (d)) of the non-
vested portion of the Employee's account, to the extent that such account
would have become vested based on additional credited service for the
Company, if the Employee had remained in the employ of the Company (or any
subsidiary) for an additional period of months equal to the Measuring
Period.
<PAGE>
(d) SUPPLEMENTAL RETIREMENT BENEFIT: In addition to any retirement
or severance benefit to which the Employee is entitled under the Pension
Plan, the Employee shall receive in cash, an amount equivalent of the
excess of (i) over (ii), where (i) equals the aggregate amount of the
retirement pension (calculated as a straight life annuity payable to
Employee on his normal retirement date) to which Employee would have been
entitled under the terms of the Pension Plan and any other qualified or
non-qualified defined benefit plan maintained by the Company and covering
the Employee, if Employee were fully vested thereunder (without regard to
(w) whether the Employee shall actually have completed the number of years
of credited service required to qualify for full vesting under such plans,
(x) any limitation on the amount of compensation used in the calculation of
the regular pension thereunder, (y) any offset thereunder for severance
allowances payable hereunder or (z) any amendment to such plans made prior
to the Employee's Date of Termination, which amendment adversely affects in
any manner the computation of retirement benefits under such plans) and had
accumulated an additional period of months of credited service after the
Date of Termination equal to the Measuring Period (but in no event shall
Employee be deemed to have accumulated an additional period of credited
service subsequent to Employee's sixty-fifth (65th) birthday), and, where
(ii) equals the amount of the retirement pension (calculated as a straight
1ife annuity payable to Employee on his normal retirement date),if any, to
which Employee is entitled pursuant to the provisions of the Pension Plan
and such other plans. For purposes of Clause (i) of this Paragraph (d),
the amount payable pursuant to Paragraph (a) of this Appendix D, shall be
deemed to represent the Employee's earnings for the period of months equal
to the Measuring Period, and for purposes of this Paragraph (d), "actuarial
equivalent" shall be determined using the same methods and assumptions
utilized under the Pension Plan immediately prior to the Date of
Termination. All other terms used in this Paragraph (d) shall have the
same meanings, respectively, as such terms have in the Pension Plan, unless
otherwise required by the context.
<PAGE>
(e) OTHER BENEFITS: The Company shall also maintain in full force
and effect, for the continued benefit of the Employee and his dependents,
for a period terminating on the earliest of (i) a period of months after
the Date of Termination equal to the Measuring Period; (ii) the
commencement date of equivalent benefits for the Employee from a new
employer; or (iii) the Employee's normal retirement date under the
Company's Pension Plan, after which the terms of the Pension Plan shall
govern; all insured and self-insured employee benefit plans in which the
Employee is entitled to participate immediately prior to the Date of
Termination; provided that the Employee's continued participation is
possible under the general terms and provisions of such Plans (and any
applicable funding media) and the Employee continues to pay an amount equal
to Employee's regular contribution for such participation. In the event
that the Employee participation in any such Plan is barred, the Company, at
its sole cost and expense, shall arrange to have issued for the benefit of
Employee and his dependents individual policies of insurance providing
benefits substantially similar (on an after-tax basis) to those which the
Employee would have been entitled to receive under such Plan or Plans
pursuant to this Paragraph (e) if such participation were not barred or, if
such insurance is not available at a reasonable cost to the Company, the
Company shall otherwise provide the Employee and his dependents with
equivalent benefits (on an after-tax basis) and the Employee shall not be
required to pay any premiums or other charges in an amount greater than
that which the Employee would have paid in order to participate in such
Plans. If, at the end of a period of months after the Date of Termination
equal to the Measuring Period, the Employee is not receiving equivalent
benefits from a new employer, the Company shall arrange, at its sole cost
and expense, to enable Employee to convert the Employee's and his
dependents' coverage under such Plans to individual policies or programs
upon the same terms as employees of the Company may apply for until the
Employee is able to receive equivalent benefits from a source other than
the Company.
(f) MITIGATION: The Employee shall not be required to mitigate the
amount of any payment or benefit provided for in this Appendix D by seeking
other employment or otherwise, nor (except as specifically provided in
Paragraph (e) above) shall the amount of any payment or benefit provided
for in this Appendix D be reduced by any compensation or benefit earned by
Employee as a result of employment by another employer after the Date of
Termination, or otherwise.
(g) MANNER OF PAYMENT: All payments which are required to be made in
cash under Paragraphs (a), (c) or (d), above, shall be paid on the Date of
Termination, or within five (5) business days thereafter, unless the
Employee has made a Deferred Payment Election with respect to such
payment(s) pursuant to the succeeding Paragraph (h).
<PAGE>
(h) ELECTION TO DEFER PAYMENT: Upon entering into this Agreement and
for a period of fourteen (14) days following each anniversary of the date
hereof (the "Election Period"), the Employee may, in writing, direct the
Company that any amounts which become payable to the Employee pursuant to
Paragraphs (a), (c) and (d), above, shall be paid to the Employee in three
(3) equal annual installments, with the first of such installments to be
paid not later than five (5) business days after the Date of Termination
and successive installments paid on the next two (2) succeeding
anniversaries of the Date of Termination or the next following business day
if such date is not a business day (the "Deferred Payment Election"). A
Deferred Payment election, once made, shall be irrevocable except during an
Election Period.
(i) EFFECT ON OTHER BENEFITS: Nothing contained in this Appendix D
shall be construed or interpreted as limiting any rights or benefits
payable to or for the Employee under any other provision of this Agreement.
<PAGE>
APPENDIX E
TO EMPLOYMENT AGREEMENT
BETWEEN AVONDALE INDUSTRIES, INC.
AND
R. DEAN CHURCH
Jurisdictions In Which Competition
Is Restricted As Provided
In Paragraph 11(c)
A. STATES
1. LOUISIANA -- The following parishes in the State of Louisiana:
Orleans and Jefferson
2. MISSISSIPPI -- The following counties in the State of
Mississippi:
Harrison
as well as any other counties in the State of Mississippi in
which the Employee regularly (a) makes contact with customers of
the Company or any of its subsidiaries, (b) conducts the business
of the Company or any of its subsidiaries or (c) supervises the
activities of other employees of the Company or any of its
subsidiaries as of the date of termination of employment.
3. VIRGINIA-- The following counties in the State of Virginia:
Arlington
as well as any other counties in the State of Virginia in which
the Employee regularly (a) makes contact with customers of the
Company or any of its subsidiaries, (b) conducts the business of
the Company or any of its subsidiaries or (c) supervises the
activities of other employees of the Company or any of its
subsidiaries as of the date of termination of employment.
Agreed to and Accepted:
Avondale Industries, Inc. Employee
By: /s/ HUGH A. THOMPSON /s/ R. DEAN CHURCH
-------------------- ------------------
Its: Compensation Committee Chairman R. Dean Church
Date: MARCH 23, 1998 Date: MARCH 5, 1998
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 23rd day of March,
1998, by and between AVONDALE INDUSTRIES, INC., a Louisiana corporation
maintaining its principal office at 5100 River Road, Avondale, Louisiana
70094 (the "Company") and Thomas H. Doussan, now residing at 2601 Metairie
Heights, Metairie, Louisiana 70002 (hereinafter called the "Employee").
W I T N E S S E T H
WHEREAS, the Employee is employed by the Company in an executive
capacity, and the Company desires to ensure that the Employee will be
available to provide executive services to the Company in the future, which
services are significant to the Company's long range prospects;
WHEREAS, the Company and Employee desire, among other things, to
prohibit Employee from disclosing or utilizing, outside the scope and term
of his employment, any non-public, confidential or proprietary information,
knowledge and data relating to the business and operations of the Company
or its subsidiaries received by Employee during the course of his
employment, and to restrict the ability of Employee to compete with the
Company or its subsidiaries for a limited period of time; and
WHEREAS, to induce the Employee to agree to provide such services on
the terms provided herein, the Company is offering to provide the Employee
with the compensation, benefits and security provided for in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements
herein contained, the parties hereto agree as follows:
1. EMPLOYMENT/CAPACITY/TERM. The Company agrees to and does hereby
employ the Employee, and the Employee agrees to be employed by the Company
upon the terms and conditions set forth in this Agreement. Such employment
shall be in a managerial and executive capacity in the operation of the
business of the Company and/or a subsidiary, subject to the supervision of
the Board of Directors of the Company. Such employment shall commence on
the date hereof and shall continue through December 31, 2000, and from year
to year thereafter subject to the right of the Employee or the Company to
terminate such employment as of December 31, 2000, or any subsequent
December 31, by written notice given to the other party at least sixty (60)
days prior to such termination date stating an intention to so terminate
such employment. Termination by either party, in accordance with the
provisions of the preceding sentence, shall not require a statement of the
reason or cause for such termination and shall not be deemed a breach or
violation of this Agreement by the party giving such notice. As used in
this Agreement, the phrase "term of this Agreement" shall be deemed to
include the period subsequent to the date hereof and prior to termination
of this Agreement; however, such phrase shall not be construed as limiting
the enforceability by either party of any rights which survive termination
of this Agreement.
<PAGE>
2. TIME AND EFFORT/ABSENCES. During the term of this Agreement, the
Employee shall devote his entire time and attention during normal business
hours to the business of the Company, and its subsidiaries, subject to the
supervision of the Board of Directors of the Company, and he shall not
engage in any other business activity whether or not such business activity
is pursued for gain, profit or other pecuniary advantage, but this
restriction shall not be construed to restrict the Employee (i) from
performing services as a member of the Board of Directors, Board of
Trustees or the like for any non-profit or for profit entity whether or not
the Employee receives compensation therefor, provided that, such services
do not unreasonably interfere with the ability of the Employee to perform
the services and discharge the responsibilities required of him under this
Agreement (it generally being agreed and understood that the quantity and
quality of the services heretofore performed by the Employee for non-profit
and for profit entities would not constitute a violation of the aforesaid
restriction), and (ii) from investing his assets in such form or manner as
will not require any services on the part of the Employee in the operation
of the business of the entity in which such investments are made. The
employee shall be excused from rendering his services during reasonable
vacation periods and during other reasonable temporary absences, all as
authorized from time to time by the Board of Directors of the Company. At
the date hereof, the Employee maintains his residence at 2601 Metairie
Heights, Metairie, Louisiana 70002 and performs services for the Company in
New Orleans, Louisiana; it is understood that, without his consent, the
Employee will not be required to relocate to a different location to
discharge his responsibilities under this Agreement.
3. CORPORATE OFFICES. If elected, the Employee will serve, without
additional compensation, as a director of the Company or as an officer or
director of any subsidiary of the Company.
4. SALARY/BONUS/OTHER BENEFITS. In consideration of the services
and duties to be rendered and performed by the Employee during the term of
this Agreement, including the assumption of the duties and responsibilities
of an executive officer of the Company, the Company agrees to pay and
provide for the Employee the compensation and benefits described below:
(a) An annual salary, payable in equal monthly installments, in
the amount of One Hundred Fifty Thousand Six Hundred Seventy-Two and 00/100
($150,672) or in such greater amount as may from time to time be fixed by
the Board of Directors or the Compensation Committee of the Board of
Directors of the Company. The Employee's annual salary shall never be
reduced.
(b) An annual incentive bonus in such amount as may from time to
time be fixed by the Board of Directors or the Compensation Committee of
the Board of Directors, provided that, the annual incentive bonus for any
period of less than twelve (12) months (other than for the period from the
date hereof through December 31, 1998) shall be prorated. The annual
incentive bonus shall be paid to the Employee (or to his personal
representative in the event of his death) in a lump sum prior to the
expiration of the period for which such bonus is payable or within 45 days
following the expiration of such period.
<PAGE>
(c) OTHER BENEFITS. All other payments and/or benefits
described or provided for in this Agreement, including the Appendices
hereto. It is intended that such payments and/or benefits shall provide
the Employee and/or his personal representative(s) and/or beneficiaries, as
the case may be, with benefits which will be at least as favorable as the
benefits which on December 31, 1997 were provided for the Employee by the
Company. In addition, the Employee shall also be eligible for and shall
participate in any other employee benefit plan, including, any pension,
supplemental pension, retirement, supplemental retirement, profit-sharing,
thrift, bonus, incentive, deferred compensation, stock option or stock
appreciation or other employee benefit plan, including any life insurance,
accident, medical, disability, health or relocation plan or policy (all of
which are included by reference to the term "Plan") maintained by the
Company for its employees, generally, or for its senior executives, in
particular, on the same basis and subject to the same requirements and
limitations as may be made applicable to other senior executive employees
of the Company, provided that participation in and the terms of any
participation in the Avondale Industries, Inc. 1997 Stock Incentive Plan or
any successor plan shall be at the discretion of the Compensation Committee
as provided in such plans. The benefit plan structure and benefits which
shall be provided for the Employee and other senior executive employees of
the Company are described in Appendix A hereto. Nothing herein, however,
shall be construed as limiting the right of the Employee to additional or
other and greater benefits than are described in said Appendix A, if the
provisions of this Agreement obligate the Company to provide such other or
greater benefits, and in particular, but without limitation by the
specification hereof, the benefits described in Paragraphs 6, 7, 8 and 9
hereof and Appendices B, C and D hereto. In addition, the Company agrees
that where credited service of the Employee for the Company is relevant in
determining eligibility for or benefits under any Plan, the Employee's
credited service for the Company shall be determined to include service for
any parent, subsidiary or affiliate of the Company or for a predecessor of
the Company.
5. EXPENSES. The Employee shall be reimbursed for out-of-pocket
expenses incurred from time to time on behalf of the Company or any
subsidiary or in the performance of his duties under this Agreement, upon
the presentation of such supporting documents and forms as the Company
shall reasonably request.
6. DISABILITY/DISABILITY BENEFIT. In the event that the Employee is
incapable because of physical or mental illness of rendering services of
the character contemplated hereby, for a period of six (6) consecutive
months, the Board of Directors of the Company may determine that the
Employee has become disabled. In the event of such a determination of
disability, the Company shall have the continuing right and option while
such disability continues by notice in writing to the Employee to terminate
this Agreement effective thirty (30) days after such notice of termination
is so given, unless within such thirty (30) day period, the Employee
resumes rendering full-time services of the character contemplated hereby.
The incapacity due to physical or mental illness to render the services of
the character contemplated hereby, shall not constitute a breach of this
Agreement by the Employee. If this Agreement is terminated by the Company
as a result of a determination of disability, as aforesaid, the Company
shall be obligated to pay to the Employee the disability benefits described
in Appendix B hereto.
<PAGE>
7. DEATH/DEATH BENEFIT. In the event of the death of the Employee
during the term of this Agreement, this Agreement will terminate and the
Employee's then rate of annual salary and an annual incentive bonus,
(prorated in accordance with subparagraph 4(b) hereof) shall be paid to the
Employee's personal representative through the last day of the month in
which such death occurs. In addition, the Company shall be obligated to
provide the Employee, his personal representative(s) and/or his
beneficiaries with the death benefits described in Appendix C hereto.
8. SEVERANCE PAY. If the employment of the Employee is terminated
at any time during the period that this Agreement is in effect (i) by the
Employee for Good Reason (as defined in Paragraph 9 hereof) or (ii) by the
Company for any reason other than for Cause (as hereafter defined) or other
than in accordance with Paragraph 6 hereof on account of the disability of
the Employee, the Company shall be obligated to pay to the Employee the
severance pay and benefits described in Appendix D attached hereto.
Termination of the Employee's employment on account of his death or
Retirement (as hereafter defined) will not be considered a termination of
the Employee's employment by the Company and will not require the Company
to pay and provide any severance pay or benefits pursuant to Appendix D.
Accordingly, the Company acknowledges that if the employment of the
Employee is terminated by it for any reason during the period that this
Agreement is in effect other than for Cause or other than on account of the
disability of the Employee in accordance with Paragraph 6 hereof, the
Company will be obligated to pay and provide the severance pay and benefits
described in Appendix D, in order to reinforce and encourage the continued
loyalty, attention, and dedication of the Employee to the Company's
business and affairs without the concerns which normally arise from the
possibility of a loss of employment security. As used herein, the terms
"Retirement" and "Cause" shall have the following meanings, respectively:
(a) RETIREMENT. Termination of the Employee's employment
"Retirement" shall mean termination on the Employee's normal retirement
date in accordance with the terms of the Avondale Industries, Inc. Pension
Plan (or any successor or substitute plan or plans of the Company or of any
subsidiary of the Company under which the Employee may be a participant);
and
<PAGE>
(b) CAUSE. Termination by the Company of the Employee's
employment for "Cause" shall mean termination as a result of (i) the
willful and continued failure by the Employee to perform substantially the
services contemplated by this Agreement (other than any such failure
resulting from the Employee's incapacity due to physical or mental illness)
after a written demand for substantial performance is delivered to the
Employee by a member or representative of the Board of Directors of the
Company which specifically identifies the manner in which it is alleged
that the Employee has not substantially performed such services, or (ii)
the willful engaging by the Employee in gross misconduct which is
materially and demonstrably injurious to the Company; provided that, no
act, or failure to act, on the Employee's part shall be considered
"willful" unless done, or omitted to be done, in bad faith and without
reasonable belief that such action or omission was in, or not opposed to,
the best interests of the Company. It is also expressly understood that
the Employee's attention to or engagement in matters not directly related
to the business of the Company shall not provide a basis for termination
for Cause if such attention or engagement is authorized by the terms of
this Agreement or has otherwise been approved by the Board of Directors of
the Company. Anything in this Agreement to the contrary notwithstanding,
the Employee's employment may not be terminated 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 the purpose (after reasonable notice to the Employee and an opportunity
for the Employee, together with his counsel, to be heard before the Board),
finding that in the good faith opinion of the Board the Employee was guilty
of the conduct set forth in clause (i) or (ii) of this subparagraph (b) and
specifying the particulars thereof in detail.
9. TERMINATION BY THE EMPLOYEE FOR GOOD REASON. The termination by
the Employee of his employment for "Good Reason" shall be deemed a
justifiable termination of his employment and shall excuse the Employee
from the obligation to render services as provided in Paragraph 2 hereof.
In that event (i) the full amount of the Employee's annual salary and
annual incentive bonus, together with all other benefits required to be
provided under this Agreement, shall be continued until the next succeeding
December 31st as of which the Company could have terminated the Employee's
employment pursuant to Paragraph 1 hereof without such termination
constituting a breach or violation of this Agreement; and (ii) the
Employee's employment shall be deemed to terminate on such December 31st.
As used herein, the term "Good Reason" shall mean:
(a) a change in the Employee's status, title or position(s) as
an officer of the Company which, in his reasonable judgment, does not
represent a promotion from or enhancement of his status, title and position
as an executive officer, or the assignment by the Board of Directors of the
Company to the Employee of any duties or responsibilities which, in his
reasonable judgment, are inconsistent with such status, title or position,
or any removal of the Employee from or any failure to reappoint or reelect
him to such position, except in connection with a justifiable termination
by the Company of the Employee's employment for Cause or on account of
disability, the Retirement or death of the Employee or the termination by
the Employee of his employment other than for Good Reason;
<PAGE>
(b) a reduction in the Employee's annual salary or a failure by
the Company to pay to the Employee any installment of the annual salary
and/or the annual incentive bonus required pursuant to Paragraph 4 hereof,
which failure continues for a period of 20 days after written notice
thereof is given by the Employee to the Company;
(c) the failure by the Company to adopt, continue or maintain in
effect, any Plan or benefit which is required to be provided by the Company
pursuant to this Agreement (unless the Company provides the Employee with
the equivalent or at least substantially similar benefits under one or more
other Plans) other than as a result of the normal expiration of such Plan;
or the taking of any action or the failure to act by the Company, which
could adversely affect the Employee's continued participation in any such
Plan(s) or the ability of the Employee to enjoy or realize upon any
material benefit intended, or which could materially reduce the Employee's
benefits under any such Plan(s) or deprive him of any material benefit then
enjoyed by the Employee;
(d) the Company's requiring the Employee to be based anywhere
other than the New Orleans, Louisiana metropolitan area, except for
required travel on the Company's business to an extent substantially
consistent with the business travel obligations which the Employee
undertook on behalf of the Company prior to such required change;
(e) the failure by the Company to obtain the assumption of this
Agreement by any successor of the Company (other than by merger or
consolidation); provided, however, that upon a Change of Control of the
Company, as defined in the Change of Control Agreement between the Employee
and the Company (the "Change of Control Agreement"), the obligations of a
successor hereunder shall be limited to the obligations of the Company
hereunder through the date of the Change of Control after which date the
Change of Control Agreement shall govern.
(f) any purported termination by the Company of the Employee's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Paragraph 10 hereof, or which is not
justified as a termination of the Employee's employment based on Cause; and
for purposes of this Agreement, no such purported termination shall be
effective; or
(g) any refusal by the Company to allow the Employee to attend
to matters or engage in activities not directly related to the business of
the Company which is permitted by this Agreement or which, prior thereto,
was permitted by the Board of Directors of the Company.
10. NOTICE OF TERMINATION. Any purported notice of termination of
the Employee's employment (other than a Notice given by either pursuant to
Paragraph 1 hereof) shall be communicated in a writing delivered to the
other party as provided in Paragraph 14 hereof, (hereinafter a "Notice of
Termination"). For purposes of this Agreement a "Notice of Termination"
shall mean a notice which specifies the termination provision relied upon
by the party giving such notice and shall set forth in detail such facts
and circumstances claimed by said party to provide a justified basis for
termination of the Employee's employment under the provision(s) so
indicated.
<PAGE>
11. NONDISCLOSURE, NONCOMPETITION AND PROPRIETARY RIGHTS.
(a) CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
(i) "Company Business" means the design, construction and
overhaul of both military and commercial ships.
(ii) "Confidential Information" means any information,
knowledge or data of any nature and in any form (including information that
is electronically transmitted or stored on any form of magnetic or
electronic storage media) relating to the past, current or prospective
business or operations of the Company and its subsidiaries, that at the
time or times concerned is not generally known to persons engaged in
businesses similar to those conducted or contemplated by the Company and
its subsidiaries (other than information known by such persons through a
violation of an obligation of confidentiality to the Company), whether
produced by the Company and its subsidiaries or any of their consultants,
agents or independent contractors or by Employee, and whether or not marked
confidential, including without limitation information relating to the
Company's or its subsidiaries' products and services, business plans,
business acquisitions, processes, product or service research and
development methods or techniques, training methods and other operational
methods or techniques, quality assurance procedures or standards, operating
procedures, files, plans, specifications, proposals, drawings, charts,
graphs, support data, trade secrets, supplier lists, supplier information,
purchasing methods or practices, distribution and selling activities,
consultants' reports, marketing and engineering or other technical studies,
maintenance records, employment or personnel data, marketing data,
strategies or techniques, financial reports, budgets, projections, cost
analyses, price lists, formulae and analyses, employee lists, customer
records, customer lists, customer source lists, proprietary computer
software, and internal notes and memoranda relating to any of the
foregoing.
(b) NONDISCLOSURE OF CONFIDENTIAL INFORMATION. During the term
of this Agreement, Employee shall hold in a fiduciary capacity for the
benefit of the Company all Confidential Information which shall have been
obtained by Employee during Employee's employment (whether prior to or
after the date of this Agreement) and shall use such Confidential
Information solely within the scope of his employment with and for the
exclusive benefit of the Company. For a period of three years after the
date of termination of Employee's employment by the Company, Employee
agrees (i) not to communicate, divulge or make available to any person or
entity (other than the Company) any such Confidential Information, except
upon the prior written authorization of the Company or as may be required
by law or legal process, and (ii) to deliver promptly to the Company any
Confidential Information in his possession, including any duplicates
thereof and any notes or other records Employee has prepared with respect
thereto. In the event that the provisions of any applicable law or the
order of any court would require Employee to disclose or otherwise make
available any Confidential Information, Employee shall give the Company
prompt prior written notice of such required disclosure and an opportunity
to contest the requirement of such disclosure or apply for a protective
order with respect to such Confidential Information by appropriate
proceedings.
<PAGE>
(c) LIMITED COVENANT NOT TO COMPETE. During the term of this
Agreement and for a period of two years thereafter, commencing with the
date of termination of employment by the Employee for Good Reason, by the
Company for any reason other than for Cause, or by the Company for Cause if
the Company chooses to extend to Employee upon termination for Cause the
severance benefits provided in Paragraph 8 hereof and Appendix D hereto,
Employee agrees that, with respect to each State of the United States or
other jurisdiction, or specified portions thereof, in which the Employee
regularly (i) makes contact with customers of the Company or any of its
subsidiaries, (ii) conducts the business of the Company or any of its
subsidiaries or (iii) supervises the activities of other employees of the
Company or any of its subsidiaries, which states and jurisdictions or
portions thereof are identified in Appendix E attached hereto and forming a
part of this Agreement, and in which the Company or any of its subsidiaries
engages in the Company Business on the Date of Termination (collectively,
the "Subject Areas"), Employee will restrict his activities within the
Subject Areas as follows:
(i) Employee will not, directly or indirectly, for himself
or others, own, manage, operate, control, be employed in an executive,
managerial or supervisory capacity by, or otherwise engage or participate
in or allow his skill, knowledge, experience or reputation to be used in
connection with, the ownership, management, operation or control of, any
company or other business enterprise engaged in the Company Business within
any of the Subject Areas; provided, however, that nothing contained herein
shall prohibit Employee from making passive investments as long as Employee
does not beneficially own more than 10% of the equity interests of a
business enterprise engaged in the Company Business within any of the
Subject Areas. For purposes of this paragraph, "beneficially own" shall
have the same meaning ascribed to that term in Rule 13d-3 under the
Securities Exchange Act of 1934.
(ii) Employee will not call upon any customer of the Company
or its subsidiaries for the purpose of soliciting, diverting or enticing
away the business of such person or entity, or otherwise disrupting any
previously established relationship existing between such person or entity
and the Company or its subsidiaries;
(iii) Employee will not solicit, induce, influence or
attempt to influence any supplier, lessor, licensor, potential acquiree or
any other person who has a business relationship with the Company or its
subsidiaries, or who on the date of termination of employment of Employee
is engaged in discussions or negotiations to enter into a business
relationship with the Company or its subsidiaries, to discontinue or reduce
the extent of such relationship with the Company or its subsidiaries; and
(iv) Employee will not make contact with any of the
employees of the Company or its subsidiaries with whom he had contact
during the course of his employment with the Company for the purpose of
soliciting such employee for hire, whether as an employee or independent
contractor, or otherwise disrupting such employee's relationship with the
Company or its subsidiaries.
<PAGE>
(v) Employee further agrees that, for a period of one year
from and after the date of termination of employment, Employee will not
hire, on behalf of himself or any company engaged in the Company Business
with which Employee is associated, any employee of the Company or its
subsidiaries as an employee or independent contractor, whether or not such
engagement is solicited by Employee; provided, however, that the
restriction contained in this subsection (v) shall not apply to Company
employees who reside in, or are hired by Employee to perform work in any
Subject Areas located within the State of Virginia.
Employee agrees that he will from time to time upon the Company's
request promptly execute any supplement, amendment, restatement or other
modification of Appendix E as may be necessary or appropriate to correctly
reflect the jurisdictions which, at the time of such modification, should
be covered by Appendix E and this Paragraph 11(c). Furthermore, Employee
agrees that all references to Appendix E in this Agreement shall be deemed
to refer to Appendix E as so supplemented, amended, restated or otherwise
modified from time to time. Enforcement of this Paragraph 11(c) is subject
to the provisions of Paragraph 11(e) hereof.
(d) CERTAIN PROPRIETARY RIGHTS. Employee agrees to and hereby
does assign to the Company all his interest in and to all inventions,
whether or not patentable, which are made or conceived solely or jointly by
him:
(i) At any time during the term of his employment by the
Company in an executive, managerial, planning, technical research or
engineering capacity (including development, manufacturing, systems,
applied science and sales), or
(ii) During the course of or in connection with his duties
during the term of this Agreement, or
(iii) With the use of time or materials of the Company.
Employee agrees to communicate to the Company or its representatives
all facts known to him concerning such inventions, to sign all rightful
papers, make all rightful oaths and generally to do everything possible to
aid the Company in obtaining and enforcing proper patent protection for all
such inventions in all countries and in vesting title to such inventions
and patents in the Company. For the purpose of this Agreement, the
subject matter of any application for patent naming Employee as a sole or
joint inventor filed during the course of employment or within one year
subsequent to the termination thereof shall be deemed to be an invention
made or conceived by him during the course of his employment by the Company
and assignable to the Company hereunder, unless the Employee establishes by
a preponderance of the evidence that such invention was made or conceived
by him subsequent to termination of his employment hereunder. At the
Company's request (during or after the term of this Agreement) and expense,
the Employee will promptly execute a specific assignment of title to the
Company, and perform any other acts reasonably necessary to implement the
foregoing assignment.
<PAGE>
(e) INJUNCTIVE RELIEF; OTHER REMEDIES. Employee acknowledges
that a breach by Employee of Paragraph 11(b), (c) or (d) would cause
immediate and irreparable harm to the Company for which an adequate
monetary remedy does not exist; hence, Employee agrees that, in the event
of a breach or threatened breach by Employee of the provisions of Paragraph
11(b), (c) or (d) during or after the Employment Term, the Company shall be
entitled to injunctive relief restraining Employee from such violation
without the necessity of proof of actual damage or the posting of any bond,
except as required by non-waivable, applicable law. Nothing herein,
however, shall be construed as prohibiting the Company from pursuing any
other remedy at law or in equity to which the Company may be entitled under
applicable law in the event of a breach or threatened breach of this
Agreement by Employee, including without limitation the recovery of damages
and/or costs and expenses, such as reasonable attorneys' fees, incurred by
the Company as a result of any such breach. It shall be a condition to the
enforceability by the Company of the provisions of this Paragraph 11(c),
however, that the Company pays to and provides for the Employee the full
amount of severance pay and benefits described in Appendix D. Unless the
Company notifies the Employee in the Notice of Termination for Cause that
it intends to enforce the provisions of Paragraph 11(c) and agrees to pay
the Employee the full amount of severance pay and benefits described in
Appendix D, it shall be conclusively presumed for all purposes of this
Agreement that the Company has elected to waive the right to enforce the
provisions of this Paragraph 11(c). Employee acknowledges that the
payments provided under Paragraph 8 and Appendix D are conditioned upon
Employee fulfilling any noncompetition and nondisclosure agreements
contained in Paragraph 11. In the event Employee shall at any time
materially breach any noncompetition or nondisclosure agreements contained
in Paragraph 11, the Company may suspend or eliminate payments under
Paragraph 8 and Appendix D during the period of such breach. Employee
acknowledges that any such suspension or elimination of payments would be
an exercise of the Company's right to suspend or terminate its performance
hereunder upon Employee's breach of this Agreement; such suspension or
elimination of payments would not constitute, and should not be
characterized as, the imposition of liquidated damages.
(f) REQUESTS FOR WAIVER IN CASES OF UNDUE HARDSHIP. In the
event that Employee should find any of the limitations of Paragraph 11(c)
(including without limitation the geographic restrictions of Appendix E) to
impose a severe hardship on Employee's ability to secure other employment,
Employee may make a request to the Company for a waiver of the designated
limitations before accepting employment that otherwise would be a breach of
Employee's promises and obligations under this Agreement. Such request
must be in writing and clearly set forth the name and address of the
organization with that employment is sought and the location, position and
duties that Employee will be performing. The Company will consider the
request and, in its sole discretion, decide whether and on what conditions
to grant such waiver.
<PAGE>
(g) GOVERNING LAW OF THIS PARAGRAPH 11; CONSENT TO JURISDICTION.
Any dispute regarding the reasonableness of the covenants and agreements
set forth in this Paragraph 11, or the territorial scope or duration
thereof, or the remedies available to the Company upon any breach of such
covenants and agreements, shall be governed by and interpreted in
accordance with the laws of the State of the United States or other
jurisdiction in which the alleged prohibited competing activity or
disclosure occurs, and, with respect to each such dispute, the Company and
Employee each hereby irrevocably consent to the exclusive jurisdiction of
the state and federal courts sitting in the relevant State for resolution
of such dispute, and agree to be irrevocably bound by any judgment rendered
thereby in connection with such dispute, and further agree that service of
process may be made upon him or it in any legal proceeding relating to this
Paragraph 11 and/or Appendix E by any means allowed under the laws of such
jurisdiction. Each party irrevocably waives any objection he or it may
have as to the venue of any such suit, action or proceeding brought in such
a court or that such a court is an inconvenient forum. It is the desire
and intent of the parties that the provisions of this Agreement be enforced
to the fullest extent permitted under applicable law, whether now or
hereafter in effect and, therefore, to the extent permitted by applicable
law, the parties hereto waive any provision of applicable law that would
render any provision of this Paragraph 11 invalid or unenforceable.
12. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of:
(a) The Company, and any successors or assigns of the Company,
except that in the event of a Change of Control of the Company as defined
in the Change of Control Agreement, this Agreement shall be superseded by
the Change of Control Agreement. In the event of the assignment by the
Company of this Agreement, the Company shall nevertheless remain liable and
obligated to the Employee in accordance with the terms hereof; and
(b) The Employee, his estate, his executors, administrators,
heirs and beneficiaries.
13. EXPENSES RELATING TO ENFORCEMENT OF RIGHTS. If either party
shall successfully seek to enforce any provision of this Agreement or to
collect any amount claimed to be due hereunder, such successful party shall
be entitled to be reimbursed by the other party for any and all out-of-
pocket expenses, including reasonable attorneys' fees, incurred in
connection with such enforcements and/or collection.
<PAGE>
14. SEVERABILITY. If any term or provision of this Agreement
(including without limitation those contained in an Appendix hereto), 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 temporally, spatially or
otherwise 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.
15. NOTICES. Any notice or other communication required under this
Agreement shall be in writing, shall be deemed to have been given and
received when delivered in person, or, if mailed, shall be deemed to have
been given when deposited in the United States mail, first class,
registered and certified, return receipt requested, with proper postage
prepaid, and shall be deemed to have been received on the third business
day thereafter, and shall be addressed as follows:
If to the Company, addressed to:
Avondale Industries, Inc.
5100 River Road
Avondale, Louisiana 70094
If to the Employee, addressed to:
Thomas H. Doussan
2601 Metairie Heights
Metairie, Louisiana 70002
or such other address as to which any party hereto may have notified
the other in writing.
16. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Louisiana without
regard to the principles of conflict of laws, except as expressly provided
in Paragraph 11(g) above with respect to the resolution of disputes arising
under, or the Company's enforcement of Paragraph 11 of this Agreement.
17. ENTIRE AGREEMENT. This document contains or refers to the entire
arrangement or understanding between the parties relating to the employment
of the Employee by the Company prior to a Change of Control of the Company,
as defined in the Change of Control Agreement. This Agreement, including
Appendices A through E, inclusive, all of which are herein incorporated by
reference and made a part hereof, contains or refers to the entire
arrangement or understanding between the Employee and the Company relating
to the employment of the Employee by the Company. No provision of the
Agreement, including the Appendices, may be modified or amended except by
an instrument in writing signed by or for both parties hereto.
<PAGE>
AVONDALE INDUSTRIES, INC.
By: /s/ Hugh A. Thompson
------------------------
Hugh A. Thompson
Chairman, Compensation Committee
/s/ Thomas H. Doussan
-------------------------
Thomas H. Doussan
<PAGE>
LIST OF APPENDICES
DESCRIPTION NUMBER OF PAGES
Appendix A Benefit Plan Structure 5
Appendix B Disability Benefits 1
Appendix C Death Benefits 1
Appendix D Severance Benefits 3
Appendix E Subject Areas under Limited 1
Covenant Not to Compete
<PAGE>
APPENDIX "A"
AVONDALE INDUSTRIES, INC.
AVONDALE SERVICES CORPORATION
EXECUTIVE GROUP
Effective Date: 1-1-98
COVERAGE DESCRIPTION
EMPLOYEE LIFE Two times base salary and bonus
Optional Coverage - additional one or two times base
salary and bonus
Maximum Coverage - Two million dollars
DEPENDENT LIFE $2,000.00 Spouse - Optional $100,000.00
$1,000.00 Dependent (over six months old)
$100.00 Dependent (less than six months old)
Accidental Death and Death - Same as Life (Employee Only)
DISMEMBERMENT Dismemberment - Benefit Schedule
Business According to rate of pay - Maximum $50,000.00
TRAVEL ACCIDENT
TRAVEL ACCIDENT (SALARIED) 5 Times Annual Salary - Maximum $500,000.00
RETIREE LIFE One-half of Life Insurance in force at time of
retirement
SHORT TERM DISABILITY Schedule based on length of service (see Page 2)
LONG TERM DISABILITY 60% of monthly base salary, after 180 day waiting
period.
Maximum $15,000 per month coordinated with Disability
Social Security Benefit.
<PAGE>
HEALTH CARE 100% Hospital - private room rate plus miscellaneous
expenses
100% Hospital Medical Expenses - (doctor's visits to
hospital)
100% Surgical Expenses
100% Laboratory and X-ray Expenses
100% Vision and Hearing Care Expenses
100% Dental and Orthodontia
100% Annual Physicals
100% Psychiatric and Nervous Care - expenses up to
$6,500.00 per year per individual
No Life-Time Maximum
Subject to applicable employee contribution requirement
<PAGE>
SHORT TERM DISABILITY
Benefits begin on first day absent due to a non-occupational injury or
illness. Original medical documentation required if absent five or more
consecutive working days.
Benefits will be reduced by any amount received from Social Security.
Successive periods of disability separated by less than two (2) weeks of
full-time work considered as one continuous period of disability, unless
later disability due to a different cause.
Benefits will be paid up to a maximum of twenty-six (26) weeks, based on
the following schedule:
YEARS OF SERVICE FULL SALARY UP TO HALF SALARY UP TO
Less than 1 Year 4 Weeks 0 Weeks
1 Year 4 Weeks 22 Weeks
2 Years 6 Weeks 20 Weeks
3 Years 8 Weeks 18 Weeks
4 Years 10 Weeks 16 Weeks
5 Years 12 Weeks 14 Weeks
6 Years 14 Weeks 12 Weeks
7 Years 16 Weeks 10 Weeks
8 Years 18 Weeks 8 Weeks
9 Years 20 Weeks 6 Weeks
10 Years 22 Weeks 4 Weeks
11 Years 24 Weeks 2 Weeks
12 Years or more 26 Weeks 0 Weeks
JURY DUTY
Pays difference between employee's base pay and jury pay received, not to
exceed eight hours pay per day.
BLOOD BANK
To be eligible, must be a participant in Group Health Insurance Program.
In joining the Blood Bank Program, the employee agrees to donate a unit of
blood as requested at irregular intervals. The Program provides the
employee and insured dependents with blood for as long as the employee
remains in the Program.
HOLIDAYS
Eight Paid Holidays - New Years Day, Mardi Gras, Good Friday, July Fourth,
Labor Day, Thanksgiving Day, Day After Thanksgiving and Christmas.
Eligible upon completion of thirty days service.
<PAGE>
VACATION
Vacation year is from January 1 to December 31. Upon completion of one
full year of service, eligible for two weeks of vacation. An employee
joining the Company after January 1 but prior to July 1 will be eligible
for one week's vacation the following January 1. Vacation time may not be
carried over from one vacation period to the next. Vacation time may be
taken in one-hour increments. Beginning with ten full years of service,
eligible for additional days of vacation, up to a maximum of five
additional days, based on the following schedule:
YEARS OF SERVICE ADDITIONAL DAYS OF VACATION
10 Years 1 Day
11 Years 2 Days
12 Years 3 Days
13 Years 4 Days
14 Years 5 Days
SICK/PERSONAL TIME
Eligible for twenty-four hours per calendar year. Time may be taken in
one-hour increments. Unused time may not be carried over to the next year.
FUNERAL LEAVE
None
TUITION ASSISTANCE
Eligible upon completion of one year's service. Only courses directly
related to employee's position and taken at an accredited institution will
be considered. Approval must be obtained prior to the start of the course.
Reimbursement will be made for the cost of tuition only, and will be based
on the following schedule:
COURSE LEVEL FINAL GRADE REIMBURSEMENT PERCENTAGE
Under-Graduate Not Lower Than "C" 100%
Post-Graduate Not Lower Than "B" 100%
AUTOMOBILE ALLOWANCE
$600 per month
RETIREMENT
Formula - 1.5% of final average compensation, multiplied by years of
credited service, less Massachusetts Mutual Annuity and equivalent
actuarial value of any shares in ESOP account.
Early Retirement Benefits available at age 55 with ten years service,
actuarially reduced by years and months early.
<PAGE>
SUPPLEMENTAL RETIREMENT PLAN
Vesting: 100% vesting upon completion of ten (10) years service
Formula: 15% of final average compensation.
Early Retirement Benefits available at Age 55 with ten (10) years service,
actuarially reduced by years and months early
EXECUTIVE EXCESS RETIREMENT PLAN
If designated as a participant by the Board of Directors.
Purpose of the plan is to reimburse participants for benefits not payable
under the Pension Plan and ESOP because of limitations in the Internal
Revenue Code and the Pension Plan.
Benefits paid upon attainment of age 75 or upon retirement, if earlier.
Benefit is unfunded.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
Plan Year - September 1 to August 31
Eligibility - 1st of month following one year of service
Compensation - Total salary, excluding severance pay, moving expenses and
non-cash contribution
Stock Allocation - Each year the Trustees divide the available shares of
stock among eligible participants, based on each participant's
compensation. These allocated shares are held in the participant's ESOP
account. Must be on payroll last pay period of each plan year to receive
allocation.
Distribution - (1) Retirement - Age 55 or later
(2) Total & Permanent Disability with Social Security Award
(3) Death
Vesting - Employees who were eligible to receive Special Shares were 100%
vested.
Vesting for Loan Shares is as follows:
Less than 4 years 0%
4 years but less than 5 40%
5 years but less than 6 50%
6 years but less than 7 60%
7 years but less than 8 70%
8 years but less than 9 80%
9years but less than 10 90%
10 years or more 100%
<PAGE>
APPENDIX B
DISABILITY BENEFIT
In the event of termination by the Company of the Employee's
employment on account of disability pursuant to Paragraph 6 of the
Agreement, the disability benefit to be provided to the Employee shall be
determined under this Appendix, unless a greater or more favorable benefit
is required to be provided pursuant to the provisions of Subparagraph 4(c)
of the Agreement and/or Appendix A.
1. CONTINUATION OF FULL ANNUAL SALARY: The full amount of the
Employee's annual salary (pursuant to paragraph 4(a) of this Agreement)
shall be continued according to the following formula:
(i) If the Employee's credited service for the Company totals
(5) five years or less his annual salary shall be continued for twelve (12)
months commencing with the month following such termination of employment;
and
(ii) If the Employee's credited service for the Company totals
more than five (5) years, the payment period referred to in (i) shall be
increased by two-tenths (2/10) of a year for each year of credited service
in excess of five (5) up to a maximum payment period of five (5) years.
Thus, if the Employee's employment is terminated on account of disability
at a time when he has twelve (12) years of credited service, the Employee's
full annual salary would be continued for 2.4 years following such
termination of employment and an Employee with twenty-five (25) or more
years of credited service as of the termination of his employment on
account of disability will receive his full annual salary for five (5)
years.
2. CONTINUATION OF PARTIAL ANNUAL SALARY. Following the expiration
of the period calculated pursuant to the preceding Paragraph 1, the
Employee will receive long term disability benefits equal to sixty percent
(60%) of his full annual salary subject to such limitations as are
contained in Appendix A.
3. LIMITATIONS. The disability benefit will in any event
discontinue and terminate upon the death of the Employee or upon the date
of his Retirement as defined in subparagraph 9(a) of the Agreement would
have occurred.
4. OTHER BENEFITS. Other benefits which may be provided or
continued for the Employee following the termination of his employment on
account of disability depend upon the terms of the Plan under which such
benefits are provided or required to be provided.
<PAGE>
APPENDIX C
DEATH BENEFITS
The death benefits to be provided by the Company subsequent to the
death of the Employee shall be determined by reference to the plan or plans
under which such benefits are provided. Reference is made to subparagraph
4(c) of the Agreement and to Appendix A.
<PAGE>
APPENDIX D
SEVERANCE BENEFITS
Upon the termination of the Employee's employment under any
circumstance requiring the Company to pay to and provide for the Employee
the severance pay and other benefits set forth in this Appendix D, the
Company shall be obligated to pay to and/or provide for the Employee the
following compensation and other benefits:
(a) PAYMENT IN LIEU OF COMPENSATION: The Company shall pay to the
Employee in cash an amount equal to the product of (i) and (ii); where (i)
shall equal the sum of (A) the Employee's annual salary and (B) the
Employee's annual incentive bonus during the twelve (12) month period
ending with the close of the month in which such termination of employment
occurs (the "Date of Termination") , divided by twelve (12) ; and where
(ii) shall be the lesser of (x) thirty-six (36), (y) six (6), plus two (2)
for each twelve (12) months of credited service of the Employee for the
Company (determined in accordance with subparagraph 4(c) of the Agreement)
through the Date of Termination, or (z) the number of months until the
Employee's normal retirement date, as defined in the Avondale Industries,
Inc. Pension Plan (or any successor, or substitute plan or plans of the
Company or of any subsidiary of the Company under which the Employee may be
a participant, hereinafter the "Pension Plan"). The number determined
under clause (ii) is sometimes herein referred to as the "Measuring
Period".
(b) ACCELERATION OF STOCK OPTIONS: Immediately following such Date
of Termination, all options and stock appreciation rights granted to
Employee under the 1997 Stock Incentive Plan or any other stock option or
similar plan before or after the date hereof (collectively referred to
herein as "Stock Option Plans") shall immediately become fully exercisable
and execution of this Agreement shall constitute an amendment to any stock
option agreement to so provide and an agreement and undertaking by the
Company to take such action as may be required to cause any and all options
or rights granted, or to be granted, to Employee thereunder to make them
consistent herewith.
<PAGE>
(c) PAYMENT FOR NON-VESTED RETIREMENT BENEFIT: In addition to the
vested portion of the Employee's interest under any employee benefit plan
maintained by the Company as a qualified plan pursuant to Section 401(a) of
the Internal Revenue Code of 1986, as amended, to which the Company or any
subsidiary has made contributions for the Employee's account which are not
otherwise expressly provided for herein, if the Employee is not fully
vested under any such plan or plans, the Company shall pay to the Employee
in cash an amount equal to the then present value of the actuarial
equivalent (within the meaning of the following Paragraph (d)) of the non-
vested portion of the Employee's account, to the extent that such account
would have become vested based on additional credited service for the
Company, if the Employee had remained in the employ of the Company (or any
subsidiary) for an additional period of months equal to the Measuring
Period.
(d) SUPPLEMENTAL RETIREMENT BENEFIT: In addition to any retirement
or severance benefit to which the Employee is entitled under the Pension
Plan, the Employee shall receive in cash, an amount equivalent of the
excess of (i) over (ii), where (i) equals the aggregate amount of the
retirement pension (calculated as a straight life annuity payable to
Employee on his normal retirement date) to which Employee would have been
entitled under the terms of the Pension Plan and any other qualified or
non-qualified defined benefit plan maintained by the Company and covering
the Employee, if Employee were fully vested thereunder (without regard to
(w) whether the Employee shall actually have completed the number of years
of credited service required to qualify for full vesting under such plans,
(x) any limitation on the amount of compensation used in the calculation of
the regular pension thereunder, (y) any offset thereunder for severance
allowances payable hereunder or (z) any amendment to such plans made prior
to the Employee's Date of Termination, which amendment adversely affects in
any manner the computation of retirement benefits under such plans) and had
accumulated an additional period of months of credited service after the
Date of Termination equal to the Measuring Period (but in no event shall
Employee be deemed to have accumulated an additional period of credited
service subsequent to Employee's sixty-fifth (65th) birthday), and, where
(ii) equals the amount of the retirement pension (calculated as a straight
1ife annuity payable to Employee on his normal retirement date),if any, to
which Employee is entitled pursuant to the provisions of the Pension Plan
and such other plans. For purposes of Clause (i) of this Paragraph (d),
the amount payable pursuant to Paragraph (a) of this Appendix D, shall be
deemed to represent the Employee's earnings for the period of months equal
to the Measuring Period, and for purposes of this Paragraph (d), "actuarial
equivalent" shall be determined using the same methods and assumptions
utilized under the Pension Plan immediately prior to the Date of
Termination. All other terms used in this Paragraph (d) shall have the
same meanings, respectively, as such terms have in the Pension Plan, unless
otherwise required by the context.
<PAGE>
(e) OTHER BENEFITS: The Company shall also maintain in full force
and effect, for the continued benefit of the Employee and his dependents,
for a period terminating on the earliest of (i) a period of months after
the Date of Termination equal to the Measuring Period; (ii) the
commencement date of equivalent benefits for the Employee from a new
employer; or (iii) the Employee's normal retirement date under the
Company's Pension Plan, after which the terms of the Pension Plan shall
govern; all insured and self-insured employee benefit plans in which the
Employee is entitled to participate immediately prior to the Date of
Termination; provided that the Employee's continued participation is
possible under the general terms and provisions of such Plans (and any
applicable funding media) and the Employee continues to pay an amount equal
to Employee's regular contribution for such participation. In the event
that the Employee participation in any such Plan is barred, the Company, at
its sole cost and expense, shall arrange to have issued for the benefit of
Employee and his dependents individual policies of insurance providing
benefits substantially similar (on an after-tax basis) to those which the
Employee would have been entitled to receive under such Plan or Plans
pursuant to this Paragraph (e) if such participation were not barred or, if
such insurance is not available at a reasonable cost to the Company, the
Company shall otherwise provide the Employee and his dependents with
equivalent benefits (on an after-tax basis) and the Employee shall not be
required to pay any premiums or other charges in an amount greater than
that which the Employee would have paid in order to participate in such
Plans. If, at the end of a period of months after the Date of Termination
equal to the Measuring Period, the Employee is not receiving equivalent
benefits from a new employer, the Company shall arrange, at its sole cost
and expense, to enable Employee to convert the Employee's and his
dependents' coverage under such Plans to individual policies or programs
upon the same terms as employees of the Company may apply for until the
Employee is able to receive equivalent benefits from a source other than
the Company.
(f) MITIGATION: The Employee shall not be required to mitigate the
amount of any payment or benefit provided for in this Appendix D by seeking
other employment or otherwise, nor (except as specifically provided in
Paragraph (e) above) shall the amount of any payment or benefit provided
for in this Appendix D be reduced by any compensation or benefit earned by
Employee as a result of employment by another employer after the Date of
Termination, or otherwise.
(g) MANNER OF PAYMENT: All payments which are required to be made in
cash under Paragraphs (a), (c) or (d), above, shall be paid on the Date of
Termination, or within five (5) business days thereafter, unless the
Employee has made a Deferred Payment Election with respect to such
payment(s) pursuant to the succeeding Paragraph (h).
<PAGE>
(h) ELECTION TO DEFER PAYMENT: Upon entering into this Agreement and
for a period of fourteen (14) days following each anniversary of the date
hereof (the "Election Period"), the Employee may, in writing, direct the
Company that any amounts which become payable to the Employee pursuant to
Paragraphs (a), (c) and (d), above, shall be paid to the Employee in three
(3) equal annual installments, with the first of such installments to be
paid not later than five (5) business days after the Date of Termination
and successive installments paid on the next two (2) succeeding
anniversaries of the Date of Termination or the next following business day
if such date is not a business day (the "Deferred Payment Election"). A
Deferred Payment election, once made, shall be irrevocable except during an
Election Period.
(i) EFFECT ON OTHER BENEFITS: Nothing contained in this Appendix D
shall be construed or interpreted as limiting any rights or benefits
payable to or for the Employee under any other provision of this Agreement.
<PAGE>
APPENDIX E
TO EMPLOYMENT AGREEMENT
BETWEEN AVONDALE INDUSTRIES, INC.
AND
THOMAS H. DOUSSAN
Jurisdictions In Which Competition
Is Restricted As Provided
In Paragraph 11(c)
A. STATES
1. LOUISIANA -- The following parishes in the State of Louisiana:
Orleans and Jefferson
2. MISSISSIPPI -- The following counties in the State of
Mississippi:
Harrison
as well as any other counties in the State of Mississippi in
which the Employee regularly (a) makes contact with customers of
the Company or any of its subsidiaries, (b) conducts the business
of the Company or any of its subsidiaries or (c) supervises the
activities of other employees of the Company or any of its
subsidiaries as of the date of termination of employment.
3. VIRGINIA-- The following counties in the State of Virginia:
Arlington
as well as any other counties in the State of Virginia in which
the Employee regularly (a) makes contact with customers of the
Company or any of its subsidiaries, (b) conducts the business of
the Company or any of its subsidiaries or (c) supervises the
activities of other employees of the Company or any of its
subsidiaries as of the date of termination of employment.
Agreed to and Accepted:
Avondale Industries, Inc. Employee
By: /s/ HUGH A. THOMPSON /s/ THOMAS H. DOUSSAN
-------------------- ---------------------
Its: Compensation Committee Chairman Thomas H. Doussan
Date: MARCH 23, 1998 Date: MARCH 9, 1998
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 23rd day of March,
1998, by and between AVONDALE INDUSTRIES, INC., a Louisiana corporation
maintaining its principal office at 5100 River Road, Avondale, Louisiana
70094 (the "Company") and Ronald J. McAlear, now residing at 221 Rue St.
Ann, Metairie, Louisiana 70005 (hereinafter called the "Employee").
W I T N E S S E T H
WHEREAS, the Employee is employed by the Company in an executive
capacity, and the Company desires to ensure that the Employee will be
available to provide executive services to the Company in the future, which
services are significant to the Company's long range prospects;
WHEREAS, the Company and Employee desire, among other things, to
prohibit Employee from disclosing or utilizing, outside the scope and term
of his employment, any non-public, confidential or proprietary information,
knowledge and data relating to the business and operations of the Company
or its subsidiaries received by Employee during the course of his
employment, and to restrict the ability of Employee to compete with the
Company or its subsidiaries for a limited period of time; and
WHEREAS, to induce the Employee to agree to provide such services on
the terms provided herein, the Company is offering to provide the Employee
with the compensation, benefits and security provided for in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements
herein contained, the parties hereto agree as follows:
1. EMPLOYMENT/CAPACITY/TERM. The Company agrees to and does hereby
employ the Employee, and the Employee agrees to be employed by the Company
upon the terms and conditions set forth in this Agreement. Such employment
shall be in a managerial and executive capacity in the operation of the
business of the Company and/or a subsidiary, subject to the supervision of
the Board of Directors of the Company. Such employment shall commence on
the date hereof and shall continue through December 31, 2000, and from year
to year thereafter subject to the right of the Employee or the Company to
terminate such employment as of December 31, 2000, or any subsequent
December 31, by written notice given to the other party at least sixty (60)
days prior to such termination date stating an intention to so terminate
such employment. Termination by either party, in accordance with the
provisions of the preceding sentence, shall not require a statement of the
reason or cause for such termination and shall not be deemed a breach or
violation of this Agreement by the party giving such notice. As used in
this Agreement, the phrase "term of this Agreement" shall be deemed to
include the period subsequent to the date hereof and prior to termination
of this Agreement; however, such phrase shall not be construed as limiting
the enforceability by either party of any rights which survive termination
of this Agreement.
<PAGE>
2. TIME AND EFFORT/ABSENCES. During the term of this Agreement, the
Employee shall devote his entire time and attention during normal business
hours to the business of the Company, and its subsidiaries, subject to the
supervision of the Board of Directors of the Company, and he shall not
engage in any other business activity whether or not such business activity
is pursued for gain, profit or other pecuniary advantage, but this
restriction shall not be construed to restrict the Employee (i) from
performing services as a member of the Board of Directors, Board of
Trustees or the like for any non-profit or for profit entity whether or not
the Employee receives compensation therefor, provided that, such services
do not unreasonably interfere with the ability of the Employee to perform
the services and discharge the responsibilities required of him under this
Agreement (it generally being agreed and understood that the quantity and
quality of the services heretofore performed by the Employee for non-profit
and for profit entities would not constitute a violation of the aforesaid
restriction), and (ii) from investing his assets in such form or manner as
will not require any services on the part of the Employee in the operation
of the business of the entity in which such investments are made. The
employee shall be excused from rendering his services during reasonable
vacation periods and during other reasonable temporary absences, all as
authorized from time to time by the Board of Directors of the Company. At
the date hereof, the Employee maintains his residence at 221 Rue St. Ann,
Metairie, Louisiana 70005 and performs services for the Company in New
Orleans, Louisiana; it is understood that, without his consent, the
Employee will not be required to relocate to a different location to
discharge his responsibilities under this Agreement.
3. CORPORATE OFFICES. If elected, the Employee will serve, without
additional compensation, as a director of the Company or as an officer or
director of any subsidiary of the Company.
4. SALARY/BONUS/OTHER BENEFITS. In consideration of the services
and duties to be rendered and performed by the Employee during the term of
this Agreement, including the assumption of the duties and responsibilities
of an executive officer of the Company, the Company agrees to pay and
provide for the Employee the compensation and benefits described below:
(a) An annual salary, payable in equal monthly installments, in
the amount of One Hundred Fifty Thousand Six Hundred Seventy-Two and 00/100
($150,672) or in such greater amount as may from time to time be fixed by
the Board of Directors or the Compensation Committee of the Board of
Directors of the Company. The Employee's annual salary shall never be
reduced.
(b) An annual incentive bonus in such amount as may from time to
time be fixed by the Board of Directors or the Compensation Committee of
the Board of Directors, provided that, the annual incentive bonus for any
period of less than twelve (12) months (other than for the period from the
date hereof through December 31, 1998) shall be prorated. The annual
incentive bonus shall be paid to the Employee (or to his personal
representative in the event of his death) in a lump sum prior to the
expiration of the period for which such bonus is payable or within 45 days
following the expiration of such period.
<PAGE>
(c) OTHER BENEFITS. All other payments and/or benefits
described or provided for in this Agreement, including the Appendices
hereto. It is intended that such payments and/or benefits shall provide
the Employee and/or his personal representative(s) and/or beneficiaries, as
the case may be, with benefits which will be at least as favorable as the
benefits which on December 31, 1997 were provided for the Employee by the
Company. In addition, the Employee shall also be eligible for and shall
participate in any other employee benefit plan, including, any pension,
supplemental pension, retirement, supplemental retirement, profit-sharing,
thrift, bonus, incentive, deferred compensation, stock option or stock
appreciation or other employee benefit plan, including any life insurance,
accident, medical, disability, health or relocation plan or policy (all of
which are included by reference to the term "Plan") maintained by the
Company for its employees, generally, or for its senior executives, in
particular, on the same basis and subject to the same requirements and
limitations as may be made applicable to other senior executive employees
of the Company, provided that participation in and the terms of any
participation in the Avondale Industries, Inc. 1997 Stock Incentive Plan or
any successor plan shall be at the discretion of the Compensation Committee
as provided in such plans. The benefit plan structure and benefits which
shall be provided for the Employee and other senior executive employees of
the Company are described in Appendix A hereto. Nothing herein, however,
shall be construed as limiting the right of the Employee to additional or
other and greater benefits than are described in said Appendix A, if the
provisions of this Agreement obligate the Company to provide such other or
greater benefits, and in particular, but without limitation by the
specification hereof, the benefits described in Paragraphs 6, 7, 8 and 9
hereof and Appendices B, C and D hereto. In addition, the Company agrees
that where credited service of the Employee for the Company is relevant in
determining eligibility for or benefits under any Plan, the Employee's
credited service for the Company shall be determined to include service for
any parent, subsidiary or affiliate of the Company or for a predecessor of
the Company.
5. EXPENSES. The Employee shall be reimbursed for out-of-pocket
expenses incurred from time to time on behalf of the Company or any
subsidiary or in the performance of his duties under this Agreement, upon
the presentation of such supporting documents and forms as the Company
shall reasonably request.
6. DISABILITY/DISABILITY BENEFIT. In the event that the Employee is
incapable because of physical or mental illness of rendering services of
the character contemplated hereby, for a period of six (6) consecutive
months, the Board of Directors of the Company may determine that the
Employee has become disabled. In the event of such a determination of
disability, the Company shall have the continuing right and option while
such disability continues by notice in writing to the Employee to terminate
this Agreement effective thirty (30) days after such notice of termination
is so given, unless within such thirty (30) day period, the Employee
resumes rendering full-time services of the character contemplated hereby.
The incapacity due to physical or mental illness to render the services of
the character contemplated hereby, shall not constitute a breach of this
Agreement by the Employee. If this Agreement is terminated by the Company
as a result of a determination of disability, as aforesaid, the Company
shall be obligated to pay to the Employee the disability benefits described
in Appendix B hereto.
<PAGE>
7. DEATH/DEATH BENEFIT. In the event of the death of the Employee
during the term of this Agreement, this Agreement will terminate and the
Employee's then rate of annual salary and an annual incentive bonus,
(prorated in accordance with subparagraph 4(b) hereof) shall be paid to the
Employee's personal representative through the last day of the month in
which such death occurs. In addition, the Company shall be obligated to
provide the Employee, his personal representative(s) and/or his
beneficiaries with the death benefits described in Appendix C hereto.
8. SEVERANCE PAY. If the employment of the Employee is terminated
at any time during the period that this Agreement is in effect (i) by the
Employee for Good Reason (as defined in Paragraph 9 hereof) or (ii) by the
Company for any reason other than for Cause (as hereafter defined) or other
than in accordance with Paragraph 6 hereof on account of the disability of
the Employee, the Company shall be obligated to pay to the Employee the
severance pay and benefits described in Appendix D attached hereto.
Termination of the Employee's employment on account of his death or
Retirement (as hereafter defined) will not be considered a termination of
the Employee's employment by the Company and will not require the Company
to pay and provide any severance pay or benefits pursuant to Appendix D.
Accordingly, the Company acknowledges that if the employment of the
Employee is terminated by it for any reason during the period that this
Agreement is in effect other than for Cause or other than on account of the
disability of the Employee in accordance with Paragraph 6 hereof, the
Company will be obligated to pay and provide the severance pay and benefits
described in Appendix D, in order to reinforce and encourage the continued
loyalty, attention, and dedication of the Employee to the Company's
business and affairs without the concerns which normally arise from the
possibility of a loss of employment security. As used herein, the terms
"Retirement" and "Cause" shall have the following meanings, respectively:
(a) RETIREMENT. Termination of the Employee's employment
"Retirement" shall mean termination on the Employee's normal retirement
date in accordance with the terms of the Avondale Industries, Inc. Pension
Plan (or any successor or substitute plan or plans of the Company or of any
subsidiary of the Company under which the Employee may be a participant);
and
<PAGE>
(b) CAUSE. Termination by the Company of the Employee's
employment for "Cause" shall mean termination as a result of (i) the
willful and continued failure by the Employee to perform substantially the
services contemplated by this Agreement (other than any such failure
resulting from the Employee's incapacity due to physical or mental illness)
after a written demand for substantial performance is delivered to the
Employee by a member or representative of the Board of Directors of the
Company which specifically identifies the manner in which it is alleged
that the Employee has not substantially performed such services, or (ii)
the willful engaging by the Employee in gross misconduct which is
materially and demonstrably injurious to the Company; provided that, no
act, or failure to act, on the Employee's part shall be considered
"willful" unless done, or omitted to be done, in bad faith and without
reasonable belief that such action or omission was in, or not opposed to,
the best interests of the Company. It is also expressly understood that
the Employee's attention to or engagement in matters not directly related
to the business of the Company shall not provide a basis for termination
for Cause if such attention or engagement is authorized by the terms of
this Agreement or has otherwise been approved by the Board of Directors of
the Company. Anything in this Agreement to the contrary notwithstanding,
the Employee's employment may not be terminated 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 the purpose (after reasonable notice to the Employee and an opportunity
for the Employee, together with his counsel, to be heard before the Board),
finding that in the good faith opinion of the Board the Employee was guilty
of the conduct set forth in clause (i) or (ii) of this subparagraph (b) and
specifying the particulars thereof in detail.
9. TERMINATION BY THE EMPLOYEE FOR GOOD REASON. The termination by
the Employee of his employment for "Good Reason" shall be deemed a
justifiable termination of his employment and shall excuse the Employee
from the obligation to render services as provided in Paragraph 2 hereof.
In that event (i) the full amount of the Employee's annual salary and
annual incentive bonus, together with all other benefits required to be
provided under this Agreement, shall be continued until the next succeeding
December 31st as of which the Company could have terminated the Employee's
employment pursuant to Paragraph 1 hereof without such termination
constituting a breach or violation of this Agreement; and (ii) the
Employee's employment shall be deemed to terminate on such December 31st.
As used herein, the term "Good Reason" shall mean:
(a) a change in the Employee's status, title or position(s) as
an officer of the Company which, in his reasonable judgment, does not
represent a promotion from or enhancement of his status, title and position
as an executive officer, or the assignment by the Board of Directors of the
Company to the Employee of any duties or responsibilities which, in his
reasonable judgment, are inconsistent with such status, title or position,
or any removal of the Employee from or any failure to reappoint or reelect
him to such position, except in connection with a justifiable termination
by the Company of the Employee's employment for Cause or on account of
disability, the Retirement or death of the Employee or the termination by
the Employee of his employment other than for Good Reason;
<PAGE>
(b) a reduction in the Employee's annual salary or a failure by
the Company to pay to the Employee any installment of the annual salary
and/or the annual incentive bonus required pursuant to Paragraph 4 hereof,
which failure continues for a period of 20 days after written notice
thereof is given by the Employee to the Company;
(c) the failure by the Company to adopt, continue or maintain in
effect, any Plan or benefit which is required to be provided by the Company
pursuant to this Agreement (unless the Company provides the Employee with
the equivalent or at least substantially similar benefits under one or more
other Plans) other than as a result of the normal expiration of such Plan;
or the taking of any action or the failure to act by the Company, which
could adversely affect the Employee's continued participation in any such
Plan(s) or the ability of the Employee to enjoy or realize upon any
material benefit intended, or which could materially reduce the Employee's
benefits under any such Plan(s) or deprive him of any material benefit then
enjoyed by the Employee;
(d) the Company's requiring the Employee to be based anywhere
other than the New Orleans, Louisiana metropolitan area, except for
required travel on the Company's business to an extent substantially
consistent with the business travel obligations which the Employee
undertook on behalf of the Company prior to such required change;
(e) the failure by the Company to obtain the assumption of this
Agreement by any successor of the Company (other than by merger or
consolidation); provided, however, that upon a Change of Control of the
Company, as defined in the Change of Control Agreement between the Employee
and the Company (the "Change of Control Agreement"), the obligations of a
successor hereunder shall be limited to the obligations of the Company
hereunder through the date of the Change of Control after which date the
Change of Control Agreement shall govern.
(f) any purported termination by the Company of the Employee's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Paragraph 10 hereof, or which is not
justified as a termination of the Employee's employment based on Cause; and
for purposes of this Agreement, no such purported termination shall be
effective; or
(g) any refusal by the Company to allow the Employee to attend
to matters or engage in activities not directly related to the business of
the Company which is permitted by this Agreement or which, prior thereto,
was permitted by the Board of Directors of the Company.
10. NOTICE OF TERMINATION. Any purported notice of termination of
the Employee's employment (other than a Notice given by either pursuant to
Paragraph 1 hereof) shall be communicated in a writing delivered to the
other party as provided in Paragraph 14 hereof, (hereinafter a "Notice of
Termination"). For purposes of this Agreement a "Notice of Termination"
shall mean a notice which specifies the termination provision relied upon
by the party giving such notice and shall set forth in detail such facts
and circumstances claimed by said party to provide a justified basis for
termination of the Employee's employment under the provision(s) so
indicated.
<PAGE>
11. NONDISCLOSURE, NONCOMPETITION AND PROPRIETARY RIGHTS.
(a) CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
(i) "Company Business" means the design, construction and
overhaul of both military and commercial ships.
(ii) "Confidential Information" means any information,
knowledge or data of any nature and in any form (including information that
is electronically transmitted or stored on any form of magnetic or
electronic storage media) relating to the past, current or prospective
business or operations of the Company and its subsidiaries, that at the
time or times concerned is not generally known to persons engaged in
businesses similar to those conducted or contemplated by the Company and
its subsidiaries (other than information known by such persons through a
violation of an obligation of confidentiality to the Company), whether
produced by the Company and its subsidiaries or any of their consultants,
agents or independent contractors or by Employee, and whether or not marked
confidential, including without limitation information relating to the
Company's or its subsidiaries' products and services, business plans,
business acquisitions, processes, product or service research and
development methods or techniques, training methods and other operational
methods or techniques, quality assurance procedures or standards, operating
procedures, files, plans, specifications, proposals, drawings, charts,
graphs, support data, trade secrets, supplier lists, supplier information,
purchasing methods or practices, distribution and selling activities,
consultants' reports, marketing and engineering or other technical studies,
maintenance records, employment or personnel data, marketing data,
strategies or techniques, financial reports, budgets, projections, cost
analyses, price lists, formulae and analyses, employee lists, customer
records, customer lists, customer source lists, proprietary computer
software, and internal notes and memoranda relating to any of the
foregoing.
(b) NONDISCLOSURE OF CONFIDENTIAL INFORMATION. During the term
of this Agreement, Employee shall hold in a fiduciary capacity for the
benefit of the Company all Confidential Information which shall have been
obtained by Employee during Employee's employment (whether prior to or
after the date of this Agreement) and shall use such Confidential
Information solely within the scope of his employment with and for the
exclusive benefit of the Company. For a period of three years after the
date of termination of Employee's employment by the Company, Employee
agrees (i) not to communicate, divulge or make available to any person or
entity (other than the Company) any such Confidential Information, except
upon the prior written authorization of the Company or as may be required
by law or legal process, and (ii) to deliver promptly to the Company any
Confidential Information in his possession, including any duplicates
thereof and any notes or other records Employee has prepared with respect
thereto. In the event that the provisions of any applicable law or the
order of any court would require Employee to disclose or otherwise make
available any Confidential Information, Employee shall give the Company
prompt prior written notice of such required disclosure and an opportunity
to contest the requirement of such disclosure or apply for a protective
order with respect to such Confidential Information by appropriate
proceedings.
<PAGE>
(c) LIMITED COVENANT NOT TO COMPETE. During the term of this
Agreement and for a period of two years thereafter, commencing with the
date of termination of employment by the Employee for Good Reason, by the
Company for any reason other than for Cause, or by the Company for Cause if
the Company chooses to extend to Employee upon termination for Cause the
severance benefits provided in Paragraph 8 hereof and Appendix D hereto,
Employee agrees that, with respect to each State of the United States or
other jurisdiction, or specified portions thereof, in which the Employee
regularly (i) makes contact with customers of the Company or any of its
subsidiaries, (ii) conducts the business of the Company or any of its
subsidiaries or (iii) supervises the activities of other employees of the
Company or any of its subsidiaries, which states and jurisdictions or
portions thereof are identified in Appendix E attached hereto and forming a
part of this Agreement, and in which the Company or any of its subsidiaries
engages in the Company Business on the Date of Termination (collectively,
the "Subject Areas"), Employee will restrict his activities within the
Subject Areas as follows:
(i) Employee will not, directly or indirectly, for himself
or others, own, manage, operate, control, be employed in an executive,
managerial or supervisory capacity by, or otherwise engage or participate
in or allow his skill, knowledge, experience or reputation to be used in
connection with, the ownership, management, operation or control of, any
company or other business enterprise engaged in the Company Business within
any of the Subject Areas; provided, however, that nothing contained herein
shall prohibit Employee from making passive investments as long as Employee
does not beneficially own more than 10% of the equity interests of a
business enterprise engaged in the Company Business within any of the
Subject Areas. For purposes of this paragraph, "beneficially own" shall
have the same meaning ascribed to that term in Rule 13d-3 under the
Securities Exchange Act of 1934.
(ii) Employee will not call upon any customer of the Company
or its subsidiaries for the purpose of soliciting, diverting or enticing
away the business of such person or entity, or otherwise disrupting any
previously established relationship existing between such person or entity
and the Company or its subsidiaries;
(iii) Employee will not solicit, induce, influence or
attempt to influence any supplier, lessor, licensor, potential acquiree or
any other person who has a business relationship with the Company or its
subsidiaries, or who on the date of termination of employment of Employee
is engaged in discussions or negotiations to enter into a business
relationship with the Company or its subsidiaries, to discontinue or reduce
the extent of such relationship with the Company or its subsidiaries; and
(iv) Employee will not make contact with any of the
employees of the Company or its subsidiaries with whom he had contact
during the course of his employment with the Company for the purpose of
soliciting such employee for hire, whether as an employee or independent
contractor, or otherwise disrupting such employee's relationship with the
Company or its subsidiaries.
<PAGE>
(v) Employee further agrees that, for a period of one year
from and after the date of termination of employment, Employee will not
hire, on behalf of himself or any company engaged in the Company Business
with which Employee is associated, any employee of the Company or its
subsidiaries as an employee or independent contractor, whether or not such
engagement is solicited by Employee; provided, however, that the
restriction contained in this subsection (v) shall not apply to Company
employees who reside in, or are hired by Employee to perform work in any
Subject Areas located within the State of Virginia.
Employee agrees that he will from time to time upon the Company's
request promptly execute any supplement, amendment, restatement or other
modification of Appendix E as may be necessary or appropriate to correctly
reflect the jurisdictions which, at the time of such modification, should
be covered by Appendix E and this Paragraph 11(c). Furthermore, Employee
agrees that all references to Appendix E in this Agreement shall be deemed
to refer to Appendix E as so supplemented, amended, restated or otherwise
modified from time to time. Enforcement of this Paragraph 11(c) is subject
to the provisions of Paragraph 11(e) hereof.
(d) CERTAIN PROPRIETARY RIGHTS. Employee agrees to and hereby
does assign to the Company all his interest in and to all inventions,
whether or not patentable, which are made or conceived solely or jointly by
him:
(i) At any time during the term of his employment by the
Company in an executive, managerial, planning, technical research or
engineering capacity (including development, manufacturing, systems,
applied science and sales), or
(ii) During the course of or in connection with his duties
during the term of this Agreement, or
(iii) With the use of time or materials of the Company.
Employee agrees to communicate to the Company or its representatives
all facts known to him concerning such inventions, to sign all rightful
papers, make all rightful oaths and generally to do everything possible to
aid the Company in obtaining and enforcing proper patent protection for all
such inventions in all countries and in vesting title to such inventions
and patents in the Company. For the purpose of this Agreement, the
subject matter of any application for patent naming Employee as a sole or
joint inventor filed during the course of employment or within one year
subsequent to the termination thereof shall be deemed to be an invention
made or conceived by him during the course of his employment by the Company
and assignable to the Company hereunder, unless the Employee establishes by
a preponderance of the evidence that such invention was made or conceived
by him subsequent to termination of his employment hereunder. At the
Company's request (during or after the term of this Agreement) and expense,
the Employee will promptly execute a specific assignment of title to the
Company, and perform any other acts reasonably necessary to implement the
foregoing assignment.
<PAGE>
(e) INJUNCTIVE RELIEF; OTHER REMEDIES. Employee acknowledges
that a breach by Employee of Paragraph 11(b), (c) or (d) would cause
immediate and irreparable harm to the Company for which an adequate
monetary remedy does not exist; hence, Employee agrees that, in the event
of a breach or threatened breach by Employee of the provisions of Paragraph
11(b), (c) or (d) during or after the Employment Term, the Company shall be
entitled to injunctive relief restraining Employee from such violation
without the necessity of proof of actual damage or the posting of any bond,
except as required by non-waivable, applicable law. Nothing herein,
however, shall be construed as prohibiting the Company from pursuing any
other remedy at law or in equity to which the Company may be entitled under
applicable law in the event of a breach or threatened breach of this
Agreement by Employee, including without limitation the recovery of damages
and/or costs and expenses, such as reasonable attorneys' fees, incurred by
the Company as a result of any such breach. It shall be a condition to the
enforceability by the Company of the provisions of this Paragraph 11(c),
however, that the Company pays to and provides for the Employee the full
amount of severance pay and benefits described in Appendix D. Unless the
Company notifies the Employee in the Notice of Termination for Cause that
it intends to enforce the provisions of Paragraph 11(c) and agrees to pay
the Employee the full amount of severance pay and benefits described in
Appendix D, it shall be conclusively presumed for all purposes of this
Agreement that the Company has elected to waive the right to enforce the
provisions of this Paragraph 11(c). Employee acknowledges that the
payments provided under Paragraph 8 and Appendix D are conditioned upon
Employee fulfilling any noncompetition and nondisclosure agreements
contained in Paragraph 11. In the event Employee shall at any time
materially breach any noncompetition or nondisclosure agreements contained
in Paragraph 11, the Company may suspend or eliminate payments under
Paragraph 8 and Appendix D during the period of such breach. Employee
acknowledges that any such suspension or elimination of payments would be
an exercise of the Company's right to suspend or terminate its performance
hereunder upon Employee's breach of this Agreement; such suspension or
elimination of payments would not constitute, and should not be
characterized as, the imposition of liquidated damages.
(f) REQUESTS FOR WAIVER IN CASES OF UNDUE HARDSHIP. In the
event that Employee should find any of the limitations of Paragraph 11(c)
(including without limitation the geographic restrictions of Appendix E) to
impose a severe hardship on Employee's ability to secure other employment,
Employee may make a request to the Company for a waiver of the designated
limitations before accepting employment that otherwise would be a breach of
Employee's promises and obligations under this Agreement. Such request
must be in writing and clearly set forth the name and address of the
organization with that employment is sought and the location, position and
duties that Employee will be performing. The Company will consider the
request and, in its sole discretion, decide whether and on what conditions
to grant such waiver.
<PAGE>
(g) GOVERNING LAW OF THIS PARAGRAPH 11; CONSENT TO JURISDICTION.
Any dispute regarding the reasonableness of the covenants and agreements
set forth in this Paragraph 11, or the territorial scope or duration
thereof, or the remedies available to the Company upon any breach of such
covenants and agreements, shall be governed by and interpreted in
accordance with the laws of the State of the United States or other
jurisdiction in which the alleged prohibited competing activity or
disclosure occurs, and, with respect to each such dispute, the Company and
Employee each hereby irrevocably consent to the exclusive jurisdiction of
the state and federal courts sitting in the relevant State for resolution
of such dispute, and agree to be irrevocably bound by any judgment rendered
thereby in connection with such dispute, and further agree that service of
process may be made upon him or it in any legal proceeding relating to this
Paragraph 11 and/or Appendix E by any means allowed under the laws of such
jurisdiction. Each party irrevocably waives any objection he or it may
have as to the venue of any such suit, action or proceeding brought in such
a court or that such a court is an inconvenient forum. It is the desire
and intent of the parties that the provisions of this Agreement be enforced
to the fullest extent permitted under applicable law, whether now or
hereafter in effect and, therefore, to the extent permitted by applicable
law, the parties hereto waive any provision of applicable law that would
render any provision of this Paragraph 11 invalid or unenforceable.
12. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of:
(a) The Company, and any successors or assigns of the Company,
except that in the event of a Change of Control of the Company as defined
in the Change of Control Agreement, this Agreement shall be superseded by
the Change of Control Agreement. In the event of the assignment by the
Company of this Agreement, the Company shall nevertheless remain liable and
obligated to the Employee in accordance with the terms hereof; and
(b) The Employee, his estate, his executors, administrators,
heirs and beneficiaries.
13. EXPENSES RELATING TO ENFORCEMENT OF RIGHTS. If either party
shall successfully seek to enforce any provision of this Agreement or to
collect any amount claimed to be due hereunder, such successful party shall
be entitled to be reimbursed by the other party for any and all out-of-
pocket expenses, including reasonable attorneys' fees, incurred in
connection with such enforcements and/or collection.
<PAGE>
14. SEVERABILITY. If any term or provision of this Agreement
(including without limitation those contained in an Appendix hereto), 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 temporally, spatially or
otherwise 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.
15. NOTICES. Any notice or other communication required under this
Agreement shall be in writing, shall be deemed to have been given and
received when delivered in person, or, if mailed, shall be deemed to have
been given when deposited in the United States mail, first class,
registered and certified, return receipt requested, with proper postage
prepaid, and shall be deemed to have been received on the third business
day thereafter, and shall be addressed as follows:
If to the Company, addressed to:
Avondale Industries, Inc.
5100 River Road
Avondale, Louisiana 70094
If to the Employee, addressed to:
Ronald J. McAlear
221 Rue St. Ann
Metairie, Louisiana 70005
or such other address as to which any party hereto may have notified
the other in writing.
16. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Louisiana without
regard to the principles of conflict of laws, except as expressly provided
in Paragraph 11(g) above with respect to the resolution of disputes arising
under, or the Company's enforcement of Paragraph 11 of this Agreement.
17. ENTIRE AGREEMENT. This document contains or refers to the entire
arrangement or understanding between the parties relating to the employment
of the Employee by the Company prior to a Change of Control of the Company,
as defined in the Change of Control Agreement. This Agreement, including
Appendices A through E, inclusive, all of which are herein incorporated by
reference and made a part hereof, contains or refers to the entire
arrangement or understanding between the Employee and the Company relating
to the employment of the Employee by the Company. No provision of the
Agreement, including the Appendices, may be modified or amended except by
an instrument in writing signed by or for both parties hereto.
<PAGE>
AVONDALE INDUSTRIES, INC.
By: /s/ Hugh A. Thompson
------------------------
Hugh A. Thompson
Chairman, Compensation Committee
/s/ Ronald J. McAlear
-------------------------
Ronald J. McAlear
<PAGE>
LIST OF APPENDICES
DESCRIPTION NUMBER OF PAGES
Appendix A Benefit Plan Structure 5
Appendix B Disability Benefits 1
Appendix C Death Benefits 1
Appendix D Severance Benefits 3
Appendix E Subject Areas under Limited 1
Covenant Not to Compete
<PAGE>
APPENDIX "A"
AVONDALE INDUSTRIES, INC.
AVONDALE SERVICES CORPORATION
EXECUTIVE GROUP
Effective Date: 1-1-98
COVERAGE DESCRIPTION
EMPLOYEE LIFE Two times base salary and bonus
Optional Coverage - additional one or two times base
salary and bonus
Maximum Coverage - Two million dollars
DEPENDENT LIFE $2,000.00 Spouse - Optional $100,000.00
$1,000.00 Dependent (over six months old)
$100.00 Dependent (less than six months old)
Accidental Death and Death - Same as Life (Employee Only)
DISMEMBERMENT Dismemberment - Benefit Schedule
Business According to rate of pay - Maximum $50,000.00
TRAVEL ACCIDENT
TRAVEL ACCIDENT (SALARIED) 5 Times Annual Salary - Maximum $500,000.00
RETIREE LIFE One-half of Life Insurance in force at time of
retirement
SHORT TERM DISABILITY Schedule based on length of service (see Page 2)
LONG TERM DISABILITY 60% of monthly base salary, after 180 day waiting
period.
Maximum $15,000 per month coordinated with Disability
Social Security Benefit.
<PAGE>
HEALTH CARE 100% Hospital - private room rate plus miscellaneous
expenses
100% Hospital Medical Expenses - (doctor's visits to
hospital)
100% Surgical Expenses
100% Laboratory and X-ray Expenses
100% Vision and Hearing Care Expenses
100% Dental and Orthodontia
100% Annual Physicals
100% Psychiatric and Nervous Care - expenses up to
$6,500.00 per year per individual
No Life-Time Maximum
Subject to applicable employee contribution requirement
<PAGE>
SHORT TERM DISABILITY
Benefits begin on first day absent due to a non-occupational injury or
illness. Original medical documentation required if absent five or more
consecutive working days.
Benefits will be reduced by any amount received from Social Security.
Successive periods of disability separated by less than two (2) weeks of
full-time work considered as one continuous period of disability, unless
later disability due to a different cause.
Benefits will be paid up to a maximum of twenty-six (26) weeks, based on
the following schedule:
YEARS OF SERVICE FULL SALARY UP TO HALF SALARY UP TO
Less than 1 Year 4 Weeks 0 Weeks
1 Year 4 Weeks 22 Weeks
2 Years 6 Weeks 20 Weeks
3 Years 8 Weeks 18 Weeks
4 Years 10 Weeks 16 Weeks
5 Years 12 Weeks 14 Weeks
6 Years 14 Weeks 12 Weeks
7 Years 16 Weeks 10 Weeks
8 Years 18 Weeks 8 Weeks
9 Years 20 Weeks 6 Weeks
10 Years 22 Weeks 4 Weeks
11 Years 24 Weeks 2 Weeks
12 Years or more 26 Weeks 0 Weeks
JURY DUTY
Pays difference between employee's base pay and jury pay received, not to
exceed eight hours pay per day.
BLOOD BANK
To be eligible, must be a participant in Group Health Insurance Program.
In joining the Blood Bank Program, the employee agrees to donate a unit of
blood as requested at irregular intervals. The Program provides the
employee and insured dependents with blood for as long as the employee
remains in the Program.
HOLIDAYS
Eight Paid Holidays - New Years Day, Mardi Gras, Good Friday, July Fourth,
Labor Day, Thanksgiving Day, Day After Thanksgiving and Christmas.
Eligible upon completion of thirty days service.
<PAGE>
VACATION
Vacation year is from January 1 to December 31. Upon completion of one
full year of service, eligible for two weeks of vacation. An employee
joining the Company after January 1 but prior to July 1 will be eligible
for one week's vacation the following January 1. Vacation time may not be
carried over from one vacation period to the next. Vacation time may be
taken in one-hour increments. Beginning with ten full years of service,
eligible for additional days of vacation, up to a maximum of five
additional days, based on the following schedule:
YEARS OF SERVICE ADDITIONAL DAYS OF VACATION
10 Years 1 Day
11 Years 2 Days
12 Years 3 Days
13 Years 4 Days
14 Years 5 Days
SICK/PERSONAL TIME
Eligible for twenty-four hours per calendar year. Time may be taken in
one-hour increments. Unused time may not be carried over to the next year.
FUNERAL LEAVE
None
TUITION ASSISTANCE
Eligible upon completion of one year's service. Only courses directly
related to employee's position and taken at an accredited institution will
be considered. Approval must be obtained prior to the start of the course.
Reimbursement will be made for the cost of tuition only, and will be based
on the following schedule:
COURSE LEVEL FINAL GRADE REIMBURSEMENT PERCENTAGE
Under-Graduate Not Lower Than "C" 100%
Post-Graduate Not Lower Than "B" 100%
AUTOMOBILE ALLOWANCE
$600 per month
RETIREMENT
Formula - 1.5% of final average compensation, multiplied by years of
credited service, less Massachusetts Mutual Annuity and equivalent
actuarial value of any shares in ESOP account.
Early Retirement Benefits available at age 55 with ten years service,
actuarially reduced by years and months early.
<PAGE>
SUPPLEMENTAL RETIREMENT PLAN
Vesting: 100% vesting upon completion of ten (10) years service
Formula: 15% of final average compensation.
Early Retirement Benefits available at Age 55 with ten (10) years service,
actuarially reduced by years and months early
EXECUTIVE EXCESS RETIREMENT PLAN
If designated as a participant by the Board of Directors.
Purpose of the plan is to reimburse participants for benefits not payable
under the Pension Plan and ESOP because of limitations in the Internal
Revenue Code and the Pension Plan.
Benefits paid upon attainment of age 75 or upon retirement, if earlier.
Benefit is unfunded.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
Plan Year - September 1 to August 31
Eligibility - 1st of month following one year of service
Compensation - Total salary, excluding severance pay, moving expenses and
non-cash contribution
Stock Allocation - Each year the Trustees divide the available shares of
stock among eligible participants, based on each participant's
compensation. These allocated shares are held in the participant's ESOP
account. Must be on payroll last pay period of each plan year to receive
allocation.
Distribution - (1) Retirement - Age 55 or later
(2) Total & Permanent Disability with Social Security Award
(3) Death
Vesting - Employees who were eligible to receive Special Shares were 100%
vested.
Vesting for Loan Shares is as follows:
Less than 4 years 0%
4 years but less than 5 40%
5 years but less than 6 50%
6 years but less than 7 60%
7 years but less than 8 70%
8 years but less than 9 80%
9years but less than 10 90%
10 years or more 100%
<PAGE>
APPENDIX B
DISABILITY BENEFIT
In the event of termination by the Company of the Employee's
employment on account of disability pursuant to Paragraph 6 of the
Agreement, the disability benefit to be provided to the Employee shall be
determined under this Appendix, unless a greater or more favorable benefit
is required to be provided pursuant to the provisions of Subparagraph 4(c)
of the Agreement and/or Appendix A.
1. CONTINUATION OF FULL ANNUAL SALARY: The full amount of the
Employee's annual salary (pursuant to paragraph 4(a) of this Agreement)
shall be continued according to the following formula:
(i) If the Employee's credited service for the Company totals
(5) five years or less his annual salary shall be continued for twelve (12)
months commencing with the month following such termination of employment;
and
(ii) If the Employee's credited service for the Company totals
more than five (5) years, the payment period referred to in (i) shall be
increased by two-tenths (2/10) of a year for each year of credited service
in excess of five (5) up to a maximum payment period of five (5) years.
Thus, if the Employee's employment is terminated on account of disability
at a time when he has twelve (12) years of credited service, the Employee's
full annual salary would be continued for 2.4 years following such
termination of employment and an Employee with twenty-five (25) or more
years of credited service as of the termination of his employment on
account of disability will receive his full annual salary for five (5)
years.
2. CONTINUATION OF PARTIAL ANNUAL SALARY. Following the expiration
of the period calculated pursuant to the preceding Paragraph 1, the
Employee will receive long term disability benefits equal to sixty percent
(60%) of his full annual salary subject to such limitations as are
contained in Appendix A.
3. LIMITATIONS. The disability benefit will in any event
discontinue and terminate upon the death of the Employee or upon the date
of his Retirement as defined in subparagraph 9(a) of the Agreement would
have occurred.
4. OTHER BENEFITS. Other benefits which may be provided or
continued for the Employee following the termination of his employment on
account of disability depend upon the terms of the Plan under which such
benefits are provided or required to be provided.
<PAGE>
APPENDIX C
DEATH BENEFITS
The death benefits to be provided by the Company subsequent to the
death of the Employee shall be determined by reference to the plan or plans
under which such benefits are provided. Reference is made to subparagraph
4(c) of the Agreement and to Appendix A.
<PAGE>
APPENDIX D
SEVERANCE BENEFITS
Upon the termination of the Employee's employment under any
circumstance requiring the Company to pay to and provide for the Employee
the severance pay and other benefits set forth in this Appendix D, the
Company shall be obligated to pay to and/or provide for the Employee the
following compensation and other benefits:
(a) PAYMENT IN LIEU OF COMPENSATION: The Company shall pay to the
Employee in cash an amount equal to the product of (i) and (ii); where (i)
shall equal the sum of (A) the Employee's annual salary and (B) the
Employee's annual incentive bonus during the twelve (12) month period
ending with the close of the month in which such termination of employment
occurs (the "Date of Termination") , divided by twelve (12) ; and where
(ii) shall be the lesser of (x) thirty-six (36), (y) six (6), plus two (2)
for each twelve (12) months of credited service of the Employee for the
Company (determined in accordance with subparagraph 4(c) of the Agreement)
through the Date of Termination, or (z) the number of months until the
Employee's normal retirement date, as defined in the Avondale Industries,
Inc. Pension Plan (or any successor, or substitute plan or plans of the
Company or of any subsidiary of the Company under which the Employee may be
a participant, hereinafter the "Pension Plan"). The number determined
under clause (ii) is sometimes herein referred to as the "Measuring
Period".
(b) ACCELERATION OF STOCK OPTIONS: Immediately following such Date
of Termination, all options and stock appreciation rights granted to
Employee under the 1997 Stock Incentive Plan or any other stock option or
similar plan before or after the date hereof (collectively referred to
herein as "Stock Option Plans") shall immediately become fully exercisable
and execution of this Agreement shall constitute an amendment to any stock
option agreement to so provide and an agreement and undertaking by the
Company to take such action as may be required to cause any and all options
or rights granted, or to be granted, to Employee thereunder to make them
consistent herewith.
<PAGE>
(c) PAYMENT FOR NON-VESTED RETIREMENT BENEFIT: In addition to the
vested portion of the Employee's interest under any employee benefit plan
maintained by the Company as a qualified plan pursuant to Section 401(a) of
the Internal Revenue Code of 1986, as amended, to which the Company or any
subsidiary has made contributions for the Employee's account which are not
otherwise expressly provided for herein, if the Employee is not fully
vested under any such plan or plans, the Company shall pay to the Employee
in cash an amount equal to the then present value of the actuarial
equivalent (within the meaning of the following Paragraph (d)) of the non-
vested portion of the Employee's account, to the extent that such account
would have become vested based on additional credited service for the
Company, if the Employee had remained in the employ of the Company (or any
subsidiary) for an additional period of months equal to the Measuring
Period.
(d) SUPPLEMENTAL RETIREMENT BENEFIT: In addition to any retirement
or severance benefit to which the Employee is entitled under the Pension
Plan, the Employee shall receive in cash, an amount equivalent of the
excess of (i) over (ii), where (i) equals the aggregate amount of the
retirement pension (calculated as a straight life annuity payable to
Employee on his normal retirement date) to which Employee would have been
entitled under the terms of the Pension Plan and any other qualified or
non-qualified defined benefit plan maintained by the Company and covering
the Employee, if Employee were fully vested thereunder (without regard to
(w) whether the Employee shall actually have completed the number of years
of credited service required to qualify for full vesting under such plans,
(x) any limitation on the amount of compensation used in the calculation of
the regular pension thereunder, (y) any offset thereunder for severance
allowances payable hereunder or (z) any amendment to such plans made prior
to the Employee's Date of Termination, which amendment adversely affects in
any manner the computation of retirement benefits under such plans) and had
accumulated an additional period of months of credited service after the
Date of Termination equal to the Measuring Period (but in no event shall
Employee be deemed to have accumulated an additional period of credited
service subsequent to Employee's sixty-fifth (65th) birthday), and, where
(ii) equals the amount of the retirement pension (calculated as a straight
1ife annuity payable to Employee on his normal retirement date),if any, to
which Employee is entitled pursuant to the provisions of the Pension Plan
and such other plans. For purposes of Clause (i) of this Paragraph (d),
the amount payable pursuant to Paragraph (a) of this Appendix D, shall be
deemed to represent the Employee's earnings for the period of months equal
to the Measuring Period, and for purposes of this Paragraph (d), "actuarial
equivalent" shall be determined using the same methods and assumptions
utilized under the Pension Plan immediately prior to the Date of
Termination. All other terms used in this Paragraph (d) shall have the
same meanings, respectively, as such terms have in the Pension Plan, unless
otherwise required by the context.
<PAGE>
(e) OTHER BENEFITS: The Company shall also maintain in full force
and effect, for the continued benefit of the Employee and his dependents,
for a period terminating on the earliest of (i) a period of months after
the Date of Termination equal to the Measuring Period; (ii) the
commencement date of equivalent benefits for the Employee from a new
employer; or (iii) the Employee's normal retirement date under the
Company's Pension Plan, after which the terms of the Pension Plan shall
govern; all insured and self-insured employee benefit plans in which the
Employee is entitled to participate immediately prior to the Date of
Termination; provided that the Employee's continued participation is
possible under the general terms and provisions of such Plans (and any
applicable funding media) and the Employee continues to pay an amount equal
to Employee's regular contribution for such participation. In the event
that the Employee participation in any such Plan is barred, the Company, at
its sole cost and expense, shall arrange to have issued for the benefit of
Employee and his dependents individual policies of insurance providing
benefits substantially similar (on an after-tax basis) to those which the
Employee would have been entitled to receive under such Plan or Plans
pursuant to this Paragraph (e) if such participation were not barred or, if
such insurance is not available at a reasonable cost to the Company, the
Company shall otherwise provide the Employee and his dependents with
equivalent benefits (on an after-tax basis) and the Employee shall not be
required to pay any premiums or other charges in an amount greater than
that which the Employee would have paid in order to participate in such
Plans. If, at the end of a period of months after the Date of Termination
equal to the Measuring Period, the Employee is not receiving equivalent
benefits from a new employer, the Company shall arrange, at its sole cost
and expense, to enable Employee to convert the Employee's and his
dependents' coverage under such Plans to individual policies or programs
upon the same terms as employees of the Company may apply for until the
Employee is able to receive equivalent benefits from a source other than
the Company.
(f) MITIGATION: The Employee shall not be required to mitigate the
amount of any payment or benefit provided for in this Appendix D by seeking
other employment or otherwise, nor (except as specifically provided in
Paragraph (e) above) shall the amount of any payment or benefit provided
for in this Appendix D be reduced by any compensation or benefit earned by
Employee as a result of employment by another employer after the Date of
Termination, or otherwise.
(g) MANNER OF PAYMENT: All payments which are required to be made in
cash under Paragraphs (a), (c) or (d), above, shall be paid on the Date of
Termination, or within five (5) business days thereafter, unless the
Employee has made a Deferred Payment Election with respect to such
payment(s) pursuant to the succeeding Paragraph (h).
<PAGE>
(h) ELECTION TO DEFER PAYMENT: Upon entering into this Agreement and
for a period of fourteen (14) days following each anniversary of the date
hereof (the "Election Period"), the Employee may, in writing, direct the
Company that any amounts which become payable to the Employee pursuant to
Paragraphs (a), (c) and (d), above, shall be paid to the Employee in three
(3) equal annual installments, with the first of such installments to be
paid not later than five (5) business days after the Date of Termination
and successive installments paid on the next two (2) succeeding
anniversaries of the Date of Termination or the next following business day
if such date is not a business day (the "Deferred Payment Election"). A
Deferred Payment election, once made, shall be irrevocable except during an
Election Period.
(i) EFFECT ON OTHER BENEFITS: Nothing contained in this Appendix D
shall be construed or interpreted as limiting any rights or benefits
payable to or for the Employee under any other provision of this Agreement.
<PAGE>
APPENDIX E
TO EMPLOYMENT AGREEMENT
BETWEEN AVONDALE INDUSTRIES, INC.
AND
RONALD J. MCALEAR
Jurisdictions In Which Competition
Is Restricted As Provided
In Paragraph 11(c)
A. STATES
1. LOUISIANA -- The following parishes in the State of Louisiana:
Orleans and Jefferson
2. MISSISSIPPI -- The following counties in the State of
Mississippi:
Harrison
as well as any other counties in the State of Mississippi in
which the Employee regularly (a) makes contact with customers of
the Company or any of its subsidiaries, (b) conducts the business
of the Company or any of its subsidiaries or (c) supervises the
activities of other employees of the Company or any of its
subsidiaries as of the date of termination of employment.
3. VIRGINIA-- The following counties in the State of Virginia:
Arlington
as well as any other counties in the State of Virginia in which
the Employee regularly (a) makes contact with customers of the
Company or any of its subsidiaries, (b) conducts the business of
the Company or any of its subsidiaries or (c) supervises the
activities of other employees of the Company or any of its
subsidiaries as of the date of termination of employment.
Agreed to and Accepted:
Avondale Industries, Inc. Employee
By: /S/ HUGH A. THOMPSON /S/ RONALD J. MCALEAR
-------------------- ---------------------
Its: Compensation Committee Chairman Ronald J. McAlear
Date: MARCH 23, 1998 Date: MARCH 23, 1998
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 23rd day of March,
1998, by and between AVONDALE INDUSTRIES, INC., a Louisiana corporation
maintaining its principal office at 5100 River Road, Avondale, Louisiana
70094 (the "Company") and Edmund C. Mortimer, now residing at 158 Villere
Drive, Destrehan, Louisiana 70047 (hereinafter called the "Employee").
W I T N E S S E T H
WHEREAS, the Employee is employed by the Company in an executive
capacity, and the Company desires to ensure that the Employee will be
available to provide executive services to the Company in the future, which
services are significant to the Company's long range prospects;
WHEREAS, the Company and Employee desire, among other things, to
prohibit Employee from disclosing or utilizing, outside the scope and term
of his employment, any non-public, confidential or proprietary information,
knowledge and data relating to the business and operations of the Company
or its subsidiaries received by Employee during the course of his
employment, and to restrict the ability of Employee to compete with the
Company or its subsidiaries for a limited period of time; and
WHEREAS, to induce the Employee to agree to provide such services on
the terms provided herein, the Company is offering to provide the Employee
with the compensation, benefits and security provided for in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements
herein contained, the parties hereto agree as follows:
1. EMPLOYMENT/CAPACITY/TERM. The Company agrees to and does hereby
employ the Employee, and the Employee agrees to be employed by the Company
upon the terms and conditions set forth in this Agreement. Such employment
shall be in a managerial and executive capacity in the operation of the
business of the Company and/or a subsidiary, subject to the supervision of
the Board of Directors of the Company. Such employment shall commence on
the date hereof and shall continue through December 31, 2000, and from year
to year thereafter subject to the right of the Employee or the Company to
terminate such employment as of December 31, 2000, or any subsequent
December 31, by written notice given to the other party at least sixty (60)
days prior to such termination date stating an intention to so terminate
such employment. Termination by either party, in accordance with the
provisions of the preceding sentence, shall not require a statement of the
reason or cause for such termination and shall not be deemed a breach or
violation of this Agreement by the party giving such notice. As used in
this Agreement, the phrase "term of this Agreement" shall be deemed to
include the period subsequent to the date hereof and prior to termination
of this Agreement; however, such phrase shall not be construed as limiting
the enforceability by either party of any rights which survive termination
of this Agreement.
<PAGE>
2. TIME AND EFFORT/ABSENCES. During the term of this Agreement, the
Employee shall devote his entire time and attention during normal business
hours to the business of the Company, and its subsidiaries, subject to the
supervision of the Board of Directors of the Company, and he shall not
engage in any other business activity whether or not such business activity
is pursued for gain, profit or other pecuniary advantage, but this
restriction shall not be construed to restrict the Employee (i) from
performing services as a member of the Board of Directors, Board of
Trustees or the like for any non-profit or for profit entity whether or not
the Employee receives compensation therefor, provided that, such services
do not unreasonably interfere with the ability of the Employee to perform
the services and discharge the responsibilities required of him under this
Agreement (it generally being agreed and understood that the quantity and
quality of the services heretofore performed by the Employee for non-profit
and for profit entities would not constitute a violation of the aforesaid
restriction), and (ii) from investing his assets in such form or manner as
will not require any services on the part of the Employee in the operation
of the business of the entity in which such investments are made. The
employee shall be excused from rendering his services during reasonable
vacation periods and during other reasonable temporary absences, all as
authorized from time to time by the Board of Directors of the Company. At
the date hereof, the Employee maintains his residence at 158 Villere Drive,
Destrehan, Louisiana 70047 and performs services for the Company in New
Orleans, Louisiana; it is understood that, without his consent, the
Employee will not be required to relocate to a different location to
discharge his responsibilities under this Agreement.
3. CORPORATE OFFICES. If elected, the Employee will serve, without
additional compensation, as a director of the Company or as an officer or
director of any subsidiary of the Company.
4. SALARY/BONUS/OTHER BENEFITS. In consideration of the services
and duties to be rendered and performed by the Employee during the term of
this Agreement, including the assumption of the duties and responsibilities
of an executive officer of the Company, the Company agrees to pay and
provide for the Employee the compensation and benefits described below:
(a) An annual salary, payable in equal monthly installments, in
the amount of One Hundred Fifty Thousand Six Hundred Seventy-Two and 00/100
($150,672) or in such greater amount as may from time to time be fixed by
the Board of Directors or the Compensation Committee of the Board of
Directors of the Company. The Employee's annual salary shall never be
reduced.
(b) An annual incentive bonus in such amount as may from time to
time be fixed by the Board of Directors or the Compensation Committee of
the Board of Directors, provided that, the annual incentive bonus for any
period of less than twelve (12) months (other than for the period from the
date hereof through December 31, 1998) shall be prorated. The annual
incentive bonus shall be paid to the Employee (or to his personal
representative in the event of his death) in a lump sum prior to the
expiration of the period for which such bonus is payable or within 45 days
following the expiration of such period.
<PAGE>
(c) OTHER BENEFITS. All other payments and/or benefits
described or provided for in this Agreement, including the Appendices
hereto. It is intended that such payments and/or benefits shall provide
the Employee and/or his personal representative(s) and/or beneficiaries, as
the case may be, with benefits which will be at least as favorable as the
benefits which on December 31, 1997 were provided for the Employee by the
Company. In addition, the Employee shall also be eligible for and shall
participate in any other employee benefit plan, including, any pension,
supplemental pension, retirement, supplemental retirement, profit-sharing,
thrift, bonus, incentive, deferred compensation, stock option or stock
appreciation or other employee benefit plan, including any life insurance,
accident, medical, disability, health or relocation plan or policy (all of
which are included by reference to the term "Plan") maintained by the
Company for its employees, generally, or for its senior executives, in
particular, on the same basis and subject to the same requirements and
limitations as may be made applicable to other senior executive employees
of the Company, provided that participation in and the terms of any
participation in the Avondale Industries, Inc. 1997 Stock Incentive Plan or
any successor plan shall be at the discretion of the Compensation Committee
as provided in such plans. The benefit plan structure and benefits which
shall be provided for the Employee and other senior executive employees of
the Company are described in Appendix A hereto. Nothing herein, however,
shall be construed as limiting the right of the Employee to additional or
other and greater benefits than are described in said Appendix A, if the
provisions of this Agreement obligate the Company to provide such other or
greater benefits, and in particular, but without limitation by the
specification hereof, the benefits described in Paragraphs 6, 7, 8 and 9
hereof and Appendices B, C and D hereto. In addition, the Company agrees
that where credited service of the Employee for the Company is relevant in
determining eligibility for or benefits under any Plan, the Employee's
credited service for the Company shall be determined to include service for
any parent, subsidiary or affiliate of the Company or for a predecessor of
the Company.
5. EXPENSES. The Employee shall be reimbursed for out-of-pocket
expenses incurred from time to time on behalf of the Company or any
subsidiary or in the performance of his duties under this Agreement, upon
the presentation of such supporting documents and forms as the Company
shall reasonably request.
6. DISABILITY/DISABILITY BENEFIT. In the event that the Employee is
incapable because of physical or mental illness of rendering services of
the character contemplated hereby, for a period of six (6) consecutive
months, the Board of Directors of the Company may determine that the
Employee has become disabled. In the event of such a determination of
disability, the Company shall have the continuing right and option while
such disability continues by notice in writing to the Employee to terminate
this Agreement effective thirty (30) days after such notice of termination
is so given, unless within such thirty (30) day period, the Employee
resumes rendering full-time services of the character contemplated hereby.
The incapacity due to physical or mental illness to render the services of
the character contemplated hereby, shall not constitute a breach of this
Agreement by the Employee. If this Agreement is terminated by the Company
as a result of a determination of disability, as aforesaid, the Company
shall be obligated to pay to the Employee the disability benefits described
in Appendix B hereto.
<PAGE>
7. DEATH/DEATH BENEFIT. In the event of the death of the Employee
during the term of this Agreement, this Agreement will terminate and the
Employee's then rate of annual salary and an annual incentive bonus,
(prorated in accordance with subparagraph 4(b) hereof) shall be paid to the
Employee's personal representative through the last day of the month in
which such death occurs. In addition, the Company shall be obligated to
provide the Employee, his personal representative(s) and/or his
beneficiaries with the death benefits described in Appendix C hereto.
8. SEVERANCE PAY. If the employment of the Employee is terminated
at any time during the period that this Agreement is in effect (i) by the
Employee for Good Reason (as defined in Paragraph 9 hereof) or (ii) by the
Company for any reason other than for Cause (as hereafter defined) or other
than in accordance with Paragraph 6 hereof on account of the disability of
the Employee, the Company shall be obligated to pay to the Employee the
severance pay and benefits described in Appendix D attached hereto.
Termination of the Employee's employment on account of his death or
Retirement (as hereafter defined) will not be considered a termination of
the Employee's employment by the Company and will not require the Company
to pay and provide any severance pay or benefits pursuant to Appendix D.
Accordingly, the Company acknowledges that if the employment of the
Employee is terminated by it for any reason during the period that this
Agreement is in effect other than for Cause or other than on account of the
disability of the Employee in accordance with Paragraph 6 hereof, the
Company will be obligated to pay and provide the severance pay and benefits
described in Appendix D, in order to reinforce and encourage the continued
loyalty, attention, and dedication of the Employee to the Company's
business and affairs without the concerns which normally arise from the
possibility of a loss of employment security. As used herein, the terms
"Retirement" and "Cause" shall have the following meanings, respectively:
(a) RETIREMENT. Termination of the Employee's employment
"Retirement" shall mean termination on the Employee's normal retirement
date in accordance with the terms of the Avondale Industries, Inc. Pension
Plan (or any successor or substitute plan or plans of the Company or of any
subsidiary of the Company under which the Employee may be a participant);
and
<PAGE>
(b) CAUSE. Termination by the Company of the Employee's
employment for "Cause" shall mean termination as a result of (i) the
willful and continued failure by the Employee to perform substantially the
services contemplated by this Agreement (other than any such failure
resulting from the Employee's incapacity due to physical or mental illness)
after a written demand for substantial performance is delivered to the
Employee by a member or representative of the Board of Directors of the
Company which specifically identifies the manner in which it is alleged
that the Employee has not substantially performed such services, or (ii)
the willful engaging by the Employee in gross misconduct which is
materially and demonstrably injurious to the Company; provided that, no
act, or failure to act, on the Employee's part shall be considered
"willful" unless done, or omitted to be done, in bad faith and without
reasonable belief that such action or omission was in, or not opposed to,
the best interests of the Company. It is also expressly understood that
the Employee's attention to or engagement in matters not directly related
to the business of the Company shall not provide a basis for termination
for Cause if such attention or engagement is authorized by the terms of
this Agreement or has otherwise been approved by the Board of Directors of
the Company. Anything in this Agreement to the contrary notwithstanding,
the Employee's employment may not be terminated 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 the purpose (after reasonable notice to the Employee and an opportunity
for the Employee, together with his counsel, to be heard before the Board),
finding that in the good faith opinion of the Board the Employee was guilty
of the conduct set forth in clause (i) or (ii) of this subparagraph (b) and
specifying the particulars thereof in detail.
9. TERMINATION BY THE EMPLOYEE FOR GOOD REASON. The termination by
the Employee of his employment for "Good Reason" shall be deemed a
justifiable termination of his employment and shall excuse the Employee
from the obligation to render services as provided in Paragraph 2 hereof.
In that event (i) the full amount of the Employee's annual salary and
annual incentive bonus, together with all other benefits required to be
provided under this Agreement, shall be continued until the next succeeding
December 31st as of which the Company could have terminated the Employee's
employment pursuant to Paragraph 1 hereof without such termination
constituting a breach or violation of this Agreement; and (ii) the
Employee's employment shall be deemed to terminate on such December 31st.
As used herein, the term "Good Reason" shall mean:
(a) a change in the Employee's status, title or position(s) as
an officer of the Company which, in his reasonable judgment, does not
represent a promotion from or enhancement of his status, title and position
as an executive officer, or the assignment by the Board of Directors of the
Company to the Employee of any duties or responsibilities which, in his
reasonable judgment, are inconsistent with such status, title or position,
or any removal of the Employee from or any failure to reappoint or reelect
him to such position, except in connection with a justifiable termination
by the Company of the Employee's employment for Cause or on account of
disability, the Retirement or death of the Employee or the termination by
the Employee of his employment other than for Good Reason;
<PAGE>
(b) a reduction in the Employee's annual salary or a failure by
the Company to pay to the Employee any installment of the annual salary
and/or the annual incentive bonus required pursuant to Paragraph 4 hereof,
which failure continues for a period of 20 days after written notice
thereof is given by the Employee to the Company;
(c) the failure by the Company to adopt, continue or maintain in
effect, any Plan or benefit which is required to be provided by the Company
pursuant to this Agreement (unless the Company provides the Employee with
the equivalent or at least substantially similar benefits under one or more
other Plans) other than as a result of the normal expiration of such Plan;
or the taking of any action or the failure to act by the Company, which
could adversely affect the Employee's continued participation in any such
Plan(s) or the ability of the Employee to enjoy or realize upon any
material benefit intended, or which could materially reduce the Employee's
benefits under any such Plan(s) or deprive him of any material benefit then
enjoyed by the Employee;
(d) the Company's requiring the Employee to be based anywhere
other than the New Orleans, Louisiana metropolitan area, except for
required travel on the Company's business to an extent substantially
consistent with the business travel obligations which the Employee
undertook on behalf of the Company prior to such required change;
(e) the failure by the Company to obtain the assumption of this
Agreement by any successor of the Company (other than by merger or
consolidation); provided, however, that upon a Change of Control of the
Company, as defined in the Change of Control Agreement between the Employee
and the Company (the "Change of Control Agreement"), the obligations of a
successor hereunder shall be limited to the obligations of the Company
hereunder through the date of the Change of Control after which date the
Change of Control Agreement shall govern.
(f) any purported termination by the Company of the Employee's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Paragraph 10 hereof, or which is not
justified as a termination of the Employee's employment based on Cause; and
for purposes of this Agreement, no such purported termination shall be
effective; or
(g) any refusal by the Company to allow the Employee to attend
to matters or engage in activities not directly related to the business of
the Company which is permitted by this Agreement or which, prior thereto,
was permitted by the Board of Directors of the Company.
10. NOTICE OF TERMINATION. Any purported notice of termination of
the Employee's employment (other than a Notice given by either pursuant to
Paragraph 1 hereof) shall be communicated in a writing delivered to the
other party as provided in Paragraph 14 hereof, (hereinafter a "Notice of
Termination"). For purposes of this Agreement a "Notice of Termination"
shall mean a notice which specifies the termination provision relied upon
by the party giving such notice and shall set forth in detail such facts
and circumstances claimed by said party to provide a justified basis for
termination of the Employee's employment under the provision(s) so
indicated.
<PAGE>
11. NONDISCLOSURE, NONCOMPETITION AND PROPRIETARY RIGHTS.
(a) CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
(i) "Company Business" means the design, construction and
overhaul of both military and commercial ships.
(ii) "Confidential Information" means any information,
knowledge or data of any nature and in any form (including information that
is electronically transmitted or stored on any form of magnetic or
electronic storage media) relating to the past, current or prospective
business or operations of the Company and its subsidiaries, that at the
time or times concerned is not generally known to persons engaged in
businesses similar to those conducted or contemplated by the Company and
its subsidiaries (other than information known by such persons through a
violation of an obligation of confidentiality to the Company), whether
produced by the Company and its subsidiaries or any of their consultants,
agents or independent contractors or by Employee, and whether or not marked
confidential, including without limitation information relating to the
Company's or its subsidiaries' products and services, business plans,
business acquisitions, processes, product or service research and
development methods or techniques, training methods and other operational
methods or techniques, quality assurance procedures or standards, operating
procedures, files, plans, specifications, proposals, drawings, charts,
graphs, support data, trade secrets, supplier lists, supplier information,
purchasing methods or practices, distribution and selling activities,
consultants' reports, marketing and engineering or other technical studies,
maintenance records, employment or personnel data, marketing data,
strategies or techniques, financial reports, budgets, projections, cost
analyses, price lists, formulae and analyses, employee lists, customer
records, customer lists, customer source lists, proprietary computer
software, and internal notes and memoranda relating to any of the
foregoing.
(b) NONDISCLOSURE OF CONFIDENTIAL INFORMATION. During the term
of this Agreement, Employee shall hold in a fiduciary capacity for the
benefit of the Company all Confidential Information which shall have been
obtained by Employee during Employee's employment (whether prior to or
after the date of this Agreement) and shall use such Confidential
Information solely within the scope of his employment with and for the
exclusive benefit of the Company. For a period of three years after the
date of termination of Employee's employment by the Company, Employee
agrees (i) not to communicate, divulge or make available to any person or
entity (other than the Company) any such Confidential Information, except
upon the prior written authorization of the Company or as may be required
by law or legal process, and (ii) to deliver promptly to the Company any
Confidential Information in his possession, including any duplicates
thereof and any notes or other records Employee has prepared with respect
thereto. In the event that the provisions of any applicable law or the
order of any court would require Employee to disclose or otherwise make
available any Confidential Information, Employee shall give the Company
prompt prior written notice of such required disclosure and an opportunity
to contest the requirement of such disclosure or apply for a protective
order with respect to such Confidential Information by appropriate
proceedings.
<PAGE>
(c) LIMITED COVENANT NOT TO COMPETE. During the term of this
Agreement and for a period of two years thereafter, commencing with the
date of termination of employment by the Employee for Good Reason, by the
Company for any reason other than for Cause, or by the Company for Cause if
the Company chooses to extend to Employee upon termination for Cause the
severance benefits provided in Paragraph 8 hereof and Appendix D hereto,
Employee agrees that, with respect to each State of the United States or
other jurisdiction, or specified portions thereof, in which the Employee
regularly (i) makes contact with customers of the Company or any of its
subsidiaries, (ii) conducts the business of the Company or any of its
subsidiaries or (iii) supervises the activities of other employees of the
Company or any of its subsidiaries, which states and jurisdictions or
portions thereof are identified in Appendix E attached hereto and forming a
part of this Agreement, and in which the Company or any of its subsidiaries
engages in the Company Business on the Date of Termination (collectively,
the "Subject Areas"), Employee will restrict his activities within the
Subject Areas as follows:
(i) Employee will not, directly or indirectly, for himself
or others, own, manage, operate, control, be employed in an executive,
managerial or supervisory capacity by, or otherwise engage or participate
in or allow his skill, knowledge, experience or reputation to be used in
connection with, the ownership, management, operation or control of, any
company or other business enterprise engaged in the Company Business within
any of the Subject Areas; provided, however, that nothing contained herein
shall prohibit Employee from making passive investments as long as Employee
does not beneficially own more than 10% of the equity interests of a
business enterprise engaged in the Company Business within any of the
Subject Areas. For purposes of this paragraph, "beneficially own" shall
have the same meaning ascribed to that term in Rule 13d-3 under the
Securities Exchange Act of 1934.
(ii) Employee will not call upon any customer of the Company
or its subsidiaries for the purpose of soliciting, diverting or enticing
away the business of such person or entity, or otherwise disrupting any
previously established relationship existing between such person or entity
and the Company or its subsidiaries;
(iii) Employee will not solicit, induce, influence or
attempt to influence any supplier, lessor, licensor, potential acquiree or
any other person who has a business relationship with the Company or its
subsidiaries, or who on the date of termination of employment of Employee
is engaged in discussions or negotiations to enter into a business
relationship with the Company or its subsidiaries, to discontinue or reduce
the extent of such relationship with the Company or its subsidiaries; and
(iv) Employee will not make contact with any of the
employees of the Company or its subsidiaries with whom he had contact
during the course of his employment with the Company for the purpose of
soliciting such employee for hire, whether as an employee or independent
contractor, or otherwise disrupting such employee's relationship with the
Company or its subsidiaries.
<PAGE>
(v) Employee further agrees that, for a period of one year
from and after the date of termination of employment, Employee will not
hire, on behalf of himself or any company engaged in the Company Business
with which Employee is associated, any employee of the Company or its
subsidiaries as an employee or independent contractor, whether or not such
engagement is solicited by Employee; provided, however, that the
restriction contained in this subsection (v) shall not apply to Company
employees who reside in, or are hired by Employee to perform work in any
Subject Areas located within the State of Virginia.
Employee agrees that he will from time to time upon the Company's
request promptly execute any supplement, amendment, restatement or other
modification of Appendix E as may be necessary or appropriate to correctly
reflect the jurisdictions which, at the time of such modification, should
be covered by Appendix E and this Paragraph 11(c). Furthermore, Employee
agrees that all references to Appendix E in this Agreement shall be deemed
to refer to Appendix E as so supplemented, amended, restated or otherwise
modified from time to time. Enforcement of this Paragraph 11(c) is subject
to the provisions of Paragraph 11(e) hereof.
(d) CERTAIN PROPRIETARY RIGHTS. Employee agrees to and hereby
does assign to the Company all his interest in and to all inventions,
whether or not patentable, which are made or conceived solely or jointly by
him:
(i) At any time during the term of his employment by the
Company in an executive, managerial, planning, technical research or
engineering capacity (including development, manufacturing, systems,
applied science and sales), or
(ii) During the course of or in connection with his duties
during the term of this Agreement, or
(iii) With the use of time or materials of the Company.
Employee agrees to communicate to the Company or its representatives
all facts known to him concerning such inventions, to sign all rightful
papers, make all rightful oaths and generally to do everything possible to
aid the Company in obtaining and enforcing proper patent protection for all
such inventions in all countries and in vesting title to such inventions
and patents in the Company. For the purpose of this Agreement, the
subject matter of any application for patent naming Employee as a sole or
joint inventor filed during the course of employment or within one year
subsequent to the termination thereof shall be deemed to be an invention
made or conceived by him during the course of his employment by the Company
and assignable to the Company hereunder, unless the Employee establishes by
a preponderance of the evidence that such invention was made or conceived
by him subsequent to termination of his employment hereunder. At the
Company's request (during or after the term of this Agreement) and expense,
the Employee will promptly execute a specific assignment of title to the
Company, and perform any other acts reasonably necessary to implement the
foregoing assignment.
<PAGE>
(e) INJUNCTIVE RELIEF; OTHER REMEDIES. Employee acknowledges
that a breach by Employee of Paragraph 11(b), (c) or (d) would cause
immediate and irreparable harm to the Company for which an adequate
monetary remedy does not exist; hence, Employee agrees that, in the event
of a breach or threatened breach by Employee of the provisions of Paragraph
11(b), (c) or (d) during or after the Employment Term, the Company shall be
entitled to injunctive relief restraining Employee from such violation
without the necessity of proof of actual damage or the posting of any bond,
except as required by non-waivable, applicable law. Nothing herein,
however, shall be construed as prohibiting the Company from pursuing any
other remedy at law or in equity to which the Company may be entitled under
applicable law in the event of a breach or threatened breach of this
Agreement by Employee, including without limitation the recovery of damages
and/or costs and expenses, such as reasonable attorneys' fees, incurred by
the Company as a result of any such breach. It shall be a condition to the
enforceability by the Company of the provisions of this Paragraph 11(c),
however, that the Company pays to and provides for the Employee the full
amount of severance pay and benefits described in Appendix D. Unless the
Company notifies the Employee in the Notice of Termination for Cause that
it intends to enforce the provisions of Paragraph 11(c) and agrees to pay
the Employee the full amount of severance pay and benefits described in
Appendix D, it shall be conclusively presumed for all purposes of this
Agreement that the Company has elected to waive the right to enforce the
provisions of this Paragraph 11(c). Employee acknowledges that the
payments provided under Paragraph 8 and Appendix D are conditioned upon
Employee fulfilling any noncompetition and nondisclosure agreements
contained in Paragraph 11. In the event Employee shall at any time
materially breach any noncompetition or nondisclosure agreements contained
in Paragraph 11, the Company may suspend or eliminate payments under
Paragraph 8 and Appendix D during the period of such breach. Employee
acknowledges that any such suspension or elimination of payments would be
an exercise of the Company's right to suspend or terminate its performance
hereunder upon Employee's breach of this Agreement; such suspension or
elimination of payments would not constitute, and should not be
characterized as, the imposition of liquidated damages.
(f) REQUESTS FOR WAIVER IN CASES OF UNDUE HARDSHIP. In the
event that Employee should find any of the limitations of Paragraph 11(c)
(including without limitation the geographic restrictions of Appendix E) to
impose a severe hardship on Employee's ability to secure other employment,
Employee may make a request to the Company for a waiver of the designated
limitations before accepting employment that otherwise would be a breach of
Employee's promises and obligations under this Agreement. Such request
must be in writing and clearly set forth the name and address of the
organization with that employment is sought and the location, position and
duties that Employee will be performing. The Company will consider the
request and, in its sole discretion, decide whether and on what conditions
to grant such waiver.
<PAGE>
(g) GOVERNING LAW OF THIS PARAGRAPH 11; CONSENT TO JURISDICTION.
Any dispute regarding the reasonableness of the covenants and agreements
set forth in this Paragraph 11, or the territorial scope or duration
thereof, or the remedies available to the Company upon any breach of such
covenants and agreements, shall be governed by and interpreted in
accordance with the laws of the State of the United States or other
jurisdiction in which the alleged prohibited competing activity or
disclosure occurs, and, with respect to each such dispute, the Company and
Employee each hereby irrevocably consent to the exclusive jurisdiction of
the state and federal courts sitting in the relevant State for resolution
of such dispute, and agree to be irrevocably bound by any judgment rendered
thereby in connection with such dispute, and further agree that service of
process may be made upon him or it in any legal proceeding relating to this
Paragraph 11 and/or Appendix E by any means allowed under the laws of such
jurisdiction. Each party irrevocably waives any objection he or it may
have as to the venue of any such suit, action or proceeding brought in such
a court or that such a court is an inconvenient forum. It is the desire
and intent of the parties that the provisions of this Agreement be enforced
to the fullest extent permitted under applicable law, whether now or
hereafter in effect and, therefore, to the extent permitted by applicable
law, the parties hereto waive any provision of applicable law that would
render any provision of this Paragraph 11 invalid or unenforceable.
12. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of:
(a) The Company, and any successors or assigns of the Company,
except that in the event of a Change of Control of the Company as defined
in the Change of Control Agreement, this Agreement shall be superseded by
the Change of Control Agreement. In the event of the assignment by the
Company of this Agreement, the Company shall nevertheless remain liable and
obligated to the Employee in accordance with the terms hereof; and
(b) The Employee, his estate, his executors, administrators,
heirs and beneficiaries.
13. EXPENSES RELATING TO ENFORCEMENT OF RIGHTS. If either party
shall successfully seek to enforce any provision of this Agreement or to
collect any amount claimed to be due hereunder, such successful party shall
be entitled to be reimbursed by the other party for any and all out-of-
pocket expenses, including reasonable attorneys' fees, incurred in
connection with such enforcements and/or collection.
<PAGE>
14. SEVERABILITY. If any term or provision of this Agreement
(including without limitation those contained in an Appendix hereto), 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 temporally, spatially or
otherwise 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.
15. NOTICES. Any notice or other communication required under this
Agreement shall be in writing, shall be deemed to have been given and
received when delivered in person, or, if mailed, shall be deemed to have
been given when deposited in the United States mail, first class,
registered and certified, return receipt requested, with proper postage
prepaid, and shall be deemed to have been received on the third business
day thereafter, and shall be addressed as follows:
If to the Company, addressed to:
Avondale Industries, Inc.
5100 River Road
Avondale, Louisiana 70094
If to the Employee, addressed to:
Edmund C.Mortimer
158 Villere Drive
Destrehan, Louisiana 70047
or such other address as to which any party hereto may have notified
the other in writing.
16. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Louisiana without
regard to the principles of conflict of laws, except as expressly provided
in Paragraph 11(g) above with respect to the resolution of disputes arising
under, or the Company's enforcement of Paragraph 11 of this Agreement.
17. ENTIRE AGREEMENT. This document contains or refers to the entire
arrangement or understanding between the parties relating to the employment
of the Employee by the Company prior to a Change of Control of the Company,
as defined in the Change of Control Agreement. This Agreement, including
Appendices A through E, inclusive, all of which are herein incorporated by
reference and made a part hereof, contains or refers to the entire
arrangement or understanding between the Employee and the Company relating
to the employment of the Employee by the Company. No provision of the
Agreement, including the Appendices, may be modified or amended except by
an instrument in writing signed by or for both parties hereto.
<PAGE>
AVONDALE INDUSTRIES, INC.
By: /s/ Hugh A. Thompson
------------------------
Hugh A. Thompson
Chairman, Compensation Committee
/s/ Edmund C. Mortimer
--------------------------
Edmund C. Mortimer
<PAGE>
LIST OF APPENDICES
DESCRIPTION NUMBER OF PAGES
Appendix A Benefit Plan Structure 5
Appendix B Disability Benefits 1
Appendix C Death Benefits 1
Appendix D Severance Benefits 3
Appendix E Subject Areas under Limited 1
Covenant Not to Compete
<PAGE>
APPENDIX "A"
AVONDALE INDUSTRIES, INC.
AVONDALE SERVICES CORPORATION
EXECUTIVE GROUP
Effective Date: 1-1-98
COVERAGE DESCRIPTION
EMPLOYEE LIFE Two times base salary and bonus
Optional Coverage - additional one or two times base
salary and bonus
Maximum Coverage - Two million dollars
DEPENDENT LIFE $2,000.00 Spouse - Optional $100,000.00
$1,000.00 Dependent (over six months old)
$100.00 Dependent (less than six months old)
Accidental Death and Death - Same as Life (Employee Only)
DISMEMBERMENT Dismemberment - Benefit Schedule
Business According to rate of pay - Maximum $50,000.00
TRAVEL ACCIDENT
TRAVEL ACCIDENT (SALARIED) 5 Times Annual Salary - Maximum $500,000.00
RETIREE LIFE One-half of Life Insurance in force at time of
retirement
SHORT TERM DISABILITY Schedule based on length of service (see Page 2)
LONG TERM DISABILITY 60% of monthly base salary, after 180 day waiting
period.
Maximum $15,000 per month coordinated with Disability
Social Security Benefit.
<PAGE>
HEALTH CARE 100% Hospital - private room rate plus miscellaneous
expenses
100% Hospital Medical Expenses - (doctor's visits to
hospital)
100% Surgical Expenses
100% Laboratory and X-ray Expenses
100% Vision and Hearing Care Expenses
100% Dental and Orthodontia
100% Annual Physicals
100% Psychiatric and Nervous Care - expenses up to
$6,500.00 per year per individual
No Life-Time Maximum
Subject to applicable employee contribution requirement
<PAGE>
SHORT TERM DISABILITY
Benefits begin on first day absent due to a non-occupational injury or
illness. Original medical documentation required if absent five or more
consecutive working days.
Benefits will be reduced by any amount received from Social Security.
Successive periods of disability separated by less than two (2) weeks of
full-time work considered as one continuous period of disability, unless
later disability due to a different cause.
Benefits will be paid up to a maximum of twenty-six (26) weeks, based on
the following schedule:
YEARS OF SERVICE FULL SALARY UP TO HALF SALARY UP TO
Less than 1 Year 4 Weeks 0 Weeks
1 Year 4 Weeks 22 Weeks
2 Years 6 Weeks 20 Weeks
3 Years 8 Weeks 18 Weeks
4 Years 10 Weeks 16 Weeks
5 Years 12 Weeks 14 Weeks
6 Years 14 Weeks 12 Weeks
7 Years 16 Weeks 10 Weeks
8 Years 18 Weeks 8 Weeks
9 Years 20 Weeks 6 Weeks
10 Years 22 Weeks 4 Weeks
11 Years 24 Weeks 2 Weeks
12 Years or more 26 Weeks 0 Weeks
JURY DUTY
Pays difference between employee's base pay and jury pay received, not to
exceed eight hours pay per day.
BLOOD BANK
To be eligible, must be a participant in Group Health Insurance Program.
In joining the Blood Bank Program, the employee agrees to donate a unit of
blood as requested at irregular intervals. The Program provides the
employee and insured dependents with blood for as long as the employee
remains in the Program.
HOLIDAYS
Eight Paid Holidays - New Years Day, Mardi Gras, Good Friday, July Fourth,
Labor Day, Thanksgiving Day, Day After Thanksgiving and Christmas.
Eligible upon completion of thirty days service.
<PAGE>
VACATION
Vacation year is from January 1 to December 31. Upon completion of one
full year of service, eligible for two weeks of vacation. An employee
joining the Company after January 1 but prior to July 1 will be eligible
for one week's vacation the following January 1. Vacation time may not be
carried over from one vacation period to the next. Vacation time may be
taken in one-hour increments. Beginning with ten full years of service,
eligible for additional days of vacation, up to a maximum of five
additional days, based on the following schedule:
YEARS OF SERVICE ADDITIONAL DAYS OF VACATION
10 Years 1 Day
11 Years 2 Days
12 Years 3 Days
13 Years 4 Days
14 Years 5 Days
SICK/PERSONAL TIME
Eligible for twenty-four hours per calendar year. Time may be taken in
one-hour increments. Unused time may not be carried over to the next year.
FUNERAL LEAVE
None
TUITION ASSISTANCE
Eligible upon completion of one year's service. Only courses directly
related to employee's position and taken at an accredited institution will
be considered. Approval must be obtained prior to the start of the course.
Reimbursement will be made for the cost of tuition only, and will be based
on the following schedule:
COURSE LEVEL FINAL GRADE REIMBURSEMENT PERCENTAGE
Under-Graduate Not Lower Than "C" 100%
Post-Graduate Not Lower Than "B" 100%
AUTOMOBILE ALLOWANCE
$600 per month
RETIREMENT
Formula - 1.5% of final average compensation, multiplied by years of
credited service, less Massachusetts Mutual Annuity and equivalent
actuarial value of any shares in ESOP account.
Early Retirement Benefits available at age 55 with ten years service,
actuarially reduced by years and months early.
<PAGE>
SUPPLEMENTAL RETIREMENT PLAN
Vesting: 100% vesting upon completion of ten (10) years service
Formula: 15% of final average compensation.
Early Retirement Benefits available at Age 55 with ten (10) years service,
actuarially reduced by years and months early
EXECUTIVE EXCESS RETIREMENT PLAN
If designated as a participant by the Board of Directors.
Purpose of the plan is to reimburse participants for benefits not payable
under the Pension Plan and ESOP because of limitations in the Internal
Revenue Code and the Pension Plan.
Benefits paid upon attainment of age 75 or upon retirement, if earlier.
Benefit is unfunded.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
Plan Year - September 1 to August 31
Eligibility - 1st of month following one year of service
Compensation - Total salary, excluding severance pay, moving expenses and
non-cash contribution
Stock Allocation - Each year the Trustees divide the available shares of
stock among eligible participants, based on each participant's
compensation. These allocated shares are held in the participant's ESOP
account. Must be on payroll last pay period of each plan year to receive
allocation.
Distribution - (1) Retirement - Age 55 or later
(2) Total & Permanent Disability with Social Security Award
(3) Death
Vesting - Employees who were eligible to receive Special Shares were 100%
vested.
Vesting for Loan Shares is as follows:
Less than 4 years 0%
4 years but less than 5 40%
5 years but less than 6 50%
6 years but less than 7 60%
7 years but less than 8 70%
8 years but less than 9 80%
9years but less than 10 90%
10 years or more 100%
<PAGE>
APPENDIX B
DISABILITY BENEFIT
In the event of termination by the Company of the Employee's
employment on account of disability pursuant to Paragraph 6 of the
Agreement, the disability benefit to be provided to the Employee shall be
determined under this Appendix, unless a greater or more favorable benefit
is required to be provided pursuant to the provisions of Subparagraph 4(c)
of the Agreement and/or Appendix A.
1. CONTINUATION OF FULL ANNUAL SALARY: The full amount of the
Employee's annual salary (pursuant to paragraph 4(a) of this Agreement)
shall be continued according to the following formula:
(i) If the Employee's credited service for the Company totals
(5) five years or less his annual salary shall be continued for twelve (12)
months commencing with the month following such termination of employment;
and
(ii) If the Employee's credited service for the Company totals
more than five (5) years, the payment period referred to in (i) shall be
increased by two-tenths (2/10) of a year for each year of credited service
in excess of five (5) up to a maximum payment period of five (5) years.
Thus, if the Employee's employment is terminated on account of disability
at a time when he has twelve (12) years of credited service, the Employee's
full annual salary would be continued for 2.4 years following such
termination of employment and an Employee with twenty-five (25) or more
years of credited service as of the termination of his employment on
account of disability will receive his full annual salary for five (5)
years.
2. CONTINUATION OF PARTIAL ANNUAL SALARY. Following the expiration
of the period calculated pursuant to the preceding Paragraph 1, the
Employee will receive long term disability benefits equal to sixty percent
(60%) of his full annual salary subject to such limitations as are
contained in Appendix A.
3. LIMITATIONS. The disability benefit will in any event
discontinue and terminate upon the death of the Employee or upon the date
of his Retirement as defined in subparagraph 9(a) of the Agreement would
have occurred.
4. OTHER BENEFITS. Other benefits which may be provided or
continued for the Employee following the termination of his employment on
account of disability depend upon the terms of the Plan under which such
benefits are provided or required to be provided.
<PAGE>
APPENDIX C
DEATH BENEFITS
The death benefits to be provided by the Company subsequent to the
death of the Employee shall be determined by reference to the plan or plans
under which such benefits are provided. Reference is made to subparagraph
4(c) of the Agreement and to Appendix A.
<PAGE>
APPENDIX D
SEVERANCE BENEFITS
Upon the termination of the Employee's employment under any
circumstance requiring the Company to pay to and provide for the Employee
the severance pay and other benefits set forth in this Appendix D, the
Company shall be obligated to pay to and/or provide for the Employee the
following compensation and other benefits:
(a) PAYMENT IN LIEU OF COMPENSATION: The Company shall pay to the
Employee in cash an amount equal to the product of (i) and (ii); where (i)
shall equal the sum of (A) the Employee's annual salary and (B) the
Employee's annual incentive bonus during the twelve (12) month period
ending with the close of the month in which such termination of employment
occurs (the "Date of Termination") , divided by twelve (12) ; and where
(ii) shall be the lesser of (x) thirty-six (36), (y) six (6), plus two (2)
for each twelve (12) months of credited service of the Employee for the
Company (determined in accordance with subparagraph 4(c) of the Agreement)
through the Date of Termination, or (z) the number of months until the
Employee's normal retirement date, as defined in the Avondale Industries,
Inc. Pension Plan (or any successor, or substitute plan or plans of the
Company or of any subsidiary of the Company under which the Employee may be
a participant, hereinafter the "Pension Plan"). The number determined
under clause (ii) is sometimes herein referred to as the "Measuring
Period".
(b) ACCELERATION OF STOCK OPTIONS: Immediately following such Date
of Termination, all options and stock appreciation rights granted to
Employee under the 1997 Stock Incentive Plan or any other stock option or
similar plan before or after the date hereof (collectively referred to
herein as "Stock Option Plans") shall immediately become fully exercisable
and execution of this Agreement shall constitute an amendment to any stock
option agreement to so provide and an agreement and undertaking by the
Company to take such action as may be required to cause any and all options
or rights granted, or to be granted, to Employee thereunder to make them
consistent herewith.
<PAGE>
(c) PAYMENT FOR NON-VESTED RETIREMENT BENEFIT: In addition to the
vested portion of the Employee's interest under any employee benefit plan
maintained by the Company as a qualified plan pursuant to Section 401(a) of
the Internal Revenue Code of 1986, as amended, to which the Company or any
subsidiary has made contributions for the Employee's account which are not
otherwise expressly provided for herein, if the Employee is not fully
vested under any such plan or plans, the Company shall pay to the Employee
in cash an amount equal to the then present value of the actuarial
equivalent (within the meaning of the following Paragraph (d)) of the non-
vested portion of the Employee's account, to the extent that such account
would have become vested based on additional credited service for the
Company, if the Employee had remained in the employ of the Company (or any
subsidiary) for an additional period of months equal to the Measuring
Period.
(d) SUPPLEMENTAL RETIREMENT BENEFIT: In addition to any retirement
or severance benefit to which the Employee is entitled under the Pension
Plan, the Employee shall receive in cash, an amount equivalent of the
excess of (i) over (ii), where (i) equals the aggregate amount of the
retirement pension (calculated as a straight life annuity payable to
Employee on his normal retirement date) to which Employee would have been
entitled under the terms of the Pension Plan and any other qualified or
non-qualified defined benefit plan maintained by the Company and covering
the Employee, if Employee were fully vested thereunder (without regard to
(w) whether the Employee shall actually have completed the number of years
of credited service required to qualify for full vesting under such plans,
(x) any limitation on the amount of compensation used in the calculation of
the regular pension thereunder, (y) any offset thereunder for severance
allowances payable hereunder or (z) any amendment to such plans made prior
to the Employee's Date of Termination, which amendment adversely affects in
any manner the computation of retirement benefits under such plans) and had
accumulated an additional period of months of credited service after the
Date of Termination equal to the Measuring Period (but in no event shall
Employee be deemed to have accumulated an additional period of credited
service subsequent to Employee's sixty-fifth (65th) birthday), and, where
(ii) equals the amount of the retirement pension (calculated as a straight
1ife annuity payable to Employee on his normal retirement date),if any, to
which Employee is entitled pursuant to the provisions of the Pension Plan
and such other plans. For purposes of Clause (i) of this Paragraph (d),
the amount payable pursuant to Paragraph (a) of this Appendix D, shall be
deemed to represent the Employee's earnings for the period of months equal
to the Measuring Period, and for purposes of this Paragraph (d), "actuarial
equivalent" shall be determined using the same methods and assumptions
utilized under the Pension Plan immediately prior to the Date of
Termination. All other terms used in this Paragraph (d) shall have the
same meanings, respectively, as such terms have in the Pension Plan, unless
otherwise required by the context.
<PAGE>
(e) OTHER BENEFITS: The Company shall also maintain in full force
and effect, for the continued benefit of the Employee and his dependents,
for a period terminating on the earliest of (i) a period of months after
the Date of Termination equal to the Measuring Period; (ii) the
commencement date of equivalent benefits for the Employee from a new
employer; or (iii) the Employee's normal retirement date under the
Company's Pension Plan, after which the terms of the Pension Plan shall
govern; all insured and self-insured employee benefit plans in which the
Employee is entitled to participate immediately prior to the Date of
Termination; provided that the Employee's continued participation is
possible under the general terms and provisions of such Plans (and any
applicable funding media) and the Employee continues to pay an amount equal
to Employee's regular contribution for such participation. In the event
that the Employee participation in any such Plan is barred, the Company, at
its sole cost and expense, shall arrange to have issued for the benefit of
Employee and his dependents individual policies of insurance providing
benefits substantially similar (on an after-tax basis) to those which the
Employee would have been entitled to receive under such Plan or Plans
pursuant to this Paragraph (e) if such participation were not barred or, if
such insurance is not available at a reasonable cost to the Company, the
Company shall otherwise provide the Employee and his dependents with
equivalent benefits (on an after-tax basis) and the Employee shall not be
required to pay any premiums or other charges in an amount greater than
that which the Employee would have paid in order to participate in such
Plans. If, at the end of a period of months after the Date of Termination
equal to the Measuring Period, the Employee is not receiving equivalent
benefits from a new employer, the Company shall arrange, at its sole cost
and expense, to enable Employee to convert the Employee's and his
dependents' coverage under such Plans to individual policies or programs
upon the same terms as employees of the Company may apply for until the
Employee is able to receive equivalent benefits from a source other than
the Company.
(f) MITIGATION: The Employee shall not be required to mitigate the
amount of any payment or benefit provided for in this Appendix D by seeking
other employment or otherwise, nor (except as specifically provided in
Paragraph (e) above) shall the amount of any payment or benefit provided
for in this Appendix D be reduced by any compensation or benefit earned by
Employee as a result of employment by another employer after the Date of
Termination, or otherwise.
(g) MANNER OF PAYMENT: All payments which are required to be made in
cash under Paragraphs (a), (c) or (d), above, shall be paid on the Date of
Termination, or within five (5) business days thereafter, unless the
Employee has made a Deferred Payment Election with respect to such
payment(s) pursuant to the succeeding Paragraph (h).
<PAGE>
(h) ELECTION TO DEFER PAYMENT: Upon entering into this Agreement and
for a period of fourteen (14) days following each anniversary of the date
hereof (the "Election Period"), the Employee may, in writing, direct the
Company that any amounts which become payable to the Employee pursuant to
Paragraphs (a), (c) and (d), above, shall be paid to the Employee in three
(3) equal annual installments, with the first of such installments to be
paid not later than five (5) business days after the Date of Termination
and successive installments paid on the next two (2) succeeding
anniversaries of the Date of Termination or the next following business day
if such date is not a business day (the "Deferred Payment Election"). A
Deferred Payment election, once made, shall be irrevocable except during an
Election Period.
(i) EFFECT ON OTHER BENEFITS: Nothing contained in this Appendix D
shall be construed or interpreted as limiting any rights or benefits
payable to or for the Employee under any other provision of this Agreement.
<PAGE>
APPENDIX E
TO EMPLOYMENT AGREEMENT
BETWEEN AVONDALE INDUSTRIES, INC.
AND
EDMUND C. MORTIMER
Jurisdictions In Which Competition
Is Restricted As Provided
In Paragraph 11(c)
A. STATES
1. LOUISIANA -- The following parishes in the State of Louisiana:
Orleans and Jefferson
2. MISSISSIPPI -- The following counties in the State of
Mississippi:
Harrison
as well as any other counties in the State of Mississippi in
which the Employee regularly (a) makes contact with customers of
the Company or any of its subsidiaries, (b) conducts the business
of the Company or any of its subsidiaries or (c) supervises the
activities of other employees of the Company or any of its
subsidiaries as of the date of termination of employment.
3. VIRGINIA-- The following counties in the State of Virginia:
Arlington
as well as any other counties in the State of Virginia in which
the Employee regularly (a) makes contact with customers of the
Company or any of its subsidiaries, (b) conducts the business of
the Company or any of its subsidiaries or (c) supervises the
activities of other employees of the Company or any of its
subsidiaries as of the date of termination of employment.
Agreed to and Accepted:
Avondale Industries, Inc. Employee
By: /S/ HUGH A. THOMPSON /S/ EDMUND C. MORTIMER
-------------------- ----------------------
Its: Compensation Committee Chairman Edmund C. Mortimer
Date: MARCH 23, 1998 Date: MARCH 23, 1998
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement ("the Agreement") between Avondale
Industries, Inc., a Louisiana corporation (the "Company"), and R. Dean
Church (the "Employee") is dated effective as of March 5, 1998 (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 March 5, 1998 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 complete
liquidation or dissolution of the Company.
<PAGE>
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.
<PAGE>
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 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.
<PAGE>
(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 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.
<PAGE>
(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 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;
<PAGE>
(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 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) notwithstanding any plan provision regarding the
payment of benefits following a change of control of the Company
which shall be superseded hereby, 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, and any other 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; and
<PAGE>
(v) notwithstanding any plan provision regarding the payment
of benefits following a change of control of the Company which
shall be superseded hereby, the Company shall pay to the Employee
in a lump sum in cash within 30 days of the date of termination
of employment an amount equal to the then present value of the
actuarial equivalent of the benefits to which the Employee would
be entitled under the Supplemental Pension Plan, the Executive
Excess Retirement Plan and any other non-qualified defined
benefit plan maintained by the Company and covering the Employee
if the Employee had an additional period of service to the
Company ending on the third anniversary of the Change of Control,
assuming the Employee were fully vested thereunder and assuming
retirement at age 55 if Employee is age 52 or younger at the time
of the Change of Control or assuming retirement at the age of the
Employee three years following the Change of Control if Employee
is over age 52 at the time of the Change of Control. Such
payment shall be made 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 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.
<PAGE>
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 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.)
<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
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.
<PAGE>
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 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
Avondale, Louisiana 70094
Attn: Albert L. Bossier, Jr.
If to the Employee, to:
R. Dean Church
Avondale Industries, Inc.
5100 River Road
Avondale, Louisiana 70094
or such other address as to which any party hereto may have notified the
other in writing.
<PAGE>
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 Agreement, 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.
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.
<PAGE>
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
Chairman, Compensation Committee
EMPLOYEE:
/s/ R. Dean Church
----------------------
R. Dean Church
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement ("the Agreement") between Avondale
Industries, Inc., a Louisiana corporation (the "Company"), and Thomas H.
Doussan (the "Employee") is dated effective as of March 23, 1998 (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 March 23, 1998 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 complete
liquidation or dissolution of the Company.
<PAGE>
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.
<PAGE>
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 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.
<PAGE>
(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 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.
<PAGE>
(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 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;
<PAGE>
(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 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) notwithstanding any plan provision regarding the
payment of benefits following a change of control of the Company
which shall be superseded hereby, 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, and any other 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; and
<PAGE>
(v) notwithstanding any plan provision regarding the payment
of benefits following a change of control of the Company which
shall be superseded hereby, the Company shall pay to the Employee
in a lump sum in cash within 30 days of the date of termination
of employment an amount equal to the then present value of the
actuarial equivalent of the benefits to which the Employee would
be entitled under the Supplemental Pension Plan, the Executive
Excess Retirement Plan and any other non-qualified defined
benefit plan maintained by the Company and covering the Employee
if the Employee had an additional period of service to the
Company ending on the third anniversary of the Change of Control,
assuming the Employee were fully vested thereunder and assuming
retirement at age 55 if Employee is age 52 or younger at the time
of the Change of Control or assuming retirement at the age of the
Employee three years following the Change of Control if Employee
is over age 52 at the time of the Change of Control. Such
payment shall be made 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 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.
<PAGE>
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 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.)
<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
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.
<PAGE>
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 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
Avondale, Louisiana 70094
Attn: Albert L. Bossier, Jr.
If to the Employee, to:
Thomas H. Doussan
Avondale Industries, Inc.
5100 River Road
Avondale, Louisiana 70094
or such other address as to which any party hereto may have notified the
other in writing.
<PAGE>
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 Agreement, 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.
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.
<PAGE>
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 H. Doussan
-------------------------
Thomas H. Doussan
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement ("the Agreement") between Avondale
Industries, Inc., a Louisiana corporation (the "Company"), and Ronald J.
McAlear(the "Employee") is dated effective as of March 23, 1998 (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 March 23, 1998 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 complete
liquidation or dissolution of the Company.
<PAGE>
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.
<PAGE>
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 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.
<PAGE>
(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 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.
<PAGE>
(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 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;
<PAGE>
(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 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) notwithstanding any plan provision regarding the
payment of benefits following a change of control of the Company
which shall be superseded hereby, 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, and any other 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; and
<PAGE>
(v) notwithstanding any plan provision regarding the payment
of benefits following a change of control of the Company which
shall be superseded hereby, the Company shall pay to the Employee
in a lump sum in cash within 30 days of the date of termination
of employment an amount equal to the then present value of the
actuarial equivalent of the benefits to which the Employee would
be entitled under the Supplemental Pension Plan, the Executive
Excess Retirement Plan and any other non-qualified defined
benefit plan maintained by the Company and covering the Employee
if the Employee had an additional period of service to the
Company ending on the third anniversary of the Change of Control,
assuming the Employee were fully vested thereunder and assuming
retirement at age 55 if Employee is age 52 or younger at the time
of the Change of Control or assuming retirement at the age of the
Employee three years following the Change of Control if Employee
is over age 52 at the time of the Change of Control. Such
payment shall be made 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 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.
<PAGE>
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 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.)
<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
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.
<PAGE>
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 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
Avondale, Louisiana 70094
Attn: Albert L. Bossier, Jr.
If to the Employee, to:
Ronald J. McAlear
Avondale Industries, Inc.
5100 River Road
Avondale, Louisiana 70094
or such other address as to which any party hereto may have notified the
other in writing.
<PAGE>
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 Agreement, 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.
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.
<PAGE>
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/ Ronald J. McAlear
-------------------------
Ronald J. McAlear
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement ("the Agreement") between Avondale
Industries, Inc., a Louisiana corporation (the "Company"), and Edmund C.
Mortimer (the "Employee") is dated effective as of March 23, 1998 (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 March 23, 1998 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 complete
liquidation or dissolution of the Company.
<PAGE>
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.
<PAGE>
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 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.
<PAGE>
(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 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.
<PAGE>
(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 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;
<PAGE>
(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 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) notwithstanding any plan provision regarding the
payment of benefits following a change of control of the Company
which shall be superseded hereby, 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, and any other 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; and
<PAGE>
(v) notwithstanding any plan provision regarding the payment
of benefits following a change of control of the Company which
shall be superseded hereby, the Company shall pay to the Employee
in a lump sum in cash within 30 days of the date of termination
of employment an amount equal to the then present value of the
actuarial equivalent of the benefits to which the Employee would
be entitled under the Supplemental Pension Plan, the Executive
Excess Retirement Plan and any other non-qualified defined
benefit plan maintained by the Company and covering the Employee
if the Employee had an additional period of service to the
Company ending on the third anniversary of the Change of Control,
assuming the Employee were fully vested thereunder and assuming
retirement at age 55 if Employee is age 52 or younger at the time
of the Change of Control or assuming retirement at the age of the
Employee three years following the Change of Control if Employee
is over age 52 at the time of the Change of Control. Such
payment shall be made 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 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.
<PAGE>
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 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.)
<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
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.
<PAGE>
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 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
Avondale, Louisiana 70094
Attn: Albert L. Bossier, Jr.
If to the Employee, to:
Edmund C. Mortimer
Avondale Industries, Inc.
5100 River Road
Avondale, Louisiana 70094
or such other address as to which any party hereto may have notified the
other in writing.
<PAGE>
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 Agreement, 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.
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.
<PAGE>
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/ Edmund C. Mortimer
--------------------------
Edmund C. Mortimer
May 1, 1998
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, 1998 and 1997, as
indicated in our report dated April 22, 1998; 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,
1998 is incorporated by reference in Registration Statement No. 333-
32165 on Form S-8.
We also are aware that the aforementioned report, pursuant to Rule
436 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
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AVONDALE
INDUSTRIES, INC.'S QUARTERLY REPORT FILED ON FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
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<RECEIVABLES> 94,320
<ALLOWANCES> 0
<INVENTORY> 19,364
<CURRENT-ASSETS> 237,923
<PP&E> 268,849
<DEPRECIATION> (136,565)
<TOTAL-ASSETS> 382,735
<CURRENT-LIABILITIES> 88,204
<BONDS> 50,838
0
0
<COMMON> 15,956
<OTHER-SE> 200,398
<TOTAL-LIABILITY-AND-EQUITY> 382,735
<SALES> 184,625
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<CGS> 164,497
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<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 1,137
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