<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the
fiscal year ended December 31, 1997
Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 0-16572
Avondale Industries, Inc.
(Exact name of registrant as specified in its charter)
Louisiana 39-1097012
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5100 River Road, Avondale, Louisiana 70094
(Address of principal executive offices) (Zip Code)
(504) 436-2121
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value per share
(Title of Class)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has
been subject to such filing requirements for the past 90
days. Yes X No
---
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
The aggregate market value of the voting stock held by
non-affiliates (affiliates being directors, executive
officers and holders of more than 5% of the Company's common
stock) of the Registrant at December 31, 1997 was
approximately $301,016,311.
The number of shares of the Registrant's common stock,
$1.00 par value per share, outstanding at December 31, 1997
was 14,493,211.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for its
1998 Annual Meeting have been incorporated by reference into
Part III of this Form 10-K.
<PAGE>
PART I
Item 1. Business.
Overview
Avondale Industries, Inc. ("Avondale" or the
"Company") is one of the largest shipbuilders in
the United States, specializing in the design,
construction, conversion, repair and modernization
of various types of ocean-going vessels for the
military and commercial markets. A majority of
Avondale's contracts in recent years has been for
the construction of U.S. Navy surface ships,
although it secured its largest ever commercial
contract in 1997 for the construction of two
125,000 Dead Weight Tons ("DWT") crude oil
carriers for the Jones Act Trade. Management
believes the Company's low cost structure,
experienced and skilled work force, technological
capabilities, sophisticated construction processes
and extensive experience in building a variety of
military and commercial vessels, position the
Company as one of the most cost-efficient and
versatile shipbuilders in the United States. At
December 31, 1997, the Company's shipbuilding
backlog (the "firm backlog") was approximately
$1.8 billion (including estimated contract
escalation), exclusive of unexercised options
aggregating approximately $1.1 billion held by the
U.S. Navy (including estimated contract
escalation) and approximately $500 million held by
a commercial customer for additional ship orders.
<PAGE>
In December 1996, an alliance led by the
Company was awarded a $641 million contract to
construct the initial ship in the U.S. Navy's LPD-
17 program (see glossary of selected industry
terms). In April 1997, the General Accounting
Office denied a protest filed by a competing
shipbuilding team and affirmed this contract
award. The contract award provides for options
exercisable by the U.S. Navy for two additional
LPD vessels to be built by the alliance. For
additional information on the LPD-17 award, see "-
U.S. Government." Also, in June 1997, the Company
announced that it had signed a $332 million
contract with ARCO Marine, Inc.("ARCO") of Long
Beach, California, for the construction of two
125,000 DWT crude oil carriers for the Jones Act
Trade. These vessels are to be built with double
hulls in compliance with the Oil Pollution Act of
1990 (see "-Commercial Shipbuilding"). The
contract, which represents the largest commercial
contract in the Company's history, also provides
for options valued at approximately $500 million
that are exercisable by ARCO for three additional
ships. Management believes that securing the LPD-
17 and ARCO contracts has conferred several
immediate and substantial benefits upon the
Company. Among other things, the Company has
substantially bolstered its visibility and
competitive posture by demonstrating the ability
to compete successfully for contracts based on the
high level of its technical, engineering and
production skills, as well as its competitive
prices. In addition, the backlog created from
these contract awards provides a strong foundation
that will allow the Company to compete
aggressively for other shipbuilding opportunities.
<PAGE>
Historical Information. Avondale is a
versatile shipyard that has been the successful
bidder for a variety of marine construction
projects. Organized in 1938, Avondale first began
building ocean-going ships in the 1950s. From 1959
to 1985, the Company operated as a subsidiary of
Ogden Corporation, a diversified New York Stock
Exchange listed company headquartered in New York,
New York. Prior to the 1980s, Avondale built both
military and commercial vessels. In addition to
the construction of 27 destroyer escorts for the
U.S. Navy, Avondale successfully completed a
variety of construction projects during that
period, including general cargo and multi-product
carriers, such as LASH vessels, container vessels,
crude oil tankers and product carriers. In the
early 1980s, however, several measures were
implemented that changed the marine construction
industry significantly. The termination of the
U.S. construction-differential subsidy program in
1981 significantly curtailed the ability of U.S.
shipyards to compete successfully for
international commercial shipbuilding contracts
with foreign shipyards, many of which are heavily
subsidized by their governments. The effects of
the elimination of these subsidies were largely
offset, however, by the initiative to expand the
U.S. Navy fleet to 600 ships, thereby
significantly increasing the U.S. Navy
shipbuilding opportunities available to Avondale.
Initially, Avondale capitalized on the U.S.
Navy shipbuilding opportunities through its
construction of five AOs during the early 1980s.
Since AOs are essentially oil tankers modified to
meet certain military requirements, they were a
natural extension of the product carrier ships
previously built by Avondale.
During the remainder of the 1980s and the
first part of this decade, Avondale steadily
expanded the range of vessels that it built for
the U.S. Navy. The Company principally focused on
those vessels that were related to, or were
natural extensions of, predecessor vessels
constructed by Avondale, where Avondale could best
capitalize on its prior experience and proven
capabilities. Among the U.S. Navy vessels built or
under construction during this period were sixteen
T-AOs, five LSDs, four LSD-CVs, five AOJs (which
constituted conversions of AOs previously built by
Avondale), one T-AGS 45, fifteen LCACs, four MHCs
and three SL 7 conversions.
<PAGE>
With the end of the Cold War and the pressure
of domestic budget constraints, spending for new
vessel construction by the U.S. Navy has been
reduced substantially, with the rate of new vessel
construction reduced to approximately 50% of that
in the 1980s. Despite the contraction in U.S. Navy
shipbuilding activity, management believes that
Avondale's versatility has been a significant
factor in its successful efforts to obtain
shipbuilding contracts, which efforts have also
been bolstered by Avondale's experience in
building vessels comparable to those currently in
demand.
U.S. Government. In addition to the contract
award by the U.S. Navy to build the first LPD-17
ship, the alliance was awarded options,
exercisable by the U.S. Navy, for two additional
ships of the LPD-17 class. It is expected that a
total of twelve ships will be built under the
LPD-17 program. The members of the alliance, Bath
Iron Works ("Bath"), Raytheon Company ("Raytheon")
(formerly Hughes Aircraft Company which later
became a subsidiary of Raytheon Company) and the
Company submitted a joint bid with the Company as
the prime contractor. Under the terms of an
agreement between the alliance members, the
Company will build the vessel covered by the
December 1996 contract and, if the U.S. Navy
exercises the two options, the Company would also
construct the second while Bath would construct
the third of the three LPD-17 vessels. Raytheon
will be responsible for total ship integration and
the alliance will use an advanced three-
dimensional ship design and modeling technology
for the design and manufacture of the ship.
<PAGE>
The first three vessels of the LPD-17 program
will be built pursuant to a cost-plus-award fee
contract, with the Company, Raytheon and Bath each
being entitled to reimbursement for its
respective allowable costs in performing the
contracts as such costs are incurred. The
contract provides for the payment of an award fee
to the members of the alliance, the amount of
which is dependent upon the results of periodic
evaluations of contract performance and will be
paid incrementally upon completion of each
periodic evaluation. Pursuant to the
subcontracting agreements between the Company and
each of Bath and Raytheon, any award fees earned
by the alliance will be distributed to the
alliance members in proportion to each member's
performance and participation in the construction
of the vessel for which the award was granted.
Unlike the Company's other principal shipbuilding
contracts where profits are recognized under the
percentage-of-completion method of accounting, the
Company will record profits on the LPD-17 contract
upon determination of the incremental award. In
addition, although the LPD-17 contract is on a
cost-plus-award fee basis, the ability of Avondale
to realize any incremental award fee is dependent
not only upon its ability to perform its
contractual obligations but also the satisfactory
performance by other members of the team.
In accordance with the U.S. Navy's
requirement of a streamlined contractual
relationship, the alliance's agreement provides
that the Company will act as the prime contractor
for all three vessels, and as such, the Company
will be responsible for submitting invoices for
not only its own costs, but also any costs
incurred by Bath and Raytheon. Accordingly, all
such amounts relating to contract performance by
alliance members Bath and Raytheon will be
reflected as sales and cost of sales in the
Company's financial statements.
The Company's backlog at December 31, 1997
includes $609 million, which amount is the
aggregate of the estimated cost to complete the
first LPD-17 vessel and the maximum award fee that
would be payable to Avondale and the alliance.
However, a substantial portion of the reported
backlog for the first vessel is related to work to
be performed by the other alliance members. To
the extent that the Company's revenues include
costs incurred by and award fees paid to the other
alliance members, such revenues will be recorded
with no operating profit margin.
<PAGE>
If the U.S. Navy proceeds with its previously
announced intention to construct additional LPD
ships beyond the first three, the Company
anticipates that the contracts for such vessels
may provide for an alternative pricing
arrangement, such as a fixed-price incentive
contract or fixed- price contract (see "-
Government Contracting").
The U.S. Navy has stated its expectation that
the LPD-17 vessels will be an important element in
the U.S. Navy's amphibious operations over the
next three decades, replacing more than 36 ships
nearing the end of their useful lives and
approaching decommissioning. In 1995, Congress
appropriated $974.0 million for the construction
of the first of an anticipated twelve ships under
the LPD-17 program. The award to the Company-led
alliance of the contract to construct the initial
LPD-17 ship enhances the viability and
competitiveness of the alliance in its pursuit of
the remaining LPD-17 ships. In 1997, Congress
appropriated $96.1 million as advance procurement
for LPD-18, the second ship in the program. If
the U.S. Navy awards contracts to the alliance to
construct all twelve ships, the Company would
construct eight ships and Bath would construct
four ships.
Also included in the current firm backlog for
the military are contracts to construct six
Sealift ships with a remaining backlog of $773
million (including estimated contract escalation).
The Sealift ships, which each contain more than
400,000 square feet of cargo space and are
designed to assist in the rapid transportation and
deployment of military personnel, equipment and
supplies, are comparable to other vessels, such as
auxiliary and amphibious support ships, that have
been previously constructed by Avondale for the
military. In addition, the Navy holds an option
to require the Company to construct a seventh
Sealift vessel for an additional $240 million
(including estimated contract escalation). In the
first quarter of 1998, the Navy exercised a
portion of this option relating to approximately
$24 million for long lead time materials while the
balance of the option is exercisable during the
first quarter of 1999. The first Sealift ship is
scheduled for delivery in 1998 with the final ship
(assuming exercise by the U.S. Navy of the balance
of the remaining Sealift option) scheduled for
delivery in 2001.
<PAGE>
Although no significant new U.S. Navy
shipbuilding programs are anticipated to be
contracted before 2000, it is expected that
additional U.S. Navy shipbuilding opportunities,
including a series of ADC(X) vessels (a class of
auxiliary vessels designed to deliver fuel,
ammunition and other supplies to the U.S. Navy
fleet with capabilities similar to the T-AOs
constructed by Avondale), and the DD-21, which
represents the next generation of surface
combatant vessels, will become available shortly
thereafter. In addition, the Coast Guard Deep
Water project, which calls for the replacement of
133 vessels over the next fifteen years, is
expected in the early 2000 timeframe.
Commercial Shipbuilding. Two legislative
enactments in the early 1990s significantly
enhanced U.S. commercial shipbuilding
opportunities. The Oil Pollution Act of 1990,
which requires the phased-in transition of
single-hulled tankers and product carriers to
double-hulled vessels beginning January 1, 1995,
created a demand for the retro-fitting of existing
tankers and the construction of new double-hulled
tankers, as oil and energy companies and other
ship operators upgrade their fleets to comply with
the law. Industry analysts believe that other
countries may pass laws comparable to the Oil
Pollution Act of 1990, which would further
increase worldwide demand for double-hulled
product carriers.
In late 1993, Congress amended the loan
guarantee program under Title XI of the Merchant
Marine Act, 1936, to permit the U.S. government to
guarantee loan obligations of foreign vessel
owners for foreign-flagged vessels that are built
in U.S. shipyards. Title XI authorizes MARAD to
guarantee debt with a term of up to 25 years in an
amount up to 87.5% of the vessel cost, thereby
enabling shipowners to obtain financing on more
favorable terms than those currently offered by
other countries having guarantee or subsidy
programs for foreign nationals similar to Title
XI. These 1993 amendments expanded Title XI in a
manner that has attracted foreign owners and
created foreign and domestic commercial
shipbuilding opportunities for U.S. shipyards.
<PAGE>
Management believes these initiatives have
assisted Avondale in attracting recent commercial
shipbuilding opportunities. In May 1995, the
Company finalized a $143.9 million contract to
retrofit four single hull tankers with double-
hulled forebodies for a U.S. shipping company.
These double-hulled product carriers were the
first U.S.-flag product carriers built in the
United States in the last eight years. The
contract is supported by a Title XI guarantee by
MARAD. The contract was completed and the last of
the vessels was delivered to the customer in
September 1997.
Also, in June 1997, the Company signed a $332
million contract with ARCO for the construction of
two double-hulled crude oil carriers. This
contract, the largest commercial contract ever
signed by Avondale, also provides for options
exercisable by the customer for three additional
ships. The Company believes that its receipt of
these commercial contracts was assisted by its
prior experience in constructing three double-
hulled T-AOs on behalf of the U.S. Navy.
Prior to 1997, legislation was introduced in
the U.S. Congress that would eliminate the
competitive advantages afforded to U.S. shipyards
under the 1993 amendments to the Title XI
guarantee program. This legislation would
implement a December 1994 trade agreement among
the United States, the European Union, Finland,
Japan, Korea, Norway and Sweden (which
collectively control over 75% of the market share
for worldwide vessel construction) negotiated
under the auspices of the Organization for
Economic Cooperation and Development (the "OECD
Agreement"). The OECD Agreement and related
accords seek, among other things, to eliminate
government subsidies provided to commercial
shipbuilders and to adopt a uniform standard of
government credit assistance for foreign
nationals. Under these multilateral accords, each
participating nation agreed not to provide credit
assistance to foreign nationals in excess of 80%
of the vessel construction price, and to limit the
term of any credit assistance to not more than
twelve years. During 1997, Congress adjourned
without adopting or ratifying the OECD Agreement.
Proponents of the OECD Agreement may seek to have
it reconsidered in 1998 and, if such legislation
were enacted by Congress in its current form, the
Title XI guarantee program would be modified to be
in accord with the uniform credit assistance
standards mandated under the OECD Agreement,
thereby eliminating the advantages available to
U.S. shipyards under the 1993 Title XI amendments.
<PAGE>
Avondale is not able at this time to assess
whether legislation implementing the OECD
Agreement will be enacted by Congress or the
ultimate impact that any such legislation may
have. Although the OECD Agreement promotes the
goal of eliminating commercial shipbuilding
subsidies by signatory nations, there can be no
assurance that certain safeguards in the agreement
will not be circumvented or will be adequately
enforced, or that worldwide commercial
shipbuilding opportunities may continue to flow to
foreign shipyards located in signatory nations
(which may have developed structural competitive
advantages as a result of their long histories of
subsidization) or may be diverted to non-signatory
nations. If the competitive advantages of the
current Title XI guarantee program are eliminated
and the OECD Agreement fails to achieve its
objectives, Avondale's ability to compete for
international commercial shipbuilding contracts
will be further limited, notwithstanding the
increased opportunities that are expected to arise
as vessels of the worldwide tanker and product
carrier fleet approach the end of their useful
lives.
Legislative bills seeking to rescind or
substantially modify the provisions of the Jones
Act mandating the use of U.S.-built ships for
coastwise trade are introduced in Congress from
time to time, and are expected to be introduced in
the future. Although management believes it is
unlikely the Jones Act will be rescinded or
materially modified in the foreseeable future,
there can be no assurance to this effect with
respect to the Jones Act or any other law or
regulation benefitting U.S. shipbuilders.
The Company believes that significant
commercial shipbuilding opportunities could become
available during the next five years. Future
commercial opportunities include constructing
vessels with national defense features for the
Ready Reserve fleet and the retrofitting of
existing tankers or product carriers and
construction of new double-hulled tankers or
product carriers in response to the Oil Pollution
Act of 1990. In addition, the Company is
currently pursuing a contract with a U.S. owner to
construct luxury cruise vessels for operation in
the Jones Act market. Management believes a
significant volume of such work as described
herein could become available before 2000, with
orders being placed in the next two years.
<PAGE>
Technological Innovations. To assure that
its shipyard remains among the most modern in the
world, Avondale regularly reviews and assesses its
construction and production processes. In this
regard, Avondale often consults with other highly
successful shipbuilding companies concerning
advances in shipbuilding technology. In the early
1980s, the Company was among the first of U.S.
shipyards to successfully implement modular
construction techniques that had been previously
perfected by Japanese shipbuilders. Management
believes these techniques were a major factor in
Japan's dominance of the commercial shipbuilding
market during the 1970s and 1980s. Avondale
obtained its modular construction capabilities and
"know-how" pursuant to an agreement with
Ishikawajima-Harima Heavy Industries Co., Ltd.,
one of Japan's largest shipbuilders, which worked
with Avondale to change its manufacturing and
design processes and to train Avondale's
employees. Modular construction afforded Avondale
significant production efficiencies in the
installation of ship systems, largely due to the
greater ease with which such systems could be
installed in open modules rather than closed-in
hulls. As a result of these efforts, Avondale
realized substantial increases in labor
productivity.
In addition, in 1994 the Company entered into
a technology sharing agreement with AESA of Spain,
regarded as an innovative and successful
world-class shipyard. After an on-site review of
Avondale's shipyard by AESA, as well as a review
by Avondale of current shipbuilding technology in
other countries, Avondale invested $20 million in
capital improvements designed to increase
efficiency by improving production flow. In
particular, the Company integrated certain
assembly-line techniques with its modular
construction processes. To that end, the Company
built a covered facility that houses production
lines dedicated to both military and commercial
ships. Avondale believes that sheltering the
production process and the introduction of
assembly line procedures have enhanced production
efficiencies and lowered unit production costs.
Because the construction of commercial
vessels, particularly the product carriers that
Avondale has traditionally built, places an
emphasis on steel fabrication rather than the
complex technological outfitting involved in U.S.
naval construction, Avondale's ability to compete
effectively for additional commercial work has
been enhanced by the new assembly-line process.
<PAGE>
An important element in the Company's success
in obtaining the LPD-17 contract award was the
Company's enhanced computer-aided design and
product modeling capabilities. The enhancement
was made possible through a cooperative endeavor
between the Company, 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.
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 ("IPDE") technology. This
technology also provides for sophisticated data
storage, management and retrieval for future
projects. Among its other features, the
technology permits engineering, production and
material procurement tasks to be performed
cooperatively, thus enhancing the efficiency of
the design phase. The IPDE captures data in
digital form at creation and then organizes,
integrates, maintains and makes available such
data to all program participants. The Foundation
is also constructing a 200,000 square foot
building on property donated to the University by
the Company, adjacent to the Company's main
shipyard. This facility, which will be known as
the "UNO/Avondale Maritime Technology Center of
Excellence", will house this new technology.
<PAGE>
Shipbuilding
The Company is predominantly engaged in the
design, construction, conversion, repair and
modernization of various types of military and
commercial ships.
The main shipyard facility, which is located
on a 270-acre site on the Mississippi River near
New Orleans, includes multiple building ways, side
launching facilities, a 900-foot floating dry
dock/launch platform that permits construction of
vessels up to 1,000 feet in length, and a 650-foot
floating dry dock principally used for ship
repair. The main shipyard is equipped to build
almost any type of vessel other than nuclear
submarines and surface vessels of the largest
classes, such as ultra-large crude carriers.
Avondale also operates several other facilities in
the vicinity of the main shipyard, including its
Westwego, La. shipyard, which is used primarily
for boat construction and repair, and its Algiers,
La. shipyard, which is used primarily for the
repair and overhaul of ocean-going vessels. In
addition, the Company operates a marine
fabrication facility in Gulfport, Mississippi,
which currently is being used to support marine
construction activities.
The Company continues to be materially
dependent on the U.S. Navy's ship construction and
conversion programs. The following table sets
forth the distribution of marine construction and
repair activities during the last five years based
on contract billings. As the table indicates, a
majority of Avondale's work in the year ended
December 31, 1997 was comprised of new military
construction. New commercial construction
increased in 1995 and 1996, principally due to the
construction of the four forebodies and the
construction of the river hopper barges discussed
in "-Other Operations - Boat Division."
<PAGE>
Distribution of Marine Construction and Repair Work
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
U.S. MILITARY:
New construction 86% 81% 80% 81% 88%
Repair, overhaul and
conversion -- -- -- -- 2%
COMMERCIAL:
New construction 12% 17% 16% 11% 6%
Repair, overhaul and
conversion 2% 2% 4% 8% 4%
---- ---- ---- ---- ----
TOTAL 100% 100% 100% 100% 100%
==== ==== ==== ==== ====
</TABLE>
The percentage of new construction for the
U.S. Navy has remained relatively constant since
1993. New commercial construction decreased in
1997 as compared to 1996 and 1995 as the Company
completed the double-hulled forebodies and the
river hopper barges and did not begin construction
of the ARCO crude oil carriers until late 1997.
Also, the percentage of commercial repair,
overhaul and conversion work decreased in recent
years as compared to 1994 as the Company's work on
several contracts with a private contractor for
the repair of existing Sealift ships approached
completion. See "-Other Operations - Repair
Operations."
<PAGE>
Government Contracting. Avondale's principal
U.S. government business is currently being
performed under fixed-price incentive contracts
although the recent LPD-17 contract is a cost-
plus-award fee contract. Fixed-price incentive
contracts provide for sharing between the
government and the contractor of cost savings and
cost overruns based primarily on a specified
formula that compares the contract target cost
with actual cost. In addition, fixed-price
incentive contracts generally provide for payment
of escalation of costs based on published indices
relating to the shipbuilding industry. Although
all cost savings are shared under fixed-price
incentive contracts, cost overruns in excess of a
specified amount must be borne entirely by the
contractor. The Sealift vessels, the fourth
LSD-CV and the Icebreaker are each being
constructed under fixed-price incentive contracts.
The LPD-17 contract provides for the payment of
all costs that are reimbursable under government
contracts. In addition, an award fee is payable
periodically after the Navy's evaluation of the
alliance's performance in executing the contract's
performance goals and objectives. See "- U.S.
Government."
Contracts for the construction and conversion
of U.S. Navy vessels are typically subject to
competitive bidding. As a safeguard against
anti-competitive bidding practices, the U.S. Navy
has employed the concept of "cost realism," which
requires that each bidder submit information on
pricing, estimated costs of completion and
anticipated profit margins. The U.S. Navy uses
this and other data to determine an estimated cost
for each bidder. The U.S. Navy may then
re-evaluate a bid by using the greater of either
the bidder's or the U.S. Navy's cost estimates.
Under government regulations, certain costs,
including certain financing costs, portions of
research and development costs and certain
marketing expenses, are not allowable costs under
fixed-price incentive and cost reimbursable
contracts. The government also regulates the
methods by which overhead costs are allocated to
government contracts.
<PAGE>
U.S. government contracts are subject to
termination by the government either for its
convenience or upon default by the contractor. If
the termination is for the government's
convenience, contracts provide for payment upon
termination for items delivered to and accepted by
the government, payment of the contractor's costs
incurred plus the costs of settling and paying
claims by terminated subcontractors, other
settlement expenses and a reasonable profit.
However, if a contract termination results from
the contractor's default, the contractor is paid
such amount as may be agreed upon for completed
and partially completed products and services
accepted by the government. The government is not
liable for the contractor's costs with respect to
unaccepted items and is entitled to repayment of
advance payments and progress payments, if any,
related to the terminated portions of the
contract. In addition, the contractor may be
liable for excess costs incurred by the government
in procuring undelivered items from another
source.
The continuation of any U.S. Navy
shipbuilding program is dependent upon the
continuing availability of Congressional
appropriations for that program. It is customary
for the U.S. Navy to award contracts to build one
or more vessels of a program to a contractor
together with options (exercisable by the U.S.
Navy) to purchase additional vessels in the
program. Generally, contracts to build vessels are
not awarded until funds to pay the full contract
have been appropriated. However, because Congress
usually appropriates funds on a fiscal year basis,
funds may never be appropriated to permit the U.S.
Navy to exercise options that have been awarded.
In addition, even if funds are appropriated, the
U.S. Navy is not required to exercise the options.
Because its U.S. Navy contracts require the
Company to have access to classified information,
Avondale must maintain a security clearance for
its facility. Among other things, facilities with
such clearances must restrict the access of
non-U.S. citizens to classified information. If in
the future the percentage of foreign ownership of
the Company's common stock is increased to a level
that could result in foreign dominance or control
of its activities, the Company would be required
to implement additional measures to insure that
classified material would not be compromised or
risk the loss of its security clearance.
<PAGE>
Due to the complexity of government contracts
and applicable regulations, contract disputes with
the government may occur in the ordinary course of
the Company's business. Based upon management's
analysis of each such dispute and advice of
counsel, the Company records, if appropriate, an
estimate of the amount recoverable upon resolution
of such disputes. There are currently no such
amounts recorded relating to such contract
disputes. Although management believes its
estimates are based upon a reasonable analysis of
such disputes, no assurance can be given that its
estimates will be accurate, and variances between
such estimates and actual results can be material.
The Company believes that adequate provision has
been made in its financial statements for this and
other normal uncertainties incident to its
government business.
There is significant oversight of defense
contractors to prevent waste in the defense
procurement process. Areas of contract dispute are
reviewed by the government for evidence of
criminal misconduct such as mischarging, product
substitution and false certification of pricing
and other data. In the event the government
alleges a violation of its procurement
regulations, it may seek compensatory, treble or
punitive damages in substantial amounts and
indictments, fines, penalties and forfeitures. In
addition, the government has the right to suspend
or debar a contractor from government contracting
for significant violations of government
procurement regulations. Avondale has never been
subject to suspension or debarment.
Vessel Deliveries and Backlog. At December
31, 1997, the Company had a firm backlog of
shipbuilding contracts of approximately $1.8
billion (exclusive of unexercised options
aggregating $1.1 billion held by the U.S. Navy
(including estimated contract escalation) and $500
million held by a commercial customer for
additional ship orders ) compared with firm
backlogs of $1.8 billion and $1.4 billion at
December 31, 1996 and 1995, respectively. The
Company's firm backlog at December 31, 1997
primarily consisted of $773 million to complete
the remaining six Sealift ships, $609 million
related to the LPD-17 contract, and $326 million
to complete the 125,000 DWT double-hulled crude
oil carriers.
<PAGE>
Vessel deliveries in 1997 and 1996 included
one T-AO, one LSD-CV, three MHCs, four double-
hulled commercial tankers and the remainder of the
river hopper barges. The Company plans to continue
to actively pursue other government construction
and conversion opportunities, as well as
commercial opportunities, when they become
available.
The Company has been actively pursuing
commercial shipbuilding opportunities, although
international commercial shipbuilding
opportunities remain limited because shipbuilders
in foreign countries are often subsidized by their
governments, which allows them to sell their ships
for prices below their construction costs.
Domestic shipbuilding opportunities that are not
affected by foreign subsidies offer better
possibilities for the Company. See "-Overview -
Commercial Shipbuilding."
In connection with the bids and proposals
that the Company has submitted or plans to submit
to various commercial and government customers, no
assurance can be given that the Company will be
the successful bidder or that the vessels bid on
will actually be built.
Other Operations
Overview. Although the Company has from time
to time, on a limited basis, pursued opportunities
to diversify its business, management strongly
believes that the Company's resources are most
profitably employed in marine construction. In
the past, the Company sold or discontinued certain
of its non-core operations in order to focus on
its core shipbuilding business and improve
liquidity. The Company will continue to evaluate
suitable diversification opportunities,
principally those that would not detract from
Avondale's core business and that would utilize
the Company's existing facilities. Among possible
diversification opportunities are: (i) the
construction of large industrial facilities
utilizing modular shipbuilding expertise and
project management experience; (ii) the repair and
overhaul of U.S. Navy and commercial vessels;
(iii) the construction of semi-submersible rigs,
tension-leg platforms or similar structures used
in the offshore oil and gas industry (which the
Company has constructed from time to time in the
past); (iv) steel fabrication and (v) other
operations.
<PAGE>
Modular Construction. The Company has been
able to apply its modular construction methods to
a variety of non-marine industrial fabrication
projects, including a sulphur recovery plant that
was shipped to Saudi Arabia for on-site assembly
and installation, two cryogenic gas separation
systems, two waste disposal units, six gas
turbine-driven compressors, six gas turbine-driven
salt water injection pumps, six condenser modules
for inclusion in a nuclear power plant, and two
sled and receiver modules for sub-sea pipeline
connections. The Company has also fabricated steel
bridge components, a hydroelectric power plant,
and an 800-bed floating detention facility that is
625 feet long, 125 feet wide, and five stories
high. Sales by this division to unrelated third
parties for the years ended December 31, 1997,
1996 and 1995 were $10.5 million, $8.5 million and
$9.8 million, respectively.
Boat Division. The Company has a facility
equipped for boat construction at its Westwego,
Louisiana shipyard that is capable of building
vessels up to 450 feet in length, as well as a
facility in Gulfport, Mississippi. In 1994 and
1995, the Boat Division delivered three gaming
vessels ranging from 210 to 350 feet in length.
In 1996 and 1997, the division was primarily
engaged in the construction of river hopper barges
under a contract signed in 1995. The Boat
Division is actively pursuing other projects
involving the construction of additional gaming
boats as well as passenger vessels and ferries,
towboats, offshore supply boats and other vessels.
Sales by this division to unrelated third parties
for the years ended December 31, 1997, 1996 and
1995 were $6.0 million, $10.2 million and $29.4
million, respectively.
Steel Operations. Through its Steel Sales
operation, Avondale sells steel plate and
structural steel to the marine and industrial
markets in the Gulf Coast region of the United
States. Sales by this division to unrelated third
parties for the years ended December 31, 1997,
1996 and 1995 were approximately $42.8 million,
$40.1 million, and $28.2 million, respectively.
<PAGE>
Repair Operations. At its main shipyard and
the Algiers shipyard, Avondale engages in the
repair, overhaul and conversion of ocean-going
vessels. With the 900 and 650 foot drydocks
located at the Company's main shipyard, the
Company is capable of offering a complete range of
vessel repairs and overhaul services. The Algiers
shipyard is operated under a long-term lease and
is designed primarily for the topside repair and
overhaul of large ocean-going vessels. Although
historically Avondale has engaged in the repair
and overhaul of U.S. Navy vessels, these
opportunities have been curtailed by the U.S.
Navy's current policy of requiring such work to be
conducted at or near the vessels' home ports.
Sales by this division to unrelated third parties
for the years ended December 31, 1997, 1996 and
1995 were $10.3 million, $13.5 million and $27.3
million, respectively.
Competition
The shipbuilding industry is divided into two
distinct markets, U.S. government contracts, which
is dominated by contracts for the U.S. Navy, and
domestic and international shipbuilding contracts
for commercial customers. The reduced level of
shipbuilding activity by the U.S. government
during the past decade has intensified competition
significantly. With respect to the market for U.S.
military contracts, there are principally five
private U.S. shipyards, including Avondale, that
compete for contracts to construct or convert
surface vessels. Two of these companies are
subsidiaries of much larger corporations that have
substantially greater resources than Avondale. A
recent trend in certain government contracts is
the concept of several shipbuilders and a weapon
systems integrator forming an alliance to bid on
major procurements. This is evidenced by the
bidding process for the recent LPD-17 program
where a Company-led alliance which includes Bath
Iron Works and Raytheon was awarded the contract
against competition which included an alliance of
other major shipbuilders and a weapon systems
integrator. This trend will likely continue on
the DD-21, ADC (X) and Coast Guard Deep Water
projects. The Company's success in participating
in these programs may be influenced by its ability
to form a competitive bidding team.
<PAGE>
With respect to commercial vessels that must
be constructed by a U.S. shipyard under the Jones
Act, there are approximately 20 private U.S.
shipyards that can accommodate the construction of
vessels up to 400 feet in length, ten of which
Avondale considers to be its direct competitors
for commercial contracts. Because of the current
overcapacity at U.S. shipyards, the current small
volume of commercial work available, and the fact
that most contracts are awarded on the basis of
competitive bidding, price competition is
particularly intense. With respect to the
international commercial shipbuilding market,
Avondale competes with numerous shipyards in
several countries, many of which are heavily
subsidized by their governments. See "- Commercial
Shipbuilding."
Substantially all military and commercial
contracts awarded to U.S. shipyards are
competitively bid. The Company has been successful
recently in securing competitively bid contracts
in large part because the Company submitted the
most cost-effective bids for the available
contracts. However, the Company also believes that
its receipt of the LPD-17 and ARCO contract awards
has demonstrated its ability to successfully bid
for shipbuilding work based on its technical
capabilities as well as its cost efficient
production methods. The Company believes that it
will continue to be competitive in bidding for
selected U.S. Navy and commercial shipbuilding
contracts in the future. However, no assurance can
be given that the Company will be the successful
bidder on any future contracts or that, if
successful, it will realize profits on such
contracts.
Marketing
The Company's marketing effort is
decentralized and conducted separately by each
division. Generally, the Company and its
competitors are all aware of the shipbuilding,
repair and conversion plans of the U.S. Navy and
most prospective commercial customers, and are
invited to bid on all major projects.
The Company's boat building and repair
operations are marketed by the sales and business
development personnel of the appropriate divisions
primarily through direct, personal sales calls.
The services of the Steel Sales operation are
marketed through industry advertising, personal
sales calls and prior business relationships.
<PAGE>
Materials and Supplies
The principal materials used by Avondale in
its shipbuilding, conversion and repair business
are standard steel shapes, steel plate and paint.
Other materials used in large quantities include
aluminum, copper-nickel and steel pipe, electrical
cable and fittings. The Company also purchases
component parts such as propulsion systems,
boilers, generators and other equipment. All of
these materials and parts are currently available
in adequate supply from domestic and foreign
sources. Generally, for all its long-term
contracts, the Company obtains price quotations
for its materials requirements from multiple
suppliers to ensure competitive pricing. In
addition, through the cost escalation provisions
contained in its U.S. military contracts, the
Company is protected from increases in its
materials costs to the extent that the increases
in the Company's costs are in line with industry
indices.
In connection with its government contracts,
the Company is required to procure certain
materials and component parts from supply sources
approved by the U.S. Government. Although certain
components and sub-assemblies are manufactured by
subcontractors, the Company's reliance on
subcontractors has been and is expected by
management to continue to be limited. The Company
is not dependent upon any one supply source and
believes that its supply sources are adequate to
meet its future needs.
Insurance
The Company maintains insurance against
property damage caused by fire, explosion and
similar catastrophic events that may result in
physical damage or destruction to the Company's
premises and properties. The Company also
maintains general liability insurance in amounts
it deems appropriate for its business. The Company
is self-insured for workers' compensation
liability and employees' health insurance except
for losses in excess of $1.0 million per
occurrence, for which the Company maintains
insurance in amounts it deems appropriate.
<PAGE>
Environmental and Safety Matters
General. Avondale is subject to federal,
state and local environmental laws and regulations
that impose limitations on the discharge of
pollutants into the environment and establish
standards for the treatment, storage and disposal
of toxic and hazardous wastes. Stringent fines and
penalties may be imposed for non-compliance with
these laws and regulations, and certain
environmental laws impose joint and several
"strict liability" for remediation of spills and
releases of oil and hazardous substances rendering
a person liable for environmental damage, without
regard to negligence or fault on the part of such
person. Such laws and regulations may expose the
Company to liability for the conduct of or
conditions caused by others, or for acts of the
Company which are or were in compliance with all
applicable laws at the time such acts were
performed. The Company is covered under its
various insurance policies for some, but not all,
potential environmental liabilities. See Note 9 of
the Notes to Consolidated Financial Statements.
The Company is also subject to the federal
Occupational Safety and Health Act ("OSHA") and
similar state statutes. The Company has an
extensive health and safety program and employs a
staff of safety inspectors and industrial hygiene
technicians, whose primary functions are to
develop Company policies that meet or exceed the
safety standards set by OSHA, train supervisors
and make daily inspections of safety procedures to
insure their compliance with Company policies on
safety and industrial hygiene. All supervisors are
required to attend safety training meetings at
which the importance of full compliance with
safety procedures is emphasized.
Waste Disposal. Avondale's operations
produce a limited amount of industrial waste
products and certain hazardous materials. The
Company's industrial waste products, which consist
principally of residual petroleum, other
combustibles and blasting abrasives, are shipped
to third party disposal sites that are licensed to
handle such materials.
<PAGE>
Employees
At December 31, 1997, Avondale had
approximately 5,500 employees, many of whom have
been employed by the Company for many years. None
of Avondale's employees is currently covered by
any collective bargaining agreement. However, on
June 23, 1993 an election was conducted to
determine whether certain of the New Orleans area
employees desired to have union representation. A
total of 3,914 workers cast votes, of which
approximately 850 votes were challenged by the
National Labor Relations Board ("NLRB") and union
organizers on a variety of grounds. The Company
filed objections with the NLRB seeking to have the
election set aside. In February 1997, the NLRB
decided that certain of the disputed votes should
be counted and that the Company's objections to
the election should be rejected. The NLRB then
counted the disputed votes, resulting in a
favorable outcome for the union, and certified the
union. The final vote count included 1,950 votes
for forming a union, 1,632 votes against forming a
union, 59 disputed votes, with 273 ballots
remaining sealed. The Company continues to
believe that it has substantive and meritorious
bases for overturning the decision of the NLRB and
has taken steps to have the propriety of the
election reviewed in court. If the NLRB's
certification of the union is enforced by
subsequent judicial proceedings, the Company would
be required under the federal labor laws to
bargain in good faith with the union on matters
such as wages, hours and working conditions. Even
though Avondale will agree only to bargaining
demands that can be economically justified, union
certification may result in an increased risk that
the union will engage in potentially disruptive
activities such as strikes or picketing, or that
the Company may incur higher labor and operating
costs.
<PAGE>
The union has also filed numerous unfair
labor practice charges with the NLRB alleging that
Avondale has committed a variety of violations of
the National Labor Relations Act principally
involving claims that employees were wrongfully
disciplined or discharged. In February 1998, an
administrative law judge ordered the Company to
reinstate twenty-six fired workers, and rescind
disciplinary actions taken against another
fifteen. Although the Company disputes these
claims and is currently appealing the decision, if
the decision is upheld, the respective employees
would be entitled to back pay from the time of his
or her claim until the resolution of the case.
However, even if there is a finding in favor of
some of the claimants with respect to one or more
of the unfair labor practice claims, management
believes that any judgment would not have a
material impact on Avondale's consolidated
financial statements.
<PAGE>
GLOSSARY OF SELECTED INDUSTRY TERMS
<TABLE>
<S> <C>
ADC(X) A class of auxiliary vessels designed to
deliver a steady stream of fuel,
ammunition and stores to the U.S. Navy
fleet. It is currently envisioned that
these vessels will have "Refuel at Sea"
capabilities similar to the T-AOs
constructed by Avondale.
AO An auxiliary oil tanker constructed for
the U.S. Navy and crewed by U.S. Navy
personnel. Avondale has built five AOs.
AOJ An AO which has been "jumboized" i.e.,
lengthened by the Company by inserting a
108 foot midbody. Avondale has
converted five AOs to AOJs.
DD-21 "Surface Combatant 21st Century," the
next generation of surface combatant to
be built for the U.S. Navy.
Icebreaker WAGB-20 Polar Icebreaker, currently
under construction at Avondale, was
ordered by the U.S. Coast Guard for its
polar operations.
IPDE An Integrated Product Data Environment
which captures data in digital format at
the point of creation and then
organizes, integrates, maintains and
makes the information available to all
program participants.
Jones Act Merchant Marine Act of 1920, as amended.
The principal requirements of the act
are that ships engaged in coastwise
trade must be owned by a U.S. company,
crewed by U.S. citizens and built by a
U.S. shipbuilder.
LASH "Lighter aboard ship," a LASH vessel
carries its cargo in pre-loaded barges
(lighters). The Company constructed 21
such vessels in the late 1960s and early
1970s for five commercial customers.
LCAC "Landing craft air cushion," a surface
effect vessel that was constructed at the
Company's previously-owned Gulfport
facility. Avondale has built 15 LCACs.
<PAGE>
LPD-17 The newest class of amphibious transport
ship for the U.S. Navy. Avondale was
awarded a contract, with options for two
ships, for the design, construction and
support of the initial LPD-17 ships.
LSD "Landing ship dock," designed to carry
troops, materials and up to four LCACs.
Avondale has built five LSDs.
LSD-CV An LSD with a "cargo variant" design
allowing for carrying more cargo and
only 2 LCACs. Avondale has delivered
four LSD-CVs and will deliver a fifth
during 1998.
MARAD United States Maritime Administration,
Department of Transportation.
MHC MHC-51 class fiberglass coastal
minehunter. Avondale has built four
MHCs.
SL 7 A "Roll on, Roll off" vessel operated by
the Military Sealift Command and crewed
by a civilian crew. Avondale has
converted three SL 7s.
Sealift As used herein, TAKR 300 Class Sealift
vessels are transport vessels built for
the U.S. Navy. Avondale has contracts
to build six Sealift vessels with an
option to build an additional vessel.
T-AGS 45 An oceanographic research vessel
constructed by Avondale and delivered to
the U.S. Navy in May 1993.
T-AO Same as an "AO" but operated by the
Military Sealift Command and crewed by a
civilian crew. Avondale has built
sixteen T-AOs.
</TABLE>
<PAGE>
Item 2. Properties.
The Company's corporate headquarters and main
shipyard are located on the west bank of the
Mississippi River at Avondale, Louisiana,
approximately 15 miles from downtown New Orleans.
That facility includes approximately 229 acres of
Company-owned land with 174 buildings enclosing
approximately 2.0 million square feet of space,
approximately 41 acres of leased land, a 900-foot
floating dry dock/launch platform that permits
construction, conversion or repair of vessels up
to approximately 1,000 feet in length, and a 650-
foot floating dry dock principally used for ship
repair and multiple building ways and side
launching facilities. The main shipyard includes
approximately 6,500 feet of wharves, 1,200 feet of
launch ways and 2,900 feet of unimproved
waterfront along the Mississippi River. The
Company's shipyard facilities have the capacity to
build virtually any type of vessel other than
submarines and surface vessels of the largest
classes, such as ultra-large crude carriers.
The Company's 900-foot floating drydock was
constructed in 1975 and financed pursuant to Title
XI of the Merchant Marine Act, 1936, as amended.
These mortgage bonds were refinanced in February
1995 with mortgage bonds of approximately $4.3
million. The 900-foot drydock is currently
subject to a Title XI mortgage of approximately
$2.3 million (see Note 4 of the Notes to
Consolidated Financial Statements).
The Company's 650-foot floating drydock and
support facilities were constructed in 1982 and
financed with $36.25 million of industrial revenue
bonds. The 650-foot drydock is currently subject
to $35.36 million of these industrial revenue
bonds (see Note 4 of the Notes to Consolidated
Financial Statements).
<PAGE>
As part of its program to significantly
improve its efficiency, in 1995 the Company
completed an approximate $20 million capital
expenditure program, financed principally through
$17.8 million of bonds issued in February 1995
utilizing a Title XI guarantee. The modernization
program is currently subject to a Title XI
mortgage of approximately $15.4 million (see Note
4 of the Notes to Consolidated Financial
Statements). The modernization program included
construction of a covered facility, which allows
for productivity gains by eliminating weather-
related problems, and adoption of a more automated
process for building the various modules which are
assembled into a completed vessel.
The Company is also in the process of making
significant capital improvements, including
enhancing its computer-aided design and product
modeling capabilities. In this effort, 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 the 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 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. This
investment in 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. In 1997, the Company
entered into a fifty-year lease for the Center
requiring a nominal annual lease payment. The
Company will provide access to the University for
its use in research and the development of
educational curricula related to naval
architecture and marine engineering. During 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.
<PAGE>
The Company also operates several other
facilities in the vicinity of the main shipyard.
The Westwego Yard is located five miles down-river
from the main shipyard on 16.6 acres of land
leased through July 1999 and includes facilities
for the construction or repair of boats and
vessels up to 450 feet in length. The Algiers
Yard is located 19 miles down-river from the main
shipyard on 22 acres of land leased through
December 1999 and includes construction facilities
used predominantly for the repair and overhaul of
large ocean-going vessels. The Steel Sales
operation is located on 4.4 acres of property
leased on a month-to-month basis in Harvey,
Louisiana, where a steel warehouse is located.
The location has direct access to the Mississippi
River via the Harvey Canal. The Modular
Construction operation, located in an
approximately 70,000 square foot facility on a 58
acre Company-owned site a few miles up-river from
the main shipyard, consists of a complete machine
shop with steel fabricating facilities.
The Avondale Enterprises, Inc. ("AEI")
facility is located on a Company-owned 121.5 acre
site near Gulfport, Mississippi on an industrial
seaway. The facility includes a 263,447 square
foot manufacturing facility and a 6,300 square
foot administration building. This facility was
acquired in 1989 for construction of the
Minehunters ("MHC") for the U.S. Navy. AEI has
pledged a portion of the facility to secure a $3
million loan it entered into in 1991 to finance a
portion of its 1989 acquisition debt (see Note 4
of the Notes to Consolidated Financial
Statements). Upon the transfer of the final MHC
hull to the main shipyard in December 1994, this
facility became idle. During 1996 and 1997, the
Company utilized the facility for the completion
of the river hopper barge contract. The Company
is currently utilizing the facility to support
marine construction activities.
The main facility of the Genco Industries
Group ("Genco"), located on a Company-owned 8.7
acre site 20 miles southeast of Beaumont, Texas,
was sold in November 1997. Genco also has a
smaller facility that is located on a Company-
owned 3.2 acre site approximately 80 miles
northwest of Beaumont. This facility consists of
three manufacturing/administration buildings
totaling approximately 26,500 square feet. This
facility has been idle since the completion of
Genco's contracts in 1994 and is currently listed
for sale by the Company. The Company is also
exploring alternative uses.
<PAGE>
The Company believes that its core marine
construction and repair facilities provide it with
sufficient capacity to handle any business it
reasonably expects to obtain in the foreseeable
future. In general, the Company's productive
capacity is limited less by physical facilities
than by the number of employees the Company can
effectively supervise. Management believes that
the Company would be operating at full capacity
with approximately 8,000 employees. The Company's
core business currently operates with
approximately 5,500 employees.
Item 3. Legal Proceedings.
Environmental Proceedings. Various
governmental and private parties have from time to
time alleged that the Company is a potentially
responsible party ("PRP") with respect to certain
hazardous waste sites, including, among other
things, the site listed below.
In January 1986, the Louisiana Department of
Environmental Quality ("DEQ") advised the Company
that it could be a PRP with respect to an oil
reclamation site operated by an unaffiliated
company in Walker, La. The Company sold to the
operator a substantial portion of the waste oil
that was processed at the reclamation site during
the period 1978 through 1982. The Company's
potential liability, if any, for cleanup of this
site will be based on the Comprehensive
Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA") or the Louisiana
Environmental Quality Act. Under these statutes,
such liability is presumptively joint and several,
but is typically apportioned among the responsible
parties based on the volume of material sent by
each to the waste site. The Company has cooperated
with other PRPs to study the potential aggregate
liability under these statutes. Moreover, the
Company believes it has substantial defenses
against liability and defenses that could mitigate
the portion of liability, if any, that would
otherwise be attributable to it.
<PAGE>
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 December 31, 1997,
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 through these settlements are placed in
escrow to fund future expenses. At December 31,
1997, the balance of the escrow was approximately
$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.
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 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% for
any additional costs.
<PAGE>
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 1996, the Company settled a class action
lawsuit involving alleged personal injury and
property damage arising from the Walker
reclamation site. Under the terms of the
settlement, the Company paid approximately $6.0
million into a settlement fund. The Company could
also have been responsible for payment to the
plaintiffs of up to an additional $6.0 million
(plus interest at 8% per annum) if the plaintiffs
were unsuccessful in collecting certain claims
under Avondale's insurance policies that were
assigned to the plaintiff class under the
settlement agreement. During the first quarter of
1997, the parties reached a settlement with the
Company's insurers which does not require any
further contribution by the Company.
In addition to the above, the Company is also
named as a defendant in other lawsuits and
proceedings arising in the ordinary course of
business, some of which involve substantial
claims.
The Company has established accruals as
appropriate for certain of the matters discussed
above. While the ultimate outcome of lawsuits and
proceedings against the Company cannot be
predicted with certainty, management believes,
based on current facts and circumstances and after
review with counsel, that the eventual resolution
of these matters is not expected to have a
material adverse effect on the Company's financial
statements.
Item 4. Submission of Matters to a Vote of
Security Holders.
The Company did not submit any matters to a
vote of security holders during the fourth quarter
of its fiscal year ended December 31, 1997.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters.
The Company's common stock trades on the
Nasdaq National Market tier of the Nasdaq Stock
Market under the symbol AVDL. The following table
sets forth the range of high and low per share
sales prices, as reported by Nasdaq, for the
periods indicated.
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, High Low
---- ----
<S> <C> <C>
1996
First Quarter $18 1/8 $14
Second Quarter $20 1/8 $16 7/8
Third Quarter $19 1/8 $13 7/8
Fourth Quarter $22 $16 1/4
1997
First Quarter $23 1/2 $17
Second Quarter $21 3/8 $16 1/4
Third Quarter $29 $20 5/8
Fourth Quarter $30 $24 3/4
</TABLE>
At December 31, 1997, there were 681 holders
of record of the Company's Common Stock.
The Company does not currently pay dividends
on its Common Stock and no dividends were paid on
the Company's Common Stock during the two years
ended December 31, 1997. As discussed in Note 4
of the Notes to Consolidated Financial Statements,
the terms of the Company's revolving credit
agreement require bank approval for the payment of
cash dividends over a specified amount.
<PAGE>
Item 6. Selected Consolidated Financial Data.
The following table contains selected consolidated
financial data for the Company and its
subsidiaries for each of the fiscal years in the
five-year period ended December 31, 1997. The
data for each of the fiscal years in the five-year
period ended December 31, 1997 are derived from
the consolidated financial statements of the
Company and its subsidiaries. The consolidated
financial statements as of December 31, 1997 and
1996, and for each of the years in the three-year
period ended December 31, 1997, and the report of
Deloitte & Touche LLP thereon, have been included
in this Form 10-K.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------
(in thousands, except per share data)
1997(2) 1996(2) 1995(2) 1994 1993(1)
--------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Continuing operations:
Net sales $ 613,993 $ 624,929 $ 576,308 $ 475,810 $ 456,724
Gross profit 75,478 81,827 58,671 47,485 33,180
Income from operations 43,593 36,790 26,548 16,949 3,400
Income (loss) from
continuing operations 26,833 30,795 28,180 13,075 (5,233)
Income (loss) from
discontinued operations -- -- -- (4,552) (3,561)
Net income (loss)(3) 26,833 30,795 28,180 8,523 (8,794)
Income (loss) per share
of Common stock
- basic & diluted:
Continuing operations 1.85 2.13 1.95 0.90 (0.36)
Discontinued operations -- -- -- (0.31) (0.25)
Total 1.85 2.13 1.95 0.59 (0.61)
BALANCE SHEET DATA:
Working capital $ 145,224 $ 119,475 $ 80,988 $ 34,836 $ 24,565
Total assets 375,615 362,872 316,727 273,503 302,139
Long-term debt 51,819 54,866 60,593 45,875 43,848
Shareholders' equity 208,977 181,853 151,058 122,878 114,355
CASH FLOW DATA:
Net cash provided by
operating activities $ 50,848 $ 26,701 $ 27,995 $ 69,128 $ 16,866
Net cash (used for)
provided by investing
activities (13,083) (10,449) (16,799) (11,931) 6,604
Net cash (used for)
provided by financing
activities (4,957) (5,832) 11,914 (44,978) (27,888)
OTHER FINANCIAL DATA:
EBITDA(4) $ 54,052 $ 47,599 $ 36,367 $ 28,501 $ 15,210
OPERATIONAL DATA:
Firm backlog $1,802,000 $1,766,000 $1,413,000 $1,424,000 $1,268,000
</TABLE>
____________________
(1) Income statement data for 1993 has been restated
to present Avondale's service contracting subsidiary
as discontinued operations.
(2) See " Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Notes to
Consolidated Financial Statements relating to, among
other things, the impact of revisions of estimated
profit on previously completed shipbuilding contracts
in 1997, 1996 and 1995.
(3) Net income for the years ended December 31, 1996 and 1995
include deferred income tax benefits of $9.0 million
($.62 per share - basic and diluted) and $13.0 million
($.90 per share - basic and diluted) respectively,
attributable to certain net operating loss carry forwards
available to offset estimated future taxable earnings.
(4) As used herein, EBITDA is income (loss) from operations
plus depreciation and amortization. EBITDA is frequently
used by securities analysts and is presented here to
provide additional information about the Company's
operations. EBITDA should not be considered as an
alternative to net income (loss) as a measure of the
Company's operating performance or as an alternative
to cash flows as a measure of the Company's liquidity.
<PAGE>
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
The following discussion should be read in conjunction
with Avondale Industries, Inc.'s (the "Company" or
"Avondale") Consolidated Financial Statements and Notes
thereto included elswhere in this Form 10-K.
Overview
The improvement in the Company's operating
results continued during fiscal 1997 with the
Company reporting record income from operations
for 1997. Income from operations increased 18%
above the level of the prior year while income
before income taxes increased 22% compared to
fiscal 1996.
The Company's firm backlog at December 31,
1997 was approximately $1.8 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. The firm
backlog includes two Navy contracts awarded in
1997, the first of which was the exercise of a
previously awarded option to construct an
additional Sealift ship for approximately $240
million (including estimated contract escalation).
The exercise of this option represents the sixth
ship which the Company has been awarded in the
Sealift program. The six Strategic Sealift ships
have a remaining backlog of approximately $773
million (including estimated contract escalation).
In addition, the Navy holds an option to require
the Company to construct a seventh Sealift vessel
for an additional $240 million (including
estimated contract escalation). In the first
quarter of 1998, the Navy exercised a portion of
this option relating to approximately $24 million
for long lead time materials while the balance of
the option is exercisable during the first quarter
of 1999. Delivery of the first two Sealift ships
is scheduled for 1998.
<PAGE>
As previously disclosed, in December 1996 the
U.S. 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") (formerly Hughes Aircraft Company
which later became a subsidiary of Raytheon), to
design and construct the first of an anticipated
twelve ships under the Navy's LPD-17 program. The
contract award provides for options exercisable by
the Navy for two additional LPD-17 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 and Bath would construct the third of the
three LPD-17 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 modeling
technology for the design and manufacture of the
ship. In order to fairly represent its role 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 operating
profit margin. For additional information on the
terms of the LPD-17 contract award, the
relationship between the members of the alliance
and certain accounting considerations, see
"Business - Overview."
Also included in the firm backlog is the
largest commercial contract ever awarded to
Avondale. In June 1997, the Company was awarded a
$332 million contract for the construction of two
125,000 DWT crude oil carriers for the Jones Act
Trade to be built with double hulls in compliance
with the Oil Pollution Act of 1990. The contract
also provides options exercisable by the customer
for three additional ships. Delivery of the first
ship is scheduled for the first quarter of 2000.
<PAGE>
Vessel deliveries in fiscal 1997 include a
MHC-51 Class Coastal Minehunter, representing the
fourth and final Minehunter constructed by the
Company for the Navy. Additionally, during 1997,
the Company delivered the final three vessels in a
contract to retrofit four commercial tankers with
double-hulled forebodies and the remaining river
hopper barges. Vessel deliveries expected in
fiscal 1998 include the LSD-CV 52 and the first
two Strategic Sealift vessels.
The Company's operating results projected for
1998 are expected to be principally related to the
Strategic Sealift, the Icebreaker and the LPD-17
contracts, while results projected for 1999 are
expected to reflect primarily the Sealift, LPD-17
and ARCO product tanker contracts. Except for the
LPD-17 contract, the Company records profits under
the percentage-of-completion method of accounting
based on direct labor charges. See "Business -
Overview". Although the Company generally does
not begin to record profits on its contracts until
contract performance is sufficient to estimate
final results with reasonable accuracy, actual
profits taken with respect to such contracts may
be affected if the Company is required in the
future to revise its estimate of the cost to
complete one or more of such contracts.
As previously disclosed, certain of the
Company's operations closed in 1994 with the
completion of their respective contracts. Two of
these facilities were sold (one in December 1996
and one in November 1997) and the one remaining
facility is currently offered for sale. With
respect to the remaining property, the Company
currently is not aware of any material
environmental liabilities to be incurred for site
restoration, post-closure monitoring commitments
or other exit costs.
<PAGE>
Results of Operations
1997 vs. 1996. The Company recorded net
income of $26.8 million, or $1.85 per share basic
and diluted, for 1997 compared to $30.8 million,
or $2.13 per share basic and diluted, for 1996.
Net income for 1996 included an income tax benefit
of $9.0 million, or $0.62 per share basic and
diluted, which recognized, for financial reporting
purposes, the benefit of certain net operating
loss carry forwards available to offset estimated
future earnings. No similar benefit was recorded
in 1997.
Income from operations for 1997 increased
$6.8 million, or 18%, compared with 1996. This
improvement is primarily reflected by operating
profits recognized on the contracts to construct
the six Strategic Sealift ships, the Icebreaker
and the LSD-CV 52. Profit recognition began in
1996 for the Sealift and 1997 for the Icebreaker
as contract progress was not sufficient to begin
profit recognition until that time. Also
contributing to the improved operating results
during 1997 were operating profits of $7.8 million
generated by the Company's marine repair, modular
construction and wholesale steel operations.
These operating profits were offset, in part,
by operating losses recorded on two commercial
marine construction contracts. During 1997,
Avondale recorded additional losses of $4.3
million on the contract to retrofit four single-
hulled commercial tankers with new double-hulls
(the last of which was delivered in September
1997), and an additional $1.5 million loss on the
contract to construct 100 river hopper barges (the
last of which was delivered in November 1997).
These losses resulted primarily from increases in
the estimated labor needed to complete the
contracts.
<PAGE>
Net sales for 1997 decreased $10.9 million,
or 2%, to $614.0 million compared to $624.9
million for 1996. The decrease in 1997 net sales
was due primarily to a reduction in production
activity associated with 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
and the contracts to construct the seven T-AOs
(the last of which was delivered in May 1996), the
four MHCs (the last of which was delivered in
January 1997), the LSD-CV 52 (expected to be
delivered in February 1998) and the three LSD-CVs
(the last of which was delivered in March 1996).
These decreases were partially offset by increased
net sales recorded on the contracts to construct
the six Strategic Sealift ships (the first of
which is expected to be delivered in 1998), the
LPD-17 (expected to be delivered in 2002), the
Icebreaker (scheduled for delivery in 1999) and
the two 125,000 DWT double-hulled crude oil
carriers (the last of which is scheduled for
delivery in 2000). The contracts to construct the
six Strategic Sealift ships, the LPD-17, the
Icebreaker and the two double-hulled crude oil
carriers collectively accounted for 75% of the
Company's 1997 net sales.
Gross profit for 1997 decreased $6.3 million,
or 8% compared to 1996. This decrease is
primarily attributable to the early stages of
construction of the majority of the Company's
contracts in progress. The Company does not begin
profit recognition until final results can be
estimated with reasonable accuracy. Refer to Note
1 of the Notes to Consolidated Financial
Statements, contained elsewhere in this Form 10-K,
for a discussion of the Company's policies and
procedures for revenue recognition. In addition,
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
recognized without any operating margins. As a
result of the factors discussed herein, contracts
which account for a majority of the Company's 1997
net sales have little or no operating margins
recognized.
<PAGE>
Selling, general and administrative ("SG&A")
expenses decreased $13.2 million, or 29%, for 1997
compared to 1996. The overall decrease in SG&A
expenses was due primarily to a decrease in
proposal preparation and related costs compared
with those recorded in 1996 in connection with the
preparation of the successful LPD-17 proposal.
In June 1997, the Financial Accounting
Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130") and Statement
of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and
Related Information" ("SFAS 131"). The Company is
required to adopt both standards for fiscal 1998.
Refer to Note 1 of the Notes to Consolidated
Financial Statements, contained elsewhere in this
Form 10-K, for a discussion of SFAS 130 and SFAS
131. Management believes that the implementation
of SFAS 130 and SFAS 131 will not have a material
impact on the presentation of the Company's
financial statements but may require additional
disclosure.
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.
1996 vs. 1995. The Company recorded net
income of $30.8 million, or $2.13 per share basic
and diluted, for 1996 compared to $28.2 million,
or $1.95 per share basic and diluted, for 1995
representing an increase of 9% in net income over
the prior year. Net income for 1996 and 1995
include income tax benefits of $9 million, or
$0.62 per share basic and diluted, and $13
million, or $0.90 per share basic and diluted,
respectively, as discussed below. Also included
in 1996 and 1995 net income are $4.4 million, or
$0.30 per share, basic and diluted,and $4.5
million, or $0.31 per share basic and diluted,
respectively, reductions of a previously
recognized loss which was recorded in prior years
on the contract to construct three LSD-CVs. The
reductions were due primarily to revisions of the
total estimated contract cost as it neared
completion.
<PAGE>
In addition to the improvements on the three
LSD-CV contract, the increases in the Company's
operating results in 1996 reflect improved
operating profits recognized on the seven T-AO
contract, which was completed in 1996, and the
LSD-CV 52 contract. In addition, the Company
began profit recognition on the contract to
construct five Strategic Sealift vessels for the
Navy. Also contributing to the increase in
operating results for 1996 were operating profits
of $8.2 million recorded by the Company's marine
repair, modular construction and wholesale steel
operations.
These profits were offset, in part, by losses
recorded on two commercial marine construction
contracts. The Company recognized an $8.5 million
loss on the contract to construct river hopper
barges, primarily representing costs incurred in
connection with the Company's entry into this
competitive market. In addition, the Company
recorded a $20 million loss with respect to the
contract to retrofit four single-hulled commercial
tankers with new double hulls. This loss resulted
from several factors, the most important of which
related to certain modifications to the hull
design that were required in order to comply with
American Bureau of Shipbuilding standards after
construction had been commenced by the Company in
order to respond to a significantly compressed
construction schedule caused by the customer's
delay in obtaining financing. In addition, this
project was commenced prior to the time that the
Company's new automated production facility had
become fully operational, and therefore did not
benefit from the efficiencies which would have
been realized from the completed factory.
Finally, the pre-delivery testing of the first
vessel revealed a condition which required certain
modifications causing the Company to incur
incremental costs.
<PAGE>
The impact of these losses was mitigated by
the fact that these contracts absorbed a
substantial amount of operating expenses which, in
the absence of these contracts, would have been
allocated to other contracts. In addition, these
contracts have been important in the Company's
reemergence in the competitive commercial marine
construction markets. The tanker contract has
also enabled the Company to construct four
forebodies which are patterned after the forebody
of Avondale's standard tanker, providing
experience in constructing this portion of the
vessel, enabling the Company to refine the design
and construction techniques, and furthering the
Company's progress toward achieving its stated
goal of a more balanced mix of military and
commercial work. The first double-hulled tanker
was delivered on October 3, 1996 while the second
hull was delivered January 16, 1997. The
remaining vessels are scheduled to be delivered in
May and September 1997.
The Company's net sales in 1996 increased
$48.6 million, or 8%, as compared to the prior
year. The increase in 1996 net sales was due
primarily to increases in sales revenues
recognized on the contracts to construct the first
five Sealift ships, the Icebreaker and the
forebodies for four double-hulled product tankers,
which collectively accounted for 63% of the
Company's 1996 net sales revenue. The increase in
net sales was partially offset by reductions in
sales revenues recognized on the contracts to
construct the three LSD-CVs (the last of which was
delivered in March 1996), LSD-CV 52 (scheduled for
completion in November 1997), the seven T-AOs (the
last of which was delivered in May 1996) and four
MHCs (the third of which was delivered in July
1996 and the last vessel which was delivered in
January 1997). The increase in 1996 net sales was
also partially offset by reduced net sales
recorded on paddle-wheeled gaming vessels (the
last of which was delivered in 1995). The
contracts to construct the three LSD-CVs, the LSD-
CV 52, the seven T-AOs and four MHCs collectively
accounted for 24% of the Company's 1996 net sales
revenue.
<PAGE>
Gross profit for 1996 increased $23.2
million, or 39%, compared to 1995. The increase in
1996 gross profit was due primarily to profits
recognized on the contract to construct the LSD-CV
52 and the seven T-AOs. Also contributing to the
increase in gross profit was the start of profit
recognition on the contract to construct the
Strategic Sealift vessels. The increase in gross
profit was partially offset by the losses recorded
on the barge and forebody contracts discussed
above.
Selling, general and administrative ("SG&A")
expenses increased $12.9 million, or 40%, for 1996
compared to 1995. The overall increase in SG&A
expenses was due primarily to increased labor
costs, professional fees and related costs
associated with the Company's successful LPD-17
proposal.
The Company's 1996 and 1995 operating results
include income tax benefits of $9 million, or
$0.62 per share basic and diluted, and $13
million, or $0.90 per share basic and diluted,
respectively. As further discussed in Note 6 of
the Notes to Consolidated Financial Statements,
these amounts were principally the result of
recognizing, for financial reporting purposes,
income tax benefits from certain net operating
loss carry forwards available to offset estimated
future taxable earnings. In 1996 and 1995, the $9
million and $13 million respective tax benefits
were offset by income tax provisions of $12.7
million and $8.6 million related to 1996 and 1995
operating results, respectively.
Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123") encourages but does not require
companies to record compensation cost for stock-
based employee compensation plans at fair value.
The Company has chosen to continue to account for
stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations and has
adopted the disclosure-only provisions of SFAS
123. Implementation of the provisions of SFAS 123
had no material effect on the financial
statements.
<PAGE>
Liquidity and Capital Resources
The Company's cash and cash equivalents
totaled $81.8 million at December 31, 1997 as
compared to $48.9 million at December 31, 1996.
The Company's operating activities represented a
significant source of cash during 1997, generating
approximately $50.8 million. The Company's
primary uses of cash in the current year consisted
of capital expenditures of $13.6 million and
principal payments on long-term borrowing of $5.0
million.
The Company's $65 million revolving credit
agreement ("the agreement") provides liquidity for
working capital purposes, capital expenditures and
letters of credit. At December 31, 1997, 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 December 31, 1997, 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 the 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 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.
<PAGE>
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 December
31, 1997, the Foundation had incurred $15.3
million of cost to construct and equip the Center.
Also, as of December 31, 1997, the State had
appropriated and paid $3.8 million, representing
the first installment to the Foundation, pursuant
to the terms of the Cooperative Endeavor
Agreement.
The Company's estimated income tax credit
carry forward was $5.3 million at December 31,
1997. This amount, plus $3.0 million of
alternative minimum tax credits will be used to
reduce the income tax liabilities for 1998 and
later years. The $1.95 million of cash paid in
1997 for income taxes reflects payments for
alternative minimum tax. The income tax credit
carry forward will expire in years 2000 through
2012. The alternative minimum tax credits may be
carried forward indefinitely.
<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 Annual Report
on Form 10-K 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, 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-K are expressly
qualified in their entirety by the cautionary
statements in this paragraph.
Item 8. Financial Statements and Supplementary
Data.
See next consecutive numbered page.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Avondale Industries, Inc.:
We have audited the accompanying consolidated
balance sheets of Avondale Industries, Inc. and
subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of operations,
shareholders' equity, and cash flows for each of
the three years in the period ended December 31,
1997. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about whether
the financial statements are free of material
misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit
also includes assessing the accounting principles
used and significant estimates made by management,
as well as evaluating the overall financial
statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial
statements present fairly, in all material
respects, the financial position of Avondale
Industries, Inc. and subsidiaries at December 31,
1997 and 1996, and the results of their operations
and their cash flows for each of the three years
in the period ended December 31, 1997 in
conformity with generally accepted accounting
principles.
/S/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 20, 1998
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
December 31,
1997 1996
ASSETS -------- --------
------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 81,752 $ 48,944
Receivables (Note 2) 101,746 119,139
Inventories (Note 3) 23,226 21,785
Deferred tax assets (Note 6) 23,253 30,157
Prepaid expenses and other current assets 2,891 2,465
-------- --------
Total current assets 232,868 222,490
-------- --------
Property, Plant and Equipment (Note 4):
Land 7,843 7,984
Buildings and improvements 55,917 55,251
Machinery and equipment 200,777 191,376
-------- --------
Total 264,537 254,611
Less accumulated depreciation (134,481) (127,009)
-------- --------
Property, plant and equipment - net 130,056 127,602
-------- --------
Goodwill - net 5,357 8,073
Other assets 7,334 4,707
-------- --------
TOTAL ASSETS $375,615 $362,872
======== ========
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current maturities of long-term debt (Note 4) $ 3,047 $ 4,957
Accounts payable 59,548 73,589
Accrued employee compensation 13,198 11,919
Other 11,851 12,550
-------- --------
Total current liabilities 87,644 103,015
Long-term debt (Note 4) 51,819 54,866
Deferred income taxes (Note 6) 13,400 10,300
Other liabilities and deferred credits 13,775 12,838
-------- --------
Total liabilities 166,638 181,019
-------- --------
Commitments and Contingencies (Notes 5 and 9)
Shareholders' equity (Note 8):
Common stock, $1.00 par value;
authorized - 30,000,000 shares;
issued - 15,956,227 shares in 1997
and 15,927,191 shares in 1996 15,956 15,927
Additional paid-in capital 374,173 373,911
Accumulated deficit (169,296) (196,129)
-------- --------
Total 220,833 193,709
Treasury stock (1,463,016 shares in 1997
and 1996) at cost (11,856) (11,856)
-------- --------
Total shareholders' equity 208,977 181,853
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $375,615 $362,872
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Years ended December 31,
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales (Note 2) $613,993 $624,929 $576,308
Cost of sales 538,515 543,102 517,637
-------- -------- --------
Gross profit 75,478 81,827 58,671
Selling, general and administrative expenses 31,885 45,037 32,123
-------- -------- --------
Income from operations 43,593 36,790 26,548
Interest expense (4,804) (4,986) (4,842)
Other - net 3,294 2,691 2,074
-------- -------- --------
Income before income taxes 42,083 34,495 23,780
Income tax provision (benefit) (Note 6) 15,250 3,700 (4,400)
-------- -------- --------
NET INCOME $ 26,833 $ 30,795 $ 28,180
======== ======== ========
Income per share of common stock (Note 8)
INCOME PER SHARE OF COMMON STOCK-BASIC $ 1.85 $ 2.13 $ 1.95
======== ======== ========
INCOME PER SHARE OF COMMON STOCK-DILUTED $ 1.85 $ 2.13 $ 1.95
======== ======== ========
Weighted average number of shares outstanding - basic 14,491 14,464 14,464
======== ======== ========
Weighted average number of shares outstanding - diluted 14,524 14,479 14,474
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 1995, 1996 and 1997
(in thousands)
<TABLE>
<CAPTION>
Additional Total
Common Paid-In Accumulated Treasury Shareholders'
Stock Capital Deficit Stock Equity
-------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 $ 15,927 $ 373,911 $ (255,104) $ (11,856) $ 122,878
Net income 28,180 28,180
-------- --------- ---------- --------- ---------
BALANCE, DECEMBER 31, 1995 15,927 373,911 (226,924) (11,856) 151,058
Net Income 30,795 30,795
-------- --------- ---------- --------- ---------
BALANCE, DECEMBER 31, 1996 15,927 373,911 (196,129) (11,856) 181,853
Net Income 26,833 26,833
Other 29 262 291
-------- --------- ---------- --------- ---------
BALANCE, DECEMBER 31, 1997 $ 15,956 374,173 $ (169,296) $ (11,856) $ 208,977
======== ========= ========== ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years ended December 31,
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 26,833 $ 30,795 $ 28,180
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,459 10,809 9,819
Deferred income taxes 12,198 3,700 (5,900)
(Gain) loss on sale of assets 598 3,135 (813)
Change in operating assets and liabilities,
net of dispositions:
Receivables 17,393 (25,955) (9,674)
Inventories (1,441) (6,496) 296
Prepaid expenses and other assets (3,053) (150) 2,952
Accounts payable (14,041) 8,072 4,600
Accrued employee compensation and other liabilities 1,517 3,660 (3,470)
Other - net 385 (869) 2,005
-------- -------- --------
Net cash provided by operating activities 50,848 26,701 27,995
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (13,593) (13,830) (21,290)
Proceeds from sale of assets 510 2,998 3,248
Other - net -- 383 1,243
-------- -------- --------
Net cash used for investing activities (13,083) (10,449) (16,799)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term borrowings (4,957) (5,832) (5,866)
Proceeds from issuance of long-term borrowings (Note 4) -- -- 17,780
-------- -------- --------
Net cash (used for) provided by financing activities (4,957) (5,832) 11,914
-------- -------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 32,808 10,420 23,110
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 48,944 38,524 15,414
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 81,752 $ 48,944 $ 38,524
======== ======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the year for:
Interest (net of amounts capitalized) $ 5,093 $ 5,207 $ 5,255
======== ======== ========
Income taxes paid $ 1,950 $ 1,760 $ 945
======== ======== ========
Noncash investing and financing activities:
Note issued in litigation settlement $ 2,000
========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts
of Avondale Industries, Inc. and its wholly-owned subsidiaries
("Avondale" or the "Company") which are primarily engaged in
marine construction and repair. All significant intercompany
transactions have been eliminated.
Revenue Recognition
Profits on long-term contracts are generally recorded on the
basis of the Company's estimates of the percentage of completion
of individual contracts, commencing when progress reaches a point
where contract performance is sufficient to estimate final
results with reasonable accuracy. Estimates of the percentage of
completion are based on direct labor charges. Revisions in cost
and profit estimates during the course of the work are reflected
in the accounting period in which the facts requiring the
revisions become known. Amounts in excess of agreed upon contract
price for customer caused delays, disruptions, unapproved change
orders or other causes of additional contract costs are
recognized in contract value if it is probable that the claim for
such amounts will result in additional revenue and the amount can
be reasonably estimated. Profits on long-term cost-plus-award
fee contracts are recognized as the aggregate of allowable costs
reimbursed and award fees earned exceed total costs incurred.
Provisions for estimated losses, if any, on uncompleted contracts
are made in the period in which such losses are determined.
Statements of Cash Flows
For purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
<PAGE>
Fair Value Disclosures
Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments", requires
the disclosure of the fair value of all significant financial
instruments. The estimated fair value amounts have been developed
by the Company based on available market information and
appropriate valuation methodologies. However, considerable
judgment is required in developing the estimates of fair value.
Therefore, such estimates are not necessarily indicative of the
amounts that could be realized in a current market exchange.
After such analysis, management believes that the carrying values
of the Company's significant financial instruments including
cash and cash equivalents, short-term investments, receivables,
payables and certain accrued liabilities approximate fair values.
The fair value of the Company's long-term debt at December 31,
1997 and 1996, based upon available market information,
approximated $60.9 million and $65.5 million, respectively.
Inventories
Inventories are recorded principally at the lower of cost
(average or first-in, first-out) or market.
Property, Plant and Equipment
Property, plant and equipment is stated at cost.
Depreciation of property, plant and equipment is computed in the
financial statements on the straight-line method based on
estimates of useful lives as follows:
<TABLE>
<CAPTION>
Type Period
-------------------------- -----------
<S> <C>
Machinery and equipment 3-20 years
Buildings and improvements 15-40 years
</TABLE>
Accelerated depreciation methods are generally used for
income tax purposes. Maintenance and repairs are charged directly
to expense as incurred. Additions, improvements and major
renewals are capitalized. Interest costs for the construction of
certain long-term assets are capitalized as part of the cost of
property, plant and equipment and amortized over the related
assets' useful lives. Interest costs capitalized in fiscal 1997,
1996 and 1995 approximated $519,000, $759,000 and $1.2 million,
respectively.
<PAGE>
Goodwill
Goodwill represents the excess of the purchase price over
the underlying fair value of the net assets of acquired
businesses and is being amortized on a straight-line basis over
its estimated useful life of twenty years. Management evaluates
the continuing value and future benefits of goodwill, including
the appropriateness of related amortization periods, on a current
basis.
The recoverability of goodwill is assessed by determining
whether the unamortized balance can be recovered through
projected cash flows and operating results over its remaining
life. Any impairment of the asset is recognized when it is
probable that such future undiscounted cash flows will be less
than the carrying value of the asset.
Accumulated amortization at December 31, 1997 and 1996
amounted to $75.5 million and $75.0 million, respectively.
Income Taxes
The Company and its subsidiaries file a consolidated Federal
income tax return. Deferred income taxes are provided in the
financial statements, where necessary, to account for the tax
effects of temporary differences resulting from reporting
revenues and expenses for income tax purposes in periods
different from those used for financial reporting purposes. The
temporary differences result principally from the use of
different methods of accounting for depreciation, long-term
contracts and certain employee benefits.
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123") encourages
but does not require companies to record compensation cost for
stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related Interpretations and has adopted
the disclosure-only provisions of SFAS 123. Accordingly,
compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the
date of the grant over the amount an employee must pay to acquire
the stock. See Note 8.
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
New Accounting Standards
During 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130 "Reporting
Comprehensive Income" ("SFAS 130") and Statement of Financial
Accounting Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 130
provides guidance for the presentation and display of
comprehensive income. SFAS 131 establishes standards for
disclosure of operating segments, products, services, geographic
areas and major customers. The Company is required to adopt both
standards for fiscal 1998. Management believes that the
implementation of SFAS 130 and SFAS 131 will not have a material
impact on the presentation of the Company's financial statements
but may require additional disclosure.
Reclassifications
Certain reclassifications of prior year amounts have been
made to conform to the current year presentation. These
reclassifications were made for comparative purposes only and
have no effect on net income as previously reported.
<PAGE>
2. Receivables
Receivables consisted of the following at December 31, 1997 and
1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Long-term contracts:
U.S. Government:
Amounts billed $ 967 $ 859
Unbilled costs, including retentions, and
estimated profits on contracts in progress 80,041 90,325
-------- --------
Total 81,008 91,184
Commercial:
Amounts billed 4,180 7,274
Unbilled costs, including retentions, and
estimated profits on contracts in progress 8,543 14,681
-------- --------
Total from long-term contracts 93,731 113,139
Trade and other current receivables 8,015 6,000
-------- --------
Total $101,746 $119,139
======== ========
</TABLE>
Unbilled costs, including retentions, and estimated profits
on contracts in progress were not billable to customers at the
balance sheet dates under terms of the respective contracts. Of
the unbilled costs and estimated profits at December 31, 1997,
approximately $20.2 million is expected to be collected in 1998
with the balance to be collected in subsequent years as contract
deliveries are made and warranty periods expire. Net sales to the
United States Government in 1997, 1996, and 1995 account for
approximately 83%, 77% and 74% of the net sales, respectively.
<PAGE>
Costs and estimated profits (losses) on contracts in
progress at December 31, 1997 and 1996 were as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Costs incurred on contracts in progress $2,786,024 $3,026,965
Estimated profits recognized on contracts in progress 135,701 92,080
Estimated losses recognized on contracts in progress (34,323) (58,600)
---------- ----------
Total 2,887,402 3,060,445
Less billings to date (2,801,829) (2,956,710)
---------- ----------
Net value of contracts in progress $ 85,573 $ 103,735
========== ==========
</TABLE>
Net value of contracts in progress was comprised of the following
amounts (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Unbilled costs and estimated profits
on contracts in progress
(included in receivables) $ 88,584 $105,006
Billings in excess of costs and estimated
profits on contracts in progress
(included in accounts payable) (3,011) (1,271)
-------- --------
Total $ 85,573 $103,735
======== ========
</TABLE>
The estimated losses on contracts in progress of $34.3
million and $58.6 million included in the net value of contracts
in progress at December 31, 1997 and 1996, respectively, are
related to certain contracts which were delivered through 1997.
During 1997 and 1996, the Company recorded increases of $5.8
million and $28.5 million, respectively in the reserves related
to the contracts to retrofit the four single-hulled forebodies
with new double hulls and to construct the series of river hopper
barges. The losses resulted primarily from increases in the
estimated labor needed to complete these contracts.
Additionally, in 1996, the Company recorded a reduction of $4.4
million of a previously recognized loss due primarily to a
revision of the total estimated contract cost as it neared
completion.
<PAGE>
3. Inventories
Inventories consisted of the following at December 31, 1997 and
1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Goods held for sale $ 14,915 $ 13,184
Materials and supplies 8,311 8,601
-------- --------
Total $ 23,226 $ 21,785
======== ========
</TABLE>
4. Financing Arrangements
Revolving Credit Agreement
The Company has available an unsecured revolving credit
agreement ("the agreement") with various financial institutions.
The agreement provides for an available line of credit equal to
the lesser of $65 million or a specified borrowing base with a
term expiring in April 2000. A committment fee based on the
average daily amount of the unused line of credit is payable on a
quarterly basis. Borrowings under the agreement bear interest at
fluctuating rates. The agreement (1) requires the Company to meet
certain financial covenants (relating to net worth, debt
coverage, interest coverage and backlog), (2) imposes limitations
and restrictions related to annual capital expenditures, the
incurrence of new indebtedness, the payment of dividends and the
repurchase of common stock and (3) requires compliance with the
terms and conditions of all other debt agreements. The agreement
also provides the Company with the right to require the bank
group to post letters of credit on the Company's behalf in
support of its operations which letters of credit reduce the
remaining available credit (see Note 9). There were no
borrowings in 1997 and 1996 under the revolving credit agreement.
<PAGE>
Long-Term Debt
Long-term debt consisted of the following at December 31, 1997
and 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Industrial revenue bonds $ 35,360 $ 36,250
Mortgage bonds, interest at 8.16%, payable
in semi-annual principal installments to 2010 15,408 16,594
Mortgage bonds,interest at 7.86%, payable in
semi-annual principal installments to 2000 2,328 3,104
General obligation industrial bonds, interest at
7%, payable in annual installments to 2008 1,770 1,875
Other long-term debt -- 2,000
-------- --------
Total 54,866 59,823
Less current maturities of long-term debt (3,047) (4,957)
-------- --------
Long-term debt $ 51,819 $ 54,866
======== ========
</TABLE>
The $35.4 million of industrial revenue bonds represent
Series 1994 bonds which consist of (1) $5.5 million bearing
interest at 8.25% and payable in annual principal installments
ranging from $600,000 in 1998 to final payment of $985,000 in 2004
and (2) $29.9 million bearing interest at 8.50% and payable in
annual principal installments ranging from $370,000 in 1998 to a
final payment of $3.8 million in 2014. The Series 1994 bonds are
secured by certain property and equipment which had a net book
value of approximately $20.4 million at December 31, 1997. Among
other things, the terms and conditions of the Series 1994 bonds
(1) require the Company to meet certain financial covenants
(relating to net worth, debt and debt service coverage and
liquidity), (2) impose limitations and restrictions related to the
incurrence of new indebtedness and the payment of dividends, and
(3) require compliance with the terms and conditions of other
specified debt agreements.
The $15.4 million of mortgage bonds represent the remaining
balance of $17.8 million of bonds issued in February 1995 as part
of the financing of the Company's approximately $20 million plant
modernization effort. The bonds were issued utilizing a U.S.
Government guarantee under Title XI of the Merchant Marine Act,
1936, as amended ("Title XI"), bear interest at the annual rate of
8.16% and are payable in equal semi-annual principal payments of
$593,000 with the final payment in 2010. The terms of the
financing include various restrictive covenants including
provisions relating to the maintenance of working capital,
incurrence of additional indebtedness, and the maintenance of a
minimum net worth. The plant modernization assets having a net
book value of approximately $19.5 million at December 31, 1997
have been pledged as collateral for these mortgage bonds.
<PAGE>
The $2.3 million of mortgage bonds at December 31, 1997
represent the balance of an earlier mortgage bond issue which also
utilized a Title XI guarantee. The terms of the financing provide
for an annual interest rate of 7.86% and contain various
restrictive covenants similar to those for the $17.8 million of
Title XI mortgage bonds discussed above. These bonds are payable
in equal semi-annual principal payments of $388,000 and mature in
the year 2000. Property, plant and equipment having a net book
value of approximately $12.5 million at December 31, 1997 has been
pledged as collateral for these mortgage bonds.
Annual maturities of long-term debt for each of the next five
years and in total thereafter follow (in thousands):
<TABLE>
<S> <C>
1998 $ 3,047
1999 3,137
2000 3,237
2001 2,571
2002 2,686
Thereafter 40,188
--------
Total $ 54,866
========
</TABLE>
5. Leases
The Company leases equipment and real property in the normal
course of business under various operating leases, including
non-cancelable and month-to-month agreements. Certain of the
leases provide for renewal privileges with escalation of the lease
payments based on changes in selected economic indices.
Rental expense for operating leases was $6.1 million, $9.0
million and $6.3 million in 1997, 1996 and 1995, respectively.
Minimum rental commitments under leases having an initial or
remaining noncancelable term in excess of twelve months follow (in
thousands):
<TABLE>
<S> <C>
1998 $ 3,111
1999 2,191
2000 1,118
2001 94
2002 --
--------
Total $ 6,514
========
</TABLE>
<PAGE>
6. Income Taxes
Income taxes are accounted for under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109") which requires the use of the asset and liability approach
for financial accounting and reporting for income taxes.
The Company has provided for Federal income taxes as
follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Current provision $ 3,052 $ 1,100 $ 1,500
Deferred provision 12,198 11,600 7,100
Deferred benefit attributable to the realization
of net operating loss carryforwards -- (9,000) (13,000)
-------- -------- --------
Provision (benefit) for income taxes $ 15,250 $ 3,700 $ (4,400)
======== ======== ========
</TABLE>
The provision (benefit) for income taxes varied from
the Federal statutory income tax rate due to the following
(dollars in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1997 1996 1995
Amount % Amount % Amount %
-------- --- -------- --- -------- ---
<S> <C> <C> <C> <C> <S> <C>
Taxes at Federal statutory rate $ 14,729 35 $ 12,073 35 $ 8,323 35
Net operating loss
carry forwards utilized -- -- (9,000) (26) (13,000) (55)
Other 521 1 627 2 277 1
-------- --- -------- --- -------- ---
Total $ 15,250 36 $ 3,700 11 $ (4,400) (19)
======== === ======== === ======== ===
</TABLE>
At December 31, 1997 the Company has available for Federal
income tax purposes a tax credit carry forward of $5.3 million.
The income tax credit carry forward expires in the years 2000
through 2012. Additionally, the Company has $3.0 million of
alternative minimum tax credits which may be carried forward
indefinitely.
<PAGE>
Deferred income taxes represent the net tax effects of (a)
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and their tax bases,
and (b) operating loss and tax credit carry forwards. The tax
effects of significant items comprising the Company's net deferred
tax balances at December 31, 1997 and 1996 are as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Deferred Tax Liabilities:
Differences between book
and tax basis of property, plant and equipment $ 25,566 $ 24,753
Other 818 976
-------- --------
Total 26,384 25,729
-------- --------
Deferred Tax Assets:
Reserves not currently deductible 3,795 4,417
Long-term contracts 18,710 18,844
Other temporary differences 6,126 4,761
Operating loss carry forwards -- 10,211
Tax credit carry forwards 8,289 8,036
-------- --------
36,920 46,269
Valuation Allowance (683) (683)
-------- --------
Total 36,237 45,586
-------- --------
Net deferred tax assets $ 9,853 $ 19,857
======== ========
</TABLE>
The net deferred tax assets are included in the following
balance sheet captions (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Current deferred tax assets $ 23,253 $ 30,157
Non-current deferred income tax liabilities (13,400) (10,300)
-------- --------
Net deferred tax assets $ 9,853 $ 19,857
======== ========
</TABLE>
<PAGE>
7. Retirement Plans
ESOP
In 1985, the Company established the Avondale Industries, Inc.
Employee Stock Ownership Plan (the "ESOP"). The ESOP is a
qualified, defined contribution plan designed primarily to invest
in equity securities of the Company and is specifically authorized
to leverage its acquisition of these securities. The ESOP is
intended to cover all employees of the Company upon completion of
one year of service, except certain employees who are covered by
collective bargaining agreements, unless, by the terms of such
agreements, the employees are to participate in the ESOP. The ESOP
owned approximately 2,835,000 and 2,980,000 shares of the
Company's Common Stock at December 31, 1997 and 1996,
respectively. In February 1996, the ESOP sold 3,581,100 shares of
the Company's common stock. The Company did not receive any of
the proceeds from this public offering.
Pension Plan
The Company also sponsors a defined benefit pension plan, which
is coordinated with the benefits payable to participating
employees in the ESOP. At retirement, a person's benefit is based
upon the greater of (i) the market value of the shares of common
stock allocated to the participant's ESOP account or (ii) the
benefit calculated under the pension plan formula. The pension
plan formula benefits are based on a defined dollar amount
multiplied by a fraction related to a participant's credited
service.
The net periodic pension cost for the years ended December 31,
1997, 1996 and 1995 included the following components (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service costs of the current period $ 2,800 $ 3,700 $ 3,300
Interest cost on the projected benefit obligation 3,500 3,700 4,200
Actual return on plan assets (5,100) (4,600) (3,600)
Net amortization of transition liability and
deferred investment (loss) gain (900) (400) 300
------- ------- -------
Net periodic pension cost $ 300 $ 2,400 $ 4,200
======= ======= =======
</TABLE>
<PAGE>
The following table sets forth the pension plan's estimated
funded status as of December 31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Projected benefit obligation:
Vested benefits $ 40,800 $ 38,800
Nonvested benefits 500 400
-------- --------
Accumulated benefit obligation 41,300 39,200
Effect of projected future compensation levels 4,700 2,600
-------- --------
Projected benefit obligation 46,000 41,800
Plan assets at market value 66,800 58,800
-------- --------
Plan assets in excess of projected benefit obligation 20,800 17,000
Unrecognized net transition obligation 100 100
Unrecognized prior service costs (1,800) (2,100)
Unrecognized net gain (18,900) (14,500)
-------- --------
Prepaid pension costs $ 200 $ 500
======== ========
</TABLE>
The Company's funding policy is to contribute each year an
amount equal to the minimum required contribution under the
Employee Retirement Income Security Act of 1974. However, the
contribution for any year will not be greater than the maximum
tax deductible contribution. Plan assets consist primarily of
United States Government and Agency securities, corporate stocks
and corporate bonds and notes. The weighted-average discount
rate used in determining the actuarial present value of the
projected benefit obligation was 7.25% for 1997 and 7.75% for
1996. The rate of increase in future compensation levels used
was 4.0% for 1997 and 1996 and thereafter. The expected long-term
rate of return on the assets was 9.0% for 1997 and 1996.
401(k) Savings Plan
Beginning in 1996, the Company sponsored a 401(k) Savings
Plan. Participation in this defined contribution plan is available
to substantially all employees with one year of credited service
to the Company. The Company may elect to make contributions to the
Plan; however, the timing and amount of such contributions is at
the discretion of the Company's Board of Directors. The Company
paid approximately $500,000 in matching contributions for the 1997
Plan Year. There was no similar contribution in 1996.
<PAGE>
8. Shareholders' Equity
Preferred Stock
The Company is authorized to issue 5,000,000 shares of
preferred stock, $1.00 par value, none of which was outstanding at
December 31, 1997 and 1996.
Earnings Per Share
In accordance with Statement of Financial Accounting
Standards Number 128, "Earnings Per Share" ("SFAS 128"), the
Company changed its method of calculating earnings per share
("EPS") during the fourth quarter of 1997. The number of weighted
average shares outstanding for "basic" EPS was 14,490,644,
14,464,175 and 14,464,175 for the years ended December 31, 1997,
1996 and 1995, respectively. The number of weighted average
shares outstanding for "diluted" EPS was 14,523,838, 14,479,364
and 14,473,613 for the years ended December 31, 1997, 1996 and
1995, respectively. In accordance with the disclosure
requirements of SFAS 128, the reconciliation of the numerator and
denominator for calculating earnings per share is as follows (in
thousands except per share data):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------------
1997 1996 1995
--------------------------------- --------------------------------- ----------------------------------
Income Shares Per Share Income Shares Per Share Income Shares Per Share
(Numerator)(Denominator) Amount (Numerator)(Denominator) Amount (Numerator)(Denominator) Amount
---------- ------------ --------- ---------- ------------ -------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to
common shareholders $26,833 14,491 $ 1.85 $30,795 14,464 $ 2.13 $28,180 14,464 $ 1.95
====== ====== ======
EFFECT OF DILUTIVE
SECURITIES
Stock appreciation
rights/options 33 15 10
------ ------ ------
DILUTED EPS
Income available to
common shareholders
plus assumed
conversions $26,833 14,524 $ 1.85 $30,795 14,479 $ 2.13 $28,180 14,474 $ 1.95
======= ====== ====== ======= ====== ====== ======= ====== ======
</TABLE>
<PAGE>
Stock-Based Compensation Plans
At December 31, 1997, the Company had two stock-based
compensation plans which are described below. The Company applies
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25") and related Interpretations in
accounting for its plans. Accordingly, no compensation expense is
recognized for its stock-based compensation plans other than for
performance-based awards as the exercise price of all stock
options granted thereunder is equal to the fair value of the
Company's common stock at the date of grant. Since no options
were granted under the Company's stock-based compensation plans
during 1996, there would have been no effect on net income and
income per common share. Had 1997 compensation costs for the
Company's stock-based compensation plans been determined based
upon the fair value at the grant date for awards under these plans
consistent with the methodology presented under Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" ("SFAS 123"), the Company's net income and
earnings per share would have been reduced to the pro forma
amounts indicated below (in thousands, except per share data):
<TABLE>
<S> <C> <C>
Net Income As reported $26,833
Pro forma $25,413
Earnings per share-basic As reported $1.85
Pro forma $1.75
Earnings per share-diluted As reported $1.85
Pro forma $1.75
</TABLE>
The weighted average fair value of the options granted during
1997 was $15.4542. The fair value of each option granted in 1997
is estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions: no dividend yield;
expected volatility of 85.0581%; risk-free interest rate of
5.772%; an expected life of 5.86 years.
<PAGE>
During 1997, the Board of Directors adopted and the
shareholders approved the Avondale Industries, Inc. 1997 Stock
Incentive Plan (the "1997 Plan") which provides for the award of
various economic incentives to key employees and directors.
Incentives granted under the 1997 Plan may be in the form of stock
options, stock appreciation rights, restricted stock and
performance shares or any combination thereof. A total of
1,430,000 shares of common stock of the Company are reserved for
issuance under the 1997 Plan. Incentives granted under the Plan
have a maximum term of ten years and are exercisable, subject to
various terms and conditions as set forth by the Compensation
Committee of the Board of Directors. Transactions of the 1997
Plan during 1997 were as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------- -------------------------------
Weighted Average
Remaining
Number Contractual Life Weighted Average Number Weighted Average
Outstanding (Years) Exercise Price Exercisable Exercise Price
----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Beginning of year -- -- -- -- --
Granted 274,904 9.47 $ 20.723 90,219 $ 22.940
Exercised -- -- -- -- --
Forfeited/expired -- -- -- -- --
--------- ------
End of year 274,904 9.47 $ 20.723 90,219 $ 22.940
========= ======
Available for grant,
end of year 1,155,096
=========
</TABLE>
The range of exercise prices for options outstanding at
December 31, 1997, under the 1997 Plan was $19.625 to $22.940. Of
the 274,904 options granted under the Plan in 1997, 184,685
options vest 25% on the second, third and fourth anniversary date
of the grant, while the remaining 90,219 options vested on the
grant date.
The Company's Performance Share Plan provided for the award
of shares of Common Stock to senior executives of the Company, as
designated by a committee of the Board of Directors, which were
earned upon the attainment of specified performance objectives.
These performance objectives have been attained and therefore no
further awards will be made.
<PAGE>
A summary of the status of the Performance Share Plan as of
December 31, 1997, 1996 and 1995 and changes during the three
years ended December 31, 1997 are presented below:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ----------------- -------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ -------- ------ -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding
and exercisable,
January 1 226,404 $17.718 240,971 $17.463 279,155 $15.885
Forfeited/expired -- -- 1,360 19.000 2,280 15.965
Exercised 221,508 17.537 13,207 12.940 35,904 5.285
------- ------- -------
Options outstanding
and exercisable,
December 31 4,896 $16.994 226,404 $17.718 240,971 $17.463
======= ======= =======
The range of exercise prices for options outstanding at
December 31, 1997 under the Performance Share Plan (which contain a
stock appreciation right feature) was $3.875 to $19.00 and the
weighted-average remaining contractual life for such options was
1.77 years.
The Company provided a Stock Appreciation Plan for key
management employees which contains a stock appreciation right
feature. As this plan has expired, no further award will be made.
<PAGE>
There were no transactions relating to this plan during the
years ended December 31, 1997 and 1996. A summary of changes in the
Stock Appreciation Plan for the year ended December 31, 1995 is
presented below:
</TABLE>
<TABLE>
<CAPTION>
1995
-----------------------
Weighted
Average
Exercise
Shares Price
-------- ---------
<S> <C> <C>
Options outstanding, January 1 40,000 $ 11.250
Forfeited/expired (40,000) $ 11.250
-------
Options outstanding, December 31 -- $ --
=======
</TABLE>
There were no options exercisable at December 31, 1997, 1996
and 1995. There were no shares available for grant at December 31,
1997 and 1996, and 437,000 shares were available for grant at
December 31, 1995. Under the terms of the plan, options expired
on March 31, 1995.
Compensation expense for the years ended December 31, 1997,
1996 and 1995 was not material.
<PAGE>
9. Commitments and Contingencies
Litigation
In January 1986, the Louisiana Department of Environmental
Quality ("DEQ") advised the Company that it could be a potentially
responsible party ("PRP") with respect to an oil reclamation site
operated by an unaffiliated company in Walker, Louisiana. To
date, the Company and certain of the other PRPs (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 December 31, 1997 such costs totaled
approximately $19.0 million, of which the Company has funded
approximately $4.0 million. Since 1998, 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
December 31, 1997, 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.
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% for any
additional costs.
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.
<PAGE>
In 1996, the Company settled a class action lawsuit involving
alleged personal injury and property damage arising from the
Walker, La. reclamation site. Under the terms of the settlement,
the Company paid approximately $6.0 million into a settlement
fund. The Company could also have been responsible for payment to
the plaintiffs of up to an additional $6.0 million (plus interest
at 8% per annum) if the plaintiffs were unsuccessful in collecting
certain claims under Avondale's insurance policies that were
assigned to the plaintiff class under the settlement agreement.
During the first quarter of 1997, the parties reached a settlement
with the Company's insurers which does not require any further
contribution by the Company.
In addition to the above, the Company is also named as a
defendant in other lawsuits and proceedings arising in the
ordinary course of business, some of which involve substantial
claims.
The Company has established accruals as appropriate for
certain of the matters discussed above. While the ultimate outcome
of lawsuits and proceedings against the Company cannot be
predicted with certainty, management believes, based on current
facts and circumstances and after review with counsel, that, the
eventual resolution of these matters is not expected to have a
material adverse effect on the Company's financial statements.
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 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 December 31, 1997, the Foundation had incurred $15.3 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.
<PAGE>
Letters of Credit
In the normal course of its business activities, the Company
is required to provide letters of credit to secure the payment of
workers' compensation 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
December 31, 1997 and 1996.
10. Quarterly Results (Unaudited)
Consolidated operating results for the four quarters of 1997 and
1996 were as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
1997 1996
------------------------------------------ ------------------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $ 139,513 $ 145,792 $ 159,217 $ 169,471 $ 156,496 $ 152,577 $ 148,384 $ 167,472
Gross Profit 18,633 19,501 19,670 17,674 17,286 18,166 19,048 27,327
Income from Operations 10,299 10,866 10,950 11,478 8,253 8,874 9,237 10,426
Net Income 6,291 6,380 6,920 7,242 4,736 14,290 5,612 6,157
Net Income per Share
- Basic $ 0.43 $ 0.44 $ 0.48 $ 0.50 $ 0.33 $ 0.99 $ 0.39 $ 0.43
========= ========= ========= ========= ========= ========= ========= =========
Net Income per Share
- Diluted $ 0.43 $ 0.44 $ 0.48 $ 0.50 $ 0.33 $ 0.99 $ 0.39 $ 0.43
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information concerning the Company's directors and officers called for
by this item will be included in the Company's definitive Proxy Statement
prepared in connection with the 1998 Annual Meeting of shareholders and is
incorporated herein by reference.
Item 11. Executive Compensation.
Information concerning the executive compensation called for by this
item will be included in the Company's definitive Proxy Statement prepared
in connection with the 1998 Annual Meeting of shareholders and is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information concerning security ownership of certain beneficial owners
and management called for by this item will be included in the Company's
definitive Proxy Statement prepared in connection with the 1998 Annual
Meeting of shareholders and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
Information concerning certain relationships and related transactions
called for by this item will be included in the Company's definitive Proxy
Statement prepared in connection with the 1998 Annual Meeting of
shareholders and is incorporated herein by reference.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements
Independent Auditors' Report.
Consolidated Balance Sheets as of December 31, 1997 and 1996.
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995.
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1995, 1996 and 1997.
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
(a)(2) Financial Statement Schedules
Not applicable
(a)(3) Exhibits
3.1 Articles of Incorporation of the Company.(1)
3.2 By-laws of the Company, as amended on November 3, 1997.
4.1 See Exhibits 3.1 and 3.2 for provisions of the Company's
Articles of Incorporation and By-laws defining the rights of
holders of Common Stock.
4.2 Specimen of Common Stock Certificate.(2)
<PAGE>
4.3 Instruments Relating to Title XI Vessel Financing
(a) Trust Indenture dated October 21, 1975, by and between
the Company and Manufacturers Hanover Trust Company, as
Indenture Trustee, relating to $19,012,000 of United
States Government Guaranteed Ship Financing Bonds, as
amended by an Assumption Agreement and Supplemental
Indenture dated September 16, 1985(3), as further
amended by a Master Assumption Agreement, Supplemental
Indenture No. 2 and Amendment to Title XI Finance
Agreements dated March 13, 1991 (the "Master Assumption
Agreement"),(4) which has been further amended by a
Third Supplemental Indenture dated February 9, 1995.(5)
(b) Title XI Reserve Fund and Financial Agreement dated
October 21, 1975, by and between the Company and the
United States of America, as amended by Amendments Nos.
1 and 2(3), as further amended by the Master Assumption
Agreement (filed as Exhibit 4.3(a) hereto). The
Reserve Fund and Financial Agreement has been further
amended by Amendment No. 5 dated February 9, 1995(5)
and Amendment No. 6 dated August 22, 1996.(6)
(c) Form of 8.80% Sinking Fund Bond, Series A (included in
Exhibit 4.3(a)).
(d) Form of 9.30% Sinking Fund Bond, Series B (included in
Exhibit 4.3(a)).
(e) Form of 7.86% Sinking Bond Fund, 2000 Series.(5)
4.4 Instruments relating to AEI's and the Company's obligations
arising in connection with the issuance of General Obligation
Bonds by Harrison County, Mississippi.
(a) Loan Agreement dated April 1, 1991 between Harrison
County, Mississippi and AEI, pursuant to which AEI is
obligated to repay $3 million in order to fund the
County's bond payment obligations.(2)
(b) Guaranty Agreement dated April 1, 1991 between the
Company, Harrison County, Mississippi and the State of
Mississippi.(2)
<PAGE>
4.5 Instruments relating to the Company's $36.25 million
Industrial Revenue Refunding Bond Series 1994 Financing.
(a) Refunding Agreement dated April 1, 1994 between the
Company and the Board of Commissioners of the Port of
New Orleans, Exhibit A and First Preferred Vessel
Mortgage thereto.(7)
(b) Trust Indenture dated April 1, 1994 between the Board
of Commissioners of the Port of New Orleans and First
National Bank of Commerce.(7)
(c) Form of Industrial Revenue Refunding Bond Series
1994.(7)
4.6 Instruments Relating to February 1995 Title XI Vessel
Financing.
(a) Trust Indenture dated February 9, 1995 by and between
the Company and Chemical Bank, as Indenture Trustee,
relating to $17,780,000.00 of United States Government
Guaranteed Ship Financing Bonds.(5)
(b) Title XI Reserve Fund and Financial Agreement dated
February 9, 1995, by and between the Company and the
United States of America,(5) as amended by Amendment
No. 1 dated August 22, 1996.(6)
(c) Form of 8.16% Sinking Bond Fund, 2010 Series.(5)
10.1 Contracts With The United States Navy
(a) Agreement dated June 28, 1985, by and between the
Company and the United States of America (Contract No.
N00024-85-C-2131) for the construction of T-AO 187
Class Oiler Ships and various modifications thereto(3)
including modification P00005 thereto entered into on
June 16, 1988, and the related Acknowledgment of
Transfer and Transfer Agreement relating to the
Company's agreement to assume certain of the rights and
obligations to build two such vessels under an
Agreement dated May 6, 1985, by and between
Pennsylvania Shipbuilding Co. and the United States of
America.(8)
(b) Agreement dated June 20, 1988, by and between the
Company and the United States of America (Contract No.
N00024-88-C-2050) for the construction of T-AO 187
Class Oiler Ships and various modifications thereto(8)
and modification P00036 thereto.(4)
<PAGE>
(c) Agreement dated November 21, 1983, by and between the
Company and the United States of America (Contract No.
N00024-84-C-2027) for the construction of LSD-41 Class
Landing Ship Dock vessels and various modifications
thereto.(3)
(d) Agreement dated June 17, 1988, by and between the
Company and the United States of America (Contract No.
N00024-88-C-2048) for the construction of LSD-41 Class
Landing Ship Dock vessels and modification nos. P00001
and P00002(8), modification nos. P00008 and P00013
thereto(2) and modification P00029 thereto.(4)
(e) Agreement dated July 15, 1988, by and between the
Company and the United States of America (Contract No.
N00024-88-C-2221) for the conversion of AO-177 Class
Oilers to AO-177 Jumbo Class and various modifications
thereto.(8)
(f) Agreement dated December 13, 1988, by and between AGM
and the United States of America (Contract No. N00024-
89-C-2110) for the construction of three LCACs.(8)
(g) Agreement dated July 1, 1987, by and between Lockheed
Shipbuilding Company and the United States of America
(Contract No. N00024-87-C-2089) for the construction of
seven LCACs (assumed by AGM in 1988).(8)
(h) Agreement dated October 3, 1989, by and between the
Company and the United States of America (Contract No.
N00024-89-C-2162) for the construction of one MHC Class
51 ship and various modifications thereto(9),
modification no. P00020(4) and modification no. P00027
thereto.(10)
(i) Agreement dated August 2, 1990, by and between the
Company and the United States of America (Contract
N00024-90-C-2304) for the construction of one MHC Class
51 ship,(2) and modification nos. P00002(4),
P00013(4)and modification no. P00020 thereto.(10)
(j) Agreement dated November 30, 1990, by and between the
Company and the United States of America (Contract No.
N00024-90-C-2307) for the construction of one T-AGS 45
ship and various modifications thereto.(2)
(k) Agreement dated July 15, 1993, by and between the
Company and the United States of America (Contract No.
N00024-93-C-2300) for the construction of one WAGB 20
Coast Guard Polar Icebreaker ship, amendment 0001 and
modification nos. P0001 and P00013 thereto.(1)
<PAGE>
(l) Agreement dated September 3, 1993, by and between the
Company and the United States of America (Contract No.
N00024-93-C-2205) for the construction of one T-AKR 300
Class Strategic Sealift ship, various amendments and
modifications nos. P00001, P00003 and P00004(4), P00007
(7), P00019 (6) and modifications P00025 and P00028
thereto.
(m) Agreement dated October 12, 1993, by and between the
Company and the United States of America (Contract No.
N00024-94-C-2200) for the construction of one LSD 41
Class Landing Ship Dock.(4)
(n) Agreement dated December 17, 1996 by and between the
Company and the UnitedStates of America (Contract No.
N00024-97-C-2202) for the design and construction of
one LPD-17 ship.(6)
10.2 Other Operating Contracts
(a) Agreement dated July 10, 1991 by and between Crawford
Technical Services, Inc. and the Dallas Area Rapid
Transit Authority, and the supplement thereto, relating
to providing operational and maintenance services for
paratransit van services for the Dallas, Texas
metropolitan area.(4)
(b) Agreement dated January 28, 1991, by and between
Crawford Technical Services, Inc. and the United States
of America and various modifications thereto (Contract
No. FO3602-91-C0007) relating to providing maintenance
services with respect to family housing units located
in a Little Rock, Arkansas air force base.(4)
(c) Agreement dated January 12, 1994 by and between the
Company and Belle of Orleans, L.L.C. for the
construction of a 350-foot-long paddlewheel gaming
vessel, various exhibits and Amendment nos. 1, 2 and 3
thereto.(7)
(d) Agreement dated May 12, 1995 by and between the Company
and American Heavy Lift Shipping Company for the
construction of one ocean-going product tanker, S/S
King.(11)
(e) Agreement dated May 12, 1995 by and between the Company
and American Heavy Lift Shipping Company for the
construction of one ocean-going product tanker, S/S
Knight.(11)
(f) Agreement dated May 12, 1995 by and between the Company
and American Heavy Lift Shipping Company for the
construction of one ocean-going product tanker, S/S
Solar.(11)
<PAGE>
(g) Agreement dated May 12, 1995 by and between the Company
and American Heavy Lift Shipping Company for the
construction of one ocean-going product tanker, S/S
Spray.(11)
10.3 Employee Benefit Plans
(a) The Company's Amended and Restated Performance Share
Plan dated April 24, 1989(12), as amended by Amendment
No. 1 adopted December 5, 1994.(7)
(b) The Company's Amended and Restated Stock Appreciation
Plan and attachments thereto dated April 24, 1989(12),
as amended by Amendment No. 1 adopted December 5,
1994.(7)
(c) The Company's Amended and Restated Employee Stock
Ownership Plan(7) and the related Amended and Retated
Trust Agreement(13) as further amended by: Amendment
No. 1 adopted April 5, 1995(5), Amendment No. 2 adopted
June 16, 1995(11), Amendment No. 3 adopted February 5,
1996(13), Amendment No. 4 adopted December 31, 1996(6),
and Amendment No. 5 adopted December 30, 1997.
(d) The Company's Pension Plan as Amended and Restated
dated December 30, 1997.
(e) The Company's Amended and Restated Supplemental Pension
Plan(3), as amended by Amendment Nos. 1 and 2
thereto(2).
(f) The Company's Excess Retirement Plan.(2)
(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.
(h) The Company's Directors' Deferred Compensation Plan.(2)
(i) Avondale Industries, Inc. Management Incentive Plan.(5)
(j) The Company's 401(k) Plan as restated effective
September 20, 1996(6), as amended by Amendment No. 1
dated December 31, 1996(6) and Amendment No. 2 dated
December 30, 1997.
(k) The Company's Executive Retirement Plan.(13)
(l) Avondale Industries, Inc. 1997 Stock Incentive Plan
adopted May 23, 1997.(15)
<PAGE>
10.4 Employment Agreements
(a) Employment Agreement dated September 27, 1985, by and
between the Company and Albert L. Bossier, Jr.(3) the
term of which has been extended such that its current
term extends through December 31, 1999.(7)
(b) Employment Agreement dated June 18, 1987, by and
between the Company and Thomas M. Kitchen(3) the term
of which has been extended such that its current term
extends through December 31, 1999.(7)
(c) Employment Agreement dated June 18, 1987, by and
between the Company and Kenneth B. Dupont(3) the term
of which has been extended such that its current term
extends through December 31, 1999.(7)
(d) Amended and Restated Change Control Agreement dated
January 19, 1996, by and between the Company and Albert
L. Bossier, Jr.(13).
(e) Amended and Restated Change Control Agreement dated
January 19, 1996, by and between the Company and Thomas
M. Kitchen(13).
(f) Amended and Restated Change Control Agreement dated
January 19, 1996, by and between the Company and
Kenneth B. Dupont(13).
(g) The Company's Severance Pay Plan and Summary Plan
Description adopted March 1, 1996.(13)
10.5 Avondale/Ogden Letter Agreement.(14)
10.6 Acquisition and Disposition Agreements
(a) Asset Purchase Agreement dated January 27, 1987, by and
between the Company and Connell Industries, L.P.(3)
(b) Purchase Agreement dated June 22, 1988, by and between
AGM, Lockheed Shipbuilding Company and Lockheed
Corporation.(8)
(c) Stock Purchase Agreement dated February 15, 1991, by
and between Avondale Technical Services, Inc. and
Oliver R. Crawford relating to the purchase of Crawford
Technical Services, Inc.(2)
(d) Asset Purchase Agreement dated November 20, 1992, by
and between the Company and Bollinger Machine Shop &
Shipyard, Inc., a Louisiana corporation (without
exhibits).(4)
<PAGE>
10.7 Lease Agreements
(a) Lease Agreement dated June 24, 1988, by and between the
Company and the Board of Commissioners of the Port of
New Orleans.(8)
(b) Lease Agreement dated June 4, 1979, by and between the
Company and Marrero Land and Improvement Association,
Ltd.(8)
(c) Adoption Agreement dated July 22, 1988, by and between
the Company and Missouri Pacific Railroad Company, as
supplemented on the date thereof.(8)
(d) Lease of Commercial Property dated July 1, 1970, by and
between the Company and Metal Building Products Co.,
Inc.(2)
(e) Sub-lease agreement dated May 16, 1997, by and between
the Company and the University of New Orleans Research
and Technology Foundation, Inc. (Without exhibits).(15)
10.8 Other Material Agreements
(a) Registration Rights Agreement between the Company and
the ESOP as Annex I of the Common Stock Purchase
Agreement dated as of September 27, 1985, by and
between Ogden American Corporation and the trustees of
the Avondale Industries, Inc., Employee Stock Ownership
Trust.(3)
(b) Registration Rights Agreement between the Company and
the participants in the Amended and Restated
Performance Share Plan (included in Exhibit 10.3(a)).
(c) License dated October 13, 1989, by and between the
Company and Intermarine S.p.A. relating to the license
of molded, glass-reinforced polyester hull construction
technology.(2)
(d) Stockholder Protection Rights Agreement dated as of
September 26, 1994, by and between Avondale
Industries, Inc. and Boatmen's Trust Company, as Rights
Agent.(16)
(e) Agreement by and between the Company and Bath Iron
Works Corporation, Subcontract for LPD-17 Class Work
dated June 23, 1996.(6)
(f) Agreement by and between the Company and Hughes
Aircraft Co., Subcontract for LPD-17 Class Work dated
June 23, 1996.(6)
<PAGE>
(g) Cooperative Endeavor Agreement dated May 16, 1997, by
and among the Company, the State of Louisiana, Board of
Supervisors of Louisiana State University and
Agricultural and Mechanical College acting on behalf of
the University of New Orleans, and the University of
New Orleans Research and Technology Foundation,
Inc.(15)
10.9 Revolving Credit Agreement dated as of May 10, 1994 among
Avondale Industries, Inc., various financial institutions
signatory thereto ("the Banks") and Continental Bank N.A. as
the Agent for the Banks, and Amendment Nos. 1 and 2
thereto.(7)
(a) Third Amendment, Waiver and Consent to Revolving Credit
Agreement, dated May 10, 1995(10).
(b) Fourth Amendment and Consent to Revolving Credit
Agreement, dated September 1, 1995(10).
(c) Fifth Amendment to Revolving Credit Agreement, dated
November 17, 1995 (10)
(d) Sixth Amendment to Revolving Credit Agreement, dated
October 22, 1996.(6)
10.10 Amended and Restated Revolving Credit Agreement dated January
29, 1997, effective April 30, 1997, among Avondale Industries,
Inc., various financial institutions signatory thereto ("the
Banks") and Bank of America National Trust and Savings
Association as the Agent for the Banks, (without exhibits and
schedules).(15)
(a) First Amendment to Amended and Restated Revolving
Credit Agreement, dated March 14, 1997.
(b) Second Amendment to Amended and Restated Revolving
Credit Agreement, dated April 30, 1997.
(c) Third Amendment to Amended and Restated Revolving
Credit Agreement and Request for Release of Collateral,
dated October 24, 1997.
21 List of subsidiaries of the Company
23 Consent of Deloitte & Touche LLP
27 Financial Data Schedule
<PAGE>
__________
(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, 1991, as amended by Form 10-
K/A.
(3) Incorporated by reference from the Company's Registration Statement on
Form S-1 (Registration No. 33-20145) filed with the Commission on
February 16, 1988.
(4) Incorporated by reference from the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1993.
(5) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 1995.
(6) Incorporated by reference from the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1996.
(7) Incorporated by reference from the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1994.
(8) Incorporated by reference from the Company's Registration Statement on
Form S-1 (Registration No. 33-27342) filed with the Commission on
March 6, 1989.
(9) Incorporated by reference from the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1990.
(10) Incorporated by reference from the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1995.
(11) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1995.
(12) Incorporated by reference from the Company's Registration Statement on
Form S-8 and Form S-3 (Registration No. 33-31984) filed with the
Commission on November 8, 1989.
(13) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 1996.
(14) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 1994.
(15) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1997.
(16) Incorporated by reference from the Company's Current Report on Form 8-
K filed with the Commission on September 30, 1994.
<PAGE>
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three month period
ended December 31, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 23, 1998.
AVONDALE INDUSTRIES, INC.
By: /s/Albert L. Bossier, Jr.
-------------------------
Albert L. Bossier, Jr.
Chairman of the Board,
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant and on the dates indicated.
Signature Title Date
------------------------- ------------------------ --------------
/s/Albert L. Bossier, Jr. Chairman of the Board, March 23, 1998
------------------------- President and Chief
Albert L. Bossier, Jr. Executive Officer
/s/Thomas M. Kitchen Vice President, Chief March 23, 1998
------------------------- Financial Officer,
Thomas M. Kitchen Corporate Secretary and
a Director
/s/Kenneth B. Dupont Vice President and a March 23, 1998
------------------------- Director
Kenneth B. Dupont
/s/Anthony J. Correro, III Director March 23, 1998
--------------------------
Anthony J. Correro, III
/s/Francis R. Donovan Director March 23, 1998
--------------------------
Francis R. Donovan
/s/Hugh A. Thompson Director March 23, 1998
--------------------------
Hugh A. Thompson
/s/Eugene K. Simon Vice President of March 23, 1998
-------------------------- Finance
Eugene K. Simon
<PAGE>
EXHIBIT INDEX
Number Description
3.2 By-laws of the Company, as amended on November 3, 1997.
10.1 Contracts With The United States Navy
(l) Agreement dated September 3, 1993, by and between the
Company and the United States of America (Contract
No. N00024-93-C-2205) for the construction of one T-
AKR 300 Class Strategic Sealift ship, various
amendments and modifications nos. P00001, P00003 and
P00004(4), P00007 (7), P00019 (6) and modifications
P00025 and P00028 thereto.
10.3 Employee Benefit Plans
(c) The Company's Amended and Restated Employee Stock
Ownership Plan(7) and the related Amended and
Retated Trust Agreement(13) as further amended by:
Amendment No. 1 adopted April 5, 1995(5), Amendment
No. 2 adopted June 16, 1995(11), Amendment No. 3
adopted February 5, 1996(13), Amendment No. 4
adopted December 31, 1996(6), and Amendment No. 5
adopted December 30, 1997.
(d) The Company's Pension Plan as Amended and Restated
dated December 30, 1997.
(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.
(j) The Company's 401(k) Plan as restated effective
September 20, 1996(6), as amended by Amendment No. 1
dated December 31, 1996(6) and Amendment No. 2 dated
December 30, 1997.
<PAGE>
10.10 Amended and Restated Revolving Credit Agreement dated
January 29, 1997, effective April 30, 1997, among
Avondale Industries, Inc., various financial institutions
signatory thereto ("the Banks") and Bank of America
National Trust and Savings Association as the Agent for
the Banks, (without exhibits and schedules).(15)
(a) First Amendment to Amended and Restated Revolving
Credit Agreement, dated March 14, 1997.
(b) Second Amendment to Amended and Restated Revolving
Credit Agreement, dated April 30, 1997.
(c) Third Amendment to Amended and Restated Revolving
Credit Agreement and Request for Release of
Collateral, dated October 24, 1997.
21 List of subsidiaries of the Company
23 Consent of Deloitte & Touche LLP
27 Financial Data Schedule
<PAGE>
__________
(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, 1991, as
amended by Form 10-K/A.
(3) Incorporated by reference from the Company's Registration
Statement on Form S-1 (Registration No. 33-20145) filed with
the Commission on February 16, 1988.
(4) Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993.
(5) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 1995.
(6) Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996.
(7) Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.
(8) Incorporated by reference from the Company's Registration
Statement on Form S-1 (Registration No. 33-27342) filed with
the Commission on March 6, 1989.
(9) Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990.
(10) Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995.
(11) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30, 1995.
(12) Incorporated by reference from the Company's Registration
Statement on Form S-8 and Form S-3 (Registration No. 33-31984)
filed with the Commission on November 8, 1989.
(13) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the fiscal quarter endedMarch 31, 1996.
(14) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the fiscal quarterended March 31, 1994.
(15) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the fiscal quarterended June 30, 1997.
(16) Incorporated by reference from the Company's Current Report on
Form 8-K filed with the Commission on September 30, 1994.
BY-LAWS
OF
AVONDALE INDUSTRIES, INC.
(as adopted on March 20, 1990)
(Section 3.1 of which was amended on June 13, 1994,
Section 5.2 of which was amended and Section 5.4
of which was deleted on December 5, 1994,
Section 2.14 of which was added on July 17, 1995,
Section 12 of which was amended on August 4, 1997 and
Section 5.2 of which was amended on November 3, 1997)
SECTION I
OFFICES
1.1 Principal Office. The principal office of the
Corporation shall be located at 5100 River Road, Avondale,
Louisiana 70094.
1.2 Additional offices. The Corporation may have such
offices at such other places as the Board of Directors may from
time to time determine or the business of the Corporation may
require.
SECTION 2
SHAREHOLDERS MEETINGS
2.1 Place of Meetings. Unless otherwise required by law or
these By-laws, all meetings of the shareholders shall be held at
the principal office of the Corporation or at such other place,
within or without the State of Louisiana, as may be designated by
the Board of Directors.
2.2 Annual Meetings; Notice Thereof. An annual meeting of
the shareholders shall be held on the fourth Monday of April in
each year, at 10:00 a.m., or at such other date or at such other
time specified as the Board of Directors shall designate, for the
purpose of electing directors and for the transaction of such
other business as may be properly brought before the meeting. If
no annual shareholders' meeting is held for a period of eighteen
months, any shareholder may call such meeting to be held at the
registered office of the Corporation as shown on the records of
the Secretary of State of Louisiana.
<PAGE>
2.3 Special Meetings. Special meetings of the share-
holders, for any purpose or purposes, may be called by the
Chairman of the Board, Chief Executive Officer and President or
the Board of Directors. At any time, upon the written request of
any shareholder or group of shareholders holding in the aggregate
at least 80% of the Total Voting Power (such term to have the
same meaning in these By-laws as is assigned in Article III of
the Articles of Incorporation), the Secretary shall call a
special meeting of shareholders to be held at the registered
office of the Corporation at such time as the Secretary may fix,
not less than fifteen nor more than sixty days after the receipt
of said request, and if the Secretary shall neglect or refuse to
fix such time or to give notice of the meeting, the shareholder
or shareholders making the request may do so. Such request must
state the specific purpose or purposes of the proposed special
meeting and the business to be conducted thereat shall be limited
to such purpose or purposes.
2.4 Notice of Meetings. Except as otherwise provided by
law, the authorized person or persons calling a shareholders'
meeting shall cause written notice of the time, place and purpose
of the meeting to be given to all shareholders entitled to vote
at such meeting, at least ten days and not more than sixty days
prior to the day fixed for the meeting. Notice of the annual
meeting need not state the purpose or purposes thereof, unless
action is to be taken at the meeting as to which notice is
required by law or the By-laws. Notice of a special meeting shall
state the purpose or purposes thereof, and the business conducted
at any special meeting shall be limited to the purpose or
purposes stated in the notice.
2.5 List of Shareholders. At every meeting of
shareholders, a list of shareholders entitled to vote, arranged
alphabetically and certified by the Secretary or by the agent of
the Corporation having charge of transfers of shares, showing the
number and class of shares held by each such shareholder on the
record date for the meeting, shall be produced on the request of
any shareholder.
2.6 Quorum. At all meetings of shareholders, the holders
of a majority of the Total Voting Power shall constitute a quorum
provided that this subsection shall not have the effect of
reducing the vote required to approve or affirm any matter that
may be established by law, the Articles of Incorporation or these
By-laws.
2.7 Voting. When a quorum is present at any meeting, the
vote of the holders of a majority of the Voting Power (as defined
in Article III of the Articles of Incorporation) present in
person or represented by proxy shall decide each question brought
before such meeting, unless the question is one upon which, by
express provision of law or the Articles of Incorporation, a
different vote is required, in which case such express provision
shall govern and control the decision of such question. Directors
shall be elected by plurality vote.
<PAGE>
2.8 Proxies. At any meeting of the shareholders, every
shareholder having the right to vote shall be entitled to vote in
person or by proxy appointed by an instrument in writing
subscribed by such shareholder and bearing a date not more than
eleven months prior to the meeting, unless the instrument
provides for a long period, but in no case will an outstanding
proxy be valid for longer than three years from the date of its
execution, provided that in no event may a proxy be voted at a
meeting called pursuant to La. R.S. 12:138 unless it is executed
and dated by the shareholder within 30 days of the date of such
meeting. The person appointed as proxy need not be a shareholder
of the Corporation.
2.9 Adjournments. Adjournments of any annual or special
meeting of shareholders may be taken without new notice being
given unless a new record date is fixed for the adjourned
meeting, but any meeting at which directors are to be elected
shall be adjourned only from day to day until such directors
shall have been elected.
2.10 Withdrawal. If a quorum is present or represented at a
duly organized meeting, such meeting may continue to do business
until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum as fixed in Section 2.6
of these By-laws, or the refusal of any shareholders present to
vote.
2.11 Lack of Quorum. If a meeting cannot be organized
because a quorum has not attended, those present may adjourn the
meeting to such time and place as they may determine, subject,
however, to the provisions of Section 2.9 hereof. In the case of
any meeting called for the election of directors, those who
attend the second of such adjourned meetings, although less than
a quorum as fixed in Section 2.6 hereof, shall nevertheless
constitute a quorum for the purpose of electing directors.
2.12 Presiding officer. The Chairman of the Board, Chief
Executive Officer and President or in his absence, a chairman
designated by the Board of Directors, shall preside at all
shareholders' meetings.
2.13 Definition of Shareholder. As used in these By-laws,
and unless the context otherwise requires, the term shareholder
shall mean a person who is (i) the record holder of shares of the
Corporation's voting stock or (ii) a registered holder of any
bonds, debentures or similar obligations granted voting rights by
the Corporation pursuant to La. R.S. 12:75A.
<PAGE>
2.14 Shareholder Proposals. No shareholder proposal shall
be considered by the shareholders at any annual or special
meeting unless such proposal has been properly brought before
such meeting. No shareholder proposal shall be deemed to have
been properly brought before a special meeting of shareholders
unless (i) the proposal is submitted by the person or persons
calling the special meeting and (ii) the proposal is contained in
the notice of the meeting. No shareholder proposal shall be
deemed to have been properly brought before an annual meeting
unless each of the following conditions is satisfied:
(a) Sufficient notice of the proposal must be received
by the Secretary of the Corporation not less than 120 days
in advance of the date in the current year that corresponds
to the date on which proxy materials were first mailed by
the Corporation in connection with the previous year's
annual meeting. In the event of the change of the date of
the annual meeting to a date that is 30 days earlier or
later than the date in the current year that corresponds to
the date on which the annual meeting was held in the
previous year, or if no annual meeting was held in the
previous year, sufficient notice of the proposal must be
received by the Secretary of the Corporation no later than
the date set by the Corporation in a public announcement to
shareholders, which date shall be no earlier than a
reasonable time before the Corporation's proxy solicitation
is first made in connection with the meeting. Notice of the
proposal will be sufficient only if it contains (i) a
complete and accurate description of the proposal; (ii) a
statement that the shareholder intends to attend the meeting
and present the proposal and to hold of record securities of
the Corporation entitled to vote at the meeting through the
meeting date; and (iii) the shareholder's name and address
and the number of shares of the Corporation's voting
securities that the shareholder holds of record or
beneficially as of the notice date. The shareholder shall
continue to hold of record securities of the Corporation
entitled to vote at the meeting through the meeting date.
(b) The Board of Directors shall have the power to
limit the shareholder proposals to be considered at a
meeting to the first ten shareholder proposals of which the
Secretary of the Corporation receives sufficient notice.
(c) If the Secretary of the Corporation has received
sufficient notice of a shareholder proposal that may
properly be brought before the meeting, a shareholder
proposal sufficient notice of which is subsequently received
by the Secretary and that is substantially duplicative of
the first proposal shall not be properly brought before the
meeting. If a shareholder proposal deals with substantially
the same subject matter as a prior proposal submitted to
shareholders at a meeting held within the preceding five
calendar years, it shall not be properly brought before any
meeting held within three calendar years after the latest
such previous submission, provided that:
<PAGE>
(i) if the proposal was submitted at
only one meeting during such
preceding period, it received less
than 3% of the total number of
votes cast in regard thereto; or
(ii) if the proposal was submitted at
only two meetings during such
preceding period, it received at
the time of its second submission
less than 6% of the total number of
votes cast in regard thereto; or
(iii) if the proposal was submitted at
three or more meetings during such
preceding period, it received at
the time of its latest submission
less than 10% of the total number
of votes cast in regard thereto.
(d) Notwithstanding compliance with Sections 2.14(a),
(b), and (c), no shareholder proposal shall be deemed to be
properly brought before a shareholders' meeting if it is not
a proper subject for action by shareholders under Louisiana
law or the Articles of Incorporation.
(e) Any proposal failing to comply with Sections
2.14(a), (b), (c), or (d) shall not be considered at the
meeting and, if introduced at the meeting, shall be ruled
out of order. If a shareholder presents a proposal at a
meeting but does not continue to hold of record securities
of the Corporation entitled to vote at the meeting through
the meeting date, as required by Section 2.14(a), no
proposal by that shareholder shall be considered at any
shareholders' meeting held in the following two calendar
years.
(f) Nothing in this Section 2.14 is intended to confer
any rights to have any proposal included in the notice of
any meeting or in proxy materials related to such meeting.
<PAGE>
SECTION 3
DIRECTORS
3.1 Number. All of the corporate powers shall be vested
in, and the business and affairs of the Corporation shall be
managed by, a Board of Directors. Except as otherwise fixed by
or pursuant to Article III of the Articles of Incorporation (as
it may be duly amended from time to time) relating to the rights
of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon
liquidation to elect, by class vote, additional directors under
particular circumstances, the Board of Directors shall consist of
not less than seven and not more than nine natural persons, as
established from time to time by a resolution of the Board of
Directors provided that, if after proxy materials for any meeting
of shareholders at which directors are to be elected are mailed
to shareholders any person or persons named therein to be
nominated at the direction of the Board of Directors becomes
unable or unwilling to serve, the foregoing number of authorized
directors as provided by the Board resolution then in effect
shall be automatically reduced by a number equal to the number of
such persons unless the Board of Directors, by a majority vote of
the entire Board, selects an additional nominee. The Board of
Directors may, by a two-thirds vote, amend this Section 3.1 to
increase or decrease the number of directors, provided that no
amendment to this Section to decrease the number of directors
shall shorten the term of any incumbent director. No director
need be a shareholder. The Secretary shall have the power to
certify at any time as to the number of directors authorized and
as to the class to which each director has been elected or
assigned.
3.2 Powers. The Board may exercise all such powers of the
Corporation and do all such lawful acts and things which are not
by law, the Articles of Incorporation or these By-laws directed
or required to be done by the shareholders.
3.3 Classes. The Board of Directors, other than those
directors who may be elected by the holders of any class or
series of stock having preference over the Common Stock as to
dividends or upon liquidation, shall be divided into three
classes as nearly equal in number as may be, with the initial
term of office of Class I expiring at the first annual meeting of
shareholders occurring more than nine months after the
incorporation of the Corporation, of Class II expiring at the
first succeeding annual meeting of shareholders and of Class III
expiring at the second succeeding annual meeting of shareholders.
Any increase or decrease in the number of directors shall be
apportioned by the Board of Directors so that all classes of
directors shall be as nearly equal in number as can be.
<PAGE>
3.4 General Election. At each annual meeting of share-
holders, directors shall be elected to succeed those directors
whose terms then expire. Such newly elected directors shall serve
until the third succeeding annual meeting of shareholders after
their election and until their successors are elected and
qualified. A director elected to fill a vacancy shall hold office
for a term expiring at the annual meeting at which the term of
the class to which he shall have been elected expires. No
decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
3.5 Vacancies. Except as otherwise provided in the
Articles of Incorporation or these By-laws (a) the office of a
director shall become vacant if he dies, resigns or is removed
from office and (b) the Board of Directors may declare vacant the
office of a director if he (i) is interdicted or adjudicated an
incompetent, (ii) is adjudicated a bankrupt, (iii) in the sole
opinion of the Board of Directors becomes incapacitated by
illness or other infirmity so that he is unable to perform his
duties for a period of six months or longer, or (iv) ceases at
any time to have the qualifications required by law, the Articles
of Incorporation or these By-laws.
3.6 Filling Vacancies. In the event of a vacancy (includ-
ing any vacancy resulting from an increase in the authorized
number of directors, or from failure of the shareholders to elect
the full number of authorized directors) the remaining directors,
even though not constituting a quorum, may fill any vacancy on
the Board for the unexpired term by a vote of at least two-thirds
of the directors remaining in office at any time that there is no
Related Person (as such term is defined in Article V.A.2 of the
Articles of Incorporation) and a two-thirds vote of all
Continuing Directors who remain in office at any time there is a
Related Person, provided that the shareholders shall have the
right, at any special meeting called for the purpose prior to
such action by the Board, to fill the vacancy.
3.7 Directors Elected by Preferred Shareholders. Notwith-
standing anything in the foregoing to the contrary, whenever the
holders of any one or more series of preferred stock of the
Corporation shall have the right, voting separately as a class,
to elect one or more directors of the Corporation, the provisions
of Article III of the Articles of Incorporation (as it may be
duly amended from time to time) fixing the rights and preferences
of such preferred stock shall govern with respect to the
election, removal, vacancies or other related matters with
respect to such directors.
<PAGE>
3.8 Notice of Shareholder Nominees. Only persons who are
nominated in accordance with the procedures set forth in this
Section 3.8 shall be eligible for election as directors. Nomina-
tions of persons for election to the Board of Directors of the
Corporation may be made at a meeting of shareholders by or at the
direction of the Board of Directors or by a shareholder of the
Corporation entitled to vote for the election of directors at the
meeting who complies with the notice procedures set forth in this
Section 3.8. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To
be timely, a shareholder's notice must be delivered or mailed and
received at the principal executive offices of the Corporation
not less than 45 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 55 days
notice or prior public disclosure of the date of the meeting is
given or made to shareholders, notice by the shareholder to be
timely must be received no later than the close of business on
the 10th day following the day on which such notice of the date
of the meeting was mailed or such public disclosure was made.
Such shareholder's notice shall set forth the following:
a. as to each person whom the shareholder proposes to
nominate for election or re-election as a director (i) the
name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the capital
stock of the Corporation of which such person is the
beneficial owner (determined in accordance with Article
V.A.2 of the Articles of Incorporation) and (iv) any other
information relating to such person that would be required
to be disclosed in solicitations of proxies for election of
directors, or would be otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended (including without limitation such
person's written consent to being named in the proxy
statement as a nominee and to serving as a director if
elected); and
b. as to the shareholder giving the notice (i) the
name and address of such shareholder and (b) the class and
number of shares of the capital stock of the Corporation of
which such shareholder is the beneficial owner (determined
in accordance with Article V.A.2 of the Articles of
Incorporation) . If requested in writing by the Secretary
the Corporation at least 15 days in advance of the meeting,
such shareholder shall disclose to the Secretary, within 10
days of such request, whether such person is the sole
beneficial owner of the shares held of record by him; and,
if not, the name and address of each other person known by
the shareholder of record to claim a beneficial interest in
such shares.
<PAGE>
At the request of the Board of Directors, any person nominated by
or at the direction of the Board of Directors for election as a
director shall furnish to the Secretary of the Corporation that
information required to be set forth in a shareholder's notice of
nomination which pertains to the nominee. If a shareholder seeks
to nominate one or more persons as directors, the Secretary shall
appoint two Inspectors, who shall not be affiliated with the
Corporation, to determine whether a shareholder has complied with
this Section 3.8. If the Inspectors shall determine that a
shareholder has not complied with this Section 3.8, the
Inspectors shall direct the Chairman of the meeting to declare to
the meeting that a nomination was not made in accordance with the
procedures prescribed by the Articles of Incorporation or these
By-laws; and the Chairman shall so declare to the meeting and the
defective nomination shall be disregarded.
The provisions of this Section 3.8 shall not apply to the
election of any directors which the holders of preferred stock of
the Corporation, voting separately as a class, may be entitled to
elect.
3.9 Compensation of Directors. Directors as such, shall
receive such compensation for their services as may be fixed by
resolution of the Board of Directors and shall receive their
actual expenses of attendance, if any, for each regular or
special meeting of the Board; provided that nothing herein
contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving
compensation therefor.
SECTION 4
MEETINGS OF THE BOARD
4.1 Place of Meetings. The meetings of the Board of
Directors may be held at such place within or without the State
of Louisiana as a majority of the directors may from time to time
appoint.
4.2 Initial Meetings. The first meeting of each newly
elected Board shall be held immediately following the share-
holders' meeting at which the Board is elected and at the same
place as such meeting, and no notice of such first meeting shall
be necessary for the newly elected directors in order legally to
constitute the meeting.
4.3 Regular Meetings; Notice. Regular meetings of the
Board may be held at such times as the Board may from time to
time determine. Notice of regular meetings of the Board of
Directors shall be required, but no special form of notice or
time of notice shall be necessary.
<PAGE>
4.4 Special Meetings; Notice. Special meetings of the
Board may be called by the Chairman of the Board, Chief Executive
Officer and President on reasonable notice given to each
director, either personally or by telephone, mail or by telegram.
Special meetings shall be called by the Chairman of the Board,
Chief Executive Officer and President, or the Secretary in like
manner and on like notice on the written request of a majority of
the directors and if such officers fail or refuse, or are unable
within 24 hours to call a meeting when requested, then the
directors making the request may call the meeting on two days'
written notice given to each director. The notice of a special
meeting of directors need not state its purpose or purposes, but
if the notice states a purpose or purposes and does not state a
further purpose to consider such other business as may properly
come before the meeting, the business to be conducted at the
special meeting shall be limited to the purposes stated in the
notice.
4.5 Waiver of Notice. Directors present at any regular or
special meeting shall be deemed to have received due, or to have
waived, notice thereof, provided that a director who participates
in a meeting by telephone (as permitted by Section 4.9 hereof)
shall not be deemed to have received or waived due notice if, at
the beginning of the meeting, he objects to the transaction of
any business because the meeting is not lawfully called.
4.6 Quorum. A majority of the Board shall be necessary to
constitute a quorum for the transaction of business, and except
as otherwise provided by law or the Articles of Incorporation or
these By-laws, the acts of a majority of the entire Board of
Directors at a meeting at which a quorum is present shall be the
acts of the Board. If a quorum is not present at any meeting of
the Board of Directors, the directors present may adjourn the
meeting from time to time without notice other than announcement
at the meeting, until a quorum is present.
4.7 Withdrawal. If a quorum is present when the meeting
convened, the directors present may continue to do business,
taking action by vote of a majority of a quorum as fixed in
Section 4.6 hereof, until adjournment, notwithstanding the
withdrawal of enough directors to leave less than a quorum as
fixed in Section 4.6 hereof or the refusal of any director
present to vote.
4.8 Action by Consent. Any action which may be taken at a
meeting of the Board or any committee thereof, may be taken by a
consent in writing signed by all of the directors or by all
members of the committee, as the case may be, and filed with the
records of proceedings of the Board or Committee.
4.9 Meetings by Telephone or Similar
Communication. Members of the Board may participate at and be
present at any meeting of the Board or any committee thereof by
means of conference telephone or similar communications equipment
if all persons participating in such meeting can hear and
communicate with each other.
<PAGE>
SECTION 5
COMMITTEES OF THE BOARD
5.1 General. The Board may designate one or more
committees, each committee to consist of two or more of the
directors of the Corporation (and one or more directors may be
named as alternate members to replace any absent or disqualified
regular members), which, to the extent provided by resolution of
the Board or the By-laws, shall have and may exercise the powers
of the Board in the management of the business and affairs of the
Corporation, and may have power to authorize the seal of the
Corporation to be affixed to documents, but no such committee
shall have power or authority in reference to amending the
Articles of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease
or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of dissolution,
removing or indemnifying directors or amending the By-laws; and
unless the resolution expressly so provides, no such committee
shall have the power or authority to declare a dividend or
authorize issuance of stock. Such committee or committees shall
have such name or names as may be stated in the By-laws, or as
may be determined, from time to time, by the Board. Any vacancy
occurring in any such committee shall be filled by the Board, but
the President may designate another director to serve on the
committee pending action by the Board. Each such member of a
committee shall hold office during the term of the Board
constituting it, unless otherwise ordered by the Board.
5.2 Compensation Committee. The Board shall establish a
Compensation Committee consisting of at least two directors. The
Compensation Committee shall administer the Performance Share
Plan, the Stock Appreciation Plan, any incentive compensation
plans involving securities of the Corporation adopted by the
Corporation in the future and employment contracts with any
employee, and shall have plenary authority with respect to all
compensation related matters. Each of the members of the
Compensation Committee shall be a "disinterested person" as
defined in Rule 16b-3 promulgated under the Securities Exchange
Act of 1934 and an "outside director" as defined in the
regulations promulgated under 162(m) of the Internal Revenue
Code. The Compensation Committee shall determine the general
compensation policies of the Corporation and the compensation to
be paid to executive officers of the Corporation. If the
Compensation Committee is composed of an even number of persons,
in the event of a disagreement, which cannot in good faith be
resolved, it will be resolved by the affirmative vote of a
majority of the entire Board.
<PAGE>
5.3 Audit Committee. The Board shall establish an Audit
Committee consisting of at least three directors who are not
officers or employees of the Corporation or any of its
affiliates. The Audit Committee shall (i) serve as a focal point
for communication between noncommittee directors, the independent
accountants, internal audit and management, as their duties
relate to financial accounting, reporting and controls, (ii)
assist the Board of Directors in fulfilling its fiduciary
responsibilities as to accounting policies and reporting
practices of the Corporation and all subsidiaries and the
sufficiency of auditing relative thereto and (iii) operate as the
Board's principal agent in ensuring the independence of the
Corporation's independent accountants, the integrity of
management and the adequacy of disclosure to shareholders.
SECTION 6
REMOVAL OF BOARD MEMBER
Any director or the entire Board of Directors may be removed
at any time, but only for cause (as such term is defined in
Article IV.C of the Articles of Incorporation), by the affirma-
tive vote of not less than 80% of the Total Voting Power,
provided that the removal may only be effected at a meeting of
shareholders duly called for that purpose. The shareholders at
such meeting may proceed to elect a successor or successors for
the unexpired term of the director or directors removed. Except
as provided in the Articles of Incorporation and in this Section
6, directors shall not be subject to removal.
SECTION 7
NOTICES
7.1 Form of Delivery. Whenever under the provisions of law
the Articles of Incorporation or these By-laws notice is required
to be given to any shareholder or director, it shall not be
construed to mean personal notice unless otherwise specifically
provided in the Articles of Incorporation or these By-laws, but
said notice may be given by mail, addressed to such shareholder
or director at his address as it appears on the records of the
Corporation, with postage thereon prepaid. Such notices shall be
deemed to have been given at the time they are deposited in the
United States mail. Notice to a director pursuant to Section 4.4
hereof may also be given personally or by telephone or telegram
sent to his address as it appears on the records of the
Corporation.
<PAGE>
7.2 Waiver. Whenever any notice is required to be given by
law, the Articles of Incorporation or these By-laws, a waiver
thereof in writing signed by the person or persons entitled to
said notice, whether before or after the time stated therein,
shall be deemed equivalent thereto. In addition, notice shall be
deemed to have been given to, or waived by, any shareholder or
director who attends a meeting of shareholders or directors in
person, or is represented at such meeting by proxy, without
protesting at the commencement of the meeting the transaction of
any business because the meeting is not lawfully called or
convened.
SECTION 8
OFFICERS
8.1 Designations. The officers of the corporation shall be
chosen by the directors and shall be the Chairman of the Board,
Chief Executive officer and President (with all such offices to
be held by one person), a Secretary and a Treasurer. The
directors may elect one or more Vice Presidents. Any two offices
may be held by one person, provided that no person holding more
than one office may sign, in more than one capacity, any
certificate or other instrument required by law to be signed by
two officers.
8.2 Additional Designations. The Board of Directors may
appoint such other officers as it shall deem necessary, who shall
hold their offices for such terms and shall exercise such powers
and perform such duties as shall be determined from time to time
by the Board.
8.3 Term of Office. The officers of the Corporation shall
hold office at the pleasure of the Board of Directors. Except as
otherwise provided in the resolution of the Board of Directors
electing any officer, each officer shall hold office until the
first meeting of the Board of Directors after the annual meeting
of shareholders next succeeding his or her election, and until
his or her successor is elected and qualified or until his or her
earlier resignation or removal. Any officer may resign at any
time upon written notice to the Board, to the Chairman, Chief
Executive Officer and President, or to the Secretary of the
Corporation. Such resignation shall take effect at the time
specified therein as acceptance of such resignation shall be
necessary to make it effective. The Board may remove any officer
with or without cause at any time, except that the removal of the
Chairman of the Board, Chief Executive Officer and President
shall require the vote of at least three-fourths of the entire
Board. Any such removal shall be without prejudice to the
contractual rights of such offices, if any, with the Corporation,
but the election of an officer shall not in and of itself create
contractual rights. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise may be
filled for the unexpired portion of the term by the Board at any
regular or special meeting.
<PAGE>
8.4 The Chairman, Chief Executive Officer, and President.
The Chairman, Chief Executive Officer and President shall have
general and active responsibility for the management of the
business of the Corporation, shall be responsible for implement-
ing all orders and resolutions of the Board of Directors, shall
be the chief operating officer of the Corporation, and shall
supervise the daily operations of the business of the
Corporation. The Chairman of the Board shall preside at meetings
of the Board of Directors and of the shareholders.
8.5 The Vice Presidents. The Vice Presidents (if any) in
the order specified by the Board or, if not so specified, in the
order of their seniority shall, in the absence or disability of
the President, perform the duties and exercise the powers of the
President, and shall perform such other duties as the President
or the Board of Directors shall prescribe.
8.6 The Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of the shareholders
and record all votes and the minutes of all proceedings in a book
to be kept for that purpose. He shall give, or cause to be
given, notice of all meetings of the shareholders and special
meetings of the Board, and shall perform such other duties as may
be prescribed by the Board or President, under whose supervision
he shall be. He shall keep in safe custody the seal of the
Corporation, if any, and affix the same to any instrument
requiring it.
8.7 The Treasurer. The Treasurer shall have the custody of
the corporate funds and shall keep or cause to be kept full and
accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all monies and
other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the
Board of Directors. He shall keep a proper accounting of all
receipts and disbursements and shall disburse the funds of the
Corporation only for proper corporate purposes or as may be
ordered by the Board and shall render to the President and the
Board at the regular meetings of the Board, or whenever they may
require it, an account of all his transactions as Treasurer and
of the financial condition of the Corporation.
<PAGE>
SECTION 9
STOCK
9.1 Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by the President
or a Vice President and the Secretary or an Assistant Secretary
evidencing the number and class (and series, if any) of shares
owned by him, containing such information as required by law and
bearing the seal of the Corporation. If any stock certificate is
manually signed by a transfer agent or registrar other than the
Corporation itself or an employee of the Corporation, the signa-
ture of any such officer may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to
be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with
the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
9.2 Missing Certificates. The President or any Vice
President may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore
issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen or
destroyed. As a condition precedent to the issuance of a new
certificate or certificates, the officers of the Corporation
shall, unless dispensed with by the President, require the owner
of such lost, stolen or destroyed certificate or certificates, or
his legal representative, (i) to advertise or give the
Corporation a bond or (ii) enter into a written indemnity
agreement, in each case in an amount appropriate to indemnify the
Corporation against any claim that may be made against the
Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
9.3 Transfers. Upon surrender to the Corporation or the
transfer agent of the Corporation, of a certificate for shares
duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction
upon its books.
<PAGE>
SECTION 10
DETERMINATION OF SHAREHOLDERS
10.1 Record Date. For the purpose of determining share-
holders entitled to notice of and to vote at a meeting, or to
receive a dividend, or to receive or exercise subscription or
other rights, or to participate in a reclassification of stock,
or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a
record date for determination of shareholders for such purpose,
such date to be not more than sixty days and, if fixed for the
purpose of determining shareholders entitled to notice of and to
vote at a meeting, not less than ten days, prior to the date on
which the action requiring the determination of shareholder is to
be taken.
10.2 Registered Shareholders. Except as otherwise provided
by law, the Corporation, and its directors, officers and agents
may recognize and treat a person registered on its records as the
owner of shares, as the owner in fact thereof for all purposes,
and as the person exclusively entitled to have and to exercise
all rights and privileges incident to the ownership of such
shares, and rights under this Section shall not be affected by
any actual constructive notice which the Corporation, or any of
its directors, officers or agents, may have to the contrary.
SECTION 11
MISCELLANEOUS
11.1 Dividends. Except as otherwise provided by law or the
Articles of Incorporation, dividends upon the stock of the
Corporation may be declared by the Board of Directors at any
regular or special meeting. Dividends may be paid in cash,
property, or in shares of stock.
11.2 Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or
such other person or persons as the Board of Directors may from
time to time designate. Signatures of the authorized signatories
may be by facsimile.
11.3 Fiscal Year. The fiscal year of this Corporation will
be a calendar year.
11.4 Seal. The Board of Directors may adopt a corporate
seal, which seal shall have inscribed thereon the name of the
Corporation. Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
Failure to affix the seal shall not, however, affect the validity
of any instrument.
11.5 Gender. All pronouns and variations thereof used in
these By-laws shall be deemed to refer to the masculine, feminine
or neuter gender, singular or plural, as the identity of the
person, persons, entity or entities referred to require.
<PAGE>
SECTION 12
INDEMNIFICATION
12.1 Definitions. As used in this section the following
terms shall have the meanings set forth below:
(a) "Board" - the Board of Directors of the Corpora-
tion.
(b) "Claim" - any threatened, pending or completed
claim, action, suit, or proceeding, whether civil, criminal, ad-
ministrative or investigative and whether made judicially or ex-
tra-judicially, or any separate issue or matter therein, as the
context requires.
(c) "Determining Body" - (i) those members of the
Board who are not named as parties to the Claim for which indem-
nification is being sought ("Impartial Directors"), if there are
at least three Impartial Directors, (ii) a committee of at least
three Impartial Directors appointed by the Board (regardless
whether the members of the Board of Directors voting on such
appointment are Impartial Directors) or (iii) if there are fewer
than three Impartial Directors or if the Board of Directors or the
committee appointed pursuant to clause (ii) of this paragraph so
directs (regardless whether the members thereof are Impartial
Directors), independent legal counsel, which may be the regular
outside counsel of the Corporation.
(d) "Disbursing Officer" - the Chief Executive Officer
of the Corporation or, if the Chief Executive Officer is a party
to the Claim for which indemnification is being sought, any offi-
cer not a party to such Claim who is designated by the Chief
Executive Officer to be the Disbursing Officer with respect to in-
demnification requests related to the Claim, which designation
shall be made promptly after receipt of the initial request for
indemnification with respect to such Claim.
(e) "Expenses" - any expenses or costs (including,
without limitation, attorney's fees, judgments, punitive or
exemplary damages, fines and amounts paid in settlement).
(f) "Indemnitee" - each person who is or was a director
or officer of the Corporation.
<PAGE>
12.2 Indemnity and Advancement of Expenses.
(a) To the extent such Expenses exceed the amounts reim-
bursed or paid pursuant to policies of liability insurance
maintained by the Corporation, the Corporation shall in-
demnify each Indemnitee against any Expenses actually and
reasonably incurred by him (as they are incurred) in
connection with any Claim either against him or as to which
he is involved solely as a witness or person required to give
evidence, by reason of his position (i) as a director or
officer of the Corporation, (ii) as a director or officer of
any subsidiary of the Corporation, (iii) as a fiduciary with
respect to any employee benefit plan of the Corporation, or
(iv) as a director, officer, partner, employee or agent of
another Corporation, partnership, joint venture, trust or
other for-profit or not-for-profit entity or enterprise, if
such position is or was held at the request of the
Corporation, whether relating to service in such position
before or after the effective date of this Section, if he (i)
is successful in his defense of the Claim on the merits or
otherwise or (ii) has been found by the Determining Body
(acting in good faith) to have met the Standard of Conduct
(defined below); provided that (A) the amount otherwise
payable by the Corporation may be reduced by the Determining
Body to such amount as it deems proper if it determines that
the Claim involved the receipt of a personal benefit by
Indemnitee, and (B) no indemnification shall be made in
respect of any Claim as to which Indemnitee shall have been
adjudged by a court of competent jurisdiction, after exhaus-
tion of all appeals therefrom, to be liable for willful or
intentional misconduct in the performance of his duty to the
Corporation or to have obtained an improper personal benefit,
unless, and only to the extent that, a court shall determine
upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, Indemnitee
is fairly and reasonably entitled to indemnity for such
Expenses as the court deems proper.
(b) The Standard of Conduct is met when the conduct by
an Indemnitee with respect to which a Claim is asserted was
conduct that was in good faith and that he reasonably
believed to be in, or not opposed to, the best interest of
the Corporation, and, in the case of a criminal action or
proceeding, that he had no reasonable cause to believe was
unlawful. The termination of any Claim by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption
that Indemnitee did not meet the Standard of Conduct.
<PAGE>
(c) Promptly upon becoming aware of the existence of any
Claim as to which he may be indemnified hereunder, Indemnitee
shall notify the Chief Executive Officer of the Corporation
of the Claim and whether he intends to seek indemnification
hereunder. If such notice indicates that Indemnitee does so
intend, the Chief Executive Officer shall promptly advise the
Board thereof and notify the Board that the establishment of
the Determining Body with respect to the Claim will be a
matter presented at the next regularly scheduled meeting of
the Board. After the Determining Body has been established
the Chief Executive Officer shall inform the Indemnitee
thereof and Indemnitee shall immediately provide the De-
termining Body with all facts relevant to the Claim known to
him. Within 60 days of the receipt of such information, to-
gether with such additional information as the Determining
Body may request of Indemnitee, the Determining Body shall
determine, and shall advise Indemnitee of its determination,
whether Indemnitee has met the Standard of Conduct.
(d) During such 60-day period, Indemnitee shall promptly
inform the Determining Body upon his becoming aware of any
relevant facts not therefore provided by him to the
Determining Body, unless the Determining Body has obtained
such facts by other means.
(e) In the case of any Claim not involving a proposed,
threatened or pending criminal proceeding,
(i) if Indemnitee has, in the good faith judgment
of the Determining Body, met the Standard of Conduct, the
Corporation may, in its sole discretion after notice to
Indemnitee, assume all responsibility for the defense of the
Claim, and, in any event, the Corporation and the Indemnitee
each shall keep the other informed as to the progress of the
defense, including prompt disclosure of any proposals for
settlement; provided that if the Corporation is a party to
the Claim and Indemnitee reasonably determines that there is
a conflict between the positions of the Corporation and
Indemnitee with respect to the Claim, then Indemnitee shall
be entitled to conduct his defense, with counsel of his
choice; and provided further that Indemnitee shall in any
event be entitled at his expense to employ counsel chosen by
him to participate in the defense of the Claim; and
<PAGE>
(ii) the Corporation shall fairly consider any
proposals by Indemnitee for settlement of the Claim. If the
Corporation (A) proposes a settlement acceptable to the
person asserting the Claim, or (B) believes a settlement
proposed by the person asserting the Claim should be ac-
cepted, it shall inform Indemnitee of the terms thereof and
shall fix a reasonable date by which Indemnitee shall
respond. If Indemnitee agrees to such terms, he shall ex-
ecute such documents as shall be necessary to effect the set-
tlement. If he does not agree he may proceed with the de-
fense of the Claim in any manner he chooses, but if he is not
successful on the merits or otherwise, the Corporation's ob-
ligation to indemnify him for any Expenses incurred following
his disagreement shall be limited to the lesser of (A) the
total Expenses incurred by him following his decision not to
agree to such proposed settlement or (B) the amount the
Corporation would have paid pursuant to the terms of the pro-
posed settlement. If, however, the proposed settlement would
impose upon Indemnitee any requirement to act or refrain from
acting that would materially interfere with the conduct of
his affairs, Indemnitee may refuse such settlement and pro-
ceed with the defense of the Claim, if he so desires, at the
Corporation's expense without regard to the limitations
imposed by the preceding sentence. In no event, however,
shall the Corporation be obligated to indemnify Indemnitee
for any amount paid in a settlement that the Corporation has
not approved.
(f) In the case of a Claim involving a proposed,
threatened or pending criminal proceeding, Indemnitee shall
be entitled to conduct the defense of the Claim, and to make
all decisions with respect thereto, with counsel of his
choice, provided, however, that the Corporation shall not be
obligated to indemnify Indemnitee for an amount paid in
settlement that the Corporation has not approved.
(g) After notifying the Corporation of the existence of
a Claim, Indemnitee may from time to time request the
Corporation to pay the Expenses (other than judgments, fines,
penalties or amounts paid in settlement) that he incurs in
pursuing a defense of the Claim prior to the time that the
Determining Body determines whether the Standard of Conduct
has been met. If the Disbursing Officer believes the amount
requested to be reasonable, he shall pay to Indemnitee the
amount requested (regardless of Indemnitee's apparent ability
to repay such amount) upon receipt of an undertaking by or on
behalf of Indemnitee to repay such amount if it shall
ultimately be determined that he is not entitled to be
indemnified by the Corporation under the circumstances. If
the Disbursing Officer does not believe such amount to be
reasonable, the Corporation shall pay the amount deemed by
him to be reasonable and Indemnitee may apply directly to the
Determining Body for the remainder of the amount requested.
<PAGE>
(h) After the Determining Body has determined that the
Standard of Conduct was met, for so long as and to the extent
that the Corporation is required to indemnify Indemnitee
under this Agreement, the provisions of Paragraph (g) shall
continue to apply with respect to Expenses incurred after
such time except that (i) no undertaking shall be required of
Indemnitee and (ii) the Disbursing Officer shall pay to
Indemnitee such amount of any fines, penalties or judgments
against him which have become final as the Corporation is
obligated to indemnify him.
(i) Any determination by the Corporation with respect to
settlements of a Claim shall be made by the Determining Body.
(j) The Corporation and Indemnitee shall keep confiden-
tial, to the extent permitted by law and their fiduciary
obligations, all facts and determinations provided or made
pursuant to or arising out of the operation of this Section,
and the Corporation and Indemnitee shall instruct its or his
agents and employees to do likewise.
12.3 Enforcement.
(a) The rights provided by this Section shall be
enforceable by Indemnitee in any court of competent
jurisdiction.
(b) If Indemnitee seeks a judicial adjudication of his
rights under this Section Indemnitee shall be entitled to
recover from the Corporation, and shall be indemnified by the
Corporation against, any and all Expenses actually and
reasonably incurred by him in connection with such proceeding
but only if he prevails therein. If it shall be determined
that Indemnitee is entitled to receive part but not all of
the relief sought, then the Indemnitee shall be entitled to
be reimbursed for all Expenses incurred by him in connection
with such judicial adjudication if the amount to which he is
determined to be entitled exceeds 50% of the amount of his
claim. Otherwise, the Expenses incurred by Indemnitee in
connection with such judicial adjudication shall be
appropriately prorated.
(c) In any judicial proceeding described in this
subsection, the Corporation shall bear the burden of proving
that Indemnitee is not entitled to any Expenses sought with
respect to any Claim.
<PAGE>
12.4 Saving Clause. If any provision of this Section is
determined by a court having jurisdiction over the matter to
require the Corporation to do or refrain from doing any act
that is in violation of applicable law, the court shall be
empowered to modify or reform such provision so that, as
modified or reformed, such provision provides the maximum
indemnification permitted by law, and such provision, as so
modified or reformed, and the balance of this Section, shall
be applied in accordance with their terms. Without limiting
the generality of the foregoing, if any portion of this
Section shall be invalidated on any ground, the Corporation
shall nevertheless indemnify an Indemnitee to the full extent
permitted by any applicable portion of this Section that
shall not have been invalidated and to the full extent per-
mitted by law with respect to that portion that has been in-
validated.
12.5 Non-Exclusivity.
(a) The indemnification and advancement of Expenses
provided by or granted pursuant to this Section shall not be
deemed exclusive of any other rights to which Indemnitee is
or may become entitled under any statute, article of
incorporation, by-law, authorization of shareholders or
directors, agreement, or otherwise.
(b) It is the intent of the Corporation by this Section
to indemnify and hold harmless Indemnitee to the fullest ex-
tent permitted by law, so that if applicable law would permit
the Corporation to provide broader indemnification rights
than are currently permitted, the Corporation shall indemnify
and hold harmless Indemnitee to the fullest extent permitted
by applicable law notwithstanding that the other terms of
this Section would provide for lesser indemnification.
12.6 Successors and Assigns. This Section shall be binding
upon the Corporation, its successors and assigns, and shall
inure to the benefit of the Indemnitee's heirs, personal
representatives, and assigns and to the benefit of the
Corporation, its successors and assigns.
12.7 Indemnification of Other Persons. The Corporation may
indemnify any person not covered by Sections 12.1 through
12.6 to the extent provided in a resolution of the Board or a
separate section of these By-laws.
<PAGE>
SECTION 13
AMENDMENTS
13.1 Adoption of By-laws; Amendments Thereof. By-laws of
the Corporation may be adopted only by (i) a majority of the
entire Board of Directors at any time when there is no
Related Person (as defined in Article V.A.2 of the Articles
of Incorporation) or (ii) both a majority of the entire
Board of Directors and a majority of the Continuing
Directors (as defined in Article V.A.4 of the Articles of
Incorporation) at any time when there is a Related Person
Article (as defined in Article V.A.2 of the Articles of
Incorporation). By-laws may be amended or repealed only by
(i) a majority of the entire Board of Directors at any time
when there is no Related Person (except that any amendment
to or repeal of Section 6 of these By-laws shall require an
affirmative vote of at least three-quarters of the entire
Board of Directors), (ii) both a majority of the entire
Board and a majority of the Continuing Directors at any time
when there is a Related Person (as defined in Article V.A.2
of the Articles of Incorporation), or (iii) the affirmative
vote of the holders of at least 80% of the Total Voting
Power at any regular or special meeting of shareholders, the
notice of which expressly states that the proposed amendment
or repeal is to be considered at the meeting.
13.2 Re-Amendment or Re-adoption by Board of Directors. Any
provision of these By-laws amended or repealed by the
shareholders may be re-amended or re-adopted in the manner
provided in Section 13.1.
13.3 New By-laws; Amendments. Any purported amendment to
these By-laws which would add hereto a matter not covered
herein prior to such purported amendment shall be deemed to
constitute the adoption of a By-law provision and not an
amendment to the By-laws.
1. Contract ID Code Page 1 of 2 Pages
AMENDMENT OF SOLICITATION/MODIFICATION
OF CONTRACT L
- --------------------------------------------------------------------------------
2. Amendment/Modification No. 3. Effective Date
P00025 BLK 16C
- --------------------------------------------------------------------------------
4. Requisition/Purchase Reg. No. 5. Proj. No. (If applicable)
N00024-98-FR-91008 8-385P-91008
- --------------------------------------------------------------------------------
6. Issued By Code N00024 7. Administered By Code N63124
NAVAL SEA SYSTEMS COMMAND
2531 JEFFERSON DAVIS HWY SUPSHIP New Orleans
ARLINGTON VA 22242-5160 New Orleans, LA 70142-5700
BUYER/SYMBOL: J.M. Clement SEA 02225
PHONE: 703/602-3102 ext 225
- --------------------------------------------------------------------------------
8. Name and Address of Contractor 9a. Amendment of Solicitation No.
(No., street, county, State and ZIP Code)
Avondale Industries, Inc.
Shipyard Division 9b. Dated (See Item 11)
P.O. Box 50280
New Orleans, LA 70150-1967
10a. Modification of Contract/
Order No.
[X] N00024-93-C-2205
10b. Dated (See Item 13)
Cage Code 96204 Facility Code NOV 20 1992
- --------------------------------------------------------------------------------
11. This Item Only Applies to Amendments of Solicitations
The above numbered solicitation is amended as set forth in Item 14. The
hour and date specified for receipt of Offers [ ]is [ ] is not extended.
Offers must acknowledge receipt of this amendment prior to the hour and date
specified in the solicitation as amended, by one of the following methods:
(a) By completing Items 8 and 15, and returning 2 copies of the amendment, (b)
By acknowledging receipt of this amendment on each copy of the offer submitted;
or (c) By separate letter or telegram which includes a reference to the
solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE
RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND
DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this
amendment you desire to change an offer already submitted, such change may be
made by telegram or letter, provided each telegram or letter makes reference to
the solicitation and this amendment, and is received prior to the opening hour
and date specified.
- --------------------------------------------------------------------------------
12. Accounting and Appropriation Data (if required)
See Attached Financial Accounting Data Sheet
- --------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS, IT MODIFIES THE
CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- --------------------------------------------------------------------------------
[ ] A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES
SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.
- --------------------------------------------------------------------------------
[ ] B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REPLACE THE
ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation
data, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR
43.103(b)
- --------------------------------------------------------------------------------
[X] C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
IN ACCORDANCE WITH OPTIONS CLAUSE
- --------------------------------------------------------------------------------
[ ] D. OTHER (Specify type of modification and authority)
- --------------------------------------------------------------------------------
E. IMPORTANT: Contractor (x) is not, ( ) is required to sign this document
and return copies to the issuing office.
- --------------------------------------------------------------------------------
14. Description of Amendment/Modification (Organize by UCF section headings,
including solicitation/contract subject matter where feasible.)
SEE THE FOLLOWING PAGE.
Except as provided herein, all terms and conditions of the document referenced
in Item 9A or 10A, as heretofore changed, remain unchanged and in full force and
effect.
- --------------------------------------------------------------------------------
15A. Name and Title of Signer (Type or print)
- --------------------------------------------------------------------------------
15B. Contractor/Offeror 15C. Date Signed
----------------------------------------
(Signature of person authorized to sign)
- -------------------------------------------------------------------------------
16A. Name and Title of Contracting Officer (Type or Print)
Jerry M. Clement
Contracting Officer
- -------------------------------------------------------------------------------
16B. United States of America 16C. Date Signed
By /s/ JERRY M. CLEMENT 14 NOV 1997
-------------------------------------
(Signature of Contracting Officer)
- --------------------------------------------------------------------------------
NSN 7540-01-152-8070 30-105 STANDARD FORM 30 (REV 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
FAR (48 CFR) 53-243
<PAGE>
N00024-93-C-2205
P00025
Page 2 of 2
Contract N00024-93-C-2205 provides, in part, under Section B.3, Item(s) 0403AA
through 0411AA that "the Government may require the Contractor to furnish items
0403AA through 0411AA as specified in Section B, for delivery at the time(s) and
place(s) and at the applicable price(s) set forth herein. The Option(s) will be
exercised, if at all, by written or telegraphic notice from the Contracting
Officer sent within the time specified below:"
1. Pursuant to the above provisions, the Government hereby exercises its option
for Item 0403AA through Item 0411AA.
2. As a result of the above option exercise, this modification executes and
fully funds CLINS 0403AA, 0407AA, and 0410AA.
3. Funding in the amount of $209,955,156.00, which consists of $209,707,826.00
for CLIN 0403AA (which includes $1,211,651.00 for Administrative Modifications
thru A00132), $225,178.00 for CLIN 0407AA, and $22,152.00 for CLIN 0410AA is
hereby provided in the attached Financial Accounting Data Sheet to fully fund
the effort in CLINS 0403AA, 0407AA, and 0410AA plus $34,204,000.00 for Item
0403AA for payment of compensation adjustment.
4. The total amount obligated on this modification is $244,159,156.00 which
consists of $209,955,156.00 for the target price as appropriate of
Items 0403AA, 0407AA and 0410AA plus $34,204,000.00 for Item 0303AA for payment
of compensation adjustment thereof.
5. Except as modified above, all other terms, conditions, and prices of Contract
N00024-93-C-2205 remain unchanged and in full force and effect.
<PAGE>
FINANCIAL ACCOUNTING DATA SHEET-NAVY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1. CONTRACT NUMBER (CRITICAL) 2.SPIN (CRITICAL) 3. MOD (CRITICAL) 4. PR NUMBER
N0002493-C-2205 P00025 N0002498FR91008
- -----------------------------------------------------------------------------------------------------------------------------------
5. 6. LINE OF ACCOUNTING
-----------------------------------------------------------------------------------------------------------------------
A. B. C. D. E. F. G. H. I. J. K.
CLIN/SLIN ACRN APPROPRIATION SUBHEAD OBJ PARM RFM SA AAA TT PAA COST CODE
(CRITICAL) (CRITICAL) (CRITICAL) CLA (CRITICAL) ----------------
PROJ PDLI
UNIT MCC & SUF
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0403/AA
0407/AA
0410/AA AS 17 X 4557 8810 312 SA 385 0 068342 2D 000000 22251 200 0000
0403/AA AT 17 X 4557 8810 312 SA 385 0 068342 2D 000000 22251 291 0000
</TABLE>
PAGE 1 OF 1
<TABLE>
<CAPTION>
NAVY INTERNAL
AMOUNT USE ONLY
(CRITICAL) REF DOC/ACRN
- ------------------------------------------------------------------------------
<S> <C>
$209,707,826.00
$225,178.00
$22,152.00
---------------
$209,955,156.00 N000240XAF0NDSF
$34,204,000.00 N000240XAF0NDSF
---------------
PAGE TOTAL $244,159,156.00
---------------
GRAND TOTAL $244,159,156.00
- ------------------------------------------------------------------------------------
PREPARED/AUTHORIZED BY: HENRY W. FITZPATRICK, JR., PMS385P COMPTROLLER APPROVAL:
/S/ Linda D. Grantham /S/ V. JEFFERSON
for 703-602-3130x212
BY DIRECTION OF
11/12/97 CAPT V. H. ACKLEY
DATE: 11/13/97 DEPUTY COMMANDER/COMPTROLLER
</TABLE>
1. Contract ID Code Page 1 of 5 Pages
AMENDMENT OF SOLICITATION/MODIFICATION
OF CONTRACT L
- --------------------------------------------------------------------------------
2. Amendment/Modification No. 3. Effective Date
P00028 BLK 16C
- --------------------------------------------------------------------------------
4. Requisition/Purchase Reg. No. 5. Proj. No. (If applicable)
N00024-98-FR-91011 8-385P-91011
- --------------------------------------------------------------------------------
6. Issued By Code N00024 7. Administered By Code N63124
NAVAL SEA SYSTEMS COMMAND SUPSHIP New Orleans
2531 JEFFERSON DAVIS HWY New Orleans, LA 70142-5700
ARLINGTON VA 22242-5160
BUYER/SYMBOL: J.M. Clement SEA 02225
PHONE: 703/602-3102 ext 225
- --------------------------------------------------------------------------------
8. Name and Address of Contractor 9a. Amendment of Solicitation No.
(No., street, county, State and ZIP Code)
Avondale Industries, Inc.
Shipyard Division 9b. Dated (See Item 11)
P.O. Box 50280
New Orleans, LA 70150-1967
10a. Modification of Contract/
Order No.
[X] N00024-93-C-2205
10b. Dated (See Item 13)
Cage Code 96204 Facility Code NOV 20 1992
- --------------------------------------------------------------------------------
11. This Item Only Applies to Amendments of Solicitations
The above numbered solicitation is amended as set forth in Item 14. The
hour and date specified for receipt of Offers [ ]is [ ] is not extended.
Offers must acknowledge receipt of this amendment prior to the hour and date
specified in the solicitation as amended, by one of the following methods:
(a) By completing Items 8 and 15, and returning 2 copies of the amendment, (b)
By acknowledging receipt of this amendment on each copy of the offer submitted;
or (c) By separate letter or telegram which includes a reference to the
solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE
RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND
DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this
amendment you desire to change an offer already submitted, such change may be
made by telegram or letter, provided each telegram or letter makes reference to
the solicitation and this amendment, and is received prior to the opening hour
and date specified.
- --------------------------------------------------------------------------------
12. Accounting and Appropriation Data (if required)
N/A
- --------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS, IT MODIFIES THE
CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- --------------------------------------------------------------------------------
[ ] A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES
SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.
- --------------------------------------------------------------------------------
[ ] B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REPLACE THE
ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation
data, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR
43.103(b)
- --------------------------------------------------------------------------------
[X] C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
IN ACCORDANCE WITH OPTIONS CLAUSE
- --------------------------------------------------------------------------------
[ ] D. OTHER (Specify type of modification and authority)
- --------------------------------------------------------------------------------
E. IMPORTANT: Contractor (x) is not, ( ) is required to sign this document
and return copies to the issuing office.
- --------------------------------------------------------------------------------
14. Description of Amendment/Modification (Organize by UCF section headings,
including solicitation/contract subject matter where feasible.)
SEE THE FOLLOWING PAGE.
Except as provided herein, all terms and conditions of the document referenced
in Item 9A or 10A, as heretofore changed, remain unchanged and in full force and
effect.
- --------------------------------------------------------------------------------
15A. Name and Title of Signer (Type or print)
E. C. MORTIMER
V. P. GOV'T PROGRAMS
- --------------------------------------------------------------------------------
15B. Contractor/Offeror 15C. Date Signed
/S/ E. C. MORTIMER 2/19/98
----------------------------------------
(Signature of person authorized to sign)
- -------------------------------------------------------------------------------
16A. Name and Title of Contracting Officer (Type or Print)
Jerry M. Clement
Contracting Officer
- -------------------------------------------------------------------------------
16B. United States of America 16C. Date Signed
By /s/ JERRY M. CLEMENT 20 FEB 1998
-------------------------------------
(Signature of Contracting Officer)
- --------------------------------------------------------------------------------
NSN 7540-01-152-8070 30-105 STANDARD FORM 30 (REV 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
FAR (48 CFR) 53-243
<PAGE>
The purpose of this modification is to restate Option Item 0501 as follows:
SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
OPTIONS - FY 98 (SEE NOTE C)
----------------------------
ITEM SUPPLIES/SERVICES PRICE/COST
---- ----------------- ----------
0501AA Procurement of Long Lead Target Cost: $21,766,504
Time Material (LLTM) for Target Profit: $ 2,433,496
one ship (See Attached Target Price: $24,200,000
List A and Notes A and Ceiling Price: $26,119,804
D)
0501AB Procurement of Long Lead Target Cost: $23,233,496
Time Material (LLTM) for Target Profit: $ 2,597,504
one ship (See Attached Target Price: $25,831,000
List B and Notes A and Ceiling Price: $27,880,196
D)
0502AA Data for Option Items NSP
0501AA, and 0501AB
OPTIONS - FY 99 (SEE NOTE C)
----------------------------
0501AC Procurement of Long Lead Target Cost: $13,000,000
Time Material (LLTM) for Target Profit: $ 1,453,270
one ship (See Attached Target Price: $14,453,270
List C and Notes A and Ceiling Price: $15,600,000
D)
0502AB Data for Option Item NSP
0501AC
0503 Completion of one Sealift Target Cost: $146,608,817
ship (See Note A) Target Profit: $ 16,389,207
Target Price: $162,998,024
Ceiling Price: $175,930,580
<PAGE>
NOTE A: These Items are priced on a 50/50 sharing arrangement
with a ceiling percentage of 120% of Target Cost. (See the
INCENTIVE PRICE REVISION--FIRM TARGET clause of Section I.) FY
99 Option Item 0503 Target Cost, which shall increase upon its
exercise by the amount rolled over from the target cost in FY 98
Option Items 0501AA and 0501AB and FY 99 Option Item 0501AC (as
specified in Note D below), shall be the amount used for
calculating incentive price revision for T-AKR 306. If after the
exercise of FY 98 Option Items 0501AA and/or 0501AB and/or FY 99
Option Item 0501AC, the decision is made not to exercise FY 99
Option Item 0503, only the amount under FY 98 Option Items 0501AA
and/or 0501AB and/or FY 99 Option Item 0501AC, will be used in
the calculation of incentive price revision. All costs under
these items shall reflect cost in DEC 1996 dollars.
NOTE B: These Items are to be priced as firm-fixed-price items.
NOTE C: Option Items to which the option clause in SECTION I-2
applies and which are to be supplied only if and to the extent
said Option Items are exercised
NOTE D: Items to be procured as LLTM are specified in the
attached lists A, B and C, attached hereto. The target cost of
each LLTM option includes the cost of procurement as well as
receipt, long-term storage, protection, and maintenance for the
items until exercise of FY 99 Option Item 05C3. After exercise
of FY99 Option Item 0503 (if option is exercised) the target cost
of FY 98 Option Items 0501AA, 0501AB and FY 99 Option Item
0501AC, whether expended or unexpended, will be merged into FY 99
Option Item 0503 via contract modification such that the Target
Cost, Target Profit, Target Price, and Ceiling Price under FY 98
Option Items 0501AA, 0501AB and FY 99 Option Item 0501AC will be
deleted from the contract and will become part of the Target
Cost, Target Profit, Target Price and Ceiling Price under FY 99
Option Item 0503. After such time, all costs, direct and
indirect, incurred under FY 98 Option Items 0501AA, 0501AB and FY
99 Option Item 0501AC will be deemed to be costs incurred under
FY 99 Option Item 0503 and all payments of costs made under FY 98
Option Items 0501AA, 0501AB and FY 99 Option Item 0501AC will be
deemed to be payments made under FY Option Item 0503.
<PAGE>
SECTION C - DESCRIPTION/SPECIFICATION/WORK STATEMENT
The paragraph entitled "Option Item 0501 of FY 98 (if the option
is exercised) - PROCUREMENT OF LONG LEAD TIME MATERIAL FOR ONE
SHIP" is restated to read as follows:
Option FY 98 Items 0501AA, 0501AB and FY 99 Option Item
0501AC (if options are exercised)- PROCUREMENT OF LONG LEAD
TIME MATERIAL FOR ONE SHIP
The Contractor shall procure, as a minimum, the Long
Lead Time Materials in accordance with Attachment A for Item
0501AA, Attachment B for Item 0501AB and Attachment C for
Item 0501AC and within the cost limits stated under Section
B of this contract modification.
SECTION I-2 - CLAUSES INCORPORATED IN FULL TEXT
The Clause "FAR 52.217-7 entitled "OPTION FOR INCREASED QUANTITY
-- SEPARATELY PRICED LINE ITEM (MAR 1989) (NAVSEA VARIATION II)
(SEP 1990)" is restated to read as follows:
OPTION FOR INCREASED QUANTITY -- SEPARATELY PRICED LINE ITEM
(MAR 1989) (NAVSEA VARIATION II) (SEP 1990)
(a) By written notice to the Contractor, The Contracting
Officer may exercise, if at all, any of the Option Items
(for T-AKR 306) identified in Section B and require the
Contractor to provide, within the performance period
specified in Section F, the work described in Section C
for such Option Item(s) at the Target Cost, Target Profit,
Target Price and Ceiling Price and sharing arrangement set
forth in Section B. The Option Item(c) shall be exercised,
if at all, on or before the following dates:
FISCAL YEAR OPTION ITEM ON OR BEFORE:
----------- ---------------------- ---------------
FY 98 0501AA 20 FEB 98
FY 98 0501AB 30 JUN 98
FY 99 0501AC 30 OCT 98
FY 99 0503, 0505, 0507, 0510 31 JAN 99
(b) The exercise of any Item identified under Section B as
an Option Item shall also extend the period of performance
for the Contract Data Requirements List (DD 1423),
Attachment J-5 of the basic contract as modified through all
"A" modification up to A000119, all "P" modlfications up to
P00021, and other changes specified in Section J of this
contract modification.
<PAGE>
(c) The Government may require the Contractor to furnish,
if the options are exercised, FY 99 Option Item 0512 as
specified in paragraph B.3 of the basic contract as modified
through all "A" modification up to A000119, all "P"
modifications up to P00021.
(d) In the event that Option Items 0501AB and 0501AC are
not exercised within the time period specified above the
Government reserves the right to still exercise Option Item
0503. In this event the Contractor would be entitled to an
equitable adjustment in Target Cost and period of
performance for T-AKR 306 only. Target profit, target
price, and ceiling would also be adjusted based upon the
agreed profit and ceiling percentage determined in contract
modification P00022 dated 23 May 1997.
SECTION J - LIST OF ATTACHMENTS is modified to add paragraph C)
as follows:
c) List A, B, and C for Long Lead Time Material to be procured
under CLINS 0501AA, 0501AB and 0501AC, respectively.
Contract N00024-93-C-2205 provides, in part, under Section I-2 in
the Clause "FAR 52.217-7 entitled "OPTION FOR INCREASED QUANTITY
-- SEPARATELY PRICED LINE ITEM (MAR 1989) (NAVSEA VARIATION II)
(SEP 1990)" that the Contracting Officer may exercise, if at all,
any of the Option Items (for T-AKR 306) identified in Section B
and require the Contractor to provide, within the performance
period specified in Section F, the work described in Section C
for such Option Item(s) at the Target Cost, Target Profit, Target
Price and Ceiling Price and sharing arrangement set forth in
Section B. The Option Item(s) shall be exercised, if at all,
on or before the following dates:"
Pursuant to the above provisions, the Government hereby exercises
its option for Item 0501AA.
As a result of the above option exercise, this modification
executes and fully funds CLIN 0501AA.
Funding in the amount of $24,200,000.00 is hereby provided in the
attached Financial Accounting Data Sheet to fully fund the effort
in CLIN 0501AA plus $462,756.00 for Item 0501AA for payment of
compensation adjustment.
The total amount obligated on this modification is $24,662,756.00
which consists of $24,200,000.00 for the target price for Item
0501AA plus $462,756.00 for Item 0501AA for payment of
compensation adjustment.
Except as modified above, all other terms, conditions, and prices
of Contract N00024-93-C-2205 remain unchanged and in full force
and effect.
<PAGE>
The Government acknowledges that the Long Lead Time Material
(LLTM) funding profile in this Modification is different from
that included in P00022 for Option Item 0501 dated 23 May 1997.
The Government recognizes that in order to accommodate its
revised LLTM funding profile with no change in the total price or
delivery date for Option Item 0503, the Contractor may incur
additional effort and risk in revising work plans and vendor
pricing arrangements. This additional effort, if justified, will
be recognized as a part of the consideration for any future
contract delivery date changes under this contract.
<PAGE>
FINANCIAL ACCOUNTING DATA SHEET-NAVY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1. CONTRACT NUMBER (CRITICAL) 2.SPIN (CRITICAL) 3. MOD (CRITICAL) 4. PR NUMBER
N0002493-C-2205 P00028 N0002498FR91011
- -----------------------------------------------------------------------------------------------------------------------------------
5. 6. LINE OF ACCOUNTING
-----------------------------------------------------------------------------------------------------------------------
A. B. C. D. E. F. G. H. I. J. K.
CLIN/SLIN ACRN APPROPRIATION SUBHEAD OBJ PARM RFM SA AAA TT PAA COST CODE
(CRITICAL) (CRITICAL) (CRITICAL) CLA (CRITICAL) ----------------
PROJ PDLI
UNIT MCC & SUF
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0501/AA AU 17 X 4557 8810 312 SA 385 0 068342 2D 000000 22252 200 0000
0501/AA AV 17 X 4557 8810 312 SA 385 0 068342 2D 000000 22252 291 0000
</TABLE>
PAGE 1 OF 1
<TABLE>
<CAPTION>
NAVY INTERNAL
AMOUNT USE ONLY
(CRITICAL) REF DOC/ACRN
- ------------------------------------------------------------------------------
<S> <C>
$24,200,000.00 N000240XAF0NDSF
$462,756.00 N000240XAF0NDSF
--------------
PAGE TOTAL $24,662,756.00
--------------
GRAND TOTAL $24,662,756.00
- ------------------------------------------------------------------------------------
PREPARED/AUTHORIZED BY: HENRY W. FITZPATRICK, JR., PMS385P COMPTROLLER APPROVAL:
/S/ HENRY W. FITZPATRICK, JR. /S/ V. JEFFERSON
V. JEFFERSON
BY DIRECTION OF
CAPT V. H. ACKLEY
DATE: 2/13/98 DEPUTY COMMANDER/COMPTROLLER
</TABLE>
AMENDMENT NUMBER FIVE
TO
AVONDALE INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, Avondale Industries, Inc., a corporation
organized and existing under the laws of the State of
Louisiana, adopted the Avondale Industries, Inc. Employee
Stock Ownership Plan (the "Plan") effective September 1, 1985,
said Plan has been amended from time to time, said Plan was
amended and restated on December 28, 1994 effective January 1,
1989;
WHEREAS, Avondale Industries, Inc. reserved the right to
amend the Plan by resolution of the Board of Directors;
WHEREAS, it is desirable to amend the Plan to clarify the
Plan's reemployment rules, to permit a distribution without
Participant consent of Accounts valued at $5,000 or less
effective January 1, 1998, to permit Participants who attain
age of 70 1/2 in 1996, 1997, or 1998 to elect to commence
distributions or defer receipt of distributions until
retirement, to further revise the definition of Required
Beginning Date to conform to the Small Business Job Protection
Act of 1996 as interpreted by recent IRS Announcements and
Notices, and to make other revisions and clarifications;
NOW, THEREFORE, as authorized by Section 11.1, the Plan
is hereby amended, effective January 1, 1997, unless stated
otherwise, as follows:
I.
Article I, Section 1.15A, Employment Year, is amended and
restated to read as follows:
1.15A Employment Year shall mean the twelve
consecutive month period of employment commencing on
the date the Employee performs his first Hour of
Service for the Employer and each anniversary
thereof. The Employment Year for a reemployed
Eligible Employee is determined in Section 2.3.
<PAGE>
II.
Article I, Section 1.33, Service Termination Date, is
added effective with respect to each Employee as of his
Employment Year beginning on or after January 1, 1997:
1.33 Service Termination Date shall mean the
earliest of the following:
(a) the date on which an Employee resigns,
is discharged, retires or dies;
(b) the first anniversary of the date on
which an Employee is laid off, starts
an authorized leave of absence, or is
absent from work for any other reason
(other than those instances covered
under paragraphs (a) and (c)),
including holidays, paid vacations,
sick leaves and absence on account of
disability;
(c) the second anniversary of the date on
which an Employee commenced a Parental
Absence, if such Employee has not yet
returned to work with a Participating
or Non-Participating Employer.
III.
Article II, Section 2.3, Participation Following
Reemployment, is amended and restated to read as follows:
2.3 Reemployment of an Eligible Employee or
Former Participant. The following reemployment
rules apply:
a. Resetting the Employment Year. If an
Eligible Employee is reemployed his
Employment Year is reset based on his
reemployment date if the following
conditions are met:
i. the Eligible Employee is not
reemployed until after the end of
the Employment Year of his
Service Termination Date, and
ii. the Eligible Employee has a One
Year Break in Service in the
Employment Year prior to the
Employment Year of his
reemployment date.
<PAGE>
b. Reemployment of a Former Participant.
Except as provided in Section 2.3(d),
a "Former Participant" is an Employee
who terminated employment after the
Entry Date following the date on which
he met the requirements of Section
2.1. A Former Participant who is
reemployed shall be treated as if his
employment was not broken. His past
Years of Service for purposes of
vesting will be added to any Years of
Service earned after reemployment.
c. Reemployment of a Non-Participant.
i. If an Eligible Employee who had
not become a Participant is
reemployed and his Employment
Year is not reset, he becomes a
Participant on the first Entry
Date after he meets the
requirements of Sections 1.13 and
2.1.
ii. If an Eligible Employee who had
not become a Participant is
reemployed and his Employment
Year is reset, he becomes a
Participant on the first Entry
Date after he meets the
requirements of Sections 1.13
and 2.1. Hours of Service prior
to reemployment are not
considered for purposes of
determining eligibility to
participate.
iii. If an Eligible Employee who had
previously met the requirements
of Sections 1.13 and 2.1 but had
not yet become a Participant
because he was not employed on an
Entry Date is reemployed and his
Employment Year is not reset, he
shall become a Participant as of
the first Entry Date following
reemployment. If such Eligible
Employee is reemployed and his
Employment Year is reset, he
shall become a Participant on the
first Entry Date following the
completion of one Year of
Service.
<PAGE>
d. Reemployment of Non-Vested
Participant. If a Participant who was
not fully vested in his Employer
Contribution Account terminates
employment and is reemployed after
incurring the greater of (i) five
consecutive One Year Breaks in Service
or (ii) the aggregate number of Years
of Service prior to termination, he
shall be treated as a new employee for
purposes of vesting and any Years of
Service accumulated by him prior to
termination shall be disregarded. For
purposes of participation, see Section
2.3(b).
e. Reemployment of Vested Participant.
If a Participant who was fully vested
in his Employer Contribution Account
terminates employment and is
reemployed after any number of One
Year Breaks in Service, he shall be
reinstated as a Participant, if he is
an Eligible Employee, as of the date
he first performs an Hour of Service
following reemployment. However, his
Employment Year may be reset for
vesting purposes based on the rules
stated in Section 2.3(a).
III.
The last paragraph of Article IV, Section 4.3 is hereby
deleted.
IV.
Article IV, Section 4.4, Reemployment, is amended and
restated to read as follows:
4.4 Reemployment. Years of Service prior to
reemployment may be considered, but only
under the circumstances described in
Section 2.3.
<PAGE>
V.
Article VII, Section 7.9, Notice, is amended, effective
January 1, 1998, to insert the following as the first three
sentences:
The notice required by Section 1.411(a)-11(c)
of the Income Tax Regulations must be provided
to a Participant no less than 30 days and no
more than 90 days before the date of
distribution. The notice explains a
Participant's right to defer receipt of a
distribution if his Vested Interest exceeds
$5,000 ($3,500 prior to January 1, 1998). A
Participant will also receive an explanation of
his distribution options no less than 30 days
and no more than 90 days before the date of
distribution.
VI.
Article VII, Section 7.10, Minimum Required Distribution,
is amended and restated to read as follows:
7.10 Minimum Required Distributions. The
following provisions apply in the event that a
Participant reaches his Required Beginning Date, as
defined below:
(a) Such Participant is required to
receive a benefit unless the
provisions stated below apply.
(b) If the Participant elects a lump-sum
benefit or an annuity, the date as of
which an annuity benefit or lump sum
benefit is required to begin, shall be
no later than the Participant's
Required Beginning Date.
(c) If the Participant elects to be paid
in annual installments, two annual
installments may be made in the year
of the Participant's Required
Beginning Date. Subsequent annual
installments must be made by the
December 31 of that year. The first
payment applicable to the year in
which the Participant attained age 70
1/2 or, if later, retired, cannot be
made later than the Participant's
Required Beginning Date. The second
annual installment must be made by the
December 31 immediately following the
Participant's Required Beginning Date.
<PAGE>
Required Beginning Date shall mean, for anyone,
other than a 5% owner (as defined in Code Section
416(i)(1)(B)(i)), who obtains age 70-1/2 after
December 31, 1998, April 1st of the calendar year
following the later of (a) the calendar year in
which the Employee attains age 70-1/2, or (b) the
calendar year in which the Employee terminates
employment with the Employer.
A Participant (other than a 5% owner) who
attained the age of 70-1/2 in 1996 and has not
retired by the end of 1996 may (i) delay
commencement of minimum distributions until no later
than April 1 following the calendar year in which
the Participant retires from employment with the
Employer or (ii) request make-up distributions for
payments that would have been made in 1997. Such
make-up distributions must be made by December 31,
1997.
A Participant (other than a 5% owner) who
attains the age of 70-1/2 in 1997 or 1998 and
remains employed with an Employer, may elect to
delay commencement of minimum distributions until no
later than April 1 following the calendar year in
which the Participant retires from employment with
an Employer.
A Participant, other than a 5% owner, who
attained age 70-1/2 before 1997 but did not retire
from employment with a Participating Employer before
January 1, 1997, may elect at any time prior to
December 31, 1997, with the consent of his spouse
and subject to the terms of any applicable qualified
domestic relations order, to cease further
distributions until a later date. Pursuant to IRS
Notice 97-75 Q&A-8(b), if such Participant elects to
cease minimum distributions, there will be no new
annuity starting date upon recommencement.
The Required Beginning Date of a Participant
who is a five percent owner (as defined in Code
Section 416(i)(1)(B)(i)) of the Employer shall be
April 1st following the calendar year in which the
Participant reaches age 70-1/2.
For Plan Years beginning prior to January 1,
1997, Required Beginning Date was defined as April
1st of the calendar year following the calendar year
in which a Participant attains age 70-1/2.
<PAGE>
IN WITNESS WHEREOF, Avondale Industries, Inc. has caused
this amendment to be executed in multiple originals by its
officers thereunto duly authorized and its corporate seal to
be hereunto affixed, as of the 30th day of December, 1997.
AVONDALE INDUSTRIES, INC
BY: /s/ Thomas M. Kitchen
---------------------
Thomas M. Kitchen,
Secretary
ATTEST
/s/ Eugene K. Simon, Jr.
------------------------
(Corporate Seal)
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF JEFFERSON
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
depose and state that he signed the foregoing Amendment Number
Five to the Avondale Industries, Inc. Employee Stock Ownership
Plan as a free act and deed on behalf of Avondale Industries,
Inc. for the purposes therein set forth.
/s/ Thomas M. Kitchen
---------------------
Thomas M. Kitchen
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 30TH DAY
OF DECEMBER, 1997.
/s/ Rudolph R. Ramelli
----------------------
NOTARY PUBLIC
AVONDALE INDUSTRIES, INC. PENSION PLAN
As Amended and Restated
Effective January 1, 1997
<PAGE>
AVONDALE INDUSTRIES, INC.
PENSION PLAN
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS
Accrued Benefit .................................... I-1
Actuarial Equivalent ............................... I-2
Actuary ............................................ I-2
Affiliated Company ................................. I-2
Avondale ESOP ...................................... I-2
Beneficiary ........................................ I-3
Code ............................................... I-3
Committee .......................................... I-3
Company ............................................ I-3
Compensation ....................................... I-3
Compensation Year .................................. I-5
Deferred Retirement Date ........................... I-5
Disability Retirement Date ......................... I-5
Early Retirement Date .............................. I-5
Effective Date ..................................... I-5
Eligible Employee .................................. I-5
Employee ........................................... I-6
Employer ........................................... I-6
Employment Year .................................... I-6
Entry Date ......................................... I-6
ERISA .............................................. I-6
Final Average Compensation ......................... I-6
Hour of Service .................................... I-7
Investment Manager ................................. I-8
Leased Employee .................................... I-8
Non-Participating Employer ......................... I-9
Normal Retirement Date ............................. I-9
One Year Break in Service for Benefit Accrual ...... I-9
One Year Break in Service .......................... I-10
Parental Absence ................................... I-10
Participant ........................................ I-10
Plan ............................................... I-10
Plan Year .......................................... I-10
Prior Plan ......................................... I-11
Service Termination Date ........................... I-11
Social Security Retirement Age ..................... I-11
Straight Life Annuity .............................. I-11
Ten Year Certain and Life Annuity .................. I-11
Trustee ............................................ I-11
Trust Agreement .................................... I-11
Trust Fund or Fund ................................. I-12
Year of Service .................................... I-12
Year of Benefit Service ............................ I-12
<PAGE>
ARTICLE II - PARTICIPATION
Eligibility Requirements ........................... II-1
Commencement of Participation ...................... II-1
Termination of Participation ....................... II-1
Transfers .......................................... II-1
Reemployment of an Eligible Employee
or Former Participant .......................... II-2
Rights of Returning Veterans ....................... II-5
ARTICLE III - ELIGIBILITY FOR RETIREMENT INCOME
Normal Retirement Date ............................. III-1
Deferred Retirement Date ........................... III-1
Early Retirement Date .............................. III-1
Disability Retirement Date ......................... III-1
Vesting Date ....................................... III-2
ARTICLE IV - AMOUNT OF RETIREMENT INCOME AND PAYMENTS
Normal Retirement Income ........................... IV-1
Deferred Retirement Income ......................... IV-3
Early Retirement Income ............................ IV-4
Disability Retirement Income ....................... IV-5
Deferred Vested Retirement Income .................. IV-8
Maximum Retirement Income .......................... IV-9
Timing of Payments ................................. IV-12
Transfer Benefit ................................... IV-12
Direct Rollover Rules .............................. IV-13
Notice ............................................. IV-14
ARTICLE V - PRE-RETIREMENT DEATH BENEFITS
Immediate Pre-Retirement Surviving
Spouse's Benefit ............................... V-1
Deferred Pre-Retirement Surviving
Spouse's Benefit ............................... V-1
ARTICLE VI - NORMAL AND OPTIONAL PAYMENT FORMS
OF RETIREMENT INCOME
Normal Form of Payment ............................. VI-1
Waiver of Normal Form and Election of Optional
Form of Payment ................................ VI-1
Waiver Period ...................................... VI-2
Temporary Non-Payment of Retirement Income ......... VI-2
Optional Forms of Payment .......................... VI-2
General Limitations ................................ VI-3
Distribution Rules ................................. VI-4
Limitation in Case of Domestic Relations Order ..... VI-5
Minimum Required Distributions ..................... VI-7
ARTICLE VII - CONTRIBUTIONS
No Contributions by Participants ................... VII-1
Employer Contributions ............................. VII-1
Expenses ........................................... VII-1
Contingent Nature of Contributions ................. VII-1
<PAGE>
ARTICLE VIII - ADMINISTRATION
Appointment of Committee ........................... VIII-1
Notice to Trustee .................................. VIII-1
Administration of Plan ............................. VIII-1
Reporting and Disclosure ........................... VIII-1
Records ............................................ VIII-1
Committee Compensation and Expenses ................ VIII-1
Rules and Regulations .............................. VIII-2
Secretary of the Committee ......................... VIII-2
Claims Review Procedure ............................ VIII-2
Information from Participants and Beneficiaries .... VIII-3
ARTICLE IX - NAMED FIDUCIARIES
Identity of Named Fiduciaries ...................... IX-1
Responsibilities and Authority of Committee ........ IX-1
Responsibilities and Authority of Trustee .......... IX-1
Responsibilities of the Company .................... IX-1
Responsibilities Not Shared ........................ IX-1
Dual Fiduciary Capacity Permitted .................. IX-2
Advice ............................................. IX-2
Indemnification .................................... IX-2
ARTICLE X - PROVISIONS TO PREVENT DISCRIMINATION
Prevention of Discrimination ....................... X-1
Highly Compensated Employees ....................... X-1
Unrestricted Benefit ............................... X-1
Restriction on Payment of Benefit .................. X-1
Repeal ............................................. X-2
ARTICLE XI - AMENDMENT OF THE PLAN
Right to Amend ..................................... XI-1
Restrictions on Amendment .......................... XI-1
ARTICLE XII - TERMINATION OF THE PLAN
Events Constituting Termination .................... XII-1
Partial Termination ................................ XII-1
Allocation of Assets ............................... XII-2
Manner of Distribution ............................. XII-3
Liquidation of Trust Fund .......................... XII-3
Internal Revenue Service Approval for Distribution . XII-3
ARTICLE XIII - TOP-HEAVY PLAN REQUIREMENTS
General Rule ....................................... XIII-1
Vesting Provisions ................................. XIII-1
Minimum Benefit Provisions ......................... XIII-1
Limitation on Compensation ......................... XIII-2
Limitation on Benefits ............................. XIII-2
Coordination With Other Plans ...................... XIII-3
Top-Heavy Plan Definition .......................... XIII-3
Key Employee ....................................... XIII-6
Non-Key Employee ................................... XIII-7
Change from Top-Heavy Status ....................... XIII-7
<PAGE>
ARTICLE XIV - GENERAL PROVISIONS
Plan Voluntary ..................................... XIV-1
Payments to Minors and Incompetents ................ XIV-1
Nonalienation of Benefits .......................... XIV-1
Merger, Consolidation or Transfer .................. XIV-1
Return of Contributions to Participating Employers . XIV-2
Payment of Small Benefits .......................... XIV-2
Recovery of Payments Made Due to a Mistake of Fact . XIV-2
Internal Revenue Service Approval .................. XIV-2
Construction of Agreement .......................... XIV-2
Headings ........................................... XIV-2
Use of Masculine and Feminine; Singular and Plural . XIV-3
Return of Employer Contributions in Excess of
Amount Deductible ............................. XIV-3
<PAGE>
PREAMBLE
--------
The Avondale Industries, Inc. Pension Plan, originally
established effective July 1, 1967 as the Retirement Plan for
Employees of Avondale Shipyards, Inc. and amended from time to
time thereafter, has been adopted by Avondale Industries, Inc.
and was amended and restated in its entirety, effective
January 1, 1988, unless stated otherwise. The Plan was
amended and restated effective January 1, 1989, unless
otherwise provided herein, to comply with the Tax Reform Act
of 1986 and subsequent legislation. The Plan is amended and
restated effective January 1, 1997, unless otherwise provided
herein, to incorporate prior amendments and to comply with the
Family and Medical Leave Act of 1993, the Uniformed Services
Employment and Reemployment Rights Act of 1994 and the Small
Business Job Protection Rights Act of 1996.
This Plan is the continuation of the original Avondale
Industries, Inc. Pension Plan after such Plan and its assets
were merged into the Danly Machine Corporation Pension Plan
for Salaried Employees on December 1, 1987 and then further
merged into the Danly Machine Corporation Hourly (Non-Union)
Pension Plan on December 2, 1987.
The purpose of this Plan is to provide a uniform program
of retirement benefits payable to employees of Avondale
Industries, Inc. and certain related companies upon their
retirement, death, or disability. It is intended that this
plan be qualified and exempt under Sections 401(a) and 501(a)
of the Internal Revenue Code of 1986, as amended from time to
time.
If the Plan shall fail to qualify under these sections of
the Internal Revenue Code, it shall be null and void, and all
contributions which may have been made hereunder shall be
treated in accordance with Section 14.8.
<PAGE>
ARTICLE I
DEFINITIONS
-----------
The following words and phrases when used in the Plan
shall have the following meanings, unless a different meaning
is plainly required by the context:
1.1 Accrued Benefit as of any date shall mean the
Participant's accrued retirement benefit determined as of such
date in accordance with the Plan's benefit formulas described
in Section 4.1 and including any additional Accrued Benefit
under Section 4.8 and before application of any Actuarial
Equivalent factor or any other reduction factor in the Plan.
The Accrued Benefit of Participants who are Employees of
Avondale Services Corporation shall be payable as a Ten-Year
Certain and Life Annuity. These forms of payment shall be
used in determining the annuitized value of the Participant's
account under the Avondale ESOP for purposes of Section
4.1(a)(iv) and Section 4.1(b)(iii) of the Plan.
For divisional employees or former divisional
employees as such terms are defined in the Asset Purchase
Agreement between Avondale Industries, Inc. and Connell
Limited Partnership dated January 27, 1987, and for
participants under the Danly Machine Corporation Pension Plan
for Salaried Employees and the Danly Machine Corporation
Hourly (Non-Union) Pension Plan, Accrued Benefit shall mean
such employees' Accrued Benefit as of January 16, 1987 or as
of March 31, 1987, as determined under the applicable
provisions of a Prior Plan.
If a Participant who was a divisional or former
divisional employee referred to above received an allocation
under the Avondale ESOP, and if any or all of such
Participant's Avondale ESOP Account is distributed to such
Participant prior to the Participant's commencement of
benefits under the Plan, then for purposes of calculating the
Accrued Benefit under the provisions of the Prior Plan the
following provisions apply:
a. the value of the distributed ESOP Account, as
described in (b) below, for purposes of
determining the amount of his Accrued Benefit
under the Prior Plan as of his Early or Normal
Retirement Date, will be added to his remaining
ESOP Account before calculating the annuitized
value of his ESOP Account, and
<PAGE>
b. The value of the distributed ESOP Account is
determined by using the market price for the
shares and other assets held in such Account as
of the close of business on the last trading day
of the month following the month the Participant
received a distribution(s) from his ESOP
Account. This initial value is increased for
assumed investment return at the rate of 7% per
annum for each year and completed month from the
date of the distribution of all or a portion of
the ESOP Account to the Participant's Early or
Normal Retirement Date under the Plan.
1.2 Actuarial Equivalent shall mean a benefit of
equivalent current value to the benefit which otherwise would
have been provided to the Participant, determined on the basis
of (a) the UP-1984 Mortality Table set forward one year for
males, set back four years for females and weighted 95% male
and 5% female and (b) 7.0% annual interest. Provided,
however, that the interest factor used in determining a lump
sum value shall be as follows: (i) prior to 1997, the interest
rate used by the Pension Benefit Guaranty Corporation as of
January 1 of the calendar year in which the determination date
occurs; and (ii) on or after January 1, 1997, the Applicable
Interest Rate. The Applicable Interest Rate is the annual
rate of interest on 30-year Treasury securities for the second
calendar month preceding the Plan Year in which the date of
determination occurs. Further, on or after January 1, 1997,
the determination of a lump sum benefit shall be based on the
Applicable Mortality Table. The Applicable Mortality Table is
the mortality table prescribed in Revenue Ruling 95-6 or any
successor publication of the Service. However, the
determination of the annuitized value of the Participant's
account under the Avondale ESOP for purposes of Section
4.1(a)(iv) and Section 4.1(b)(iii) of the Plan shall be based
on no mortality and 7% annual interest for the period, if any,
from (i) the date the Participant terminates employment with
the Participating Employer or Non-Participating Employer,
retires or becomes totally and permanently disabled, whichever
is earlier, to (ii) the Participant's Normal Retirement Date.
The above notwithstanding, for Participants whose
Accrued Benefits are frozen as described in Section 1.1,
Actuarial Equivalent of a benefit shall mean a benefit of
equivalent value to the benefit which would otherwise have
been provided determined under the terms of a Prior Plan.
1.3 Actuary shall mean an individual who is an "enrolled
actuary" in accordance with regulations issued by the Joint
Board for the Enrollment of Actuaries and who has been
selected by the Committee.
<PAGE>
1.4 Affiliated Company shall mean any corporation which
is included with the Company in a controlled group of
corporations, as determined in accordance with Section 414(b)
of the Code, or any unincorporated trade or business which is
under common control with the Company in accordance with
Section 414(c) of the Code, or any organization (whether or
not incorporated) which is a member of an affiliated service
group with the Company in accordance with Section 414(m) of
the Code, or any other entity required to be aggregated with
the Company pursuant to regulations under Section 414(o) of
the Code.
1.5 Avondale ESOP shall mean the Avondale Industries,
Inc. Employee Stock Ownership Plan, effective September 1,
1985, as amended from time to time.
1.6 Beneficiary shall mean the person or persons
designated by the Participant or former Participant to receive
benefits under the Plan in the event of the Participant's
death. Each Beneficiary designation shall be in a form
prescribed by the Committee.
If the Participant is married and designates someone
other than his legal spouse, his Beneficiary designation must
include the written consent of his spouse at the time the
designation is made. Such written consent must approve the
Beneficiary designated and acknowledge the effect of such
designation and must be notarized by a notary public. If it
is established to the satisfaction of the Committee that the
Participant has no spouse, or that the spouse's consent cannot
be obtained because the spouse cannot be located, or because
of such other circumstances as may be prescribed in
regulations issued pursuant to Section 417 of the Code, such
written consent shall not be required.
If no valid Beneficiary designation is in effect at
the time of the Participant's death, then, to the extent, if
any, benefits are payable under the Plan after such death,
Beneficiary shall mean the Participant's legal spouse, if he
is married at the time of his death, or otherwise the
Participant's estate.
1.7 Code shall mean the Internal Revenue Code of 1986,
as amended from time to time and any Regulations issued
thereunder. Reference to any Section of the Code will include
any successor provision thereto.
1.8 Committee shall mean the Pension Plan Administrative
Committee designated by the Company to administer the Plan in
accordance with Section 8.1 hereof.
1.9 Company shall mean Avondale Industries, Inc. and any
successor company that may continue the Plan.
<PAGE>
1.10 Compensation shall mean, for Employees who are not
Employees of Avondale Services Corporation the monthly base
wages or salary paid to such Employees by their Employer in
effect on July 1 of each year, excluding bonuses, overtime
pay, shift differentials, severance pay, imputed income or
other non-cash compensation, contributions or benefits under
this Plan, the Performance Share Plan, the Stock Appreciation
Plan, or any other employee benefit plan, or reimbursed
expenses. Compensation shall include, however, any pre-tax
contributions Employees elect to have their Employer
contribute to a plan under Section 125 of the Code or a
qualified plan under Section 401(k) of the Code. The monthly
base wages for Employees who are paid on an hourly basis shall
be determined by multiplying the basic hourly rate of pay in
effect on July 1 by 2,080 and dividing the result by 12. The
monthly base salary for Employees who are paid on a salaried
basis shall be such Employees' base monthly salary in effect
on July 1 of each year. The monthly compensation for
Employees who are commission-based Employees or who are
classified by their Employer as temporary or part-time
employees shall be the Employees' Compensation for the
previous calendar year divided by 12.
For Employees of Avondale Services Corporation,
Compensation shall mean the total annual salaries, wages,
bonuses and base car allowance paid to such Employees by their
Employer, but shall exclude severance pay, any contributions
or benefits under this Plan, the Performance Share Plan, the
Stock Appreciation Plan, or any other employee benefit plan,
or reimbursed expenses. Compensation shall include, however,
any pretax contributions Employees elect to have their
Employer contribute to a plan under Section 125 of the Code or
a qualified plan under Section 401(k) of the Code.
For years beginning prior to December 31, 1993, a
Participant's annual Compensation taken into account under the
Plan for any Plan Year shall not exceed $200,000, as adjusted
from time to time in accordance with Section 401(a)(17) of the
Code. For years beginning on or after January 1, 1994, a
Participant's annual Compensation taken into account under the
Plan for any Plan Year shall not exceed $150,000, as adjusted
from time to time in accordance with Section 401(a)(17) of the
Code. For years beginning on or after January 1, 1997, the
adjusted amount is $160,000.
<PAGE>
Unless otherwise provided under the Plan, each
Section 401(a)(17) Employee's Accrued Benefit under this Plan
will be the greater of the Accrued Benefit determined for the
Employee under a. or b. below minus c. below:
a. the Employee's Accrued Benefit before
subtracting the annuitized value of the
Participant's ESOP account described in c. below
determined with respect to the benefit formula
as applied to the Employee's total Years of
Service taken into account under the Plan for
the purposes of benefit accruals, or
b. the sum of:
i. the Employees Accrued Benefit before
subtracting the annuitized value of the
Participant's ESOP account described in c.
below as of the last day of the last Plan
Year beginning before January 1, 1994,
frozen in accordance with Section
1.401(a)(4)-13 of the treasury regulations
and
ii. the Employee's Accrued Benefit before
subtracting the annuitized value of the
Participant's ESOP account described in c.
below determined under the benefit formula
as applied to the Employee's Years of
Service credited to the Employee for Plan
Years beginning on or after January 1,
1994, for purposes of benefit accruals.
c. the annuitized value of the Participant's ESOP
account as described in Section 4.1(a)(iv).
A Section 401(a)(17) Employee means an Employee whose current
Accrued Benefit as of December 31, 1993 is based on
Compensation that exceeded $150,000.
1.11 Compensation Year shall mean each calendar year in
which an Employee employed by a Participating Employer or Non-
Participating Employer on December 31st of such year, or if
not employed on such date is reemployed by a Participating
Employer or Non-Participating Employer within 12 months of his
termination of employment.
1.12 Deferred Retirement Date shall mean the date on
which a Participant retires with a deferred retirement benefit
under the Plan, as determined in accordance with Section 3.2.
1.13 Disability Retirement Date shall mean the date on
which a Participant retires with a disability retirement
benefit under the Plan, as determined in accordance with
Section 3.4.
<PAGE>
1.14 Early Retirement Date shall mean the date on which a
Participant retires with an early retirement benefit under the
Plan, as determined in accordance with Section 3.3.
1.15 Effective Date shall mean January 1, 1997, unless
otherwise provided herein.
1.16 An Eligible Employee shall mean any Employee of a
Participating Employer; provided, however, that an Eligible
Employee shall not include: (a) any Employee who is included
in a unit of employees covered by a negotiated collective
bargaining agreement which does not provide for his
participation in this Plan; (b) any Employee who is providing
services pursuant to an oral or written contract or leasing
arrangement with an unrelated employer, including any Employee
who under a Participating Employer's standard personnel
practices, is deemed a subcontractor or a leased employee;
(c) any Employee who is a Leased Employee; (d) any Employee
who, under a Participating Employer's standard personnel
practices, is deemed an independent contractor (without regard
to such person's status for Federal income tax purposes and
without regard to any subsequent determination that such
person is a common law employee) and (e) any Employee who,
under a Participating Employer's standard personnel practices,
is deemed a contractor, jobber, or a consultant. All
determinations shall be made in the sole discretion of the
Participating Employer in a uniform non-discriminating manner.
1.17 Employee shall mean any person who is employed by a
Participating Employer or Non-Participating Employer as a
common law employee receiving remuneration subject to
withholding for purposes of the Federal Insurance Contribution
Act (except that Leased Employees as described in Section
414(n)(2) of the Code shall be considered Employees solely for
purposes of determining whether the requirements of Section
414(n)(3) of the Code are satisfied). A director of the
Company is not eligible for participation in the Plan unless
he is also an Employee.
1.18 Employer shall mean the Company, Avondale Services
Corporation, and any Affiliated Company, subsidiary or related
entity that adopts this Plan pursuant to authorization by the
Board of Directors of the Company. The list of Employers and
the date such Employers adopted this Plan shall be contained
in Appendix A. A Participating Employer shall mean an entity,
including the Company, included in this definition of
Employer.
1.19 Employment Year shall mean the twelve consecutive
month period of employment commencing on the date the Eligible
Employee performs his first Hour of Service for the Employer
and each anniversary thereof. The Employment Year for a
reemployed Eligible Employee is determined in Section 2.5.
<PAGE>
1.20 Entry Date shall mean January 1 or July 1 for anyone
who does not become a Participant on or before December 31,
1997. Any other reemployed Eligible Employee will become a
Participant on the date on which he meets the eligibility
requirements that were in effect at the time his employment
began.
1.21 ERISA shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
References to any section of ERISA include any successor
provision thereto.
1.22 Final Average Compensation shall mean for a
Participant who is not an Employee of Avondale Services
Corporation, such Participant's average monthly Compensation
for the five consecutive Compensation Years out of the ten (or
fewer) calendar years immediately prior to his actual
retirement date, or the date of his earlier termination of
employment, as the case may be, during which his Compensation
was highest. If a Participant has less than five Compensation
Years on the date of the calculation of his Final Average
Compensation, then those Compensation Years which the
Participant had accumulated on such date shall be utilized.
For Participants who are Employees of Avondale
Services Corporation, Final Average Compensation shall mean
the average annual Compensation for the five consecutive
Compensation Years out of the ten (or fewer) calendar years
immediately prior to his actual retirement date, or the date
of his earlier termination of employment, as the case may be,
during which his Compensation was highest. If a Participant
has less than five Compensation Years on the date of the
calculation of his Final Average Compensation, then those
Compensation Years which the Participant has accumulated on
such date shall be utilized.
1.23 Hour of Service shall mean:
a. Each hour for which an Employee is directly or
indirectly paid or entitled to payment by a
Participating Employer or Non-Participating
Employer for the performance of duties,
including periods of vacation and holidays;
<PAGE>
b. Each hour for which an Employee is directly or
indirectly paid or entitled to payment by a
Participating Employer or Non-Participating
Employer (including payments made or due from a
trust fund or insurer to which the Participating
Employer or Non-Participating Employer
contributes or pays premiums) on account of a
period of time during which no duties are
performed (irrespective of whether the
employment relationship has terminated) due to
illness, incapacity, disability, layoff, jury
duty, or leave of absence, provided that:
i. no more than 501 Hours of Service shall be
credited under this Section 1.23(b) to an
Employee on account of any single
continuous period during which the Employee
performs no duties; and
ii. Hours of Service shall not be credited
under this Section 1.23(b) to an Employee
for a payment which solely reimburses the
Employee for medically related expenses
incurred by the Employee or which is made
or due under a plan maintained solely for
the purpose of complying with applicable
workers' compensation, unemployment
compensation or disability insurance laws;
c. Each hour not already included under Section
1.23(a) or (b) above for which back pay,
irrespective of mitigation of damages, is either
awarded or agreed to by such Employer, provided
that crediting of Hours of Service under this
Section 1.23(c) with respect to periods
described in Section 1.23(b) above shall be
subject to the limitation therein set forth; and
<PAGE>
d. If an Employee is absent from his or her
employment with the Employer for any period on
account of (i) Parental Absence, or (ii) any
paid period of leave recognized under the Family
and Medical Leave Act of 1993, such Employee
shall be credited with sufficient Hours of
Service (not in excess of 501 in any Plan Year)
so that a Break in Service does not occur in
either the Employment Year in which such absence
begins (if credit is required to preclude a
Break in Service in such year) or in the
immediately following Employment Year (if no
credit was awarded in the preceding year). For
purposes of computing Hours of Service credited
under this paragraph (d), an Employee shall be
credited with (i) Hours of Service which would
otherwise be credited to such Employee without
regard to the absence, or (ii) 8 Hours of
Service for each day of the absence. The
Committee, in its sole discretion, may require
(i) evidence that the absence is on account of a
reason enumerated in this paragraph (d), and
(ii) evidence as to the duration of the absence.
The number of Hours of Service to be credited under Section
1.23(b), (c) or (d) above on account of a period during which
an Employee performs no duties, and the Plan Years to which
Hours of Service shall be credited under Sections 1.23(a),
(b), (c) or (d) above shall be determined by the Committee in
accordance with Sections 2530.200b-2(b) and (c) of the
Regulations of the U.S. Department of Labor.
1.24 Investment Manager shall mean the individual,
individuals or institution appointed by the Committee to
direct the investment of all or a part of the Trust Fund.
Such Investment Manager must:
a. be (i) registered in good standing under the
Investment Advisors Act of 1940; or (ii) a bank
as defined in such Act; or (iii) an insurance
company qualified to perform investment
management services under the laws of more than
one State of the United States; and
b. acknowledge in writing its status as a "Named
Fiduciary" under the Plan.
<PAGE>
1.25 A Leased Employee shall mean any person (excluding a
person who is a common law employee of the Participating
Employer or Non-Participating Employer) who, pursuant to an
agreement between a Participating Employer (or an Affiliated
Company) and any other person ("leasing organization") has
performed services for the Participating Employer (or an
Affiliated Company) and related persons determined in
accordance with Section 414(n)(6) of the Code, on a
"substantially full-time basis" for a period of at least one
year and: for Plan Years after 1996, such services are
performed under the primary direction or control of a
Participating Employer (or an Affiliated Employer); for Plan
Years prior to 1997, such services are of the type
historically performed, in the business field of the
Participating Employer (or an Affiliated Employer) by
employees.
A person is considered to have performed services on
a "substantially full-time basis" for a period of at least one
year if: (a) during any consecutive 12-month period such
person has performed at least 1,500 Hours of Service for the
Employer or (b) during any consecutive 12-month period such
person performed services for the Employer for a number of
Hours of Service at least equal to 75% of the average number
of hours that are customarily performed by an employee of the
Employer in the particular position.
Such a person will not be a Leased Employee if the
person (a) is covered by a money purchase pension plan
providing (i) a nonintegrated employer contribution rate of at
least 10% of such person's W-2 wages, (ii) immediate
participation, and (iii) full and immediate vesting, and (b)
provided, the Leased Employee, determined without regard to
whether such person is a participant in the above described
money purchase plan, do not constitute more than 20 percent of
the recipient's nonhighly compensated workforce.
In the event that any Leased Employee subsequently
becomes an Eligible Employee, then unless the Plan is
otherwise excluded by applicable Treasury Regulations from the
requirements of Code Section 414(n), the total period that
such former Leased Employee provided services to the
Participating Employer shall be treated under the Plan, for
participation eligibility and vesting purposes as though he
had been an Employee of the Participating Employer or Non-
Participating Employer.
1.26 Non-Participating Employer shall mean an Affiliated
Company, subsidiary or related entity which is not
participating in the Plan or which is no longer participating
in the Plan by reason of the recision of a prior designation
of participation by the Board of Directors of the Company.
<PAGE>
1.27 Normal Retirement Date shall mean the later of (a) a
Participant's 65th birthday, or (b) the first day of the month
coincident with or next following a Participant's fourth
anniversary of commencement of participation in the Plan.
1.28 One Year Break in Service for Benefit Accrual, for
purposes of benefit accrual, shall mean a 12-month consecutive
period following an Employee's Service Termination Date during
which the Employee fails to be credited with an Hour of
Service. An Employee's One Year Break in Service for Benefit
Accrual includes all periods counted for benefit accrual
purposes prior to 1997 under Plan provisions then in effect.
1.29 One Year Break in Service shall mean an Employment
Year in which a Participant has 500 or less Hours of Service,
effective as to each Employee as of his Employment Year
beginning on or after January 1, 1997.
1.30 Parental Absence shall mean an Employee's absence
from work, on or after January 1, 1985, which has commenced
for any of the following reasons:
a. the pregnancy of the Employee;
b. the birth of the Employee's child;
c. the adoption of a child by the Employee; or
d. the need to care for the Employee's child
immediately following its birth or adoption.
Provided, however, that the Committee, in its sole
discretion, may require evidence that any absence is on
account of a reason enumerated herein and evidence as to the
duration of such absence.
<PAGE>
1.31 Participant shall mean (a) any Eligible Employee who
satisfies the participation requirements set forth in Article
II, and (b) any former Employee on whose behalf an Account
continues to be maintained in the Plan pursuant to Article II.
In the event the Plan fails to pass the coverage
requirements of Section 410(b) of the Code for a Plan Year,
certain Employees will be given "Eligible Employee" status in
a number necessary to satisfy the coverage requirements of
Section 410(b) of the Code. "Eligible Employee" status will
be given to certain Employees beginning first with the
Employee who has both satisfied the participation requirements
of Article II and has the most recent original employment date
and continuing in descending original employment date order,
to the extent necessary for the Plan to pass the coverage
requirements of Section 410(b) of the Code. If two or more
Employees have satisfied the participation requirements of
Article II and have the same original employment date,
Employees will be given "Eligible Employee" status determined
in alphabetical order of the Employees' last names until the
coverage requirements are met. Coverage under this paragraph
only applies to the year in question.
1.32 Plan shall mean the Avondale Industries, Inc.
Pension Plan as set forth in this document and appendices and
as amended from time to time.
1.33 Plan Year shall mean each 12-month period commencing
on January 1 and ending on the next following December 31.
1.34 Prior Plan shall mean the following plans that were
previously sponsored by the Company: (a) the Avondale
Industries, Inc. Pension Plan (reference is to the plan prior
to restatement in 1988); (b) the Danly Machine Corporation
Pension Plan for Salaried Employees; and (c) the Danly Machine
Corporation Hourly (Non-Union) Pension Plan.
1.35 Service Termination Date shall mean the earliest of
the following:
a. the date on which an Employee resigns, is
discharged, retires or dies;
b. the first anniversary of the date on which an
Employee is laid off, starts an authorized leave
of absence, or is absent from work for any other
reason (other than those instances covered under
Sections 1.35(a) and (c)), including holidays,
paid vacations, sick leaves and absence on
account of disability;
c. the second anniversary of the date on which an
Employee commenced a Parental Absence, if such
Employee has not yet returned to work with a
Participating or Non-Participating Employer.
<PAGE>
1.36 Social Security Retirement Age shall mean the age
used as the retirement age for the Participant under Section
216(1) of the Social Security Act, except that such section
shall be applied without regard to the age increase factor,
and as if the early retirement age under Section 216(1)(2) of
such Act were 62.
1.37 Straight Life Annuity shall mean an annuity for
life, ending with the payment due on the last day of the month
coincident with or preceding the date of the Participant's
death.
1.38 Ten Year Certain and Life Annuity shall mean a
benefit providing an annuity for the life of the Participant,
ending with the payment due on the first day of the month
coincident with or preceding the date of his death, with a
guaranteed payment period of 120 months, and as further
described in Article VI.
1.39 Trustee shall mean the individual, individuals or
institution appointed by the Board of Directors of Avondale
Industries, Inc. to act in accordance with the applicable
provisions of the Plan.
1.40 Trust Agreement shall mean the agreement by and
between the Employer and the Trustee, as said Agreement may
from time to time be amended.
1.41 Trust Fund or Fund shall mean all assets held by the
Trustee in accordance with this Plan and the Trust Agreement.
1.42 Year of Service shall mean, for purposes of
eligibility to participate and vesting, any Employment Year
beginning on or after January 1, 1997 in which an Employee
completes 1000 Hours of Service with the Employer. An
Employee's Years of Service include all periods counted as the
Employee's Years of Service earned prior to 1997 under Plan
provisions then in effect.
All of the Employee's Years of Service with the
Employer shall be taken into account including service prior
to the year the Employee meets the definition of Eligible
Employee, for purposes of satisfying the Plan's eligibility
requirements and for calculating a Participant's Vested
Interest in his Employer Contribution Account unless such
periods of service are disregarded pursuant to Section 2.5 of
the Plan.
<PAGE>
1.43 Year of Benefit Service shall mean a 12-month period
commencing on the date the Eligible Employee completes one
Hour of Service, but counting only months while an Eligible
Employee, (or such later date of participation as specified in
Appendix A) or anniversary thereof during which he is employed
by a Participating Employer, provided that:
a. An Employee shall be credited with one Year of
Benefit Service for each 12 complete months of
employment, whether or not consecutive.
b. An Employee shall cease accruing Years of
Service on his Service Termination Date, except
if such Employee performs an Hour of Service
within the 12 month period commencing on his
Service Termination Date, his period of absence
shall be treated as employment.
c. Years of Benefit Service shall include any one
or more of the following, if they occur while
the Employee is an Eligible Employee:
i. any period of absence because of Service in
the Uniformed Services for a Returning
Veteran;
ii. any period of layoff not in excess of one
year in duration;
iii. any period while the Eligible Employee is
on an approved leave of absence with or
without pay (including any leave of absence
for maternity or paternity reasons);
iv. any other period of absence approved by a
Participating Employer or Non-Participating
Employer including paid holidays, paid
vacations and sick leaves;
v. any other period of absence during which
the Eligible Employee does not incur a One
Year Break in Service for Benefit Accrual;
provided the Employee returns to work as an
Eligible Employee with a Participating
Employer or Non-Participating Employer
within the one-year period after his
Service Termination Date;
vi. to the extent not otherwise credited above,
the first 12 months of a Parental Absence
if the Employee provides the Committee with
any evidence it may reasonably require to
determine that the absence is on account of
such Parental Absence.
<PAGE>
Except as otherwise specifically provided under this
Section 1.43, a partial Year of Service shall be determined by
dividing the number of days of employment, whether or not
consecutive, by the number of days in the calendar year.
An Employee's Years of Benefit Service include all
periods counted for benefit accrual purposes prior to 1997
under the Plan then in effect. Notwithstanding anything in
the Plan to the contrary, the Years of Service of any
Participant determined as of January 1, 1988, shall not be
less than the number of years he would have had on such date
under the terms of a Prior Plan as in effect on December 31,
1987.
<PAGE>
ARTICLE II
PARTICIPATION
-------------
2.1 Eligibility Requirements. An Employee is eligible
to participate only after he (a) attains age 21; (b) has
completed one Year of Service; and (c) is an Eligible
Employee.
2.2 Commencement of Participation. An Employee shall
become a Participant on the first Entry Date on which he is an
Eligible Employee and which coincides with or immediately
follows the completion of the requirements set forth in
Section 2.1. However, no Employee shall become a Participant
prior to the effective date of the adoption of the Plan by his
Employer.
Employees or former employees whose Accrued Benefits
are frozen as described in Section 1.1 under the applicable
provisions of a Prior Plan shall not be entitled to a benefit
in excess of their frozen Accrued Benefit.
2.3 Termination of Participation. A Participant shall
terminate his active participation hereunder on the date he
retires, dies, becomes permanently disabled, or terminates
employment with his Participating Employer for any reason.
2.4 Transfers. The following provisions shall govern
in the case of Employees who change employment status:
a. In the event that a Participant transfers
directly from one Participating Employer to
another Participating Employer, he shall not be
deemed to have terminated his participation
under the Plan but shall thereafter be
considered for all purposes of the Plan as an
Eligible Employee of the succeeding
Participating Employer from the date of such
transfer.
b. In the event that an Employee of a Participating
Employer either (i) transfers directly to a Non-
Participating Employer or (ii) becomes a member
of an ineligible class of Employees so that he
is no longer considered an Eligible Employee, he
shall be credited with Years of Service during
such period of employment with the Non-
Participating Employer for vesting purposes
under this Plan, but shall not be credited with
Years of Benefit Service during such period of
employment for purposes of determining the
amount of his Accrued Benefit under this Plan.
Such Participant shall be entitled only to
benefits under the provisions of the Plan as in
effect on the date he ceased to be an Eligible
Employee.
<PAGE>
c. In the event that an Employee of a Non-
Participating Employer either (i) transfers
directly to a Participating Employer or (ii)
otherwise becomes an Eligible Employee, he shall
be credited with Years of Service during his
employment with the Non-Participating Employer
or during a period in which he was not an
Eligible Employee for vesting purposes under
this Plan, but he shall not be credited with
Years of Benefit Service during such period of
employment for purposes of determining the
amount of his Accrued Benefit under this Plan.
Such Employee shall become a Participant on the
date of such transfer, provided he meets the
requirements of Sections 1.16 and 2.1 or if
later, the date on which he meets such
requirements.
d. In the event that a Participant transfers from
any Participating Employer (other than Avondale
Services Corporation) or Avondale Services
Corporation (the "Transferor Employer") to any
Participating Employer (other than Avondale
Services Corporation) or Avondale Services
Corporation (the "Transferee Employer"), such
Participant's Accrued Benefit shall be equal to
the sum of (i) the Participant's Accrued Benefit
based on his Years of Benefit Service earned
while an Employee of the Transferor Employer and
his Final Average Compensation as of the date of
his transfer, and (ii) the Participant's Accrued
Benefit based on his Years of Benefit Service
earned while an Employee of the Transferee
Employer and his Final Average Compensation as
of the date of his termination of employment
with such Transferee Employer. Notwithstanding
the previous sentence, in no event shall a
Participant's Accrued Benefit be less than the
Accrued Benefit to which he would have been
entitled had he always been an Employee of the
Transferor Employer for the entire period during
which he earned Years of Benefit Service.
<PAGE>
2.5 Reemployment of an Eligible Employee or Former
Participant. Except as provided in Section 2.4, when
applicable, the following reemployment rules apply:
a. Reemployment Within One Month. If an Eligible
Employee (whether or not a Participant)
terminates employment and is reemployed before
the end of the month of termination, his
termination is ignored for all purposes.
b. Reemployment of a Former Participant. Except as
provided in Section 2.5(f), a "Former
Participant" is an Employee who terminated
employment after the Entry Date following the
date on which he met the requirements of Section
1.16 and 2.1. A Former Participant who is
reemployed within twelve (12) months from his
Service Termination Date becomes a Participant
on his reemployment date. His termination date
is ignored for benefit accrual purposes and he
has a Year of Service for vesting purposes for
each Employment Year in which he has completed
1000 Hours of Service.
A Former Participant who is reemployed after
twelve months from his Service Termination Date,
shall become a Participant (without waiting
until an Entry Date) after he completes One Year
of Benefit Service from his date of
reemployment. If reinstated as a Participant
past Years of Benefit Service for purposes of
benefit accrual purposes will be added to any
Years of Benefit Service earned after
reemployment and past Years of Service for
purposes of vesting will be added to any Years
of Service earned after reemployment. If the
Former Participant is not reinstated as a
Participant, he will not accrue any additional
vesting or Benefit Service.
c. Resetting the Employment Year. If an Eligible
Employee (whether or not a Participant) is
reemployed, his Employment Year, for purposes of
eligibility to participate and vesting, is reset
based on his reemployment date if the following
conditions are met:
i. the Eligible Employee is not reemployed
until after the end of the Employment Year
of his Service Termination Date, and
ii. the Eligible Employee has a One Year Break
in Service in the Employment Year prior to
the Employment Year of his reemployment
date.
<PAGE>
d. Reemployment of a Non-Participant.
i. If an Eligible Employee who had not become
a Participant is reemployed and his
Employment Year is not reset, he becomes a
Participant on the first Entry Date after
he meets the requirements of Sections 1.16
and 2.1.
ii. If an Eligible Employee who had not become
a Participant is reemployed and his
Employment Year is reset, he becomes a
Participant on the first Entry Date after
he meets the requirements of Sections 1.16
and 2.1. Hours of Service prior to
reemployment are not considered for
purposes of determining eligibility to
participate.
iii. If an Eligible Employee who had previously
met the requirements of Sections 1.16 and
2.1 but had not yet become a Participant
because he was not employed on an Entry
Date is reemployed and his Employment Year
is not reset, he shall become a Participant
as of the first Entry Date following
reemployment. If such Eligible Employee is
reemployed and his Employment Year is
reset, he shall become a Participant on the
first Entry Date following the completion
of one Year of Service.
e. Reemployment of Non-Vested Participant. If a
Participant who was not fully vested in his
Accrued Benefit terminates employment and had
accrued less than five Years of Benefit Service,
is reemployed after incurring five consecutive
One Year Breaks in Service for Benefit Accrual,
he shall be treated as a new employee for
purposes of his Accrued Benefit and any Years of
Benefit Service accumulated by him prior to
termination shall be disregarded.
If a Participant who was not fully vested in his
Accrued Benefit terminates employment and is
reemployed after incurring the greater of (i)
five consecutive One Year Breaks in Service or
(ii) the aggregate number of Years of Service
prior to termination, he shall be treated as a
new employee for purposes of vesting and any
Years of Service accumulated by him prior to
termination shall be disregarded. For purposes
of participation, see Section 2.5(b).
<PAGE>
f. Reemployment of Vested Participant. If a
Participant who was vested in his Accrued
Benefit terminates employment and is reemployed
after any number of One Year Breaks in Service
or any number of One Year Breaks in Benefit
Service, he shall be reinstated as a
Participant, if he is an Eligible Employee,
after he completes a Year of Benefit Service
from his date of reemployment. His Years of
Service and Years of Benefit Service accumulated
before his termination shall be added to any
Years of Service and Years of Benefit Service
which subsequently accumulate. However, his
Employment Year may be reset based on the rules
stated in Section 2.5(c).
g. Reemployment After Commencement of Benefits. If
the Participant was vested in his Accrued
Benefit and payment of such benefits had
commenced or if the Participant otherwise
received a distribution pursuant to Section
14.6,
i. his benefit payments shall be suspended
during the period of his resumed employment
for any month in which he is regularly
scheduled in "Section 203(a)(3)(B) service"
within the meaning of ERISA and, if
suspended, shall recommence on the first
day of the month next following cessation
of his employment;
ii. he shall be eligible for additional Years
of Benefit Service as a result of his
resumed participation in accordance with
the provisions of the Plan;
iii. if he shall die during the period of
resumed participation, benefits shall be
payable in accordance with the provisions
of Article VI; and
iv. any benefits subsequently payable under the
Plan shall be reduced on account of any
benefit payments previously made; but
notwithstanding any other provision of this
Section 2.5(h) to the contrary, any
benefits subsequently payable shall not be
reduced below the level of benefits (or
Actuarial Equivalent thereof) which would
have been payable in the absence of the
Participant's resumed participation.
<PAGE>
2.6 Rights of Returning Veterans. This Section applies
to Returning Veterans who apply for reemployment on or after
December 12, 1994.
a. Definitions
i. Compensation. The Compensation of a
Returning Veteran for a prior year in which
a makeup contribution is required under the
Uniformed Services Employment and
Reemployment Rights Act shall be (a) the
pay the Returning Veteran would have
received if not in the Uniformed Services
(including wage increases and bonuses) or
(b) if it is not "reasonably certain" what
the pay rate during the Uniformed Services
would have been, the Returning Veteran's
average earnings during the twelve months
(or shorter period, if applicable) prior to
the Service in the Uniformed Services.
ii. Returning Veteran means a reemployed
Employee who gave notice to the Company of
his impending service in the Uniformed
Services, (unless such notice was precluded
by military necessity or was otherwise
impossible or unreasonable), and the
cumulative length of absence from the
Company by reason of Service in the
Uniformed Services does not exceed five
years.
iii. Service in the Uniformed Services means the
performance of duty on a voluntary or
involuntary basis in a "Uniformed Service"
and includes: active duty, active duty for
training, initial active duty for training,
inactive duty training, full-time National
Guard duty, and a period for which a person
is absent from a position of employment for
the purpose of an examination to determine
the fitness of the person to perform any
such duty. The "Uniformed Services"
include the Armed Forces, the Army National
Guard, and the Air National Guard when
engaged in active duty for training,
inactive duty training, or full-time
National Guard duty; the commissioned corps
of the Public Health Service; and any other
category of persons designated by the
President of the United States in time of
war or emergency.
b. Years of Benefit Service shall mean any period
of absence because of Service in the Uniformed
Services for a Returning Veteran.
<PAGE>
c. Break in Service. If a Returning Veteran was
absent from his or her employment with the
Employer on account of Service in the Uniformed
Services, the Returning Veteran shall be
credited with sufficient Hours of Service so
that a Break in Service does not occur.
d. Vesting. To the extent not credited above,
Hours of Service will also be credited, for
vesting purposes, based on the customary work
week of the Employee for periods of Service in
the Uniformed Services (as required by
applicable law).
<PAGE>
ARTICLE III
ELIGIBILITY FOR RETIREMENT INCOME
---------------------------------
3.1 Normal Retirement Date. A Participant's Normal
Retirement Date shall be the later of (a) a Participant's 65th
birthday, or (b) the first day of the month coincident with or
next following a Participant's fourth anniversary of
commencement of participation in the Plan. Upon reaching his
Normal Retirement Date, a Participant's right to his Accrued
Benefit shall be fully vested and non-forfeitable. A
Participant who attains his Normal Retirement Date shall be
entitled to a normal retirement income determined pursuant to
Section 4.1.
3.2 Deferred Retirement Date. A Participant may
continue his employment after his Normal Retirement Date and
retire on the first day of any month thereafter, such date
being known as his Deferred Retirement Date. An Employee
continuing his employment beyond his Normal Retirement Date
shall be eligible for participation in the Plan on the same
basis as any other Employee. A Participant retiring on a
Deferred Retirement Date shall be entitled to a deferred
retirement income determined pursuant to Section 4.2.
Notwithstanding the foregoing, if required by the
Board of Directors of the Company, a high-ranking executive or
other policy-making individual with an aggregate anticipated
annual retirement benefit, including benefits not provided
under the Plan, of $44,000 or more, when expressed as a
Straight Life Annuity, shall not be allowed to continue his
employment after his Normal Retirement Date and shall retire
on such Normal Retirement Date, all as determined by the Board
of Directors under uniform rules and in accordance with
applicable law and Regulations.
3.3 Early Retirement Date. A Participant who has
completed at least ten Years of Benefit Service may retire on
the first day of any month following his 55th birthday, such
date being known as his Early Retirement Date; provided,
however, that such Participant provides the Committee with
written notice at least 60 days prior to his Early Retirement
Date.
<PAGE>
3.4 Disability Retirement Date. A Participant who has
completed at least ten Years of Service may retire on the
first day of any month following twelve months of total and
permanent disability, such date being known as his Disability
Retirement Date. Effective January 1, 1989, a Participant who
has completed at least five Years of Service may retire on the
first day of any month following twelve months of total and
permanent disability, such date being known as his Disability
Retirement Date.
For purposes of the Plan, a Participant shall be
considered totally and permanently disabled if he suffers an
illness or injury which prevents him from performing duties of
any substantially gainful activities due to any medically
determinable cause, as determined by the Committee, and which
qualifies him for commencement of benefits for permanent and
total disability under Federal Old Age and Survivor Insurance.
A Participant retiring on a Disability Retirement Date shall
be entitled to a disability retirement income determined
pursuant to Section 4.4; provided, however, that such
disability retirement income shall not be payable during any
period of time prior to the Participant's Normal Retirement
Date during which the Participant receives disability income
benefits under a long-term disability program provided by the
Participating Employer, including any Worker's Compensation
benefits, or under a disability program made available to the
Participant by the Participating Employer through payroll
deductions.
3.5 Vesting Date. A Participant who has completed at
least five Years of Service shall be vested in his Accrued
Benefit and entitled to a deferred vested retirement income
determined pursuant to Section 4.5. Prior to January 1, 1989,
a Participant who terminates his employment with a
Participating Employer or a Non-Participating Employer before
he is eligible to retire on a Normal, Early or Disability
Retirement Date but on or after completing at least ten Years
of Service, shall be vested in his Accrued Benefit.
The above notwithstanding, an employee or former
employee whose Accrued Benefit is frozen as described in
Section 1.1 under the applicable provisions of a Prior Plan
shall be fully vested in such Benefit.
For purposes of this Section 3.5, if a Participant
terminates employment with zero vesting, the Participant will
be deemed to have received a distribution and the non-vested
portion shall be immediately forfeited. For a Participant
first credited with an Hour of Service after December 31, 1987
who terminates employment with a zero benefit, such
Participant will be deemed to have received his full benefit,
vested and nonvested. A Participant can have a benefit
restored after reemployment, but only under the circumstances
described in Section 2.5.
<PAGE>
ARTICLE IV
AMOUNT OF RETIREMENT INCOME AND PAYMENTS
----------------------------------------
4.1 Normal Retirement Income. A Participant who
retires in accordance with Section 3.1 shall be entitled to
receive a normal retirement income equal to his Accrued
Benefit computed as follows:
a. For a Participant who is not an Employee of
Avondale Services Corporation, his monthly
Accrued Benefit shall equal the product of [(i)
times (ii)], minus (iii), minus (iv) plus (v)
where:
i. Equals 25% of the Participant's Final
Average Compensation not in excess of $550
plus 40% of such Participant's Final
Average Compensation in excess of $550;
ii. Equals a fraction the numerator of which is
the Participant's Years of Benefit Service
up to a maximum of 30 years and the
denominator of which is 30;
iii. Equals the amount, if any, of monthly
annuity purchased on behalf of the
Participant in 1985 to be paid directly to
the Participant, commencing at retirement,
from Massachusetts Mutual Life Insurance
Company; and
iv. Equals the monthly annuitized value of the
Participant's account (and any account
derived from such Participant's account or
any account from which such Participant's
account was derived, as the case may be)
under the Avondale ESOP, which is the
Actuarial Equivalent value of the market
value of the Participant's Avondale ESOP
account determined by using the market
price for the shares and other assets held
in such Account as of the close of business
on the last trading day of the month which
is coincident with or precedes the date the
Participant terminates employment with the
Participating Employer or Non-Participating
Employer, retires or becomes totally and
permanently disabled, whichever is earlier,
excluding any shares or other assets
allocated to such Account on or after the
date the Participant terminates employment
with the Participating Employer or Non-
Participating Employer, retires or becomes
totally and permanently disabled, whichever
is earlier (other than allocations for the
preceding ESOP plan year occurring in the
first quarter of the Plan Year of such
termination).
<PAGE>
Pursuant to the provisions of Sections 4.7
and 6.1, such retirement income determined
under this Section 4.1(a) shall be payable
monthly, beginning on the Participant's
Normal Retirement Date and ending upon the
Participant's death.
v. an additional Accrued Benefit pursuant to
Section 4.8, if applicable.
b. For a Participant who is an Employee of Avondale
Services Corporation, his annual Accrued Benefit
shall equal the greater of the benefit obtained
in (i) or (ii), minus (iii) plus (iv) where:
i. Equals 1.5% of the Participant's Final
Average Compensation multiplied by the
Participant's Years of Benefit Service
accrued after September 27, 1985;
ii. Equals 1.5% of the Participant's Final
Average Compensation multiplied by the
Participant's Years of Benefit Service
(including such service with Ogden American
Corporation), minus the benefit, if any,
which the Participant receives under the
Ogden American Corporation Pension Plan,
minus the amount, if any, of the annual
annuity purchased on behalf of the
Participant in 1985 to be paid directly to
the Participant, commencing at retirement,
from Massachusetts Mutual Life Insurance
Company; and
<PAGE>
iii. Equals the monthly annuitized value of the
Participant's account (and any account
derived from such Participant's account or
any such account from which such
Participant's account was derived, as the
case may be) under the Avondale ESOP, which
is the Actuarial Equivalent value of the
market value of the Participant's Avondale
ESOP account determined by using the market
price for the shares and other assets held
in such Account as of the close of business
on the last trading day of the month which
is coincident with or precedes the date the
Participant terminates employment with the
Participating Employer or Non-Participating
Employer, retires or becomes totally and
permanently disabled, whichever is earlier,
excluding any shares or other assets
allocated to such Account on or after the
date the Participant terminates employment
with the Participating Employer or Non-
Participating Employer, retires or becomes
totally and permanently disabled, whichever
is earlier (other than allocations for the
preceding ESOP plan year occurring in the
first quarter of the Plan Year of such
termination).
Pursuant to the provisions of Sections 4.7
and 6.1, such retirement income determined
under this Section 4.1(b) shall be payable
monthly in equal amounts of 1/12 of such
annual Accrued Benefit, beginning on the
Participant's Normal Retirement Date for
his lifetime, with the provision that if
the Participant's death occurs before he
has received 120 monthly payments, the
remaining number of such payments shall be
paid to the person designated as his
Beneficiary.
iv. an additional Accrued Benefit pursuant to
Section 4.8, if applicable.
For purposes of determining the amount by which
a Participant's Accrued Benefit shall be reduced
as determined under Section 4.1(a)(iv) and
Section 4.1(b)(iii), the number of shares held
in the Participant's account (and any account
derived from such Participant's account or any
such account from which such Participant's
account was derived, as the case may be) in the
Avondale ESOP shall be increased by the number,
including fractions, of any shares which have
been distributed to the Participant prior to the
date of the calculation of the Participant's
Accrued Benefit.
<PAGE>
4.2 Deferred Retirement Income. A Participant who
retires on a Deferred Retirement Date in accordance with
Section 3.2 shall be entitled to receive a deferred retirement
income equal to the normal retirement amount described in
Section 4.1(a) or (b), whichever is applicable, determined as
of his actual retirement date, based on his Years of Benefit
Service and Final Average Compensation at retirement.
Pursuant to the provisions of Sections 4.7 and 6.1, for
Participants who are not Employees of Avondale Services
Corporation, such retirement income shall be payable beginning
on the Participant's Deferred Retirement Date and ending upon
the Participant's death. Pursuant to the provisions of
Sections 4.7 and 6.1, for Participants who are Employees of
Avondale Services Corporation, such retirement income shall be
payable monthly in equal amounts of 1/12 of such Benefit,
beginning on the Participant's Deferred Retirement Date for
his lifetime, with the provision that if the Participant's
death occurs before he has received 120 monthly payments, the
remaining number of such payments shall be paid to the person
designated as his Beneficiary.
4.3 Early Retirement Income. A Participant who retires
on an Early Retirement Date in accordance with Section 3.3
shall be entitled to receive a retirement income beginning at
his Normal Retirement Date determined as follows:
a. For a Participant who is not an Employee of
Avondale Services Corporation, his early
retirement income shall be equal to the product
of [(i) times (ii)] minus (iii) plus (iv) where:
i. Equals the product obtained by multiplying
the amount determined under Section
4.1(a)(i) times the amount determined under
Section 4.1(a)(ii), based on his Final
Average Compensation as of his actual
retirement date. For purposes of
calculating the amount described in Section
4.1(a)(ii), Years of Benefit Service shall
be calculated assuming the Participant
remained employed until his Normal
Retirement Date (up to a maximum of 30
years);
ii. Equals a fraction, the numerator of which
is the Participant's Years of Benefit
Service as of his actual retirement date
and the denominator of which is the
Participant's Years of Benefit Service
assuming the Participant remained employed
until his Normal Retirement Date; and
iii. Equals the sum of the amounts determined
under Section 4.1(a)(iii) and Section
4.1(a)(iv).
iv. an additional Accrued Benefit pursuant to
Section 4.8, if applicable.
<PAGE>
If the Participant has completed ten or more
Years of Benefit Service and elects to begin
receiving his early retirement income on his
Early Retirement Date, such early retirement
income shall be reduced by a percentage amount
specified in Appendix B for each month that
commencement upon his actual retirement date of
his early retirement income precedes his Normal
Retirement Date. Pursuant to the provisions of
Sections 4.7 and 6.1, such retirement income
determined under this Section 4.3(a) shall be
payable monthly beginning on the Participant's
Early Retirement Date and ending upon the
Participant's death.
b. For a Participant who is an Employee of Avondale
Services Corporation, his early retirement
income shall be equal to the normal retirement
amount described in Section 4.1(b), determined
as of his actual retirement date based on his
Years of Benefit Service and Final Average
Compensation at actual retirement.
If the Participant has completed ten or more
Years of Benefit Service and elects to begin
receiving his early retirement income on his
Early Retirement Date, such early retirement
income shall be reduced by a percentage amount
specified in Appendix B for each month that
commencement upon his actual retirement date of
his early retirement income precedes his Normal
Retirement Date. Pursuant to the provisions of
Sections 4.7 and 6.1, such retirement income
determined under this Section 4.3(b) shall be
payable monthly in equal amounts of 1/12 of such
annual Accrued Benefit beginning on the
Participant's Early Retirement Date for his
lifetime, with the provision that if the
Participant's death occurs before he has
received 120 monthly payments, the remaining
number of such payments shall be paid to the
person designated as his Beneficiary.
<PAGE>
4.4 Disability Retirement Income. A Participant who
retires on a Disability Retirement Date in accordance with
Section 3.4 shall be entitled to receive a retirement income
beginning at his Normal Retirement Date determined as follows:
a. For a Participant who is not an Employee of
Avondale Services Corporation, his disability
retirement income shall be equal to the product
of [(i) times (ii)] minus (iii) plus (iv) where:
i. Equals the product obtained by multiplying
the amount determined under Section
4.1(a)(i) times the amount determined under
Section 4.1(a)(ii), based on his Final
Average Compensation as of his actual
retirement date. For purposes of
calculating the amount described in Section
4.1(a)(ii), Years of Benefit Service shall
be calculated assuming the Participant
remained employed until his Normal
Retirement Date (up to a maximum of 30
years);
ii. Equals a fraction, the numerator of which
is the Participant's Years of Benefit
Service as of his actual retirement date
and the denominator of which is the
Participant's Years of Benefit Service
assuming the Participant remained employed
until his Normal Retirement Date; and
iii. Equals the sum of the amounts determined
under Section 4.1(a)(iii) and Section
4.1(a)(iv). For Participants who elect to
begin receiving disability retirement
income prior to the commencement of the
annuity amounts described in Section
4.1(a)(iii), the retirement income payable
under this Plan shall be increased by the
amount of such annuity (reduced as provided
under this paragraph for early
commencement). Such retirement income
shall be subsequently reduced by the same
amount at such time the Participant is
eligible to receive the annuity amounts
described in Section 4.1(a)(iii).
iv. an additional Accrued Benefit pursuant to
Section 4.8, if applicable.
<PAGE>
If the Participant has completed five or more
Years of Service (ten Years of Service prior to
January 1, 1989) and elects to begin receiving
his disability retirement income on his
Disability Retirement Date, such early
retirement income shall be reduced by a
percentage amount specified in Appendix B for
each of the first 120 months, and the Actuarial
Equivalent of each additional month thereafter
that commencement, upon his actual retirement
date, of his disability retirement income
precedes his Normal Retirement Date. Pursuant
to the provisions of Sections 4.7 and 6.1, such
retirement income determined under this Section
4.4(a) shall be payable monthly beginning on the
Participant's Disability Retirement Date and
ending upon the Participant's death.
b. For a Participant who is an Employee of Avondale
Services Corporation, his disability retirement
income shall be equal to the normal retirement
amount described in Section 4.1(b), determined
as of his actual retirement date, based on his
Years of Benefit Service and Final Average
Compensation at actual retirement.
If the Participant has completed five or more
Years of Service (ten Years of Service prior to
January 1, 1989) and elects to begin receiving
his disability retirement income on his
Disability Retirement Date (or the first of any
month prior to his Normal Retirement Date), such
early retirement income shall be reduced by a
percentage amount specified in Appendix B for
each of the first 120 months, and the Actuarial
Equivalent of each additional month thereafter
that commencement, upon his actual retirement
date, of his disability retirement income
precedes his Normal Retirement Date. Pursuant
to the provisions of Sections 4.7 and 6.1, such
retirement income determined under this Section
4.4(b) shall be payable monthly in equal amounts
of 1/12 of such Benefit beginning on the
Participant's Disability Retirement Date for his
lifetime, with the provision that if the
Participant's death occurs before he has
received 120 monthly payments, the remaining
number of such payments shall be paid to the
person designated as his Beneficiary.
<PAGE>
c. Retirement Benefits payable under this Section
4.4 shall not be payable during any period of
time prior to the Participant's Normal
Retirement Date during which the Participant
receives disability income benefits under a
long-term disability program provided by the
Participating Employer including any Worker's
Compensation benefits, or under a disability
program made available to the Participant by the
Participating Employer through payroll
deductions.
d. In the event a Participant covered by this
Section 4.4 recovers from total and permanent
disability prior to his Normal Retirement Date
and is reemployed by the Employer, payment of
his disability retirement benefit shall cease
and his subsequent benefits under the Plan shall
be based on his Years of Benefit Service earned
prior to his Disability Retirement Date and
Years of Benefit Service accrued after he is
reemployed in the same manner as though all his
Years of Benefit Service had been continuous.
e. In the event a Participant covered by this
Section 4.4 recovers from total and permanent
disability prior to his Normal Retirement Date
and is not reemployed by a Participating
Employer, his retirement benefit shall cease and
he shall be entitled to a retirement benefit
pursuant to Section 4.3 based on his Years of
Benefit Service earned prior to his Disability
Retirement Date and Final Average Compensation
at his Disability Retirement Date.
<PAGE>
4.5 Deferred Vested Retirement Income. If a
Participant is entitled to a deferred vested retirement income
pursuant to Section 3.5, such retirement income shall be
determined in accordance with the following provisions:
a. If a Participant who is not an Employee of
Avondale Services Corporation does not make
written request for his retirement income to
begin before his Normal Retirement Date, his
deferred vested retirement income payable on his
Normal Retirement Date shall be equal to the
product of [(i) times (ii)] minus (iii) plus
(iv) where:
i. Equals the product obtained by multiplying
the amount determined under Section
4.1(a)(i) times the amount determined under
Section 4.1(a)(ii), based on his Final
Average Compensation as of his actual
termination date. For purposes of
calculating the amount described in Section
4.1(a)(ii), Years of Benefit Service shall
be calculated assuming the Participant
remained employed until his Normal
Retirement Date (up to a maximum of 30
years);
ii. Equals a fraction, the numerator of which
is the Participant's Years of Benefit
Service as of his actual termination date
and the denominator of which is the
Participant's Years of Benefit Service
assuming the Participant remains employed
until his Normal Retirement Date;
iii. Equals the sum of the amounts determined
under Section 4.1(a)(iii) and Section
4.1(a)(iv); and
iv. An additional Accrued Benefit pursuant to
Section 4.8, if applicable.
If such Participant has completed ten or more
Years of Benefit Service and gives 60 days'
written notice for retirement income to begin on
an Early Retirement Date, such deferred vested
retirement income shall be reduced by a
percentage amount specified in Appendix B for
each month that commencement, upon his actual
retirement date, of his deferred vested
retirement income precedes his Normal Retirement
Date. Pursuant to the provisions of Sections
4.7 and 6.1, such retirement income determined
under this Section 4.5(a) shall be payable
monthly beginning on the Participant's Early
Retirement Date and ending upon the
Participant's death.
<PAGE>
b. If a Participant who is an Employee of Avondale
Services Corporation does not make written
request for his retirement income to begin
before his Normal Retirement Date, his deferred
vested retirement income payable on his Normal
Retirement Date shall be equal to the normal
retirement amount described in Section 4.1(b),
determined as of his date of termination, based
on his Years of Benefit Service and Final
Average Compensation at termination.
If such Participant has completed ten or more
Years of Benefit Service and gives 60 days'
written notice for retirement income to begin on
an Early Retirement Date, such deferred vested
retirement income shall be reduced by a
percentage amount specified in Appendix B for
each month that commencement, upon his actual
retirement date, of his deferred vested
retirement income precedes his Normal Retirement
Date. Pursuant to the provisions of Sections
4.7 and 6.1, such retirement income determined
under this Section 4.5(b) shall be payable
monthly in equal amounts of 1/12 of such Benefit
beginning on the Participant's Early Retirement
Date for his lifetime, with the provision that
if the Participant's death occurs before he has
received 120 monthly payments, the remaining
number of such payments shall be paid to the
person designated as his Beneficiary.
4.6 Maximum Retirement Income.
a. Any other provision of the Plan to the contrary
notwithstanding, in no event may a Participant's
annual retirement income payment under the Plan,
expressed as a benefit payable in the form of a
Straight Life Annuity with no ancillary benefits
(exclusive of any benefit not required to be
considered for purposes of applying the
limitations of Section 415 of the Code),
together with the annual benefit payable under
any other defined benefit plan of the Company or
an Affiliated Company, exceed the lesser of (i)
or (ii) below, but subject to (iii), (iv), (v)
and (vi) below:
i. 100% of the Participant's average
compensation (as defined under Section
415(b) of the Code) in the three
consecutive highest paid calendar years.
ii. $94,023, as adjusted from time to time in
accordance with Section 415(d) of the Code.
<PAGE>
iii. In the case where a benefit commences prior
to the Participant's Social Security
Retirement Age and on or after age 62, the
limitation under (ii) shall be reduced by
5/9ths of one percent for each of the first
thirty-six (36) months and 5/12ths of one
percent for each of the additional months
(up to 24 months) by which the benefit
commences before the month of the
Participant's Social Security Retirement
Age. If the benefit commences before the
Participant's 62nd birthday, the limitation
described in (ii) shall be the Actuarial
Equivalent of the limitation for benefits
commencing at age 62.
iv. In the case where a Participant has
completed less than ten Years of Benefit
Service as a Participant, the amount
otherwise determined under this Section
4.6(a)(ii) shall be multiplied by a
fraction with a numerator equal to the
number of whole Years of Benefit Service as
a Participant and a denominator equal to
ten.
v. Except in the case where a benefit is
payable in the form of a 50% Joint and
Survivor Annuity with the Participant's
spouse designated as the joint annuitant,
where a benefit is payable in a benefit
form other than a Straight Life Annuity the
amount otherwise determined under this
Section 4.6(a) shall be the Actuarial
Equivalent of the amount payable as a
Straight Life Annuity.
vi. Notwithstanding the foregoing, the benefit
payable to a Participant shall not be
considered to exceed the limitations
imposed under this Section 4.6(a) if the
aggregate retirement benefit payable to the
Participant under the Plan does not exceed
$10,000 (and has not exceeded $10,000 in
any prior year); provided, however, that
this paragraph shall not apply if the
Participant has participated in a defined
contribution plan maintained by the Company
or an Affiliated Company.
vii. Notwithstanding the foregoing, the benefit
payable to a Participant shall not be
considered to exceed the limitation under
(ii) if the Participant's Accrued Benefit
as of December 31, 1986, exceeds that
dollar limitation, but was not in violation
of the requirements of Code Section 415 for
1986 and prior years.
<PAGE>
For the purpose of determining the Actuarial
Equivalent amount described in (v), above, or in
(iii) above if the benefit is payable prior to
the Social Security Retirement Age, the interest
rate shall be the greater of 5% or the rate
specified in Section 1.2 of the Plan. To
determine the Actuarial Equivalent amount in
(iii) above if the benefit is payable after the
Social Security Retirement Age, the interest
rate shall be the lesser of 5%, or the rate
specified in Section 1.2 of the Plan, with no
mortality. In any event, the mortality table
shall be as set forth in Revenue Ruling 95-6 or
any successor publication of the Service. If
the standard rate for determining Actuarial
Equivalent benefits under Section 1.2 is
modified, the above "greater of" rate will
change accordingly. If the rate specified in
Code Section 415(b)(2)(E) is modified the above
"lesser of" rate will change accordingly.
b. In the case of a Participant who has
participated in a defined contribution plan
maintained by the Company or an Affiliated
Company, the sum of a Participant's "defined
benefit plan fraction" and "defined contribution
plan fraction", determined as of the close of
any Plan Year, shall not exceed one. For the
purpose of this Section 4.6(b), a Participant's
defined benefit plan fraction and defined
contribution plan fraction shall have the
meanings described in (i) and (ii) below:
i. Defined benefit plan fraction shall mean a
fraction with a numerator equal to the
Participant's projected annual benefit
(other than any benefit attributable to
employee contributions) under the Plan
(assuming the Participant continues in
employment to his Normal Retirement Date at
his current rate of compensation), and a
denominator equal to the lesser of (1) 1.25
multiplied by the amount described in
Section 4.6(a)(ii) or (2) 1.4 multiplied by
the amount described in Section 4.6(a)(i).
<PAGE>
ii. Defined contribution plan fraction shall
mean a fraction with a numerator equal to
(1) below and a denominator equal to (2)
below:
(1) The sum of the annual additions made
to the Participant's account under any
defined contribution plan maintained
by the Company or an Affiliated
Company, where the annual additions
are equal to the sum of (a) any
Participating Employer contributions
allocated to the account (including
any pre-tax contributions), (b) any
forfeitures allocated to the account
and (c) any Participant after-tax
contributions allocated to the
account.
(2) The sum for each calendar year of the
Participant's employment with the
Company or Affiliated Company of the
lesser of (a) 1.4 multiplied by 25% of
the Participant's earnings (as defined
under Section 415 of the Code) for the
calendar year, or (b) for each
calendar year after 1982, 1.25
multiplied by $30,000 as adjusted for
increases in the cost-of-living as
provided under rules and regulations
adopted by the Secretary of the
Treasury, and for each calendar year
prior to 1983, 1.25 multiplied by the
amount for such calendar year
determined in accordance with Section
415(e)(3)(B)(i) of the Code.
In the event that the aforesaid limitation would
otherwise be exceeded with respect to a Participant, it is
intended that the benefit accrual under this Plan shall be
limited as necessary, except that an Employee may elect to
reduce his contributions, whether pre-tax or after-tax, under
any defined contribution plan in which he participates if he
determines this method of compliance would be in his best
interest.
For purposes of this Section 4.6, an Affiliated
Company shall be determined by assuming the phrase "more than
50 percent" is substituted for the phrase "at least 80
percent" wherever it appears in Section 1563 of the Code.
<PAGE>
4.7 Timing of Payments. Notwithstanding anything in
the Plan to the contrary the actual payment of a Participant's
retirement income under the Plan shall be deferred until the
March 1 of the calendar year immediately following the
Participant's actual retirement date. Upon such date, the
Participant (or his Beneficiary, if applicable) shall receive
(a) a lump sum payment representing the sum of the monthly
retirement income, determined pursuant to the provisions of
Article IV, deferred from his actual retirement date until
such March 1 and (b) monthly retirement income, determined
pursuant to the provisions of Article VI, thereafter.
4.8 Transfer Benefit
a. With the consent of the Committee, amounts may
be transferred from the Avondale ESOP to the
Trust Fund by Participants who retire in
accordance with Article III and who are eligible
to receive benefits, subject to the following
conditions:
i. The transfer will not jeopardize the tax
exempt status of this Plan or Trust Fund or
create adverse tax consequences to the
Employer.
ii. The amount transferred must be the entire
vested Avondale ESOP account balance of
such Participant.
iii. The transfer must be based upon a voluntary
election by the Participant and all notice
and consent requirements of the Avondale
ESOP must be met;
iv. The amounts transferred shall be considered
an additional Accrued Benefit (as provided
in Section 4.8(b)) and shall be so
identified. Such benefit shall be fully
vested at all times and shall not be
subject to forfeiture for any reason.
v. Pursuant to Section 414(l) of the Code,
after the transfer, the Participant is
entitled to receive a benefit, on a
termination basis, with respect to the
transferred assets, which is equal to or
greater than the benefit he or she would
have been entitled to receive immediately
before the transfer.
vi. Prior to accepting the transfer to which
this Section applies, the Committee may
require the Participant to establish that
the amounts to be transferred to the Trust
Fund meet the requirements of this Section.
<PAGE>
b. If a Participant elects to transfer his or her
Avondale ESOP account balance to the Trust Fund
pursuant to Section 4.8(a), such Participant
shall be entitled to an Accrued Benefit equal to
the amount determined under Section 4.1(a)(iv)
or Section 4.1(b)(iii), whichever is applicable.
c. The benefits provided under this Section 4.8
shall be paid as part of and subject to the same
terms and provisions as the other benefits
provided under the Plan.
4.9 Direct Rollover Rules. This Section 4.9 applies to
distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this
Article, a distributee may elect, at the time and in the
manner prescribed by the plan administrator, to have any
portion of an eligible rollover distribution paid directly to
an eligible retirement plan specified by the distributee in a
direct rollover.
a. The term Eligible rollover distribution means
any distribution of all or any portion of the
balance to the credit of the distributee, except
that an eligible rollover distribution does not
include: any distribution that is one of a
series of substantially equal periodic payments
(not less frequently than annually) made for the
life (or life expectancy) of the distributee or
the joint lives (or joint life expectancies) of
the distributee and the distributee's designated
beneficiary, or for a specified period of ten
years or more; any distribution to the extent
such distribution is required under section
401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross
income (determined without regard to the
exclusion for net unrealized appreciation with
respect to employer securities).
b. An Eligible retirement plan includes an
individual retirement account described in
section 408(a) of the Code, an individual
retirement annuity described in section 408(b)
of the Code, an annuity plan described in
section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that
accepts the distributee's eligible rollover
distribution. However, in the case of an
eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an
individual retirement account or individual
retirement annuity.
<PAGE>
c. The term Distributee includes an employee or
former employee. In addition, the employee's or
former employee's surviving spouse and the
employee's or former employee's spouse or former
spouse who is the alternate payee under a
qualified domestic relations order, as defined
in section 414(p) of the Code, are distributees
with regard to the interest of the spouse or
former spouse.
d. The term Direct rollover means a payment by the
plan to the eligible retirement plan specified
by the distributee.
4.10 Notice. The notice required by Section 1.411(a)-
11(c) of the Income Tax Regulations must be provided to the
Participant no less than 30 days and no more than 90 days
before the date of distribution. The notice explains a
Participant's right to defer receipt of the distribution if
the Actuarial Equivalent present value of monthly payments of
retirement income exceeds $3,500 for Plan Years prior to
January 1, 1998 and $5,000 for Plan Years beginning after
January 1, 1998. A Participant will also receive an
explanation of distribution options no less than 30 days and
no more than 90 days before the date of distribution.
Effective January 1, 1994, if a distribution is one to which
Sections 401(a)(11) and 417 of the Internal Revenue Code do
not apply, such distribution may commence less than 30 days
after the notice required under Section 1.411(a)-11(c) of the
Income Tax Regulations is given, provided that:
a. the Committee clearly informs the Participant
that the Participant has a right to a period of
at least 30 days after receiving the notice to
consider the decision of whether or not to elect
a distribution (and, if applicable, a particular
distribution option), and
b. the Participant, after receiving the notice,
affirmatively elects a distribution.
<PAGE>
ARTICLE V
PRE-RETIREMENT DEATH BENEFITS
-----------------------------
5.1 Immediate Pre-Retirement Surviving Spouse's Benefit.
In the event of the death of an active or vested terminated
Participant after becoming eligible to retire on an Early
Retirement Date but before his actual retirement date, a
monthly retirement benefit shall be payable to his surviving
legal spouse. Such amount shall be determined as if:
a. the Participant had retired and elected
retirement income payments to begin on the first
day of the month coinciding with or next
preceding his date of death, and
b. his retirement income was payable in the form of
a 50% Joint and Survivor Spouse Annuity with his
spouse entitled to receive 50% of the amount of
the Participant's retirement income.
Benefits shall be payable to the surviving spouse on
the first day of the month following the Participant's death.
Pursuant to the provisions of Section 4.7, payments shall
commence on the Participant's death and shall continue to be
made on the first day of the month thereafter during the
surviving spouse's lifetime. In lieu of the joint and
survivor spouse annuity payments described in this Section
5.1, such spouse may elect to receive such payments in one
lump sum; provided, however, that the Actuarial Equivalent
value of such retirement payments is $5,000 or less.
Notwithstanding the foregoing, no benefit shall be
payable under this Section 5.1 if the Participant is not
married on the date his distribution of benefits commences, or
the Participant has not been legally married throughout the
one-year period ending on the earlier or (i) the date as of
which distribution of his benefit commences or (ii) the date
of the Participant's death.
<PAGE>
5.2 Deferred Pre-Retirement Surviving Spouse's Benefit.
In the event of the death of an active or vested terminated
Participant on or after completing the vesting requirements
under Section 3.5, but prior to being eligible for early
retirement pursuant to Section 3.3, a monthly retirement
benefit shall be payable to his surviving legal spouse. Such
amount shall be determined as if:
a. the Participant separated from service as of his
date of death, then
b. survived until reaching the earliest retirement
age under the Plan, or if later, the age at
death,
c. retired, electing immediate payment of benefits
under the 50% Joint and Survivor Spouse Annuity,
with his surviving spouse entitled to receive
50% of the amount of the Participant's reduced
retirement income, and then
d. died on the day after the date in (b) above.
Benefits shall be payable to such surviving spouse
on the first day of the month coincident with or next
following the month in which the Participant would have
reached the earliest retirement age under the Plan or, if
later, the age at death. Pursuant to the provisions of
Section 4.7, payments shall commence on the first day of the
month coincident with or next following the month in which the
Participant would have reached age 55 or, if later, the
Participant's death and shall continue to be made on the first
day of each month thereafter during such surviving spouse's
lifetime. In lieu of the joint and survivor spouse annuity
payments described in this Section 5.2, such spouse may elect
to receive such payments in one lump sum; provided, however,
that the Actuarial Equivalent value of retirement payments is
$5,000 or less.
If a benefit is payable under Section 5.1, no
benefit shall be payable under this Section 5.2.
Notwithstanding the foregoing, no benefit shall be
payable under this Section 5.2 if the Participant is not
survived by a legal spouse.
<PAGE>
ARTICLE VI
NORMAL AND OPTIONAL PAYMENT FORMS OF RETIREMENT INCOME
------------------------------------------------------
6.1 Normal Form of Payment. Retirement income under
the Plan shall be payable as follows:
a. If a Participant is married on the date his
retirement income begins, the normal form of
payment shall be an immediate 50% Joint and
Survivor Spouse Annuity with the legal spouse
entitled to receive 50% of the Participant's
reduced amount of retirement income, which shall
be the Actuarial Equivalent of the amount
determined pursuant to Article IV.
b. If a Participant who is not an Employee of
Avondale Services Corporation is not married on
the date his retirement income begins, the
normal form of payment shall be a Straight Life
Annuity, which shall be equal to the amount
determined pursuant to Article IV with no
retirement income payable after the
Participant's death.
c. If a Participant who is an Employee of Avondale
Services Corporation is not married on the date
his retirement income begins, the normal form of
payment shall be a Ten Year Certain and Life
Annuity, which shall be equal to the amount
determined pursuant to Article IV with the
provision that if the Participant's death occurs
before he has received 120 monthly payments, the
remaining number of such payments shall be paid
to his Beneficiary.
6.2 Waiver of Normal Form and Election of Optional Form
of Payment. A Participant may waive his normal form of
payment described in Section 6.1 provided that concurrently
with such waiver he shall elect an optional form of payment
from those provided for in Section 6.5. Such waiver and
election may be made only during the waiver period specified
in Section 6.3; otherwise, payment shall be made to him in the
normal form. The Participant shall file such forms and
provide such information as the Committee may reasonably
require to comply with all applicable laws and to determine
his eligibility, qualification of his spouse and his amount of
retirement income.
<PAGE>
Such election shall be made in writing and shall not
take effect unless either:
a. the Participant's legal spouse consents in
writing to such election and the spouse's
consent acknowledges the effect of such election
and is witnessed by a notary public, or
b. it is established to the satisfaction of the
Committee that the Participant has no legal
spouse, or that such spouse's consent cannot be
obtained because the spouse cannot be located,
or because of such other circumstances as may be
prescribed in regulations issued pursuant to
Section 417 of the Code.
6.3 Waiver Period. The Committee shall make an
election form available to each Participant not less than nine
months before the Participant meets the requirements for early
retirement described in Section 3.3; provided, however, that
such election form shall not be distributed if the Committee
determines in a uniform and non-discriminatory manner that no
retirement income is payable under this Plan, as determined
under the provisions of Article IV. Such form shall describe
in plain language the terms and conditions of the optional
forms of benefit and shall provide for election of optional
forms of benefit and a benefit commencement date. The
completed election form must be returned to the Committee
within the 90 day period ending on the designated benefit
commencement date. If a Participant files a subsequent
election form, the prior form shall be of no effect. If no
election has been made at the expiration of the election
period, retirement benefits will be payable in accordance with
Section 6.1.
The Committee shall, when necessary, mail the form
to the Participant via certified mail, at his last address on
the records of the Committee or, if deemed appropriate,
through any facilities made available by the United States
Social Security Administration. During the waiver period, the
Participant may request information with respect to the
financial effect of his waiver on the normal form of payment
and the election of any available optional form of payment.
Any waiver may be revoked, or election changed, at any time up
to the due date for the Participant's first retirement income
payment, on a form approved by the Committee.
<PAGE>
6.4 Temporary Non-Payment of Retirement Income. If a
Participant or Beneficiary fails to submit the form required
under Section 6.2 or fails to furnish information reasonably
requested by the Committee which is necessary to determine
whether such Participant or Beneficiary has satisfied all
requirements for payment of benefits, the Committee shall
delay payment of benefits until the requested information is
furnished and shall make reasonable efforts to obtain such
information. After the requested information has been
furnished and the Committee has determined that the
Participant or Beneficiary has met the requirements for
payment of benefits, such benefits shall be payable as if the
Participant or Beneficiary had furnished the requested
information in a timely manner.
6.5 Optional Forms of Payment. The forms of benefit
payment available to each Participant shall be the Actuarial
Equivalent of his normal form of retirement income pursuant to
Section 6.1. A Participant may elect to receive that portion
of his Accrued Benefit which accrued prior to January 1, 1988
in the form of any one of the options which he could have
elected under the terms of the Plan on December 31, 1987. A
Participant may also elect to receive that portion of his
Accrued Benefit accruing on or after January 1, 1988, or his
entire Accrued Benefit, in the form of any one of the
following optional forms of benefit:
a. Straight Life Annuity, under which retirement
income payments are made to the Participant
during his lifetime, with no further payments
from the Plan on his behalf after his death.
b. 50% Joint and Survivor Spouse Annuity, under
which reduced retirement income payments are
made to the Participant during his lifetime,
based on Actuarial Equivalent factors, with
payments from the Plan upon his death equal to
50% of the payment previously payable to the
Participant to be continued to and for the
lifetime of his legal spouse. The payments
under a 50% Joint and Survivor Spouse Annuity,
will commence effective immediately upon
election by the Participant.
i. If a Participant elects the 50% Joint and
Survivor Spouse Annuity and his legal
spouse dies before benefit payments
commence, his election of the 50% Joint and
Survivor Spouse Annuity shall be null and
void.
ii. If a Participant elects the 50% Joint and
Survivor Spouse Annuity and benefit
payments have commenced, his retirement
income payments thereafter shall not be
changed by reason of the death of his legal
spouse during his own lifetime.
<PAGE>
c. Ten Year Certain and Life Annuity, under which
reduced retirement income payments are made to
the Participant during his lifetime, based on
Actuarial Equivalent factors, with the provision
that if the Participant's death occurs before he
has received 120 monthly payments, the value of
the remaining number of such payments shall be
paid to the person designated as his
Beneficiary.
d. Lump Sum Option, under which the present value
of retirement income payments are paid to a
Participant in one lump sum. This option is
available to Participants whose Actuarial
Equivalent value of retirement income payments
is $5,000 or less.
6.6 General Limitations. Anything in this Article VI
to the contrary notwithstanding, no method of distribution
shall be made under a normal or optional payment form of
retirement income which would result in the actuarial value of
a Beneficiary's interest exceeding 50% of the actuarial value
of the Participant's own interest on a life annuity basis,
both being determined as of the Participant's Normal
Retirement Date or the earlier date on which he becomes
entitled to first payment of his retirement income. This
limitation shall not apply where the Beneficiary is the
Participant's legal spouse.
An election under this Article VI of a Beneficiary
other than the Participant's legal spouse is effective only if
the Participant's spouse consents to the beneficiary
designated, the consent is witnessed by a notary public, and
the spouse's consent acknowledges the effect of such
designation. Such spousal consent is not required, however,
if the Participant establishes to the satisfaction of the
Committee that the consent cannot be obtained because the
spouse cannot be located, or because of such other
circumstances as may be prescribed in regulations issued
pursuant to Section 417 of the Code. Any consent by a spouse
(or establishment that consent cannot be obtained) is
effective only with respect to that spouse.
<PAGE>
6.7 Distribution Rules. Unless the Participant elects
otherwise, retirement income payments shall commence no later
than the 60th day after the close of the Plan Year in which
the latest of the following occurs:
a. the Participant attains age 65, or
b. the 10th anniversary of the date the Participant
commenced participation, or
c. the Participant terminates employment.
Further, distribution of benefits shall not be
deferred beyond the Required Beginning Date, as defined in
Section 6.9, and payments after the initial payment shall be
made monthly, except in the case of a lump sum payment where
no additional payments are due.
Upon the death of a Participant after payment of
retirement income has commenced, any remaining payments shall
be made no less rapidly than under the form of payment in
effect at the Participant's death. Upon the death of a
Participant prior to the date payment of retirement income has
commenced, payment of a death benefit, if any, to the
Participant's spouse shall commence no later than the April 1
following the calendar year in which the Participant would
have attained age 70-1/2, or if later, within one year
following the date of the Participant's death; and payment of
a death benefit to a person other than the Participant's
spouse shall commence no later than one year following the
Participant's death.
Notwithstanding the foregoing, an earlier
distribution shall be made where provided by the applicable
provisions of the Plan. However, in the case of a Participant
who is a 5% owner of the Company or an Affiliated Company, no
distribution of any amounts attributable to Employer
contributions while he was a 5% owner shall be made before the
earlier of the date such Participant dies, becomes disabled
within the meaning of Section 72(m)(7) of the Code or attains
age 59-1/2, unless such Participant acknowledges in writing
that he understands that such premature distribution will be
subject to the penalties imposed by Section 72(m)(5)(B) of the
Code.
<PAGE>
6.8 Limitation in Case of Domestic Relations Order.
All rights and benefits including election rights, provided to
Participants pursuant to this Plan, are subject to the rights
afforded to any "alternate payee" pursuant to a "qualified
domestic relations order," as those terms are defined below.
Pursuant to the provisions of Section 414(p) of the
Code, a "qualified domestic relations order" shall mean a
judgment, decree or order (including approval of a property
settlement agreement) made pursuant to a State domestic
relations law (including a community property law) that
relates to the provision of child support, alimony payments,
or marital property rights to a spouse, former spouse, child
or other dependent of a Participant ("alternate payee") and
which:
a. creates or recognizes the existence of an
alternate payee's right to, or assigns to an
alternate payee the right to, receive all or a
portion of the benefits payable to a Participant
under this Plan; and
b. specifies (i) the name and last known mailing
address (if any) of the Participant and each
alternate payee covered by the order (ii) the
amount or percentage of the Participant's
benefits under the Plan to be paid to each such
alternate payee, or the manner in which such
amount or percentage is to be determined and,
(iii) the number of payments or the period to
which the order applies; and
c. does not require this Plan to:
i. provide any type or form of benefit, or any
option, not otherwise provided hereunder;
ii. pay any benefits to any alternate payee
prior to the earlier of:
(1) the earliest date benefits are payable
hereunder to a Participant, or
(2) the later of the date the Participant
attains age 50 or the earliest date on
which the Participant could obtain a
distribution under the Plan if the
Participant terminated employment;
iii. pay any benefits which are not vested under
the Plan;
iv. provide increased benefits (as actuarially
determined using such assumptions for
Actuarial Equivalence as are required under
Section 414(p) of the Code), or
<PAGE>
v. pay benefits to an alternate payee which
are required to be paid to another
alternate payee under a prior qualified
domestic relations order.
For purposes of this Plan, an alternate payee who
had been married to the Participant for at least one year may
be treated as a spouse with respect to the portion of the
Participant's Accrued Benefit in which such alternate payee
has an interest provided that the qualified domestic relations
order provides for such treatment. However, under no
circumstances may the spouse of an alternate payee (who is not
a Participant hereunder) be treated as a spouse under the
terms of the Plan.
Upon receipt of any judgment, decree or order
(including approval of a property settlement agreement)
relating to the provision of payment by the Plan to an
alternate payee pursuant to a State domestic relations law,
the Committee shall promptly notify the affected Participant
and any alternate payee of the receipt of such judgment decree
order and shall notify the affected Participant and any
alternate payee of the Committee's procedure for determining
whether or not the judgment, decree or order is a qualified
domestic relations order.
The Committee shall establish procedures to
determine the status of a judgment, decree or order as a
qualified domestic relations order and to administer Plan
distributions in accordance with any such qualified domestic
relations order. Such procedures shall be in writing, shall
include provisions specifying the notification requirements
enumerated in the preceding paragraph, shall permit an
alternate payee to designate a representative for receipt of
communications from the Committee, and shall include such
other provisions as the Committee shall determine, including
such provisions required under Regulations promulgated by the
Secretary of the Treasury.
During any period in which the issue of whether a
judgment, decree or order is a qualified domestic relations
order is being determined (by the Committee, a court of
competent jurisdiction or otherwise), the Committee shall
separately account for the portion of the Participant's
Accrued Benefit, if any, which would have been payable to the
alternate payee during such period if the judgment, decree or
order were determined to be a qualified domestic relations
order.
<PAGE>
If the judgment, decree or order is determined to be
a qualified domestic relations order within the 18-month
period following the receipt by the Committee of the qualified
domestic relations order, then payment of the portion of the
Participant's Accrued Benefit shall be paid to the appropriate
alternate payee at the time and in the form specified in such
order. If such a determination is not made within the 18-
month period, the Participant's Accrued Benefit under the Plan
shall be paid at the time and in the manner provided under the
Plan as if no order, judgment or decree had been received by
the Committee.
6.9 Minimum Required Distributions. The following
provisions apply in the event that a Participant reaches his
Required Beginning Date, as defined below:
a. Such Participant is required to receive a
benefit.
b. If the Participant elects a lump-sum benefit or
an annuity, the date as of which an annuity
benefit or lump sum benefit is required to
begin, shall be no later than the Participant's
Required Beginning Date.
c. If the Participant elects to be paid in annual
installments, two annual installments may be
made in the year of the Participant's Required
Beginning Date. Subsequent annual installments
must be made by the December 31 of that year.
The first payment cannot be made later than the
Participant's Required Beginning Date. The
second annual installment must be made by the
December 31 immediately following the
Participant's Required Beginning Date.
Required Beginning Date shall mean, for anyone,
other than a 5% owner (as defined in Code
Section 416(i)(1)(B)(i)), who obtains age 70-1/2
after December 31, 1998, April 1st of the
calendar year following the later of (a) the
calendar year in which the Employee attains age
70-1/2, or (b) the calendar year in which the
Employee terminates employment with the
Employer.
A Participant (other than a 5% owner) who
attained the age of 70-1/2 in 1996 and has not
retired by the end of 1996 may (i) delay
commencement of minimum distributions until no
later than April 1 following the calendar year
in which the Participant retires from employment
with the Employer or (ii) request make-up
distributions for payments that would have been
made in 1997. Such make-up distributions must
be made by December 31, 1997.
<PAGE>
A Participant (other than a 5% owner) who
attains the age of 70-1/2 in 1997 or 1998 and
remains employed with an Employer, may elect to
delay commencement of minimum distributions
until no later than April 1 following the
calendar year in which the Participant retires
from employment with an Employer.
A Participant, other than a 5% owner, who
attained age 70-1/2 before 1997 but did not
retire from employment with a Participating
Employer before January 1, 1997, may elect at
any time prior to December 31, 1997, with the
consent of his spouse and subject to the terms
of any applicable qualified domestic relations
order, to cease further distributions until a
later date. Pursuant to IRS Notice 97-75 Q&A-
8(b), if such Participant elects to cease
minimum distributions, there will be no new
annuity starting date upon recommencement.
The Required Beginning Date of a Participant who
is a five percent owner (as defined in Code
Section 416(i)(1)(B)(i)) of the Employer shall
be April 1st following the calendar year in
which the Participant reaches age 70-1/2.
For Plan Years beginning prior to January 1,
1997, Required Beginning Date was defined as
April 1st of the calendar year following the
calendar year in which a Participant attains age
70-1/2.
<PAGE>
ARTICLE VII
CONTRIBUTIONS
-------------
7.1 No Contributions by Participants. No Participant
shall be required or permitted to make a contribution under
the Plan.
7.2 Employer Contributions. All contributions to
provide benefits under the Plan shall be made by each
Participating Employer or the Company on behalf of
Participating Employers from time to time, any forfeiture of
the interest of any Participant in the Trust Fund being
applied to reduce the amount of such contributions. The
Committee, on the basis of actuarial estimates made by the
Actuary, will recommend the amount of contributions which will
accomplish the purposes of the Plan and be in compliance with
ERISA and the Code. Such contributions for each Plan Year
shall be remitted to the Trustee no later than the date
prescribed by law for filing the Participating Employer's
federal income tax return, including extensions, for such
Employer's taxable year ending with or within such Plan Year.
7.3 Expenses. The reasonable expenses incident to the
operation of the Plan, including premiums for termination
insurance payable to the Pension Benefit Guaranty Corporation,
fees for professional services and the costs of such other
technical or clerical assistance as may be required, shall be
paid out of the Fund, to the extent not paid by all
Participating Employers.
7.4 Contingent Nature of Contributions. Unless the
Employer notifies the Committee and the Trustee in writing to
the contrary, all contributions made to this Plan are
conditioned upon their deductibility under Section 404 of the
Code.
<PAGE>
ARTICLE VIII
ADMINISTRATION
--------------
8.1 Appointment of Committee. The Board of Directors
of the Company will appoint a Committee which may, but need
not, consist of Plan Participants or Employees of an Employer.
Such Committee shall be known as the Pension Plan
Administrative Committee. The Committee shall consist of
three or more members, each of whom shall be appointed by and
shall remain in office at the will of the Board of Directors
of the Company. The Board of Directors may also remove any
Committee member at any time, with or without cause. A
Committee member may resign at any time by filing his written
resignation with the Board of Directors of the Company.
8.2 Notice to Trustee. The Company will notify the
Trustee in writing of each Committee member's appointment, and
the Trustee may assume such appointment continues in effect
until written notice to the contrary is given by the Company.
8.3 Administration of Plan. The Committee will have
all powers and authority necessary or appropriate to carry out
its responsibilities with respect to the operation and
administration of the Plan. It will interpret and apply all
Plan provisions and may supply any omission, or reconcile any
inconsistency or ambiguity in such manner as it deems
advisable. It will make all final determinations concerning
eligibility, benefits and rights hereunder, and all other
matters concerning Plan administration and interpretation.
All determinations and actions of the Committee will be
conclusive and binding upon all persons, except as otherwise
provided herein or by law, except that the Committee may
revoke or modify a determination or action previously made in
error. The Committee will exercise all powers and authority
given to it in a nondiscriminatory manner, and will apply
uniform administrative rules of general application in order
to assure similar treatment to persons in similar
circumstances.
8.4 Reporting and Disclosure. The Committee will
prepare, file, submit, distribute, or make available any Plan
descriptions, reports, statements, forms or other information
to any government agency, Employee, Participant, or
Beneficiary as may be required by law.
8.5 Records. The Committee will record its
proceedings, acts and decisions, and will keep all data,
records, books of account and instruments pertaining to Plan
administration, which will be subject to inspection or audit
by the Company at any time. The Company will supply all
information required by the Committee to administer the Plan,
and the Committee may rely upon the accuracy of such
information.
<PAGE>
8.6 Committee Compensation and Expenses. The
Committee, and each Committee member, will serve without
compensation unless otherwise determined by the Company;
provided that in no event will an Employee receive extra
compensation for his services as a Committee member. All
reasonable expenses incurred by the Committee in administering
the Plan will be paid by the Participating Employers.
8.7 Rules and Regulations. Any action or decision
concurred in by a majority of the Committee members, either at
a meeting or in writing without a meeting, will constitute an
action or decision of the Committee. The Committee may adopt
and amend such rules for the conduct of its business and
administration of the Plan as it deems advisable.
8.8 Secretary of the Committee. The Committee at its
option may elect any Committee member or other person to serve
as Secretary, and may remove him at any time. The Committee
will notify the Trustee in writing of such election, and the
Trustee may assume the Secretary's authority to act as
Secretary continues until written notice to the contrary is
given the Committee. The Secretary, or a majority of the
Committee members then in office, will have the authority to
execute all instruments or memoranda necessary or appropriate
to carry out the actions and decisions of the whole Committee;
and any person may rely upon any instrument or memoranda so
executed as evidence of the Committee action or decision
indicated thereby.
8.9 Claims Review Procedure. Any request for benefits
(the "claim") by a Participant or his Beneficiary (the
"claimant") will be filed in writing with the Committee.
Within 90 days after receipt of a claim or, 180 days if the
Committee determines that special circumstances exist which
require extension of the time for processing a claim, the
Committee will provide written notice to any claimant whose
claim has been wholly or partly denied, including:
a. the reasons for the denial,
b. the Plan provisions on which the denial is
based,
c. any additional material or information necessary
to perfect the claim and the reasons it is
necessary, and
d. the Plan's claims review procedure.
<PAGE>
A claimant will be given a full and fair review by
the Committee of the denial of his claim if he requests a
review in writing within 60 days after notification of the
denial. The claimant may review pertinent documents and may
submit issues and comments orally, in writing, or both. The
Committee will render its decision on review in writing within
60 days after receipt by the Committee of the application for
review, or within 120 days if the Committee determines that
special circumstances exist which require extension of the
time for processing the application for review, and will
include specific reasons for the decision and references to
the Plan provisions on which the decision is based.
8.10 Information from Participants and Beneficiaries.
Each Participant and Beneficiary shall be required to furnish
to the Committee, in the form prescribed by it, such personal
data, affidavits, authorization to obtain information, and
other information as the Committee may deem appropriate for
the proper administration of the Plan.
<PAGE>
ARTICLE IX
NAMED FIDUCIARIES
-----------------
9.1 Identity of Named Fiduciaries. The Company, the
Trustee, the Committee, and any Investment Manager will be the
"Named Fiduciaries" under the Plan and will control and manage
the Plan and its assets to the extent and in the manner
indicated in this Plan. Any responsibility assigned to a
"Named Fiduciary" will not be deemed to be a duty of a
"Fiduciary" (as that term is defined in ERISA) solely by
reason of such an assignment.
9.2 Responsibilities and Authority of Committee. The
Committee will control and manage the operation and
administration of the Plan. The Committee will also
(a) recommend candidates for Trustee to the Company,
(b) appoint any Investment Manager to the Plan, and
(c) monitor the performance of such Trustee and Investment
Manager. The Committee will recommend Plan amendments to the
Company as necessary and will communicate such information to
the Trustee and Investment Manager as they may need for the
proper performance of their duties.
9.3 Responsibilities and Authority of Trustee. The
Trustee will manage and control the assets of the Plan, except
to the extent that such responsibilities are specifically
vested in the Company or the Committee under the terms of the
Plan, or are delegated to one or more Investment Managers
appointed by the Committee.
9.4 Responsibilities of the Company. The Company will
have the following responsibilities and authority with respect
to control and management of the Plan and its assets:
a. to amend the Plan;
b. to merge or consolidate the Plan with, or
transfer all or part of the assets or
liabilities to, any other plan or to accept the
transfer of assets from another qualified plan;
c. to establish a funding policy;
d. to appoint, remove, and replace Trustee(s) and
Committee members; and
e. to perform such additional duties as are imposed
by law.
9.5 Responsibilities Not Shared. Except as otherwise
specified herein or required by law, each "Named Fiduciary"
will have only those responsibilities that are specifically
assigned to it hereunder, and no "Named Fiduciary" will incur
liability because of improper performance or nonperformance of
responsibilities specifically assigned to another "Named
Fiduciary".
<PAGE>
9.6 Dual Fiduciary Capacity Permitted. Any person or
group of persons may serve in more than one fiduciary
capacity, including service both as Trustee and Committee
member.
9.7 Advice. A "Named Fiduciary" may employ or retain
such attorneys, accountants, investment advisors, consultants,
specialists, and other persons or firms, including such
persons or firms that may also perform services for the
Company, as he deems necessary or desirable to advise or
assist him in the performance of his duties. Unless otherwise
provided by law, the "Fiduciary" will be fully protected with
respect to any action taken or omitted by him in reliance upon
any such person or firm.
9.8 Indemnification. The Company to the extent
permitted by law, will indemnify and hold harmless every
person serving as a "Fiduciary" (whether a "Named Fiduciary"
or otherwise) from and against all loss, damages, liability,
and reasonable costs and expenses, incurred in carrying out
his fiduciary responsibilities, unless due to the bad faith or
willful misconduct of such person, provided that a
"Fiduciary's" counsel fees and amount paid in settlement must
be approved by the Company. The preceding sentence will not
apply to a corporate Trustee or to an investment manager as
defined in ERISA, except as the Company and such corporate
Trustee or investment manager may otherwise agree in writing.
<PAGE>
ARTICLE X
PROVISIONS TO PREVENT DISCRIMINATION
------------------------------------
10.1 Prevention of Discrimination. With a view of
preventing any discrimination in favor of highly compensated
Employees and notwithstanding anything in the Plan to the
contrary, the use of the assets of the Fund is subject to the
limitations specified in this Article.
10.2 Highly Compensated Employees. For the purpose of
this Article, "Highly Compensated Employees" means the twenty-
five highest paid Employees of any Employer as of the
Effective Date or the date the Plan was most recently amended
in a manner substantially affecting benefits for such
Employees, but excluding any Employee to whom, on the basis of
his annual rate of compensation on such date, an annual
retirement benefit to which he may be entitled upon retirement
on or after his Normal Retirement Date will not exceed $1,500.
10.3 Unrestricted Benefit. For the purpose of this
Article, the term unrestricted benefit means the amount of any
highly compensated Employee's retirement benefit which is not
in excess of that provided by the greater of:
a. $20,000, or
b. 20% of his average annual compensation over a
period of at least five consecutive years, or
$10,000, whichever is less, multiplied by the
number of years from the date determined
pursuant to Section 10.2 and prior to any date
on which benefits are restricted under Section
10.4(a)(ii), or
c. a dollar amount which equals the present value
of the maximum benefit described in Section
4022(b)(3)(B) of ERISA (determined on the
earlier of the date the Plan terminates or the
date benefits commence, and determined in
accordance with regulations of the PBGC) without
regard to any other limitations in Section 4022
of ERISA.
<PAGE>
10.4 Restriction on Payment of Benefit
a. During the ten years after the date determined
pursuant to Section 10.2, the retirement
benefits payable on account of highly
compensated Employees shall be subject to the
following conditions, notwithstanding any other
provisions in the Plan to the contrary:
i. Any highly compensated Employee who is
retired may receive his full benefit while
the Plan is in full effect.
ii. If, during the aforesaid ten years,
contributions are terminated or the Plan is
terminated or an Employer is dissolved or
liquidated, no highly compensated Employee
shall receive any benefit which is in
excess of his unrestricted benefit.
b. The conditions of Section 10.4(a) shall not
restrict the full payment of benefit payments to
the Beneficiary of any highly compensated
Employee who dies while the Plan is in full
effect.
10.5 Repeal. If the provisions of this Article X are
no longer required by the Code or ERISA, such provisions shall
have no further force or effect.
<PAGE>
ARTICLE XI
AMENDMENT OF THE PLAN
---------------------
11.1 Right to Amend. The Company, through its Board of
Directors, reserves the right, subject to the limitation
hereinafter provided, to amend the Plan from time to time
without the consent of any Participating Employer,
Participant, Beneficiary, or other eligible survivor. Each
amendment of the Plan shall be in writing, and shall become
effective on the date specified therein. Each Participating
Employer by its adoption of the Plan shall be deemed to have
delegated this authority to the Company.
11.2 Restrictions on Amendment. No amendment of the
Plan may be made which shall either:
a. deprive any Participant or Beneficiary of any
part of his Accrued Benefit as constituted at
the time of such amendment; or
b. result in the reversion to any Participating
Employer of any part of the Fund prior to the
satisfaction of all liabilities of the Plan.
<PAGE>
ARTICLE XII
TERMINATION OF THE PLAN
-----------------------
12.1 Events Constituting Termination.
a. It is expressly declared to be the desire and
intention of each Participating Employer to
continue the Plan and Fund in existence for an
indefinite period of time. However,
circumstances not now anticipated or foreseeable
may arise in the future, as a result of which
each Participating Employer may deem it to be
impracticable or unwise to continue the Plan
established hereunder, and each Participating
Employer therefore reserves the right to
terminate the Plan insofar as it affects its
Employees at any time. Any Participating
Employer may terminate its participation in the
Plan by action of its Board of Directors. Such
termination shall be evidenced by a written
instrument of termination executed by an officer
of the Participating Employer pursuant to
authorization by its Board of Directors and
shall be delivered to the Company, the
Committee, the Trustee and to each other
Participating Employer. To the maximum extent
permitted by ERISA, the termination of the Plan
as to any Participating Employer shall not in
any way affect any other Participating
Employer's participation in the Plan.
b. With respect to any Participating Employer which
has adopted the Plan, its adjudication of
bankruptcy or insolvency by any court of
competent jurisdiction, its making of a general
assignment for the benefit of creditors, its
dissolution, merger, consolidation, other
reorganization or discontinuance of business,
unless coverage for its Employees under the Plan
is continued by a successor company, or its
complete discontinuance of contributions, shall
operate to terminate the Plan with respect to
such Employer.
c. Subject to applicable requirements of ERISA
governing termination of employee pension
benefit plans, the Committee shall direct the
Trustee to segregate the assets of the
appropriate Fund allocable to a terminating
Participating Employer for payment of benefits
in accordance with the provisions of this
Article.
<PAGE>
12.2 Partial Termination. Upon a partial termination
of the Plan as determined by the Committee under applicable
law with respect to a group of Participants, the Committee
shall direct the Actuary to determine the proportionate
interests of the Participants affected by such partial
termination. After such proportionate interests have been
determined, the Committee shall direct the Trustee to
segregate the assets of the appropriate Fund allocable to such
group of Participants for payment of benefits in accordance
with the provisions of this Article, subject to applicable
requirements of ERISA.
12.3 Allocation of Assets. Upon termination or partial
termination under Sections 12.1 and 12.2, the Accrued Benefits
of Participants affected thereby shall become fully vested and
non-forfeitable. The assets of the Fund shall be allocated by
the Committee (after payment or provision for expenses) to
such Participants in the following manner and order:
a. There shall first be set aside an amount which
will provide for a return of the Participant's
account balance attributable to voluntary
contributions.
b. There shall next be set aside an amount which
will provide retirement income for Participants
and Beneficiaries who were receiving benefits or
who were eligible to receive benefits at least
three years prior to termination of the Plan
based on the lowest benefit under Plan
provisions in effect during the five years
preceding the date of the Plan's termination.
c. There shall next be set aside an amount which
will provide all other guaranteed benefits as
provided under ERISA, but determined without
regard to Sections 4022(b)(5) and 4022(b)(6).
d. There shall next be set aside an amount which
will provide all other non-forfeitable benefits,
under the provisions of the Plan at its
termination, but which are not guaranteed under
ERISA.
e. Finally, there shall be set aside an amount
which will provide all other Accrued Benefits as
of the date of Plan termination.
If the appropriate assets of the Fund by the Trustee
for retirement income for Participants of the Plan, as of the
date the Plan is terminated, are not sufficient to provide in
whole the amounts required within the classes described above,
such assets will be allocated pro rata within the class in
which the amounts first cannot be provided in full.
Allocation in any of the above listed categories is to be
adjusted for any allocation already made to the same
Participant under a prior category so as to avoid any
duplication of benefits payable under a prior category.
<PAGE>
12.4 Manner of Distribution. Subject to the foregoing
provisions of this Article XII, any distribution after
termination of the Plan may be made, in whole or in part, to
the extent that no discrimination results, in cash, securities
or other assets in kind (based on their fair market value as
of the date of distribution), or in nontransferable annuity
contracts, as the Committee in its sole discretion shall
determine. Any amounts remaining in the Fund after the
satisfaction of all liabilities of the Plan shall be returned
to the Company and the respective Participating Employer who
made contributions hereunder.
12.5 Liquidation of Trust Fund. The Fund shall
continue in existence after the termination of the Plan for
such period of time as may be required to complete the
liquidation thereof in accordance with the terms of this
Article XII.
12.6 Internal Revenue Service Approval for
Distribution. In the event that the Committee applies to
the Internal Revenue Service for a determination on the
qualification of the Plan upon termination, no person shall
have any right or claim to any assets of the Fund before the
Internal Revenue Service shall determine that the proposed
distribution of assets under this Article does not result in
the discrimination prohibited by Section 401(a) of the Code.
<PAGE>
ARTICLE XIII
TOP-HEAVY PLAN REQUIREMENTS
---------------------------
13.1 General Rule. For any Plan Year for which this
Plan is a Top-Heavy Plan (as defined in Section 13.7), any
other provisions of the Plan to the contrary notwithstanding,
the Plan shall be subject to the following provisions:
a. The vesting provisions of Section 13.2;
b. The minimum benefit provisions of Section 13.3;
c. The limitation on compensation set by Section
13.4; and
d. The limitation on benefits set by Section 13.5.
13.2 Vesting Provisions. Each Participant who has
completed an Hour of Service during any Plan Year in which the
Plan is Top-Heavy shall have a non-forfeitable right to his
Accrued Benefit under this Plan determined by the following
schedule to the extent that such schedule is more liberal than
the vesting provided in Section 3.5:
-------------------------------------------------------------
| Years of Service | Vesting Percentage |
-------------------------------------------------------------
|less than 2 | 0% |
|2 but less than 3 | 20 |
|3 but less than 4 | 40 |
|4 but less than 5 | 60 |
|5 but less than 6 | 80 |
|6 or more | 100 |
-------------------------------------------------------------
<PAGE>
13.3 Minimum Benefit Provisions. Each Participant who
is a Non-Key Employee (as defined in Section 13.9) shall be
entitled to an Accrued Benefit attributable to Company or
Affiliated Company contributions in the form of an annual
retirement benefit (as defined in Section 13.3(a)) that shall
not be less than the applicable percentage (as defined in
Section 13.3(b)) of the Participant's average annual earnings
(as determined under Section 415 of the Code) for years in the
testing period (as defined in Section 13.3(c)):
a. Annual retirement benefit means a benefit
payable annually in the form of a Straight Life
Annuity (with no ancillary benefits) beginning
at a Participant's Normal Retirement Date.
b. Applicable percentage means the lesser of 2%
multiplied by the number of Years of Service in
which the Plan is Top-Heavy or 20%.
c. Testing Period means, with respect to a
Participant, the period of consecutive Years of
Service (not exceeding five) during which the
Participant had the greatest aggregate earnings
from his Employer. The testing period shall not
include any Year of Service that ends in a Plan
Year beginning before January 1, 1984 or during
which the Plan was not a Top-Heavy Plan.
Benefits taken into account under this Section 13.3
shall not include any benefits payable under the Social
Security Act or any other Federal or State law.
13.4 Limitation on Compensation. Annual compensation
taken into account under this Article XIII for purposes of
computing benefits under this Plan shall not exceed the first
$200,000, provided that such limit shall be adjusted
automatically for each Plan Year to the amount prescribed by
the Secretary of the Treasury pursuant to regulations for the
calendar year in which such Plan Year commences.
13.5 Limitation on Benefits. In the event that the
Company or an Affiliated Company also maintains a defined
contribution plan providing benefits on behalf of Participants
in this Plan, one of the two following provisions shall apply:
a. If for the Plan Year this Plan would not be a
Top-Heavy Plan if "90%" were substituted for
"60%," then Section 13.3 shall apply for such
Plan Year as if amended so that the "applicable
percentage" means the lesser of 3% multiplied by
the number of Years of Service during which the
Plan would be Top-Heavy and the overall
applicable percentage does not exceed the lesser
of 30% or 20% plus 1% for each Year the Plan is
taken into account under this Section 13.5(a).
<PAGE>
b. If for the Plan Year (1) if this Plan is subject
to Section 13.5(a) but does not provide the
required additional minimum benefit as required
therein or (2) this Plan would continue to be a
Top-Heavy Plan if "90%" were substituted for
"60%," then the denominator of both the defined
contribution plan fraction and the defined
benefit plan fraction shall be calculated as set
forth in Section 4.6 for the limitation year
ending in such Plan Year by substituting "1.0"
for "1.25" in each place such figure appears,
except with respect to any individual for whom
there are no employer contributions, forfeitures
or voluntary nondeductible contributions
allocated or any accruals for such individual
under the defined benefit plan.
13.6 Coordination With Other Plans. In the event that
another defined contribution or defined benefit plan
maintained by the Company or an Affiliated Company provides
contributions or benefits on behalf of Participants in this
Plan, such other plan shall be treated as a part of this Plan
pursuant to the applicable principles set forth in Revenue
Ruling 81-202 in determining whether the plans are providing
benefits at least equal to the minimum benefit required under
this Plan. If the Plan is subject to Section 13.5(b) but the
Company or an Affiliated Company does not substitute "1.0" for
"1.25" as required, the applicable percentage provided in
Section 13.3 shall be increased by one percentage point (up to
a maximum of 10 percentage points). Such determination shall
be made by the Committee.
13.7 Top-Heavy Plan Definition. This Plan shall be a
Top-Heavy Plan for any Plan Year if, as of the Determination
Date, the present value of the cumulative Accrued Benefits
under the Plan for Participants (including former
Participants) who are Key Employees exceeds 60% of the present
value of the cumulative Accrued Benefits under the Plan for
all Participants, or if this Plan is required to be in an
Aggregation Group which for such Plan Year is a Top-Heavy
Group. For purposes of making this determination, the present
value of Accrued Benefits for a Participant (i) who is not a
Key Employee, but who was a Key Employee in a prior year, or
(ii) for Plan Years beginning after December 31, 1984, who has
not performed any service for the Employer at any time during
the five-year period ending on the Determination Date, shall
be disregarded.
a. Determination Date means for any Plan Year the
last day of the immediately preceding Plan Year
(except that for the first Plan Year the
Determination Date means the last day of such
Plan Year).
<PAGE>
b. The present value shall be determined as of the
most recent valuation date that is within the
12-month period ending on the Determination Date
and as described in the regulations under the
Code using the assumptions for determining an
Actuarial Equivalent under the Plan, except the
interest assumption shall be an annual rate of
5%.
c. Aggregation Group means the group of plans, if
any, that includes both the group of plans that
are required to be aggregated and, if the
Committee so elects, the group of plans that are
permitted to be aggregated.
i. The group of plans that are required to be
aggregated (the "Required Aggregation
Group") includes: (a) each plan of the
Employer in which a Key Employee is a
Participant, including collectively-
bargained plans, and (b) each other plan of
the Company or an Affiliated Company
including collectively-bargained plans,
which enables a plan in which a Key
Employee is a Participant to meet the
requirements of the Code prohibiting
discrimination as to contributions or
benefits in favor of employees who are
officers, shareholders or the highly-
compensated or prescribing the minimum
participation standards.
ii. The group of plans that are permitted to be
aggregated (the "Permissive Aggregation
Group") includes the Required Aggregation
Group plus one or more plans of the Company
or an Affiliated Company that is not part
of the Required Aggregation Group and that
the Committee certifies as constituting a
plan within the Permissive Aggregation
Group. Such plan or plans may be added to
the Permissive Aggregation Group only if,
after the addition, the Aggregation Group
as a whole continues not to discriminate as
to contributions or benefits in favor of
officers, shareholders or the highly-
compensated and to meet the minimum
participation standards under the Code.
<PAGE>
d. Top-Heavy Group means the Aggregation Group, if
as of the applicable Determination Date, the sum
of the present value of the cumulative accrued
benefits for Key Employees under all defined
benefit plans included in the Aggregation Group
plus the aggregate of the accounts of Key
Employees under all defined contribution plans
included in the Aggregation Group exceeds 60% of
the sum of the present value of the cumulative
accrued benefits for all Employees under all
such defined benefit plans plus the aggregate
accounts for all Employees under such defined
contribution plans. For purposes of making this
determination, the present value of the accrued
benefits for a Participant (i) who is not a Key
Employee, but who was a Key Employee in a prior
year or (ii) who has not performed services for
the Company or an Affiliated Company at any time
during the five-year period ending on the
Determination Date, shall be disregarded.
If the Aggregation Group that is a Top-Heavy
Group is a Required Aggregation Group, each plan
in the Group will be Top-Heavy. If the
Aggregation Group that is a Top-Heavy Group is a
Permissive Aggregation Group, only those plans
that are part of the Required Aggregation Group
will be treated as Top-Heavy. If the
Aggregation Group is not a Top-Heavy Group, no
plan within such Group will be Top-Heavy.
e. In determining whether this Plan constitutes a
Top-Heavy Plan, the Committee shall make the
following adjustments in connection therewith:
i. When more than one plan is aggregated, the
Committee shall determine separately for
each plan as of each plan's determination
date the present value of the accrued
benefits or account balance. The results
shall then be aggregated by adding the
results of each plan as of the
determination dates for such plans that
fall within the same calendar year.
<PAGE>
ii. In determining the present value of the
cumulative accrued benefit or the amount of
the account of any Employee, such present
value or account shall include the dollar
value of the aggregate distributions made
to such Employee under the applicable plan
during the five-year period ending on the
determination date, unless reflected in the
value of the accrued benefit or account
balance as of the most recent valuation
date. Such amounts shall include
distributions to Employees which
represented the entire amount credited to
their accounts under the applicable plan,
and distributions made on account of the
death of a Participant to the extent such
death benefits do not exceed the present
value of the accrued benefit or account.
iii. Further, in making such determination, such
present value or such account shall include
any rollover contribution (or similar
transfer), as follows:
(1) If the rollover contribution (or
similar transfer) is initiated by the
Employee and made to or from a plan
maintained by another employer, the
plan providing the distribution shall
include such distribution in the value
of such account; the plan accepting
the distribution shall not include
such distribution in the value of such
account unless the plan accepted it
before December 31, 1983.
(2) If the rollover contribution (or
similar transfer) is not initiated by
the Employee or made from a plan
maintained by another employer, the
plan accepting the distribution shall
include such distribution in the
present value of such account, whether
the plan accepted the distribution
before or after December 31, 1983; the
plan making the distribution shall not
include the distribution in the
present value of such account.
<PAGE>
13.8 Key Employee. The term Key Employee means any
Employee or former Employee under this Plan who, at any time
during the Plan Year containing the Determination Date or
during any of the four preceding Plan Years, is or was one of
the following:
a. An officer of the Company having annual
compensation from the Employer of 150% of the
Code Section 415 dollar limitation for the
calendar year in which the Plan Year ends.
Whether an individual is an officer shall be
determined by the Committee on the basis of all
the facts and circumstances, such as an
individual's authority, duties and term of
office, and not on the mere fact that the
individual has the title of an officer. For any
such Plan Year, there shall be treated as
officers no more than the lesser of:
i. 50 Employees, or
ii. the greater of three Employees or 10% of
the Employees of the Company during the
Plan Year containing the Determination Date
or any of the preceding four Plan Years.
For this purpose, the highest-paid officers
shall be selected.
b. One of the ten Employees owning (or considered
as owning, within the meaning of the
constructive ownership rules of the Code) both
more than a .50% interest in value and the
largest interests in the Company. An Employee
who has more than a .50% ownership interest is
considered to be one of the top ten owners
unless at least ten other Employees own a
greater interest than that Employee.
However, an Employee will not be considered a
top ten owner for a Plan Year if the Employee
earns less than the maximum dollar limitation
under Section 415 of the Code on contributions
and other annual additions to a Participant's
account in a defined contribution plan for the
calendar year in which the Determination Date
falls.
c. Any person who owns (or is considered as owning
within the meaning of the constructive ownership
rules of the Code) more than 5% of the
outstanding stock of the Company or stock
possessing more than 5% of the combined total
voting power of all stock of the Company.
<PAGE>
d. Any person having annual compensation from the
Company of more than $150,000 who owns (or is
considered as owning within the constructive
ownership rules of the Code) more than 1% of the
outstanding stock of the Company or stock
possessing more than 1% of the combined total
voting power of all stock of the Company.
For purposes of this Section 13.8, "Compensation"
means all items includable as compensation for purposes of
applying the limitations on contributions and other annual
additions to a Participant's account in a defined contribution
plan under the Code, and a Beneficiary of a Key Employee shall
be treated as a Key Employee.
13.9 Non-Key Employee. The term "Non-Key Employee"
means any Employee (and any Beneficiary of an Employee) who is
not a Key Employee.
13.10 Change from Top-Heavy Status. In the event the
Plan should become a Top-Heavy Plan for a Plan Year and
subsequently reverts to a Plan which is not Top-Heavy, (a) and
(b) below shall apply:
a. The change from a Top-Heavy Plan to a plan which
is not Top-Heavy shall not reduce a
Participant's non-forfeitable right to any
benefit he has accrued under the Plan, and any
Participant who has completed five or more Years
of Service at the time the Plan reverts to a
plan which is not Top-Heavy shall have his non-
forfeitable right to benefits under the Plan
determined in accordance with Section 13.2.
b. The change from a Top-Heavy Plan to a Plan which
is not Top-Heavy shall not reduce a
Participant's Accrued Benefit.
<PAGE>
ARTICLE XIV
GENERAL PROVISIONS
------------------
14.1 Plan Voluntary. Although it is intended that the
Plan shall be continued and that contributions shall be made
as herein provided, this Plan is entirely voluntary on the
part of the Participating Employer and the continuance of this
Plan and the payment of contributions hereunder are not to be
regarded as contractual obligations of such Participating
Employer. The Participating Employers do not guarantee or
promise to pay or to cause to be paid any of the benefits
provided by this Plan. Each person who shall claim the right
to any payment or benefit under this Plan, shall be entitled
to look only to the Trust Fund for any such payment or benefit
and shall not have any right, claim, or demand therefore
against the Participating Employer, except as provided by law.
The Plan shall not be deemed to constitute a contract between
the Participating Employer and any Employee or to be a
consideration for, or an inducement for, the employment of any
Employee by the Participating Employer. Nothing contained in
the Plan shall be deemed to give any Employee the right to be
retained in the service of the Participating Employer or to
interfere with the right of the Participating Employer to
discharge or to terminate the service of any Employee at any
time without regard to the effect such discharge or
termination may have on any rights under the Plan.
14.2 Payments to Minors and Incompetents. If a
Participant or Beneficiary entitled to receive any benefits
hereunder is a minor or is deemed by the Committee, or is
adjudged, to be legally incapable of giving valid receipt and
discharge for such benefits, such benefits will be paid to
such person or institution as the Committee may designate or
to the duly appointed guardian. Such payment shall, to the
extent made, be deemed a complete discharge of any liability
for such payment under the Plan.
14.3 Nonalienation of Benefits. Except as provided
under a qualified domestic relations order, as defined in
Section 414(p) of the Code, no amount payable to, or held
under the Plan for the account of, any Participant or
Beneficiary shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance
or charge, and any attempt to so anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same shall be
void. Nor shall any amount payable to, or held under the Plan
for the account of, any Participant of Beneficiary be in any
manner liable for his debts, contracts, liabilities,
engagements or torts, or be subject to any legal process to
levy upon or attach the same.
<PAGE>
14.4 Merger, Consolidation or Transfer. In the event
that the Plan is merged or consolidated with any other plan,
or should the assets or liabilities of the Plan be transferred
to any other plan, each Participant shall be entitled to a
benefit immediately after such merger, consolidation or
transfer if the Plan should then terminate equal to or greater
than the benefit he would have been entitled to receive
immediately before such merger, consolidation or transfer if
the Plan had then terminated.
14.5 Return of Contributions to Participating
Employers. The Plan is created for the exclusive benefit of
Participants and their Beneficiaries. Except as specifically
otherwise provided in Sections 12.4, 14.8 and 14.12, at no
time shall any contributions to the Plan by a Participating
Employer or any assets of the Trust Fund ever revert to or
be used by a Participating Employer.
14.6 Payment of Small Benefits. Effective January 1,
1998, if the Actuarial Equivalent present value of monthly
payments of retirement income to any person would amount to
less than $5,000 before such payments have commenced, the
Committee shall direct the Trustee to pay such person the then
present value of such retirement income in one lump sum
payment. Prior to January 1, 1998, the reference to $5,000
was $3,500.
14.7 Recovery of Payments Made Due to a Mistake of
Fact. If it is determined that the retirement income under
the Plan actually being paid to a Participant due to a mistake
of fact, including, but not limited to, the calculation of the
offset to a Participant's Accrued Benefit for the value of the
Participant's account under the Avondale ESOP, is greater than
the income such Participant is entitled to receive pursuant to
Articles IV, V and VI, the Committee may elect to alter
subsequent payments to such Participant in order to recover
the value of such overpayments.
14.8 Internal Revenue Service Approval. If the Plan
shall not be initially approved and qualified by the Internal
Revenue Service so as to permit the Employer to deduct its
contributions to the Trust Fund for income tax purposes, or
shall not remain so approved and qualified, all Participating
Employer contributions shall be returned to the applicable
Participating Employer.
This Section 14.8 shall apply only if contributions
are returned within one year from the date on which the
Internal Revenue Service issues a notice that the Plan is not
qualified.
14.9 Construction of Agreement. The Plan shall be
administered, construed and enforced according to the laws of
the State of Louisiana; provided, however, wherever applicable
the provisions of ERISA shall govern, and in such event the
laws of the United States of America shall be applied and to
the extent necessary, its courts shall have competent
jurisdiction.
<PAGE>
14.10 Headings. The headings of articles and Sections
of this Plan are for convenience of reference only, and in the
case of any conflict between any such headings and the text of
this Plan, the text shall govern.
14.11 Use of Masculine and Feminine; Singular and
Plural. Wherever used in this Plan, the masculine gender will
include the feminine gender and the singular will include the
plural, unless the context indicates otherwise.
14.12 Return of Employer Contributions in Excess of
Amount Deductible. A contribution conditioned upon its
deductibility under Section 404 of the Code, may be returned,
to the extent the deduction is disallowed, to the Employer
within one (1) year after the disallowance.
IN WITNESS WHEREOF, Avondale Industries, Inc. has caused
this instrument to be executed by its officers thereunto duly
authorized and its corporate seal to be hereunto affixed, as
of the 30th day of December, 1997.
AVONDALE INDUSTRIES, INC
BY: /s/ Thomas M. Kitchen
-----------------
Thomas M. Kitchen,
Secretary
ATTEST
/s/ Eugene K. Simon, Jr.
------------------------
(Corporate Seal)
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF JEFFERSON
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
depose and state that he signed the foregoing Avondale
Industries, Inc. Pension Plan as a free act and deed on behalf
of Avondale Industries, Inc. for the purposes therein set
forth.
/s/ Thomas M. Kitchen
---------------------
Thomas M. Kitchen
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 30TH DAY
OF DECEMBER, 1997.
/s/ Rudolph R. Ramelli
----------------------
NOTARY PUBLIC
<PAGE>
AVONDALE INDUSTRIES, INC. PENSION PLAN
APPENDIX A
PARTICIPATING EMPLOYERS
The following Participating Employers have entered under this
Plan as of the following dates. Such dates of participation
shall be used for purposes of determining such Participating
Employers' Employees' eligibility to participate under the
Plan. Such dates shall also be used for determining Years of
Service for both vesting and benefit accrual purposes under
the Plan, if later than the dates specified in Section 1.38 of
this Plan.
Participating Employer Date of Participation
------------------------------------- -----------------------
Avondale Industries, Inc. October 1, 1985
Avondale Services Corporation October 1, 1985
Avondale Gulfport Marine, Inc. July 2, 1988
Avondale Industries of New York, Inc. July 1, 1989
Avondale Transportation Co., Inc. July 1, 1989
Avondale Enterprises, Inc. January 1, 1990
<PAGE>
AVONDALE INDUSTRIES, INC. PENSION PLAN
APPENDIX B
REDUCTION FACTORS FOR EARLY RETIREMENT
<TABLE>
<CAPTION>
Age MONTHS
0 1 2 3 4 5 6 7 8 9 10 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 0.4960 0.4988 0.5016 0.5044 0.5072 0.5100 0.5128 0.5156 0.5184 0.5212 0.5240 0.5268
56 0.5296 0.5324 0.5352 0.5380 0.5408 0.5436 0.5464 0.5492 0.5520 0.5548 0.5576 0.5604
57 0.5632 0.5660 0.5688 0.5716 0.5744 0.5772 0.5800 0.5828 0.5856 0.5884 0.5912 0.5940
58 0.5968 0.5996 0.6024 0.6052 0.6080 0.6108 0.6136 0.6164 0.6192 0.6220 0.6248 0.6276
59 0.6304 0.6332 0.6360 0.6388 0.6416 0.6444 0.6472 0.6500 0.6528 0.6556 0.6584 0.6612
60 0.6640 0.6696 0.6752 0.6808 0.6864 0.6920 0.6976 0.7032 0.7088 0.7144 0.7200 0.7256
61 0.7312 0.7368 0.7424 0.7480 0.7536 0.7592 0.7648 0.7704 0.7760 0.7816 0.7872 0.7928
62 0.7984 0.8040 0.8096 0.8152 0.8208 0.8264 0.8320 0.8376 0.8432 0.8488 0.8544 0.8600
63 0.8656 0.8712 0.8768 0.8824 0.8880 0.8936 0.8992 0.9048 0.9104 0.9160 0.9216 0.9272
64 0.9328 0.9384 0.9440 0.9496 0.9552 0.9608 0.9664 0.9720 0.9776 0.9832 0.9888 0.9944
65 1.000
</TABLE>
NOTES:
- Factors determined as follows:
Age Factor
------------------------ -------------------------------
65 1.000
At least 60 but under 65 1.000 minus .56% for each month
prior to age 65
At least 55 but under 60 .6640 minus .28% for each month
prior to age 60
- Multiply benefit payable at age 65 by factor above to
determine a benefit payable at an earlier retirement date.
AMENDED AND RESTATED
AVONDALE SERVICES CORPORATION
EXECUTIVE GROUP INSURANCE BENEFITS PLAN
AND SUMMARY PLAN DESCRIPTION
October, 1997
PREAMBLE
Avondale Services Corporation (the "Company"), a corporation
organized and existing under the laws of the State of Delaware,
adopted the Avondale Services Corporation Executive Group
Insurance Benefits Plan on February 20, 1990, pursuant to its
desire to continue and maintain its policy to provide increased
insurance benefits (in addition to the group insurance benefits
provided to all eligible employees of Avondale Services
Corporation) to certain employees designated by the Board of
Directors of Avondale Industries, Inc., which plan and the
amendments thereto made through September 30, 1997 shall
hereinafter be referred to as the "Prior Plan."
Effective October 1, 1997, the Avondale Services Corporation
Executive Group Insurance Benefits Plan is amended and restated
as set forth in this document and any amendments hereto and shall
hereinafter be referred to as the "Plan." The Plan is the
continuation of the Prior Plan and no gap in time or effect
exists, or shall ever be construed to exist, between them.
ARTICLE I
Participation
-------------
Participation in the Plan shall be limited to those
employees of Avondale Services Corporation designated by the
Compensation Committee of the Board of Directors of Avondale
Industries, Inc. as Participants in the Plan. The names of all
Participants so designated shall be listed on the attached
Exhibit A.
<PAGE>
ARTICLE II
Benefits
--------
The benefits payable under the Plan shall be identical to
the Group Life, Accidental Death and Dismemberment, Salary
Continuation, Business Travel, and Comprehensive Medical Benefits
paid to employees of Avondale Services Corporation under its
Group Insurance Benefits Plan as set forth in applicable plan
documents, insurance contracts and the Avondale Services
Corporation Employee Benefit Plan booklet and summary plan
description as in effect on the date hereof (as may be modified
from time to time), which documents are incorporated herein by
reference. All capitalized terms not otherwise defined herein
shall have the meaning ascribed to them in the Avondale
Industries, Inc. Avondale Services Corporation Plan.
In addition to the benefits paid pursuant to Avondale
Services Corporation Group Insurance Benefits Plan, the following
additional benefits and/or modifications shall apply to
Participants in the Plan during their employment with Avondale
Services Corporation and, where indicated, after retirement or
Total Disability provided such Participant is employed by
Avondale Services Corporation at the time of retirement or Total
Disability:
Coverage Description
-------- -----------
Employee Life 2 times the sum of (i) base
salary and (ii) Participant's
previous year's bonus.
Optional Coverage-additional
one or two times the sum of
(i) base salary and (ii)
Participant's previous year's
bonus.
Maximum Coverage-Two million
dollars or such lesser amount
as may be set forth in any
applicable insurance policy.
Evidence of Insurability - To
the extent provided in any
applicable insurance policy,
coverage shall be conditioned
on submission of evidence of
insurability.
Dependent Life Optional - $100,000.00
Retiree Life One half of life insurance in
force at time of retirement
<PAGE>
Total Disability (Totally Employee Life (as set forth
Disabled) prior to Normal above) in force prior to Total
Retirement Date Disability continues until
Normal Retirement Date;
thereafter Retiree Life
Long Term Disability 60% of monthly base salary,
after 180 day waiting period.
Maximum $5,000.00 per month
coordinated with Disability
Social Security Benefit
Retiree Health Comprehensive Medical Benefits
(as provided under the
Avondale Services Corporation
Group Insurance Benefits Plan)
shall continue beyond a
Participant's retirement for
his life without any premium
payment during the
Participant's life. The
Participant's surviving spouse
may continue coverage
thereafter without any premium
payment for her life.
Provided, however, that upon a
Retiree's eligibility for
Medicare, this Retiree Health
benefit shall be paid only as
a supplement to Medicare and a
Participant must establish his
entitlement to Medicare
benefits to be eligible for
the supplemental Retiree
Health benefits provided
herein.
<PAGE>
Total Disability (Totally An Employee who is Totally
Disabled) Disabled will be treated as an
"Active Employee" for twelve
(12) months following the
commencement of the Disability
so long as he remains Totally
Disabled. When a Totally
Disabled Participant is no
longer an "Active Employee"
such Participant will be
treated as a Retiree eligible
for the supplemental Retiree
Health benefits provided
herein.
Provided, however, that when
such Participant becomes
eligible for Medicare, this
Retiree Health benefit shall
be paid only as a supplement
to Medicare and a Participant
must establish his entitlement
to Medicare benefits to be
eligible for the supplemental
Retiree Health benefits
provided herein.
ARTICLE III
Administration
--------------
The Board of Directors of Avondale Services Corporation has
primary responsibility for the administration of the Plan,
including interpretation of all Plan provisions and determination
of benefit entitlement; provided, however, that the Participant
shall be entitled to utilize the claim review procedure set forth
in the Avondale Industries, Inc. Corporate Services Avondale
Health Plan booklet.
The Board of Directors of Avondale Services Corporation may
delegate its responsibilities, other than its powers to amend or
terminate the Plan, to a Committee appointed by it. The Board of
Directors of Avondale Services Corporation can override any
decision of the Committee.
The Company agrees to indemnify and hold harmless each
person serving as a member of the Committee from all liabilities
and claims arising from the good faith performance of his duties
in accordance with the terms of the Plan.
<PAGE>
ARTICLE IV
Termination or Amendment
------------------------
Although Avondale Services Corporation expects and intends
to continue this Plan indefinitely, it reserves the right to
modify, amend, suspend or terminate the Plan at any time by
resolution of the Board of Directors of Avondale Services
Corporation; provided, however, that no such amendment or
termination shall be effective without the concurrence of the
Board of Directors of Avondale Industries, Inc.
ARTICLE V
Plan Identification and Administration
--------------------------------------
Name of Plan Avondale Services Corporation
Executive Group Insurance
Benefits Plan
Type of Plan Welfare Benefit Plan which
provides health care benefits
Sponsoring Employer and Avondale Industries, Inc.
Plan P.O. Box 50280
Administrator New Orleans, LA 70150
5100 River Road
Avondale, LA 70094
Plan No. 501
Plan Year January 1 through December 31
Employer Identification 39-1097012
No.
Plan Fiduciary Avondale ERISA Review
Committee
P.O. Box 50280
New Orleans, LA 70150
5100 River Road
Avondale, LA 70094
Agent for Service of R. Dean Church
Legal Process P.O. Box 50280
New Orleans, LA 70150
Service may also be made on
the Plan Administrator
Benefits Provided By and Omega Claims Service, Inc.
Disbursements From the P. O. Box 1100
Plan Made By Marrero, Louisiana 70073
West Jefferson Behavioral
Medicine Center
229 Belle Meade Boulevard
Gretna, Louisiana 70056
<PAGE>
Contributions to the Plan The Health Care Benefits under
the Plan are paid for
partially by Avondale
Industries, Inc. and partially
by Employees. The costs of
dependent care coverage are
paid for partially by Avondale
Industries, Inc. and partially
by those Employees eligible to
elect dependent care coverage.
The contributions are
determined by Avondale
Industries, Inc. based on the
actual cost of benefits.
ARTICLE VI
Your Rights Under ERISA
-----------------------
As a Participant in the Avondale Services Corporation
Executive Group Insurance Benefits Plan, you are entitled to
certain rights and protections under the Employee Retirement
Income Security Act of 1974 ("ERISA"). ERISA provides that all
Plan Participants shall be entitled to:
Examine without charge, at the Employee Benefits Department
where you work, all Plan documents, including those filed by the
Plan with U.S. Department of Labor, such as annual reports and
Plan descriptions.
Obtain, upon written request to the Plan Administrator,
copies of all Plan documents, for which a reasonable charge will
be made.
Receive a summary of the Plan's annual financial report.
File suit in a federal court if any materials requested by you
are not received within 30 days of your request. The court may
require the Company to pay you up to $100 for each day beyond 30
days until you receive the materials, unless the materials were
not sent because of reasons beyond the control of the Plan
Administrator.
In addition to creating rights for Plan Participants, ERISA
imposes duties upon the Company and upon "fiduciaries" that are
responsible for the operation of the Plan. The Company may not
discharge you or otherwise discriminate against you to prevent
you from obtaining a benefit or exercising your rights under
ERISA.
If you have a claim for benefits which is denied in whole or
in part, you must receive a written explanation stating the facts
upon which the denial is based and the Plan provisions upon which
the denial was based.
<PAGE>
All decisions of the Avondale ERISA Review Committee shall
be final and binding on all employees, participants and their
beneficiaries. No claimant may file suit in a court to obtain
benefits under the Plan without first completely exhausting all
stages of the claims review process.
If Plan fiduciaries misuse the Plan's money, or if you are
discriminated against for asserting your rights, you may seek
assistance from the U.S. Department of Labor, or you may file a
suit in a federal court. If you are successful, the court may
order the other party to pay your court costs and legal fees. If
you lose, the court may order you to pay these costs and fees-for
example, if it finds your claim frivolous.
If you have any questions about this statement or your
rights under ERISA, you should contact the Plan Administrator at
the nearest Area Office of the U.S. Department of Labor-
Management Services Administrator, Department of Labor.
Executed in Avondale, Louisiana, this 14th day of October,
1997.
WITNESSES: AVONDALE SERVICES CORPORATION
/s/ Jackie H. Walker By: /s/ Thomas M. Kitchen
-------------------- ---------------------
Thomas M. Kitchen
/s/ Robin L. Dempsey
--------------------
<PAGE>
EXHIBIT A
The following individuals have been designated by the Board
of Directors of Avondale Industries, Inc. as Participants in the
Avondale Services Corporation Executive Group Insurance Benefits
Plan:
Harris F. Arnold (Retired)
Albert L. Bossier, Jr.
Richard F. Brunner (Deceased) Vivian
Ronald D. Church
Melvin Colen (Deceased) June
James H. Cottrell (Retired)
Rodney J. Duhon, Jr.
Kenneth B. Dupont
Ernest F. Griffin, Jr.
William A. Harmeyer (Retired)
Bruce L. Hicks (Deceased) Carolyn
Thomas M. Kitchen
Rene P. Meric
Edmund C. Mortimer
Joseph W. Oberfell (Retired)
Eugene K. Simon, Jr.
AMENDMENT NUMBER TWO
TO
AVONDALE INDUSTRIES, INC.
401(k) SAVINGS PLAN
WHEREAS, Avondale Industries, Inc., ("Employer") is the
sponsor of the Avondale Industries, Inc. 401(k) Savings Plan
(the "Plan") which was adopted effective January 1, 1996;
WHEREAS, the Plan can be amended by the Employer.
WHEREAS, it is desirable to amend the Plan to clarify the
Plan's reemployment rules, to permit a distribution without
Participant consent of Accounts valued at $5,000 or less
effective January 1, 1998, to permit Participants who attain
age of 70 1/2 in 1996, 1997, or 1998 to elect to commence
distributions or defer receipt of distributions until
retirement, to further revise the definition of Required
Beginning Date to conform to the Small Business Job Protection
Act of 1996 as interpreted by recent IRS Announcements and
Notices, and to make other revisions and clarifications;
NOW, THEREFORE, as authorized by Section 13.1, the Plan
is hereby amended, effective January 1, 1997, unless stated
otherwise, as follows:
I.
Article I, Section 1.20A, Employment Year, is amended and
restated to read as follows:
1.20A Employment Year shall mean the twelve
month period of employment commencing on the date
the Employee first Hours of Service for the Employer
and each anniversary thereof. The Employment Year
for a reemployed Eligible Employee is determined in
Section 2.3.
II.
Article I, Section 1.34B, Required Beginning Date is
deleted.
<PAGE>
III.
Article I, Section 1.36, Service Termination Date, is
added effective with respect to each Employee as of his
Employment Year beginning on or after January 1, 1997:
1.36 Service Termination Date shall mean the
earliest of the following:
(a) the date on which an Employee resigns,
is discharged, retires or dies;
(b) the first anniversary of the date on
which an Employee is laid off, starts
an authorized leave of absence, or is
absent from work for any other reason
(other than those instances covered
under paragraphs (a) and (c)),
including holidays, paid vacations,
sick leaves and absence on account of
disability;
(c) the second anniversary of the date on
which an Employee commenced a Parental
Absence, if such Employee has not yet
returned to work with a Participating
or Non-Participating Employer.
III.
Article II, Section 2.1, Commencement of Participation,
is amended and restated to read as follows:
2.1 Commencement of Participation. Each person
who is an Eligible Employee shall become a
Participant on the Entry Date which coincides with
or immediately follows the date (a) which such
Eligible Employee attained age 21 and (b) on which
such Eligible Employee completed one Year of
Service, provided he is employed by a Participating
Employer on such date.
<PAGE>
IV.
Article II, Section 2.3, Participation Following
Reemployment, is amended and restated to read as follows:
2.3 Reemployment of an Eligible Employee or
Former Participant. The following reemployment rules
apply:
a. Resetting the Employment Year.
If an Eligible Employee is reemployed
his Employment Year is reset based on
his reemployment date if the following
conditions are met:
i. the Eligible Employee is
not reemployed until
after the end of the
Employment Year of his
Service Termination
Date, and
ii. the Eligible Employee
has a One Year Break in
Service in the
Employment Year prior to
the Employment Year of
his reemployment date.
b. Reemployment of a Former Participant.
Except as provided in Section 2.3(d),
a "Former Participant" is an Employee
who terminated employment after the
Entry Date following the date on which
he met the requirements of Section
2.1. A Former Participant who is
reemployed shall be treated as if his
employment was not broken. Such
Employee, if an Eligible Employee,
shall be allowed to make Employee-
Deferrals pursuant to Section 3.1.
His past Years of Service for purposes
of vesting will be added to any Years
of Service earned after reemployment.
c. Reemployment of a Non-Participant.
i. If an Eligible Employee
who had not become a
Participant is
reemployed and his
Employment Year is not
reset, he becomes a
Participant on the first
Entry Date after he
meets the requirements
of Sections 1.12 and
2.1.
<PAGE>
ii. If an Eligible Employee
who had not become a
Participant is
reemployed and his
Employment Year is
reset, he becomes a
Participant on the first
Entry Date after he
meets the requirements
of Sections 1.12 and
2.1. Hours of Service
prior to reemployment
are not considered for
purposes of determining
eligibility to
participate.
iii. If an Eligible Employee
who had previously met
the requirements of
Sections 1.12 and 2.1
but had not yet become a
Participant because he
was not employed on an
Entry Date is reemployed
and his Employment Year
is not reset, he shall
become a Participant as
of the first Entry Date
following reemployment.
If such Eligible
Employee is reemployed
and his Employment Year
is reset, he shall
become a Participant on
the first Entry Date
following the
completion of one Year
of Service.
d. Reemployment of Non-Vested
Participant. If a Participant who was
not fully vested in his Employer
Contribution Account terminates
employment and is reemployed after
incurring the greater of (i) five
consecutive One Year Breaks in Service
or (ii) the aggregate number of Years
of Service prior to termination, he
shall be treated as a new employee for
purposes of vesting and any Years of
Service accumulated by him prior to
termination shall be disregarded. For
purposes of participation, see Section
2.3(b).
<PAGE>
e. Reemployment of Vested Participant.
If a Participant who was fully vested
in his Employer Contribution Account
terminates employment and is
reemployed after any number of One
Year Breaks in Service, he shall be
reinstated as a Participant, if he is
an Eligible Employee, as of the date
he first performs an Hour of Service
following reemployment. However, his
Employment Year may be reset for
vesting purposes based on the rules
stated in Section 2.3(a).
V.
Article VI, Section 6.4(c) is hereby deleted.
VI.
Article VI, Section 6.5, Reemployment Before Break in
Service, is amended and restated to read as follows:
6.5 Reemployment. Years of Service prior to
reemployment may be considered, but only under the
circumstances described in Section 2.3.
VII.
Section 6.6, Reemployment After Break in Service, is
hereby deleted.
VIII.
Article X, Section 10.1, Time of Payment, is amended and
restated to read as follows:
10.1 Time of Payment. A Participant shall be
eligible to receive a distribution of his Vested
Interest when he has terminated employment. A
distribution is based upon the value of the
Participant's Vested Interest as of the Valuation
Date coincident with or immediately preceding the
date of distribution.
<PAGE>
a. If the value of a Participant's
Vested Interest is $5,000 or less
($3,500 prior to January 1,
1998), the Vested Interest will
be distributed 30 days following
his date of termination or as
soon as administratively
practicable thereafter but no
later than the 60th day after the
latest of the close of the Plan
Year in which (a) the Participant
attains age 65, or (b) terminates
employment with all Participating
Employers;
b. If the value of a Participant's
Vested Interest is greater than
$5,000 ($3,500 prior to January
1, 1998), the Participant must
consent to the distribution.
Such a Participant's Vested
Interest cannot be made sooner
than 30 days following his date
of termination and no later than
the Participant's Required
Beginning Date.
A distribution may occur while a Participant
remains in the employ of an Employer, in the event
of a withdrawal by reason of Financial Hardship or
after age 59 1/2, as described in Sections 11.1 and
11.2, below.
The distribution rules that apply to an
"alternate payee" pursuant to a "qualified domestic
relations order" are stated in Section 9.4 herein.
Required Beginning Date shall mean, for
anyone, other than a 5% owner (as defined in Code
Section 416(i)(1)(B)(i)), who attains age 70-1/2
after December 31, 1998, April 1st of the calendar
year following the later of (a) the calendar year in
which the Employee attains age 70-1/2, or (b) the
calendar year in which the Employee terminates
employment with the Employer.
The Required Beginning Date of a Participant
who is a five percent owner (as defined in Code
Section 416(i)(1)(B)(i)) of the Employer shall be
April 1st following the calendar year in which the
Participant attains age 70-1/2.
For Plan Years beginning prior to January 1,
1997, Required Beginning Date was defined as April
1st of the calendar year following the calendar year
in which a Participant attained the age of 70-1/2.
<PAGE>
IX.
The second sentence of Article X, Section 10.6, Notice,
is amended and restated, effective January 1, 1998, to read as
follows:
The notice explains a Participant's right to
defer receipt of a distribution if his Vested
Interest exceeds $5,000 ($3,500 prior to January 1,
1998).
IN WITNESS WHEREOF, Avondale Industries, Inc. has caused
this amendment to be executed in multiple originals by its
officers thereunto duly authorized and its corporate seal to
be hereunto affixed, as of the 30th day of December, 1997.
AVONDALE INDUSTRIES, INC
BY: /s/ Thomas M. Kitchen
---------------------
Thomas M. Kitchen, Secretary
ATTEST
/s/ Eugene K. Simon, Jr,
(Corporate Seal)
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF JEFFERSON
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
depose and state that he signed the foregoing Amendment Number
Two to the Avondale Industries, Inc. 401(k) Savings Plan as a
free act and deed on behalf of Avondale Industries, Inc. for
the purposes therein set forth.
/s/ Thomas M. Kitchen
---------------------
Thomas M. Kitchen
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 30TH DAY
OF DECEMBER, 1997.
/s/ Rudolph R. Ramelli
----------------------
NOTARY PUBLIC
FIRST AMENDMENT TO AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
This FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING
CREDIT AGREEMENT (this "First Amendment") is entered into as of
March 14, 1997, among AVONDALE INDUSTRIES, INC., a Louisiana
corporation (the "Company"), the several financial institutions
party to this First Amendment (collectively, the "Banks";
individually, a "Bank"), and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as agent for the Banks (the "Agent").
Capitalized terms which are used herein without definition and
which are defined in the Credit Agreement referred to below shall
have the meanings ascribed to them in the Credit Agreement.
WHEREAS, the Company, the Banks, and the Agent are parties
to a certain Amended and Restated Revolving Credit Agreement
dated as of January 28, 1997 (as at any time amended, modified or
supplemented and in effect from time to time, the "Credit
Agreement"); and
WHEREAS, the Company proposes to add ABN-Amro Bank, N.V. as
an "Additional Bank" pursuant to Section 2.20 of the Credit
Agreement, with a Commitment of $15,000,000; and
WHEREAS, pursuant to Section 2.20 as currently in effect,
the Commitments of BAI and Whitney National Bank, respectively,
would decrease as a result thereof by the amount of $2,500,000
each; and
WHEREAS, BAI and Whitney National Bank desire to, and have
requested that the other parties to the Credit Agreement, amend
Section 2.20 of the Credit Agreement, in connection with the
addition of ABN-Amro Bank, N.V. as an "Additional Bank"
thereunder, so that the full amount of the aggregate reduction of
the Commitments of BAI and Whitney National Bank that would
result from such addition instead would be applied entirely in
reduction of BAI's Commitment (such that the Commitment of BAI
instead would be reduced by the amount of $5,000,000), with no
corresponding reduction in the Commitment of Whitney National
Bank;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agrees as follows:
<PAGE>
SECTION 1. Amendments to the Credit Agreement.
(a) The reference in Subsection 2.20(a) of the Credit
Agreement to the maximum Commitments of the Additional Banks
of "$20,000,000" is amended to read "$15,000,000."
(b) Subsection 2.20(b)(ii) of the Credit Agreement is
amended to read as follows:
"the `Commitment' of BAI shall be reduced
automatically in an aggregate amount equal to the
amount, if any, by which the aggregate Commitments of
the Additional Banks exceed $10,000,000;"
(c) Subsection 2.20(b)(iv) of the Credit Agreement is
amended to read as follows:
"the Company shall pay to the Agent for the
account of and disbursement to the Additional Banks,
respectively, a participation fee in an amount equal to
the product of (i) 20 Basis Points (.20%) times (ii)
the aggregate Commitment of such Banks up to the first
$10,000,000 thereof, as if such fee had been payable
pursuant to Section 2.9 hereof and not in addition
thereto, and, in the event that the aggregate amount of
the Commitments of the Additional Banks exceed
$10,000,000, BAI shall remit to the Agent, for the
account of and disbursement to the Additional Banks, a
pro rata portion of the `participation fee' paid to BAI
pursuant to Section 2.9(b) hereof equal to the product
of (A) 20 Basis Points (.20%) times (B) the amount by
which such Bank's Commitment is decreased pursuant to
clause (ii) above, for payment over to the Additional
Banks pro rata relation to their respective
Commitments; and".
(d) Subsection 2.20(e) of the Credit Agreement is
hereby deleted therefrom.
SECTION 2. Representations and Warranties. The Company
represents and warrants to the Agent and to each of the Banks
that:
(a) This First Amendment and the Credit Agreement as
amended hereby, have been duly authorized, executed and delivered
by the Company and constitute its legal, valid and binding
obligations enforceable in accordance with their respective terms
(subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium and similar
laws affecting creditors' rights generally and to general
principles of equity.
<PAGE>
(b) The representations and warranties set forth in
Section IV of the Credit Agreement are true and correct in all
material respects before and after giving effect to this First
Amendment with the same effect as if made on the date hereof,
except to the extent such representations and warranties
expressly related to an earlier date, in which case they were
true and correct in all material respects on and as of such
earlier date.
(c) As of the date hereof, at the time of and
immediately after giving effect to this First Amendment, no
Default or Event of Default has occurred and is continuing.
SECTION 3. Conditions of Effectiveness. This First
Amendment shall be effective on the date (the "Effective Date")
of the delivery by the Company to the Administrative Agent
of the following:
(a) this First Amendment, signed by the Company, the
Agent, and each of the Banks;
(b) the documents required pursuant to Section 2.20
of the Credit Agreement, as amended hereby, to effect the
addition of ABN-Amro Bank, N.V. as an "Additional Bank" in
accordance therewith; and
(c) the fees and expenses payable to the Agent
pursuant to Sections 2.20 and 10.5 of the Credit Agreement, in
connection with this First Amendment and the addition of ABN-Amro
Bank, N.V. as an "Additional Bank".
SECTION 4. Effect of Amendment. This First Amendment (i)
except as expressly provided herein, shall not be deemed to be a
consent to the modification or waiver of any other term or
condition of the Credit Agreement or of any of the instruments or
agreements referred to therein and (ii) shall not prejudice any
right or rights which the Agent or the Banks may now have under
or in connection with the Credit Agreement, as amended by this
First Amendment. Except as otherwise expressly provided by this
First Amendment, all of the terms, conditions and provisions of
the Credit Agreement shall remain the same. It is declared and
agreed by each of the parties hereto that the Credit Agreement,
as amended hereby, shall continue in full force and effect,
subject to and in accordance with the terms thereof, and that
this First Amendment and such Credit Agreement shall be read and
construed as one instrument.
<PAGE>
SECTION 5. Miscellaneous. This First Amendment shall for
all purposes be construed in accordance with and governed by the
laws of the State of Illinois. The captions in this First
Amendment are for convenience of reference only and shall not
define or limit the provisions hereof. This First Amendment
may be executed in separate counterparts, each of which when so
executed and delivered shall be an original, but all of which
together shall constitute one instrument. In proving this
First Amendment, it shall not be necessary to produce or account
for more than one such counterpart.
NO ORAL AGREEMENTS. THE CREDIT AGREEMENT (AS AMENDED BY
THIS FIRST AMENDMENT) AND THE OTHER LOAN DOCUMENTS, REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
First Amendment to be duly executed and delivered by their
proper and duly authorized officers as of the date and year
first above written.
AVONDALE INDUSTRIES, INC.
By: /s/ Thomas M. Kitchen
---------------------
Name: Thomas M. Kitchen
Title: Vice President and
Chief Financial Officer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By: /s/ W. Thomas Barnett
---------------------
Name: W. Thomas Barnett
Title: Vice President
BANK OF AMERICA ILLINOIS,
as a Bank
By: /s/ W. Thomas Barnett
---------------------
Name: W. Thomas Barnett
Title: Vice President
WHITNEY NATIONAL BANK
By: /s/ Elmer H. Hemphill, Jr.
--------------------------
Name: Elmer H. Hemphill, Jr.
Title: Senior Vice President
FIRST NATIONAL BANK OF COMMERCE
By: /s/ A. David Kocen
------------------
Name: A. David Kocen
Title: Banking Officer
SECOND AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
This SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING
CREDIT AGREEMENT (this "Amendment") is entered into as of April
30, 1997, by and among AVONDALE INDUSTRIES, INC., a Louisiana
corporation (the "Company"), the various financial institutions
signatory hereto (collectively, the "Banks", and, individually, a
"Bank"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as agent for the Banks (the "Agent"). Words and
phrases having defined meanings in the Credit Agreement referred
to below shall have the same respective meanings when used
herein, unless otherwise expressly defined herein.
W I T N E S S E T H:
WHEREAS, the parties hereto have entered into an Amended and
Restated Revolving Credit Agreement dated as of January 28, 1997
as amended by that certain First Amendment thereto dated as of
March 14, 1997 (collectively, the "Existing Agreement" and, as
amended by this Amendment, the "Credit Agreement"), relating to a
revolving credit facility in an amount not to exceed $85,000,000
for the Company's ongoing working capital and general corporate
needs; and
WHEREAS, the Company has requested that the Banks agree to
certain amendments and modifications to the terms of the Existing
Agreement;
NOW THEREFORE, in consideration of the premises and the
mutual agreements set forth herein and for other consideration
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
<PAGE>
1. Amendment to the Existing Agreement. Subject to and
conditioned upon the fulfillment of each of the conditions
precedent set forth in Section 3 hereof, the Existing Agreement
is hereby amended as follows: Section 6.11 of the Existing
Agreement is hereby amended to delete the terms thereof in their
entirety and to insert the following therefor:
Section 6.11. Delivery of Assignment of Claims
Notices. Except as provided in the next sentence of
this Section 6.11, within 30 days after executing any
contract with any Governmental Authority of the United
States, including, without limitation, the Department
of Navy, providing for aggregate payments to the
Company or any Subsidiary Guarantor of $1,000,000 or
more, the Company shall, and shall cause each
Subsidiary Guarantor party thereto, to assign such
contract to the Agent and deliver a Notice of
Assignment with respect to such contract which has been
sent to the United States government pursuant to the
Assignment of Claims Act of 1940 as amended (31 U.S.C.
3727, 41 U.S.C. 15) and acknowledged by the appropriate
administrative contracting officer, and disbursing
officer, and if applicable, any surety on any bond
applicable to such contract. On or before May 31,
1997, the Company shall assign the LPD-17 Contract to
the Agent and deliver a Notice of Assignment with
respect to the LPD-17 Contract which has been sent to
the United States government pursuant to the Assignment
of Claims Act of 1940 as amended (31 U.S.C. 3727, 41
U.S.C. 15) and acknowledged by the appropriate
administrative contracting officer, and disbursing
officer, and if applicable, any surety on any bond
applicable to the LPD-17 Contract.
2. Conditions Precedent to Effectiveness of Amendments and
Consents. The amendments and modifications set forth in Section
1 hereof shall become effective upon, and are expressly
conditioned upon, the fulfillment of each of the following
conditions precedent:
(a) Amendment. The Agent shall have received this
Amendment, duly executed and delivered by an authorized officer
of the Company and each of the Banks.
(b) Subsidiary Guarantor Consent. The Agent shall
have received (with a copy for each of the Banks) from each of
the Subsidiary Guarantors a reaffirmation of the Subsidiary
Guarantee executed by it in the form attached hereto.
(c) Material Adverse Change. In the opinion of the
Banks (as evidenced by their execution of this Amendment), no
event or condition shall have occurred or exist which could
reasonably be expected to have a Material Adverse Effect.
<PAGE>
(d) Other Documents. The Agent shall have received
such other documents, instruments and agreements as it shall have
reasonably requested in connection with the transactions
contemplated by this Amendment.
3. Representations, Warranties and Covenants. In order to
induce the Agent and the Banks to enter into this Amendment, the
Company hereby represents, warrants and covenants to the Agent
and the Banks as follows:
(a) The execution, delivery and performance by the
Company of this Amendment (i) are within the Company's corporate
powers, (ii) have been duly authorized by all necessary corporate
action, (iii) require no action by or in respect of, or filing
with, any governmental body, agency or official, (iv) do not
contravene, or constitute a default under, any provision of any
applicable law, statute, ordinance, regulation, rule, order or
other governmental restriction or of the Certificate or Articles
of Incorporation or By-Laws of the Company, (v) do not
contravene, or constitute a default under, any agreement,
judgment, injunction, order, decree, indenture, contract, lease,
instrument or other commitment to which the Company is a party or
by which the Company or any of its assets are bound and (vi) will
not result in the creation or imposition of any Lien upon any
asset of the Company under any existing indenture, mortgage, deed
of trust, loan or credit agreement or other agreement or
instrument to which the Company is a party or by which it or any
of its assets may be bound or affected.
(b) This Amendment and the Credit Agreement are the
legal, valid and binding obligations of the Company, and are
enforceable against the Company in accordance with their terms.
(c) The representations and warranties contained in
the Credit Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date hereof as
though made on the date hereof, except to the extent that such
representations expressly relate solely to an earlier date (in
which case such representations and warranties were true and
accurate on and as of such earlier date).
(d) No Default or Event of Default has occurred and is
continuing.
4. Reference to and Effect Upon the Credit Agreement.
Upon the effectiveness of this Amendment, each reference in the
Existing Agreement to "the Agreement", "hereunder", "hereof",
"herein", or words of like import, shall mean and be a reference
to the Credit Agreement, as amended hereby and each reference to
the Existing Agreement in any other Loan Document shall mean and
be a reference to the Credit Agreement, as amended hereby.
<PAGE>
5. Reaffirmation; Expenses. The Company hereby reaffirms
to the Agent and each of the Banks that, except as modified
hereby, the Credit Agreement and all of the Loan Documents remain
in full force and effect and have not been otherwise waived,
modified or amended. Except as expressly modified hereby, all of
the terms and conditions of the Credit Agreement shall remain
unaltered and in full force and effect. The Company acknowledges
that all reasonable legal fees and expenses of the Agent related
to this Amendment shall be paid by the Company.
6. Confirmation of Collateral Documents. The Company
hereby (a) ratifies and confirms its obligations under the
Collateral Documents and acknowledges and agrees that the
Collateral Documents to which the Company is a party are the
legal, valid and binding obligations of the Company, enforceable
against it in accordance with their terms; and (b) agrees that
the Obligations (for purposes of each of such Collateral
Documents) shall include, without limitation, the Obligations
under and as defined in the Credit Agreement as amended by this
Amendment.
7. Choice of Law. THIS AMENDMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ILLINOIS AND ANY
DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL
TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANY, THE
SUBSIDIARIES, THE AGENT AND THE BANKS IN CONNECTION WITH THIS
AMENDMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS
AND DECISIONS OF THE STATE OF ILLINOIS.
8. Counterparts. This Amendment may be executed in one or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument. One or more counterparts of this Amendment may be
delivered by telecopier, and if so delivered shall be deemed to
be delivered with the intention that they shall have the same
effect as an original counterpart hereof. Any party delivering
any such counterpart by telecopy shall promptly forward to the
Agent an original counterpart hereof.
[Signature Pages Follow]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their
duly authorized officers to execute and deliver this Agreement as
of the date first above written.
AVONDALE INDUSTRIES, INC.
By: /s/ Thomas M. Kitchen
---------------------
Name: Thomas M. Kitchen
Title: Vice President
[SIGNATURES CONTINUED ON
THE FOLLOWING PAGE]
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: /s/ W. Thomas Barnett
---------------------
Name: W. Thomas Barnett
Title: Vice President
THE BANKS:
BANK OF AMERICA ILLINOIS
By: /s/ W. Thomas Barnett
---------------------
Name: W. Thomas Barnett
Title: Vice President
[SIGNATURES CONTINUED ON
THE FOLLOWING PAGE]
<PAGE>
WHITNEY NATIONAL BANK
By: /s/ Elmer H. Hemphill, Jr.
--------------------------
Name: Elmer H. Hemphill, Jr.
Title: Senior Vice President
[SIGNATURES CONTINUED ON
THE FOLLOWING PAGE]
<PAGE>
ABN-AMRO BANK, N.V.
By: /s/
Name:
Title:
[SIGNATURES CONTINUED ON
THE FOLLOWING PAGE]
<PAGE>
FIRST NATIONAL BANK OF
COMMERCE
By: /s/ A. David Kocen
------------------
Name: A. David Kocen
Title: Banking Officer
[SIGNATURES CONTINUED ON
THE FOLLOWING PAGE]
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Second Amendment to Amended and Restated Revolving
Credit Agreement and acknowledges the continued validity,
enforceability and effectiveness of the Guarantee with respect to
all loans, advances and extensions of credit to the Company,
whether heretofore or hereafter made, together with all interest
thereon and all expenses in connection therewith.
AVONDALE GULFPORT MARINE, INC.
By: /s/ Thomas M. Kitchen
---------------------
Title: Vice President,
Secretary & Treasurer
Dated as of April 30, 1997.
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Second Amendment to Amended and Restated Revolving
Credit Agreement and acknowledges the continued validity,
enforceability and effectiveness of the Guarantee with respect to
all loans, advances and extensions of credit to the Company,
whether heretofore or hereafter made, together with all interest
thereon and all expenses in connection therewith.
AVONDALE TECHNICAL SERVICES,
INC.
By: /s/ Bruce L. Hicks
------------------
Title: Secretary & Treasurer
Dated as of April 30, 1997.
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Second Amendment to Amended and Restated Revolving
Credit Agreement and acknowledges the continued validity,
enforceability and effectiveness of the Guarantee with respect to
all loans, advances and extensions of credit to the Company,
whether heretofore or hereafter made, together with all interest
thereon and all expenses in connection therewith.
CRAWFORD TECHNICAL SERVICES,
INC.
By: /s/ Bruce L. Hicks
------------------
Title: Secretary & Treasurer
Dated as of April 30, 1997.
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Second Amendment to Amended and Restated Revolving
Credit Agreement and acknowledges the continued validity,
enforceability and effectiveness of the Guarantee with respect to
all loans, advances and extensions of credit to the Company,
whether heretofore or hereafter made, together with all interest
thereon and all expenses in connection therewith.
GENCO INDUSTRIES, INC.
By: /s/ Bruce L. Hicks
------------------
Title: Secretary & Treasurer
Dated as of April 30, 1997.
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Second Amendment to Amended and Restated Revolving
Credit Agreement and acknowledges the continued validity,
enforceability and effectiveness of the Guarantee with respect to
all loans, advances and extensions of credit to the Company,
whether heretofore or hereafter made, together with all interest
thereon and all expenses in connection therewith.
AVONDALE PROPERTIES, INC.
By: /s/ Thomas M. Kitchen
---------------------
Title: Vice President &
Secretary
Dated as of April 30, 1997.
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed to the
Secured Parties (as defined therein), subject to the terms,
conditions and limitations set forth therein, the prompt payment
and performance of all of the Obligations (as defined therein).
The Guarantor consents to the Company's execution of the
foregoing Second Amendment to Amended and Restated Revolving
Credit Agreement and acknowledges the continued validity,
enforceability and effectiveness of the Guarantee with respect to
all loans, advances and extensions of credit to the Company,
whether heretofore or hereafter made, together with all interest
thereon and all expenses in connection therewith.
AVONDALE LAND MANAGEMENT
COMPANY, a Louisiana general
partnership
By Avondale Industries, Inc.,
a general partner
By: /s/ Thomas M. Kitchen
---------------------
Name: Thomas M. Kitchen
Title: Vice President, Chief
Financial Officer and
Secretary
By Avondale Properties, Inc.,
a general partner
By: /s/ Thomas M. Kitchen
---------------------
Name: Thomas M. Kitchen
Title: Vice President and
Secretary
Dated as of April 30, 1997.
<PAGE>
THIRD AMENDMENT TO AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
AND REQUEST FOR RELEASE OF COLLATERAL
This THIRD AMENDMENT TO AMENDED AND RESTATED REVOLVING
CREDIT AGREEMENT (this "Third Amendment") is entered into as of
October 24, 1997, among AVONDALE INDUSTRIES, INC., a Louisiana
corporation (the "Company"), the several financial institutions
party to this Third Amendment (collectively, the "Banks";
individually, a "Bank"), and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as agent for the Banks (the "Agent").
Capitalized terms which are used herein without definition and
which are defined in the Credit Agreement referred to below shall
have the meanings ascribed to them in the Credit Agreement.
WHEREAS, the Company, the Banks, and the Agent are parties
to a certain Amended and Restated Revolving Credit Agreement
dated as of January 28, 1997 (as previously amended by First
Amendment to Amended and Restated Revolving Credit Agreement
entered into as of March 14, 1997, and Second Amendment to
Amended and Restated Revolving Credit Agreement entered into as
of April 30, 1997, the "Credit Agreement"); and
WHEREAS, the Company has requested that the Agent and the
Banks amend the Credit Agreement to (i) modify certain provisions
relating to the refinancing of a portion of the LPD-17
Expenditures and the corresponding Commitment reduction,
prepayment and release of certain Collateral; and (ii) modify the
provisions regarding dividends and related matters, in each case
as provided herein; and
WHEREAS, the Agent and the Banks are willing to so modify
the Credit Agreement, upon the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agrees as follows:
SECTION 1. Amendments to the Credit Agreement.
----------------------------------
(a) The reference in Section 2.3 of the Credit Agreement
to "$50,000,000" is amended to read "$65,000,000".
(b) The clause "other than the liens created by the
900 Foot Floating Drydock Mortgage," appearing immediately prior
to the proviso in the first sentence of Subsection 2.18(a) of the
Credit Agreement is deleted therefrom.
<PAGE>
(c) The clause "a preferred ship mortgage covering the
Avondale Drydock (substantially in the form of the 900 Foot
Floating Drydock Mortgage, with such revisions as may be
requested by the Agent or the Required Banks), along with such
MARAD and other consents and related documentation as may be
required by the Agent and the Required Banks in connection
therewith," is inserted after the word "deliver" and before the
word "Security" in subpart (i) of the second sentence of
Subsection 2.18(b) of the Credit Agreement.
(d) The reference in Section 6.12 of the Credit
Agreement to "$50,000,000" is amended to read "$65,000,000".
(e) Section 7.6 of the Credit Agreement is amended by
deleting clause (ii) thereof and substituting the following
clauses (ii) and (iii) in lieu thereof:
(ii) so long as no Default or Event of Default
shall have occurred and be continuing, the
Company may pay cash dividends on its capital
stock and make payments for the purchase or
redemption of shares of its common stock during
any Dividend Calculation Period in an aggregate
amount not to exceed (A) 40% of Consolidated
Net Income for such Dividend Calculation Period
minus (B) the aggregate amount of all cash
dividends paid by the Company and the amount
paid by the Company for purchases and
redemptions pursuant to this clause (ii) during
such Dividend Calculation Period, and (iii) in
addition to purchases and redemptions permitted
pursuant to clause (ii) of this Section 7.6,
and so long as no Default or Event of Default
has occurred and is continuing, the Company may
purchase or redeem shares of its common stock,
provided that during the period commencing on
the Effective Date (April 30, 1997) through the
Expiration Date, the aggregate number of shares
of common stock purchased or redeemed by the
Company pursuant to this clause (iii) may not
exceed 1,500,000 and the aggregate amount paid
by the Company on account of such purchases or
redemptions may not exceed $50,000,000.00. As
used in this Section 7.6, "Dividend Calculation
Period" shall mean, as of the last day of each
of the Company's fiscal quarters, the four
fiscal quarter period ending on such day.
(f) Schedule I to the Credit Agreement is hereby
deleted and Schedule I attached hereto is substituted therefor.
<PAGE>
SECTION 2. Representations and Warranties.
------------------------------
The Company represents and warrants to the Agent and to each of
the Banks that:
(a) This Third Amendment and the Credit Agreement as
amended hereby, (i) have been duly authorized, executed and
delivered by the Company and each of the Subsidiary Guarantors
and constitute their legal, valid and binding obligations
enforceable in accordance with their respective terms (subject,
as to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting
creditors' rights generally and to general principles of equity),
within the Company's and the Subsidiary Guarantors' corporate
powers, (ii) require no action by or in respect of, or filing
with, any governmental body, agency or official, (iii) do not
contravene, or constitute a default under, any provision of any
applicable law, statute, ordinance, regulation, rule, order or
other governmental restriction, or of the charter documents of
the Company or any Subsidiary Guarantor, or of any agreement,
judgment, injunction, order, decree, indenture, contract, lease,
instrument or other commitment to which the Company or any
Subsidiary Guarantor is a party or by which the Company or any
Subsidiary Guarantor or any of their assets are bound, and (iv)
will not result in the creation or imposition of any Lien upon
any asset of the Company or any Subsidiary Guarantor under any
existing indenture, mortgage, deed of trust, loan or credit
agreement or other agreement or instrument to which the Company
or any Subsidiary Guarantor is a party or by which it or any of
its assets may be bound or affected.
(b) The representations and warranties set forth in
Section IV of the Credit Agreement are true and correct in all
material respects before and after giving effect to this Third
Amendment with the same effect as if made on the date hereof,
except to the extent such representations and warranties
expressly related to an earlier date, in which case they were
true and correct in all material respects on and as of such
earlier date.
(c) As of the date hereof, at the time of and
immediately after giving effect to this Third Amendment, no
Default or Event of Default has occurred and is continuing.
(d) As of the date hereof, at the time of and
immediately after giving effect to this Third Amendment, no
events or conditions have occurred or exist which, individually
or in the aggregate, have had, or could reasonably be expected to
have, a Material Adverse Effect, and no litigation is pending or
threatened against the Company or any Subsidiary in which there
is a reasonable possibility of an adverse decision which would
result in a Material Adverse Effect.
<PAGE>
SECTION 3. Certain Covenants.
-----------------
The Company hereby agrees to deliver to the Agent the following:
(a) no later than October 28, 1997: (i)
certified copies of all corporate action taken by the
Company and each of the Subsidiary Guarantors to
authorize the execution, delivery and performance of
this Third Amendment and any other documents required
or contemplated hereunder, and (ii) a certificate of
incumbency with respect to the officers of the Company
and each of the Subsidiary Guarantors authorized and
directed to execute and deliver this Third Amendment
and the Consents attached hereto; and
(b) no later than November 4, 1997: copies of
all documents and instruments executed and delivered in
connection with the refinancing of the LPD-17
Expenditures in accordance with Section 2.18(a) of the
Credit Agreement.
SECTION 4. Conditions of Effectiveness.
---------------------------
This Third Amendment shall be effective on the date (the
"Effective Date") of the delivery by the Company to the Agent of
the following: (a) this Third Amendment, signed by the
Company, each of the Subsidiary Guarantors, the Agent and each
of the Banks; and (b) the fees and expenses payable to the Agent
pursuant to Section 10.5 of the Credit Agreement, in connection
with this Third Amendment.
SECTION 5. Effect of Amendment.
--------------------
This Third Amendment (i) except as expressly provided herein,
shall not be deemed to be a consent to the modification or
waiver of any other term or condition of the Credit Agreement or
of any of the instruments or agreements referred to therein and
(ii) shall not prejudice any right or rights which the Agent or
the Banks may now have under or in connection with the Credit
Agreement, as amended by this Third Amendment. Except
as otherwise expressly provided by this Third Amendment, all of
the terms, conditions and provisions of the Credit Agreement
shall remain the same. It is declared and agreed by each of
the parties hereto that the Credit Agreement, as amended hereby,
shall continue in full force and effect, subject to and in
accordance with the terms thereof, and that this Third Amendment
and such Credit Agreement shall be read and construed as one
instrument.
<PAGE>
SECTION 6. Miscellaneous.
-------------
This Third Amendment shall for all purposes be construed in
accordance with and governed by the laws of the State of
Illinois. The captions in this Third Amendment are for
convenience of reference only and shall not define or limit the
provisions hereof. This Third Amendment may be executed in
separate counterparts, each of which when so executed and
delivered shall be an original, but all of which together shall
constitute one instrument. In proving this Third Amendment, it
shall not be necessary to produce or account for more than one
such counterpart.
SECTION 7. Request for Release of Collateral; Consent of
-------------------------------------------------
Banks.
-----
(a) Pursuant to Section 2.18 of the Credit Agreement
as amended pursuant hereto, the Company hereby requests that the
Agent release the liens and other security (but not the
Subsidiary Guarantees) securing the Obligations, at the Company's
expense, and, in connection therewith and as an inducement
thereto, hereby represents and warrants to the Agent and the
Banks that (a) the Company has refinanced a sufficient amount
of the LPD-17 Expenditures directly funded with the Line of
Credit to reduce the Line of Credit to an amount not to exceed
$65,000,000; (b) the material terms of such refinancing are
summarized in Exhibit A attached hereto; (c) the amount of the
Commitments has reduced automatically, permanently and pro rata
among the Banks to an aggregate amount equal to $65,000,000 and
the Company has prepaid the outstanding principal amount of the
Loans by an amount equal to the excess, if any, of (i) the
aggregate amount of Loans outstanding plus the aggregate
amount of Letter of Credit Outstandings over (ii) the Line of
Credit (after giving effect to such reduction in the
Commitments); and (d) no Default or Event of Default has occurred
and is continuing.
(b) The Banks consent to the Company's request for
release of collateral set forth in Section 7(a) of this Third
Amendment, and hereby direct the Agent to execute and deliver a
Global Release Agreement in substantially the form set out in
Exhibit B attached to this Third Amendment, and to execute and
deliver such UCC termination statements, release of liens and
other instruments as may be necessary to release and terminate
the liens and security interests securing the Obligations.
Pursuant to Section 6.12 and clause (v) of Section 7.13 of the
Credit Agreement, the Agent and each Bank acknowledges that the
terms of the LPD-17 Refinancing Indebtedness are satisfactory to
it.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
<PAGE>
NO ORAL AGREEMENTS. THE CREDIT AGREEMENT (AS AMENDED BY
THIS THIRD AMENDMENT) AND THE OTHER LOAN DOCUMENTS, REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this
Third Amendment to be duly executed and delivered by their
proper and duly authorized officers as of the date and year
first above written.
AVONDALE INDUSTRIES, INC.
By /s/ Eugene K. Simon, Jr.
------------------------
Name: Eugene K. Simon, Jr.
Title: V. P. - Finance
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Agent
By /s/ Janice Hammond
------------------
Name: Janice Hammond
Title: Vice President
Agency Specialist
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
successor to Bank of America
Illinois, as a Bank
By /s/ Gina M. West
----------------
Name: Gina M. West
Title: Vice President
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
<PAGE>
WHITNEY NATIONAL BANK
By: /s/ Brigette L. Duhe
--------------------
Name: Brigette L. Duhe
Title: Banking Officer
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
<PAGE>
ABN-AMRO BANK, N.V.
By: /s/ David P. Orr
----------------
Name: David P. Orr
Title: Vice President
By: /s/ Lila Jordan
---------------
Name: Lila Jordan
Title: Vice President
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
<PAGE>
FIRST NATIONAL BANK OF COMMERCE
By: /s/ David Kocen
---------------
Name: David Kocen
Title: Banking Officer
<PAGE>
Attachments:
Schedule I -Commitments
Exhibit A -Summary of Material Terms of LPD-17 Refinancing
Indebtedness
Exhibit B -Form of Global Release
Consents of Guarantors:
Avondale Gulfport Marine, Inc.
Avondale Technical Services, Inc.
Crawford Technical Services, Inc.
Genco Industries, Inc.
Avondale Properties, Inc.
Avondale Land Management Company
<PAGE>
SCHEDULE I
COMMITMENTS
Bank of America National Trust and
Savings Association $23,705,882.35 36.470588%
Whitney National Bank $18,352,941.18 28.235294%
ABN-AMRO Bank, N.V. $11,470,588.24 17.647059%
First National Bank of Commerce $11,470,588.24 17.647059%
-------------- ------------
$65,000,000.00 100.0000000%
============== ============
<PAGE>
EXHIBIT A
Summary of Material Terms of LPD-17 Refinancing Indebtedness
------------------------------------------------------------
See attached
"EXHIBIT "A"
Summary of LPD-17 Refinancing
-----------------------------
BACKGROUND INFORMATION
In March, 1997, Avondale acquired the property on which the
UNO/Avondale Maritime Technology Center of Excellence (the
"Technology Center") will be located. On May 16, 1997, Avondale
entered into a Cooperative Endeavor Agreement (the "Cooperative
Endeavor Agreement") with the State of Louisiana (the "State"),
the Board of Supervisors of Louisiana State University and
Agricultural and Mechanical College, acting on behalf of the
University of New Orleans (the "Board"), and University of New
Orleans Research and Technology Foundation, Inc. (the
"Foundation"). Under the Cooperative Endeavor Agreement, the
State made a non-binding commitment to appropriate $40,000,000,
plus interest, in installments over the period from September,
1997 through September, 2008 for donation to the Foundation for
purposes of funding the Technology Center.
At essentially the same time:
1. Avondale donated the property where the Technology
Center will be located to the Board, acting on behalf of the
University of New Orleans.
2. The Board in turn leased the undeveloped property to the
Foundation through a ground lease.
3. The Foundation subleased the property, including the
proposed Technology Center to be constructed by the
Foundation, to Avondale.
4. Avondale entered into a second tier sublease in favor of
the Board, on behalf of the University of New Orleans, for
use of space in the Technology Center by the University of
New Orleans' naval architecture program.
As a result of these transactions, the Foundation is the
nominal borrower on all indebtedness incurred to construct
and to equip the Technology Center. Avondale and the
Foundation intend, however, that appropriations by the State
under the Cooperative Endeavor Agreement will service the
Foundation's debt. If the State's appropriations are
insufficient, Avondale will be ultimately responsible for
making up the shortfall. In June, 1997, the State
appropriated $3.75 million and donated this amount to the
Foundation in accordance with the Cooperative Endeavor
Agreement.
<PAGE>
FINANCING STRUCTURE
Avondale and the Foundation established two separate
financing facilities for the construction and equipping of
the Technology Center, the first of which (the "Equipment
Lease Facility") is with Interlease ("Interlease"), and the
second of which (the "Building Loan Facility") is with
Whitney National Bank ("Whitney") and First National Bank of
Commerce of New Orleans ("FNBC").
A. The Equipment Lease Facility.
--------------------------------
The Equipment Lease Facility is a relatively standard
equipment leasing arrangement between Interlease, as the
financing lessor, and the Foundation, as lessee, pursuant to
which the Foundation will lease from Interlease most of the
computer equipment necessary to furnish the Technology
Center. Under the Equipment Lease Facility, the Foundation
may lease up to $14,000,000 in computer equipment and
related accessories, with each leased item to be subject, at
the Foundation's option, to a 3, 4 or 5 year term. Lease
payments include an interest component which varies with the
lease term. Lease payments are made once annually, and the
Equipment Lease Facility requires the cost of each item of
leased equipment to be fully amortized over the lease term.
Upon expiration of the lease term for any item, the
Foundation may purchase such item for $1.
Avondale has fully and unconditionally guaranteed the
Foundation's payment and performance obligations under the
Equipment Lease Facility. The Avondale guaranty is
unsecured. The Avondale guaranty contains a waiver of
subrogation rights by Avondale and an agreement to waive any
rights of contribution or indemnity which Avondale may have
against the Foundation.
In the event of a default under the Equipment Lease
Facility, Interlease is entitled to exercise the usual range
of equipment lease remedies, including the right to
repossess the leased equipment and to enforce the Avondale
guaranty. Avondale does not have any extraordinary cure
rights (such as an additional grace period in which to cure
a lease default) but should be entitled, as guarantor, to
cure a lease default subject to the same time limitations
and conditions that apply to the Foundation as lessee.
<PAGE>
B. The Building Loan Facility.
-------------------------------
Avondale and the Foundation financed the remainder of the
Technology Center through the Building Loan Facility with
Whitney and FNBC. The Building Loan Facility is governed by
a Loan Agreement dated as of August 14, 1997 among the
Foundation, Avondale, Whitney, and FNBC (the "Loan
Agreement"). The Foundation has the right to borrow up to
$26,000,000 under the Loan Agreement's line of credit for
purposes of constructing and equipping the Technology
Center, with such debt to be secured by (a) a leasehold
mortgage on the Foundation's lease on the land underlying
the Technology Center, (b) an assignment of the construction
contract between the Foundation and the general contractor,
(c) a security interest in the Foundation's equipment,
fixtures, general intangibles, and other items of movable
property located at the Technology Center, and (d) an
unconditional, unsecured guaranty by Avondale.
The Building Loan Facility bears interest at the rate of
7.30% per annum and is payable in annual installments due on
each September 1, commencing September 1, 1997 and ending on
September 1, 2006. The installments are in unequal amounts.
Whitney and FNBC have the usual remedies in the event of a
default by the Foundation, including foreclosure on the
leasehold mortgage, execution upon the movable property
subject to the Foundation's security agreement, and
enforcement of the Avondale guaranty.
The Avondale guaranty prohibits Avondale's exercise of any
subrogation rights until the Building Loan Facility has been
paid in full. Avondale is entitled to receive any
acceleration notice delivered to the Foundation but is
generally not entitled to any extraordinary cure rights
(such as longer cure periods).
AVONDALE'S RIGHT TO USE THE TECHNOLOGY CENTER
Avondale's right to use the Technology Center derives from
its sublease from the Foundation which in turn derives its
rights to use the Technology Center from the Foundation's
ground lease with the Board. Avondale's sublease, which has
a term of 50 years, requires an annual rental payment of
$100,000 (which is subject to an offset in favor of Avondale
if Avondale is required to make payments on its guaranties
of the Foundation's debt). The sublease also passes on to
Avondale all requirements imposed on the Foundation under
its ground lease with the Board. The sublease includes an
intervention by the Board, as the ultimate lessor,
consenting to the sublease and permitting Avondale a 30 day
period in which to cure any default by the Foundation under
the ground lease. Avondale will lose its rights under the
sublease following a default thereunder or under the ground
lease, which, in each instance, is not cured within the
applicable cure period.
<PAGE>
EXHIBIT B
Form of Global Release
----------------------
See attached
EXHIBIT "B"
GLOBAL RELEASE AGREEMENT
THIS GLOBAL RELEASE AGREEMENT (this "Agreement") is entered
into as of the 24th day of October, 1997, by and among BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (as successor to
Continental Bank N.A., the "Agent"), as agent for the several
financing institutions (the "Banks") party to the Credit
Agreement (as defined herein), AVONDALE INDUSTRIES, INC., a
Louisiana Corporation (the "Company"), AVONDALE GULFPORT MARINE,
INC., a Delaware corporation ("Gulfport"), AVONDALE TECHNICAL
SERVICES, INC., a Louisiana corporation ("Technical"), CRAWFORD
TECHNICAL SERVICES, INC., a Texas corporation ("Crawford"), GENCO
INDUSTRIES, INC., a Texas corporation ("Genco"), AVONDALE
PROPERTIES, INC., a Louisiana corporation ("Avondale Properties")
and AVONDALE LAND MANAGEMENT COMPANY, a Louisiana general
partnership ("Shipyard Partnership").
W I T N E S S E T H :
WHEREAS, the Company, the Banks and the Agent are parties to
that certain Amended and Restated Revolving Credit Agreement,
dated as of January 28, 1997, as amended by that certain First
Amendment to Amended and Restated Revolving Credit Agreement,
dated as of March 14, 1997, as further amended by that certain
Second Amendment to Amended and Restated Revolving Credit
Agreement, dated as of April 30, 1997 and as further amended by
that certain Third Amendment to Amended and Restated Revolving
Credit Agreement and Request for Release of Collateral, dated as
of even date with this Agreement (as at any time amended,
modified or supplemented and in effect from time to time, the
"Credit Agreement");
WHEREAS, capitalized terms used but not otherwise defined
herein shall have the meaning ascribed to such terms in the
Credit Agreement;
WHEREAS, Gulfport, Technical, Crawford, Genco, Avondale
Properties and Shipyard Partnership (each a "Subsidiary" and
collectively the "Subsidiaries") each entered into a separate
guarantee in favor of the Agent, as agent for the various
financial institutions party to the Credit Agreement,
guaranteeing certain obligations of the Company under the Credit
Agreement (each a "Subsidiary Guarantee");
WHEREAS, the Company executed that certain Security
Agreement in favor of the Agent, as agent for the Banks, dated as
of May 10, 1994 (the "Company Security Agreement"), pursuant to
which the Company granted a security interest in certain
collateral to secure the Obligations;
WHEREAS, each Subsidiary executed a separate security
agreement (each a "Subsidiary Security Agreement", and together
with the Company Security Agreement, the "Security Agreements")
in favor of the Agent, as agent for the Banks, pursuant to which
each Subsidiary granted a security interest in certain collateral
to secure the Obligations;
WHEREAS, all of the requirements under Section 2.18(a) of
the Credit Agreement as amended by the Third Amendment have been
fulfilled, thereby allowing the Company to require the Agent to
release the liens and other security securing the Obligations and
the Company hereby directs that the Agent release such liens and
security; and
WHEREAS, the Agent has agreed to release all such liens and
security in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the premises, and mutual
covenants, agreements and understandings contained herein and in
the Credit Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Termination and Release. The Agent, for itself and on
behalf of the Banks, hereby terminates, releases and forever
discharges the Company and each of the Subsidiaries from each of
their respective Security Agreements and from any other pledge
agreements, security interests, mortgages, assignments, liens and
other security (but not the Subsidiary Guarantees) securing the
Obligations (collectively, "Other Security Instruments") to the
extent such Other Security Instruments secure the Obligations;
2. Further Assurances. The Agent, for itself and on
behalf of the Banks, agrees to execute any and all further
documents necessary to achieve the purpose and intent of this
Agreement, including without limitation any and all UCC
termination instrument and any other instrument or document to
release the liens and other security as contemplated herein and
in Section 2.18(a) of the Credit Agreement.
3. Counterparts. This Agreement may be executed by one
or more of the parties to this Agreement on any number of
separate counterparts, and all of said counterparts taken
together shall be deemed to constitute one in the same
instruments.
4. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any jurisdiction.
5. Governing Law. This Agreement and the rights and
obligations of the parties hereunder shall be governed by,
construed and interpreted in accordance with the laws of the
State of Louisiana.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and
duly authorized officers as of the date first above-written.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By: /s/ Janice Hammond
--------------------------
Name: Janice Hammond
Title: Vice President
Agency Sepcialist
AVONDALE INDUSTRIES, INC.
By: /s/ Eugene K. Simon, Jr.
---------------------------
Name: Eugene K. Simon, Jr.
Title: Assistant Secretary
AVONDALE GULFPORT MARINE, INC
By: /s/ Kenneth B. Dupont
-------------------------
Name: Kenneth B. Dupont
Title: President
AVONDALE TECHNICAL SERVICES, INC.
By: /s/ Thomas M. Kitchen
--------------------------
Name: Thomas M. Kitchen
Title: President
CRAWFORD TECHNICAL SERVICES, INC.
By: /s/ Joseph J. Jarvis III
--------------------------
Name: Joseph J. Jarvis III
Title: President
GENCO INDUSTRIES, INC.
By: /s/ Kenneth B. Dupont
---------------------------
Name: Kenneth B. Dupont
Title: CEO
AVONDALE PROPERTIES, INC.
By: /s/ Thomas M. Kitchen
---------------------------
Name: Thomas M. Kitchen
Title: V. P.
AVONDALE LAND MANAGEMENT COMPANY
By: Avondale Industries, Inc.
a general partner
By: /s/ Thomas M. Kitchen
---------------------
Name: Thomas M. Kitchen
---------------------
Title: V. P.
---------------------
By: Avondale Properties, Inc.
a general partner
By: /s/ Thomas M. Kitchen
---------------------
Name: Thomas M. Kitchen
---------------------
Title: V. P.
---------------------
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed
to the Secured Parties (as defined therein), subject to the
terms, conditions and limitations set forth therein, the
prompt payment and performance of all of the Obligations (as
defined therein). The Guarantor (a) consents to the
Company's execution of the foregoing Third Amendment to
Amended and Restated Revolving Credit Agreement and Request
for Release of Collateral (the "Third Amendment"), (b)
consents to the release of collateral therein requested, and
(c) acknowledges the continued validity, enforceability and
effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest
thereon and all expenses in connection therewith.
AVONDALE GULFPORT MARINE, INC.
By: /s/ Kenneth B. Dupont
---------------------
Name: Kenneth B. Dupont
Title: President
Dated as of even date with the above-referenced Third
Amendment.
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed
to the Secured Parties (as defined therein), subject to the
terms, conditions and limitations set forth therein, the
prompt payment and performance of all of the Obligations (as
defined therein). The Guarantor (a) consents to the
Company's execution of the foregoing Third Amendment to
Amended and Restated Revolving Credit Agreement and Request
for Release of Collateral (the "Third Amendment"), (b)
consents to the release of collateral therein requested, and
(c) acknowledges the continued validity, enforceability and
effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest
thereon and all expenses in connection therewith.
AVONDALE TECHNICAL SERVICES, INC.
By: /s/ Thomas M. Kitchen
---------------------
Name: Thomas M. Kitchen
Title: President
Dated as of even date with the above-referenced Third
Amendment.
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed
to the Secured Parties (as defined therein), subject to the
terms, conditions and limitations set forth therein, the
prompt payment and performance of all of the Obligations (as
defined therein). The Guarantor (a) consents to the
Company's execution of the foregoing Third Amendment to
Amended and Restated Revolving Credit Agreement and Request
for Release of Collateral (the "Third Amendment"), (b)
consents to the release of collateral therein requested, and
(c) acknowledges the continued validity, enforceability and
effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest
thereon and all expenses in connection therewith.
CRAWFORD TECHNICAL SERVICES, INC.
By: /s/ Joseph J. Jarvis, III
-------------------------
Name: Joseph J. Jarvis, III
Title: President
Dated as of even date with the above-referenced Third
Amendment.
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed
to the Secured Parties (as defined therein), subject to the
terms, conditions and limitations set forth therein, the
prompt payment and performance of all of the Obligations (as
defined therein). The Guarantor (a) consents to the
Company's execution of the foregoing Third Amendment to
Amended and Restated Revolving Credit Agreement and Request
for Release of Collateral (the "Third Amendment"), (b)
consents to the release of collateral therein requested, and
(c) acknowledges the continued validity, enforceability and
effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest
thereon and all expenses in connection therewith.
GENCO INDUSTRIES, INC.
By: /s/ Kenneth B. Dupont
---------------------
Name: Kenneth B. Dupont
Title: Chief Executive Officer
Dated as of even date with the above-referenced Third
Amendment.
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed
to the Secured Parties (as defined therein), subject to the
terms, conditions and limitations set forth therein, the
prompt payment and performance of all of the Obligations (as
defined therein). The Guarantor (a) consents to the
Company's execution of the foregoing Third Amendment to
Amended and Restated Revolving Credit Agreement and Request
for Release of Collateral (the "Third Amendment"), (b)
consents to the release of collateral therein requested, and
(c) acknowledges the continued validity, enforceability and
effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest
thereon and all expenses in connection therewith.
AVONDALE PROPERTIES, INC.
By: /s/ Thomas M. Kitchen
---------------------
Name: Thomas M. Kitchen
Title: Vice President &
Secretary
Dated as of even date with the above-referenced Third
Amendment.
<PAGE>
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the
"Guarantee"), the undersigned (the "Guarantor") guaranteed
to the Secured Parties (as defined therein), subject to the
terms, conditions and limitations set forth therein, the
prompt payment and performance of all of the Obligations (as
defined therein). The Guarantor (a) consents to the
Company's execution of the foregoing Third Amendment to
Amended and Restated Revolving Credit Agreement and Request
for Release of Collateral (the "Third Amendment"), (b)
consents to the release of collateral therein requested, and
(c) acknowledges the continued validity, enforceability and
effectiveness of the Guarantee with respect to all loans,
advances and extensions of credit to the Company, whether
heretofore or hereafter made, together with all interest
thereon and all expenses in connection therewith.
AVONDALE LAND MANAGEMENT COMPANY,
a Louisiana general partnership
By: Avondale Industries, Inc.,
a general partner
By: /s/ Thomas M. Kitchen
---------------------
Name: Thomas M. Kitchen
Title: Vice President & CFO
By: Avondale Properties, Inc.,
a general partner
By: /s/ Thomas M. Kitchen
---------------------
Name: Thomas M. Kitchen
Title: Vice President &
Secretary
Dated as of even date with the above-referenced Third
Amendment.
Avondale Properties, Inc.
Avondale Services Corporation
Avondale Transportation Company, Inc.
Avondale Shipyard of Texas, Inc.
Avondale Construction Management, Inc.
Avondale Gulfport Marine, Inc.
Avondale Industries of New York, Inc.
Avondale Enterprises, Inc.
Avondale Technical Services, Inc.
Crawford Technical Services, Inc.
Genco Industries, Inc.
M & D Steel Fabrication, Inc.
AAA Quality Construction, Inc.
Genco Industries of Lufkin, Inc.
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 333-32165 of Avondale Industries, Inc. on Form S-8 of
our report dated February 20, 1998, appearing in this Annual Report
on Form 10-K of Avondale Industries, Inc. for the year ended
December 31, 1997.
/s/ DELOITTE & TOUCHE LLP
-------------------------
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
March 20, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AVONDALE
INDUSTRIES, INC.'S ANNUAL REPORT FILED ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 81,752
<SECURITIES> 0
<RECEIVABLES> 101,746
<ALLOWANCES> 0
<INVENTORY> 23,226
<CURRENT-ASSETS> 232,868
<PP&E> 264,537
<DEPRECIATION> (134,481)
<TOTAL-ASSETS> 375,615
<CURRENT-LIABILITIES> 87,644
<BONDS> 51,819
0
0
<COMMON> 15,956
<OTHER-SE> 193,021
<TOTAL-LIABILITY-AND-EQUITY> 375,615
<SALES> 613,993
<TOTAL-REVENUES> 613,993
<CGS> 538,515
<TOTAL-COSTS> 538,515
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,804
<INCOME-PRETAX> 42,083
<INCOME-TAX> 15,250
<INCOME-CONTINUING> 26,833
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,833
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 1.85
</TABLE>
